<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549

                                  FORM 10-Q/A


   X          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  ---         EXCHANGE ACT OF 1934
              For the quarterly period ended March 31, 1998

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE 
  ---         ACT OF 1934
              For the transition period from ______________ to ______________


                        Commission File Number:  0-28596


                              THE NORTH FACE, INC.
             (Exact name of registrant as specified in its charter)


     Delaware                                           94-3204082
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

407 Merrill Avenue, Carbondale, Colorado                 81623
(Address of principal executive offices)              (Zip Code)

                                (970) 704-2300
             (Registrant's telephone number, including area code)

              2013 Farallon Drive, San Leandro, California  94577
             (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes         No    X
      ---        ---


The number of shares of Common Stock, $0.0025 par value per share, outstanding
on April 30, 1999, was 12,725,656.

                                       1
<PAGE>
 
                              THE NORTH FACE, INC.

                                 MARCH 31, 1998


                              INDEX TO FORM 10-Q/A

<TABLE>
<CAPTION>


PART I.       FINANCIAL INFORMATION                                     PAGE NO.
<S>           <C>                                                       <C>

     Item 1 - Financial Statements (unaudited)

                Condensed Consolidated Balance Sheets as of
                  March 31, 1998 (Restated), December 31, 1997
                  and March 31, 1997......................................    3

                Condensed Consolidated Statements of Operations
                  for the Three Months Ended March 31, 1998
                  (Restated) and 1997.....................................    4

                Condensed Consolidated Statements of Cash Flows
                  for the Three Months Ended March 31, 1998
                  (Restated) and 1997.....................................    5

                Notes to Condensed Consolidated Financial Statements......    6


     Item 2 - Management's Discussion and Analysis of Financial
                Condition and Results of Operations.......................    9


PART II.      OTHER INFORMATION

     Item 1 - Legal Proceedings...........................................   13
     Item 6 - Exhibits and Reports on Form 8-K............................   14

</TABLE>

                                       2
<PAGE>
 
ITEM 1.  FINANCIAL STATEMENTS

                              THE NORTH FACE, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
              (In thousands, except share and per share amounts)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                         March 31,    December 31,  March 31,
                                Assets                                      1998          1997         1997
----------------------------------------------------------------------   ---------     ----------   ---------
                                                                          RESTATED
                                                                        (See Note 3)
Current assets:
<S>                                                                     <C>           <C>           <C>
Cash and cash equivalents.............................................     $  4,867       $  4,511   $  1,618
Accounts receivable, net..............................................       46,455         54,857     27,062
Inventories...........................................................       52,779         46,682     35,889
Deferred taxes........................................................        2,867          2,865      2,483
Other current assets..................................................       12,281          9,046      6,013
                                                                           --------       --------   --------
 Total current assets.................................................      119,249        117,961     73,065
Property and equipment, net...........................................       18,508         17,524     13,596
Trademarks and intangibles, net.......................................       28,610         29,066     29,655
Other assets..........................................................        2,987          2,898      2,279
                                                                           --------       --------   --------
 Total assets.........................................................     $169,354       $167,449   $118,595
                                                                           ========       ========   ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, accrued expenses and other                                                                  
 current liabilities..................................................     $ 34,789       $ 30,232   $ 20,113 
Short-term borrowings and current portion of long-term debt                  
 and capital lease obligations........................................       23,256         25,734      3,821
                                                                           --------       --------   --------
 Total current liabilities............................................       58,045         55,966     23,934
Long-term debt and obligations under capital leases...................        4,953          5,177        477
Other long-term liabilities...........................................        6,216          6,165      6,461
                                                                           --------       --------   --------
 Total liabilities....................................................       69,214         67,308     30,872
                                                                           --------       --------   --------
 
