UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C.  20549
                            FORM 10-K/A

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

                  Commission file number: 0-18926

            For the fiscal year ended November 30, 2002

                          INNOVO GROUP INC.
        (Exact name of registrant as specified in its charter)

           Delaware                       11-2928178
(State or other jurisdiction of      (IRS Employer Identification No.)
 incorporation or organization)

5900 S. Eastern Ave., Suite 104, Commerce, California       90040
(Address of principal executive offices)                  (Zip code)


 Registrant's telephone number, including area code: (323) 725-5516

 Securities registered pursuant to Section 12 (b) of the Act:  NONE

    Securities registered pursuant to Section 12 (g) of the Act:
           Common Stock, $.10 par value per share

  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 r egistrant  was  required  to  file such  reports), and (2) has  been
subject to such filing requirements for the past 90 days.  Yes [X] No [  ]

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

  Indicate by  check mark  whether the registrant is  an accelerated filer
(as defined by Rule 12b-2 of the Act.) Yes [ ]  No [ X ]

  The aggregate value of voting  and  non-voting  common  equity  held by
non-affiliates of the registrant as of March 14, 2003 was $16,234,000.

  The aggregate market value of the voting and  non-voting common  equity
held by non-affiliates of the registrant based  on  the  closing price of
the registrant's common stock  on  the  NASDAQ Stock  Market, Inc. as  of
May 31, 2002, the last  business day  of  the registrant's  most recently
completed second quarter, was $11,596,000 million.

  As  of    March 14, 2003  14,901,264  shares  of   common   stock  were
outstanding.



Documents incorporated  by reference:  The information required by Part
III  (Items 10, 11, 12 and 13)  is  incorporated  by  reference  to the
Registrant's  definitive  proxy  statement  to  be  filed   pursuant to
Regulation 14A relating  to  the  Registrant's  2003 annual  meeting of
stockholders.




INNOVO GROUP INC.
FORM 10-K
TABLE OF CONTENTS


PART I		                                             Page

Item 1.   Business                                                3
Item 2.   Properties                                             23
Item 3.   Legal Proceedings                                      23
Item 4.   Submission of Matters to a Vote of Security Holders    23

PART II

Item 5.   Market for the Company's Common Equity and Related
           Stockholder Matters                                   24
Item 6.   Selected Consolidated Financial Data                   25
Item 7.   Management's Discussion and Analysis of Financial
           Condition and Result of Operations                    26
Item 7A.  Quantitative and Qualitative Disclosures about
           Market Risk                                           42
Item 8.   Financial Statements and Supplementary Data            43
Item 9.   Changes in and Disagreements With Accountants on
           Accounting and Financial Disclosures                  43

PART III

Item 10.  Directors and Executive Officers of the Registrant     43
Item 11.  Executive Compensation                                 43
Item 12.  Security Ownership of Certain Beneficial Owners
           and Management                                        43
Item 13.  Certain Relationships and Related Transactions         43
Item 14.  Controls and Procedures                                43

PART IV

Item 15.  Exhibits, Financial Statement Schedules and
           Reports on Form 8-K                                   43

Signatures                                                       48
Certifications                                                   48





  FORWARD-LOOKING STATEMENTS.  Statements contained in this Annual Report on
Form 10-K and in future filings with the Securities  and Exchange Commission
(the "SEC"), in our press releases or  in  our other  public or  shareholder
communications  that  are  not  purely  historical facts are forward-looking
statements.  Statements looking  forward in time are included in this Annual
Report on Form 10-K pursuant to the "safe harbor" provision  of  the Private
Securities Litigation Reform  Act of 1995.  Such  forward-looking statements
include, without  limitation,  any  statement that  may  predict,  forecast,
indicate, or  imply  future results,  performance,  or achievements, and may
contain the words, "believe", "anticipate", "expect", "estimate",  "intend",
"plan", "project", "will be", "will continue", "will likely result", and any
variations of  such  words with  similar meanings.  These statements are not
guarantees of future  performance  and  are  subject  to  certain risks  and
uncertainties that are difficult to predict,  therefore, actual  results may
differ   materially  from   those  expressed   or  forecasted  in  any  such
forward-looking statements.

  Factors that would cause or contribute  o  such  differences include,  but
are not  limited to,  the  risk  factors contained  or  referenced under the
headings "Business," "Risk Factors" and "Managements Discussion and Analysis
of Financial Condition and  Results of Operations" set  forth below.  Innovo
Group Inc. ("IGI") and its subsidiaries (collectively, the "Company")operate
in a very competitive and rapidly changing environment. New risk factors can
arise and  it  is  not  possible  for  management  to  predict all such risk
factors, nor  can  it  assess  the  impact  of  all such risk factors on the
Company's business or the extent  to  which  any factor,  or  combination of
factors, may cause actual results to differ  materially from those contained
in any  forward-looking  statements.   Given  these risks and uncertainties,
readers  are  cautioned  not  to  place  undue reliance  on  forward-looking
statements that only speak as of the date of this filing.

  The   Company   undertakes  no  obligation  to   publicly   revise   these
forward-looking  statements  to  reflect  events  or circumstances occurring
after the date hereof or to reflect the occurrence of unanticipated events.

  IGI's Internet address is www.innovogroup.com, and the Company maintains a
website  at  that  address.  The Company makes available  on  or through its
Internet website, without charge, its annual report on From 10-K,  quarterly
reports on Form 10-Q, current reports on Form 8-K,  and  amendments to those
reports, and since December 18, 2001 those reports have been  made available
on our website on the day such  material  was electronically filed  with the
Securities and Exchange  Commission or if  not  reasonably practical on that
day, on the first business day following electronic filing with the SEC.  In
addition, any materials filed with the SEC may be  read  and  copied  at the
SEC's Public Reference  Room  at  450 Fifth Street,  N.W.,  Washington, D.C.
20549 or viewed on line at www.sec.gov. Information regarding the  operation
of  the  Public  Reference  Room  can  be  obtained  by  calling  the SEC at
1-800-SEC-0330.



PART I

ITEM 1.  BUSINESS

Narrative Description of Business

  The Company's principle business activity involves the design, development
and worldwide marketing of  high quality  consumer products for the  apparel
and accessory markets.  We sell our products to  over 1,000 different retail
and  private  label  customers and to distributors around the world.  Retail
customers purchase finish goods directly from the Company and  then sell the
product through their retail stores  to  the  consumer marketplace.  Private
label customers outsource the production and sourcing of their private label
products to the  Company  and  then  sell  through  their  own  distribution
channels.  Distributors purchase  finished goods  directly  from the Company
and  then   distribute  to   retailers  in  the  international  marketplace.
Additionally, the Company owns, operates and invests in real estate ventures
throughout the United States.

  The  Company  operates   its  consumer  products  business  through  three
wholly-owned, operating subsidiaries,  Innovo, Inc. ("Innovo"), Joe's Jeans,
Inc. ("Joe's), and Innovo Azteca Apparel, Inc. ("IAA") with Innovo and Joe's
having  two  wholly-owned  operating subsidiaries,  Innovo Hong Kong Limited
("IHK")  and  Joe's Jeans Japan, Inc. ("JJJ"), respectively.    All  of  the
Company's products are manufactured  by  independent  contractors located in
Los Angeles, Mexico and the Far East, including,  Hong Kong,  China,  Korea,
Vietnam and India.   The products are then distributed out of Los Angeles or
directly from the factory to the customer.

  In April 2002,  the  Company  entered  into  the  real  estate  investment
business  by  purchasing   limited   partnership  interests  in  22  limited
partnerships that subsequently acquired limited partnerships in 28 apartment
buildings consisting  of  approximately 4,000 apartment units.   The Company
also owns  its  former  headquarters  located in  Springfield,  TN, which it
currently  leases  to  third  parties.  The Company operates its real estate
business   through   two  wholly-owned   operating   subsidiaries:   Leasall
Management, Inc. ("LMI") and Innovo Realty Inc. ("IRI").

  The Company's headquarters and principal executive offices  are located at
5900 S. Eastern Ave., Suite 104, Commerce, CA 90040 and its telephone number
at  this  location  is  (323) 725-5516.   The  Company  also has operational
offices and/or showrooms in Los Angeles, New York, Knoxville,  Mexico, Tokyo
and Hong Kong and third party showrooms in New York, Los Angeles and Paris.

Operating Segments

  The Company's operations are comprised of two reportable segments: apparel
and   accessory,  with  the  operations  of  the  Company's  Joe's  and  IAA
subsidiaries representing the apparel segment and Innovo conducting business
in the accessory segment.  Segment revenues  are generated  from the sale of
consumer products  by  Joe's,  IAA  and  Innovo.   The  Company's  corporate
activities are represented by the operations of IGI, the parent company, and
its real estate operations are conducted through  the  Company's LMI and IRI
subsidiaries.  The Company's real estate operations do not currently require
a substantial allocation of the Company's resources and is not a significant
part of management's daily operational functions,  and thus,  the  Company's
real estate operations are not currently defined  as  a  distinct  operating
segment but  are  classified  as  "other"  along  with  the  Company's other
corporate activities.

General Development of Business

  Innovo,  a Texas corporation,  was formed in April 1987 to manufacture and
domestically distribute cut and sewn canvas and nylon  consumer products for
the utility, craft, sports licensed  and advertising specialty  markets.  In
1990, Innovo merged into Elorac Corporation, a "blank check" company,  which
was renamed Innovo Group, Inc.,  a Delaware  corporation.  As  used in  this
Annual Report on Form 10-K, the terms  "we",  "us",  "IGI",  "our",  and the
"Company" refer to Innovo Group Inc. and  its subsidiaries  and  affiliates,
unless the context indicates otherwise.



  In 1991, the  Company acquired  the business  of NASCO, Inc. ("NASCO"),  a
Tennessee  corporation,   a   manufacturer,  importer   and  distributor  of
sports-licensed  sports bags,  backpacks,  and other sporting goods, located
in  Springfield,  Tennessee.    NASCO,   subsequently  renamed  Spirco, Inc.
("Spirco"), was also engaged in the marketing   of  fundraising  programs to
school and youth organizations.   The fundraising programs involved the sale
of magazines, gift wraps, food items and seasonal gift items.


  In 1992, the Company formed  NASCO  Products International, Inc. ("NPII"),
Tennessee corporation.   NPII was formed to focus on the distribution of the
Company's  accessory  products  in   the  international  marketplace.   NPII
currently does not currently have any business activities.   See "Management
Discussion  and   Analysis   of   Financial   Condition   and   Results   of
Operations-Other Income."

  In 1993, the Company sold the  youth  and school  fundraising  business of
Spirco to QSP, Inc. ("QSP").  Spirco  had  incurred  significant  trade debt
from the fiscal 1992 losses it incurred  in  marketing  fundraising programs
and from  liabilities  incurred  by  NASCO  prior to  its acquisition by the
Company that were not disclosed at that time.   On  August 27, 1993,  Spirco
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.  IGI,
Innovo and NPII were not parties to the filing.

  In 1994, the Company formed Leasall Management, Inc. ("LMI"), a  Tennessee
corporation.   Leasall acquired Spirco's equipment and plant and assumed the
related equipment and mortgage debt.  Leasall still owns and leases to third
parties the  plant  purchased  from Sprico,  which  served  as the Company's
former headquarters  in  Springfield, TN.  Subsequently,  Spirco  was merged
into IGI,  resulting  in IGI  acquiring direct  ownership in  the  remaining
assets Leasall did not purchase.  Spirco claims,  which had been  guaranteed
by IGI, received full payment through  the  issuance of shares of IGI common
stock.

  In the latter part of 1998, the Company closed its domestic  manufacturing
and distribution facilities in Springfield, TN  and  relocated its corporate
headquarters, manufacturing  and distribution  facilities  to Knoxville, TN.
The Company's closed the Springfield  facility based  on the Company's  need
for a more suitable facility for its manufacturing  needs and  the Company's
need at the  time for  a  more skilled  labor force  to  meet  the Company's
production requirements.  Additionally, in 1998 the  Company had  brought in
additional investors  and  new management,  and these individuals resided in
Knoxville, TN.

  During fiscal 2000, the Company restructured its operations by closing its
domestic  manufacturing  and  distribution   facilities  in   Knoxville  and
realigning  the  Company's  operational  structure  to  focus on  sales  and
marketing.    The  Company  also  raised  additional  working  capital   and
converted certain indebtedness to equity.  The restructuring was  undertaken
as a condition to the equity investment  by  Commerce  Investment Group, LLC
("Commerce"), a strategic investment partner. In an effort to reduce product
costs and  increase  gross  profit, the  Company  shifted  manufacturing  to
third-party  foreign  manufacturers,  including Commerce's  affiliates,  and
outsourced distribution to Commerce's affiliates in  an effort  to  increase
the effectiveness and capacity of  the Company's  distribution network.  See
Note 1 "Business Description, Restructuring  of  Operations" to the Notes to
the Consolidated Financial Statements.

  In  March  of  2001,  the  Company  formed  Joe's Jeans, Inc. ("Joe's"), a
Delaware corporation, to  focus  on  the  design, production  and  worldwide
marketing of high fashion apparel products bearing the  "Joe's Jeans" brand.
See  Note 3 "Acquisitions"  to  the  Notes  to  the  Consolidated  Financial
Statements.

  In August of 2001, the Company acquired  Azteca  Production International,
Inc.'s ("Azteca"), a Commerce affiliate,  knit apparel division  and  formed
Innovo-Azteca Apparel, Inc. ("IAA"), a California corporation.  IAA designs,
sources and markets a wide array of apparel products  to  the  private label
and  retail  market.   See  Note  3  "Acquisitions" to   the  Notes  to  the
Consolidated Financial Statements.

  In May 2002, the  Company's Joe's  subsidiary created  Joe's Jeans  Japan,
Inc. ("JJJ"), a Japanese corporation to facilitate  the  distribution of the
Joe's Jeans brand in the Japanese marketplace.

  Furthermore, in May 2002, the Company's Innovo  subsidiary  created Innovo
Hong Kong Limited ("IHK"),  a  Hong Kong corporation.  IHK  was  created  to
assist the  Company's  accessory division  with the design,  development and
sourcing of accessory products out of the Far East.



  In  April 2002,  the  Company   formed  Innovo  Realty,  Inc.  ("IRI"),  a
California corporation, to facilitate an investment in real estate apartment
complexes located throughout the United States.  See "Business-Investments."

Summary of Significant 2002 Developments

General Overview

  The Company,  in fiscal 2002, experienced a 219% increase in revenues as a
result of the Company's  consumer products  division's developing,  sourcing
and distributing its product lines to its existing customer base as  well as
to a growing new customer base.    This combined with the Company's  efforts
to manage its operating expenses has resulted in the Company showing  a  net
profit  of  $572,000  for  fiscal 2002.   See  "Management's Discussion  and
Analysis of Financial Condition and  Results of Operations" for a discussion
of the Company's financial performance for fiscal 2002.

  In the third quarter of  2002,  IGI, the  parent  company,  relocated  its
corporate offices from Knoxville, TN to the Company's existing facilities in
Commerce, CA, just outside of Los Angeles.   Commerce is an important center
of business in the apparel and accessory industries.    The Company believes
the relocation was necessary to support  the Company's future development in
the apparel and accessory business.

Accessory

  Innovo. In fiscal 2002, the Company's Innovo subsidiary,  which is focused
on the distribution of accessory products, grew  its business  significantly
compared to fiscal 2001.  The growth is a result of Innovo's entry into  the
private label marketplace and as  a result  of  continued success  with  its
Bongo accessory product line and its craft business.   Prior to fiscal 2002,
Innovo did not  produce  fashion  accessory products for  the  private label
market.  Consequently, Innovo experienced  a  growth of 114% in  fiscal 2002
compared  to  fiscal 2001.   See "Management's Discussion  and  Analysis  of
Financial Condition and Results of Operations."

  In May of 2002, Innovo established IHK  to  serve as  a sourcing office in
Hong  Kong.   IHK  is  focused  on  the  design,  development  and  sourcing
accessory products for its parent company, Innovo.

