SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the fiscal year ended November 30, 2002

[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from _____ to _____

                          Commission file number 1-5901


                              FAB INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)


         Delaware                                       13-2581181
(State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                      Identification No.)

         200 Madison Avenue, New York, NY                10016
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: 212-592-2700

Securities registered pursuant to Section 12(b) of the Act:

                                            NAME OF EACH EXCHANGE ON
         TITLE OF EACH CLASS                    WHICH REGISTERED
         -------------------                ------------------------

         Common Stock, $.20 par value       American Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: Share Purchase
Rights

         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, and (2) has been subject to such filing
requirements for the past 90 days.

                  Yes           [X]             No              [_]

         Indicate by 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 [_]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of The Act)

                  Yes           [_]             No              [X]

         The aggregate market value at June 3, 2002 of shares of the
registrant's Common Stock, $.20 par value (based upon the closing price per
share of such stock on the Composite Tape for issues listed on the American
Stock Exchange), held by non-affiliates of the registrant was approximately
$29,000,000. Solely for the purposes of this calculation, shares held by
directors and executive officers of the registrant and members of their
respective immediate families sharing the same household have been excluded.
Such exclusion should not be deemed a determination or an admission by the
registrant that such individuals are, in fact, affiliates of the registrant.

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: At February 11,
2003, there were outstanding 5,238,015 shares of Common Stock, $.20 par value.

         DOCUMENTS INCORPORATED BY REFERENCE: Certain portions of the
registrant's definitive proxy statement to be filed not later than 120 days
after the end of the fiscal year covered by this Annual Report on Form 10K
pursuant to Regulation 14A are incorporated by reference in Items 10 through 13
of Part III of this Annual Report on Form 10-K.

<PAGE>

                              FAB INDUSTRIES, INC.

                               INDEX TO FORM 10-K


ITEM NUMBER                                                                 PAGE
-----------                                                                 ----


PART I.........................................................................1
         Item 1. Business......................................................1
         Item 2. Properties....................................................4
         Item 3. Legal Proceedings.............................................5
         Item 4. Submission of Matters to a Vote of Security-Holders...........6

PART II........................................................................6
         Item 5. Market for Common Equity and Related Stockholder Matters......7
         Item 6. Selected Consolidated Financial Data..........................7
         Item 7. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations...........................7
         Item 7A. Quantitative and Qualitative Disclosures About Market Risk..13
         Item 8. Financial Statements and Supplementary Data..................13
         Item 9. Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure..........................13

PART III......................................................................14
         Item 10. Directors and Executive Officers............................14
         Item 11. Executive Compensation......................................15
         Item 12. Security Ownership of Certain Beneficial Owners and
                  Management..................................................15
         Item 13. Certain Relationships and Related Transactions..............15
         Item 14. Controls and Procedures.....................................15

PART IV.......................................................................16
         Item 15. Exhibits, Financial Statement Schedules and Reports
                  on Form 8-K.................................................16

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

         Fab Industries, Inc. was incorporated on April 21, 1966, under the laws
of the State of Delaware and is a successor by merger to previously existing
businesses. References in this Annual Report to "Fab" or "us" or "our" or "the
Company" mean Fab Industries, Inc. and its subsidiaries on a consolidated basis,
unless the context otherwise requires.

         We have been a leader in the domestic textile industry since we were
founded. We are a major manufacturer of warp and circular knit fabrics, raschel
laces, and laminated fabrics. We also produce comforters, sheets, blankets and
other bedding products.

         The Company's Board of Directors has determined that it is in the best
interests of its stockholders to sell the Company's textile business as a going
concern. In order to maximize stockholder value, the Board of Directors adopted
resolutions dated March 1, 2002 which authorized, subject to stockholder
approval, the sale of the Company's business pursuant to a Plan of Liquidation
and Dissolution (the "Plan"). The Company's stockholders approved the Plan at
the Company's annual meeting on May 30, 2002. The Plan provides the Company's
officers and directors will continue to operate the Company's textile business
in its current fashion and pursue a sale of the business as a going concern. The
Company's Board of Directors has approved the engagement of McFarland Dewey &
Co., LLC financial advisors in November 2002 to assist with the sale of the
business. There can be no assurance, however, that the Company will be
successful in selling its business or if it does sell the business, that it will
be able to recover the full value of its property, plant and equipment. On May
30, 2002, the Company's Board of Directors declared an initial liquidating
distribution of $10.00 per share, which was paid on June 24, 2002, with a record
date of June 10, 2002. Accordingly, $52,380,000 was paid on June 24, 2002.

         In addition, pursuant to resolutions adopted by the Company's Board of
Directors, upon approval of the Plan by the stockholders, the Employee Stock
Ownership Plan (the "ESOP") was terminated and all shares of common stock of the
Company then held in the ESOP suspense account (86,456 shares) were transferred
to the Company, and held as treasury stock, in exchange for the cancellation of
the outstanding loan in the amount of $3,957,000 from the Company to the ESOP.
The liquidating distribution paid on the ESOP shares allocated to participants
are being held in a money market account under the ESOP and the shares plus the
liquidating distribution will be paid to participants following approval of the
ESOP plan termination by the Internal Revenue Service.

         Pursuant to resolutions adopted by the Company's Board of Directors and
documentation sent to and returned to the Company by option holders, effective
immediately following stockholder approval of the Plan, all outstanding options
under the Company's 1997 Stock Incentive Plan became vested, and all options as
to which optionees (including employees and directors) had returned to the
Company the appropriate forms (representing options held by all but one
optionee, who exercised via payment to the Company) were exercised through the
issuance of loans from the Company to the optionees with stock of the optionees
held as collateral by the Company until the loans have been satisfied. These
loans receivable have been recorded as a reduction of stockholders' equity as of
November 30, 2002. As of November 30, 2002, the balance of the loans outstanding
was $221,000.

OPERATIONS

         Fab is a leading supplier of knitted fabrics and lace in the domestic
textile industry. The Company currently operates in three segments: (1) Apparel
Fabrics, (2) Home Fashions and Accessories, and (3) Other, consisting of the Gem
Urethane operation, the Over-the-Counter Retail operation, located at the
Salisbury Manufacturing facility, and Industrial Fabrics.

                                       1
<PAGE>

         APPAREL FABRICS

         The Company's textile fabrics are sold to a wide variety of
manufacturers of ready-to-wear and intimate apparel for women and children,
including dresses and sportswear, children's sleepwear, activewear, swimwear,
and recreational apparel.

         These fabrics are sold and marketed through the Company's Warp Knit and
Circular Knit Business Units. The fabrics are sold primarily in piece dyed form,
as well as "PFP" (prepared for printing), and heat transfer printed
configurations.

         Fab's raschel lace products are sold to manufacturers of intimate
apparel products consisting of lingerie, daywear, panty, bra and foundations,
ladies' sportswear, children's wear, swimwear, home furnishing, accessories, and
hobby and crafts.

         The Company's laces are sold in both narrow and all-over constructions.
Narrow band laces are offered with scalloped or galloon edges in rigid and
stretch constructions. All-over laces are offered with either straight or
galloon edges in rigid and stretch constructions utilizing both spandex and
helenca nylon.

         Fab's lace products are sold to manufacturers of intimate apparel
through the Raval Designer and Wiener Lace divisions. The Raval Lace division
sells and markets laces to manufacturers and jobbers of dresses and sportswear,
blouses, other related outwear industries, and to the home furnishing and
bedding industry.

         The Company's subsidiary, SMS Textiles, Inc. ("SMS"), specializes in
wide elastic fabrics for sale to manufacturers of intimate apparel, swimwear,
athleticwear, and sportswear.

         Fab's Lida Stretch Fabrics Division specializes in circular knit
products blending nylon, cotton, polyester, and rayon with spandex to create
stretch fabrics in a variety of constructions. These fabrics are sold as piece
and yarn dyes to the ready-to-wear, aerobicwear, swimwear, and intimate apparel
markets. The broad range of products includes jerseys, ribs, jacquards, and
failles.

         The Company also offers a comprehensive line of heat transfer prints
for sleepwear, robewear, outerwear, and activewear applications.

         HOME FASHIONS AND ACCESSORIES

         The Company sells its fabrics and laces directly to manufactures in the
home fashion and bedding-related industries.

         In addition, Fab utilizes its own fabrics and laces to internally
produce flannel and satin sheets, blanket products, comforters, and other
bedding-related products, which are sold to specialty stores, catalogue and mail
order companies, airlines and cruise lines, and health care institutions through
the Company's subsidiary, Salisbury Manufacturing Corporation.

         OTHER

         Included in this segment is (1) Gem Urethane Corporation, (2) the
Over-the-Counter Retail operation, and (3) Industrial and other miscellaneous
non-apparel fabrics.

         The Company's subsidiary, Gem Urethane produces a line of
ultrasonically, hot melt adhesive, flame and adhesive bonded products for
apparel, environmental, health care, industrial, and consumer markets.

                                       2
<PAGE>

         In addition, Gem Urethane does toll laminating and converting for these
markets as well as a fire resistant fabric, Sandel(R), through its subsidiary
Sandel International, to the seating, transportation and military markets.

         The Company also sells its fabrics and laces to the over-the-counter
retail market through its retail manufacturing operation located at the
Salisbury Manufacturing plant. Internally produced fabrics and laces are
transported to the Salisbury Manufacturing facility where the fabrics and laces
are "doubled and rolled" on specialized equipment, packaged, and then shipped to
various over-the counter retail customers.

         The Company also manufactures various engineered fabrics for specific
industrial and institutional end-uses, including Velcro-UBL (unbroken loop)
constructions, laminating and coating substrates, linings, and filtration.

GENERAL

         We engage in research and product development activities to create new
fabrics and styles to meet the continually changing demands of our customers.
Direct expenditures in this area aggregated $3,206,000 in fiscal 2000,
$1,999,000 in fiscal 2001, and $1,690,000 in fiscal 2002. Through these efforts,
we have developed a full line of proprietary knitted fabrics for sale to
manufacturers of men's, women's, and children's apparel in both domestic and
foreign markets. Similarly, we have also developed a full line of flannel and
satin sheets and blankets, including specialty blankets for the airline and
cruise lines, and health care institutions.

         While we use various trademarks and trade names in the promotion and
sale of our products, we do not believe that the loss or expiration of any such
trademark or trade name would have a material adverse effect on our operations.

         We market our products primarily through our full-time sales personnel,
as well as independent representatives located throughout the United States and
abroad.

         We do not believe our backlog of firm orders is a material indicator of
future business trends because goods subject to such orders are shipped within
two to ten weeks depending on the availability of yarn and other raw materials.
On average, orders are filled within six weeks.

         During fiscal 2002, no single customer or group of affiliated customers
accounted for more than 10% of the year's net sales. Our export sales are not
material.

SUPPLIES OF RAW MATERIALS

         We have not experienced difficulties in obtaining sufficient yarns,
chemicals, dyes and other raw materials and supplies to maintain full
production. We do not depend upon any single source of supply, and alternative
sources are available for most of the raw materials used in our business.

INVENTORIES

         We maintain adequate inventories of yarns and other raw materials to
ensure an uninterrupted production flow. Greige and finished goods are
maintained as inventory to meet varying customer demand and delivery
requirements. We must maintain adequate working capital, because credit terms
available to customers normally exceed credit terms extended to us by suppliers
of raw materials.

                                       3
<PAGE>

COMPETITION

         Fab is engaged in a highly competitive global business which is based
largely upon price, product quality, service and general consumer demand for the
Company's finished goods. The portion of imported textile goods sold in the
United States has increased substantially in the past few years, adversely
impacting domestically manufactured textile products and the number of domestic
manufacturers of such products. Our sales have declined from approximately
$151,000,000 in 1998 to approximately $63,000,000 in 2002, largely as a result
of increased foreign competition.

SEGMENT INFORMATION

         See Note 14 of the Notes to Consolidated Financial Statements.


EMPLOYEES

         At February 8, 2003, the Company employed approximately 620 people, of
whom approximately 585 are employed by our subsidiaries. The employees are not
represented by unions. We consider relations with our employees to be
satisfactory. The number of our employees has declined from approximately 1,600
at the end of 1998 to approximately 620 on February 8, 2003.

ITEM 2.  PROPERTIES.

         The Company conducts its manufacturing operations in Lincolnton and
Salisbury, North Carolina, and Amsterdam, New York.

         Yarn receiving and storage, dye and chemical receiving and storage,
knitting operations, and dyeing and finishing operations are conducted at the
Mohican Mills facility. These operations more specifically include tricot (warp
knit) and raschel warping, tricot knitting, raschel lace knitting, wide
elastic/stretch raschel knitting, circular and double-knit knitting, dyeing,
framing, surface finishing including sueding, napping, shearing, heat transfer
printing, lace separation, all facility-wide quality operations, laboratory
testing and certification, yielding, packaging, and shipping.

         The Mohican Mills facility also processes and serves as a warehouse for
griege and finished fabrics and lace.

         The Salisbury facility is the site of our consumer and institutional
finished products manufacturing, the Over-The-Counter Retail Operation, and the
Company's Mill Outlet Store.

         The Gem Urethane plant in Amsterdam, New York utilizes approximately
106,000 square feet for production.

         Fab closed two manufacturing plants, Travis Knits in Cherryville, North
Carolina and Adirondack Knitting in Amsterdam, New York, during the first week
of July 2001. In addition, on November 16, 2001, Fab closed its manufacturing
plant in Maiden, North Carolina. The manufacturing operations of each of these
facilities were consolidated into the Company's Mohican Mills facility located
in Lincolnton, North Carolina. The Company is attempting to sell its plants in
Cherryville and Maiden, North Carolina.

         Over the past two years, the Company has reduced the floor space of its
executive offices and showroom facilities in its New York City headquarters.

         The following table sets forth the location of each of Fab's current
manufacturing facilities, its current principal use, if any, approximate floor
space and, where leased, the lease expiration date. There are no mortgages or
other encumbrances on any of our facilities. All the Company's operating
facilities are in good operating condition and repair.

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                                        APPROXIMATE                    LEASE
LOCATION                             PRINCIPAL USE                      FLOOR SPACE               EXPIRATION DATE
--------                             -------------                      -----------               ---------------
<S>                                  <C>                                <C>                        <C>
Lincolnton,                          Dyeing and finishing,              630,550 sq.ft.             (1)
North Carolina                       raschel and tricot
                                     knitting, circular single and
                                     double knitting, tricot and
                                     raschel warping, printing
                                     and warehousing.

Lincolnton, North Carolina           Warehouse                          55,000 sq. ft.             (1)

Maiden, North Carolina               (3)                                224,013 sq.ft.             (1)

Salisbury, North Carolina            Manufacturing finished consumer    125,000 sq.ft.             (1)
                                     and institutional products and
                                     retail and over-the- counter
                                     fabrics

Amsterdam, New York                  Laminated fabrics, fire fighting   106,000 sq.ft.             (2)
                                     material manufacturing
                                     operations and bonding and
                                     laminating

Cherryville, North Carolina          (3)                                197,000 sq. ft.            (1)

New York, New York                   Executive offices and showroom     5,753 sq. ft               7/31/05
                                     facilities
---------------------------
(1)  Company owned.
(2)  The lease currently runs from month to month.
(3)  These facilities were closed during 2001 and are currently subject to a
     brokerage sale agreement. Manufacturing operations were consolidated into
     Fab's Mohican Mills facility located in Lincolnton, North Carolina.
</TABLE>

         All of our facilities are constructed of brick, steel or concrete, and
we consider all facilities to be adequate and in good operating condition and
repair.

