<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                   FORM 10-Q


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

                For the quarterly period ended October 30, 1999
                                               ----------------
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

        For the transition period from _______________ to ________________

               Commission file number      0-21406
                                      --------------------------

                                  Brookstone, Inc.
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                    Delaware                                    06-1182895
                    --------                                    ----------
(State or other jurisdiction of incorporation                (I.R.S. Employer
             or organization)                               Identification No.)

                      17 Riverside Street, Nashua, NH  03062
                      --------------------------------------
               (address of principal executive offices, zip code)

                                  603-880-9500
                                  ------------
              (Registrant's telephone number, including area code)

  --------------------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed since last
                                    report)

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

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed, by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes________ No_______

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,183,213 shares of common
                                                 ---------
stock as of December 5, 1999.
            ----------------
<PAGE>

                               BROOKSTONE, INC.

                              Index to Form 10-Q

<TABLE>
<CAPTION>
Part I:  Financial Information                                                  Page No.
         ---------------------                                                  --------
<S>                                                                             <C>
Item 1:
         Consolidated Balance Sheet
         as of October 30, 1999, January 30, 1999 and October 31, 1998             3

         Consolidated Statement of Operations for the thirteen and thirty-nine
          weeks ended October 30, 1999 and October 31, 1998                        4

         Consolidated Statement of Cash Flows for the thirty-nine
         weeks ended October 30, 1999 and October 31, 1998                         5

         Notes to Consolidated Financial Statements                              6 - 8

Item 2:
         Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                     9 - 11

Part II: Other Information
         -----------------

Item 1:
         Legal Proceedings                                                          12

Item 2:
         Change in Securities                                                       12

Item 3:
         Defaults by the Company upon its Senior Securities                         12

Item 4:
         Submission of Matters to a Vote of Security Holders                        12

Item 5:
         Other Information                                                          12

Item 6:
         Exhibits and Reports on Form 8-K                                           12

Signatures                                                                          13
</TABLE>

                                       2
<PAGE>

                               BROOKSTONE, INC.
                          CONSOLIDATED BALANCE SHEET
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                       (Unaudited)                                 (Unaudited)
                                                     October 30, 1999      January 30, 1999      October 31, 1998
                                                     ----------------      ----------------      ----------------
<S>                                                  <C>                   <C>                   <C>
Assets
------

Current assets:
  Cash and cash equivalents                               $  1,242              $ 17,391              $  4,028
  Receivables, net                                           5,915                 6,256                 4,795
  Merchandise inventories                                   64,150                37,444                62,143
  Deferred income taxes                                      8,301                 1,781                 9,503
  Other current assets                                       6,082                 4,623                 5,256
                                                          --------              --------              --------
     Total current assets                                   85,690                67,495                85,725

Deferred income taxes                                        2,956                 3,643                 2,916
Property and equipment, net                                 43,276                42,124                39,345
Intangible assets                                            6,377                    --                    --
Other assets                                                 3,291                 1,299                 2,446
                                                          --------              --------              --------
                                                          $141,590              $114,561              $130,432
                                                          ========              ========              ========

Liabilities and Shareholders' Equity
------------------------------------

Current liabilities:
  Short-term borrowings                                   $ 25,000              $     --              $ 30,000
  Accounts payable                                          28,245                10,727                24,491
  Other current liabilities                                 11,185                18,950                 9,968
                                                          --------              --------              --------
     Total current liabilities                              64,430                29,677                64,459

Other long-term liabilities                                 10,492                 9,962                10,017
Long-term obligation under capital lease                     2,540                 2,612                 2,628