Stockholders' equity:
Common stock, $.0025 par value  shares authorized 50,000,000;                                                 
 Issued and outstanding; 11,554,000 at March 31, 1998;
 11,502,000 at December 31, 1997; and 11,205,000 at
 March 31, 1997.......................................................           29             29         29 
Additional paid-in capital............................................       82,504         81,727     77,256
Subscription receivable...............................................           --             --        (62)
Retained earnings.....................................................       17,225         18,068     10,348
Accumulated other comprehensive income -                                        
 cumulative translation adjustments...................................          382            317        152
                                                                           --------       --------   --------
 Total stockholders' equity...........................................      100,140        100,141     87,723
                                                                           --------       --------   --------
 Total liabilities and stockholders' equity...........................     $169,354       $167,449   $118,595
                                                                           ========       ========   ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                              THE NORTH FACE, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                  (unaudited)



<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                        March 31
                                                                         -----------------------------------------
                                                                             1998                       1997
                                                                         ---------------           ---------------
                                                                           RESTATED
                                                                         (See Note 3)
<S>                                                                <C>                       <C>
Net sales........................................................                  $45,704                 $39,342
Cost of sales....................................................                   25,779                  22,127
                                                                           ---------------         ---------------
Gross profit.....................................................                   19,925                  17,215
Operating expenses...............................................                   20,325                  16,773
                                                                           ---------------         ---------------
Operating income (loss)..........................................                     (400)                    442
Interest expense.................................................                     (674)                   (119)
Other income (expense), net......................................                     (297)                     62
                                                                           ---------------         ---------------
Income (loss) before provision for income taxes..................                   (1,371)                    385
Provision (benefit) for income taxes.............................                     (528)                    150
                                                                           ---------------         ---------------
Net income (loss)................................................                  $  (843)                $   235
                                                                           ===============         ===============
Net Income (loss) per share:
  Basic..........................................................                   $(0.07)                  $0.02
  Diluted........................................................                   $(0.07)                  $0.02
Weighted average shares outstanding:
  Basic..........................................................                   11,539                  11,206
  Diluted........................................................                   11,539                  11,643
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                              THE NORTH FACE, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                                    Three Months Ended
                                                                                                         March 31
                                                                                                    ------------------ 
                                                                                                      1998       1997
                                                                                                    -------    -------   
Cash Flows From Operating Activities:                                                               RESTATED
                                                                                                  (See Note 3)
<S>                                                                                               <C>           <C>
Net income (loss)...............................................................................      $  (843)  $   235
Adjustments to reconcile net income to cash provided by (used in)
 operating activities:
  Depreciation and amortization.................................................................        1,461     1,004
  Loss from disposal of property and equipment..................................................          324        --
  Deferred income taxes.........................................................................           (2)        7
  Provision for doubtful accounts...............................................................          217       554
  Tax benefit of exercise of stock options......................................................           12     1,055
Effect of changes in:
  Accounts receivable...........................................................................        8,604    (3,283)
  Inventories...................................................................................       (6,097)   (4,414)
  Income tax receivable.........................................................................       (1,034)   (1,291)
  Other assets..................................................................................       (2,498)   (3,687)
  Accounts payable, accrued expenses and other current liabilities..............................        4,606     2,789
                                                                                                      -------   -------   
Net cash provided by (used in) operating activities.............................................        4,750    (7,031)
                                                                                                      -------   -------   
Cash Flows From Investing Activities:
Purchases of property and equipment.............................................................       (2,524)   (3,668)
                                                                                                      -------   -------   
Cash Flows From Financing Activities:
Long-term debt proceeds.........................................................................           --       380
Repayments of long-term debt....................................................................         (312)       (9)
Proceeds (repayment) from revolver, net.........................................................       (2,388)    3,697
Proceeds from issuance of stock.................................................................          765       104
                                                                                                      -------   -------   
Net cash provided by (used in) financing activities.............................................       (1,935)    4,172
                                                                                                      -------   -------   
Effect of foreign currency fluctuations on cash.................................................           65      (170)
                                                                                                      -------   -------   
Increase (decrease) in cash and cash equivalents................................................          356    (6,697)
Cash and cash equivalents, beginning of period..................................................        4,511     8,315
                                                                                                      -------   -------   
Cash and cash equivalents, end of period........................................................      $ 4,867   $ 1,618
                                                                                                      =======   =======   
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                              THE NORTH FACE, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


NOTE 1.  BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements of
The North Face, Inc. and its subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Accordingly, the interim unaudited financial statements should be
read in conjunction with the financial statements included in the Company's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 1997 (the
Form "10-K/A").  Operating results for the three month period ended March 31,
1998 are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1998.