ITEM 3.  LEGAL PROCEEDINGS.

         During the fall of 1999, San Francisco Network ("SFN") commenced an
action in the Superior Court of California, Marin County, against the Company
and the Company's Salisbury Manufacturing Corporation ("Salisbury") subsidiary.
The action related to an agreement between SFN and Salisbury (whose performance
the Company guaranteed), pursuant to which Salisbury was licensed to use the
Karen Neuburger trademark for branded bedding products. The case was removed to
the United States District Court of California. Salisbury and the Company denied
any wrongdoing and asserted affirmative claims against SFN and certain of its
principals. On March 14, 2002, at a court-ordered conference, the Company
settled this issue without admitting liability. On April 12, 2002, the Company
paid SFN $750,000 in exchange for a complete release of all claims.

         A number of claims and lawsuits are pending against the Company. It is
impossible at this time for the Company to predict with any certainty the
outcome of such litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability, to the
extent not provided for through insurance or otherwise, would be material in
relation to the Company's consolidated financial position or results of
operations.

                                       5
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

         Not Applicable



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Fab's Common Stock is traded on the American Stock Exchange, Inc.
(ticker symbol - FIT). The table below sets forth the high and low sales prices
of the Common Stock during the past two fiscal years.

         FISCAL 2002                         HIGH              LOW
         -----------                         ----              ---
First Quarter...........................     $ 18.70           $ 12.75

Second Quarter..........................     $ 19.05           $ 17.50

Third Quarter...........................     $  8.67           $  7.70

Fourth Quarter..........................     $  9.00           $  6.90

         FISCAL 2001
         -----------
First Quarter...........................     $ 14.87           $ 11.30

Second Quarter..........................     $ 15.00           $ 11.50

Third Quarter...........................     $ 14.50           $ 13.75

Fourth Quarter..........................     $16.25            $12.55

         At February 6, 2003, there were approximately 479 holders of record of
Common Stock. For fiscal 2001, quarterly dividends of $.10 per share were
declared on February 22, 2001, May 3, 2001, August 15, 2001 and November 27,
2001. On May 30, 2002, the Company's Board of Directors declared an initial
liquidating distribution of $10.00 per share, which was paid on June 24, 2002,
with a record date of June 10, 2002. Accordingly, $52,380,000 was paid on June
24, 2002. The payment of further cash dividends will be at the discretion of the
Board of Directors and will depend upon, among other things, the status of the
sale of our business, our earnings, our capital requirements and our financial
condition.

         Subsequent to November 30, 2002, the Company has terminated all of its
stock option plans. As a result, currently, there are no options outstanding or
available for grant.

                                       6
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.
         (in thousands, except for share and per share data)

<TABLE>
<CAPTION>
                                                                   AS AT OR FOR THE FISCAL YEAR ENDED
                                       --------------------------------------------------------------------------
                                       NOVEMBER       DECEMBER          DECEMBER         NOVEMBER        NOVEMBER
                                       30, 2002        1, 2001           2, 2000 (1)     27, 1999        28, 1998
                                       --------        -------          --------         --------        --------
<S>                                     <C>            <C>              <C>              <C>             <C>
Net Sales                               $62,965        $80,036          $118,185         $128,889        $151,436
Income (loss) before taxes                3,010       (15,488)             4,178            (338)           8,017
    on income (3)
Net income (loss) (3)                     1,970        (8,623)             3,033              517           6,017
Earnings (loss) per share:
     Basic                                  .38         (1.64)               .57              .10            1.07
     Diluted                                .38         (1.64)               .57              .10            1.06
Total assets                             81,229        131,528           151,412          152,178         160,403
Long-term debt                               --            311               362              409             486
Stockholders' equity                     64,571        113,503           123,855          123,788         130,527
Book value                                12.33          21.79             23.45            22.91           23.38
per share (2)
Cash dividends per share                  10.00            .40              .475              .70             .70
Weighted average number of
    shares outstanding:
     Basic                            5,222,812      5,258,353         5,336,958        5,414,687       5,627,788
     Diluted                          5,222,812      5,258,353         5,336,958        5,419,130       5,665,194
---------------------
(1)  Fifty-three week period.
(2)  Computed by dividing stockholders' equity by the number of shares
     outstanding at year-end.
(3)  Fiscal year ended December 1, 2001 amounts include asset impairment and
     restructuring charges of $14,530,000.
</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

CRITICAL ACCOUNTING ESTIMATES

         Our critical accounting estimates are those which we believe require
our most significant judgments about the effect of matters that are inherently
uncertain. A discussion of our critical accounting estimates, the underlying
judgments and uncertainties used to make them and the likelihood that materially
different estimates would be reported under different conditions or using
different assumptions, is set forth below:

                                       7
<PAGE>

         Accruals and Contingencies

         We periodically assess the potential liabilities related to any
lawsuits or claims brought against us, as well as for other known unasserted
claims, including environmental, legal and tax matters. While it is typically
very difficult to determine the timing and ultimate outcome of these matters, we
use our best judgment to determine if it is probable that we will incur an
expense related to the settlement or final adjudication of such matters and
whether a reasonable estimation of such probable loss, if any, can be made. In
assessing probable losses, we make estimates of the amount of insurance
recoveries, if any. We accrue a liability when we believe a loss is probable and
the amount of the loss can be reasonably estimated, in accordance with the
provisions of SFAS No. 5, "Accounting for Contingencies," as amended. See Note 9
in the accompanying financial statements for additional information concerning
our contingencies.

         Given the inherent uncertainty related to the eventual outcome of these
matters and potential insurance recoveries, it is possible that all or some of
these matters may be resolved for amounts materially different from any
provisions or disclosures that we may have made with respect to their
resolution. In addition as new information becomes available, we may need to
reassess the amount of probable liability that needs to be accrued related to
our contingencies. All such revisions in our estimates could materially impact
our results of operations and financial position.

         We maintain an accrual for workers compensation, which is classified as
other current liabilities in our consolidated balance sheets. We determine the
adequacy of the accrual by periodically evaluating our historical experience and
trends related to workers compensation claims and payments, information provided
to us by our insurance broker and industry experience and trends. If such
information indicates that our accrual is overstated or understated, we will
adjust the assumptions utilized in our methodologies and reduce or provide for
additional accruals as appropriate.

         Revenue Recognition

         We recognize our revenues upon shipment of the related goods.
Allowances for estimated returns are provided when sales are recorded.

         Bad Debt

         We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

         Impairment of Long-lived Assets

         Whenever events or circumstances indicate that the carrying values of
long-lived assets (including property, plant and equipment) may be impaired, we
perform an analysis to determine the recoverability of the asset's carrying
value. The carrying value of the asset includes the original purchase price (net
of depreciation) plus the value of all capital improvements (net of
depreciation). If the analysis indicates that the carrying value is not
recoverable from future cash flows, we write down the asset to its estimated
fair value and recognize an impairment loss. The estimated fair value is based
on what we estimate the current sale price of the asset to be based on
comparable sales information or other estimates of the asset's value. Any
impairment losses we recognize are recorded as operating expenses. In 2001, we
recognized $13.2 million of impairment losses. We did not recognize any
impairment losses in 2002 or 2000.

                                       8
<PAGE>

         We make estimates of the undiscounted cash flows from the expected
future operations of the asset. In projecting the expected future operations of
the asset, we base our estimates on future budgeted earnings before interest
expense, income taxes, depreciation and amortization, or EBITDA, amounts and use
growth assumptions to project these amounts out over the expected life of the
underlying asset. If actual conditions differ from those in our assumptions, the
actual results of each asset's actual future operations could be significantly
different from the estimated results we used in our analysis. Our operating
results are also subject to the risks set forth under "Summary of Accounting
Policies - Risk and Uncertainties."

RESULTS OF OPERATIONS

         FISCAL 2002 COMPARED TO FISCAL 2001

         Net sales for fiscal 2002 were $62,965,000 as compared to $80,036,000
in fiscal 2001, a decrease of 21.3%. The decrease was caused substantially by
lower volume as business conditions within the domestic textile industry
remained depressed, and low-cost foreign imports continued to take a toll on the
U.S. textile manufacturing sector. These factors have negatively impacted sales
and production.

         Apparel external sales for fiscal 2002 were $51.3 million, a decrease
of $9.6 million or 15.8%, as compared to $60.9 million for fiscal 2001.

         Home Fashions and Accessories external sales for fiscal 2002 were $4.7
million, a decrease of $5.7 million or 55.0%, as compared to $10.4 million for
fiscal 2001.

         Other external sales for fiscal 2002 were $7.0 million, a decrease of
$1.8 million or 19.9%, as compared to $8.8 million for fiscal 2001.

         The decreases across our segments were due to a flood of low-priced
imports from Asia, weak market conditions and a weak economy which has continued
to take a toll on the U.S. textile manufacturing sector.

         The apparel and home fashions segments implemented measures beginning
in fiscal 2001 to reduce operating costs including a reduction in the number of
employees which reduced fixed overhead.

         Gross margins as a percentage of sales increased to 10.4% from 1.9% as
compared to similar 2001 period. A more favorable product mix and the
consolidation of three manufacturing facilities, combined with a reduction in
costs due to employee terminations, a decrease in depreciation expense and other
related costs resulted in the higher margins. Due to lower average FIFO cost
levels, LIFO inventory reserves decreased by $96,000 and $1,518,000 in fiscal
2002 and fiscal 2001, respectively.

         Management projects that in fiscal 2003 that gross margins will be
fairly consistent with fiscal 2002 results tempered, however, by the continuing
deterioration in domestic textile manufacturing due to foreign imports and
currency valuation issues.

         The financial results for the fiscal year ended December 1, 2001
include a charge of $14,530,000, which includes $13,230,000 for the writedown of
fixed assets to fair value less costs of disposal. Such fixed assets are
comprised of machinery and equipment from the knitting, dyeing, and finishing
activities of the business, and also include the building facilities in North
Carolina. The marketability of the assets held for disposal are subject to
worldwide economic conditions which can affect the sale of such buildings and
machinery. Additionally, for the fiscal year ended December 1, 2001, the Company
expended approximately $1,300,000 to remove and transfer machinery and equipment
to the Company's Mohican Mills facility which was included in the asset
impairment and restructuring charges.

                                       9
<PAGE>

         Selling, general and administrative expenses decreased by $2,376,000,
or 24.4% as compared to fiscal year 2001. The decrease in expenses resulted
primarily from the reduction in the number of employees and related expenses,
moving executive offices and showroom facilities to smaller premises and the
continued effectiveness of the cost containment programs. This decrease also
resulted from the gain on sale of fixed assets totaling $817,000 for fiscal
2002.

         In March 2002, the Company settled a dispute without admitting
liability for $750,000. See Note 16 to the consolidated financial statements.

         Apparel operating loss for fiscal 2002 was $0.7 million as compared to
a operating loss of $22.3 million for fiscal 2001. A more favorable product mix
and the consolidation of three manufacturing facilities, combined with a
reduction in costs resulted in higher margins. In fiscal 2001, the financial
results include a charge for impairment of fixed assets and restructuring
charges of approximately $13.8 million.

         Home Fashions and Accessories operating loss for fiscal 2002 was $1.1
million compared to a operating income of $0.7 million for fiscal 2001. These
decreases were due primarily to lower sales volume. Additionally, in fiscal 2002
the financial results includes a charge of $750,000 for settlement of a dispute
without admitting liability. See Note 16 to the consolidated financial
statements.

         Other segments operating income for fiscal 2002 was $0.2, million
compared to an operating loss of $1.1 million for fiscal 2001. Higher margins
and reduction of costs increased operating income. In fiscal 2001, the financial
results include a charge of approximately $750,000 for impairment of fixed
assets and a restructuring charge.

         Interest and dividend income decreased by $1,876,000, or 43.7% as
compared to fiscal 2001. On June 24, 2002, the Company distributed an initial
liquidating distribution of $10.00 per share, or $52,380,000. Accordingly, the
Company had lower average invested balances which were invested primarily in
United States Treasury obligations resulting in lower risks and lower yields.
The Company realized gains from the sale of investment securities of $2,179,000
in fiscal 2002 as compared to $3,025,000 in fiscal 2001.

         The effective income tax rate for fiscal 2002 was 34.6% compared to a
tax benefit of 44.3% for fiscal 2001. The fiscal 2001 tax benefit included
approximately $1.5 million of certain tax reserves recorded in prior years,
which were reversed in the fourth quarter of fiscal 2001 due to changes in
estimates for tax contingency items.

         As a result of these factors, the Company generated net income of
$1,970,000, or $.38 basic and diluted per share in fiscal 2002. In fiscal 2001,
the Company had a net loss of $8,623,000 which included asset impairment and
restructuring charges of $9,590,000 net of income tax benefit. For fiscal 2001,
basic and diluted losses per share were $1.64, including asset impairment and
restructuring charges of $1.82 per share.

FISCAL 2001 COMPARED TO FISCAL 2000

         Net sales for fiscal 2001 were $80,036,000 as compared to $118,185,000
in fiscal 2000, a decrease of 32.3% (fiscal 2000 had 53 weeks). Such decreases
were caused substantially by lower volume as continued weakness in the economy,
market conditions and unfair foreign competition have adversely affected the
domestic textile industry.

         Apparel external sales for fiscal 2001 were $60.9 million, a decrease
of $33 million or 35%, as compared to $93.9 million for fiscal 2000.

         Home Fashions and Accessories external sales for fiscal 2001 were $10.4
million, a decrease of $3.9 million or 27%, as compared to $14.3 million for
fiscal 2000.

                                       10
<PAGE>

         Other external sales for fiscal 2001 were $8.8 million, a decrease of
$1.2 million or 12%, as compared to $10 million for fiscal 2000.

         The decreases across our segments were due to the current economic
downturn, continued weakness in the domestic textile industry and foreign
competition.

         Gross margins as a percentage of sales declined from 9.7% to 1.9%.
Lower sales volume and the consolidation of three of our manufacturing
facilities reduced operating rates at production facilities. Due to lower
average FIFO cost levels, LIFO inventory reserves decreased by $1,518,000 in
fiscal 2001, compared to an increase in LIFO inventory reserve of $228,000 due
to higher FIFO unit material costs in fiscal 2000. With the Company's decrease
in costs relating to employee terminations, and the future decrease in
depreciation expenses and other related costs, management is hopeful that gross
margins will show an improvement over last year's performance tempered, however,
by the continuing deterioration in domestic textile manufacturing due to foreign
imports and currency valuation issues.

         The Company, in an on-going effort to restore operations to acceptable
levels of profitability by eliminating over-capacities, during the first week of
July 2001, closed two of its manufacturing plants, Travis Knits in Cherryville,
North Carolina and Adirondack Knitting in Amsterdam, New York. The knitting,
dyeing and finishing activities of these two operations were consolidated into
Fab's Mohican Mills facility in Lincolnton, North Carolina. The Company also
completed the closure of its Maiden, North Carolina facility as of November 16,
2001 and also transferred its knitting and warping operations to the Mohican
Mills facility.