Commitments and contingencies

Shareholders' equity:
Preferred stock, $0.001 par value:
  Authorized - 2,000,000 shares; issued and
  outstanding - 0 shares at October 30, 1999,
  January 30, 1999 and October 31, 1998
Common stock, $0.001 par value:
  Authorized - 50,000,000 shares; issued and
  outstanding - 8,171,213 at October 30, 1999,
  8,064,586 shares at January 30, 1999 and
  8,019,711 shares at October 31, 1998                           8                     8                     8
Additional paid-in capital                                  49,251                48,330                48,042
Retained earnings                                           14,916                24,019                 5,325
Treasury stock, at cost - 3,616 shares at
  October 30, 1999, January 30, 1999 and
  October 31, 1998                                             (47)                  (47)                  (47)
                                                          --------              --------              --------
     Total shareholders' equity                             64,128                72,310                53,328
                                                          --------              --------              --------

                                                          $141,590              $114,561              $130,432
                                                          ========              ========              ========
</TABLE>

Note: The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                               BROOKSTONE, INC.

                     CONSOLIDATED STATEMENT OF OPERATIONS
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                              Thirteen Weeks Ended                 Thirty-nine Weeks Ended
                                                       -----------------------------------   -----------------------------------
                                                       October 30, 1999   October 31, 1998   October 30, 1999   October 31, 1998
                                                       ----------------   ----------------   ----------------   ----------------
<S>                                                    <C>                <C>                <C>                <C>
Net sales
                                                            $ 53,234           $ 43,459          $ 159,439          $ 135,134

Cost of sales                                                 37,270             32,076            110,148             97,561
                                                            --------           --------          ---------          ---------

Gross profit                                                  15,964             11,383             49,291             37,573

Selling, general and administrative expenses                  22,723             18,163             63,058             51,731
                                                            --------           --------          ---------          ---------

Loss from operations                                          (6,759)            (6,780)           (13,767)           (14,158)

Interest expense, net                                            528                587              1,011              1,281
                                                            --------           --------          ---------          ---------

Loss before taxes                                             (7,287)            (7,367)           (14,778)           (15,439)

Income tax benefit                                            (2,798)            (2,903)            (5,675)            (6,083)
                                                            --------           --------          ---------          ---------

Net loss                                                    $ (4,489)          $ (4,464)         $  (9,103)         $  (9,356)
                                                            ========           ========          =========          =========

Loss per share - basic/diluted                              $  (0.55)          $  (0.56)         $   (1.12)         $   (1.17)
                                                            ========           ========          =========          =========
Weighted average shares outstanding - basic/diluted            8,164              8,012              8,131              7,967

</TABLE>

Note: The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

                               BROOKSTONE, INC.

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                        Thirty-nine Weeks Ended
                                                                                   ---------------------------------
                                                                                    October 30,          October 31,
                                                                                       1999                 1998
                                                                                   -----------           -----------
<S>                                                                                <C>                   <C>
Cash flows from operating activities:
Net loss                                                                            $  (9,103)            $ (9,356)

Adjustments to reconcile net loss to net cash used by operating activities:

 Depreciation and amortization                                                          6,672                5,605
 Amortization of debt issuance costs                                                      115                  108
 Deferred income taxes                                                                 (5,833)              (6,698)
 Increase in other assets                                                                (828)              (1,489)
 Increase in other long-term liabilities                                                  530                  205

Changes in working capital:
 Accounts receivable, net                                                                 341                  737
 Merchandise inventories                                                              (24,305)             (24,858)
 Other current assets                                                                  (1,459)              (4,301)
 Accounts payable                                                                      17,518               10,051
 Other current liabilities                                                             (8,501)              (6,634)
                                                                                    ---------             --------

Net cash used by operating activities                                                 (24,853)             (36,630)
                                                                                    ---------             --------

Cash flows from investing activities:
 Expenditures for property and equipment                                               (7,535)              (7,096)
 Expenditure for Gardeners Eden acquisition                                            (9,616)                ----
                                                                                    ---------             --------
Net cash used for investing activities                                                (17,151)              (7,096)
                                                                                    ---------             --------