     These financial statements have been prepared by the Company in a manner
consistent with that used in the preparation of the consolidated financial
statements included in the Form 10-K/A.  Certain items contained in these
statements are based on estimates.  In the opinion of management, the
accompanying financial statements reflect all adjustments, consisting of only
normal and recurring adjustments, necessary for a fair presentation of the
financial position and results of operations and cash flows for the periods
presented.  All significant intercompany accounts and transactions have been
eliminated.

     The Condensed Consolidated Balance Sheet as of December 31, 1997, has been
derived from the Consolidated Balance Sheet as of December 31, 1997 included in
the Form 10-K/A.

     Reclassifications.  Certain reclassifications of the 1997 interim financial
statements have been made to conform with the 1998 presentation.  Such
reclassifications had no effect on net earnings.


NOTE 2.  RECENTLY ISSUED ACCOUNTING STANDARDS

  In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
established standards for reporting and displaying comprehensive income and its
components in financial statements.  Comprehensive income is defined as a change
in equity from transactions and other events and circumstances from nonowner
sources.  Accumulated other comprehensive income consists entirely of foreign
currency translation adjustments.  Total comprehensive income (loss) for the
quarters ended March 31, 1998 and 1997 was ($778,000) and $65,000, respectively.

                                       6
<PAGE>
 
NOTE 3.  RESTATEMENT

     Subsequent to the issuance of the Company's Condensed Consolidated
Financial Statements for the three months ended March 31, 1998, the Company's
management determined that certain barter transaction revenue had been
improperly recognized, certain severance costs had not been properly accrued,
certain capitalized costs related to information systems selection and
consulting costs should have been expensed, and certain other income should have
been recognized during the three months ended June 30, 1998 rather than the
three months ended March 31, 1998. In addition, it was determined that certain
property amounts had been improperly accrued. As a result, the condensed
consolidated financial statements as of March 31, 1998 and for the three months
then ended have been restated from amounts previously reported. The effects of
the restatement have been reflected herein.

     In addition to the restatements reflected herein, the Company has also 
restated its previously issued Consolidated Financial Statements for the year 
ended December 31, 1997 and its previously issued Condensed Consolidated 
Financial Statements for the six and nine months ended June 30, 1998 and 
September 30, 1998.  See the Form 10-K/A and the Company's Quarterly Reports on 
Form 10-Q/A for the six and nine months ended June 30, 1998 and September 30, 
1998.

A summary of the effects of the restatement as of March 31, 1998 and for the
three months then ended follows:

<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                    March 31
                                                                    ----------------------------------------
                                                                          1998                    1998
                                                                    ----------------        ----------------
                                                                         PREVIOUSLY             RESTATED
                                                                          REPORTED
                                                                    (In thousands, except per share amounts)
                                                                                   (unaudited)
<S>                                                                 <C>                   <C>
Net sales........................................................            $47,809              $45,704
Cost of sales....................................................             26,817               25,779
Operating expenses...............................................             19,911               20,325
Other income (expense) net.......................................                353                 (297)
Income (loss) before provision for income taxes..................                760               (1,371)
Provision (benefit) for income taxes.............................                300                 (528)
Net income (loss)................................................                460                 (843)
Net Income (loss) per share:
  Basic..........................................................            $  0.04               ($0.07)
  Diluted........................................................            $  0.04               ($0.07)
</TABLE>