         As a result of the consolidation of the manufacturing facilities and
the announcement to pursue a sale of the business as part of a plan of
liquidation, the results for fiscal year ended December 1, 2001 include asset
impairment and restructuring charges of $14,530,000, including $13,230,000 for
the writedown of fixed assets to fair value less costs of disposal. Such fixed
assets are comprised of machinery and equipment from the knitting, dyeing, and
finishing activities of the business, and also include the building facilities
in North Carolina. Management believes the marketability of the assets held for
disposal are subject to worldwide economic conditions which can affect the sale
of such buildings and machinery. Additionally, for the fiscal year ended
December 1, 2001, the Company expended approximately $1,300,000 to remove and
transfer machinery and equipment to the Company's Mohican Mills facility which
was included in the asset impairment and restructuring charges. The Company
expects to incur expenditures to maintain the facilities to be disposed of until
such sales occur. The above charges for the asset impairment and restructuring
charges apply mainly to the apparel segment with a small portion to the other
segment.

         Selling, general and administrative expenses decreased by $2,717,000,
or 21.8% as compared to fiscal year 2000. Reduced expenses related primarily to
the reduced number of employees and a reduction of half of the floor space of
the Company's executive offices and showroom facilities in the New York City
headquarters. In addition, expenses decreased as a result of the continued
effectiveness of expense and cost containment programs.

         Apparel operating loss for fiscal 2001 was $22.3 million, a decrease of
$20.2 million or 957%, as compared to $2.1 million for fiscal 2000. Lower sales
volume and the consolidation of three of our manufacturing facilities reduced
operating rates at production facilities. In addition, the financial results
include a charge for impairment of fixed assets and restructuring charges of
approximately $13.8 million. Lower selling margins also contributed to the
increase in operating loss, notwithstanding a reduction in selling, general and
administrative expenses.

         Home Fashions and Accessories operating income for fiscal 2001 was
$674,000, a decrease of $443,000 or 40%, as compared to $1.1 million for fiscal
2000. These decreases were due primarily to lower sales volume and a lower gross
margin decreased operating gains.

                                       11
<PAGE>

         Other operating loss for fiscal 2001 was $1.1 million, a decrease of
$1.0 million or 2,689%, as compared to $39,000 for fiscal 2000. These decreases
were due primarily to lower sales volume and a charge of approximately $750,000
for impairment of fixed assets and a restructuring charge.

         Interest and dividend income increased by $289,000, or 7.2% as compared
to fiscal year 2000, because of higher invested balances. We realized gains from
the sale of investment securities of $3,025,000 in fiscal 2001 as compared to
$1,300,000 in fiscal 2000.

         We realized a tax benefit for fiscal 2001 which had an effective tax
rate of 44.3%, as compared to an effective income tax rate of 27.4% in fiscal
2000. Fiscal 2001's tax benefit includes approximately $1.5 million of certain
tax reserves recorded in prior years, which were reversed in the fourth quarter
of fiscal 2001 due to changes in estimates for tax contingency items.

         As a result of these factors, the Company had a net loss of $8,623,000
including the asset impairment and restructuring charges of $9,590,000 net of
income tax benefit in fiscal 2001, compared to net income of $3,033,000 in
fiscal 2000. For fiscal 2001, basic and diluted losses per share were $1.64,
including asset impairment and restructuring charges of $1.82 per share,
compared to basic and diluted earnings per share of $0.57 in fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities in fiscal 2002 amounted to
$8,758,000, as compared to $10,074,000 in fiscal 2001. Of this decrease, major
changes were as follows: $3,285,000 relates to comparative changes in accounts
receivable, $3,134,000 to inventories, $2,466,000 to depreciation and
amortization, $556,000 to gain on disposition of fixed assets, and $13,241,000
to non-cash assets impairment and restructuring charges. These decreases were
offset by $10,953,000 increase in net income, $6,593,000 in deferred income
taxes, $219,000 to current and other assets, $846,000 to net gain on investment
securities and $2,697,000 attributable to accounts payable, accruals and other
liabilities.

         For the fiscal year ended November 30, 2002, proceeds from sales of
investment securities were $38,650,000 as compared to the acquisitions of
$15,681,000 in investment securities for the fiscal year ended December 1, 2001.
For the fiscal year ended November 30, 2002, the Company used proceeds for the
initial distribution of $10.00 per share or $52,380,000. In the fiscal year
ended December 1, 2001 approximately $12,000,000 of the net acquisitions of
invested securities was in cash and cash equivalents. The Company has invested
these funds in high quality investment grade taxable bonds. Our investment
securities, all classified as available-for-sale, had a fair market value of
$45,551,000 and $82,021,000 at fiscal year-end 2002 and 2001, respectively. See
Note 2 of the Notes to Consolidated Financial Statements for further details
about the investment portfolio.

         Capital expenditures for fiscal 2002 were $225,000 as compared to
$703,000 in fiscal 2001.

         Stockholders' equity was $64,571,000, or $12.33 book value per share at
the end of fiscal 2002, as compared to $113,503,000, or $21.79 book value per
share, at the previous fiscal year end. The reduction in stockholders' equity
was primarily due to the liquidating dividend of $10.00 per share or $52,380,000
declared on May 30, 2002 by the Company's Board of Directors, which was paid on
June 24, 2002.

         Management believes that our current financial position is adequate to
satisfy working capital requirements and to internally fund any future
expenditures to maintain our manufacturing facilities for the next twelve
months.

                                       12
<PAGE>

INFLATION

         Management does not believe that the effects of inflation have had a
significant impact on our consolidated financial statements.

FORWARD-LOOKING INFORMATION

         Certain statements in this report are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risks and uncertainties. In particular, any
statement contained herein, in press releases, written statements or other
documents filed with the Securities and Exchange Commission, or in our
communications and discussions with investors and analysts in the normal course
of business including, but not limited to, meetings, phone calls and conference
calls, regarding the sale of our assets pursuant to a plan of liquidation and
dissolution, as well as expectations with respect to future sales and operating
efficiencies prior to a sale of the company, are subject to known and unknown
risks, uncertainties and contingencies, many of which are beyond our control and
which may cause actual results, performance or achievements to differ materially
from anticipated results, performances or achievements. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of them or other variations of them or
comparable terminology.

         Factors that could have a material adverse effect on our operations and
furutre prospects include, but are not limited to: our ability to find qualified
buyers for our assets; overall economic and business conditions; our continuing
ability to support the demand for our goods and services; competitive factors in
the industries in which we compete; changes in government regulation; changes in
tax requirements (including tax rate changes, new tax laws and revised tax law
interpretations); interest rate fluctuations and other capital market
conditions, including foreign currency rate fluctuations; material contingencies
provided for in a sale of our assets; de-listing of our common stock from the
American Stock Exchange; our ability to retain key employees through any wind
down period; and any litigation arising as a result of our plan to wind down our
operations. These risks and uncertainties should be considered in evaluating any
forward-looking statements contained in the Form 10-K.

         We undertake no obligation to update or revise an forward-looking
statement, whether as a result of new information, future events, or otherwise,
other than required by law.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         See "Summary of Accounting Policies - Risks And Uncertainties" and
"-Investments" in the Consolidated Financial Statements attached hereto. See
also Note 2 of the Notes to Consolidated Financial Statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See the Consolidated Financial Statements, the Notes to Consolidated
Financial Statements and the Consolidated Financial Statements Schedules
attached hereto.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         As previously reported on our Current Report on Form 8-K dated
September 17, 2001 and our Annual Report on Form 10-K for the fiscal year ended
December 1, 2001, by letter dated September 11, 2001, Ernst & Young, LLP ("Ernst
& Young") resigned as our independent accountants. Ernst & Young's resignation
became effective on September 25, 2001, the date that we engaged BDO Seidman,
LLP as our new independent public accountants.

                                       13
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

EXECUTIVE OFFICERS

         The following table sets forth certain information concerning our
executive officers as of February 13, 2003.

NAME                            AGE       POSITIONS AND OFFICES

Samson Bitensky............     83        Chairman of the Board of Directors and
                                          Chief Executive Officer

Steven Myers...............     54        President, Chief Operating Officer

David A. Miller............     65        Vice President-Finance, Treasurer, and
                                          Chief Financial Officer

Jerry Deese................     51        Vice President-Controller of Plant
                                          Operations

Sam Hiatt .................     55        Vice President-Sales

Mark J. Goldberg...........     54        Vice President

Bruce Chroback.............     41        Assistant Treasurer and Controller

         Each of our executive officers serves at the pleasure of the Board of
Directors and until his or her successor is duly elected and qualified.

         SAMSON BITENSKY was one of Fab's founders in 1966 and has served as
Chairman of the Board of Directors and Chief Executive Officer of Fab since such
time. Mr. Bitensky also served as President of Fab from 1970 until May 1, 1997.

         STEVEN MYERS, an attorney, has been employed by Fab in various senior
administrative and managerial capacities since 1979. He served as Vice President
- Sales for more than five years prior to May 1988 and as Vice President from
May 1988 to May 1, 1997 and Co-President, Chief Operating Officer from May 1,
1997 to November 27, 2001. On November 27, 2001, he became President, Chief
Operating Officer upon the retirement of our former Co-President, Stanley
August. Mr. Myers is the son-in-law of Mr. Bitensky.

         DAVID A. MILLER has been employed by Fab since 1966 and has served as
Controller from 1973 until December 7, 1995, as Vice President - Finance and
Treasurer since December 7, 1995, and as Chief Financial Officer since May 1,
1997.

         JERRY DEESE has been employed by Fab in various senior administrative
and managerial capacities since 1978. Mr. Deese served as Divisional Controller
from 1994 until 1998 and has served as Vice President-Controller of Plant
Operations since May 12, 1998.

         SAM HIATT has been employed by Fab since 1978 and previously had
various management responsibilities in the warp knit area. He has served as Vice
President-Sales since May 12, 1998.

         MARK J. GOLDBERG has been employed by Fab in various financing and
operational capacities since 1983. He was the Director of Corporate Planning
from 1999 until 2001 and he has served as Vice President since May 3, 2001.

         BRUCE S. CHROBACK, a C.P.A., has been employed by Fab since 1996 and
has held various senior financial positions with the Company. He has served as
Assistant Treasurer and Controller since May 3, 2001.

                                       14
<PAGE>

         Other information required by this item is incorporated by reference
from our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K pursuant
to Regulation 14A of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended ("Regulation 14A").

ITEM 11. EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference from
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K pursuant to
Regulation 14A.

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

         The information required by this item is incorporated by reference from
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K pursuant to
Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated by reference from
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K pursuant to
Regulation 14A.

ITEM 14. CONTROLS AND PROCEDURES

         (a)      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The
Company's Chief Executive Officer and its Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)
as of a date within 90 days of the filing date of this Annual Report on Form
10-K (the "Evaluation Date")), have concluded that as of the Evaluation Date,
the Company's disclosure controls and procedures were adequate and effective to
ensure that material information relating to the Company and its consolidated
subsidiaries would be made known to them by others within those entities,
particularly during the period in which this Annual Report on Form 10-K was
being prepared.

         (b)      CHANGES IN INTERNAL CONTROLS. There were no significant
changes in the Company's internal controls or in other factors that could
significantly affect the Company's internal controls and procedures subsequent
to the date of their evaluation, nor any significant deficiencies or material
weaknesses in such internal controls and procedures requiring corrective
actions. As a result, no corrective actions were taken.


                                       15
<PAGE>

                                     PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

        (a)(1)    Financial Statements: See the Index to Consolidated Financial
                  Statements at page F-2.

           (2)    Financial Statement Schedules: See the Index to Consolidated
                  Financial Statements Schedules at page S-2.

           (3)    Exhibit List


EXHIBIT                    DESCRIPTION OF EXHIBIT
-------                    ----------------------

3.1      -        Restated Certificate of Incorporation, incorporated by
                  reference to Exhibit 3.1 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended November 27, 1993 (the
                  "1993 10-K").

3.2      -        Amended and Restated By-laws, incorporated by reference to
                  Exhibit 3.2 to the 1993 10-K.

3.3      -        Certificate of Amendment of Restated Certificate of
                  Incorporation, incorporated by reference to Exhibit 3.3 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 3, 1994 (the "1994 10-K").

3.4      -        Amendments to the Amended and Restated By-laws, incorporated
                  by reference to Exhibit 3.4 of the Company's Annual Report on
                  Form 10-K for the fiscal year ended November 29, 1997.

3.5      -        Amendment to the Amended and Restated By-laws, incorporated by
                  reference to Exhibit 3.5 of the Company's Annual Report on
                  Form 10-K for the fiscal year ended November 27, 1999.

4.1      -        Specimen of Common Stock Certificate, incorporated by
                  reference to Exhibit 4-A to Registration Statement No.
                  2-30163, filed on November 4, 1968.

4.2      -        Rights Agreement dated as of June 6, 1990 between the Company
                  and Manufacturers Hanover Trust Company, as Rights Agent,
                  which includes as Exhibit A the form of Rights Certificate and
                  as Exhibit B the Summary of Rights to purchase Common Stock,
                  incorporated by reference to Exhibit 4.2 to the 1993 10-K.

4.3      -        Amendment to the Rights Agreement between the Company and
                  Manufacturers Hanover Trust Company dated as of May 24, 1991,
                  incorporated by reference to Exhibit 4.3 to the 1993 10-K.

10.1     -        1987 Stock Option Plan of the Company, incorporated by
                  reference to Exhibit 10.1 to the 1993 10-K.

10.2     -        Employment Agreement dated as of March 1, 1993, between the
                  Company and Samson Bitensky, incorporated by reference to
                  Exhibit 10.2 to the 1993 10-K.

10.3     -        Fab Industries, Inc. Hourly Employees Retirement Plan (the
                  "Retirement Plan"), incorporated by reference to Exhibit 10.3
                  to the 1993 10-K.

                                       16
<PAGE>

10.4     -        Amendment to the Retirement Plan effective December 11, 1978,
                  incorporated by reference to Exhibit 10.4 to the 1993 10-K.

10.5     -        Amendment to the Retirement Plan effective December 1, 1981,
                  incorporated by reference to Exhibit 10.5 to the 1993 10-K.

10.6     -        Amendment to the Retirement Plan dated November 21, 1983,
                  incorporated by reference to Exhibit 10.6 to the 1993 10-K.

10.7     -        Amendment to the Retirement Plan dated August 29, 1986,
                  incorporated by reference to Exhibit 10.7 to the 1993 10-K.

10.8     -        Amendment to the Retirement Plan effective as of December 1,
                  1989, incorporated by reference to Exhibit 10.8 to the 1993
                  10-K.

10.9     -        Amendment to the Retirement Plan dated September 21, 1995,
                  incorporated by reference to Exhibit 10.9 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  2, 1995 (the "1995 10-K").

10.10    -        Fab Lace, Inc. Employees Profit Sharing Plan (the "Profit
                  Sharing Plan"), incorporated by reference to Exhibit 10.9 to
                  the 1993 10-K.

10.11    -        Amendment to the Profit Sharing Plan effective December 1,
                  1978, incorporated by reference to Exhibit 10.10 to the 1993
                  10-K.

10.12    -        Amendment dated December 1, 1985 to the Profit Sharing Plan,
                  incorporated by reference to Exhibit 10.11 to the 1993 10-K.

10.13    -        Amendment dated February 5, 1987 to the Profit Sharing Plan,
                  incorporated by reference to Exhibit 10.12 to the 1993 10-K.

10.14    -        Amendment dated December 24, 1987 to the Profit Sharing Plan,
                  incorporated by reference to Exhibit 10.13 to the 1993 10-K.

10.15    -        Amendment dated June 30, 1989 to the Profit Sharing Plan,
                  incorporated by reference to Exhibit 10.14 to the 1993 10-K.