Cash flows from financing activities:
 Borrowings from revolving credit                                                      25,000               30,000
 Payments for capitalized lease                                                           (66)                 (70)
 Proceeds from exercise of stock options and related tax benefits                         921                  918
                                                                                    ---------             --------

Net cash provided by financing activities                                              25,855               30,848

                                                                                    ---------             --------
Net decrease in cash and cash equivalents                                             (16,149)             (12,878)

Cash and cash equivalents at beginning of period                                       17,391               16,906
                                                                                    ---------             --------
Cash and cash equivalents at end of period                                          $   1,242             $  4,028
                                                                                    =========             ========
</TABLE>

Note: The accompanying notes are an integral part of these financial
statements.

                                       5
<PAGE>

                                BROOKSTONE, INC.

                   Notes to Consolidated Financial Statements


1.   The results of the thirty-nine week period ended October 30, 1999 are not
     necessarily indicative of the results for the full fiscal year. The
     Company's business, like the business of retailers in general, is subject
     to seasonal influences. Historically, the Company's fourth fiscal quarter,
     which includes the winter holiday selling season, has produced a
     disproportionate amount of the Company's net sales and substantially all of
     its income from operations. The Company expects that its business will
     continue to be subject to such seasonal influences.

2.   The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles and
     practices consistently applied. In the opinion of the Company, these
     financial statements contain all adjustments (consisting of only normal
     recurring adjustments) necessary to present fairly the financial position
     and the results of operations for the periods reported. Certain information
     and footnote disclosures normally included in financial statements
     presented in accordance with generally accepted accounting principles have
     been condensed or omitted. It is suggested that the accompanying
     consolidated financial statements be read in conjunction with the annual
     financial statements and notes thereto which may be found in the Company's
     Fiscal 1998 annual report.

3.   The exercise of stock options which have been granted under the Company's
     stock option plans gives rise to compensation which is includable in the
     taxable income of the optionees and deductible by the Company for tax
     purposes upon exercise. Such compensation reflects an increase in the fair
     market value of the Company's common stock subsequent to the date of grant.
     For financial reporting purposes, the tax effect of this deduction is
     accounted for as a credit to additional paid-in capital rather than as a
     reduction of income tax expense. Such exercises resulted in a tax benefit
     to the Company of approximately $314,000 for the thirty-nine week period
     ended October 30, 1999.

4.   Business conducted by the Company can be segmented into two distinct areas
     determined by the method of distribution channel. The retail segment is
     comprised of all full-year stores in addition to all temporary stores and
     kiosks. Retail product distribution is conducted directly through the store
     location. The direct marketing segment is comprised of the Hard-to-Find
     Tools, Brookstone Gift Collection and Gardeners Eden catalogs, products
     promoted via SkyMall and the interactive Internet site www.Brookstone.com.
                                                            ------------------
     Direct marketing product distribution is conducted through the Company's
     direct marketing call center and distribution facility located in Mexico,
     Missouri. Both segments of the Company sell similar products, although not
     all Company products are fully available within both segments.

                                       6
<PAGE>

     All costs directly attributable to the direct marketing segment are charged
     accordingly while all remaining operating costs are charged to the retail
     segment. The Company's management does not review assets by segment.

     The tables below disclose segment net sales and pre-tax loss for the
     thirteen and thirty-nine week periods ended October 30, 1999 and October
     31, 1998, respectively (in thousands):

<TABLE>
<CAPTION>
Thirteen Weeks:
(in thousands)                          Net Sales                                       Pre-tax Loss
                           ---------------------------------                -----------------------------------
                               October 30,     October 31,                      October 30,       October 31,
                                  1999            1998                             1999                1998
                           ---------------------------------                -----------------------------------
<S>                        <C>                <C>                           <C>                 <C>
Reportable segment:
  Retail                     $      43,235    $      38,654                    $   (6,120)      $   (6,358)
  Direct marketing                   9,999            4,805                          (639)            (422)