<TABLE>
<CAPTION>
                                                                               March 31,          March 31,
                                                                                 1998               1998
                                                                         -------------------  ----------------
                                                                             PREVIOUSLY             RESTATED
                                                                              REPORTED
                                                                               (In thousands, unaudited)
<S>                                                                      <C>                   <C>
Total current assets.............................................              $117,945             $119,249
Property and equipment, net......................................                22,957               18,508
Other assets.....................................................                 3,174                2,987
Total current liabilities........................................                57,112               58,045
Other long-term liabilities......................................                 6,025                6,216
Retained earnings................................................                21,681               17,225
</TABLE>

                                       7
<PAGE>
 
NOTE 4.  SUBSEQUENT EVENTS

     On February 27, 1999, the Company's Board of Directors approved a
Transaction Agreement (the "Transaction Agreement") between the Company and TNF
Acquisition LLC ("TNF"), an affiliate of Leonard Green & Partners, L.P. ("LGP").
The Transaction Agreement provides for a tender offer for all of the Company's
outstanding stock (other than shares held by James G. Fifield, Chief Executive
Officer) at $17 cash per share and the acquisition of control of the Company by
LGP and Mr. Fifield.  On March 5, 1999, the Company withdrew its tender offer,
however, the Transaction Agreement remained in full force and effect.  There can
be no assurance that the transactions contemplated by the Transaction Agreement
(the "Transactions") will be consummated at all or on terms favorable to the
Company's stockholders.  If the Transaction Agreement is terminated, the Company
could be required under certain circumstances to pay TNF a $7 million
termination fee plus up to $5.5 million of TNF's expenses associated with the
Transactions.

     In connection with the Transactions and following the Company's accounting
related announcements, which reported the restatement of the Company's 1997
Consolidated Financial Statements and 1998 interim Condensed Consolidated
Financial Statements, several lawsuits have been filed against the Company.
There can be no assurance that the Company will successfully defend these
lawsuits. Regardless of whether the Transactions are consummated or of the
outcome of these lawsuits, the Company will likely incur significant related
expenses and costs that could have a material adverse effect on the Company's
business and operations.

     During the first week of March 1999, various complaints were filed against
the Company and its Board of Directors in the Delaware Court of Chancery and in
California Superior Court, Alameda County in connection with the Transactions.
The complaints, filed on behalf of a purported class of the Company's
shareholders, generally allege that the Transactions are unfair and inadequate
to the Company's shareholders and charge the defendants with self-dealing and
breach of fiduciary duties. The various complaints generally request injunctive
relief to prevent the consummation of the Transactions, and seek other remedies
in the event the Transactions are completed. The Company has not yet responded
to these complaints.

     On March 9, 1999, a purported shareholder class action complaint was filed
in federal district court in Colorado, alleging that the Company and various of
its officers and directors violated the federal securities laws by making false
and misleading statements about the Company's financial results during a class
period from April 25, 1997 through March 4, 1999.  Markus v. The North Face,
Inc., et al., Civ. A. No. 99-WM-473.  Subsequently, complaints with similar
allegations and class periods on behalf of persons trading in the Company's
securities, have been filed in federal district courts in Colorado and
California (collectively, the "Securities Litigation").  The Company believes it
has meritorious defenses to these claims and intends to contest the Securities
Litigation vigorously.  An unfavorable resolution of the Securities Litigation
could have a material adverse effect on the business, results of operations or
financial condition of the Company.

     On April 6, 1999, a shareholder derivative action purportedly on behalf of
the Company, captioned Eng v. Cason, et al., Civil Action No. 810726-0, was
filed in California Superior Court, Alameda County.  The complaint alleges that
the Company's directors and various officers violated California law and
breached fiduciary duties to the Company by engaging in alleged wrongful conduct
from April 25, 1997 through March 12, 1999, including the conduct complained of
in the Securities 

                                       8
<PAGE>
 
Litigation. The Company is named solely as a nominal defendant, against whom the
plaintiff seeks no recovery.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

