FORM 10-KSB
                  SECURITIES AND EXCHANGE COMMISSION
                           Washington, DC 20549

             [x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended September 30, 1997

       [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
               OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from N/A to 
                               ----   --------------
Commission file #33-72880

                        GLENGATE APPAREL, INC.
        (Exact Name of Registrant as Specified in its Charter)

               New Jersey                       22-3266971
      (State or Other Jurisdiction of         (IRS Employer
      Incorporation or Organization         Identification No.)

            75 Rod Smith Place, Cranford, New Jersey 07016

      (Address of principal executive offices)   (Zip Code)

Registrant's telephone No. including area code:  (908) 653-9100

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

                             None
                        (Title of class)
Securities registered pursuant to Section 12(g) of the Exchange
Act:
                             None
                        (Title of class)

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 and Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such report), and (2) has been subject to such filing
requirement for the past 90 days.  Yes X     No  
                                       ----     -----

Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB [X] NONE

Issuer's Revenue for the fiscal year ended September 30, 1997: 
$9.3 million

The aggregate market value of the 4,858,032 shares of common stock
held by non affiliates of the Registrant as of December 19, 1997,
was $3,036,270 based upon the closing bid price of such shares as
listed in the over the counter market.

Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, $.001 par value,as of December 19, 1997: 
10,613,932

Documents incorporated by reference
Incorporated in Part III of this Form 10-KSB:  Proxy Statement to
be furnished to security holders for the fiscal year ended
September 30, 1997

Transitional Small Business Disclosure format   Yes        No   X
                                                    -----     -----
<PAGE>
                          GLENGATE APPAREL, INC.
                      Annual Report on Form 10-KSB
                           Table of Contents

Item                                                          Page
----                                                          -----

Part I       

 1        Description of Business . . . . . . . . . . . . . . . 3

 2        Description of Property . . . . . . . . . . . . . . . 5

 3        Legal Proceedings . . . . . . . . . . . . . . . . . . 5

 4        Submission of Matters to a Vote of Security Holders . 5

Part II

 5        Market for Common Stock, Equity and Related 
          Stockholder Matters . . . . . . . . . . . . . . . . . 6

 6        Management's Discussion and Analysis of Financial 
          Condition and Plan of Operation . . . . . . . . . . . 7

 7        Financial Statements and Supplementary Data . . . . . 8

 8        Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure . . . . . . . . . 8

Part III

 9        Directors, Executive Officers, Promoters and
          Control Persons; Compliance with Section 16(a)
          of the Exchange Act  . . . . . . . . . . . . . . . .  8

 10       Executive Compensation . . . . . . . . . . . . . . .  9

 11       Security Ownership of Certain Beneficial Owners
          and Management . . . . . . . . . . . . . . . . . . .  9

 12       Certain Relationships and Related Transactions . . .  9

 13       Exhibits and Reports on Form 8-K . . . . . . . . . .  9


                                   2                                  
<PAGE>

                               PART I

ITEM 1 - Description of Business
--------------------------------

General
-------

GlenGate Apparel, Inc., (the "Company") a New Jersey corporation,
was formed on November 8, 1993.  The Company is engaged in the
design and production of a line of golf apparel marketed under the
GlenGate, Sun Ice, Aureus and Fairway to Heaven labels and sold
primarily to public and private golf course pro shops and resorts
domestically through regional sales vice presidents and independent
sale representatives and internationally through licensed
distributors.

Design and Manufacturing

The Company designs and contracts for the design of classic golf-
style garments with contemporary influences with a view toward
developing and maintaining consumer recognition and loyalty across
product lines from season to season.  The Company contracts with
third parties to manufacture its lines of apparel.  The Company
exhibits at international industry shows and presents two seasonal
lines of clothing which include men's knit cotton shirts, sweaters,
slacks, shorts, jackets and headwear and men's and ladies' golf
outerwear.  All items in each line are sold separately.

The Company staffs its design team with both Company and
independent designers who receive direction from the Company's
sales, marketing and production staffs.  Product planning meetings
occur on a regular basis to review the status of each line and to
discuss adjustments in line composition, fabrication, selection,
product mix and manufacturing.  In addition, members of the design
team attend the industry's principal trade shows during each design
cycle to discuss and consult with customers concerning current
retail trends.  The design process for each line is an approximate
six-month process of styling, coloring, fabrication of samples and
selection of sewing techniques.

The Company's design and production team consists of six employees
with extensive experience in the apparel industry.  The activities
of these six employees include management of the design and
production process, sourcing, merchandising and quality control. 
The merchandise manager is a graduate of the Parson's School of
Design in New York City with over eight years international
experience with men's clothing retailers and manufacturers.  The
production assistants have been extensively involved with the
athletic apparel field for many years with emphasis on quality and
production control.

The Company additionally utilizes the services of an independent
design studio located in New York City specializing in men's
sportswear.  The studio has expertise in design, trends, color and
patterns, style and product engineering and packaging.

The Company has entered into purchase agreements with third party
domestic and international manufacturers to cut and sew the
Company's products according to the Company's specifications.  The
Company has no plans to own any manufacturing facilities.  The
Company currently uses ten or more independent facilities to
manufacture its products. One such facility currently accounts for
approximately 30% of such manufacturing on an annual basis and two
other facilities each account for approximately 20%.  No other
facility accounts for more than 8% annually.  The Company has
generally followed a policy of diversifying production among such
manufacturers while maintaining sufficient production at each to
remain a significant purchaser from each manufacturer.  The Company
believes that, while the loss of any one manufacturer would prove
detrimental, given the availability of alternative sources of
supply, such a loss and its impact on the Company's business would
likely be limited in scope and duration.

The Company has chosen to produce its primary product lines within
the United States but has begun the process of off-shore production
to improve margins and attain certain product not attainable
domestically.

The Company's production staff coordinates product engineering
(including pattern and sample making), negotiates price and
quantity with its cutting and sewing contractors, establishes
production scheduling and performs quality control.  The production
staff also coordinates inspection of fabric as well as sample
testing of fabric for shrinkage, strength and color fastness.  The
production staff additionally oversees production at
the facilities of each of the cutting and sewing contractors as
well as the Company's contract embroidery operations to monitor
continuing compliance with the Company's specifications.

                                3
<PAGE>

The Company had implemented its original plan to custom embroider
logos of country clubs and resorts utilizing the services of
independent embroidery contractors.  The Company has also
implemented an in-house embroidery operation which 
has been running approximately one year.  The Company has recently
acquired additional embroidery equipment to further expand its in-
house embroidery operation at the warehouse and distribution
center.  Final inspection, packing and shipping of the Company's
products is performed by the Company's employees at its warehouse
and distribution center.  The Company has implemented a
computerized software system to monitor inventory levels of
finished goods.