Reconciling items:
  Interest expense                     ---              ---                          (528)            (587)
                           ---------------------------------                -----------------------------------
Consolidated:                $      53,234    $      43,459                    $   (7,287)      $   (7,367)
                           =================================                ===================================
</TABLE>

<TABLE>
<CAPTION>
 Thirty-nine Weeks:
(in thousands)                        Net Sales                                         Pre-tax Loss
                           ---------------------------------                ----------------------------------
                              October 30,      October 31,                     October 30,       October 31,
                                 1999             1998                           1999                1998
                           ---------------------------------                ----------------------------------
<S>                        <C>                <C>                           <C>               <C>
Reportable segment:
  Retail                     $     134,362    $   121,797                    $    (12,227)    $   (12,567)
  Direct marketing                  25,077         13,337                          (1,540)         (1,591)

Reconciling items:
  Interest expense                     ---            ---                          (1,011)         (1,281)
                           ---------------------------------                ----------------------------------
Consolidated:                $     159,439    $   135,134                    $    (14,778)    $   (15,439)
                           =================================                ==================================
</TABLE>


5.   Effective May 3, 1999, the Company acquired certain assets relating to the
     Gardeners Eden catalog from Williams-Sonoma, Inc. at a purchase price of
     approximately $9.6 million. The acquisition was accounted for as a
     purchase. The assets acquired were comprised of inventory valued at
     approximately $2.4 million and deferred catalog costs valued at
     approximately $1.3 million. The value of these assets was offset by a
     liability of approximately $0.7 million for open customer orders under the
     Gardeners Eden continuity program. The Company allocated the remaining
     purchase price, approximately $6.6 million, to the valuation of intangible
     assets consisting of trade name and customer lists. The Company recorded
     amortization expense of $289,000 for the thirty-nine week period ended
     October 30, 1999 relating to the intangible assets.

                                       7
<PAGE>

6.   Basic and diluted earnings per share (EPS) were calculated for the thirteen
     and thirty-nine week periods ended October 30, 1999 and October 31, 1998 as
     follows:



                     (In thousands, except per share data)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                 Thirteen Weeks Ended                       Thirty-nine Weeks Ended
                                        -----------------------------------------   --------------------------------------
                                           October 30, 1999    October 31, 1998       October 30, 1999   October 31, 1998
                                        -------------------   -------------------   ------------------   ------------------
<S>                                     <C>                   <C>                   <C>                 <C>
Net loss                                  $      (4,489)       $    (4,464)           $     (9,103)     $      (9,356)
                                          ===============      ===============        ==============    ===============
Weighted average number of common
 shares outstanding                               8,164              8,012                   8,131              7,967

Effect of dilutive securities:
   Stock options                                    ---                ---                     ---                ---
Weighted average number of common         ---------------      ---------------        --------------    ---------------
 shares as adjusted                               8,164              8,012                   8,131              7,967
                                          ===============      ===============        ==============    ===============

Net loss per share - basic/diluted        $      ( 0.55)       $     (0.56)           $      (1.12)     $       (1.17)
                                          ===============      ===============        ==============    ===============
</TABLE>

  For the thirteen and thirty-nine week periods ended October 30, 1999,
  antidilutive shares of 266,108 and 261,661, respectively, were excluded from
  the computation of diluted earnings per share. For the thirteen and thirty-
  nine week periods ended October 31, 1998, antidilutive shares of 238,386 and
  305,129, respectively, were excluded from the computation of diluted earnings
  per share.

                                       8
<PAGE>

                               BROOKSTONE, INC.