     Subsequent to the issuance of the Company's Condensed Consolidated
Financial Statements for the three months ended March 31, 1998, the Company's
management determined that certain barter transaction revenue had been
improperly recognized, certain severance costs had not been properly accrued,
certain capitalized costs related to information systems selection and
consulting costs should have been expensed and certain other income should have
been recognized during the three months ended June 30, 1998 rather than the
three months ended March 31, 1998. In addition, it was determined that certain
property amounts had been improperly accrued. As a result, the Condensed
Consolidated Financial Statements as of March 31, 1998 and for the three months
then ended have been restated from amounts previously reported. The effects of
the restatement are presented in Note 3 of the Notes to the Condensed
Consolidated Financial Statements and have been reflected herein.

     In addition to the restatements reflected herein, the Company has also 
restated its previously issued Consolidated Financial Statements for the year 
ended December 31, 1997 and its previously issued Condensed Consolidated 
Financial Statements for the six and nine months ended June 30, 1998 and 
September 30, 1998.  See the Form 10-K/A and the Company's Quarterly Reports on 
Form 10-Q/A for the six and nine months ended June 30, 1998 and September 30, 
1998.

Overview: Factors That May Affect Future Results

     When used below in connection with matters that may occur in the future,
the words "anticipate," "estimate," "expect" or similar words identify forward
looking statements within the meaning of federal securities laws.  Forward
looking statements below are based on the Company's current expectations of
future events.  The matters described in the forward looking statements are
subject to risks and uncertainties.  The actual results of these matters may
differ substantially from the results anticipated by the Company.  The Company
cannot assure that future results will meet its current expectations.  Risks and
uncertainties relating to forward looking statements and to the Company's
business include, but are not limited to, those described herein, under "Factors
That May Affect Our Business," in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 and in other documents that may be
subsequently filed with the Securities and Exchange Commission.

                                       9
<PAGE>
 
Results of Operations

     The following tables set forth, for the periods indicated, certain items in
the Company's consolidated statements of operations as a percentage of net sales
(except for income taxes, which are shown as a percentage of pretax income).
The results of operations for the three months ended March 31, 1998 and 1997 are
not necessarily indicative of future results to be expected for the full year.

<TABLE>
<CAPTION>
                                                                                                  Three Months Ended
                                                                                                       March 31
                                                                                         ---------------------------------------
                                                                                             1998                       1997
                                                                                         ---------------          --------------
<S>                                                                                      <C>                      <C>
Net sales...................................................................                    100.0%                     100.0%
Gross profit................................................................                     43.6%                      43.8%
Operating expenses..........................................................                     44.5%                      42.6%
Operating income (loss).....................................................                     (0.9%)                      1.1%
Interest expense............................................................                     (1.5%)                     (0.3%)
Income (loss) before provision for income taxes.............................                     (3.0%)                      1.0%
Provision (benefit) for income taxes........................................                    (38.5%)                     39.0%
Net income (loss)...........................................................                     (1.8%)                      0.6%
</TABLE>


Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
(Open)

Net Sales.  Net sales increased by 16.2% to $45.7 million from $39.3 million for
the three months ended March 31, 1998 (the "First Quarter 1998") over the three
months ended March 31, 1997 (the "First Quarter 1997").

     Net sales to wholesale customers increased by 20.7% to $37.8 million from
$31.3 million for the First Quarter 1998 compared to the First Quarter 1997.
This increase was primarily a result of increased unit sales to the Company's
existing wholesale customers resulting from (i) continued sales in recently
introduced products, including Tekware/TM/ and Ascentials; (ii) continued strong
sales of sales of existing products, and (iii) increased sales through the
Summit Shop program.

     Retail sales in the US and Canada were $7.9 million compared to
approximately $8.0 million in the prior year.  On a comparable store basis,
retail sales were lower by 4.8% (approximately 4.0% lower for retail stores and
approximately 6.7% lower for outlets).  The decline was primarily in January and
early February due to inadequate inventory levels related to the allocation of
retail product to the wholesale division during the Fourth Quarter 1997.  March
results improved with a better retail inventory position, favorable weather
conditions and a sale held at the outlets.