10.16    -        Amendment dated February 1, 1991 to the Profit Sharing Plan,
                  incorporated by reference to Exhibit 10.15 to the 1993 10-K.

10.17    -        Amendment dated September 1, 1995 to the Profit Sharing Plan,
                  incorporated by reference to Exhibit 10.17 to the 1995 10-K.

10.18    -        Lease dated as of December 8, 1988 between Glockhurst
                  Corporation, N.V. and the Company, incorporated by reference
                  to Exhibit 10.16 to the 1993 10-K.

10.19    -        Lease Modification Agreement dated April 2, 1991 between
                  Glockhurst Corporation, N.V. and the Company, incorporated by
                  reference to Exhibit 10.17 to the 1993 10-K.

10.20    -        Second Lease Modification Agreement dated May 23, 1996 between
                  200 Madison Associates, L.P. and the Company, incorporated by
                  reference to Exhibit 10.20 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended November 30, 1996.

                                       17
<PAGE>

10.21    -        Third Lease Modification Agreement dated April 24, 2000
                  between 200 Madison Associates, L.P. and the Company,
                  incorporated by reference to Exhibit 10.21 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended November
                  30, 2001.

*10.22   -        Fourth Lease Modification Agreement dated April 11, 2002
                  between 200 Madison Associates, L.P. and the Company.

10.23    -        Lease dated as of March 1, 1979 between City of Amsterdam
                  Industrial Development Agency and Gem Urethane Corp.,
                  incorporated by reference to Exhibit 10.18 to the 1993 10-K.

10.24    -        Lease dated as of January 1, 1977 between City of Amsterdam
                  Industrial Development Agency and Lamatronics Industries,
                  Inc., incorporated by reference to Exhibit 10.19 to the 1993
                  10-K.

10.25    -        Form of indemnification agreement between the Company and its
                  officers and directors, incorporated by reference to Exhibit
                  10.20 to the 1993 10-K.

10.26    -        Fab Industries, Inc. Employee Stock Ownership Plan effective
                  as of Nov. 25, 1991, incorporated by reference to Exhibit
                  10.24 to the 1993 10-K.

10.27    -        Amendment dated September 21, 1995 to the Employee Stock
                  Ownership Plan, incorporated by reference to Exhibit 10.27 to
                  the 1995 10-K.

10.28    -        Fab Industries, Inc. Non-Qualified Executive Retirement Plan
                  dated as of November 30, 1990, incorporated by reference to
                  Exhibit 10.25 to the 1993 10-K.

10.29    -        Fab Industries, Inc. 1997 Stock Incentive Plan, incorporated
                  by reference to Exhibit A to the Proxy Statement dated May 6,
                  1999, File No. 1-5901.

10.30    -        Fab Industries, Inc. 2001 Stock Incentive Plan, incorporated
                  by reference to Exhibit B to the Proxy Statement dated April
                  2, 2001, File No. 1-5901.

*10.31   -        Form of loan agreement, dated May 30, 2002, entered into
                  between Fab Industries, Inc. and certain of its executive
                  officers and directors.

  21     -        Subsidiaries of the Company, incorporated by reference to
                  Exhibit 21 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 2, 2000.

*99.1    -        Certification of Chief Executive Officer pursuant to U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

*99.2    -        Certification of Chief Financial Officer pursuant to U.S.C.
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

---------------------

*    Filed herewith.


        (b)       Reports on Form 8-K.

                  No reports on Form 8-K were filed during the last quarter of
                  the period covered by this report.

                                       18


<PAGE>


                              FAB INDUSTRIES, INC.
                                AND SUBSIDIARIES







                                               CONSOLIDATED FINANCIAL STATEMENTS
                                                                FORM 10-K ITEM 8
                      FISCAL YEARS ENDED NOVEMBER 30, 2002, DECEMBER 1, 2001 AND
                                                                DECEMBER 2, 2000



<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K ITEM 8

            FISCAL YEARS ENDED NOVEMBER 30, 2002, DECEMBER 1, 2001,
                              AND DECEMBER 2, 2000



                                                                             F-1
<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES


                                    CONTENTS


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                           F-3
REPORT OF INDEPENDENT AUDITORS                                               F-4


CONSOLIDATED FINANCIAL STATEMENTS:
   Balance sheets                                                            F-5
   Statements of operations                                                  F-6
   Statements of stockholders' equity                                        F-7
   Statements of cash flows
                                                                             F-8
SUMMARY OF ACCOUNTING POLICIES                                        F-9 - F-16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           F-17 - F-43


                                                                             F-2
<PAGE>


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
Fab Industries, Inc.
New York, New York

We have audited the accompanying consolidated balance sheets of Fab Industries,
Inc. and subsidiaries as of November 30, 2002 and December 1, 2001, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the fiscal years then ended. Our audits also included the 2002 and
2001 schedule listed in the index on page S-2. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and schedule. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements and schedule.
We believe that our audits provides a reasonable basis for our opinion.

As discussed in the summary of accounting policies, on March 1, 2002, the
Company's Board of Directors adopted resolutions, which authorize, subject to
stockholders approval, the sale of the business pursuant to a plan of
liquidation. The Company's stockholders approved the Plan at the Company's
annual meeting on May 30, 2002.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fab Industries, Inc.
and subsidiaries at November 30, 2002 and December 1, 2001, and the results of
their operations and their cash flows for the fiscal years then ended, in
conformity with accounting principles generally accepted in the United States of
America.

Also, in our opinion, the related schedule presents fairly, in all material
respects, the information set forth therein for the fiscal years ended November
30, 2002 and December 1, 2001.

/s/ BDO SEIDMAN, LLP
--------------------
New York, New York
February 15, 2003


                                                                             F-3
<PAGE>


REPORT OF INDEPENDENT AUDITORS


Board of Directors and Stockholders
Fab Industries, Inc.

We have audited the accompanying consolidated statements of income,
stockholders' equity, and cash flows of Fab Industries, Inc. and subsidiaries
for the year ended December 2, 2000. Our audit also included the 2000 financial
statement schedule listed in the index on page S-2. These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations of Fab Industries,
Inc. and subsidiaries and their cash flows for the year ended December 2, 2000,
in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related 2000 financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP
---------------------
Charlotte, North Carolina
February 16, 2001


                                                                             F-4
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                     CONSOLIDATED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                                          NOVEMBER 30, 2002      DECEMBER 1, 2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                    <C>
ASSETS
CURRENT:
   Cash and cash equivalents (Note 1)                                     $    3,146,000         $    6,742,000
   Investment securities available-for-sale (Note 2)                          45,551,000             82,021,000
   Accounts receivable, net of allowance of $1,000,000 and $600,000
      for doubtful accounts                                                    7,548,000             10,668,000
   Inventories (Note 3)                                                        8,386,000             12,335,000
   Other current assets                                                          867,000              1,617,000
---------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT ASSETS                                                  65,498,000            113,383,000
PROPERTY, PLANT AND EQUIPMENT - NET (NOTE 4)                                  12,007,000             14,065,000
DEFERRED TAX ASSET (NOTE 8)                                                      528,000                826,000
OTHER ASSETS (NOTE 7)                                                          3,196,000              3,254,000
---------------------------------------------------------------------------------------------------------------------
                                                                             $81,229,000           $131,528,000
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
   Accounts payable                                                       $    2,858,000         $    3,661,000
   Corporate income and other taxes                                            1,980,000              1,787,000
   Accrued payroll and related expenses                                          903,000              1,318,000
   Dividends payable                                                                  --                521,000
   Other current liabilities                                                     940,000                816,000
   Deferred income taxes (Note 8)                                                  9,000                269,000
---------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT LIABILITIES                                              6,690,000              8,372,000
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT MATURITIES (NOTE 5)
                                                                                      --                311,000
OTHER NONCURRENT LIABILITIES (NOTE 7)                                          2,968,000              2,342,000
---------------------------------------------------------------------------------------------------------------------
        TOTAL LIABILITIES                                                      9,658,000             11,025,000
---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 7 AND 9)
REDEEMABLE COMMON STOCK (NOTE 9)                                               7,000,000              7,000,000
---------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (NOTES 2, 6, 7, AND 9):
   Preferred stock, $1 par value - shares authorized 2,000,000;
      none issued                                                                     --                     --
   Common stock, $.20 par value - shares authorized 15,000,000;
      issued 6,724,944 and 6,591,944                                           1,345,000              1,319,000
   Additional paid-in capital                                                         --              6,967,000
   Retained earnings                                                         100,455,000            144,224,000
   Loan to employee stock ownership plan                                              --             (3,957,000)
   Accumulated other comprehensive gain                                          229,000                334,000
   Cost of common stock  held in treasury - 1,486,929 and
      1,383,574 shares                                                       (37,237,000)           (35,384,000)
   Notes receivable from stockholders (Note 6)                                  (221,000)                    --
---------------------------------------------------------------------------------------------------------------------
        TOTAL STOCKHOLDERS' EQUITY                                            64,571,000            113,503,000
---------------------------------------------------------------------------------------------------------------------
                                                                             $81,229,000           $131,528,000
=====================================================================================================================
</TABLE>

                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                             F-5
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                           CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================

<TABLE>
<CAPTION>
=====================================================================================================================
FISCAL YEAR ENDED
---------------------------------------------------------------------------------------------------------------------
                                                                 NOVEMBER 30,        DECEMBER 1,         DECEMBER 2,
                                                                    2002                 2001              2000 (1)
---------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>                  <C>
NET SALES (NOTE 14)                                            $  62,965,000     $   80,036,000       $ 118,185,000
COST OF GOODS SOLD                                                56,412,000         78,518,000         106,756,000
---------------------------------------------------------------------------------------------------------------------
        GROSS PROFIT                                               6,553,000          1,518,000          11,429,000
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                       7,372,000          9,748,000          12,465,000
ASSET IMPAIRMENT AND RESTRUCTURING CHARGES (NOTE 12)                      --         14,530,000                  --
OTHER EXPENSE (NOTE 16)                                              750,000                 --                  --
---------------------------------------------------------------------------------------------------------------------
        OPERATING LOSS                                            (1,569,000)       (22,760,000)         (1,036,000)
---------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSES):
   Interest and dividend income (Note 11)                          2,413,000          4,289,000           4,000,000
   Interest expense                                                  (13,000)           (42,000)            (86,000)
   Net gain on investment securities (Note 2)                      2,179,000          3,025,000           1,300,000
---------------------------------------------------------------------------------------------------------------------
        TOTAL OTHER INCOME                                         4,579,000          7,272,000           5,214,000
---------------------------------------------------------------------------------------------------------------------
        INCOME (LOSS) BEFORE TAXES ON INCOME                       3,010,000        (15,488,000)          4,178,000
INCOME TAX EXPENSE (BENEFIT) (NOTE 8)                              1,040,000         (6,865,000)          1,145,000
---------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                              $   1,970,000     $   (8,623,000)      $   3,033,000
=====================================================================================================================
EARNINGS (LOSS) PER SHARE (NOTE 13):
   Basic                                                       $         .38     $        (1.64)      $         .57
   Diluted                                                     $         .38     $        (1.64)      $         .57
=====================================================================================================================
CASH DIVIDENDS DECLARED PER SHARE                              $       10.00     $          .40       $        .475
=====================================================================================================================
</TABLE>

                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


(1) 53 WEEKS

                                                                             F-6
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                  COMMON STOCK                                                 ACCUMULATED
                                            -----------------------   ADDITIONAL                  LOAN TO        OTHER
                                               NUMBER                  PAID-IN      RETAINED  EMPLOYEE STOCK  COMPREHENSIVE
                                  TOTAL      OF SHARES      AMOUNT     CAPITAL      EARNINGS  OWNERSHIP PLAN  INCOME (LOSS)
----------------------------------------------------------------------------------------------------------------------------
<S>                          <C>             <C>          <C>          <C>        <C>           <C>            <C>
Balance, November 27, 1999   123,788,000     6,591,944    1,319,000    6,967,000  154,445,000   (5,537,000)    (411,000)
Net income - fiscal 2000       3,033,000            --           --           --    3,033,000           --           --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                      114,000            --           --           --           --           --      114,000
                                --------                                                                             --
Total comprehensive income     3,147,000            --           --           --           --           --           --
Cash dividends                (2,531,000)           --           --           --   (2,531,000)          --           --
Purchase of treasury stock    (1,339,000)           --           --           --           --           --           --
Payment of loan from ESOP        790,000
   (Note 7)                                         --           --           --           --      790,000           --
----------------------------------------------------------------------------------------------------------------------------
Balance, December 2, 2000    123,855,000     6,591,944    1,319,000    6,967,000  154,947,000   (4,747,000)    (297,000)

Net loss - fiscal 2001        (8,623,000)           --           --           --   (8,623,000)          --           --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                      631,000            --           --           --           --           --      631,000
                                --------
Total comprehensive loss      (7,992,000)           --           --           --           --           --           --
Cash dividends                (2,100,000)           --           --           --   (2,100,000)          --           --
Purchase of treasury stock    (1,050,000)           --           --           --           --           --           --
Payment of loan from ESOP        790,000
   (Note 7)                                         --           --           --           --      790,000           --
----------------------------------------------------------------------------------------------------------------------------
Balance, December 1, 2001    113,503,000     6,591,944    1,319,000    6,967,000  144,224,000   (3,957,000)     334,000
Net income - fiscal 2002       1,970,000            --           --           --    1,970,000           --           --
Minimum pension liability
   adjustment of $164,000,
   net of tax benefit of
   $59,000                      (105,000)           --           --           --           --           --     (105,000)
                               ---------                                                                      ---------
Total comprehensive income     1,865,000            --           --           --           --           --           --
Cash dividends               (52,380,000)           --           --   (6,641,000) (45,739,000)          --           --
Acceleration of stock            418,000
   options (Note 6)                                 --           --      418,000           --           --           --
Exercise of stock options      1,445,000
   (Note 6)                                    133,000       26,000    1,640,000           --           --           --
Purchase of treasury stock      (280,000)           --           --       17,000           --           --           --
Termination of Employee
   Stock Ownership Plan               --            --           --   (2,401,000)                3,957,000           --
----------------------------------------------------------------------------------------------------------------------------
Balance, November 30, 2002   $64,571,000     6,724,944   $1,345,000           --  $100,455,000          --     $229,000
----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>

--------------------------------------------------------------------
                                    TREASURY STOCK          NOTES
                               ------------------------   RECEIVABLE
                                  NUMBER                    FROM
                                OF SHARES       COST    STOCKHOLDERS
--------------------------------------------------------------------
Balance, November 27, 1999     (1,188,389)  (32,995,000)
Net income - fiscal 2000               --            --          --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                            --            --          --
Total comprehensive income             --            --          --
Cash dividends                         --            --          --
Purchase of treasury stock       (122,069)   (1,339,000)         --
Payment of loan from ESOP
   (Note 7)                            --            --          --
--------------------------------------------------------------------
Balance, December 2, 2000      (1,310,458)   (34,334,000)        --
Net loss - fiscal 2001                 --            --          --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                            --            --          --
Total comprehensive loss               --            --          --
Cash dividends                         --            --          --
Purchase of treasury stock        (73,116)   (1,050,000)         --
Payment of loan from ESOP
   (Note 7)                            --            --          --
--------------------------------------------------------------------
Balance, December 1, 2001      (1,383,574)  (35,384,000)         --
Net income - fiscal 2002               --            --          --
Minimum pension liability
   adjustment of $164,000,
   net of tax benefit of
   $59,000                             --            --          --
Total comprehensive income             --            --          --
Cash dividends                         --            --          --
Acceleration of stock
   options (Note 6)                    --
Exercise of stock options
   (Note 6)                            --            --    (221,000)
Purchase of treasury stock        (16,899)     (297,000)         --
Termination of Employee
   Stock Ownership Plan           (86,456)   (1,556,000)         --
--------------------------------------------------------------------
Balance, November 30, 2002     (1,486,929) $(37,237,000)  $(221,000)
--------------------------------------------------------------------
====================================================================