                    Management's Discussion and Analysis of
               Financial Condition and Results of Operations for
     the Thirteen-Week and Thirty-nine Week Periods Ended October 30, 1999

Results of Operations
---------------------

     For the thirteen-week and thirty-nine week periods ended October 30, 1999,
net sales increased 22.5% and 18.0% respectively over the comparable periods
last year. Comparable store sales for the thirteen-week and thirty-nine week
periods increased 6.0% and 4.5% respectively. The sales increase reflected the
results of opening 10 new stores during the fourth quarter of Fiscal 1998 and 12
new stores during Fiscal 1999, offset by the closing of one store during the
fourth quarter of Fiscal 1998. The total number of Brookstone stores open at the
end of the thirty-nine week period ended October 30, 1999 was 208 versus 187 at
the end of the comparable period in Fiscal 1998. Direct marketing sales
increased 88.0% over the comparable thirty-nine week period last year. This
increase was driven by sales from the recently acquired Gardeners Eden catalog
and increased Hard-to-Find Tools and Brookstone Gift Collection catalog
circulation.

     Gross profit as a percentage of net sales was 30.0% and 30.9% for the
thirteen and thirty-nine week periods ended October 30, 1999 versus 26.2% and
27.8% for the comparable periods last year. The increase in the percentage was
primarily attributable to a decrease in net material costs resulting from lower
sourcing costs, combined with a decrease in occupancy percentage resulting from
the strong comparable store sales performance and the increase in direct
marketing sales.

     Selling, general and administrative expenses as a percentage of net sales
were 42.7% and 39.5% for the thirteen and thirty-nine week periods ended October
30, 1999 versus 41.8% and 38.3% for the comparable periods last year. This
increase in percentage was primarily the result of costs associated with the
acquisition and integration of the Gardeners Eden catalog, the increased
Hard-to-Find Tools and Brookstone Gift Collection catalog circulation and costs
associated with new information processing systems.

     Net interest expense for the thirteen-week and thirty-nine week periods
ended October 30, 1999 was $528,000 and $1,011,000, compared to $587,000 and
$1,281,000 during the comparable periods last year. The decrease for the
thirteen and thirty-nine week periods was related to decreased borrowings under
the revolving credit agreement during comparable periods for Fiscal 1999
compared with Fiscal 1998.

     As a result of the foregoing, the Company reported a net loss of $4,489,000
or $0.55 per basic/diluted share for the thirteen-week period ended October 30,
1999, as compared to a net loss of $4,464,000 or $0.56 per basic/diluted share
for the comparable period last year. For the thirty-nine week period ended
October 30, 1999, the Company reported a net loss of $9,103,000 or $1.12 per
basic/diluted share, compared to a net loss of $9,356,000 or $1.17 per
basic/diluted share for the comparable period last year.


Financial Condition
-------------------

     For the thirty-nine week period ended October 30, 1999, net cash used by
operating activities totaled $24.9 million, reflecting primarily the net loss,
purchase of inventory and the payment of income taxes, offset by an increase in
the accounts payable balance due to the timing of expense and merchandise
payments. Cash used for investment activities during the thirty-nine week period
of Fiscal 1999, representing the purchase of property and equipment and the
acquisition of the Gardeners Eden catalog, amounted to $17.2 million. Cash from
financing activities during the thirty-nine week period of Fiscal 1999 amounted
to $25.9 million, acquired primarily through borrowings under the Company's
revolving credit agreement and the exercise of stock options and related tax
benefits.

                                       9
<PAGE>

     For the thirty-nine week period ended October 31, 1998, net cash used by
operating activities totaled $36.6 million, primarily as a result of the net
loss, purchase of inventory and payment of income taxes. Cash used for
investment activities during the thirty-nine week period of Fiscal 1998,
representing the purchase of property and equipment, amounted to $7.1 million.
Cash from financing activities during the thirty-nine week period of Fiscal 1998
amounted to $30.8 million, acquired primarily through borrowings under the
Company's revolving credit agreement and the exercise of stock options and
related tax benefits.

     Merchandise inventories were $64.2 million at October 30, 1999 compared to
$37.4 million at January 30, 1999. The increase in inventory was primarily to
support the heightened holiday selling season needs, the acquisition of the
Gardeners Eden catalog and the new stores opened. The accounts payable balance
was $28.2 million at October 30, 1999 compared to $10.7 million at January 30,
1999. This increase was primarily due to the timing of expense and merchandise
payments.