Gross Profit.  Gross profit as a percentage of net sales for the First Quarter
1998 was 43.6% compared to 43.8% for the First Quarter 1997.  The lower gross
margin was primarily attributable to certain increased sourcing costs and lower
margins on international sales.

Operating Expenses.  Operating expenses, which include selling, marketing, and
general administrative expenses, increased by 21.2% to $20.3 million from $16.8
million for the First Quarter 1998 compared to the First Quarter 1997, primarily
as a result of increases in variable and fixed costs to support the growth of
the Company's business.

Interest Expense.  Interest expense for the First Quarter 1998 increased to $0.7
million from $0.1 million for the First Quarter 1997.  The low level of interest
in the First Quarter 1997 was primarily a result of the

                                       10
<PAGE>
 
application of the proceeds from the Company's initial public offering in July
1996 and secondary offering in November 1996, which were used to repay debt.

Provision for Income Taxes.  Income tax benefit as a percentage of pretax loss
was approximately 38.5% for the First Quarter 1998 compared to 39.0% of income
tax expense for the First Quarter 1997.  This decrease in the effective income
tax rate reflects the application of tax credits for research and development
activities as well as the mix of the Company's pretax earnings amongst domestic
and international operations, which are subject to different tax rates.

SEASONALITY

     The Company's business is subject to seasonal and quarterly fluctuations.
Historically, the Company has realized substantially all of its profits in the
third quarter and has recognized losses during the first quarter and the second
quarter, with the exception of the first quarter of 1997. The Company's results
of operations may fluctuate from quarter to quarter as a result of, among other
things, the amount and timing of shipments to wholesale customers, government
shipments, the timing and magnitude of discounts in retail stores, advertising
and marketing expenditures, increases in the number of employees and overhead to
support growth and store opening costs.

     The Company anticipates that it will continue to incur net losses during
the first and second calendar quarters for the foreseeable future.
Additionally, the Company's effective tax rate can vary significantly from
quarter to quarter due to the relative mix of earnings from the Company's
domestic and international operations, which are taxed at different rates.

YEAR 2000 COMPLIANCE

     Many currently installed computer systems and software products are coded
to accept only six digit entries in the date code field.  These date code fields
will need to accept eight digit entries to distinguish 21st century dates from
20th century dates.  As a result, during the next year, computer systems,
software and some non-information technology ("IT") products used by many
companies may need to be upgraded to comply with such "Year 2000" requirements.

     State of Readiness.  We have conducted an internal review of our
information and significant non-IT systems.  We are involved in an enterprise-
wide project to upgrade or modify portions of our software so that our computer
systems will meet Year 2000 requirements.  We have been using both external and
internal resources to reprogram or upgrade our software.  We plan to complete
the modifications and upgrades, including testing, of all systems by November
1999.  No significant Year 2000 problems have been identified in the Company's
non-IT systems.

     Costs to Address the Year 2000 Issue. Based on Management's current
estimates, the total cost for addressing the Year 2000 issue is estimated to be
approximately $750,000 of which $366,000 has been incurred through December 31,
1998.

     Risks Presented by the Year 2000 Issue.  We believe that the modifications
and upgrades to our software will mitigate any Year 2000 problems associated
with our internal systems.   However, if we do not complete the process of
modifying and upgrading our software in a timely manner, or at all, or if we do
not identify computer systems and non-IT systems that need to be upgraded, the
Year 2000 issue could have a material impact on our operations.  We have
surveyed our significant vendors and other third parties on whom we rely to
ensure that they will convert their systems in a timely manner.  We currently
are in the process of analyzing third party responses to our survey.  We cannot
be sure that other companies will convert their systems effectively or in a
timely manner.  If third parties, such as suppliers, manufacturers and other
vendors, fail to meet Year 2000 requirements, our business could be materially
adversely affected.