                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                             F-7
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                       (NOTE 10)

<TABLE>
<CAPTION>
============================================================================================================================
                                                                             NOVEMBER 30,      DECEMBER 1,       DECEMBER 2,
FISCAL YEAR ENDED                                                                2002             2001              2000
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                       $   1,970,000    $  (8,623,000)    $   3,033,000
   Adjustments to reconcile net income (loss) to net cash provided by
      operating activities:
        Provision for doubtful accounts                                          400,000          400,000           850,000
        Depreciation and amortization                                          2,143,000        4,609,000         5,864,000
        Deferred income taxes                                                     38,000       (6,555,000)          335,000
        Non-cash asset impairment and restructuring charges                           --       13,241,000                --
        Compensation relating to acceleration of stock options                   418,000               --                --
        Net gain on investment securities                                     (2,179,000)      (3,025,000)       (1,300,000)
        Gain on disposition of fixed assets                                     (817,000)        (261,000)         (106,000)
             Decrease (increase) in:
           Accounts receivable                                                 2,720,000        6,005,000         3,494,000
           Inventories                                                         3,949,000        7,083,000         4,584,000
           Other current assets                                                  750,000          922,000          (324,000)
           Other assets                                                           58,000         (333,000)          558,000
        Increase (decrease) in:
           Accounts payable                                                     (804,000)      (1,871,000)       (1,659,000)
           Accruals and other liabilities                                        112,000       (1,518,000)          833,000
----------------------------------------------------------------------------------------------------------------------------
              NET CASH PROVIDED BY OPERATING ACTIVITIES                        8,758,000       10,074,000        16,162,000
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                                   (225,000)        (703,000)       (1,403,000)
   Proceeds from sale of property and equipment                                  957,000          725,000           379,000
   Proceeds from sales of investment securities                               38,650,000               --         2,816,000
   Acquisition of investment securities                                               --      (15,681,000)       (5,839,000)
----------------------------------------------------------------------------------------------------------------------------
              NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES             39,382,000      (15,659,000)       (4,047,000)
----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of treasury stock                                                   (280,000)      (1,050,000)       (1,339,000)
   Principal repayment on loan to employee stock ownership plan                       --          790,000           790,000
   Dividends                                                                 (52,901,000)      (2,108,000)       (2,949,000)
   Exercise of stock options                                                   1,445,000               --                --
----------------------------------------------------------------------------------------------------------------------------
              NET CASH USED IN FINANCING ACTIVITIES                          (51,736,000)      (2,368,000)       (3,498,000)
----------------------------------------------------------------------------------------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS                                         (3,596,000)      (7,953,000)        8,617,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                   6,742,000       14,695,000         6,078,000
----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                      $  3,146,000     $  6,742,000     $  14,695,000
============================================================================================================================
</TABLE>

                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                             F-8
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

 BUSINESS                       Fab Industries, Inc. (the "Company") is a major
                                manufacturer of knitted apparel fabrics,
                                including laces and finished home products, as
                                well as laminated fabrics. The Company's sales
                                in fiscal 2002, 2001 and 2000 were primarily
                                made to customers in the United States.

                                The Company's Board of Directors has determined
                                that it is in the best interests of its
                                stockholders to sell the Company's business as a
                                going concern. In order to maximize stockholder
                                value, the Board of Directors adopted
                                resolutions dated March 1, 2002 which
                                authorized, subject to stockholder approval, the
                                sale of the Company's business pursuant to a
                                Plan of Liquidation and Dissolution (the
                                "Plan"). The Company's stockholders approved the
                                Plan at the Company's annual meeting on May 30,
                                2002. The Plan provides the Company's officers
                                and directors will continue to operate the
                                Company's business in its current fashion and
                                pursue a sale of the business as a going
                                concern. The Company's Board of Directors has
                                approved the engagement of McFarland Dewey &
                                Co., LLC financial advisors in November 2002 to
                                assist with the sale of the business. The
                                accompanying financial statements have been
                                prepared on a going concern basis. There can be
                                no assurance, however, that the Company will be
                                successful in selling its business or if it does
                                sell the business, that it will be able to
                                recover the full value of its assets,
                                particularly its property, plant and equipment.
                                On May 30, 2002, the Company's Board of
                                Directors declared an initial liquidating
                                distribution of $10.00 per share, which resulted
                                in a payment to stockholders of $52,380,000 in
                                June 2002.


 PRINCIPLES OF CONSOLIDATION    The financial statements include the accounts of
                                the Company and its subsidiaries, all of which
                                are wholly owned. Significant intercompany
                                transactions and balances have been eliminated.


                                                                             F-9
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================
 FISCAL YEAR                    The Company's fiscal year ends on the Saturday
                                closest to November 30. Each of fiscal 2002 and
                                2001 had fifty-two weeks, and fiscal 2000 had
                                fifty-three weeks.


 RISKS AND UNCERTAINTIES        The preparation of financial statements in
                                conformity with generally accepted accounting
                                principles requires management to make estimates
                                and assumptions that affect the reported amounts
                                of assets and liabilities and disclosure of
                                contingent assets and liabilities at the date of
                                the financial statements and the reported
                                amounts of revenues and expenses during the
                                reporting period. Actual results could differ
                                from those estimates and assumptions.

                                Financial instruments which potentially subject
                                the Company to concentrations of credit risk
                                consist principally of cash and cash
                                equivalents, investment securities, and trade
                                receivables. The Company places its cash and
                                cash equivalents with high credit quality
                                financial institutions. The Company is subject
                                to credit risk if the brokers are unable to
                                repay balances due or deliver securities in
                                their custody. By policy, the Company limits the
                                amount of credit exposure to any one financial
                                institution. The Company has received
                                confirmation indicating that, with respect to
                                investment securities, each custodian with the
                                exception of one custodian maintains appropriate
                                insurance coverage. During fiscal 2002 and
                                fiscal 2001, that custodian had approximately
                                $10 million and $16 million, respectively, of
                                the Company's cash under investment which from
                                time to time during such periods was invested
                                entirely in equity securities. At November 30,
                                2002, that custodian had approximately $10
                                million of the Company's cash under investments,
                                which were invested in U.S. Treasury
                                obligations. In June 2002, the Company
                                liquidated $8,000,000 from that custodian as
                                part of the liquidating dividend. The Company's
                                investment policy currently permits up to 25% of
                                the Company's portfolio to include equity
                                securities.


                                                                            F-10
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

                                Concentrations of credit risk with respect to
                                trade receivables are limited due to the diverse
                                group of manufacturers, wholesalers and
                                retailers to whom the Company sells. The Company
                                reviews a customer's credit history before
                                extending credit. The Company further reduces
                                its credit risk by factoring, without recourse,
                                a variable amount of trade receivables. As of
                                November 30, 2002 and December 1, 2001, 11% and
                                18%, respectively, of the accounts receivable
                                outstanding were due from factors. The Company
                                has established an allowance for doubtful
                                accounts based upon factors surrounding the
                                credit risk of specific customers, historical
                                trends and other information.


                                                                            F-11
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

 CASH EQUIVALENTS               The Company considers all highly liquid debt
                                instruments with original maturities of three
                                months or less to be cash equivalents.


 INVESTMENTS                    The Company follows Statement of Financial
                                Accounting Standards ("SFAS") No. 115,
                                "Accounting for Certain Investments in Debt and
                                Equity Securities" ("SFAS No. 115"). SFAS No.
                                115 addresses accounting and reporting for
                                investments in equity securities that have
                                readily determinable fair values and for all
                                investments in debt securities. Investments in
                                such securities are to be classified as either
                                held-to-maturity, trading, or
                                available-for-sale. The Company classifies all
                                of its investments as available-for-sale. The
                                investments are recorded at their fair value and
                                the unrealized gain or loss, net of income
                                taxes, is recorded in stockholders' equity.

                                Gains and losses on sales of investment
                                securities are computed using the specific
                                identification method.


 INVENTORIES                    Inventories are valued at the lower of cost or
                                market. For a portion of the inventories, cost
                                is determined by the last-in, first-out (LIFO)
                                method with the balance being determined by the
                                first-in, first-out (FIFO) method.


                                                                            F-12
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

 DERIVATIVE FINANCIAL           The Company is party to equity option
 INSTRUMENTS HELD OR ISSUED     contracts as part of its investing activities.
                                Option contracts are contractual agreements that
                                give the purchaser the right, but not the
                                obligation, to purchase or sell a financial
                                instrument at a predetermined exercise price. In
                                return for this right, the purchaser pays a
                                premium to the seller of the option. By selling
                                or writing options, the Company receives a
                                premium and becomes obligated during the term of
                                the option to purchase or sell a financial
                                instrument at a predetermined exercise price if
                                the option is exercised, and assumes the risk of
                                not being able to enter into a closing
                                transaction if a liquid secondary market does
                                not exist.

                                In accordance with SFAS No. 133, the Company's
                                policy is to recognize all derivatives
                                instruments as either assets or liabilities on
                                the balance sheet at fair value. Changes in fair
                                value are recognized in the income statement in
                                the period in which they occur. Derivatives are
                                not used for trading purposes. Derivatives are
                                used to hedge against fluctuations in the market
                                value of equity securities.


 PROPERTY, PLANT AND EQUIPMENT  Property, plant and equipment are stated at
                                cost. Depreciation is computed using principally
                                the straight-line method. The range of estimated
                                useful lives is 15 to 33 years for buildings and
                                building improvements, 4 to 10 years for
                                machinery and equipment, 10 years for leasehold
                                improvements and 5 years for trucks and
                                automobiles.


 LONG-LIVED ASSETS              The Company reviews the carrying values of its
                                long-lived and identifiable intangible assets
                                for possible impairment whenever events or
                                changes in circumstances indicate that the
                                carrying amount of the assets may not be
                                recoverable. Any long-lived assets held for
                                disposal are reported at the lower of their
                                carrying amounts or fair value less cost to
                                sell. During fiscal 2001, the Company recorded
                                asset impairment and restructuring charges. See
                                Note 12 of the notes to the consolidated
                                financial statements.


 RESEARCH AND DEVELOPMENT       Research and development costs are charged to
 COSTS                          expenses in the year incurred and amounted to
                                $1,690,000, $1,999,000, and $3,206,000 in fiscal
                                2002, 2001 and 2000, respectively.


                                                                            F-13
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

 STOCK-BASED COMPENSATION       In fiscal 1997, the Company became subject to
                                SFAS No. 123, "Accounting for Stock-Based
                                Compensation" ("SFAS No. 123"), which allows
                                either the intrinsic or fair value method. SFAS
                                No. 123 encourages, but does not require,
                                entities to adopt the fair value method in place
                                of the intrinsic value method as provided for in
                                Accounting Principles Board Opinion No. 25,
                                "Accounting for Stock Issued to Employees" ("APB
                                No. 25"), for all arrangements under which
                                employees receive shares of stock or other
                                equity instruments of the employer or the
                                employer incurs liabilities to employees in
                                amounts based on the price of its stock. When
                                the Company adopted SFAS No. 123, it elected to
                                retain the intrinsic value method. The required
                                fair value disclosures are included in the notes
                                to the consolidated financial statements.

 TAXES ON INCOME                The Company follows the liability method of
                                accounting for income taxes. Accordingly,
                                deferred income taxes reflect the net tax effect
                                of temporary differences between the carrying
                                amounts of assets and liabilities for financial
                                reporting purposes and for income tax purposes.


 EARNINGS (LOSS) PER SHARE      Basic earnings (loss) per share is based on the
                                weighted average number of common shares
                                outstanding during the fiscal year. Diluted
                                earnings per share is based on the weighted
                                average number of common shares and dilutive
                                potential common shares outstanding during the
                                fiscal year. The Company's dilutive potential
                                common shares outstanding during fiscal 2002,
                                2001, and 2000 resulted entirely from dilutive
                                stock options. For fiscal 2002, 2001 and 2000,
                                potentially dilutive securities that related to
                                shares issuable upon the exercise of stock
                                options granted by the Company were excluded, as
                                their effect was antidilutive. See Note 13 of
                                notes to the consolidated financial statements.


 REVENUE RECOGNITION            The Company recognizes its revenues upon
                                shipment of the related goods. Allowances for
                                estimated returns are provided when sales are
                                recorded.


                                                                            F-14
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

 NEW ACCOUNTING STANDARDS       In July 2001, the Financial Accounting Standard
                                Board (FASB) issued FASB Statements Nos. 141 and
                                142 (FAS 141 and FAS 142), "Business
                                Combinations" and "Goodwill and Other Intangible
                                Assets." FAS 141 replaces APB 16 and eliminates
                                pooling-of-interests accounting prospectively.
                                It also provides guidance on purchase accounting
                                related to the recognition of intangible assets
                                and accounting for negative goodwill. FAS 142
                                changes the accounting for goodwill from an
                                amortization method to an impairment-only
                                approach. FAS 141 and FAS 142 are effective for
                                all business combinations completed after June
                                30, 2001. Companies are required to adopt FAS
                                142 for fiscal years beginning after December
                                15, 2001, but early adoption is permitted. The
                                Company will adopt FAS 142 on December 1, 2002,
                                the beginning of fiscal 2003. The Company does
                                not believe the adoption of FAS 142 will impact
                                its results of operations or financial position.

                                In August 2001, the FASB issued FAS No. 144,
                                "Accounting for the Impairment or Disposal of
                                Long-Lived Assets," which addresses financial
                                accounting and reporting for the impairment or
                                disposal of long-lived assets and supersedes FAS
                                No. 121 and the accounting and reporting
                                provisions of APB Opinion No. 30 for a disposal
                                of a segment of a business. FAS 144 is effective
                                for fiscal years beginning after December 15,
                                2001, with earlier application encouraged. The
                                Company will adopt FAS 144 as of December 1,
                                2002, the beginning of fiscal 2003, and it does
                                not expect that the adoption of the Statement
                                will have a significant impact on the Company's
                                financial position and results of operations.


                                                                            F-15
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
================================================================================

                                In July 2002, the FASB issued FAS No. 146,
                                "Accounting for Restructuring Costs". FAS 146
                                applies to costs associated with an exit
                                activity (including restructuring) or with a
                                disposal of long-lived assets. Those activities
                                can include eliminating or reducing product
                                lines, terminating employees and contracts, and
                                relocating plant facilities or personnel. Under
                                FAS 146, a company will record a liability for a
                                cost associated with an exit or disposal
                                activity when that liability is incurred and can
                                be measured at fair value. FAS 146 will require
                                a company to disclose information about its exit
                                and disposal activities, the related costs, and
                                changes in those costs in the notes to the
                                interim and annual financial statements that
                                include the period in which an exit activity is
                                initiated and in any subsequent period until the
                                activity is completed. FAS 146 is effective
                                prospectively for exit or disposal activities
                                initiated after December 31, 2002, with earlier
                                adoption encouraged. Under SFAS 146, a company
                                may not restate its previously issued financial
                                statements and the new statement grandfathers
                                the accounting for liabilities that a company
                                had previously recorded under Emerging Issues
                                Task Force Issue 94-3. The Company does not
                                anticipate that the adoption of FAS 146 will
                                have a material effect on its results of
                                operations or financial position.