     For the thirty-nine week period ended October 30, 1999, the Company's
capital expenditures were principally related to the remodeling of six retail
stores and the opening of 12 new stores. The Company anticipates opening a total
of approximately 15 new stores, including as many as two airport locations, and
remodeling approximately 10 stores during Fiscal 1999.

     The Company maintains a revolving credit agreement to finance inventory
purchases which historically peak in the third quarter in anticipation of the
winter holiday selling season. At October 30, 1999, the Company had $25.0
million in outstanding borrowings under its revolving credit agreement as
compared to an outstanding balance of $30.0 million at October 31, 1998.

     The Company believes that available borrowings, cash on hand and
anticipated cash generated from operations will be sufficient to finance planned
retail store openings / remodelings and other capital requirements throughout
Fiscal 1999.


Year 2000 Software Compliance
-----------------------------

     Many computer programs in use today were originally written using two-digit
fields to identify years instead of four digits to define century and year.
These programs were written without considering the impact of the upcoming
change in the century and may experience difficulty in handling dates beyond
December 31, 1999. This phenomenon, sometimes referred to as "the year 2000
problem" or "the Y2K problem", could cause computer software to fail or create
erroneous results unless corrective or alternative measures are instituted.

     The Company relies on software for the efficient operation of many of its
important functions, including inventory purchasing, shipping and receiving,
logistics, inventory forecasting and replenishment, payroll and human resource
record-keeping, direct marketing operations, point-of-purchase transaction
recording and financial reporting. Nearly all of the software relied upon in the
Company's operations is purchased from outside sources (who, in some instances,
modify or customize pre-packaged software to fit the Company's needs). In
addition, the Company has entered into maintenance contracts from such vendors
to ensure that such programs will remain operable or will be upgraded at
marginal incremental cost to the Company in the event that such a program is not
functioning optimally. Since 1996, the Company has been working with its outside
software vendors to (i) assess the Y2K readiness of their products, (ii)
implement changes and upgrades necessary to eliminate the risk of Y2K problems
and (iii) test the Company's systems and components to ensure proper
functionality.

     Each of the software products involved in the Company's significant
operations has been represented to be year 2000 compliant, or has been upgraded
to versions that have been represented to be year 2000 compliant, by their
respective vendors. In addition, the Company has received representations from
its primary bank and its credit card processors that the software programs they
operate to facilitate services provided to the Company are, or are in the
process of becoming, year 2000 compliant.

     Because the Y2K problem is often not immediately apparent, the Company
believes that the evaluation of its systems and the assessment of their
readiness must be a continuous process. During Fiscal 1999, the Company has

                                       10
<PAGE>

continued to test and evaluate its systems for year 2000 compliance and will
continue to perform this testing and evaluating process through the remainder of
the fiscal year.

     As part of that testing program, the Company leased an additional IBM
AS/400 computer system and transferred to it copies of the Company's key
software applications and their associated data. Starting in June 1999, the
Company used this system to test its key operational systems (including point of
sale, inventory planning and tracking, product distribution, financial
reporting, and payroll and other human resources systems) on several "high-risk"
dates identified by the Company, including September 9, 1999 ("9/9/99"),
December 31, 1999, January 1, 2000, January 29, 2000 (the end of the Company's
1999 fiscal year) and February 29, 2000. The Company conducted similar tests
using the Hewlett-Packard computer systems that are used to operate the
Company's direct marketing operations. The testing disclosed only minor
problems, all of which have been addressed. Finally, the actual September 9,
1999 date has now passed without any incidents relating to the Company's
computer systems.

     The Company expects that the combined incremental cost of testing and
hardware and software upgrades relating to the Year 2000 problem will not exceed
$1,000,000.