     Contingency Plans.  The Company's Year 2000 plan includes the development
of contingency plans in the event that the Company has not completed all of its
remediation plans in a timely manner or any third parties who provide goods or
services essential to the Company's business fail to appropriately address their
Year 2000 issues.  The Company plans to conclude the development of these plans
by the end of the third quarter of 1999.

                                       11
<PAGE>
 
STOCK MARKET RISKS

     The trading price of the Company's Common Stock has fluctuated
significantly since the Company's initial public offering in July 1996, and may
fluctuate in the future as a result of many factors, including the Company's
operating results, new products introduced by the Company or its competitors,
market conditions for the Company's products, changes in earnings estimates by
analysts, actual results reported by the Company which may be better or worse
than estimates provided by analysts, insider selling of Common Stock and
speculation in the trade or business press.  The trading price may also be
affected by retail industry, stock market, or economic factors unrelated to the
Company's operating performance.  Future sales of substantial amounts of Common
Stock by existing stockholders may also adversely affect prevailing market
prices for the Common Stock and could impair the Company's ability to raise
equity capital in the future.

     Trading in the Company's Common Stock was halted on April 16, 1999. There 
can be no assurance that the trading price of the Company's Common Stock will 
not fluctuate significantly upon the resumption of trading in its Common Stock 
or that there will not be any other adverse effect on the Company's business or
operations as a result of the trading halt.

LIQUIDITY AND CAPITAL RESOURCES

     Historically, the Company's ability to maintain adequate levels of
inventory was constrained by its capital resources. As a result of increases in
its existing credit facility, as well as the Company's public offerings in 1996,
the Company has increased its levels of inventory in order to better enable it
to meet demand for its key products. The Company anticipates that inventory
levels will continue to increase as the Company expands its business and
implements its core inventory replenishment program. Such inventory increases
are expected to be financed by borrowings under the Company's credit facility
(the "Credit Facility"). The Credit Facility provides for borrowings up to $60.0
million under its revolving line of credit with actual borrowings limited to the
lesser of $60.0 million or available collateral (approximately $58.0 million of
gross availability as of March 31, 1998) and for borrowings of up to $5.0
million under a term note for capital expenditures which was fully utilized as
of March 31, 1998. The Credit Facility also provides a sub-limit for letters of
credit of up to $25.0 million to finance the Company's purchases of merchandise
inventories from foreign suppliers. As of March 31, 1998, the Company had
approximately $19.3 million of letters of credit outstanding under the Credit
Facility.

     In September 1998, the Company entered into a new five year Global Senior
Secured Revolving Credit Facility (the "New Credit Facility") with The
Industrial Bank of Japan, Limited, New York Branch (as syndication agent and
documentation agent), and IBJ Whitehall Business Credit Corporation (as
arrangers, collateral agent and as administrative agent for itself and the other
lenders), and other financial institutions (the "Financial Institutions"). The
New Credit Facility includes a term note, a revolving line of credit and a
letter of credit facility. The term note (availability up to $15 million) is
payable in equal quarterly installments based on five year amortization of the
outstanding term loan from the last day of the term loan availability period
with payments commencing on October 1, 1999, but the outstanding principal
balance shall be due and payable in full on the termination date which is
September 2003. The term note carries interest payable monthly at the higher of
(a) the bank's base commercial lending rate minus one-half of one percent (.50%)
and (b) one-half of one percent (.50%) above the federal funds effective rate
plus the applicable margin. The Company had an outstanding $5 million term note
as of December 31, 1998, with the interest rate of 7.25%. The revolving line of
credit provides for borrowing up to $115 million with the actual borrowings
limited to available collateral, representing eligible receivables and inventory
(approximately $91.9 million of gross availability as of December 31, 1998, of
which the Company borrowed $55.1 million at December 31,