Apparel

  Joe's.   In  fiscal  2002,  Joe's  continued  to  establish  domestic  and
international brand recognition  in the  high-end fashion  apparel industry.
As a result of increased brand recognition and heightened visibility,  sales
of Joe's products increased  by 504% from fiscal 2001.   Joe's was formed in
February of  2001,  thus  fiscal  2002  results  reflect  Joe's  first  full
twelve-month cycle of business.

  In May of 2002, Joe's created JJJ to market and  distribute Joe's products
in the Japanese marketplace.

  IAA.  IAA, which was formed in August of 2001, grew its revenues  by  292%
in fiscal 2002 compared to fiscal 2001.   Fiscal 2002  results reflect IAA's
first full twelve-month cycle of business.   The growth  is  primarily as  a
result of an  increase in  revenues from  IAA's private label  division.  In
fiscal 2002, IAA created a separate division to focus on  the development of
branded product lines.  IAA's  branded products  division has since  entered
into licensing agreements with Mattel, Inc. for the licensing rights  to the
Hot Wheels  trademark for apparel  and  accessory products and with platinum
recording artist Lil Bow Wow for the right to produce apparel  and accessory
products.  Pursuant to both agreements, IAA has the right to  sublicense the
accessory   category    to    its   affiliated   subsidiary   Innovo.    See
"Business - Licensing Agreements."



Real Estate

  IRI.  On April 5, 2002, the Company through IRI, closed on  a  transaction
pursuant to which IRI  purchased limited  partner  interests  in  22 limited
partnerships.  Subsequently, the limited partnerships purchased 28 apartment
buildings  consisting  of  approximately 4,000  apartment units  located  in
various states throughout the United States.  See "Business - Investments."

Principal Products and Revenue Sources

  The Company's products are created and its  revenues are  derived  through
its Innovo, IAA,  and  Joe's subsidiaries.   Revenues  generated  by  Innovo
represent sales in  the  accessory segment.   The  Company's  Joe's  and IAA
subsidiaries account for the Company's apparel segment revenues

The Company's net revenues  by segment for the last three years are shown in
the table below:


                                  2002        2001       2000
                                  ----        ----       ----

Accessories                        41%         61%       100%
Apparel                            59%         39%         0%
                                  ---         ---        ---
                                  100%        100%       100%

Accessory

  Innovo, headquartered in Knoxville,  TN,  designs,  develops  and  markets
accessory  consumer  products  such as fashion  handbags,  purses,  wallets,
backpacks, duffle bags, sports bags, belts, hats and  scarves for department
stores,  mass  merchandisers,  specialty  chain  stores  and  private  label
customers.  Additionally, Innovo markets craft products  including tote bags
and aprons  to  mass  merchandisers  and  craft  specialty stores.  Innovo's
products generally are accompanied  by one  of  Innovo's own  logos  such as
Daily Denim, Tote Works and Test Tube, the brand of a private label customer
or the brand of a third party licensor such as Bongo.   Innovo's revenues in
the accessory segment increased by 114%  in  fiscal 2002 compared  to fiscal
2001. See "Management's Discussion  and  Analysis of Financial Condition and
Results of Operations."

  In fiscal 2002, Innovo entered the private label  accessory business.   As
of November 30, 2002, Innovo produced private  label products  primarily for
American Eagle Outfitters, Inc. and Limited Brands, Inc.'s Express division.
Private label business accounted  for approximately 26%  of  Innovo's  gross
revenues  in  fiscal  2002.   See "Management's Discussion  and  Analysis of
Financial Condition and Results of Operations." Innovo anticipates continued
growth in the private  label  market  as  a result  of  Innovo's ability  to
provide  quality  accessory  products  that  are  fashionably  desirable  at
competitive prices, however, there can be no assurances  that Innovo will be
able to increase its market share in the private label business.

  In fiscal 2002, Innovo's Bongo  accessory product line experienced growing
demand in the retail marketplace.   Gross revenues associated with the Bongo
Product line grew significantly in fiscal 2002 and represented approximately
28% of Innovo's  total  gross revenues  in  fiscal 2002.   See "Management's
Discussion and Analysis of Financial Condition and Results  of  Operations."
In November 2002, Innovo solidified and extended  its relationship  with the
owner of the Bongo brand, by signing a  four-year  licensing agreement.  The
agreement  gives  Innovo  multi-year  extension  options  based  on  certain
performance criteria for the bag and small PVC/leather goods categories. See
"Business - Licensing Agreements and Intellectual Property."

  Innovo initially obtained the licensing rights to the Bongo  trademark  in
the second quarter of 2001.   Innovo has  since launched  the  Bongo line to
department stores and specialty stores across the  United States,  including
Sears,  Roebuck & Co.,  Beall's,  Inc.,  Hecht's,  Foley's,   Robinsons-May,
J. C. Penney Company, Inc., and Claire's Stores, Inc.

  Innovo's IHK subsidiary is headquartered in Hong Kong  and  assists Innovo
with the development, design and sourcing of the products sold by Innovo  to
its customers.  IHK allows Innovo to minimize the amount of time required to
design, develop  and  source  its  products, thus  allowing Innovo  to react
quickly to changing markets  conditions  and  to deliver  its products  in a
timely manner.



  In fiscal 2002, Innovo experienced increased demand for its craft  product
lines due to Innovo's ability to increase   its  business with its  existing
customers such as  Wal-Mart  and  Michaels Stores, Inc. and  add  additional
customers such as A.C. Moore Arts & Crafts.    The Company's craft  business
increased by approximately 62% in fiscal 2002,  compared to fiscal 2001. See
"Management's Discussion and Analysis of  Financial Condition and Results of
Operations."

  The following are the principal products  that  Innovo distributes in the
United States to the accessory and craft market:

FASHION ACCESSORY      GENERAL ACCESSORIES      CRAFT
Purses                 Travel and Tote bags     Tote Bags
Hand Bags              Waist Packs              Adult and Children's Aprons
Duffle Bags            Duffle Bags              Christmas Stockings
Wallets                Stadium Totes/Cushions   Gourmet/BBQ Aprons
Beach Bags             Insulated Lunch Bags
Tote Bags              Soft Coolers
                       Pencil Cases
                       Backpacks
                       Waist Packs
                       Hats
                       Scarves



Apparel

  Joe's.  Joe's, headquartered in Commerce, CA, designs, develops, and markets
high-fashion apparel products under the "Joe's Jeans" brand.    Joe's products
are typically part of a collection that includes pants,  denim jeans,  shirts,
sweaters, jackets and other apparel products.   In fiscal 2002,  Joe's focused
its  efforts  on  establishing  the  Joes  brand  in  both  the  domestic  and
international marketplace by continuing to offer its customers and consumers a
fashion forward, quality product.   In  fiscal 2002, Joe's  created JJJ in  an
effort to establish the Joe's brand in the Japanese marketplace. Additionally,
in fiscal 2002, Joe's successfully entered the Canadian  and  European markets
through the use of international distributors.

  Joe's believes that it has developed a strong customer base upon which Joe's
can grow its business going forward.  Joe's  products are  sold in  the United
States and abroad  to  upscale  retailers and  boutiques such as  Barney's New
York, Inc.,  Bloomingdale's, Inc.,  Loehmann's, Inc.,  Nordstrom, Inc.,  Sak's
Fifth Avenue, Inc., Intermix and Fred Segal  in  the  United States  and other
complimentary retailers in the international market.

  Joe's products are  marketed  to  retailers  through  third party  showrooms
located in New York, Los Angeles, and Paris  and through  its own  showroom in
Tokyo.  Joe's revenues increased  by  504% in fiscal 2002,  compared to fiscal
2001.   Joe's  did  not  have  revenues in  the  international  marketplace in
fiscal 2001.  See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

  Joe's product lines include, but are not limited to, the following:

WOMEN                   MEN
Denim Jeans             Denim Jeans
Denim Skirts            Knit Shirts
Denim Jackets
Knit Shirts
Sweaters
Hand Bags


  IAA.  IAA, which was formed in August 2001,  focuses on marketing  products
to the  private  label  apparel market.   IAA has since  diversified  and now
consists of two divisions, one focusing on the development  of  private label
business and the other on the development of branded apparel products.



  Since establishing IAA's branded  division, IAA has entered  into  licensing
agreements with  Mattel, Inc.  for  the  licensing  rights  to the Hot  Wheels
trademark for  apparel  and  accessory products  and  with platinum  recording
artist Lil Bow Wow for the right to  produce apparel  and  accessory products.
IAA entered into the agreement with Mattel in August of 2002  and  IAA entered
into the agreement for the Lil Bow Wow license in October of 2002. Pursuant to
both agreements, IAA has the right to sublicense the accessory category to its
affiliated   subsidiary   Innovo.  See "Business - Licensing   Agreements  and
Intellectual Property."

  As of November 30, 2002, IAA's private  label  division primarily  designed,
sourced and marketed denim jeans for J. Crew, Inc.  and  Target  Corporation's
Mossimo division.  IAA's revenues increased by 292% in fiscal 2002 compared to
fiscal 2001.  IAA's branded division did not have any revenues in fiscal 2002.
See "Management's Discussion  and  Analysis of Financial Condition and Results
of Operations."

  IAA's private label product lines primarily consist of knit tops  and  denim
bottoms for both the men's and women's market.  The branded sportswear product
lines are focused around fashion oriented tops  and bottoms. The product lines
include, but are not limited to the following:

Tops                           Bottoms
Knit Fashion Shirts            Fleece Sweatpants
Fashion T-Shirts               Knit Pants
Basic T-Shirts                 Denim Jeans
Fleece Sweatshirts             Velour Pants
Thermal Pullovers              Sweat Suits
Velour Shirts
Sports Jersey's

Product Development and Sourcing

Accessory

  Innovo. Innovo develops the designs  and  artwork for all products through
its in-house design staff.  Innovo's fashion and licensed accessory products
are produced with  the logos  or  other designs licensed  from  licensors or
produced bearing the Innovo's own private brands such as Test Tube and  Tote
Works.   See  "Business-Licensing  Agreements  and  Intellectual  Property."
Innovo markets its craft products, without artwork, to be sold for finishing
by retail craft customers.

  Innovo's craft products are purchased  from Commerce,  which  manufactures
the Company's craft products in Mexico.  Innovo is obligated,  as defined in
the supply agreement with Commerce, to purchase  all  of its  craft products
from  Commerce  through  August  2004.  In  fiscal  2002,  Innovo  purchased
approximately $3.4 million of craft products from Commerce Investment Group.
See "Business Description-Restructuring of Operations"  in  the Notes to the
Consolidated Financials.

  Innovo's sourcing office in Hong Kong, IHK, manages much of the design and
development of its products that are sourced out of  the Far East.  Innovo's
products are distributed out  of  Los Angeles through  an agreement  with an
affiliate of Commerce or the products may  be  shipped directly  to Innovo's
customers located in the country of origin of the manufactured products. See
"Business Description-Restructuring  of  Operations" in  the  Notes  to  the
Consolidated Financials.

  Innovo obtains its  fashion  accessory products  from  overseas  suppliers
located mainly in China through short  term  manufacturing agreements.   The
independent contractors that manufacture  Innovo's products are  responsible
for obtaining the necessary supply of  raw materials  and for  manufacturing
the products to Innovo's specifications.   See "Business-Import  and  Import
Restrictions."



  With  Innovo  primarily   utilizing   overseas   contractors  that  employ
production facilities located in China the products manufactured  for Innovo
are subject to export quotas and other restrictions imposed  by  the Chinese
government.  To date  the Company  has not  been adversely  affected by such
restrictions; however, there can be no assurance that future changes in such
restrictions by the Chinese  government would  not adversely  affect Innovo,
even if only temporarily, while Innovo shifted production to other countries
or regions such as Mexico, Korea, Taiwan or Latin America. It is anticipated
that in fiscal 2003 that most if not all of Innovo's sales will  be imported
products that  are  subject  to  United States import quotas,  inspection or
duties.  See "Business--Import and Import Restrictions."

Apparel

  Joe's.  Joe's  product  development  is  managed  internally by a team of
designers  led  by  Joe  Dahan,  which  are  responsible  for the creation,
development and coordination  of  the product  group offerings  within each
collection.  Joe's typically develops four collections per year for spring,
summer,  fall  and  holiday,  with  certain  basic  styles  being   offered
throughout the year.  Joe Dahan is  an instrumental  part  of  Joe's design
process.   A loss of  Joe Dahan could  potentially have  a material adverse
impact on Joe's.  In the event of the loss of Joe Dahan,  Joe's believes it
could find  alternative sources  for  the development  and  design of Joe's
products, although  there  can be  no  assurances.  See "Risk Factors-- The
loss of the services of Mr. Joe Dahan could have a material  adverse effect
on Joe's business."

  Joe's products are sourced through Commerce, or from domestic contractors
generally located in  the  Los  Angeles area.  Joe's is  not  contractually
obligated to purchase its products  from Commerce.  Joe's  staff,  however,
controls the production schedules  in  order to ensure quality  and  timely
deliveries.  Commerce  is  responsible   for  the  acquisition of  the  raw
materials necessary for the production of Joe's goods.   In the  event that
Commerce is unable to acquire the necessary  raw materials,  Joe's believes
that there are alternative sources from which  the  raw  materials could be
acquired.    The Company  is  currently reviewing  the  option of  sourcing
products from international sources and/or directly  sourcing  the products
from domestic suppliers.  During fiscal 2002, Joe's purchased approximately
$6.1 million  of goods  from  Commerce.   See  "Certain Relationships   and
Related Transactions-Commerce Investment Group."

  While Joe's believes that there are  currently  alternative  sources from
which to outsource  the  production  of  Joe's products, in  the  event the
economic climate or other factors resulted in significant  reduction in the
number of local contractors in the  Los Angeles area, Joe's  business could
be negatively impacted.  At this time, Joe's believes that it would be able
to find alternative sources for the production of  its products if this was
to occur, however, no assurances  can  be  given that a transition could be
completed without a disruption to Joe's business.

  IAA.  IAA's  private  label  product  development  is  managed  by  IAA's
internal design and merchandising staff or  in conjunction with  the design
teams of  the  customer.  IAA's products  are  sourced from  Mexico through
independent contractors, through Commerce  or through  independent overseas
contractors.   During fiscal 2002, IAA purchased approximately $6.1 million
of  goods  from  Commerce.    See   "Certain  Relationships   and   Related
Transactions-Commerce Investment Group."

  IAA's branded division's products are  developed  by  its in-house design
team or through  the use  of  outside  freelance designers.  IAA's  branded
division will be sourcing a majority of its products out of Mexico  and the
Far East,  including  countries  such  as China,  South Korea,  Vietnam and
India.  IAA's purchases in the international markets will be subject to the
risks  associated  with  the  importation  of  these  type  products.   See
"Business-Import and Import Restrictions."

  The Company relies on Commerce and its affiliates' ability to  source and
supply the Company's products. The Company expects its reliance on Commerce
to decrease in the future as  the  Company begins  to  purchase more of its
products from third party suppliers.  During  2002, the  Company  purchased
approximately $15.6 million or 63% of its products from Commerce.

  The Company generally purchases its products in U.S. dollars. However, as
a result of using  overseas suppliers,  the cost of  these products  may be
affected by changes in the value  of  the  relevant currencies.  See  "Risk
Factors -- Our  business  is  exposed  to  domestic  and  foreign  currency
fluctuations."



  Notwithstanding the supply agreement for craft  products  with  Commerce,
the Company does not have any long-term supply agreements  with independent
overseas contractors, but believes that there are a number of  overseas and
domestic contractors that could fulfill  the  Company's  requirements.  See
"Business Description-Restructured Operations" in Notes to the Consolidated
Financials.

  While the Company attempts to mitigate its exposure to manufacturing, the
use  of  independent  contractors does  reduce the  Company's control  over
production and delivery and exposes the Company to the other usual risks of
sourcing products  from independent suppliers.   The Company's transactions
with its foreign manufacturers  and suppliers  are subject  to the risks of
doing business abroad.   Imports  into the  United States  are affected by,
among other things, the cost of transportation and the imposition of import
duties and restrictions. The United States and the countries  in  which our
products are manufactured may,  from  time  to  time,  impose  new  quotas,
duties,  tariffs  or  other  restrictions,  or  adjust presently prevailing
quotas, duty or tariff levels,  which could  affect our operations  and our
ability to  import  products  at  current  or increased levels.   We cannot
predict the likelihood  or frequency  of  any such  events  occurring.  See
"Business-Import and Import Restrictions."