     There can be no assurance that the Company's operating results would not be
adversely affected if any of its largest vendors were unable to fill the
Company's orders. The Company has received written statements from each of its
largest vendors which represent that each such vendor has addressed, or is in
the process of addressing, the year 2000 issue such that manufacturing and
shipping activities will not be disrupted by the Y2K problem. The Company's
merchandising team is also considering other sources for similar products in the
event that such vendors are unable to meet the Company's needs. Because the
products sold by the Company are oftentimes unique in the marketplace, however,
there can be no assurance that adequate substitute products will be available.
See "Outlook: Important Factors and Uncertainties -- Dependence on Innovative
Merchandising" on pages 21 - 23 of the Company's 1998 Annual Report on Form
10-K. The Company does not currently use advance shipping notification ("ASN")
technology with its vendors. The Company is currently implementing an electronic
purchase order confirmation system that uses standard email systems to exchange
orders and confirmations with its vendors.

     The Company believes that it has established appropriate measures to
minimize the risk of disruption to its business as it approaches the year 2000.
This belief is a forward-looking statement and is premised, in part, on
representations provided to the Company by third-party sources and vendors, the
accuracy of which is in many cases difficult or impossible for the Company to
validate. If any such representation relating to a software product relied upon
for a significant business function, or a representation from a significant
vendor, ultimately proves inaccurate, the Company could incur material
remediation expenses and/or lost sales. In addition, like most other retailers,
the Company could be materially adversely affected by disruption in the
externally controlled distribution channel (including ports, United States
Customs and transportation vendors), the banking and credit systems and electric
and other utility suppliers.


Outlook:  Important Factors and Uncertainties
---------------------------------------------

     Statements in this quarterly report which are not historical facts,
including statements about the Company's confidence or expectations, plans for
opening new stores, capital needs and liquidity and other statements about the
Company's operational outlook, are forward-looking statements subject to risks
and uncertainties that could cause actual results to differ materially from
those set forth in such forward-looking statements. Such risks and uncertainties
include, without limitation, risks of changing market conditions in the overall
economy and the retail industry, consumer demand, the availability of
appropriate real estate locations and the ability to negotiate favorable lease
terms in respect thereof, customer response to the Company's direct marketing
initiatives, availability of products, availability of adequate transportation
of such products, unforeseen difficulties arising from the Company's or its
vendors' systems as a result of the Year 2000 problem, and other factors
detailed from time to time in the Company's annual and other reports filed with
the Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
thereof. The Company undertakes no obligations to publicly release any revisions
to these forward-looking statements or reflect events or circumstances after the
date hereof.

                                       11
<PAGE>

                                    PART II

                               Other Information


Item 1:    LEGAL PROCEEDINGS
           -----------------

           The Company is involved in various legal proceedings arising in the
           normal course of business. The Company believes that the resolution
           of these matters will not have a material effect on the Company's
           financial condition or results of operations.


Item 2:    CHANGES IN SECURITIES
           ---------------------

           None


Item 3:    DEFAULT UPON SENIOR SECURITIES
           ------------------------------

           None


Item 4:    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
           ---------------------------------------------------

           None

Item 5:    OTHER INFORMATION
           -----------------

           None

Item 6:    EXHIBITS AND REPORTS ON FORM 8-K
           --------------------------------

       A)  Exhibits

           None

       B)  Reports on Form 8-K

           No reports on Form 8-K were filed during the period for which this
           report is filed.

                                       12
<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.



                                 Brookstone, Inc.
                                 ----------------
                                    (Registrant)



                                  /s/  Philip W. Roizin
                                 -----------------------------------------------
          December 14, 1999                        (Signature)

                                 Philip W. Roizin
                                 Executive Vice President Finance and
                                 Administration, Treasurer and Secretary
                                 (Principal Financial Officer
                                 and duly authorized to sign on behalf of
                                 registrant)

                                       13