                                       12
<PAGE>
 
1998). Interest on the revolving line of credit is payable monthly at a rate of
either (1) the prime rate which is the higher of (a) the bank's base commercial
lending rate minus .50% and (b) .50% above the federal funds effective rate plus
the applicable margin, or (2) LIBOR plus the applicable margin, at the option of
the Company. The average interest rate was 7.15% at December 31, 1998. The
revolving line of credit agreement provides a sublimit facility for letters of
credit up to a maximum of $40 million (approximately $10.5 million outstanding
as of December 31, 1998). Fees for outstanding letters of credit are payable
quarterly at 1.5% per annum. The Company also pays a monthly unused line fee on
the revolver at .375% per annum. Borrowings and outstanding letters of credit
under the New Credit Facility are secured by substantially all of the assets of
the Company. The New Credit Facility includes certain financial covenants and
restrictions on new indebtedness and the payment of cash dividends. On May 3,
1999, the Company received a written waiver from the Financial Institutions for
violations of certain of the Company's non-financial covenants set forth in
the agreements relating to the New Credit Facility.

     The Company's capital expenditures in 1998 were approximately $17.2
million.  This amount was used principally for investment in Summit Shops, the
upgrade of management information systems, the expansion of the Company's
administration and distribution facilities, the expansion of its European sales
and marketing operations and the remodeling of existing retail stores.

     The Company anticipates that cash available under the Company's credit
facilities and through increased bank financing, will be sufficient to satisfy
its cash requirements for at least the next 12 months.


PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     During the first week of March 1999, various complaints were filed against
the Company and its Board of Directors in the Delaware Court of Chancery and in
the California Superior Court, Alameda County in connection with the
transactions (the "Transactions") contemplated by the Transaction Agreement
dated February 27, 1999, between the Company and TNF Acquisition LLC. The
complaints, filed on behalf of a purported class of the Company's shareholders,
generally allege that the Transactions are unfair and inadequate to the
Company's shareholders and charge the defendants with self-dealing and breach of
fiduciary duties. The various complaints generally request injunctive relief to
prevent the consummation of the Transactions, and seek other remedies in the
event the Transactions are completed. The Company has not yet responded to these
complaints.

     On March 9, 1999, a purported shareholder class action complaint was filed
in federal district court in Colorado, alleging that the Company and various of
its officers and directors violated the federal securities laws by making false
and misleading statements about the Company's financial results during a class
period from April 25, 1997 through March 4, 1999.  Markus v. The North Face,
Inc., et al., Civ. A. No. 99-WM-473.  Subsequently, complaints with similar
allegations and class periods on behalf of persons trading in the company's
securities, have been filed in federal district courts in Colorado and
California (collectively, the "Securities Litigation").  The Company believes it
has meritorious defenses to these claims and intends to contest the Securities
Litigation vigorously.  An unfavorable resolution of the Securities Litigation
could have a material adverse effect on the business, results of operations or
financial condition of the Company.

     On April 6, 1999, a shareholder derivative action purportedly on behalf of
the Company, captioned Eng v. Cason, et al., Civil Action No. 810726-0, was
filed in California Superior Court, 

                                       13
<PAGE>
 
Alameda County. The complaint alleges that the Company's directors and various
officers violated California law and breached fiduciary duties to the Company by
engaging in alleged wrongful conduct from April 25, 1997 through March 12, 1999,
including the conduct complained of in the Securities Litigation. The Company is
named solely as a nominal defendant, against whom the plaintiff seeks no
recovery.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     27.1 Financial Data Schedule

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed by the Company during the three-month
     period ended March 31, 1998.

                                       14
<PAGE>
 
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         THE NORTH FACE, INC.
                                             (Registrant)


     Dated:  May 7, 1999            By:  /s/ James G. Fifield
                                         -------------------------------------
                                         James G. Fifield
                                         President and Chief Executive Officer


     Dated:  May 7, 1999            By:  /s/ Jeffrey C. Mack
                                         -------------------------------------
                                         Jeffrey C. Mack
                                         Acting Chief Financial Officer
                                         (Principal Financial and Accounting
                                         Officer of the Registrant)

                                       15
<PAGE>
 
INDEX OF EXHIBITS


27.1   Financial Data Schedule

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