Sales and Marketing

Management believes that the Company's ability to attain and
maintain brand name recognition of the GlenGate label will be a
critical element in enabling the Company to successfully continue
to participate in the growing golf industry.

The Company estimates that there are approximately 14,000 public
and private golf clubs and resorts with golf courses in the United
States.  The Company has currently targeted approximately 3,500 of
these clubs and resorts as customers.  The Company has either made
sales to or received purchase orders from approximately 2,000 clubs
and resorts in the targeted group.  No single customer accounted
for more than 3% of the Company's net sales.

The Company enlists the services of 23 independent sales
representatives who sell on a commission basis.  These independent
representatives are responsible for certain targeted accounts in a
given territory.  Sales management, consisting of three regional
sales vice-presidents and a customer service network of five others
directs and implements the sale and marketing plans and programs
adopted by the Company.

The Company has begun test marketing studies for acceptance of
GlenGate Apparel in the international market.  Test marketing has
successfully begun in Canada, where there are over 1,200 clubs and
resorts and to the prime resort facilities in Bermuda.

The Company introduces new product at the two major golf industry
trade shows held January and September each year in Orlando,
Florida and Las Vegas, Nevada.  Feedback received from the shows in
the form of orders, comments, and booth attendance is used to
redefine the product lines and corresponding forecasts.

The Company has enlisted six touring golf professionals (Mike
Hulbert, Jerry McGee, Jerry Kelly, Mike Small, Phil Blackmar, and
Jeff Gallagher) and other persons both inside and outside of the
golf industry (including Peter Kostis, a director of the Company),
to endorse and wear GlenGate apparel.  In addition, the Company has
enlisted approximately 24 home club golf professionals to help
promote the Company's products. The Company has oral arrangements
with such golf professionals and other persons under which they
have been compensated solely by the granting of stock options.  The
Company may attempt to obtain additional endorsement arrangements
in the future with other touring golf professionals, home club
professionals and other notables.

The Company assists its pro shop customers with sales incentives
and merchandise assistance programs.

The Company's sales terms generally require payment from customers
within 30 days after shipment.  The Company does not sell goods on
consignment or accept returns of purchased merchandise other than
damaged goods or goods delivered beyond the specified delivery
date.

Competition

Golf apparel sold at the pro shop and resort level is not dominated
by any single company and is highly competitive, both within the
United States and abroad.  The Company views Ashworth, Polo/Ralph
Lauren, Izod and Sport-Haley as its most significant competitors. 
Recent entries into the market by other competitors offering
comparable product may intensify competitive pressures.  Many of
the existing competitors have longer operating histories, better
name recognition and greater financial, marketing and other
resources than the Company.  The Company also competes with other
high quality manufacturers of men's leisurewear sold at the
department and specialty store level.  There can be no assurances
that the Company will be able to obtain new and maintain existing
market share in the face of competition.

                                  4
<PAGE>

Raw materials

The Company's primary products are made of natural fibers.  The
selection of raw materials is based on quality, consistency,
availability, flexibility in meeting changing production
requirements and pricing.  The Company's manufacturers generally
obtain the materials to manufacture the product lines in accordance
with the Company's design specifications.

Trademarks

The Company sells and markets its products under the GlenGate, Sun
Ice, Aureus and Fairway to Heaven trademarks.  The Company obtained
registration of the GlenGate name with the United States Patent and
Trademark Office in 1994.  Registration on the Principal Register
constitutes constructive nationwide notice of the registrants'
claim of ownership of the trademark and creates a refutable
presumption of the registrant's exclusive right to the trademark. 
Although the Company believes that it will have the exclusive right
to use the trademark for the United States and overseas markets in
which it is granted registration, there can be no assurance that
the Company will be able successfully to protect the trademark from
conflicting uses or claims of ownership.  The Sun Ice, Aureus and
Fairway to Heaven labels are used under exclusive distribution
agreements.

Seasonality

The Company's business is seasonal, with the highest sales volume
expected in the period from February through July and the lowest
sales volume in the period from November through January.  In the
golf apparel business, inventories are at their highest from
February through April, as finished goods are accumulated for
Spring and Summer sales.  The Company's cash requirements are
highest during this period to enable the Company to support the
accumulation.

Employees

As of December 1, 1997, the Company had 41 full-time employees.

ITEM 2 - Description of Property
--------------------------------

Property

Effective October 1997 the company moved from its 14,000 square
foot of space in Mountainside, New Jersey to a new facility in
Cranford, New Jersey.  The new facility has approximately 36,000
square feet of space for use as its principal office, production,
warehouse and distribution facility.  The lease provides for an
annual base rental of $209,875 during the term of the lease.  The
lease expires October 31, 2002.  The Company is also obligated to
pay taxes, insurance and maintenance expenses.  Management believes
that the new facilities will be adequate for its future needs.

ITEM 3 - Legal Proceedings
--------------------------

In January 1997, as a result of performance issues, the Company dismissed
Norman Britman, then the Company's Treasurer and Chief Financial Officer.
On April 11, 1997, Mr. Britman filed an action in the Superior Court
of New Jersey, Law Division, Union County against the Company and
its President.  The plaintiff claims that it was represented to him
upon becoming employed that he would remain employed by the Company
until his retirement at age 65.  Plaintiff alleges that his
termination from employment on or about January 3, 1997, was
discriminatory based upon his age, was in violation of state anti-
discrimination laws, was wrongful and without cause and that the
Company breached its contract as to allegedly promised stock
options.  The Company has filed an Answer to the Complaint and pre-
trail discovery has commenced.  The Company believes that the plaintiff's
claims are without merit and it is the Company's intention to
defend the action vigorously to the fullest extent.

ITEM 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

The Company held a Special Meeting of Shareholders on July 11,
1997.  At the Special Meeting, the shareholders voted on a proposal
to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 10,000,000 to
17,000,000, which proposal was approved by a vote of 6,485,558
shares of Common Stock for and 45,195 against.

                                  5
<PAGE>

                            PART II

ITEM 5 - Market for Common Stock, Equity and Related Stockholder
Matters
------------------------------------------------------------------

The Company's common stock is quoted on the over-the-counter market
under the symbol "GLNN."  On August 19, 1994 the Company completed
its initial public offering of 493,740 Units, each consisting of
five shares of common stock and one Warrant entitling the holder
thereof to purchase one share of common stock.  in July 1995, the
Company called for the redemption of all warrants outstanding as of
August 28, 1995 at $.05 each.  Through August 28, 1995, 473,200
warrants were exercised and 4,700 warrants were redeemed.  The
remaining 15,840 warrants not redeemed were canceled on August 17,
1996.