 RECLASSIFICATIONS              Certain prior fiscal years' accounts have been
                                reclassified for comparative purposes.


                                                                            F-16
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

1.       CASH AND CASH            Cash and cash equivalents at November 30, 2002
         EQUIVALENTS              and December 1, 2001 consisted of the
                                  following (in thousands):

<TABLE>
<CAPTION>
                                                                                     2002                   2001
                                  ---------------------------------------------------------------------------------
                                  <S>                                              <C>                    <C>
                                  Cash                                             $  526                 $  155
                                  Taxable and tax-free short-term
                                     debt instruments

                                                                                    2,620                  6,587
                                  ---------------------------------------------------------------------------------
                                                                                   $3,146                 $6,742
                                  =================================================================================
</TABLE>

2.       INVESTMENT SECURITIES    Investment securities available-for-sale at
                                  November 30, 2002 and December 1, 2001
                                  consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                            GROSS         GROSS
                                                                          UNREALIZED    UNREALIZED
                                                               COST      HOLDING GAIN  HOLDING LOSS    FAIR VALUE
                                  --------------------------------------------------------------------------------
                                  <S>                       <C>              <C>            <C>         <C>
                                  November 30, 2002:
                                     Equities               $   750          $     --       $    --     $     750
                                     U.S. Treasury
                                        obligations          32,411               617            --        33,028
                                     Corporate bonds          7,748               194          (254)        7,688
                                     Money market             4,085                --            --         4,085
                                  --------------------------------------------------------------------------------
                                                            $44,994          $    811       $  (254)    $  45,551
                                  ================================================================================
                                  December 1, 2001:
                                     Equities               $   798          $     --       $   (15)    $     783
                                     U.S. Treasury
                                        obligations          47,240               316           (16)       47,540
                                     Corporate bonds         32,288               721          (450)       32,559
                                     Money market             1,139                --            --         1,139
                                  --------------------------------------------------------------------------------
                                                            $81,465          $  1,037       $  (481)    $  82,021
                                  ================================================================================
</TABLE>


                                                                            F-17
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

The carrying values and approximate fair values of investments in debt
securities available-for-sale, at November 30, 2002 and December 1, 2001, by
contractual maturity are as shown below:

                          NOVEMBER 30, 2002              DECEMBER 1, 2001
                      ---------------------------  -----------------------------
                          Cost       Fair value        Cost        Fair value
--------------------------------------------------------------------------------
Maturing in one
   year or less           $ 10,064      $ 10,067       $ 29,983      $ 30,005
Maturing after one
   year through
   five years               28,054        28,520         35,321        35,781
Maturing after five
   years through
   ten years                   259           264          8,130         8,161
Ten years and over           1,782         1,865          6,094         6,152
--------------------------------------------------------------------------------
                           $40,159       $40,716        $79,528       $80,099
================================================================================

Gross and net realized gains and losses on sales of investment securities were:

                                           2002            2001           2000
--------------------------------------------------------------------------------
Gross realized gains                    $ 6,653         $ 6,619        $ 4,214
Gross realized losses                    (4,474)         (3,594)        (2,914)
--------------------------------------------------------------------------------
Net realized gain                       $ 2,179         $ 3,025        $ 1,300
================================================================================

Other comprehensive income for fiscal 2002, 2001, and 2000 consisted of the
following (in thousands):

                                           2002            2001            2000
--------------------------------------------------------------------------------
Unrealized holding gains
arising during the year, net of
tax                                      $1,307          $2,446            $894

Reclassification adjustment,
net of tax                               (1,307)         (1,815)           (780)
--------------------------------------------------------------------------------
Other comprehensive income, net
of tax                                    $  --          $  631            $114
================================================================================


                                                                            F-18
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                              During fiscal 2002, the Company invested a portion
                              of its securities in equity consisting of a
                              portfolio of Standard and Poor's 100 ("S&P 100")
                              common stocks, the fair value of which varies
                              consistently with changes in the S&P 100 index. To
                              hedge against fluctuations in the market value of
                              the portfolio, the Company has purchased
                              short-term S&P 100 index put options and sold
                              short-term S&P 100 call options. At November 30,
                              2002 and December 1, 2001, the Company had no such
                              investments, but will continue to invest in such
                              equities in the future.

                              Realized gains or (losses) on purchased short-term
                              S&P 100 index put options and sold short-term S&P
                              100 call options during fiscal 2002, 2001, and
                              2000 were approximately ($1,463,000), $925,000 and
                              $2,217,000, respectively.

                              The Company has agreements with various brokerage
                              firms to carry its account as a customer. The
                              brokers have custody of the Company's securities
                              and, from time to time, cash balances which may be
                              due from these brokers.

                              These securities and/or cash positions serve as
                              collateral for any amounts due to brokers or as
                              collateral for securities sold short or securities
                              purchased on margin. The securities and/or cash
                              positions also serve as collateral for potential
                              defaults of the Company.


                                                                            F-19
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

3.    INVENTORIES        Inventories at November 30, 2002 and December 1, 2001
                         consisted of the following (in thousands, except for
                         percentages):
<TABLE>
<CAPTION>
                         --------------------------------------------------------------------------------
                                                                            2002                   2001
                         --------------------------------------------------------------------------------
                         <S>                                            <C>                    <C>
                         Raw materials                                  $  2,131               $  3,036
                         Work-in-process                                   2,717                  4,083
                         Finished goods                                    3,538                  5,216
                         --------------------------------------------------------------------------------
                                                                        $  8,386                $12,335
                         ================================================================================

                         Approximate percentage of
                            inventories valued under LIFO
                            method                                          62%                    56%
                         ================================================================================
                         Excess of FIFO valuation over
                            LIFO valuation                              $  1,614               $  1,710
                         ================================================================================
</TABLE>

                         In fiscal 2002 and 2001, the liquidation of certain
                         LIFO layers increased cost of goods sold by $503,000
                         and $1,909,000, respectively. The inventories in
                         these LIFO layers were acquired at higher costs than
                         current costs.


                                                                            F-20
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

4.       PROPERTY, PLANT AND       Property,  plant  and  equipment  at
         EQUIPMENT                 November 30, 2002 and December 1, 2001
                                   consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                                                     2002                2001
                                   -----------------------------------------------------------------------------
                                   <S>                                        <C>                 <C>
                                   Land and improvements                      $       682         $       682
                                   Buildings and improvements                       8,377              11,304
                                   Machinery and equipment                         70,431              74,275
                                   Trucks and automobiles                           1,742               1,742
                                   Office equipment                                   681                 681
                                   Leasehold improvements                             929                 929
                                   Assets held for sale                             2,786               1,482
                                   -----------------------------------------------------------------------------
                                                                                   85,628              91,095
                                   Less:  Accumulated depreciation and
                                              amortization                         73,621              77,030
                                   -----------------------------------------------------------------------------
                                                                                $  12,007           $  14,065
                                   =============================================================================
</TABLE>


5.       OBLIGATIONS UNDER         Obligations  under capital leases at
         CAPITAL LEASES            November 30, 2002 and December 1, 2001
                                   consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                                                        2002                2001
                                   --------------------------------------------------------------------------------
                                   <S>                                                     <C>              <C>
                                   Obligations under capital leases                       --                $339
                                      through 2006 payable in monthly
                                      installments of $11 including
                                      interest at 10% per annum
                                   Less:  Current maturities (included
                                             with other current
                                             liabilities)                                 --                  28
                                   --------------------------------------------------------------------------------
                                                                                           -                $311
                                   ================================================================================
</TABLE>

                                   During fiscal 2002, the capital lease
                                   liability was forgiven by the lessor,
                                   resulting in other income of $339,000, which
                                   was included in selling, general and
                                   administrative expenses for fiscal 2002.


                                                                            F-21
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

6.       STOCK COMPENSATION        STOCK OPTION PLAN
         PLANS
                                   In May 2001 and May 1997, the Board of
                                   Directors adopted and the shareholders
                                   approved two new stock option plans providing
                                   for the grant of up to 200,000 shares and
                                   175,000 shares of common stock, respectively,
                                   at any time over the next ten years from the
                                   date such plans were adopted. These stock
                                   option plans have been terminated subsequent
                                   to the fiscal year ended November 30, 2002.

                                   Pursuant to resolutions adopted by the
                                   Company's Board of Directors and
                                   documentation sent to and returned to the
                                   Company by option holders, effective
                                   immediately following stockholder approval of
                                   the Plan on May 30, 2002, all outstanding
                                   options under the Company's 1997 Stock
                                   Incentive Plan became vested, and all options
                                   as to which optionees (including employees
                                   and directors) had returned to the Company
                                   the appropriate forms (representing options
                                   held by all but one optionee, who exercised
                                   via payment to the Company) were exercised
                                   through the issuance of loans from the
                                   Company to the optionees, with stock of the
                                   optionees held as collateral by the Company
                                   until the loans have been satisfied. These
                                   loans receivable have been recorded as a
                                   reduction of stockholders' equity as of
                                   November 30, 2002. The original amount of the
                                   loans issued to employees to exercise their
                                   options was approximately $1,495,000, of
                                   which approximately $1,274,000 was repaid
                                   prior to the fiscal year ending November 30,
                                   2002. These options are subject to variable
                                   accounting at each reporting period, until
                                   the related loans are repaid. No compensation
                                   cost was recorded at November 30, 2002
                                   related to variable accounting since the
                                   market price per option did not change
                                   significantly from the date the options were
                                   exercised to November 30, 2002. As of
                                   November 30, 2002, the balance of the loans
                                   outstanding was $221,000. Based on the
                                   acceleration of certain stock options, the
                                   Company recorded a charge of approximately
                                   $418,000 to compensation expense and an
                                   increase to additional paid-in capital. As of
                                   November 30, 2002, there were no outstanding
                                   options under either the 2001 stock option
                                   plan or the 1997 stock option plan.


                                                                            F-22
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   The Company has adopted the disclosure-only
                                   provisions of SFAS No. 123, "Accounting for
                                   Stock-Based Compensation." Accordingly, no
                                   compensation cost has been recognized for the
                                   Company's stock option plans. If the Company
                                   had elected to recognize compensation costs
                                   based on the fair value of the options
                                   granted at grant date as prescribed by SFAS
                                   No. 123, net income (loss) and earnings
                                   (loss) per share would have been reduced to
                                   the pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                    (DOLLARS IN THOUSANDS,
                                      EXCEPT PER SHARE DATA)                2002           2001            2000
                                   --------------------------------------------------------------------------------
                                   <S>                                    <C>           <C>               <C>
                                   Pro forma net income (loss)            $1,840        ($8,652)          $3,008
                                   Pro forma earnings (loss) per share
                                      - diluted                            $0.35         ($1.65)           $0.56
                                   ================================================================================
</TABLE>


                                   There were no options granted in fiscal 2002.

                                   The weighted average fair value of options
                                   granted was $3.67 and $2.45 per share in
                                   fiscal 2001 and 2000, respectively.

                                   The fair value of each option grant is
                                   estimated on the date of grant using the
                                   Black-Scholes option-pricing model with the
                                   following assumptions for fiscal 2001 and
                                   2000 grants:

                                   -------------------------------------------
                                   Dividends            $.40 to $.70 per share
                                   Volatility                   21.4% to 29.2%
                                   Risk-free interest           4.54% to 5.00%
                                   Expected term                 1 to 10 years
                                   ===========================================


                                                                            F-23
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   Data regarding the Company's stock option
                                   plan follows:


<TABLE>
<CAPTION>
                                                                                                  WEIGHTED AVERAGE
                                                                                                   EXERCISE PRICE
                                                                                        SHARES        PER SHARE
                                   ---------------------------------------------------------------------------------
                                   <S>                                                <C>              <C>
                                   Shares under option, November 27, 1999              269,750         $18.19
                                   Options granted                                      54,000          11.06
                                   Options exercised                                        --             --
                                   Options canceled                                   (161,050)        (21.58)
                                   ---------------------------------------------------------------------------------
                                   Shares under option, December 2, 2000               162,700          12.47
                                   Options granted                                       8,000          12.75
                                   Options exercised                                        --             --
                                   Options canceled                                    (27,500)        (12.25)
                                   ---------------------------------------------------------------------------------
                                   Shares under option, December 1, 2001               143,200          12.53
                                   Options granted                                          --             --
                                   Options exercised                                  (133,000)         12.51
                                   Options canceled                                    (10,200)         12.70
                                   ---------------------------------------------------------------------------------
                                   Shares under option, November 30, 2002                   --             --
                                   =================================================================================
                                   ---------------------------------------------------------------------------------
                                   Options exercisable at:
                                      December 2,  2000                                 24,140          13.75
                                      December 1,  2001                                 47,280          12.72
                                      November 30, 2002                                     --             --
                                   =================================================================================
</TABLE>


                                                                            F-24
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   RESTRICTED STOCK PLAN

                                   The Company has a restricted stock plan which
                                   awards shares of common stock previously held
                                   in its treasury to key employees. Shares are
                                   awarded in the name of the employee, who has
                                   all rights of a shareholder, subject to
                                   certain restrictions or forfeiture. Vesting
                                   occurs over a five-year period from the date
                                   the shares were awarded. Dividends associated
                                   with the shares are held by the Company and
                                   vest over the same five-year period. The
                                   compensation element related to such shares
                                   is recognized ratably over the five-year
                                   restriction period. Compensation expense
                                   related to the above restricted shares was $0
                                   for fiscal 2002, 2001 and 2000. No restricted
                                   stock was awarded in fiscal 2002, 2001 or
                                   2000 and no restricted stock was outstanding
                                   as of November 30, 2002. This restricted
                                   stock plan was terminated subsequent to
                                   fiscal year ended November 30, 2002.


7.       BENEFIT PLANS             PROFIT SHARING PLANS

                                   A qualified plan, which covers the majority
                                   of salaried employees, provides for
                                   discretionary contributions up to a maximum
                                   of 15% of eligible salaries. The distribution
                                   of the contribution to the Plan's
                                   participants is based upon their annual base
                                   compensation. Contributions for fiscal 2002,
                                   2001 and 2000 were $144,000, $181,000 and
                                   $241,000, respectively.

                                   The Company also has a nonqualified, defined
                                   contribution retirement plan for key
                                   employees who are ineligible for the salaried
                                   employees' qualified profit sharing plan.
                                   Contributions for fiscal 2002, 2001 and 2000
                                   were $41,000, $52,000 and $57,000,
                                   respectively. Benefits payable under this
                                   plan amounting to $1,898,000 and $2,107,000
                                   at November 30, 2002 and December 1, 2001,
                                   respectively, are included in other
                                   noncurrent liabilities. These liabilities are
                                   fully funded by plan assets of equal amounts,
                                   which are included in other assets.


                                                                            F-25
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   PENSION PLAN

                                   The Company maintains a non-contributory
                                   defined benefit pension plan (Fab Industries,
                                   Inc. Hourly Employees' Retirement Plan) which
                                   covers substantially all hourly employees.
                                   The Plan provides benefits based on the
                                   participants' years of service.