Licensing Agreements and Intellectual Property

Accessory

  Innovo.  On March 26, 2001, Innovo  entered into  a  two-year  exclusive
licensing  agreement  with  Candies, Inc.  ("Candies") pursuant  to  which
Innovo obtained the right to design, manufacture  and  distribute bags and
small leather/PVC goods bearing  the  Bongo trademark.  According  to  the
original terms of the licensing agreement, the  license was  to  expire on
March 31, 2003.   However,  in November 2002,  Innovo signed  a  four-year
agreement effective April 1, 2003 with Candies to extend the  term of  the
licensing agreement.  The extended agreement offers  Innovo  the potential
for multi-year extensions tied to certain performance criteria.

  Innovo pays Candies a five percent royalty and a two percent advertising
fee on the net sales of Innovo's goods  bearing  the  Bongo trademark.  In
accordance with the terms of the agreement, Innovo has the exclusive right
to sell, market, distribute, advertise and  promote the Bongo  products in
the  United  States, including  its territories  and  possessions, Mexico,
Central and South America and Canada.  Candies has  the right to terminate
the agreement in  the  event Innovo  breaches  any  material  terms of the
agreement.

  Innovo's collegiate  sports-licensed  accessory  products  display logos
insignias,  names,  or  slogans  licensed  from  the  various   collegiate
licensors.  Innovo holds licenses for the  use of the logos  and names  of
over 130 colleges for various products.  Each of  the collegiate licensing
agreements grants Innovo either an exclusive or non-exclusive  license for
use in connection with specific products and/or specific territories.  The
agreements are generally for  a  twelve  to  twenty-four month  period and
generally call for Innovo to  pay  an  eight percent royalty on goods sold
bearing the marks.

  Innovo  had  entered  into  a  licensing  agreement with  Major  League
Baseball, which expired on December 31, 2002.   Subsequently,  Innovo has
reached a verbal agreement with Major League Baseball  for  an additional
twelve-month extension period for bag related products.  While  Innovo is
in the process  of  formally  memorializing  the agreement,  there are no
guarantees that Innovo will be able  to  enter into  a  written agreement
with Major League Baseball.  According to the terms of  the understanding
between Innovo and  Major League Baseball,  Innovo is  to  pay  an eleven
percent royalty on products sold bearing Major League Baseball logos with
Innovo having the right to sell the  products to concession,  club retail
outlets and premium customers in the United States.

  While  Innovo  is  continuing  to  develop  products  bearing the sport
licenses, Innovo is placing more time  and  resources towards  developing
more fashion oriented product lines that  the Company believes  will have
greater potential in the marketplace.



  Innovo's craft line includes tote bags imprinted  with  the  E.A.R.T.H.
("EVERY AMERICAN'S  RESPONSIBILITY TO HELP")  BAG  trademark.  E.A.R.T.H.
Bags are marketed as a reusable  bag that represents  an  environmentally
conscious alternative to paper or plastic bags. Sales of E.A.R.T.H. Bags,
while significant in Innovo's early years,  have not been  significant in
the last five years.  The Company still considers  the trademark  to be a
valuable asset, and has registered it with the United  States Patent  and
Trademark Office.

  The Company has  also  applied  for a trademark  for  its product lines
known as "Friendship" and "Toteworks."

Apparel

  Joe's.  In February 2001, the Company's Joe's  subsidiary  acquired the
licensing rights to the JD logo  and  the Joe's  Jeans trademark  for all
apparel and accessory products.   The license  agreement with  JD Design,
LLC, has a ten-year  term with  two ten-year  renewal periods  upon there
being no material default  at  the  end  of  each period.   Additionally,
pursuant to the terms of the agreements, Joe Dahan is to receive  a three
percent royalty on the net revenues of Joe's.    See "Employees-Executive
Officers."

  IAA.  IAA has entered into a five-year licensing agreement with Mattel,
Inc. to produce Hot Wheels branded adult apparel  and accessories  in the
United States, Canada and Puerto Rico.  Under the terms  of  the  license
agreement, IAA will produce apparel  and  accessory products  targeted to
men and women in the junior and contemporary markets.  The products lines
will include  active wear,  sweatshirts and pants,  outerwear,  t-shirts,
"baby tee's" for women, headwear,  bags, backpacks and totes,  which will
be emblazoned with the familiar Hot Wheelsflame logo.

  The product line,  to be released  in  2003,  will  also  include items
sporting the Hot Wheels 35th Anniversary logo, as a part  of  the brand's
celebratory campaign for  the year.  IAA may terminate  the agreement  in
any year by paying the remaining balance of  that year's  minimum royalty
guarantees  plus  the  subsequent  years   minimum   royalty  guarantees.
Royalties  paid  by  IAA  earned  in  excess   of   the  minimum  royalty
requirements for  any  one  given  year,  may  be  credited  towards  the
shortfall amount  of  the  minimum required  royalties  in any subsequent
period during the term of the licensing agreement.

  According  to  the  terms  of  the  agreement, IAA  has  the  right  to
sublicense the  accessory product's  category to  Innovo.  The  agreement
calls for a  royalty rate of  seven percent  royalty  and  a  two percent
advertising  fee  on  the  net sales  of  goods  bearing  the  Hot Wheels
trademark.  In  the event  IAA defaults upon  any  material terms  of the
agreement, the Licensor shall have the right to terminate the agreement.

  On August 1, 2002, IAA  entered into  an  exclusive 42-month  worldwide
agreement for the Lil Bow Wow license,  granting IAA the right to produce
and market products bearing the mark and likeness  of  the popular  stage
and screen performer.  The IAA division plans to create and market a wide
range of apparel and coordinating accessories for  boys  and girls.   The
license agreement between IAA, Bravado  International  Group, the  agency
with the master licensing rights to Lil Bow Wow,  and  LBW Entertainment,
Inc. calls for the performer to make at least one public appearance every
six months during the term of the agreement to  promote  the  Lil Bow Wow
products, as well as use his best efforts  to  promote  and  market these
products on a daily basis.

  Additional terms of the license agreement allows IAA to market boys and
girls  products  bearing  the  Lil Bow  Wow  brand  to  all  distribution
channels, the right  of first refusal  on  all  other Lil Bow Wow related
product categories during the  term  of  the license  agreement, and  the
right of first of refusal on proposed transactions by  the licensor  with
third parties upon the expiration of the agreement.   The agreement calls
for IAA to pay an  eight  percent royalty  on  the  nets sales  of  goods
bearing Lil Bow Wow related marks.    In the event IAA defaults  upon any
material terms of the  agreement, the  Licensor  shall  have the right to
terminate the agreement.  Furthermore,  IAA has  the  right to sublicense
the accessory product's category to Innovo.



  The following sets  forth certain  information concerning  the  license
agreements currently held by the Company:





Licensor             Types of Products               Geographical           Minimum          Expiration
                                                        Areas               Royalties
                                                                                     

Colleges/logos of    Tote, lunch, shoe and           United States          $8,000           Varying
approximately 130    laundry bags, stadium                                                   expiration dates
colleges             seat cushions, sports bags                                              over 12 to 24
                     and backpacks                                                           month period


Major League         Tote, lunch, shoe and           United States          N/A              12/31/02-12
Baseball             laundry bags, stadium                                                   month verbal
                     seat cushions, sports bags                                              extension

Candies, Inc.        Bags, belts, small              North & South          $312,500 prior   3/31/07
(Bongo)              leather/pvc goods               America and U.S.       to expiration
                                                     Territories

Bravado              Apparel and accessories         United States          $75,000 prior    02/01/06
International                                                               to 01/31/05
Group, Inc.
(Lil Bow Wow)

Mattel, Inc.         Apparel and accessories         United States,         $1,050,000       12/31/07
(Hot Wheels)                                         Canada, Puerto
                                                     Rico

JD Design            Apparel and accessories         Worldwide              N/A              02/11/2031



  The Company believes that it will continue to be able to obtain the renewal
of all material licenses; however, there can be no assurance that competition
for an expiring license from another entity, or other factors will not result
in the non-renewal of a license.  As we  continue  to  expand our business in
the international marketplace, our trademarks  or  the trademarks  we license
may  not  be  able  to  be  adequately  protected.   See "Risk Factors -- Our
trademark  and  other  intellectual  property  rights  may  not be adequately
protected outside the United States."

  The Company believes that it is in substantial compliance with the terms of
all material licenses, excluding the  sports licenses previously  held by the
Company's  Nasco  Products  International, Inc.'s ("NPII") for  international
markets.  Historically, the Company has accrued for what it  deems to be  the
reasonable expense or obligation associated  with these  licensing agreements
in  the  event the  Company  could  not successfully  negotiate a  reasonable
settlement with  certain  international licensors.  During 2002, the  Company
determined that  it  was  no  longer  necessary to accrue  for the  potential
liability associated with its NPII subsidiary's prior licensing agreements in
the international marketplace because of the lack of any material discussions
or contact with the licensors over the last three fiscal years. Consequently,
Innovo reversed the accrual which the Company had previously reserved for the
potential  liability  associated  with  Nasco Products  International, Inc.'s
licenses  in  the  international licenses.   See  "Managements Discussion and
Analysis of Financial Condition and Results of Operations."

Customers

Accessory

  Innovo.  During  fiscal  2002,  Innovo  sold  products  to  a  mix of mass
merchandisers,  department  stores,  craft  chain  stores  and other  retail
accounts.   Innovo  estimates  that  its products  are  carried  by over 500
customers in over 4,000 retail outlets  in the United States.  Additionally,
in  fiscal  2002, Innovo  began  to  sell  its  products  to  private  label
customers.



  In   marketing  Innovo's  products,  Innovo  attempts  to  emphasize  the
competitive pricing  and quality  of its  products, its  ability to  assist
customers  in designing  marketing programs, its  short lead  times and the
high success rate  our customers have  had  with our products.   Generally,
Innovo's accounts  are  serviced by Innovo's sales  personnel  working with
marketing  organizations   that   have   sales   representatives  that  are
compensated on a commission basis.  Innovo's New York City showroom is used
to showcase all product lines developed by Innovo  and  to  help facilitate
sales for all accounts.

  In fiscal 2002, Innovo sold its products to  private label customers such
as American Eagle Outfitters  and Limited Brands, Inc.'s  Express division.
Innovo currently sells it  products  to retailers  such  as Wal-Mart, Inc.,
A.C.  Moore  Arts  &  Crafts,   Joannes,  Inc.,    Michaels  Stores,  Inc.,
Sears, Roebuck  & Co.,  579, Stores,   Beall's, Inc.,   Hecht's,   Foley's,
Robinson-May, J. C. Penney Company, Inc., Claire's Stores, Inc. and The Wet
Seal, Inc.

  For  fiscal  2002,   Innovo's  three   largest  customers  accounted  for
approximately 54% of its total gross revenues.  The loss  of  any of  these
three customers would have a material adverse effect on Innovo.

  Joe's.  Joe's products are sold to consumers  through high-end department
stores and  boutiques  located  throughout  the world.  For  Joe's domestic
sales, Joe's has entered into sales agreements  with third  party showrooms
where retailers review the  latest collections  offered  by Joe's and place
orders.  Subsequently,  the  showrooms provide Joe's  with  purchase orders
from the retailers.   Joe's  then  distributes  the  products  from its Los
Angeles  distribution  facility.   Joe's  currently has domestic agreements
with  showrooms  in  Los Angeles  and  New York  and  these showrooms  have
representatives throughout the United States.

  Joe's products are sold in Japan  through  its  subsidiary  Joe's  Jeans
Japan.  Joe's Jeans Japan operates a  company-operated showroom  in  Tokyo
through which Joe's products are sold to retailers. Additionally, Joe's is
currently selling its products in Europe  and Canada through  distributors
who purchase  the product  directly  from Joe's  and  then  distribute the
product in to the local markets.  Revenues generated by  Joes  Jeans Japan
represented approximately 21% of Joe's total net revenue  in  fiscal 2002.
See "Management's Discussion  and  Analysis  of  Financial  Condition  and
Results of Operations."

  The Company currently sells to domestic retailers  such as  Barney's New
York, Saks Fifth Ave, Inc., Bloomingdale's, Inc., Macy's, Inc.,  Intermix,
Fred Segal  and  Loehmann's  and  in  Japan  to  retailers  such  as Sanei
International,  Interplanet,  Free's Shops,  Isetan,  Mitsukoshi New  York
Runway and Barney's New York.

  The Joe's Jeans website (www.joesjeans.com) has  been built  to  advance
the brand's image and to allow consumers to review  the  latest collection
of products.  Joe's currently uses  both online  and  print advertising to
create brand awareness with customers as well as consumers.

  For   fiscal   2002,   Joe's   five  largest  customers  accounted   for
approximately 18% of its total gross revenues.

  IAA.  IAA develops  apparel  products for the private label and  branded
product markets.  IAA  currently distributes  its  private label  products
primarily  to  Target  Corporation's  Mossimo division  and  J. Crew, Inc.
IAA is  currently  relying  on  these  customers for  a  majority  of  its
business.

  During  fiscal  2002, sales  to  J. Crew, Inc.  and  Target  Corporation
represented approximately 34% and 21%, respectively, of  the  total  gross
revenues of IAA.  The Company is  focused  on  broadening  IAA's  customer
base within the private label markets.

  The Company does not enter into long-term  agreements  with any  of its
customers.  Instead, it receives  individual purchase  order  commitments
 from its customers.  A decision by the controlling owner of  a  group of
stores  or   any   other  significant  customer,   whether  motivated  by
competitive   conditions,   financial   difficulties   or  otherwise,  to
decrease the amount of merchandise  purchased from  the   Company, or  to
change their manner  of doing  business with  the  Company, could  have a
material  adverse  effect  on  our  financial  condition  and  results of
operations.  See "Risk Factors--A substantial portion of  our  net  sales
and gross profit is derived from a small number of large customers."



  The Company's  business  has  historically  been  seasonal by  nature.
While the Company believes  that as  a  result of  its  growing  product
lines and expanding business model its business should  be less seasonal
in future periods, a majority of  the Company's  revenues  are generated
during    the    Company's    third    and    fourth    quarters.    See
"Business-Seasonality of Business and Working Capital."

Seasonality of Business and Working Capital

  The Company has historically experienced and expects  to  continue to
experience  seasonal   fluctuations   in   sales   and   net  earnings.
Historically,  a significant amount  of the Company's  net sales  and a
majority of its net earnings  have been  realized during  the third and
fourth quarter.  In the second  quarter  in  order to prepare  for peak
sales that occur during the third quarter, the Company builds inventory
levels, which results  in  higher  liquidity needs  as  compared to the
other quarters in the fiscal year.  If  sales were materially different
from seasonal norms  during  the  third quarter,  the  Company's annual
operating results could  be materially affected.  Accordingly,  results
for  the  individual  quarters  are  not  necessarily indicative of the
results to be expected for the entire year.

  The Company is anticipating a significant increase in organic  growth
during 2003.  The Company believes that it could be necessary to obtain
additional working  capital  in order  to  meet  the  operational needs
associated with such growth.  The Company believes that it will address
these needs by  increasing  the  availability  of  funds offered to the
Company under its financing agreements with CIT Group, Inc.  ("CIT") or
other financial institutions.  Nonetheless, the Company may be required
to obtain additional capital through  debt  or  equity  financing.  See
"Managements Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources."

  The Company believes  that  any  additional capital,  to  the  extent
needed, may be obtained from the sale of  equity securities  or through
short-term working capital loans.  However,  there can be no  assurance
that this or other financing will be available if needed. The inability
of the Company  to  be  able  to  fulfill any  interim  working capital
requirements would force the Company to constrict its operations.

Backlog

  Although the Company may at any given time have significant business
booked  in  advance  of  ship dates,  customers' purchase  orders  are
typically filled and shipped within two to six  weeks.  As of November
30, 2002, there were no significant backlogs.

Competition

  The industries in which  the  Company operates  are  fragmented and
highly competitive in the United States and on a worldwide basis.  We
compete  against  a  large  number  of marketing  products similar to
ours.  The Company does not hold a dominant competitive position, and
its ability to sell its products is  dependent  upon the  anticipated
popularity of its designs, the brands  its  products bear,  the price
and quality of its products  and  its  ability to meet its customers'
delivery schedules.