In June 1995, the Company commenced proceedings for the private
placement of up to 750,000 shares of common stock at $2.00 per
share through August 10, 1995.  In July 1995, the Company received
$288,400 for 144,200 shares pursuant to that private placement.

In May 1996, the Company commenced proceedings for the private
placement of up to 1,500,000 shares of common stock at $1.00 per
share.  In September 1996, the Company received $1,250,000 for
1,250,000 shares and a warrant to purchase an additional 85,000
shares at $1.00 through September 30, 1997.

In July 1997, the holders of the Company's common stock approved an
increase in the number of authorized shares of common stock to
17,000,000 shares, and the Company consummated a private placement
in which the Company received $2,500,000 for  2,500,000 shares and
the grant of certain stock options.

The following table sets forth the high and low bid quotations for
the common stock for the periods indicated.  The quotations in the
over-the-counter market reflect inter-dealer prices without retail
markup, markdown or commissions and may not necessarily represent
actual transactions.

                   Period                      High        Low
                   ------                      ----        ----

                 Fiscal Year 1995 
                 ----------------

        October 1, 1994 - December 31, 1994    $1.75      $1.25
        January 1, 1995 - March 31, 1995       $3.00      $1.25
        April 1, 1995 - June 30, 1995          $4.25      $2.25 
        July 1, 1995 - September 30, 1995      $3.87      $1.43


            Fiscal Year 1996

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

        October 1, 1995 - December 31, 1995    $2.625     $1.625
        January 1, 1996 - March 31, 1996       $2.125     $1.375
        April 1, 1996 - June 30, 1996          $2.625     $1.25
        July 1, 1996 - September 30, 1996      $2.125     $1.25

            Fiscal Year 1997
            ----------------

        October 1, 1996 - December 31, 1996    $1.750     $0.625 
        January 1, 1997 - March 31, 1997       $1.125     $0.688
        April 1, 1997 - June 30, 1997          $1.312     $0.875
        July 1, 1997 - September 30, 1997      $1.281     $0.812

                                6
<PAGE>

As of December 19, 1997, there were approximately 200 holders of
record of the common stock and the closing bid price for the common
stock was $0.625.  The Company believes that there are
approximately 2,000 beneficial owners of common stock.

The Company has never paid any cash dividends on its common stock. 
The Company anticipates that for the foreseeable future any
earnings will be retained for use in the Company's business and no
cash dividends will be paid to stockholders.


ITEM 6 - Management's Discussion and Analysis of Financial Condition
and Plan of Operation
------------------------------------------------------------------

Results of Operations

Comparison of Fiscal Years Ended September 30, 1997 and 1996.

In February 1997 the Company entered into a Consignment Agreement
with Sun Ice Ltd. and Sun Ice USA, Inc. to sell certain apparel
inventory of Sun Ice on a consignment basis, whereby the Company
agreed to sell such inventory and pay Sun Ice for the costs of the
goods sold and to return, dispose of or purchase any unsold goods
upon the termination of the agreement.  In addition, in February
1997 the Company entered into a Trademark License Agreement with
Sun Ice Ltd. and Sun Ice USA under which the Company was granted a
license to use the Sun Ice and Aureus trademarks within the United
States.  The Company has agreed to pay a royalty during the
exclusive long-term agreement.  The Sun Ice label consists of men's
and ladies' golf outerwear and the Aureus label consists of men's
golf apparel.

During fiscal 1997 the Company had sales of approximately
$9,347,000 an increase of 50% compared to the fiscal 1996 sales of
$6,230,000.  The increase in sales resulted from the continually
expanding customer base and sales made pursuant to the Sun Ice
Consignment Agreement and the Sun Ice Trademark License Agreement.

Cost of goods sold as a percentage of sales, was approximately 71%
for fiscal 1997 compared to 70% for fiscal 1996.  Costs continued
to run higher than expected in fiscal 1997 primarily due to start-
up costs associated with the addition of the Sun Ice and Aureus
labels and the Company's decision to sell certain prior season's
inventories at reduced prices.

Warehousing, design, selling and administrative expenses as a
percentage of sales was approximately 50% for both fiscal 1997 and
for fiscal 1996.  Such expenses remain high due to continued
sales growth and costs related to the acquisition of rights to the 
Sun Ice and Aureus trademarks and transaction costs associated with
the infusion of additional funds.

Interest expense was $478,185 for fiscal 1997 compared to $202,821 for fiscal
1996.  The increase resulted from higher borrowings required to fund the 
Company's net losses and to support the increased levels of inventory and
accounts receivable resulting from the Company's growth.  In addition, interest
expenses include $140,000 of costs related to the value of warrants and shares
granted by an officer, George Gatesy, to a lending group in connection with
interim financing requirements. This lending group includes the Koffman Group,
Inc., a stockholder in the company, Lyonshare Venture Capital and Linden Nelson.
The fiscal 1997 net loss was $2,465,222 compared to $1,449,291 for fiscal 1996
as a result of the factors described above.  As demonstrated by the growth in
sales, the Company is moving towards its plan with a continued focus on
improving operating results in fiscal 1998.

Liquidity and Capital Resources

In fiscal 1997 working capital requirements increased due to the
continued sales growth and the need to fund continuing losses. The
Company had cash used in operating activities during the fiscal
year of $3,268,489 resulting primarily from a net loss of
$2,465,222 and increases in inventory and accounts receivable of
$1,264,332.  In addition, cash of $219,579 was used in investing
activities in fiscal 1997 to purchase equipment and fund security
deposits in connection with the move to expanded facilities which
was necessitated by the continued growth of inventory and sales.

                                7
<PAGE>

During fiscal 1997 cash requirements for both the
operating and investing activities were funded primarily by
financing activities that provided additional net cash of
$3,634,064 resulting from $2,425,000 in net proceeds from the sale
of common stock and $1,089,648 from borrowings under the Company's
credit facilities and $547,905 from borrowings on equipment notes
payable.

In July 1997, the holders of the Company's common stock approved an
increase in the number of authorized shares of common stock to
17,000,000 shares, enabling American Marketing Industries, Inc. to
purchase 2,500,000 shares and to receive certain stock options
for an aggregate purchase price of $2,500,000.  In addition,
effective July 1, 1997 the Company also agreed to amend its
revolving loan and security agreement and continue with the same
lender until September 1998.  Management believes these events
place GlenGate Apparel, Inc. in a more stable position to fund its
current growth.