                                                                            F-26
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   The following tables provide a reconciliation
                                   of the changes in the Plan's benefit
                                   obligations and fair value of assets and a
                                   statement of the funded status of the Plan
                                   for fiscal 2002 and 2001:


<TABLE>
<CAPTION>
                                                                                               2002               2001
                                                                                      ------------------ ------------------
                                   <S>                                                   <C>                <C>
                                   RECONCILIATION OF THE BENEFIT OBLIGATION
                                   Obligation at beginning of year                       $3,513,000         $3,588,000
                                   Service cost                                             177,000            246,000
                                   Interest cost                                            246,000            284,000
                                   Amendments                                                51,000                 --
                                   Curtailment                                               27,000             55,000
                                   Actuarial loss                                           267,000            721,000
                                   Benefit payments                                        (969,000)        (1,381,000)
                                                                                      -------------------------------------
                                   Obligation at end of year                             $3,312,000         $3,513,000
                                                                                      =====================================

                                                                                               2002               2001
                                                                                      -------------------------------------
                                   RECONCILIATION OF FAIR VALUE OF PLAN ASSETS
                                   Fair value of plan assets at beginning of year
                                                                                         $3,855,000         $5,522,000
                                   Actual return on plan assets (net of expenses)
                                                                                           (409,000)          (286,000)
                                   Benefit payments                                        (969,000)        (1,381,000)
                                                                                      -------------------------------------
                                   Fair value of plan assets at end of year              $2,477,000         $3,855,000
                                                                                      =====================================

                                                                                               2002               2001
                                                                                      -------------------------------------
                                   FUNDED STATUS
                                   Funded status                                          $(835,000)          $342,000
                                   Unrecognized prior service cost                          293,000            372,000
                                   Unrecognized actuarial (gain) loss                       164,000           (797,000)
                                                                                      -------------------------------------
                                   Net amount recognized                                  $(378,000)       $   (83,000)
                                                                                      =====================================
</TABLE>


                                                                            F-27
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   The following table provides the amounts
                                   recognized in the consolidated balance sheets
                                   as of November 30, 2002 and December 1, 2001:

<TABLE>
<CAPTION>
                                                                                                   2002              2001
                                                                                          ------------------------------------
                                  <S>                                                       <C>             <C>
                                   Accrued benefit liability (included in other
                                      noncurrent liabilities)                               $  (835,000)    $     (83,000)
                                   Intangible pension asset (included in other assets)          293,000                --
                                   Accumulate other comprehensive loss (Net of tax
                                      effect below)                                             105,000                --
                                   Deferred tax asset                                            59,000                --
                                                                                          ------------------------------------
                                   Net amount recognized                                    $  (378,000)     $    (83,000)
                                                                                          ====================================
</TABLE>


                                   The following table provides the components
                                   of the net periodic (benefit) cost for the
                                   Plan for fiscal 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                                  2002              2001
                                                                                         ------------------------------------
                                   <S>                                                      <C>                 <C>
                                   Service cost                                             $   177,000         $ 246,000
                                   Interest cost on projected benefit obligation                246,000           284,000
                                   Expected return on plan assets                              (300,000)         (430,000)
                                   Amortization of prior service cost                            45,000            74,000
                                   Amortization of net gain                                     (35,000)         (156,000)
                                   Recognized (gain) loss due to curtailment and
                                     settlement                                                 161,000          ( 72,000)
                                                                                          ====================================
                                   Net periodic pension cost (credit)                        $  294,000        $ ( 54,000)
                                                                                          ====================================
</TABLE>

                                   Prior service costs are amortized on a
                                   straight-line basis over the average
                                   remaining service period of active
                                   participants. Gains and losses in excess of
                                   10% of the greater of the benefit obligations
                                   and the market-related value of assets are
                                   amortized over the average remaining service
                                   period of active participants.

                                   The weighted average assumptions used in the
                                   measurement of the Company's benefit
                                   obligations for fiscal 2002 and 2001 are
                                   shown in the following table:

                                                                  2002      2001
                                                                ----------------
                                   Discount rate                  6.75%    7.25%
                                   Expected return on
                                      plan assets                 8.00%    8.00%


                                                                            F-28
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   EMPLOYEE STOCK OWNERSHIP PLAN

                                   The Company had an Employee Stock Ownership
                                   Plan ("ESOP") which covered all full-time
                                   employees who have completed one year of
                                   service. In 1991, the ESOP purchased 340,000
                                   shares of common stock from the Chairman of
                                   the Board of Directors and President of the
                                   Company for $34.875 per share, which
                                   represented 5.5% of the Company's then
                                   outstanding common stock. The ESOP was funded
                                   by the Company, pursuant to a loan pledge
                                   agreement for $11,857,000. The loan was
                                   payable by the ESOP to the Company from
                                   contributions to be made in fifteen equal
                                   annual principal installments plus interest
                                   at the prime rate. Employee rights to the
                                   common shares vest over a seven-year period
                                   and are payable at retirement, death,
                                   disability or termination of employment.

                                   The Company accounted for the ESOP shares in
                                   accordance with the provisions of the
                                   American Institute of Certified Public
                                   Accountants' Statement of Position No. 76-3.
                                   ESOP contributions were recorded for
                                   financial reporting purposes as the ESOP
                                   shares became allocable to the plan
                                   participants. All ESOP shares were considered
                                   outstanding in the determination of earnings
                                   (loss) per share.

                                   The portion of the common stock dividends
                                   declared relating to ESOP shares totaled $0,
                                   $104,000 and $161,000 for fiscal 2002, 2001
                                   and 2000, respectively. Of these amounts, $0,
                                   $65,000 and $90,000 for fiscal 2002, 2001 and
                                   2000, respectively, related to allocated
                                   shares and $0, $39,000 and $71,000 for fiscal
                                   2002, 2001 and 2000, respectively, related to
                                   unallocated shares. The dividends related to
                                   the unallocated shares were applied towards
                                   the $790,000 annual principal installments
                                   referred to above.

                                   Pursuant to resolutions adopted by the
                                   Company's Board of Directors, upon approval
                                   of the Plan by the stockholders on May 30,
                                   2002, the ESOP was terminated and all shares
                                   of common stock of the Company then held in
                                   the ESOP suspense account (86,456 shares)
                                   were transferred to the Company, and held as
                                   treasury stock, in exchange for the
                                   cancellation of the outstanding loan in the
                                   amount of $3,957,000 from the Company to the
                                   ESOP. The Company recorded the related
                                   treasury stock at the fair market value on
                                   the date of the termination, which resulted
                                   in a $2.4 million charge to additional
                                   paid-in-capital.


                                                                            F-29
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   As of November 30, 2002 and December 1, 2001,
                                   ESOP shares information was as follows:

<TABLE>
<CAPTION>
                                                                                        2002                2001
                                   --------------------------------------------------------------------------------
                                   <S>                                                   <C>             <C>
                                   Allocated                                              --             142,822
                                   Committed to be released                               --              18,889
                                   In suspense                                            --              67,567
                                   --------------------------------------------------------------------------------
                                         Total shares held by ESOP                        --             229,278
                                   ================================================================================
</TABLE>

                                   The net charges to earnings for fiscal 2002,
                                   2001 and 2000 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                             2002           2001            2000
                                   --------------------------------------------------------------------------------
                                   <S>                                  <C>               <C>             <C>
                                   Contribution to ESOP                 $      --         $1,048          $1,150
                                   Less:  Interest income on
                                              loan to ESOP                     --            296             547
                                   --------------------------------------------------------------------------------
                                   Net charge to earnings               $      --        $   752         $   603
                                   ================================================================================
</TABLE>


                                   The contribution to the ESOP is allocated
                                   between costs of goods sold and operating
                                   expenses; the interest income is included in
                                   interest and dividend income.

8.       INCOME TAXES              Provisions (benefits) for Federal, state
                                   and local income taxes for fiscal 2002,
                                   2001 and 2000 consisted of the following
                                   components (in thousands):
<TABLE>
<CAPTION>
                                                                             2002            2001            2000
                                   ------------------------------------------------------------------------------
                                   <S>                                    <C>            <C>              <C>
                                   Current:
                                      Federal                             $   902        $   (469)        $   734
                                      State and local                         100             159              77
                                   ------------------------------------------------------------------------------
                                                                            1,002            (310)            811
                                   Deferred:
                                      Federal and state                        38          (6,555)            334
                                   ------------------------------------------------------------------------------
                                                                           $1,040        $ (6,865)         $1,145
                                   ==============================================================================
</TABLE>


                                                                            F-30
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   The net deferred tax liability at November
                                   30, 2002 and December 1, 2001 consisted of
                                   the following (in thousands):

<TABLE>
<CAPTION>
                                                                                                2002               2001
                                   ------------------------------------------------------------------------------------
                                   <S>                                                     <C>                <C>
                                   Long-term portion:
                                      Gross deferred tax liability (asset) for:
                                           Excess depreciation for tax purposes            $     619          $     306
                                           Future tax deductions for employee
                                              benefit plans                                   (1,118)            (1,185)
                                           Pension obligation                                    (59)                --
                                           Other                                                  30                 53
                                   ------------------------------------------------------------------------------------
                                                 Net long-term asset                            (528)              (826)
                                   ------------------------------------------------------------------------------------
                                   Current portion:
                                      Gross deferred tax liability (asset) for:
                                           Accounts receivable - Section 475
                                              adjustment                                        (204)               218
                                           Net unrealized holding gain
                                              on investment securities
                                              available-for-sale, included in
                                              stockholders' equity                               249                222
                                           ESOP contribution accrued for tax
                                              purposes                                            --                430
                                           Other                                                 (36)              (601)
                                   ------------------------------------------------------------------------------------
                                                   Net current liability                           9                269
                                   ------------------------------------------------------------------------------------
                                   Net deferred tax asset                                   $   (519)          $   (557)
                                   ====================================================================================
</TABLE>


                                                                            F-31
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   The provision (benefit) for income taxes
                                   differed from the amount computed by applying
                                   the statutory federal income tax rate of
                                   34.0% for fiscal 2002, 2001 and 2000 to
                                   income (loss) before income taxes due to the
                                   following:

<TABLE>
<CAPTION>
                                                                          2002           2001            2000
                                   -----------------------------------------------------------------------------
                                                                                    (Tax effect in thousands)
                                   <S>                                 <C>            <C>              <C>
                                   Federal tax expense
                                    (benefit) at statutory rate        $   513        $(5,266)         $1,421
                                   State and local income taxes,
                                      net of Federal benefit                66            105              51
                                   Tax-free interest income and
                                      dividends received deduction        (119)          (147)           (338)
                                   Change in estimates for tax
                                      contingency and other                580         (1,557)             11
                                   -----------------------------------------------------------------------------
                                   Income tax expense (benefit)         $1,040        $(6,865)         $1,145
                                   =============================================================================
</TABLE>

                                   In the fourth quarter of fiscal 2001, the
                                   Company reversed approximately $1.5 million
                                   of certain tax reserves recorded in prior
                                   years, due to changes in estimates for tax
                                   contingency items.

9.       COMMITMENTS AND           STOCK REPURCHASE
         CONTINGENCIES
                                   The Company has an agreement with the
                                   Chairman of the Board of Directors and Chief
                                   Executive Officer which provides that, in the
                                   event of the Chairman's death, his estate has
                                   the option to sell, and the Company the
                                   obligation to purchase, certain stock owned
                                   by the Chairman. The amount of stock subject
                                   to purchase is equal to the lesser of $7
                                   million or 10% of the book value of the
                                   Company at the end of the year immediately
                                   following his death, plus the $3 million
                                   proceeds from insurance on his life for which
                                   the Company is the beneficiary. The agreement
                                   extends automatically from year to year
                                   unless either party gives notice of
                                   cancellation at least six months prior to the
                                   then current expiration date. The current
                                   expiration date is March 2003. As a result of
                                   this feature, $7 million has been classified
                                   as redeemable common stock, for all periods
                                   presented.

                                                                            F-32
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   LEASE

                                   The Company leases its New York City offices
                                   and showrooms until 2005, at average minimum
                                   annual rentals of $112,000 plus escalation
                                   and other costs.

                                   Rental expense for operating leases in fiscal
                                   2002, 2001 and 2000 aggregated $495,000,
                                   $679,000 and $901,000, respectively.

                                   Future minimum annual payments over the
                                   remaining noncancellable term of the
                                   Company's New York City operating lease are
                                   as follows:

                                   FISCAL YEAR ENDING (IN THOUSANDS)
                                   ---------------------------------------------
                                   2003                                  $133
                                   2004                                   135
                                   2005                                    91
                                   ---------------------------------------------
                                                                         $359
                                   =============================================

                                   LITIGATION

                                   A number of claims and lawsuits are pending
                                   against the Company. It is impossible at this
                                   time for the Company to predict with any
                                   certainty the outcome of such litigation.
                                   However, management is of the opinion, based
                                   upon information presently available, that it
                                   is unlikely that any liability, to the extent
                                   not provided for through insurance or
                                   otherwise, would be material in relation to
                                   the Company's consolidated financial position
                                   or results of operations.


                                                                            F-33
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

10.      STATEMENT OF CASH FLOWS   Cash outlays (net refunds) for corporate
                                   income taxes and interest for fiscal 2002,
                                   2001 and 2000 were as follows (in thousands):

                                                      CORPORATE
                                                    INCOME TAXES        INTEREST
                                   ---------------------------------------------
                                   2002               $    156           $   13
                                   2001                    438               42
                                   2000                    (53)              86
                                   =============================================


                                                                            F-34
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   NONCASH INVESTING AND FINANCING ACTIVITIES

                                   In fiscal 2002, 2001 and 2000, net unrealized
                                   holding gains of $0, $1,051,000 and $190,000,
                                   respectively, less related income taxes of
                                   $0, $420,000 and $76,000, on investment
                                   securities available-for-sale were recorded
                                   as increases in stockholders' equity.

11.       INTEREST AND DIVIDEND    Interest and dividend income for the past
          INCOME                   three fiscal years were as follows (in
                                   thousands):

<TABLE>
<CAPTION>
                                                   INTEREST INCOME    DIVIDEND INCOME      TOTAL
                                   -----------------------------------------------------------------
                                   <S>                  <C>                  <C>           <C>
                                   2002                 $2,164               $249          $2,413
                                   2001                  4,123                166           4,289
                                   2000                  3,877                123           4,000
                                   =================================================================
</TABLE>

12.      ASSET IMPAIRMENT AND      In the second quarter of fiscal 2001, the
         RESTRUCTURING CHARGES     Company implemented a restructuring plan to
                                   consolidate several manufacturing facilities.
                                   As a result, the Company's fiscal year ended
                                   December 1, 2001 financial results include a
                                   charge for impairment of fixed assets held
                                   for sale of $5,958,000 for the writedown of
                                   fixed assets held for disposal to their fair
                                   value less costs to dispose. The
                                   consolidation of manufacturing facilities is
                                   an effort to restore the operations to an
                                   acceptable level of profitability by
                                   eliminating over-capacities at the
                                   manufacturing level in response to the
                                   continued weakness in the economy and market
                                   conditions that have adversely affected the
                                   domestic textile industry.

                                   The fixed assets held for disposal are
                                   comprised of buildings, machinery and
                                   equipment from the knitting, dyeing and
                                   finishing activities of the business. The
                                   marketability of the assets held for disposal
                                   are subject to worldwide economic conditions
                                   which can affect the sale of such buildings
                                   and machinery.

                                   During the fiscal year ended December 1,
                                   2001, the Company had expended approximately
                                   $1,300,000 to remove and transfer machinery
                                   and equipment to the Company's Mohican Mills
                                   facility as part of the consolidation of the
                                   Company's manufacturing facilities.