  The Company believes that it is competitive in  each of the above-
described segments with companies  producing goods  of like  quality
and  pricing,  and that  new product  development, product  identity
through marketing, promotions and low price points will  allow it to
maintain its competitive position.   However,  many of the Company's
competitors possess substantially  greater financial, technical  and
other resources than the Company, including the ability to implement
more  extensive  marketing  campaigns.    Furthermore,  the  intense
competition and the rapid changes in consumer preferences constitute
significant risk factors in our operations.   As the Company expands
globally,   it  continues  to   encounter  additional   sources   of
competition.  See "Risk Factors--We face  intense competition in the
worldwide apparel and accessory industry."



Imports and Import Restrictions

The  Company's  transactions  with  its  foreign  manufacturers and
suppliers are  subject  to  the  risks  of  doing  business abroad.
Imports into the United States are affected by, among other things,
the cost of transportation and the imposition of import  duties and
restrictions.  The countries in which the  Company's products might
be manufactured may, from time to time,  impose new quotas, duties,
tariffs  or  other  restrictions,  or  adjust presently  prevailing
quotas, duty or  tariff levels,  which could  affect the  Company's
operations  and  its  ability  to  import  products  at  current or
increased levels.  The Company  cannot  predict  the  likelihood or
frequency of any  such  events  occurring.  The  enactment  of  any
additional duties, quotas or restrictions could result in increases
in the cost of our  products  generally  and might adversely affect
our sales and profitability.

  The Company's  import  operations  are  subject  to  constraints
imposed by bilateral textile agreements between the  United States
and a number  of  foreign countries,  including Hong Kong,  China,
Taiwan and Korea. These agreements impose quotas on the amount and
type of goods that can be  imported  into  the United  States from
these countries.  Such agreements  also allow the United States to
impose, at any time, restraints on  the importation of  categories
of  merchandise  that,  under  the terms  of  the agreements,  are
not subject to specified limits.  The Company's imported  products
are also subject  to  United States  customs  duties  and, in  the
ordinary course of  business,  the  Company is from time  to  time
subject to claims by  the United States Customs Service for duties
and other charges.

  The Company monitors duty, tariff and quota-related developments
and continually seeks to minimize its potential exposure to quota-
related   risks   through,   among  other  measures,  geographical
diversification of its manufacturing sources,  the maintenance  of
overseas offices, allocation of overseas production to merchandise
categories where more quota is available and  shifts of production
among countries and manufacturers.

  Because  the  Company's  foreign  manufacturers  are located  at
greater geographic distances from the  Company  than  its domestic
manufacturers, the Company is generally required to  allow greater
lead  time  for  foreign  orders,  which  reduces  the   Company's
manufacturing  flexibility.   Foreign  imports  are  also affected
by the high cost of transportation into the United States.

  In addition to the factors outlined  above, the Company's future
import  operations    may   be  adversely  affected  by  political
instability resulting in the  disruption of trade  from  exporting
countries, any significant fluctuation in the value of  the dollar
against foreign currencies  and restrictions on  the  transfer  of
funds.

Employees

  As of March 13, 2003 the Company had 71 fulltime employees.  IGI
accounted for 3 of the employees, Innovo  employed 19 individuals,
including 5  individuals  in  Innovo's  New York  showroom,  Joe's
employed 30 individuals out  of  its  Los Angeles office  and 5 in
Japan, and IAA employed 9 individuals.

Investments

Real Estate

  IRI.   IRI,  the  Company's  real-estate investment   subsidiary
headquartered  in  Commerce,  CA,  has  invested   in   22 limited
partnerships.  On April 5, 2002, the Company issued 195,295 shares
of its  cumulative,  non-convertible  preferred stock  with  an 8%
coupon ("Preferred Shares"), having a stated redemption  value  at
$100 per share (approximately $19.5 million),  to  IRI in exchange
for  all  1,000 shares of IRI's capital stock.  On that  same day,
IRI acquired a 30% limited partner interest in each of 22 separate
limited partnerships (collectively, the "Limited Partnerships") in
exchange for the Preferred Shares.



  Simultaneous with the acquisition by IRI of its interests in the
Limited  Partnerships,  the  Limited   Partnerships  acquired   28
apartment complexes  at  various locations  throughout the  United
States  consisting  of  approximately 4,000  apartment  units (the
"Properties"). The  aggregate purchase  price  of  the  Properties
was $98,079,000.  The Limited Partnerships were  organized for the
sole purpose of purchasing the Properties.   The Preferred  Shares
were transferred by the IRI to the sellers  of  the  Properties in
partial payment of  the purchase price  of  the  Properties.   The
allocation of the Preferred Shares among  the Limited  Partnership
was  based  on  the  number  of  Preferred  Shares  applied to the
purchase  price  of   the   Property  acquired  by   such  Limited
Partnership.  The allocation of Preferred Shares was  based on the
contract price of the  Property  plus costs  associated  with  the
transaction  (e.g. attorney's fees,  real  estate tax  prorations,
etc.), less the loan  amount,  less  the  cash  from  the  limited
partner, less  the  buyer's deposit.   The partners in each of the
partnerships are: (i) IRI with a 30% limited partnership interest,
(ii) Metra Capital,  LLC with a 69% limited  partnership  interest
and  (iii)   a   1% general  partner  which  is   unique  to  each
partnership.

  Each    Limited     Partnership   owns   different   Properties.
 Approximately  20% of  the  $98,079,000  aggregate   sellers   in
partial  payment  of  the  purchase price.   The  balance  of  the
purchase price was funded by Metra Capital, LLC and  by  financing
provided by Bank of America.  The Bank of America  Financing is in
the  approximate  amount  of $81,000,000  and  is  secured by  the
Properties, but neither the Company  nor IRI have  any obligations
under that  financing.   None of  the  Company's  Board Members or
executive officers participated  in the transaction.  However, Mr.
Hubert Guez and Mr. Joseph Mizachi,  both of  whom  are affiliates
of the Company due  to their 10%  ownership  or  more  of  Company
common stock, were investors in the partnerships.

  The Preferred Shares 8% coupon is  funded  entirely  and  solely
through partnership  distributions  received by  the  Company from
cash flows generated by the  operation and sale of the Properties.
If sufficient funds are not  available for the payment  of  a full
quarterly 8% coupon, then  partial payments shall  be  made to the
extent funds are available.  Unpaid  dividends accrue. Partnership
distribution amounts remaining after the  payment  of all  accrued
dividends must  be used  by  the  Company  to  redeem  outstanding
Preferred Shares.  The  Preferred Shares have  a  redemption price
of   $100   per   share.   In  the  event  that   the  partnership
distributions  received by the Company are insufficient  to  cover
the 8% coupon or the  redeem Preferred  Shares,  the Company  will
have no  obligation  to  cover  any  shortcomings  so long as  all
distributions from the partnership  are  properly  applied  to the
payment of dividends and the redemption of Preferred  Shares.  If,
after all of the Properties are sold and the  proceeds of the sale
of the Properties and cash flow derived  from such Properties have
either  been  applied  to  the  payment  of  the 8% coupon and the
redemption of  Preferred Shares or deposited into the sinking fund
for that  purpose, and the total amount  of funds remaining in the
Sinking  Fund is  insufficient to pay  the  full 8% coupon and the
full Redemption Price for all then outstanding  Preferred  Shares,
then  the  Company (or IRI) shall  pay  $1.00  in  total into  the
Sinking Fund and the Redemption  Price shall  be  adjusted so that
it equals (x) the total  amount in the  sinking fund available for
distribution,  minus  (y)  all  direct  costs  of  maintaining the
Sinking Fund and  making  distributions therefrom, divided  by (z)
the  number  of  then  outstanding Preferred Shares. The adjusted
Redemption Price  shall be  and  shall  represent full  and final
payment for the redemption of all Preferred Shares.

  IRI receives  partnership distributions on  the  occurrence  of
Capital   Events  (property  sales)  and,  quarterly  "cash flow"
distributions.  Partnership distributions  are made in descending
priority with first priority  going to the  Metra Partners,  then
to Third Millennium Partners, LLC,  an  entity controlled by  Mr.
Joseph Mizrachi, then to IRI until  all capital has been returned
and   certain   specified   returns  are   achieved.   Thereafter
distributions are  divided 70% to the Metra partners  and  30% to
IRI.  According  to the original terms of the transaction, IRI is
entitled to  receive   a  sub-managemen  fees equal  to 1% of the
gross annual revenues  from  the Properties, plus  an  additional
incentive management fee  equal to 1% of the gross annual revenue
less administrative costs, entity  maintenance costs, third party
professional fees, travel  costs, costs of property studies, etc.
to  the  extent  that  there  is  excess  cash  flow  (i.e., cash
remaining after payment of  debt service, all  other amounts  due
in connection with the mortgage and  all  property expenses  then
due and payable, including, the 1% of  gross annual  revenues the
IRI is to receive.   In an effort to  simplify  the  amounts owed
under the Sub Asset Management Fee agreement, the  parties to the
sub-asset management fee  agreement  have agreed  to  a quarterly
payment of $85,000 as  satisfaction of amounts owed to  IRI under
the sub-asset  management  fee  agreement.  Neither  IRI  nor the
Company have any obligation to apply any fees  paid to IRI or the
Company under  the  sub-asset  management  fee  agreement to  the
payment of the 8% coupon or  the redemption of Preferred Shares.



  The Company has not given accounting recognition to  the  value
of its  investment  in  the  Limited  Partnerships,  because  the
Company has  determined that  the asset  is contingent  and  will
only have value to the extent that cash flow from  the operations
of the properties or from the sale  of  underlying  assets is  in
excess of the 8% coupon and redemption  of the  Preferred Shares.
The Company is obligated  to  pay  the 8%  coupon  and redeem the
Preferred Shares from  its  partnership  distributions,  prior to
the Company being able  to  recover  the underlying value  of its
investment.  Additionally, the  Company  has determined that  the
Preferred Shares will  not  be  accounted for  as  a component of
equity as the shares  are  redeemable  outside  of  the Company's
control.  No value has been ascribed to  the Preferred Shares for
financial reporting purposes as  the  Company is obligated to pay
the 8% coupon or redeem the shares only  if  the Company receives
cash flow from the  Limited  Partnerships  adequate  to  make the
payments.  The Company has included the  quarterly management fee
paid  to   IRI  in  other income   using  the  accrual  basis  of
accounting.

Executive Officers

  Samuel  J.  (Jay)  Furrow,  Jr.,  who  is  29 years  of age, is
currently the Chief  Executive Officer,  Chief Operating  Officer
and acting Chief  Financial Officer of  the Company.   Mr. Furrow
became the Company's  Vice-President  for  Corporate  Development
and In-House  Counsel  in August 1998 and  a  Director in January
1999.  Mr. Furrow served as  President  from  December 2000 until
July 2002, when he became Chief  Executive  Officer.  He has also
served as  the Company's  Chief  Operating  Officer  since  April
1999 and its Acting Chief  Financial  Officer  since August 2000.
Mr. Furrow is an attorney.   Mr. Furrow  has  a  J.D degree  from
Southern  Methodist  University School  of  Law  and  has  a B.S.
degree  from   Vanderbilt   University.   See "Risk Factors-- The
loss of the services  of key personnel  could  have   a  material
adverse effect on our business."

  Patricia Anderson, who  is  43 years  of  age, is currently the
President of the Company.  Ms. Anderson  has been a  Director  of
the Company since  August 1990,  President  of  the  Company from
August  1990  through   December 2000  and   since July 2002, and
President of  the  Company's Innovo, Inc.  subsidiary  since  she
founded  that  company in 1987.   From August 1990  until  August
1997,  Ms. Anderson  was  also the Chairman  and  Chief Executive
Officer  of  the  Company,  and  she once again  served  as Chief
Executive  Officer  from  December  2000 through July 2002.   See
"Risk Factors-- The  loss of  the services of key personnel could
have a material adverse effect on our business."

  The Company does not  currently have  an  employment  agreement
with Mr. Furrow or Ms. Anderson.  The  Company, upon the creation
of Joe's in March of 2001,  entered into an  employment agreement
with  Joe  Dahan.   According  to  the  terms  of  the  agreement
Mr. Dahan  shall  serve as President of the Joe's division and be
paid  an   annual  salary  of   $100,000.   The  agreement renews
annually unless either party gives 60 days  written notice  prior
to the annual renewal  date  of  its  intention to terminate  the
employment agreement.   The agreement  also provides for a  grant
of qualified stock option under the  Company's stock option  plan
for the  purchase  of  an  aggregate  of  two  hundred  and fifty
thousand shares of common  stock of the  Company  at an  exercise
price of one dollar per share.  The  option  grant has  a term of
4 years and vests in equal  percentages  monthly over a  24-month
period.

Financial Information about Geographical Areas

  See Note 15 "Segment  Disclosures -Operations  by  Geographic
Area" in the Notes to Consolidated Financial Statements.

Risk Factors

  The  following   risk  factors  should   be  read carefully in
connection    with     evaluating   our    business   and   the
forward-looking  statements  contained  in   this Annual Report.
Any of the  following risks  could  materially  adversely affect
our business, our  operating  results,  our financial  condition
and the actual outcome  of  matters as  to which forward-looking
statements are made in this Report.



  The  loss  of  the  services  of key personnel  could  have a
material adverse effect on our business.

  Our  executive  officers   have  substantial  experience  and
expertise  in  our   business   and   have  made    significant
contributions  to  our growth and success.  The unexpected loss
of services of one or more  of  these  individuals  could  also
adversely affect us.   We  are  currently  not  protected  by a
material amount of key-man  or  similar life insurance covering
any of our executive officers.

  A substantial portion of our net  sales  and gross  profit is
derived from a small number of large customers.

  Our ten largest  customers  accounted  for  approximately 52%
of our gross sales  during  fiscal 2002.   We do not enter into
long-term agreements with  any of our customers.   Instead, we
enter into a number  of  individual purchase order  commitments
with our customers.  A decision  by  the controlling owner of a
group of stores or  any  other  significant  customer,  whether
motivated by  competitive  conditions,  financial  difficulties
or otherwise, to decrease the amount  of  merchandise purchased
from us, or to change their manner  of doing business with  us,
could  have   a   material  adverse  effect  on  our  financial
condition and results of operations.

  The Company's business could be  negatively impacted  by  the
financial instability of our customers.

  We sell our product primarily  to retail,  private label  and
distribution    companies    around    the   world   based   on
pre-qualified   payment  terms.   Financial  difficulties  of a
customer  could   cause   us  to  curtail  business  with  that
customer.  We may also   assume  more  credit  risk relating to
that customer's receivables.  Our inability  to  collect on our
trade accounts receivable  from  any  one  of  these  customers
could have  a   material  adverse  effect  on  our  business or
financial condition.

  Our business could  suffer  as a  result  of  manufacturer's
inability   to  produce   our  goods  on  time  and   to   our
specifications.

  We do not own or  operate any  manufacturing  facilities and
therefore   depend  upon  independent  third   parties for the
manufacture  of  all   of   our  products.  Our  products  are
manufactured to   our   specifications  by   both domestic and
international     manufacturers.     During    fiscal    2002,
approximately 24%, of our  products were  manufactured  in the
United States and  approximately  76%  of  our  products  were
manufactured   in  foreign  countries.   The  inability  of  a
manufacturer to  ship orders  of  our  products  in  a  timely
manner or to  meet our  quality standards  could  cause us  to
miss the  delivery  date  requirements  of  our  customers for
those  items, which could  result in  cancellation of  orders,
refusal  to accept  deliveries  or  a  reduction  in  purchase
prices, any  of  which  could  have  a material adverse effect
on our financial condition and results of operations.

  The loss of  the  services  of Mr. Joe Dahan  could  have  a
material adverse effect on Joe's business.