Prior to the receipt of the investment from AMI, the Company received
bridge financing from several sources as follows.

In January 1997, George Gatesy, President and CEO of the Company, and
Peter Kostis, a Director of the Company, advanced the Company a total
of $250,000 to satisfy working capital needs. The notes remain outstanding
at September 30, 1997, are payable on demand and bear interest at a rate
of 12% payable monthly.

In April 1997, the Company obtained a financing arrangement of $750,000
with a lending group (the "lending group") which included the Koffman Group,
Inc., a stockholder of the Company, Lyonshare Venture Capital and Linden
Nelson. Jeffrey Koffman and Martin Koffman, directors of the Company, are
principals of The Koffman Group, Inc. In addition, the lending group made
available another $150,000 in connection with a letter of credit. In connection
with this financing, George Gatesy, President and CEO of the Company was
required to sell 135,000 shares of his common stock to the lending group for
$.20 per share and the Company agreed to grant the lending group warrants to
acquire up to 270,000 shares of common stock with an exercise price equal to
sixty percent of the common stock market value during the thirty day period
prior to exercise of the warrants. The estimated market value of the shares
sold to the lending group by the officer, less the proceeds received, along
with the estimated market value of the warrants amounted to $140,000 and was
charged to interest expense. The financing provided by the lending group also
bore interest at a face rate of prime plus 2-1/2% and was repaid out of
proceeds from the AMI investment.

In June 1997, AMI advanced the Company a bridge loan in the amount of $600,000
pursuant to a term note which bore interest at a rate of 9% per annum, payable
quarterly. The note was to mature on the earlier of June 23, 1998 or at AMI's 
option in the event the Company defaulted on the note. The AMI note was 
repaid in connection with the AMI investment. 

In February 1997, the Company acquired the exclusive right to
distribute certain golf apparel under the Sun Ice and Aureus
trademarks in the United States for the period of five (5) years
renewable at the option of the Company for three (3) successive
five (5) year periods.  The product under these labels was
initially provided to the Company on a consignment basis.  Although
there can be no assurances, management expects the acquisition of
these distribution rights to have a positive impact on the
liquidity and operating results of the Company.

Future events, including the problems, expenses, difficulties and
delays encountered in connection with a new business and the
competitive environment in which the Company operates, may lead to
cost overruns that could make the Company's sources of working
capital insufficient to fund the Company's planned operations.  No
assurance can be given that the Company will be able to obtain such
funds or that the terms thereof will be acceptable to the Company.

                               8
<PAGE>

Important Factors Related to Forward-Looking Statements

The statements contained in this annual report or incorporated by
reference herein that are not purely historical are forward-looking
statements and are based on current expectations that involve a
number of risks and uncertainties.  These forward-looking
statements were based on assumptions that the Company would
continue to develop and introduce new products on a timely basis,
that the competitive conditions within the golf apparel industry
would not change materially or adversely, that the demand for the
company's golf apparel would remain strong, that the market would
accept the Company's new apparel lines, that inventory risks due to
shifts in market demand would be minimized, that the Company's
forecasts would accurately anticipate market demand, and that there
would be no material adverse change in the Company's operations or
business.  Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive
and market conditions, and future business decisions, all of which
are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the
forward-looking information will prove to be accurate.  In
addition, the business and operations of the Company are subject to
substantial risks which increase the uncertainty inherent in such
forward-looking statements.  Budgeting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience
and business developments, the impact of which may cause the
Company to alter its marketing or other budgets, which may in turn
affect the Company's results of operations.  In light of the
significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information
should not be regarded as a representation by the Company or any
other person that the objectives planned for the Company will be
achieved.

ITEM 7 - Financial Statements
-----------------------------

The financial information required by this Item is submitted
beginning on Page F-1

ITEM 8 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
------------------------------------------------------------------

None

                             PART III
                             --------

ITEM 9 - Directors, Executive Officers, Promoters and Control
-------------------------------------------------------------
persons; Compliance with Section 16(a) of the Exchange Act
----------------------------------------------------------

For information with respect to the Company's directors, see the
section entitled "Election of Directors" in the Company's Proxy
Statement to be filed in connection with the Annual Meeting of
Stockholders of the Company to be held on February 16, 1998 which
section is incorporated herein by reference.

ITEM 10 - Executive Compensation
--------------------------------

For information with respect to the Company's executive
compensation, see the section entitled "Executive Compensation" in
the Company's Proxy Statement to be filed in connection with the
Annual Meeting of Stockholders of the Company to be held on
February 16, 1998 which section is incorporated herein by
reference.

                                  9
<PAGE>

ITEM 11 - Security Ownership of Certain Beneficial Owners and
-------------------------------------------------------------
Management
----------
For information with respect to the Company's security ownership of
certain beneficial owners and management, see the section entitled
"Security Ownership of Directors and Officers" and "Principal
Stockholders" in the Company's Proxy Statement to be filed in
connection with the Annual Meeting of Stockholders of the Company
to be held on February 16, 1998 which section is incorporated
herein by reference.

ITEM 12 - Certain Relationships and Related Transactions
--------------------------------------------------------

For information with respect to the Company's relationships and
related transactions with certain directors, see the section
entitled "Election of Directors" in the Company's Proxy Statement
to be filed in connection with the Annual Meeting of Stockholders
of the Company to be held on February 16, 1998 which section is
incorporated herein by reference.

ITEM 13 - Exhibits and Reports on Form 8-K
------------------------------------------

Reports on Form 8-K
-------------------

On July 11, 1997, the Company filed a report on Form 8-K relating
to the amendment to the Company's certificate of incorporation to
increase the number of shares of the Company's common stock
authorized for issuance thereunder from 10,000,000 to 17,000,000.