                                                                            F-35
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   As a result, in accordance with FAS No. 121,
                                   the Company reviewed long-lived assets to be
                                   held and used for impairment and, in the
                                   fourth quarter of 2001, recorded an
                                   impairment charge of approximately $7,272,000
                                   relating to fixed assets. The Company
                                   continues to utilize the majority of its
                                   property, plant and equipment, however, there
                                   can be no assurance that the Company will
                                   sell its assets or if it does sells its
                                   assets, that it will be able to recover the
                                   full value of its assets, particularly its
                                   property, plant and equipment.


                                                                            F-36
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

13.      EARNINGS (LOSS)           Basic and diluted earnings (loss) per share
         PER SHARE                 for the fiscal years ended November 30, 2002,
                                   December 1, 2001 and December 2, 2000 are
                                   calculated as follows:

<TABLE>
<CAPTION>
                                   -------------------------------------------------------------------------------------------
                                   -------------------------------------------------------------------------------------------
                                                                                                 WEIGHED
                                                                               NET INCOME        AVERAGE
                                                                                 (LOSS)           SHARES      PER SHARE AMOUNT
                                   -------------------------------------------------------------------------------------------
                                   <S>                                         <C>                <C>             <C>
                                   Fiscal year ended November 30, 2002:
                                      Basic earnings per share                 $1,970,000         5,222,812       $   .38
                                                                                                              ================
                                      Effect of assumed exercise of
                                         employee stock options                        --                --
                                   -------------------------------------------------------------------------------------------
                                      Diluted earnings per share               $1,970,000         5,222,812       $   .38
                                   ===========================================================================================
                                   Fiscal year ended December 1, 2001:
                                      Basic loss per share                    $(8,623,000)        5,258,353        $(1.64)
                                                                                                              ================
                                      Effect of assumed exercise of
                                         employee stock options                        --                --
                                   -------------------------------------------------------------------------------------------
                                      Diluted loss per share                  $(8,623,000)        5,258,353        $(1.64)
                                   ===========================================================================================
                                   Fiscal year ended December 2, 2000:
                                      Basic earnings per share                 $3,033,000         5,336,958       $   .57
                                                                                                              ================
                                      Effect of assumed exercise of
                                         employee stock options                        --                --
                                   -------------------------------------------------------------------------------------------
                                      Diluted earnings per share               $3,033,000         5,336,958       $   .57
                                   ===========================================================================================
</TABLE>


                                                                            F-37
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                   During fiscal 2002, all outstanding options
                                   were either exercised or cancelled. Options
                                   to purchase 143,200, and 162,700 shares of
                                   common stock were outstanding during fiscal
                                   2001 and 2000, respectively, but were not
                                   included in the computation of diluted
                                   earnings per share, as their effect would be
                                   anti-dilutive.


                                                                            F-38
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

14.      SEGMENT INFORMATION

         The Company adopted SFAS No. 131 "Disclosure About Segments of an
Enterprise and Related Information" in fiscal 1999. SFAS No. 131 requires
companies to report information on segments using the way management organizes
segments within the company for making operating decisions and assessing
financial performance.

         The Company's chief operating decision-maker is considered to be the
Chief Executive Officer (CEO). The Company's CEO evaluates both consolidated and
disaggregated financial information in deciding how to allocate resources and
assess performance. The Company has identified three reportable segments based
upon the primary markets it serves: Apparel Fabrics, Home Fashions, Industrial
Fabrics and Accessories.

Apparel Fabrics: The Company is a major manufacturer of warp and circular knit
fabrics and raschel laces. The Company's textile fabrics are sold to a wide
variety of manufacturers of ready-to-wear and intimate apparel for men, women,
and children, including dresses and sportswear, children's sleepwear,
activewear, swimwear, and recreational apparel.

Home Fashions and Accessories: While sales primarily to manufacturers of home
furnishings, the Company used its own textile fabrics internally to produce
flannel and satin sheets, blanket products, comforters, and other bedding
products which it sells to specialty stores, catalogue and mail order companies,
airlines and cruise lines, and health care institutions.

Other: The Company produces a line of ultrasonically, hot melt adhesive, flame
and adhesive bonded products for apparel, environmental, health care, industrial
and consumer markets. The Company's textile fabrics are sold to manufacturers
servicing the residential and contract markets. The Company sells fabrics to
vendors in the over the counter markets.

         The accounting policy of the reportable segments are the same as those
described in Summary of Accounting Policies (Business F-9). The Company neither
allocates to the segments nor bases segment decisions on the following:

         - Interest and dividend income
         - Interest expense
         - Net gain on investment securities
         - Income tax expense or benefit

         Many of the Company's assets are used by multiple segments. While
certain assets such as Inventory and Property, Plant and Equipment are
identifiable by segment, an allocation of the substantial remaining assets is
not meaningful.

         For the 52 weeks ending December 1, 2001, charges for the asset
impairment and restructuring charges apply mainly to the apparel segment with a
small portion to the other segment. The 52 weeks ended November 30, 2002 include
a litigation settlement in the amount of $750,000, which is included in the Home
Fashions and Accessories segment (see Note 16).


                                                                            F-39
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

During all years presented, no single customer or group of affiliated customers
accounted for more than 10% of the year's net sales.

The following are segment revenues and income (loss) by reportable segments for
the fiscal years 2002, 2001, and 2000.

<TABLE>
<CAPTION>
                                                     HOME FASHIONS
2002                                    APPAREL      AND ACCESSORIES           OTHER             TOTAL
----                                    -------      ---------------           -----             -----
<S>                                    <C>                <C>                 <C>              <C>
External sales                          $51,269           $4,673              $7,023           $62,965
Intersegment sales                        3,860               22                 372             4,254
Operating income/(loss)                    (679)          (1,085)                195            (1,569)
Depreciation expense                      1,600               51                 327             1,978
Segment assets                           16,629            1,005               2,543            20,177
Capital expenditures                         --               --                 225               225


                                                     HOME FASHIONS
2001                                    APPAREL      AND ACCESSORIES           OTHER             TOTAL
----                                    -------      ---------------           -----             -----
External sales                          $60,884          $10,382              $8,770           $80,036
Intersegment sales                        9,781               44                 326            10,151
Operating income/(loss)                 (22,346)             674              (1,088)          (22,760)
Depreciation expense                      3,919               54                 477             4,450
Segment assets                           21,844            1,454               2,867            26,165
Capital expenditures                        374               --                 302               676


                                                      HOME FASHIONS
2000                                    APPAREL       AND ACCESSORIES          OTHER             TOTAL
----                                   --------       ---------------          -----             -----
External sales                          $93,901          $14,269             $10,015          $118,185
Intersegment sales                       12,324               51                 342            12,717
Operating income/(loss)                  (2,114)           1,117                 (39)           (1,036)
Depreciation expense                      5,171               55                 463             5,689
Segment assets                           44,671            1,579               4,375            50,625
Capital expenditures                        922                4                 318             1,244
</TABLE>


                                                                            F-40
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

<TABLE>
<CAPTION>
REVENUES                                            2002             2001             2000
                                                    ----             ----             ----
<S>                                           <C>              <C>              <C>
Total external sales for segments             $   62,965       $   80,036       $  118,185
Intersegment sales for segments                    4,254           10,151           12,717
Elimination of intersegment sales                 (4,254)         (10,151)         (12,717)
                                           -------------------------------------------------
Total consolidated sales                      $   62,965       $   80,036       $  118,185
                                           =================================================


PROFIT OR LOSS

Total operating loss for segments             $   (1,569)       $ (22,760)      $   (1,036)
Total other income
                                                   4,579            7,272            5,214
                                           -------------------------------------------------
Income (loss) before taxes on income          $    3,010        $ (15,488)      $    4,178
                                           =================================================


ASSETS

Total segments assets                         $   20,177       $   26,165       $   50,625
Assets not allocated to segments                  61,052          105,363          100,787
                                           -------------------------------------------------
Total consolidated assets                     $   81,229       $  131,528       $  151,412
                                           =================================================


OTHER SIGNIFICANT ITEMS

Depreciation expense                          $   1,978        $    4,450       $    5,689
Not allocated to segments                           165               159              175
                                           -------------------------------------------------
Consolidated total                            $   2,143        $    4,609       $    5,864
                                           =================================================


Capital expenditures                          $     225        $      676       $    1,244
Not allocated to segments
                                                     --                27              159
                                           -------------------------------------------------
Consolidated total                            $     225        $      703       $    1,403
                                           =================================================
</TABLE>


                                                                            F-41
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

15.      QUARTERLY                Quarterly earnings were as follows (in
         FINANCIAL DATA           thousands, except for earnings per share):
         (UNAUDITED)

<TABLE>
<CAPTION>
                                          FIRST              SECOND               THIRD              FOURTH
                                         QUARTER             QUARTER             QUARTER             QUARTER                TOTAL
         ---------------------------------------------------------------------------------------------------------------------------
         <S>                           <C>                 <C>                 <C>                <C>                 <C>
         Fiscal 2002:
            Net sales                  $  14,250           $  17,362           $  17,920          $   13,433          $    62,965
            Gross profit                   1,107               2,424               2,362                 660                6,553
            Net income (loss)               (677)              1,626               1,010                  11                1,970
            Earnings (loss)
             per share:
               Basic                   $   (0.13)          $    0.31           $    0.19          $     0.00          $      0.38
               Diluted                 $   (0.13)          $    0.31           $    0.19          $     0.00          $      0.38
         ===========================================================================================================================
                  Fiscal 2001:
            Net sales                  $  20,005           $  23,002           $  19,901          $   17,128          $    80,036
            Gross profit (loss)             (152)                857                 659                 154                1,518
            Net loss                      (1,042)             (4,393)             (1,320)             (1,868)              (8,623)
            Loss per share:
               Basic                   $   (0.20)          $   (0.83)          $   (0.25)         $     (.36)         $     (1.64)
               Diluted                 $   (0.20)          $   (0.83)          $   (0.25)         $     (.36)         $     (1.64)
         ===========================================================================================================================
</TABLE>

         Net loss includes $5,958,000, $967,000 and $7,605,000 for second, third
         and fourth quarter 2001 respectively, and $14,530,000 for the 52 weeks
         ending December 1, 2001 for asset impairment and restructuring charges.


                                                                            F-42
<PAGE>


                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

16.       OTHER EXPENSE           During the fall of 1999, San Francisco Network
                                  ("SFN") commenced an action in the Superior
                                  Court of California, Marin County, against the
                                  Company and the Company's Salisbury
                                  Manufacturing Corporation ("Salisbury")
                                  subsidiary. The action relates to an agreement
                                  between SFN and Salisbury (whose performance
                                  the Company guaranteed), pursuant to which
                                  Salisbury was licensed to use the Karen
                                  Neuburger trademark for branded bedding
                                  products. The case was removed to the United
                                  States District Court of California. Salisbury
                                  and the Company denied any wrongdoing and
                                  asserted affirmative claims against SFN and
                                  certain of its principals. On March 14, 2002,
                                  at a court ordered conference, the Company
                                  settled this issue without admitting
                                  liability. On April 12, 2002, the Company paid
                                  SFN $750,000 in exchange for a compete release
                                  of all claims.


                                                                            F-43
<PAGE>







                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                      -------------------------------------

                   CONSOLIDATED FINANCIAL STATEMENTS SCHEDULES
                                    FORM 10-K

             FISCAL YEARS ENDED NOVEMBER 30, 2002, DECEMBER 1, 2001,
                              AND DECEMBER 2, 2000









                                       S-1
<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES


                                      INDEX
                                      -----

SCHEDULE:                                   PAGE

II. Valuation and Qualifying Accounts       S-3





                                       S-2
<PAGE>


                                                                     SCHEDULE II
                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                               VALUATION AND QUALIFYING ACCOUNTS
                                                                  (IN THOUSANDS)
================================================================================

<TABLE>
<CAPTION>
COL. A                             COL. B                    COL. C               COL. D         COL. E
------                             ------                    ------               ------         ------
                                                            ADDITIONS
                                                 - - - - - - - - - - - - - -
                                                     (1)           (2)
                                 BALANCE AT       CHARGED TO     CHARGED TO
                                 BEGINNING        COSTS AND        OTHER                        BALANCE AT
DESCRIPTION                       OF YEAR          EXPENSES       ACCOUNTS       DEDUCTIONS    END OF YEAR
-----------------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>            <C>          <C>               <C>
Fiscal year ended
   November 30, 2002:
         Allowance for doubtful
              Accounts              $   600         $400(i)        $   --       $        --       $  1,000
Fiscal year ended
   December 1, 2001:
         Allowance for doubtful
              Accounts              $   300         $400(i)        $   --       $  (100)(ii)      $    600
Fiscal year ended
   December 2, 2000:
         Allowance for doubtful
              Accounts              $ 1,500         $850(i)        $   --       $(2,050)(ii)      $    300
===========================================================================================================
</TABLE>

(i)  Current year's provision.
(ii) Accounts receivable written-off, net of recoveries.


                                      S-3
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Fab has duly caused this report to be signed
on our behalf by the undersigned, thereunto duly authorized.

                                       FAB INDUSTRIES, INC.


                                       By:  /s/ Samson Bitensky
                                           ---------------------------
                                       Samson Bitensky
                                       Chairman of the Board and
                                       Chief Executive Officer


                                       Date:    February 28, 2003


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Company and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                     DATE                    CAPACITY IN WHICH SIGNED
---------                     ----                    ------------------------
<S>                           <C>                     <C>
/s/ Samson Bitensky           February 28, 2003       Chairman of the Board, Chief Executive Officer, and
---------------------------                           Director (Principal Executive Officer)
Samson Bitensky


/s/ David A. Miller           February 28, 2003       Vice President - Finance, Treasurer, and Chief Financial
---------------------------                           Officer (Principal Financial and Accounting Officer)
David A. Miller


/s/ Martin B. Bernstein       February 28, 2003       Director
---------------------------
Martin B. Bernstein


/s/ Lawrence H. Bober         February 28, 2003       Director
---------------------------
Lawrence H. Bober


/s/ Frank S. Greenberg        February 28, 2003       Director
---------------------------
Frank S. Greenberg


/s/ Susan B. Lerner           February 28, 2003       Director
---------------------------
Susan B. Lerner


/s/ Richard Marlin            February 28, 2003       Director
---------------------------
Richard Marlin


/s/ Steven E. Myers           February 28, 2003       Director, President and Chief Operating
---------------------------                           Officer
Steven E. Myers
</TABLE>


<PAGE>


CERTIFICATION
-------------

I, Samson Bitensky, certify that:

        1.        I have reviewed this annual report on Form 10-K of Fab
Industries, Inc.;

        2.        Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

        3.        Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;

        4.        The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

        a)        designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

        b)        evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

        c)        presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

        5.        The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

        a)        all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

        b)        any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

        6.        The registrant's other certifying officers and I have
indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: February 28, 2003


              /s/ Samson Bitensky
              -----------------------
              Samson Bitensky
              Chief Executive Officer


<PAGE>



CERTIFICATION
-------------

I, David A. Miller, certify that:

        1.        I have reviewed this annual report on Form 10-K of Fab
Industries, Inc.;

        2.        Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

        3.        Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;

        4.        The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

        a)        designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

        b)        evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

        c)        presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

        5.        The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

        a)        all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

        b)        any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and

        6.        The registrant's other certifying officers and I have
indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: February 28, 2003


                /s/ David A. Miller
                -----------------------
                David A. Miller
                Chief Financial Officer