  Mr. Joe Dahan's  leadership  in  the design,  marketing  and
operational areas of  Joe's  has  been a  critical  element of
Joe's  success.  The  loss  of  his services, or  any negative
market or industry perception  arising  from  his  loss, could
have  a  material  adverse  effect  on  our business.   We are
currently not protected by a  material  amount  of  key-man or
similar  life insurance  covering  Mr. Dahan  or  any  of  our
other  executive  officers.  We  have  entered into employment
agreements    with    Mr. Dahan.     See   "Business-Executive
Officers."

  Our  business  could  suffer   if   we   need   to   replace
manufacturers.



  We  compete   with   other   companies  for  the  production
capacity of  our  manufacturers  and  import  quota  capacity.
Some of these  competitors have  greater  financia  and  other
resources than we  have, and  thus  may have an  advantage  in
the competition for  production  and  import  quota  capacity.
If we experience  a  significant  increase  in  demand,  or if
an existing manufacturer of  ours must  be  replaced,  we  may
have to  expand  our  third-party  manufacturing capacity.  We
cannot  assure you  that  this  additional  capacity  will  be
available  when  required  on  terms that  are  acceptable  to
us.  We enter into  a  number of  purchase  order  commitments
each  season   specifying  a  time  for  delivery,  method  of
payment,   design   and   quality   specifications  and  other
standard  industry  provisions, but  do   not  have  long-term
contracts  with any  manufacturer.   None of the manufacturers
we use produces our products exclusively.

  If a manufacturer  of  ours fails  to use  acceptable  labor
practices, our business could suffer.

  We require  our  independent  manufacturers  to  operate  in
compliance with applicable laws  and regulations.   While  our
internal  and  vendor  operating  guidelines  promote  ethical
business practices  and  our  staff  periodically  visits  and
monitors  the  operations of  our  independent  manufacturers,
we  do  not  control  these   manufacturers  or   their  labor
practices.  The  violation  of  labo r or  other  laws  by  an
independent   manufacturer   of  ours,  or  by   one  of   our
licensing  partners, or  the  divergence  of  an   independent
manufacturer's or  licensing  partner's labor  practices  from
those generally  accepted  as  ethical  in  the United States,
could   interrupt,   or  otherwise  disrupt  the  shipment  of
 finished products to  us  or  damage our reputation.   Any of
these, in turn,  could  have  a  material  adverse  effect  on
our financial condition and results of operations.

Our trademark and  other  intellectual  property  rights   may
not be adequately protected outside the United States.

  We  believe  that  our  trademarks,  whether   licensed   or
owned by us, and other  proprietary  rights  are  important to
our success and our  competitive position.  In  the course  of
our international  expansion,  we may,   however,   experience
conflict  with  various  third parties  who  acquire or  claim
ownership  rights  in  certain  trademarks.   We cannot assure
that  the  actions  we  have taken  to  establish and  protect
these   trademarks   and  other  proprietary  rights  will  be
adequate to prevent  imitation of our  products  by  others or
to prevent  others  from  seeking  to  block   sales  of   our
products as a  violation of  the  trademarks  and  proprietary
rights  of  others.  Also,  we  cannot  assure you that others
will  not  assert  rights  in,  or   ownership of,  trademarks
and other proprietary rights  of  ours  or  that  we  will  be
able to  successfully resolve  these types   of  conflicts  to
our  satisfaction.  In addition,  the  laws of certain foreign
countries may  not  protect  proprietary  rights to  the  same
extent  as   do   the   laws   of  the  United  States.    See
"Business   -  Licensing    Agreement    and     Intellectual
Property."

  We cannot assure  the   successful  implementation   of  our
growth strategy.

  As part  of our  growth  strategy, we  seek  to  expand  our
geographic    coverage,    strategically   acquiring    select
licensees   and   enhancing  our  operations.   We   may  have
difficulty  hiring  and  retaining  qualified key employees or
otherwise successfully  managing  the  required  expansion  of
our  infrastructure   in   Japan   and    other  international
markets the Company may enter into.   Furthermore,  we  cannot
assure you that we  will  be  able  to  successfully integrate
the business  of  any  licensee that we acquire into  our  own
business or achieve any  expected  cost  savings or  synergies
from such integration.

  Our business is exposed to  domestic  and  foreign  currency
fluctuations.

  We  generally   purchase   our   products  in U.S.  dollars.
However, we source most  of  our  products  overseas   and, as
such,  the   cost   of  these  products  may  be  affected  by
changes in  the  value  of the relevant  currencies.   Changes
in currency  exchange  rates  may  also  affect  the  relative
prices  at  which   we   and   our  foreign  competitors  sell
products in the same market.  We currently  do  not  hedge our
exposure to changes in  foreign  currency exchange rates.   We
cannot  assure you  that foreign  currency  fluctuations  will
not  have  a   material   adverse   impact  on  our  financial
condition and results of operations.

  Our ability to  conduct business  in  international  markets
may  be  affected   by   legal,   regulatory,   political  and
economic risks.



  Our ability to capitalize on growth  in  new  international
markets and to maintain the  current  level  of operations in
our existing  international  markets  is  subject  to   risks
 associated with international operations. These include:

 - the burdens of complying with a  variety  of  foreign laws
   and regulations,
 - unexpected  changes  in  regulatory  requirements,  and
 - new   tariffs  or other  barriers  to  some  international
   markets.

  We are also subject  to  general political   and   economic
risks associated  with   conducting  international  business,
including:

 - political instability,
 - changes in diplomatic and trade relationships,  and
 - general  economic  fluctuations in specific  countries  or
   markets.

  We cannot predict whether   quotas,   duties,   taxes,   or
other similar restrictions  will  be  imposed by  the  United
States,  the  European  Union,   China,   Japan,   or   other
countries  upon  the  import  or  export of  our  products in
the  future, or  what  effect  any  of  these  actions  would
have on  our  business, financial  condition  or  results  of
operations.  Changes  in  regulatory,  geopolitical  policies
and other  factors  may  adversely  affect  our  business  in
the  future  or  may  require  us  to  modify   our   current
business practices.

  We face intense   competition  in   the  worldwide  apparel
and accessory industry.

  We face a variety  of  competitive  challenges  from  other
domestic    and    foreign   fashion-oriented    apparel  and
accessory producers, some  of  which  may   be  significantly
larger  and  more  diversified  and  have  greater  financial
and  marketing  resources  than  we  have.   We  compete with
these companies primarily on the basis of:

 - anticipating  and  responding   to  changing  consumer
   demands in a timely manner,
 - maintaining favorable brand recognition,
 - developing innovative, high-quality products in sizes,
   colors and styles that appeal to consumers,
 - appropriately pricing products,
 - providing strong and effective marketing support,
 - creating  an  acceptable  value proposition for retail
   customers,
 - ensuring product availability  and  optimizing  supply
   chain efficiencies with manufacturers  and  retailers,
   and
 - obtaining sufficient retail  floor space and effective
   presentation of our products at retail.

  The success of our  business  depends  on   our  ability to
respond   o   constantly   changing    fashion   trends   and
consumer demands.

  Our  success  depends  in  large  part  on  our  ability to
originate and  define  fashion  product  trends, as  well  as
to   anticipate,  gauge   and   react   to changing  consumer
demands in a timely manner.  Our  products  must  appeal to a
broad  range  of  consumers  whose  preferences   cannot   be
predicted with certainty  and  are subject  to rapid  change.
We cannot  assure  that  we  will  be  able  to  continue  to
develop  appealing  styles  or  successfully  meet constantly
changing consumer  demands in  the  future.  In  addition, we
cannot assure  you that  any  new  products or brands that we
introduce will be successfully  received  by consumers.   Any
failure  on our  part  to  anticipate, identify  and  respond
effectively  to   changing  consumer  demands   and   fashion
trends could adversely  the acceptance  of  our  products and
leave us with a substantial amount  of  unsold  inventory  or
missed opportunities.   If that occurs, we  may be forced  to
rely  on  markdowns  or   promotional  sales  to  dispose  of
excess,   slow-moving   inventory,   which   may   harm   our
business.  At the same time,  our focus  on tight  management
of  inventory  may  result,  from  time to  time,  in our not
having  an adequate  supply  of  products  to  meet  consumer
demand and cause us to lose sales.

  A downturn in the  economy may  affect  consumer  purchases
of discretionary items,  which  could  adversely  affect  our
sales.



  The  industries  in  which  we operate  are cyclical. Many
factors  affect  the  level  of  consumer  spending  in  the
apparel,  accessories  and  craft   industries,   including,
among others:

 - general business conditions,
 - interest rates,
 - the availability of consumer credit,
 - taxation, and
 - consumer confidence in future economic conditions.

  Consumer  purchases  of  discretionary  items,  including
accessory and  apparel  products, including  our  products,
may  decline  during  recessionary  periods  and  also  may
decline  at  other  times  when disposable income is lower.
A   downturn   in  the  economies  in  which  we  sell  our
products, whether  in  the  United States  or  abroad,  may
adversely affect our sales.

  Our   business    could    suffer    as   a   result   of
consolidation,    restructurings    and   other   ownership
changes in the retail industry.

  In recent years, the  retail  industry   has  experienced
consolidation and  other ownership  changes.  Some  of  our
customers  have   operated  under  the  protection  of  the
federal  bankruptcy  laws. While  to date  these changes in
the  retail  industry have  not had   a   material  adverse
effect  on   our   business  or  financial  condition,  our
business could be  materially  affected  by  these  changes
in the future.

  Terrorist  attacks  and  the  possibility of  wider armed
conflict may have an  adverse effect on  our  business  and
operating results.

  Terrorist  attacks  and  other  acts of  violence or war,
such  as  those  that  took  place  on  September 11, 2001,
could  have  a  material  adverse  effect  on  our business
and operating  results.  There  can be  no  assurance  that
there will not  be further  terrorist  attacks against  the
United   States  or  its  businesses   or   interests.  The
adverse effects  that  such  violent acts  and  threats  of
future  attacks  could  have  on  the  U.S.  economy  could
similarly   have   a   material  adverse   effect   on  our
business and  results  of  operations.   Finally,   further
terrorist acts could  cause  the  United  States  to  enter
into a wider  armed  conflict  which  could further  impact
our business and operating results.

  Impact of potential future acquisitions

  From time to  time, the  Company  has  pursued,  and  may
continue  to  pursue,   acquisitions.   If   one  or   more
acquisitions    results   in     the     Company   becoming
substantially  more  leveraged  on  a  consolidated  basis,
the  Company's   flexibility   in  responding   to  adverse
changes in  economic,  business  or market  conditions  may
be adversely affected.

  We are subject  to  risks  inherent in ownership  of real
estate.

  Real estate cash flows  and  values  are  affected  by  a
number  of  factors,  including   changes  in  the  general
economic    climate,    local,    regional    or   national
conditions (such as an oversupply  of  communities   or   a
reduction  in  rental  demand  in  a   specific area),  the
quality and  philosophy  of  management,  competition  from
\other  available  properties  and  the  ability to provide
adequate   property   maintenance  and  insurance   and  to
control  operating  costs.   Real  estate  cash  flows  and
values are also affected  by  such  factors  as  government
regulations,  including   zoning,   usage  and   tax  laws,
interest  rate  levels,  the   availability  of  financing,
property   tax   rates,    utility   expenses,    potential
liability   under   environmental   and   other  laws   and
changes in  environmental  and  other  laws.   Although  we
seek   to   minimize  these   risks   through   our  market
research   and   property   management  capabilities,  they
cannot be totally eliminated.



  Real  estate  investments  are  relatively  illiquid  and
we  may   not   be    able    to   sell   properties   when
appropriate.

  Equity real estate investments  are  relatively illiquid,
which may tend to limit our  ability to react  promptly  to
changes  in  economic   or  other  market conditions.   Our
ability to dispose  of assets in the future will depend  on
prevailing economic and  market conditions.

 Changes in laws  may result in increased cost.

  We  may   not   be   able to  pass  on   increased  costs
resulting  from  increases in  real  estate  taxes,  income
taxes   or  other  governmental  requirements  directly  to
our  residents.   Substantial  increases  in  rents,  as  a
result   of   those   increased   costs,   may  affect  the
ability of  a  resident to  pay  rent,  causing   increased
vacancy.    Changes    in    laws    increasing   potential
liability  for  environmental  conditions   or   increasing
the  restrictions  on  discharges  or  other  environmental
conditions  may    result   in   significant  unanticipated
expenditures.

Compliance   with   environmental   regulations   may    be
costly.

  We must comply with  certain  environmental  and  health
and   safety   laws   and   regulations   related   to  the
ownership,  operation,  development   and   acquisition  of
apartments.   Under  those  laws  and  regulations, we  may
be  liable   for,  among  other   things,   the  costs   of
removal    or     remediation    of    certain    hazardous
substances, including   asbestos-related  liability.  Those
laws  and   regulations  often  impose   liability  without
regard to fault.

  Compliance or failure to  comply  with   laws   requiring
access  to  the  Company's  properties  or  investments  by
disabled persons could result in substantial cost.

  The   Americans   with   Disabilities   Act,   the   Fair
Housing Act of 1988  and  other  federal, state  and  local
laws  generally  require  that   public  accommodations  be
made  accessible   to   disabled   persons.   Noncompliance
could   result   in   the   imposition   of   fines  by the
government   or   the   award   of    damages  to   private
litigants.   These  laws   may   require   the  Company  to
modify  its  existing   properties.  These  laws  may  also
restrict  renovations  by  requiring  improved   access  to
such  buildings  by  disabled  persons  or may  require the
Company to add other   structural  features  that  increase
construction costs.   Legislation  or  regulations  adopted
in   the   future   may   impose    further   burdens    or
restrictions    on     the     Company     with     respect
ascertain   the   costs  of  compliance  with  these  laws,
which may be substantial.

   Unfavorable    changes    in   apartment   markets   and
economic  conditions   could   adversely  affect  occupancy
levels and rental rates.

  Market   and   economic   conditions   in   the   various
metropolitan   areas   of  the  United  States  where   the
Company's has made  real  estate  investments  or has  real
estate   operations  may  significantly  affect   occupancy
levels  and  rental  rates   and   therefore profitability.
Factors that   may   adversely   affect  these   conditions
include the following:

 - the  economic  climate,   which  may  be  adversely
   impacted by a reduction in jobs, industry slowdowns
   and other factors;
 - local conditions, such as oversupply of, or reduced
   demand for, apartment homes;
 - a future  economic  downturn  that  simultaneously
   affects one or  more of  the Company's  geographic
   markets or declines in household formation;
 - rent control or stabilization laws, or other  laws
   regulating rental housing, which could prevent the
   Company from raising rents to offset  increases in
   operating costs; and
 - competition  from other  available  apartments and
   other housing alternatives  and changes in  market
   rental rates.

  Any of these  factors  could   adversely   affect   the
Company's  ability   to    achieve    desired   operating
results from its communities.



  Possible     difficulty     of     selling    apartment
communities  could    limit  the  company's   operational
and financial results.

  Market conditions  could  change  and  purchasers   may
not  be  willing   to   pay  acceptable  prices  for  the
apartment  complexes  the Company   has  invested  in  if
the  properties  were  to  be  put  up  for  sale.   This
could  negatively   effect   the  Company's   anticipated
results    from   its    real   estate   investment   and
operations.

ITEM 2.  PROPERTIES

  The    Company's    Tennessee   sales   and   marketing
headquarters    is   located   in   approximately   5,000
square  feet  of  office  space  located  near   downtown
Knoxville, TN.   The   Company  pays $3,500   per  month,
triple  net  for  the  office  space.   The  space  being
leased  in  Knoxville  is  owned  by  an  entity  that is
controlled  by  the  Company's  Chairman.   See  "Certain
relationships   and  related   transactions-New  Facility
Lease Arrangements."

  The  Company's  Los  Angeles  offices  are  located  in
an   office   complex  located    in  Commerce, CA.   The
Company  occupies  the  space  under  an  agreement  with
Azteca  Productions  International,  Inc.,  an  affiliate
of   Commerce   with  a   reasonable   allocation   being
allotted  to  the  Company  depending  upon the amount of
space   used    by    the    Company.     See    "Certain
relationships     and     related   transactions-Commerce
Investment Group."

  The  Company  currently  leases  office  space  for its
Innovo  accessory  showroom  in  New  York  City  on   an
annual  basis.   The  Company  pays $5,504  a  month  for
the property.