Exhibits
--------

3.1  (1)  Certificate of Incorporation of the Company
3.2  (1)  Certificate of Amendment to the Certificate of
          Incorporation dated December 1, 1993
3.3  (4)  Certificate of Amendment to the Certificate of
          Incorporation dated July 11, 1997 
3.4  (2)  Amended By-laws of the Company
4.1  (1)  Specimen certificate for common stock, $.001 par value
4.2  (2)  Form of warrant to purchase common stock issuable to The
          Koffman Group, Inc.
4.3  (1)  Form of Subordinated Note in favor of George Gatesy
4.4  (1)  Form of Subordinated Note in favor of Richard Martinelli
10.1 (2)  Restricted stockholders agreement
10.2 (2)  Financing and Security Agreement
10.3 (2)  Lease dated October 4, 1996
10.4 (3)  Trademark License Agreement dated February 14, 1997
10.5      Merchandise License Agreement dated as of June 20, 1997
10.11(1)  GlenGate Apparel, Inc. 1994 Stock Option Plan

------------------------------------------------------------------
(1)       Incorporated herein by reference to the identically
          numbered Exhibit in the Company's Registration Statement
          on Form SB-2, Registration No. 33-7280-NY

(2)       Incorporated herein by reference to the identically
          numbered Exhibit in the Company's Annual Report for the
          fiscal year ended September 30, 1996 on Form 10-KSB

(3)       Incorporated herein by reference to the identically
          numbered Exhibit in the Company's Registration Statement
          on Form SB-2, Regristration No. 333-23417


(4)       Incorporated herein by reference to Exhibit 3.1 to the
          Company's current report on Form 8-K dated July 11, 1997

                                   10
 <PAGE>

                             SIGNATURES

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

                                   GLENGATE APPAREL, INC.



                                   BY:  /s/ George J. Gatesy
                                      -----------------------------
                                        George J. Gatesy, President

Dated:    December 29, 1997

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

Signature                          Title                 Date

/s/ George J. Gatesy         President, Director      December 29, 1997
---------------------        (principal executive 
George J. Gatesy             officer)


/s/ Peter Culbertson          Treasurer and           December 29, 1997
---------------------         Secretary (principal
Peter Culbertson              financial and
                              accounting officer)



/s/ Peter J. Kostis           Director                December 29, 1997
---------------------
Peter J. Kostis


/s/ Robert J. Munch           Director                December 29, 1997
---------------------
Robert J. Munch
      
/s/ Jeffery Koffman           Director                December 29, 1997
--------------------- 
Jeffery Koffman

Martin Koffman                Director                December 29, 1997
---------------------
Martin Koffman


/s/ James C. Willcox          Director                December 29, 1997
---------------------
James C. Willcox


/s/ Travis Metz               Director                December 29, 1997
--------------------- 
Travis Metz

                                   11
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
                         -----------------------------



                                                                            Page

Report of Independent Certified Public Accountants                           F-1

Balance Sheets as of September 30, 1997 and 1996                             F-2

Statements of Operations for the years ended
  September 30, 1997 and 1996                                                F-3

Statements of Stockholders' Equity for the years ended
  September 30, 1997 and 1996                                                F-4

Statements of Cash Flows for the years ended September 30,
  1997 and 1996                                                              F-5

Notes to Financial Statements                                         F-6 - F-11

<PAGE>
                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                --------------------------------------------------




Board of Directors and Stockholders
GlenGate Apparel Inc.
Mountainside,  New Jersey

We have audited the accompanying balance sheets of GlenGate Apparel Inc. as of
September 30, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our respons-
ibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing stand-
ards. 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GlenGate Apparel Inc. as of
September 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.



BDO Seidman, LLP

Woodbridge, New Jersey
November 12, 1997

                                                                           F-1
<PAGE>
                            GLENGATE APPAREL, INC.
                                BALANCE SHEETS
                          ===========================

<TABLE>
<CAPTION>
                                                    September 30,   September 30,
                                                         1997           1996
                                                    --------------  -------------
             ASSETS (Note 4)
             ---------------
<S>                                              <C>                <C>                                    
Current:
  Cash                                              $    180,913      $    34,917
  Accounts receivable, net of allowance for 
  doubtful accounts of $112,226 and $173,515           2,471,837        1,848,507
  Inventories                                          1,732,419        1,139,655
  Prepaid and other current assets                       623,362          381,313
                                                      ----------        ---------

      TOTAL CURRENT ASSETS                             5,008,531        3,404,392

  Property and equipment, net of accumulated 
   depreciation and amortization (Note 3)                864,283          257,530
  Security deposits and other assets                      59,740           35,917
                                                      ----------       ----------
      TOTAL ASSETS                                    $5,932,554       $3,697,839
                                                      ==========      ===========


      LIABILITIES AND STOCKHOLDERS' EQUITY
      -------------------------------------
Current:
Notes payable - bank (Note 4)                         $2,687,566      $1,597,918
  Current portion of long-term debt (Note 4)             136,000           5,127
  Subordinated notes payable to stockholders (Note 5)    350,000         190,000
  Accouts payable and accrued expenses                   872,883         490,915
                                                      ----------      ----------
      TOTAL CURRENT LIABILITIES                        4,046,449       2,283,960

  Long-term debt (Note 4)                                383,065          10,617
                                                      ----------      ----------
                                                       4,429,514       2,294,577
Commitments and contingencies (Notes 7 and 9)

STOCKHOLDERS' EQUITY (Note 9):

  Common stock at cost $.001 par value - 17,000,000
   and 10,000,000 shares authorized; 10,613,932 and
   8,113,932 issued and outstanding                       10,614           8,114
  Additional paid-in capital                           7,230,639       4,668,139
  Accumulated deficit                                 (5,738,213)     (3,272,991)
                                                      ------------    ----------

      TOTAL STOCKHOLDERS' EQUITY                        1,503,040      1,403,262
                                                      ------------    ----------
      TOTAL STOCKHOLDERS' EQUITY AND LIABILITIES      $ 5,932,554     $3,697,839
                                                      ============    ==========
</TABLE>
                      See accompanying notes to financial statements         F-2

<PAGE>

                             GLENGATE APPAREL INC.
                          STATEMENTS OF OPERATIONS
                       ==============================
<TABLE>
<CAPTION>

                                                             Year Ended
                                                 -------------------------------
                                                 September 30,    September 30,
                                                    1997              1996
                                                 -------------    -------------
<S>                                              <C>              <C>
Sales                                             $ 9,347,233      $ 6,229,728
Cost of sales                                       6,677,713        4,378,949
                                                 -------------     ------------
        GROSS PROFIT                                2,669,520        1,850,779
                                                 -------------     ------------

Operating expenses:
   Warehousing                                        507,170          318,516
   Design                                             258,791          202,779
   Selling                                          2,171,470        1,378,456
   General and administrative                       1,719,126        1,197,498
                                                 -------------     ------------
        TOTAL OPERATING EXPENSES                    4,656,557        3,097,249
                                                 -------------     ------------
Operating loss                                     (1,987,037)      (1,246,470)
Interest expense (Note 5)                            (478,185)        (202,821)
                                                 --------------    ------------

Net loss                                         $ (2,465,222)     $(1,449,291)
                                                 ==============    ============

Loss per share                                   $       (.29)     $      (.22)
                                                 ==============    ============