  Joe's  products  are  displayed  in  showrooms  in  New
York   City    and   Los   Angeles    through    a  sales
representation   arrangement,   thus  the  Company   does
not lease or  own  the  space  in  which  Joe's  products
are sold in the United States.

  The   Company's    Joe's     Jeans   Japan   subsidiary
currently  rents  two  offices  spaces  located in Tokyo,
Japan. One of  the spaces  serves  as  JJJ's  operational
office and  the other is  used as  a  showroom  to market
Joe's  products.    JJJ  currently   pays   approximately
$6,000  per  month  with  90-day  termination provisions.

  The    Company's      previous      headquarters    and
manufacturing     facilities      were     located     in
Springfield,  TN.    The   Springfield   facilities   are
currently owned by LMI.   The  main  Springfield  complex
is  situated    on    seven   acres    of    land    with
approximately  220,000  square  feet   of  usable  space,
including  30,000  square  feet  of   office  space   and
35,000 square feet of cooled manufacturing area.

  The   Springfield   facilities   are   currently  being
leased to third  party  tenants  with  approximately  17%
of the  facilities  being  leased   as   of  November 30,
2002,  totaling  $2,646  on   a  monthly  basis.   During
2002,   the Company  made  several  capital  improvements
to  the   Springfield   facility,   including   but   not
limited to,  putting  a   new   roof   on  the  facility.
While the rental income  during  the  year  decreased  as
a   result   of   the   renovations,   the   Company   is
anticipating  an  increase in  demand  for  rental  space
within the facility.

  In   fiscal   2002,  the  Company  broadened  its  real
estate  operations.    On  April 5, 2002,   the   Company
through IRI,   closed   on  a   transaction  pursuant  to
which  IRI  purchased  limited  partner  interests  in 22
limited  partnerships.      Subsequently,   the   limited
partnerships    purchased    28    apartment    buildings
consisting   of   approximately  4,000   apartment  units
located   in  various   states   throughout  the   United
States.  See "Business - Investments."

ITEM 3.  LEGAL PROCEEDINGS

  The  Company  is   a  party  to   lawsuits  and   other
contingencies   in    the   ordinary   course   of    its
business.  The  Company  does  not  believe  that  it  is
probable  that  the  outcome  of  any  individual  action
will have a  material  adverse  effect,  or  that  it  is
likely    that    adverse    outcomes   of   individually
insignificant  actions  will  be  sufficient  enough,  in
number or  magnitude,  to   have   a   material   adverse
effect  in  the  aggregate  on   the  Company's financial
condition.



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

 (a) The  Company  held  its  annual shareholder  meeting
on November 12, 2002.

  At the  annual  shareholders  meeting,  all   nominated
directors  were   re-elected   for   one (1) yea r  terms
with the following totals:


                   In Favor     Opposed     Withheld
Sam Furrow         11,083,657      0        6,839
Pat Anderson       11,085,467      0        5,029
Jay Furrow         11,085,457      0        5,039
Daniel Page        11,084,151      0        6,345
Marc Crossman      11,084,332      0        6,164
Dr. John Looney    11,085,482      0        5,014

  The second and final  item  of  business  brought forth
for shareholder approval  was  the  ratification  of  the
appointment  of  Ernst & Young, LLP  as  the  independent
auditors for  the  fiscal year ending  November 30, 2002.
The tallied votes for the proposal were:

        In Favor         Opposed             Withheld
        11,083,944       4,252               2,300



ITEM 5.  MARKET  FOR  THE  COMPANY'S  COMMON  EQUITY  AND
RELATED STOCKHOLDER MATTERS

  The Common Stock   is   currently   traded   under  the
symbol   "INNO"   on    the    Nasdaq   SmallCap   Market
 maintained    by    The    Nasdaq    Stock   Market, Inc
("Nasdaq"). The following  sets forth  the  high and  low
bid quotations  for  the  common  stock  in  such  market
for the  periods  indicated.  This  information  reflects
inter-dealer    prices,      without    retail   mark-up,
mark-down   or   commissions, and  may  not   necessarily
represent  actual   transactions.  No  representation  is
made by  the  Company   that  the  following   quotations
necessarily  reflect   an   established   public  trading
market in the Common Stock:

Fiscal 2002            High         Low
First Quarter          $2.67        $1.63
Second Quarter          2.25         1.43
Third Quarter           3.09         1.85
Fourth Quarter          4.00         2.40

Fiscal 2001            High         Low
First Quarter          $1.16        $0.81
Second Quarter          1.12         1.03
Third Quarter           2.06         1.23
Fourth Quarter          2.67         2.25

 Fiscal 2000           High         Low
 First Quarter         $1.59        $1.03
Second Quarter          2.12         0.87
Third Quarter           1.43         0.81
Fourth Quarter          1.18         0.78



  As of  February 27, 2003,  there   were  approximately
3,000 record holders  of  the  Common  Stock.   Although
the  Company  will   continually use  its  best  efforts
to  maintain  its  Nasdaq  SmallCap  listing, there  can
be no assurance that it  will  be  able  to  do  so.  If
in the future, the  Company  is  unable  to  satisfy the
Nasdaq    criteria   for    maintaining   listing,   its
securities  would   be   subject   to   delisting,   and
trading, if  any,  of  the  Company's  securities  would
thereafter   be   conducted   in   the  over-the-counter
market,  in  the   so-called "pink sheets"  or  on   the
National   Association   of   Securities  Dealers,  Inc.
("NASD") "Electronic Bulletin Board."  As  a consequence
of any such delisting, a stockholder  would likely find
it more difficult to dispose of, or to  obtain  accurate
quotations as to the prices, of the Common Stock.

  The Company has never declared or paid a cash dividend
and  does  not  anticipate  paying cash dividends on its
Common Stock in  the  foreseeable  future.  In  deciding
whether  to  pay dividends  on  the Common Stock in  the
future, the Company's Board  of  Directors will consider
factors  it  deems  relevant,  including  the  Company's
earnings  and  financial  condition   and   its  capital
expenditure requirements.

  IRI, the Company's real-estate  investment  subsidiary
headquartered   in   Commerce, CA,  has  invested  in 22
limited partnerships.   On  April 5, 2002,  the  Company
issued 195,295 shares of its cumulative, non-convertible
preferred stock with an  8% coupon ("Preferred Shares"),
having  a  stated  redemption value  at $100  per  share
(approximately $19.5 million), to  IRI  in  exchange for
all 1,000 shares of IRI's capital stock.    On that same
day, IRI acquired a 30% limited partner interest in each
of 22 separate  limited  partnerships (collectively, the
"Limited Partnerships") from the sellers (the "Sellers")
in exchange for the Preferred Shares.  Simultaneous with
the acquisition by IRI of its interests  in the  Limited
Partnerships,  the  Limited  Partnerships  acquired   28
apartment complexes at various locations throughout  the
United  States   consisting   of   approximately   4,000
apartment units.  See "Business-Investments."

 The Company has not registered the Preferred Shares and
the Preferred Shares will not  be  registered under  the
Federal Securities Act  of 1933,  as  amended (the "1933
Act"), on the ground that  this  transaction  is  exempt
from  such  registration  under  Section 4(2) thereof as
part of an issue  not  involving  a  public offering and
applicable state securities laws.

  The Sellers have represented to  the  Company  that it
purchased  the  Preferred Shares  for  the  Sellers' own
account, with the intention  of  holding  the  Preferred
Shares for investment  and  not  with  the  intention of
participating, directly or indirectly,  in any resale or
distribution  of  the  Preferred  Shares.  The Preferred
Shares were offered and sold to  the Sellers in reliance
upon exemptions from  registration under  the  1933 Act.
The Sellers have represented to  the  Company that  they
are an "Accredited Investor," as that term is defined in
Rule 501(a) of Regulation D under said Act.

  The information required  by Part II,  Item 5 relating
to Equity Compensation Plans  is incorporated  herein by
reference to our definitive proxy statements to be filed
pursuant to Regulation 14A relating  to  our 2003 annual
meeting of stockholders.

ITEM 6. SELECTED FINANCIAL DATA

  The table below (includes the notes hereto) sets forth
a summary of selected  consolidated financial data.  The
selected consolidated financial  data should  be read in
conjunction  with  the  related  consolidated  financial
statements and notes thereto.



                                                                 Years Ended
                                    11/30/02       12/01/01       11/30/00      11/30/99       11/30/98
                                    --------       --------       --------      --------       --------
                                                    (in thousands, except per share amounts)
                                                                                  
Net Sales                           $ 29,609       $  9,292       $  5,767      $ 10,837       $  6,790
Costs of Goods Sold                   19,839          6,333          5,195         6,252          4,493
                                     -------        -------        -------       -------        -------
Gross Profit                           9,770          2,959            572         4,585          2,297

Operating Expenses (3)                 8,581          3,358          5,113         5,688          4,203
                                     -------        -------        -------       -------        -------
Income (Loss) from Operations          1,189           (399)        (4,541)       (1,103)        (1,906)

Interest Expense                        (538)          (211)          (446)         (517)          (503)
Other Income (Expense)                    61             81            (69)          280            142
                                     -------        -------        -------       -------        -------
Income (Loss) Before Income Taxes        712           (529)        (5,056)       (1,340)        (2,267)
Income Taxes                             140             89             --            --             --
                                     -------        -------        -------       -------        -------
Income (Loss) from Continuing
 Operations                              572           (618)        (5,056)       (1,340)        (2,267)
Discontinued Operations(1)                --             --             --            (1)        (1,747)
Extraordinary Item (2)                    --             --         (1,095)            0              0
                                     -------        -------        -------       -------        -------
Net Income (Loss)                        572           (618)       $(6,151)      $(1,341)       $(4,014)
                                     -------        -------        -------       -------        -------
Income (Loss) per share from
 Continuing Operations
  Basic                                $0.04         $(0.04)        $(0.62)       $(0.22)        $(0.49)
  Diluted                              $0.04         $(0.04)        $(0.62)       $(0.22)        $(0.49)

Weighted Average Shares Outstanding
  Basic                               14,856         14,315          8,163         5,984          4,618
  Diluted                             16,109         14,315          8,163         5,984          4,618

Balance Sheet Data:
Total Assets                         $15,143        $10,247         $7,416        $6,222         $7,232
Long-Term Debt                         3,387          4,225          1,340         2,054          2,604
Stockholders' Equity                   5,068          4,519          3,758         1,730          1,722



(1) The amount  for  1998  represents  the operations of
Thimble  Square.    Thimble  Square's  operations   were
discontinued during the fourth fiscal quarter of 1998.
(2) Represents  the  loss from the early extinguishments
of debt in 2000.
(3) Amount includes a $300,000 impairment  write down of
long-term assets in 1998 and a $145,000 impairment write
down of long-term assets  in  1999 as well  as  $293,000
related  to  the  termination  of  a  capital lease  and
$100,000 for the settlement of a  lawsuit in 1999, and a
$600,000 impairment  write down  of  long-term assets in
2000.

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Introduction

  The  following  discussion   and   analysis   contains
statements that maybe considered forward-looking.  These
statements contain a number of risks  and  uncertainties
as discussed here,  under  the heading  "Forward-Looking
Statements" and in Item I of this  Form 10-K  that could
cause actual results to differ materially. Additionally,
this  discussion  and  analysis  should   be   read   in
conjunction with the  financial statements  and  related
notes  and  the  other  financial  information  included
elsewhere in this Form 10-K.


Results of Operations
  The following table  sets  forth certain statement  of
operations data for the years indicated (in thousands):


                                                      Years Ended
                                                     (in thousands)
                                      11/30/02    12/01/01    $ Change    % Change
                                      --------    --------    --------    --------
                                                                
Net Sales                             $ 29,609    $  9,292    $ 20,317       219

Costs of Goods Sold                     19,839       6,333      13,506       213
                                       -------     -------     -------       ---
Gross Profit                             9,770       2,959       6,811       230

Selling, General &
 Administrative                          8,325       3,191       5,136       161

Depreciation & Amortization                256         167          87        52
                                       -------     -------     -------       ---

Income (Loss) from Operations            1,189        (399)      1,588        (A)

Interest Expense                          (538)       (211)       (327)      155
Other Income (expense)                      61          81         (20)      (25)
                                       -------     -------     -------       ---
Income (Loss) Before Income Taxes          712        (529)      1,241        (A)
Income Taxes                               140          89          51        57
                                       -------     -------     -------       ---

Net Income (Loss)                      $   572     $  (618)    $ 1,190        (A)



(A)  Not Meaningful

Comparison of  Fiscal Year   Ended  November 30,  2002, to
Fiscal Year Ended December 1, 2001 Overview

  In 2002, the Company significantly increased its revenues
and returned  to  profitability.  The  Company  experienced
strong growth in all three of  its  main consumer  products
operating subsidiaries and moved  forward in its efforts to
strengthen its presence in the apparel market.

  The   Company's   accessory   division,   Innovo,   Inc.,
experienced an increase in sales largely as a result of its
efforts to enter into the private label business, continued
growth from the Bongo  product line  and  an increase  from
Innovo's legacy craft division.  In 2002, Innovo focused on
strengthening  its   sourcing   capabilities   through  the
establishment  of Innovo  Hong  Kong  Li ited ("IHK").  IHK
should assist Innovo in continuing to be able  to offer its
customers quality products at a competitive price.

  During 2002, the Company's Joe's subsidiary continued  to
experience  strong  demand  for  its  product  lines  on  a
world-wide basis.  In May of 2002, Joe's established JJJ to
distribute   its   products   in   the   Japanese   market.
Additionally, the Company began  to distribute its products
in Europe and Canada.



	The Company's IAA subsidiary increased  its  revenues
in fiscal 2002 mainly as a result  of  its ability  to grow
its  business with  its  private  label  customers  such as
Target Corporation and  J. Crew, Inc.   During the  period,
the IAA subsidiary formed a second division to focus on the
creation  and  building  of  branded  product  lines.    In
furtherance of this  objective, the  IAA  branded  division
obtained the licensing rights to the  Hot Wheel brand  from
Mattel, Inc. and to  Lil Bow Wow from Bravado International
Group, the agency with the  master  licensing rights to Lil
Bow Wow, and LBW Entertainment, Inc.

  The Company's net income for fiscal 2002 was $572,000, or
$0.04 per share compared to a loss of $618,000 or $0.04 per
share for fiscal 2001.   The Company generated a net income
in fiscal 2002 as compared to a net loss in  fiscal 2001 as
a result of the Company's ability to significantly increase
its revenues, maintain its gross  margins and to reasonably
control its increase in expenses.

Reportable Segments

  During fiscal 2002 and fiscal 2001, the Company  operated
in two segments, accessories and apparel.   The accessories
segment  represents   the   Company's  historical  line  of
business as conducted  by Innovo.   The apparel  segment is
comprised of the operations of Joe's and IAA, both of which
began in 2001, as a result of acquisitions.   The Company's
real  estate  operations   and  corporate   activities  are
categorized under "other." The operating segments have been
classified  based  upon  the  nature  of  their  respective
operations, customer base and the  nature  of  the products
sold.

  The following  table  sets  forth  certain  statement  of
operations data  by  segment for  the  years  indicated (in
thousands):



November 30, 2002                    Accessories     Apparel     Other (A)    Total
                                     -----------     -------     --------     -----
                                                        (in thousands)
                                                                   
Revenues, net                        $    12,072    $ 17,537     $      -    $ 29,609
Gross profit                                  3,502       6,268            -       9,770
Depreciation and amortization                 21         183           52         256
Interest expense                             140         339           59         538





December 1, 2001                     Accessories    Apparel      Other (A)    Total
                                     -----------    -------      --------     -----
                                                                     
                                                         (in thousands)

Revenues, net                        $	5,642    $  3,650      $      -   $ 9,292
Gross profit                              1,751       1,208             -      2,959
Depreciation and amortization                45          35            87        167
Interest expense                             32          79           100        211






2002 to 2001                            Accessories             Apparel             Other (A)
                                    $ Change  % Change    $ Change   % Change   $ Change   % Change
                                     -------   -------     -------    -------    -------    -------
                                                                            

Revenues, net                       $  6,430       114    $ 13,887        380   $      -         -
Gross profit                           1,751       100       5,060        419          -          -
Depreciation and amortization            (24)      (53)        148        423        (35)       (40)
Interest expense                         108       338         260        329        (41)       (41)



(A)  Other  includes  corporate  expenses  and  assets and
expenses related to real estate operations.



Operating Revenues

  Net  revenues  for  the  year   ended   November 30, 2002
increased to $29,609,000 or 219% from  $9,292,000 in fiscal
2001.   During  the  period,   the  Company  experienced  a
significant increase in sales from its three main operating
subsidiaries, Innovo operating in the accessory segment and
Joe's and IAA operating in the apparel segment.

Accessory

  Innovo. The Company's accessory  business,  conducted  by
Innovo, increased its net revenues to $12,072,000 in fiscal
2002  compared  to  $5,642,000   in  fiscal  2001,  a  114%
increase.    Innovo's  gross  sales  for  fiscal  2002 were
$12,216,000.    The  increase is  a result of the Company's
entry into the private label accessory  business, increased
demand for Innovo's craft  products  and higher  sales from
Innovo's Bongo accessory product line.

  Innovo's accessory craft business increased as  a  result
of  Innovo's  ability  to  sell  a  greater amount  of  its
existing products as well as new products to  its  existing
customers and  to  new craft customers.   In  fiscal  2002,
Innovo focused  upon  increasing the quality of  its  craft
products and improving  the marketing  strategy  associated
with the Innovo's craft products.  Innovo's  craft business
gross  revenues  increased  to $4,577,449  in  fiscal  2002
compared to $2,830,949 in fiscal  2001  representing  a 62%
increase  in  gross  revenues.    Innovo's  craft  business
represented  approximately  37%  of  Innovo's  total  gross
revenues for fiscal 2002.

  Innovo's Bongo product line experienced  an  increase  in
sales partly as  a result of  fiscal  2002  being  Innovo's
first full twelve month  cycle  of  business with the Bongo
product  line.    Additionally,  Innovo's  customers   have
generally been successful in selling the Bongo product line
at the retail level to consumers as  a  result  of Innovo's
ability  to  develop  fashionably   desirable  products  at
competitive prices.    This trend  has  allowed  Innovo  to
establish the Bongo product line as a stable  and desirable
product line  for  its  customers  thus  giving  Innovo the
opportunity  to  market the  Bongo line  to new  customers.
Gross  sales  generated  by  the   Bongo  product  line  of
$3,101,000  epresented  approximately 25% of Innovo's total
gross revenues for fiscal 2002.

  Innovo  began  selling  its  products  to  private  label
customers in fiscal 2002.   Innovo's two main private label
customers  as  of  November 30, 2002  were  American  Eagle
Outfitters,  Inc.  and   Limited  Brands,  Inc.'s   Express
division.   Innovo  is  currently working  on products  for
additional private label customers  and believes  that  its
private  label  business  will play  an  important  role in
Innovo's growth strategy going forward.    Innovo's private
label business  gross revenues  of  $3,218,000  represented
approximately 26% of Innovo's  gross  revenues  for  fiscal
2002.

Apparel

  Joe's.    Joe's  operates  under  the  Company's  apparel
segment.   During fiscal 2002, Joe's net revenues increased
to $9,179,000 compared  to $1,519,000  in  fiscal 2001,  an
increase of 504%.   Joe's was formed in February 2001, thus
making fiscal 2002 Joe's first  full  twelve-month business
cycle.   Joe's  2002  product  mix consisted  primarily  of
women's denim based jeans, skirts  and  jackets  and  men's
denim jeans.  During 2002, denim products, in general, sold
well at the retail level and Joe's  was  able to capitalize
on this demand.   Joe's  is  continuing  to  diversify  its
product offerings to meet the changing  trends in the  high
fashion apparel markets and believes, although there can be
no assurances, that  its 2003 product line  is  designed to
meet the current fashion trends and the expectations of its
customers and the consumer.

  During fiscal 2002, Joe's experienced increase  demand in
both  the  domestic  and  international  marketplaces.   In
regards to domestic sales, Joe's net revenues  increased by
approximately 319% to  approximately $6,371,000  in  fiscal
2002 compared to fiscal 2001.  This increase is primarily a
result of the maturity and development of  the Joe's brands
in the marketplace.   Joe's continues  to  attract customer
and consumer  awareness  as  a  result  of  its design  and
quality characteristics.  The ability of Joe's customers to
successfully sell  Joe's  products  to  its  customers (the
consumer) eventually determines  the  ability of  Joe's  to
market  its  products  to   its  customer  base  management
believes.  Management believes the desirability of products
bearing the Joe's brand and the  characteristics associated
therewith  are  resulting  in  increased  demand from Joe's
customers.



  In fiscal 2002,  Joe's  expanded  into the  international
marketplace through  the  formation  of  Joe's Jeans Japan,
Inc.  ("JJJ")  and  through   the   use   of  international
distributors.  JJJ is headquartered  in Tokyo, Japan  where
the Company operates  a showroom  and  operational offices.
During  fiscal  2002,   net  sales  by  JJJ  of  $1,902,000
represented approximately 21% of Joe's total net  revenues.
Additionally, Joe's marketed  its  products  in  Europe and
Canada through the use  of  international  distributors who
purchase Joe's products and then distributed the product to
retailers in the distributor's local markets.  Sales in the
international market, excluding sales  by  JJJ, represented
approximately 10% of Joe's total revenues for fiscal 2002.

  IAA.  IAA, which operates  under  the  Company's  apparel
segment, increased its net revenues to $8,358,000 in fiscal
2002 compared to fiscal 2001, representing  an  increase of
approximately 292%.  IAA was formed in August 2002 pursuant
to the acquisition of  a  division of Azteca,  thus  fiscal
2002 represents  IAA's  first  full  twelve-month  business
cycle.   See  Note 1 "Acquisitions" in  the  Notes  to  the
Consolidated  Financials.   The  increase  in  revenues  is
largely a result of an increase in sales  of  IAA's private
label apparel products its  two  main  customers,  J. Crew,
Inc.  and  Target  Corporations  Mossimo  division.   IAA's
products in fiscal 2002 primarily consisted of  denim jeans
and  knit  shirts.    IAA  is  currently  working   towards
expanding its private label customer base in an  attempt to
reduce its reliance on a limited number of customers.

  In  fiscal  2002,   with  IAA's  private  label  business
representing one division, IAA created a second division to
focus on the development of branded products.    To further
its  branded  division's  business, IAA  has  entered  into
licensing agreements  with  Mattel, Inc. for the  licensing
rights  to  develop,  market  and  distribute  apparel  and
accessory  products  bearing  the  Hot   Wheels  trademark.
Additionally, IAA has entered into  a  licensing  agreement
for the creation of  apparel and accessory products bearing
the likeness of Lil Bow Wow  the  multi platinum  recording
artist.     See    "Business-Licensing    Agreements    and
Intellectual Property."  During fiscal 2002,  IAA's branded
division did not have any revenues.

Gross Margin

  The Company's gross  margin  increased from 32% in fiscal
2001 to 33% in fiscal 2002.

Accessory

  Innovo.  The Company's accessory segment's  gross  margin
decreased from approximately 31% in  fiscal  2001 to 29% in
fiscal 2002.   Innovo's gross margin is  largely a function
of Innovo's  product mix  for  the  given period,  however,
during  the  period Innovo's  gross margin  was  negatively
impacted from the west coast dock strike.  As  a  result of
the west coast dock strike, Innovo was  obligated  to incur
increased  airfreight  and  was required  to give  customer
discounts as a result of  the late  shipment  of  products.
Innovo's product categories have  historically had a  gross
margin in  the  thirty  percent  range, with  some  product
categories being higher and some lower.   Innovo's  branded
product have traditionally experienced  higher  margin than
its craft and private label  business, which  usually  have
similar gross margins.

Apparel

  Joe's.  Joe's gross margins decreased from 57% in  fiscal
2001 to  50%  in  fiscal  2002.  The  decrease  reflects an
increase in sales in the  international marketplace,  which
are often sold at a  discount.  Additionally,  Joe's  gross
margin was negatively impacted as a result  of  an increase
in cost for some of the more  fashion oriented  products in
Joe's product line.  In an effort to maintain high margins,
Joe's usually attempts to pass  the higher cost  of certain
goods to its customer by charging a higher sales  price for
such products.

  IAA.  IAA's gross margins increased in fiscal 2002 to 20%
from 16% in fiscal  2001.    IAA's  sales  in  fiscal  2002
primarily consisted  of denim  jeans  and  knit  shirts  to
private label customers.   The increase in gross margins is
a result of IAA being able  to purchase  its products  at a
lower cost and/or sell  the  products  at  a  higher price.
IAA's sales to its  private label  customers  usually  have
lower  margins  than  the  sales  of  the  Company's  other
divisions.  It is anticipated  that IAA's branded  division
will experience higher gross margins than its private label
business as a  result of IAA's  ability  to  obtain  higher
prices for its branded apparel products.



  The increase in IAA  margins  offset  decreases in  other
subsidiaries  resulting  in  an  overall  increase  in  the
collective margin.   The Company's collective  gross margin
may fluctuate in future periods based  upon which  segments
operating subsidiary and operating division  accounts for a
larger percentage of sales.

Selling, General and Administrative Expense

  The   Company's   selling,   general  and  administrative
("SG&A") expenses increased in 2002  by  approximately 161%
from $3,191,000 in 2001 to $8,325,000 in 2002. The increase
in SG&A expenses is largely  a  result  of an  increase  in
expenses to support  the Company's  revenues growth  during
the period.   During  the  period  the  Company  incurred a
notable   increase   in   wages,    advertising,    travel,
professional fees, sales shows  and  other expenses related
to the Company's revenue growth.

Accessory

  Innovo.     Innovo's    SG&A   expenses   increased    by
approximately 111% to $2,963,000 in fiscal 2002 compared to
fiscal 2001.  Innovo's increase in SG&A expenses is largely
attributable to expenses which were necessary to support or
associated with  Innovo's increase  in  revenues.    During
fiscal 2002, Innovo's wages increased by approximately 103%
to  $842,000  as  Innovo  added   staff   members  at   its
headquarters in Knoxville and to its showroom  in  New York
City.   Additionally,  Innovo's  wages increased  from  the
addition of employees  at Innovo's  sourcing office  IHK in
Hong Kong.   Innovo's commission expense  increased by 132%
to $292,000  during  the  period  due  to  the  increase in
commission based revenues.

  Royalties expense for fiscal 2002  increased  by 215%  to
$270,000 mainly in response to the increase in the sales of
Bongo related products and the  royalty  expense associated
therewith.  Innovo's distribution costs  also  increased by
approximately  50% during  the  period as a  result  of the
expense associated with distributing  a  greater amount  of
product.

Nasco Products International, Inc.

  The Company's accessory  business  in  the  international
marketplace  had  previously  been  conducted  through  the
ompany's Nasco Products International, Inc. ("NPII").  NPII
had international licensing rights for certain  sports  and
character related trademarks.  NPII sold accessory products
primarily in Europe bearing the trademarks.  In 1999,  NPII
ceased operations in the  international  accessory  market.
At  such  time,  NPII  was  in  disagreement  with  certain
licensors in regards to the terms  and royalty  commitments
under the  licensing  agreements.   In  1999, NPII  accrued
$104,000 against  the potential  liability  associated with
the agreements.   In fiscal 2002, NPII  reversed  into SG&A
expense the  accrual  due to  the fact  there has  not been
material activity in regards  to  the  agreements  over the
last three fiscal years. See "Business--Licensing Agreement
and Intellectual Properties."

Apparel

  Joe's.  With fiscal 2002 being  Joe's  irst  twelve-month
cycle   of    business,   its   SG&A   expenses   increased
significantly during the period compared to the prior year.
Joe's results for fiscal 2002 also include  the  additional
expenses associated with the operation of JJJ.   Joe's SG&A
expenses increased  by  approximately 425% to $3,245,000 in
fiscal 2002 compared to $618,000 in fiscal 2001. Joe's wage
expense increased  significantly  during  fiscal 2002  as a
result of  the  increase in staff  to support Joe's growth.
With Joe's royalty and commission expense  being a function
of Joe's revenues, these expenses  increased  substantially
in fiscal 2002 as a result  of  Joe's  increasing revenues.
During fiscal  2002 as part  of  Joe's  marketing campaign,
Joe's participated in numerous sales shows  and  advertised
the Joe's brand in national print publications. As a result
in fiscal 2002 Joe's  sales show expense increased  by 232%
to $166,000 and its advertising expenses increased  by 294%
to  $264,000  compared  to  fiscal 2001.   Joe's  factoring
expense increased to $41,000 in fiscal 2002  in response to
the increase in the number of receivables Joe's factored.




  IAA.   IAA's SG&A expenses in  fiscal 2002  increased  to
$761,000 from $83,000 in fiscal 2001  a  817% increase.  As
noted previously, fiscal 2002 was IAA's first  full twelve-
month business cycle.  IAA's wages increased in fiscal 2002
to $492,000 from $77,000 in fiscal 2001. During the period,
IAA had $46,000  of  sales  samples with  no  sales  sample
expense in fiscal 2001.  IAA's factor expense increased  to
$130,000 in fiscal 2002 as a result of  an increase  in the
amount of receivables IAA factored and an extra  factor fee
charged  to   IAA   for  the  factoring  of  one  of  IAA's
significant   customers.    See  "Liquidity   and   Capital
Resources"  in   Managements  Discussion  and  Analysis  of
Financial Condition and  Results  of Operations.

Other

  IGI.  IGI, which reflects the  corporate  expenses of the
Company and operates under  the "other"  segment  does  not
have revenues.  For fiscal 2002, IGI's expenses,  excluding
interest,  depreciation   and  amortization,  increased  by
approximately 17.4% to $1,375,000 compared to $1,171,000 in
fiscal 2001.  The most notable increase in expense  for IGI
is the increase in  its  professional  fees  and  insurance
expenses. For fiscal 2002, IGI's professional fee's expense
increased approximately 49% compared to  fiscal 2001.   The
increase in professional fees  is  largely  attributable to
additional legal  and  accounting  fees.   IGI's  insurance
expense increased by 22% as a result of an increase  in the
cost   of  the  Company's  Director  and  Officer insurance
and as a result  of  an  increase  in  the cost  of general
liability insurance for the  Company's  growing operations.
IGI's   remaining   expenses  did  not   differ  materially
compared to fiscal 2001.

  IRI. During fiscal 2002,  IRI  had  approximately $61,000
of professional  fees which were  represented  in  the SG&A
under the Company's other segment.  These professional fees
were primarily associated  with the formation  of  IRI  and
professional  fees  necessary  for  the  completion  of the
investments made by IRI during the period.  See "Business-
Investments."

Depreciation and Amortization Expenses

  Depreciation and Amortization  expenses for  the  Company
increased  in  fiscal 2002  to  $256,000  from  $167,000 in
fiscal 2001, an increase of 53%.  The increase is primarily
attributable  to  IAA's  amortization  of  the  non-compete
agreement entered  into  in  August 2001,  pursuant to  the
terms of the knit acquisition.  The  non-compete  agreement
has been valued at $250,000 and is being amortized over two
years,  based  upon  the  term  of  the  agreement.   IAA's
amortization expense in fiscal 2001 was $35,000 compared to
$120,000 in fiscal 2002.  See Note 3 "Acquisitions," in the
Notes to the Consolidated Financials.

  The  Company's   combined   deprecation  expense  totaled
$86,000,  with  LMI's   depreciation   of  the  Springfield
facility representing $40,000  of  the  depreciation total.
The remaining depreciation  expense is associated  with the
depreciation of small operational assets such as furniture,
fixtures, leasehold improvements, machinery and software.

Interest Expense

  The Company's  combined  interest  expense for  the  year
ended November 30, 2002 increased by approximately $327,000
to $538,000 compared to $211,000 fiscal 2001. The Company's
interest expense is primarily associated with its factoring
and  inventory  lines  of  credit,   the  knit  acquisition
purchase note and the  note associated with  the  Company's
former   manufacturing   facility   and   headquarters   in
Springfield, TN. See "Business-Properties" and "Managements
Discussion and Analysis of Financial Condition  and Results
of Operations-Liquidity and Capital Resources."