Weighted average number of common shares
   outstanding                                       8,648,179       6,605,941
                                                 ==============    ============

                      See accompanying notes to financial statements         F-3
</TABLE>

<PAGE>

                                   GLENGATE APPAREL INC.
                              STATEMENTS OF STOCKHOLDERS' EQUITY
                        ============================================
<TABLE>
<CAPTION>
                                  Common Stock                              
                              -------------------   Additional                   Total
                                                     Paid-In    Accumulated   Stockholders'
                                Shares     Amount    Capital      Deficit        Equity
                               ---------  --------  ----------  ------------  -------------
<S>                            <C>        <C>       <C>         <C>            <C>
Balance, September 30, 1995    6,284,600  $ 6,285   $3,012,448  $(1,823,700)   $1,195,033

Options exercised                554,332      554      557,361       -            557,915

Private placements of common
stock                          1,275,000    1,275    1,248,725       -          1,250,000

Offering costs, net                -          -       (150,395)      -           (150,395)

Net loss                           -          -          -       (1,449,291)   (1,449,291)
                               ---------   -------   ----------  -----------  -----------

Balance, September 30, 1996    8,113,932    8,114    4,668,139   (3,272,991)    1,403,262

Private placements of common 
 stock                         2,500,000    2,500    2,497,500        -         2,500,000

Offering costs                     -          -        (75,000)       -           (75,000)

Funding of expenses by 
 stockholder (Note 6)              -          -        140,000        -           140,000

Net loss                           -          -          -       (2,465,222)    (2,465,222)
                              ----------  --------  ----------- ------------    ----------
Balance, September 30, 1997   10,613,932  $10,614   $7,230,639  $(5,738,213)    $1,503,040
                            ========== ======== ========= ============ ==========

                      See accompanying notes to financial statements          F-4

</TABLE>

<PAGE>

                                   GLENGATE APPAREL INC.
                                 STATEMENTS OF CASH FLOWS
                          =====================================

<TABLE>
<CAPTION>
                                                             Year Ended
                                                    -----------------------------
                                                    September 30,   September 30,
                                                        1997            1996


                                                    --------------  ------------
<S>                                                 <C>             <C>         
 Cash flows from operating activities: 
  Net loss                                          $ (2,465,222)   $(1,449,291)
  Adjustments to reconcile net loss to net cash   
    used in operating activities:                                   
     Depreciation and amortization                       132,908         77,578
     Provision for doubtful accounts                      48,238         13,051
     Non-cash interest expense                           140,000              - 
   Changes in assets and liabilities:  
       Inventories                                      (592,764)      (245,620)
       Accounts receivable                              (671,568)    (1,056,221)
       Prepaid and other current assets                 (242,049)      (190,033)
       Accounts payable and accrued expenses             381,968        222,450
                                                     ------------   -------------
           Net cash used in operating activities      (3,268,489)    (2,628,086)
                                                     ------------   -------------
Cash flows from investing activities:
  Purchases of property and equipment                   (193,695)      (114,542)
  Security deposits and other assets                     (25,884)             - 
                                                     ------------    ------------
           Net cash used in investing activities        (219,579)      (114,542)
                                                     ------------    ------------

Cash flows from financing activities:
  Payment of financing cost                                     -       (22,000)
  Proceeds from sale of common stock                    2,500,000     1,250,000
  Proceeds from options exercised                               -       557,915
  Payment of offering and registration costs              (75,000)     (150,395)
  Payments on equipment notes payable                     (40,584)      (30,326)
  Net borrowings under line of credit                   1,089,648     1,272,809
  Borrowings from (repayments to) stockholders            160,000      (110,496)
                                                      -----------    -----------
           Net cash provided by financing activities    3,634,064     2,767,507
                                                      -----------    -----------
Net increase in cash                                      145,996        24,879
Cash, beginning of period                                  34,917        10,038
                                                      -----------    ----------
Cash, end of period                                   $   180,913    $   34,917
                                                      ===========    ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid                                       $   313,915    $ 196,216
                                                      ===========    ==========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
  In 1997, capital lease obligations of $547,905 were incurred in connection with
  various leases for new equipment.

                      See accompanying notes to financial statements          F-5

</TABLE>
<PAGE>

                              GLENGATE APPAREL INC.
                          NOTES TO FINANCIAL STATEMENTS
                       ====================================

NOTE 1 - ORGANIZATION
----------------------

GlenGate Apparel, Inc. (the "Company") was incorporated in the State of New
Jersey on November 8, 1993. The Company designs, contracts to have made, and
markets men's golf apparel and men's and ladies golf outerwear. The Company's
primary products consist of men's knit cotton shirts, sweaters and woven cotton
slacks, shorts and headwear and also men's and ladies golf rainwear. Customers
of the Company are primarily public and private golf course pro shops and
resorts in the United States.

      
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
---------------------------------------

CASH AND CASH EQUIVALENTS
-------------------------

For statement of cash flow purposes, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. The Company did not have any cash equivalents at September 30, 1997
and 1996.

REVENUE RECOGNITION
-------------------

Revenue is recognized upon shipment of goods to customers.

INVENTORIES
-----------

Inventories consist of finished goods and are valued at the lower of cost or
market with cost determined by the first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT
----------------------

Property and equipment is recorded at cost. Depreciation and amortization are
calculated on a straight line basis over the estimated useful lives of the
related assets.

LOSS PER SHARE
--------------

Loss per share is computed on the basis of the weighted average number of common
shares outstanding during the period. The assumed conversion of common stock
equivalents has not been included because the effect would be anti-dilutive.

SIGNIFICANT 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.

RECLASSIFICATIONS
-----------------

Certain items presented as of September 30, 1996 have been reclassified to
conform to the presentation used in 1997.
                                                                             F-6
<PAGE>

                               GLENGATE APPAREL INC.
                           NOTES TO FINANCIAL STATEMENTS
                         ================================          

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------------

In March 1995, the Financial Accounting Standards Board ("FASB") issued State-
ment of Financial Accounting Standard ("SFAS") No. 121 "Accounting for Impair-
ment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which
establishes accounting standards for, among other things, the impairment of
long-lived assets and certain identifiable intangibles. The adoption of this
pronouncement on October 1, 1996 did not have a material effect on the
Company's financial statements.

In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation." On October 1, 1996, the Company adopted SFAS No. 123 and chose to
continue the application of APB Opinion 25 and related interpretations in
accounting for its stock options.  As a result, the adoption of SFAS No. 123 did
not have a material impact on the Company's financial statements.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. SFAS No.
128 replaces the presentation of primary and fully diluted earnings per share
with basic and diluted earnings per share, respectively.  Basic earnings per
share are computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share are computed similarly to fully diluted earnings per share.
The standard is effective for financial statements for periods ending after
December 15, 1997, with earlier application not permitted. The adoption of this
standard is not expected to have a material effect on the Company's earnings per
share.

In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure about Segments of and Enterprise and Related Information," were
issued. SFAS No. 130 addresses standards for reporting and display of
comprehensive income and its components and SFAS No. 131 requires disclosure of
reportable operating segments. Both statements are effective for the Company's
1999 fiscal year.  The Company will review these pronouncements to determine
their applicability, if any. Management does not expect these pronouncements to
have a material effect on the Company's financial statements.

NOTE 3 - PROPERTY AND EQUIPMENT
--------------------------------

Property and equipment consists of the following as of September 30: 

                                                                  Estimated
                                                                    useful
                                       1997           1996       lives (years) 
                                   ----------     -----------    -------------
Leasehold improvements             $   23,919     $    37,718               3
Machinery and equipment               642,474         153,311           4 - 5
Furniture and fixtures                140,772          90,020           3 - 5
Computer equipment and software       256,967          82,483               5
                                   -----------    ------------   

Less:  Accumulated depreciation
   and amortization                   199,849         106,002
                                   -----------    ------------
                                   $  864,283     $   257,530 
                                   ===========    ============

Property and equipment includes capitalized leases of $547,905 for equipment,
less accumulated amortization of $11,000 at September 30,1997.
                                                                             F-7
<PAGE>

                              GLENGATE APPAREL INC.
                          NOTES TO FINANCIAL STATEMENTS
                        ================================          

NOTE 4 - NOTES PAYABLE
-----------------------

On July 25, 1997, the Company amended the revolving loan and security agreement
(the "Agreement") originally entered into in September 1996 with a financial
institution. Availability under the Agreement, is limited by a collateral
formula calculated as the lesser of $4,000,000 or 85% of qualified accounts
receivable and 50% of eligible finished goods inventory. Interest accrues at a
variable rate equal to 2-1/4% in excess of the bank's prime lending rate
(8-1/2% as of September 30, 1997). Outstanding borrowings are collateralized by
substantially all the assets of the Company. The Agreement expires in September
1998.

The average amount outstanding under the Agreement during the year ended
September 30, 1997 was approximately $1,910,422 at a weighted average interest
rate of 9 3/4%.

The fair value of the debt approximates the recorded value based on the
borrowing rates currently available for loans with similar terms and maturities.

Additionally, the Company has outstanding borrowings under several equipment
leases accounted for as capital leases aggregating $519,065 as of September 30,
1997. Annual amounts due under these obligations are approximately $140,000 -
September 30, 1998, $162,000 - September 30, 1999, $169,000 - September 30, 2000
and $48,000 - September 30, 2001.

NOTE 5 - NOTES PAYABLE - STOCKHOLDERS
-------------------------------------

The Company has currently outstanding $100,000 in note and $3,333 in related
accrued interest in favor of an officer and director. The funds were advanced
during the developmental stages to satisfy working capital needs.  The Note has
matured and has been converted to a demand note with interest at a rate per
annum of 1-1/2% over Prime due on January 15 and July 15 until the Note is paid.
In addition, in January 1997, an officer, who is also a director, and a director
advanced the Company a total of $250,000 to satisfy additional working capital
needs. The Notes are payable upon demand and bear interest at a rate of 12%,
payable monthly.  Interest expense on these notes amounted to approximately
$30,000 for the year ended September 30, 1997.

NOTE 6 - INTERIM FINANCING
--------------------------

In April 1997, the Company obtained a financing arrangement of $750,000 with a
lending group (the "lending group"), which included an existing stockholder of
the Company. In addition, the lending group made available another $150,000 in
connection with a Letter of Credit. The debt bore interest at 2-1/2% above the
prime rate quoted in the Wall Street Journal (8-1/2% as of March 31, 1997) and
was collateralized by a second lien on the Company's inventory, accounts
receivable and trademarks. Principal and any outstanding interest was due and
payable on December 31, 1997. As described in Note 9(c), in July 1997, the
Company repaid in full the lending group loan, substituted approximately
$150,000 for the collateral securing the Letter of Credit and the lending group
released the second lien on the Company's inventory, accounts receivable and
trademarks.

As part of the initial loan transaction, an officer of the Company sold 135,000
shares of his common stock to the lending group for $.20 per share and the
Company agreed to grant to the lending group, upon the occurrence of certain
conditions, warrants to acquire up to 270,000 shares of common stock with an
exercise price equal to sixty percent (60%) of the common stock market value (as
defined) during the thirty day period prior to exercise of the warrants. Such
warrants became exercisable on August 8, 1997 for a period of three years. In
addition, if the debt was not repaid by August 8, 1997, the officer agreed to
grant to the lending group options to acquire an additional 90,000 shares of his

                                                                             F-8

<PAGE>

                               GLENGATE APPAREL INC.
                           NOTES TO FINANCIAL STATEMENTS
                         ================================          

common stock exercisable from August 8, 1997 to August 18, 1997 at $.20 per
share and the Company agreed to grant the lending group warrants to acquire an
additional 180,000 shares of common stock on the same terms as the warrants
described above. The debt was repaid in July 1997, as described in Note 9(c)
and, accordingly, the additional options and warrants were not granted.

The estimated market value of the shares sold to the lending group by the
officer, less the proceeds received, along with the estimated market value of
the warrants to acquire 270,000 shares of common stock amounted to approximately
$140,000. This amount was charged to interest expense between April and July
1997.


NOTE 7 - COMMITMENTS
--------------------

As of September 30, 1997, the Company had purchase commitments for merchandise
of approximately $3,765,000.

In June 1997, the Company entered into a five year operating lease agreement
with a three year renewal option for office and warehouse facilities under which
the future minimum annual rentals as of September 30, 1997 are as follows:

                        1998         $   192,365
                        1999             209,875
                        2000             209,875
                        2001             209,875
                        2002             209,875
                                     -----------
                                     $ 1,031,865
                                     ===========

Rent expense was $93,225 and $70,408 for the years ended September 30, 1997 and
1996, respectively.

On February 14, 1997, the Company entered into a Consignment Agreement with Sun
Ice Ltd. and Sun Ice USA, Inc. to sell certain apparel inventory of Sun Ice on
a consignment basis. As of September 30, 1997, the Company held approximately
$364,000 of inventory under the Consignment Agreement with Sun Ice. The Company
agreed to return, dispose of or purchase any unsold goods upon the termination
of the Consignment Agreement on November 14, 1997. Through December 1997, no
purchase of unsold goods has been finalized.

In addition, on February 14, 1997, the Company entered into a Trademark License
Agreement with Sun Ice Ltd. and Sun Ice USA under which the Company was granted
a license to use the Sun Ice and Aureus trademarks within the United States for
a five year period. The Company has agreed to pay a royalty based on a percent-
age of licensed net sales with the annual minimum royalty ranging up to approx-
imately $220,000 during the five year term commencing December 1, 1997. The Sun
Ice label consists of men's and ladies' golf outerwear and the Aureus label
consists of men's golf apparel.

NOTE 8 - INCOME TAXES
---------------------

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
a company to recognize deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized in a company's
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial state-
ment carrying amounts and tax bases of assets and liabilities using enacted tax
rates.
                                                                             F-9

<PAGE>

                               GLENGATE APPAREL INC.
                           NOTES TO FINANCIAL STATEMENTS
                         ================================          

in effect in the years in which the differences are expected to reverse.

At September 30, 1997, the Company had net operating loss carryforwards of
approximately $5,600,000, which expire through 2017 and are restricted as to
annual utilization during the carryforward period, and temporary differences
related primarily to inventory costs capitalized for tax purposes totalling
approximately $54,000. The deferred tax asset related to the net operating loss
carryforwards and temporary differences amounted to approximately $2,400,000 and
is fully offset by a valuation allowance of the same amount.

NOTE 9 - STOCKHOLDERS' EQUITY
------------------------------

a)  Common Stock Options

   In December 1994 the Company's Board of Directors approved the adoption of
   the 1994 Stock Option Plan (the "Plan") to provide incentives for selected
   persons to promote the financial success and progress of the Company.  The
   Plan provides for the Compensation Committee or such other committee that
   the Board may appoint to administer the Plan. The Plan provides for the
   reservation of 2,500,000 shares of common stock for issuance upon the
   exercise of granted options.

    The following is a summary of the common stock options granted, canceled or
    exercised under the Plan for the period October 1, 1995 through September
    30, 1997.                                                  
                                                           Exercise price per
                                             Shares             share
                                           ----------      ----------------

    Outstanding - September 30, 1995       1,934,000       $1.00 to $3.00

    Granted                                  476,000       $1.25 to $1.625

    Canceled                                (119,668)      $1.00 to $2.50

    Exercised                               (554,332)      $1.00 to $1.25

    Outstanding - September 30, 1996       1,736,000       $1.00 to $2.50

    Granted                                   67,500       $1.00 to $1.06

    Canceled                                (212,500)      $1.00 to $1.25

    Exercised                                      -                    -
                                           ----------      ---------------

    Outstanding - September 30, 1997       1,591,000       $1.00 to $2.50
                                           ==========      ===============

    The fair value of the stock options granted during 1997 and 1996 was $23,163
    and $195,300, respectively, on the date of grant using the Black Scholes
    option-pricing model. The weighted-average assumptions used for both 1997
    and 1996 were: risk-free interest rate of 6.1%, an expected life of 2 years
    and an expected volatility of 47%.

    In addition, the Company has 270,000 warrants outstanding as described in
    Note 6 and 2,500,000 options outstanding as described in Note 9(c).

                                                                            F-10

<PAGE>

                              GLENGATE APPAREL INC.
                         NOTES TO FINANCIAL STATEMENTS
                       ================================          

    The following table summarizes information on stock options outstanding at
    September 30, 1997:

<TABLE>
<CAPTION>
                           Options Outstanding                Options Exercisable
              -----------------------------------  -----------------------------
<S>              <C>            <C>           <C>        <C>             <C>   
                                Weighted
                 Number          Average      Weighted   Number          Weighted
                 Outstanding at  Contractual  Average   Exercisable at   Average
Range of          September 30,   Life         Exercise  September 30,   Exercise
Exercise Prices     1997         (Years)       Price        1997          Price
------------------------------------------------------  -------------------------
$1.00 - $1.25    1,437,000         8.3         $1.04     1,335,331        $1.03
$1.50 - $1.63       86,000         9.0         $1.53        80,000        $1.54
$2.00 - $2.40       68,000         8.0         $2.11        68,000        $2.11
                 -------------------------------------  -------------------------
                 1,591,000         8.3         $1.12     1,483,331        $1.11
                 ====================================== =========================

</TABLE>

b)  Stockholders Agreement

    In April 1995, the Company and the founding stockholders (the
    "Stockholders") negotiated a stockholders' agreement which requires the
    Company to purchase the shares held by a Stockholder upon the death of
    that Stockholder, at estimated fair market value (as defined), but limited
    to the extent of any insurance proceeds payable to the Company as a result
    of the Stockholder's death.

c)  Increased Shares Authorized and Private Placement of Common Stock

   In July 1997, the holders of the Company's stock approved an increase in the 
   number of authorized shares of common stock to 17,000,000 shares enabling 
   American Marketing Industries, Inc. ("AMI") to purchase 2,500,000 shares and 
   receive 2,500,000 stock options for an aggregate price of $2,500,000.  The 
   options consists of an option to acquire up to 1,000,000 shares of Common
   Stock at a purchase price of $1.50 per share, such option to be immediately
   exercisable and expiring three years after the date of the grant and an
   option to acquire up to 1,500,000 shares at a purchase price of $2.00 per
   share, such option to become exercisable one year from the date of the grant
   and expiring three years after the date of the grant.

   In June 1997, AMI had advanced to the Company a bridge loan in the amount
   of $600,000 pursuant to a term note, such term note to bear interest at a
   rate of 9% per annum, with interest to be payable quarterly beginning
   September 1, 1997. The note was to mature on the earlier of June 23, 1998
   or at AMI's option in the event the Company defaulted on the note and could
   be prepaid by the Company without penalty at any time prior to the maturity
   date.

    The Company used the net proceeds of $2,425,000 as follows: (i) approx-
    imately $600,000 to repay the AMI bridge loan, (ii) approximately $750,000
    to repay outstanding loans made by the lending group described in Note 6,
    and (iii) approximately $150,000 in substitution of the collateral provided
    by the same lending group in connection with a certain letter of credit.
    Approximately $200,000 of the remainder of the proceeds was used for capital
    expenditures and the balance has been used for working capital and other
    general corporate purposes.


NOTE 10 - CONCENTRATION OF CREDIT RISK
--------------------------------------

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
The Company performs ongoing credit evaluations of its customers' financial
condition to mitigate its credit risk. The Company does not normally require
collateral on its accounts receivable.

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