Accessory

  Innovo.   For fiscal 2001, Innovo's interest expense was
$139,000  compared  to  $33,000  in  fiscal  2001.    This
represents interest expense incurred from borrowings under
Innovo's factoring agreement and inventory line of credit.
See "Managements  Discussion  and  Analysis  of  Financial
Condition and Results of Operations-Liquidity and  Capital
Resources."



Apparel

  Joe's.   Joe's  interest  expense  for  fiscal 2002  was
approximately $29,000 as  a  result of the fact that Joe's
does not factor all of its receivables and  thus does  not
borrow  against  these  receivables  under  its  factoring
agreement  and   carries   these  receivables   as  "house
accounts."  Joe's interest expense does include borrowings
under its inventory  line  of  credit.   See  "Managements
Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources."

  IAA.  IAA's  interest  expense  increased  significantly
during fiscal 2002 as a result  of  IAA factoring  a  vast
majority  of  its  receivables  and then  borrowing  funds
against these receivables.    See "Managements  Discussion
and  Analysis  of   Financial  Condition  and  Results  of
Operations-Liquidity and Capital Resources  "Additionally,
IAA's interest expense increased as a result  of  interest
payments associated with the  knit acquisition  note which
was issued as part of the purchase  of  the knit  division
from  Azteca  and  the  creation  of  IAA.   See  Note  3,
"Acquisitions"   in   the   Notes   to   the  Consolidated
Financials.

  For fiscal 2002, IAA's  interest  expense  increased  by
approximately 377% to $310,000 compared to fiscal 2001.

Other Income

  The Company had other income of $61,000  in  fiscal 2002
compared to other income of $81,000 in fiscal 2001.

  LMI.  The decrease in income is largely  attributable to
a $90,000 expense the Company's LMI subsidiary incurred as
a result of repair expenses associated  with the Company's
former  manufacturing   facility   and   headquarters   in
Springfield, TN. See "Business--Properties." During fiscal
2002,  LMI's   operational   expenses   did   not   change
materially.    LMI's   main   operational   expenses   are
maintenance and taxes.  However, during the year, LMI made
significant renovations to the  Springfield facility  that
totaled  approximately  $425,000  of  which  $335,000  was
capitalized and $90,000 was expensed  during fiscal  2002.
LMI operations are part of  the  Company's "other" segment
of business.

  IRI.  Other Income in fiscal 2002  includes $173,000  of
income from a management fee the IRI receives pursuant  to
an investment the Company made through its IRI  subsidiary
in the second quarter of 2002. See "Business-Investments."
IRI, which operates under the Company's  "other"  business
segment was formed during  fiscal 2002  and  thus did  not
have operations during  fiscal 2001.  During  fiscal 2002,
IRI had approximately $61,000 of  professional  fees which
were represented in the SG&A expense under  the  Company's
other segment.   These  professional  fees were  primarily
associated with the formation of IRI and professional fees
necessary for the  completion of the investments  made  by
IRI during the period.  See "Business-Investments."

  The remaining other income is primarily associated  with
rental income generated from tenants who are occupying the
Company's  former   manufacturing   facility   located  in
Springfield, TN.

Net Income

  The Company's net income  of  $572,000  for  fiscal 2002
compared to a net loss of $618,000  in  fiscal 2001.   The
Company's  profitability is  largely  attributable  to the
significant increase revenues in  fiscal 2002  compared to
fiscal 2001 and  the  Company's  ability  to  maintain its
gross margins during fiscal 2002.   The Company's expenses
increased  significantly  in  fiscal  2002,  however,  the
Company'  higher  gross  profit  offset  the  increase  in
revenues, resulting in net income for the period.




Results of Operations

  The following  table  sets  forth  certain statement of
operations data for the years indicated:



                                                        Years Ended
                                                      (in thousands)

                                                                    $        %
                                            12/01/01   11/30/00   Change   Change
                                            --------   --------   ------   ------
                                                              
Net Sales                                   $  9,292   $  5,767   $3,525     61
Costs of Goods Sold                            6,333      5,195    1,138     22
                                            --------   --------   ------   ------
Gross Profit                                   2,959        572    2,387    417

Selling, General &
 Administrative                                3,191     4,147     (956)    (23)
Write down of long-term assets                    --       600       (A)     (A)
Other                                             --       116       (A)     (A)

Depreciation & Amortization                      167       250      (83)    (33)
                                            --------   -------   ------   -----
Income (Loss) from Operations                   (399)   (4,541)   4,142      91

Interest Expense                                (211)     (446)    (235)    (53)
Other Income (expense)                            81       (69)     150      (A)
                                            --------   -------   ------   -----

Income (Loss) Before Income
Taxes and extraordinary item                    (529)   (5,056)   4,527      90
Income Taxes                                      89        --       89      (A)
                                            --------   -------   ------   -----

Income (Loss) before
extraordinary item                              (618)   (5,056)   4,438      88
                                            --------   -------   ------   -----

Extraordinary Item                                --    (1,095)      (A)     (A)
                                            --------   -------   ------   -----

Net Income (Loss)                           $   (618)  $(6,151)  $5,533      90



(A) Not Meaningful

Reportable Segments

  During fiscal 2001, the Company operated in two segments,
accessories and apparel. The accessories segment represents
the Company's historical line of business  as  conducted by
Innovo.  The apparel segment is comprised of the operations
of Joe's and IAA, both of which began in 2001, as  a result
of acquisitions.   The Company's real estate operations and
corporate activities  are  categorized  under "other."  The
operating segments  have  been  classified  based upon  the
nature of their respective operations,  customer  base  and
the nature of the products sold.

  Prior to November 30, 2000,the Company had two reportable
segments, domestic and international, based on the business
activities  from which  they  earned revenues  or  incurred
expenses.  During 2000, the Company  significantly  reduced
its international sales efforts and ceased to operate under
the international segment in 2001.  Both  of the  segments,
however, were in the  accessory business.   Therefore,  the
following  discussion  will  compare   the   domestic   and
international segments for 2000 with the accessory  segment
for 2001.

  The  following  table  sets  forth  certain statement  of
operations data  by  segment for  the  years  indicated (in
thousands):





December 1, 2001                Accessories    Apparel    Other (A)    Total
                                -----------    -------    --------     -----
                                                            
Revenues, net                   $ 	5,642      $ 3,650    $      -    $ 9,292
Gross profit                        1,751        1,208           -      2,959
Depreciation and amortization          45           35          87        167
Interest expense                       32           79         100        211



(A) Other  includes  corporate  expenses  and  assets  and
expenses related to real estate investments.




November 30, 2000               Domestic       International     Total
                                --------       -------------     -----
                                                         
Revenues, net                   $  5,686       $      81         $  5,767
Gross profit                         558              14              572
Depreciation and amortization        250               -              250
Interest expense                     446               -             446





                                 Accessories
                                 (Domestic &
2001 to 2000                     International)        Apparel             Other (A)
                                 -------------        ----------          -----------
                              $ Change  % Change  $ Change  % Change  $ Change  % Change
                              --------  --------  --------  --------  --------  --------
                                                                  
Revenues, net                 $   (125)     (2.2) $  3,650        (B) $      -         -
Gross profit                     1,179       206     1,208        (B)        -         -
Depreciation and amortization     (205)     (455)       35        (B)       87       100
Interest expense                  (414)   (1,294)       79        (B)      100       100



(B)  Not Meaningful

  Comparison  of  Fiscal  Year  Ended  December 1, 2001  to
Fiscal Year Ended November 30, 2000

  During Fiscal 2001, the Company began operations  in  the
apparel segment.   With the additional  revenues  from  the
Company's apparel segment, net revenues for the  year ended
December 1, 2001  increased  by $3,525,000  or  61.1%  from
$5,767,000 in 2000 to $9,292,000 in 2001.  While sales  for
the Company's accessory segment remained flat in 2001.

Accessory

  Innovo.  The Company's accessory segment  had  revenue of
approximately  $5,642,000   in   fiscal  2001  compared  to
$5,767,000 in fiscal 2000.  During fiscal 2000, the Company
implemented significant changes to the Company's operations
including the restructuring of  the Company's manufacturing
and distribution operations.  Consequently, with a majority
of the Company's resources and  efforts  during fiscal 2000
focused  on  completing  the  corporate  restructuring, the
Company's revenues decreased in fiscal 2001.  The  decrease
is  primarily   attributable  to   the   Company's  limited
manufacturing and  marketing  capacity  during  the period.
See Note 1 "Restructuring of Operations" in  the  Notes  to
the Consolidated Financials.


Apparel

  During fiscal 2001, the Company entered into the apparel
business through the acquisition of  the  licensing rights
to the Joe's Jeans label from JD Design, LLC  and  through
the acquisition of the knit  division of Azteca Production
International, Inc. See Note 3 "Acquisitions" in the Notes
to the  Consolidated  Financials.  The  Company's  apparel
segment  accounted  for  combined sales  of $3,650,000  in
fiscal 2001.



  Joe's.  Since the acquisitions of  the  licensing rights
in February  of 2001,  Joe's  Jeans sales  for the  period
totaled  $1,520,000.  During fiscal 2001, Joe's  primarily
sold  denim  jeans  to  high-end  department  stores   and
boutiques located in the United States.


  IAA.  IAA's  revenues  since  August  of  2001,  totaled
$2,130,000.  IAA's main product categories in  fiscal 2001
were denim jeans and knit tops,  which IAA sold to private
label customers.

Gross Margin

  The Company's gross margin percentage increased from 10%
in fiscal 2000 to 32% in fiscal 2001.

Accessory

  Innovo.  Innovo's  gross  margin  for  fiscal  2000  was
approximately 10%.  During fiscal 2000, the Company closed
its domestic manufacturing and  distribution facilities in
Knoxville, TN, which produced and distributed products for
the Company's accessory segment of  business  conducted by
Innovo.  As a result, in  fiscal 2000,  Innovo  incurred a
$300,000 inventory  adjustment  for  liquidated  inventory
thus increasing Innovo's cost of goods.  Furthermore, as a
result  of  closing  its  manufacturing  and  distribution
operations,  Innovo  wrote  off  $250,000  of  capitalized
overhead that was associated with its  production facility
and  the  manufacturing  process.   The  impact  of  these
adjustments significantly reduced Innovo's gross margin in
fiscal 2000.  In fiscal 2001, Innovo's  gross  margin  was
approximately 32%, more in line with its  historical gross
margins.


Apparel

  IAA.  IAA's gross  margins  were  approximately  16%  in
fiscal 2001.  IAA  primarily provides products  to private
label apparel customers and its  gross margins  for fiscal
2001 were in  line  with  industry  norms  for the private
label industry.

  Joe's.    Joe's  gross  margins  in  fiscal  2001   were
approximately 57%. Joe's did not have operations in fiscal
2000.

Selling General and Administrative Expenses

  The Company's SG&A expenses decreased  in  2001  by  23%
from $4,147,000 in 2000 to $3,191,000 in 2001.  The change
in SG&A expense  resulted  primarily  from  the  Company's
restructuring efforts taken in  fiscal 2001.  See  Note  1
"Business Description-Restructuring  of Operations" to the
Notes to the Consolidated Financial Statements. Additional
savings  resulted  from  the Company's  restructuring  and
reduction in headcount, which commenced  in 2000 and ended
in 2001.

Depreciation and Amortization

  The Company's  depreciation  and  amortization  expenses
were not significantly different from 2000  to 2001 due to
the lack of  significant  purchases  of  fixed assets  and
intangible assets during 1999.

Interest Expense

  The Company's  interest  expense  for  the  year  ended
December 1, 2001 decreased by $235,000 to $211,000  as  a
result  of  decreased  borrowing   from   the   Company's
factoring facility and the Company's higher cash reserves
offset by interest on $3.6 million of debt related to the
knit division acquisition.   See Note 3 "Acquisitions" in
the Notes to the Consolidated Financials.



Other Income

  Other Income (expense) was  income of $81,000  in  2001
compared to expense of $69,000 in 2000.  The increase can
largely be attributed to rental income  of  approximately
$70,000 derived  from tenants  in  the  Company's  former
headquarters in Springfield, TN  and  other miscellaneous
income of  $13,000, offset by a $2,000 loss  on  the sale
and/or  disposal  of  the  equipment  resulting from  the
closure of the Company's manufacturing facility  and sale
of real estate  property  owned  by  the  Company in Lake
Worth, FL.

Net Loss

  The  Company's  losses  decreased  from  $6,151,000  in
fiscal 2000 to a loss of $618,000  for  fiscal 2001.  The
decrease is primarily  a  function  of  the  increase  in
revenues the  Company  experienced  in  fiscall 2001, the
return  of  the  Company's   gross  margins   to   levels
consistent  with  its  historical  gross margins and  the
decrease  in  expenses  associated  with  the   Company's
restructuring  efforts  during  fiscal 2000.   See Note 1
"Business  Description--Restructuring  of Operations"  in
the Notes to  the Consolidated  Financials.   Seasonality
The Company's business is seasonal.  The majority of  the
marketing and sales activities take place from late  fall
to early spring.  The  greatest  volume of  shipments and
sales are generally made  from  late  spring  through the
summer,  which  coincides  with the Company's  second and
third fiscal quarters and the Company's fiscal year. Cash
flow  is  strongest  in  the  Company's  third and fourth
fiscal quarters.  During the first half  of  the calendar
year, the  Company  incurs  the  expenses of  maintaining
corporate offices, administrative,  sales  employees, and
developing the  marketing programs  and  designs for  the
majority of its sales campaigns.  Inventory  levels  also
increase  during   the   first  half   of  the   year  in
anticipation  of  sales  during  the   third  and  fourth
quarters.  Consequently, during  the first half  of  each
calendar year, corresponding to  the Company's first  and
second fiscal quarters, the Company utilizes  substantial
working  capital  and  its  cash  flows  are  diminished,
whereas   the   second   half    of  the  calendar  year,
corresponding to the  Company's third  and fourth  fiscal
quarters, generally provides increased cash flows and the
build-up of working capital.


Liquidity and Capital Resources

  The Company's primary  sources  of liquidity  are  cash
flows from operations, trade payables credit from vendors
and related parties and borrowings from the  factoring of
accounts receivables.

  Cash generated from operating activities during  fiscal
2002 was $1,504,000 compared to a cash use in  operations
of $632,000 in fiscal 2001.  The increase is  a result of
an increase in accounts receivable  of  $1,490,000 and  a
$3,330,000  increase  in  inventory  purchases offset  by
current liability increases of $1,742,000, related  party
increases of $3,440,000 and net income of $572,000.  Cash
generated by operating activities funded the  purchase of
additional property, plant and equipment expenditures and
the   repayment   of   the   current  principal  payments
associated with the Company's long-term debt.

  In fiscal 2000, cash used in operating  activities  was
$632,000 for the year ended December 1, 2001 compared  to
$4,598,000 in fiscal 2000.  The  use  of  cash  primarily
resulted from  the  Company's net  loss,  an  increase in
accounts receivables  of  $882,000  and  a  reduction  in
accounts  payable  and  accrued  expenses  of  $1,064,000
offset by a decrease in  inventory  of  $933,000  and  an
increase in amounts due to related parties of $698,000.

  Cash  used  in  operating  activities   was  $4,598,000
resulting  primarily  from  the  Company's  net  loss, an
increase in inventory of $1,375,000 offset  by  decreases
in  accounts  receivables $566,000  and  a  decrease   in
accounts payable and accrued expenses of $282,000.



  The  Company  has  experienced  operating   losses  and
negative cash flows  from  operations  during  the  years
ended December 1, 2001 and November 30, 2000. The Company
is dependent on credit  arrangements  with suppliers  and
factoring agreements for working capital needs. From time
to time,  the  Company  has  obtained short-term  working
capital loans from senior members of  management and from
members of the Board  of Directors,  and conducted equity
financing through  private placements.   See Notes 11, 14
and 17 in the Notes to the Consolidated  Financials for a
further discussion of the financing arrangements.

  The Company relied on the following primary  sources to
fund operations during fiscal 2002:

 - A financing agreement with CIT Group, Inc. ("CIT")
 - Cash reserves
 - Trade  payables   credit   with   its   domestic   and
   international suppliers
 - Trade payables credit from related parties

  On June 1, 2000, the  Company,  through  its three main
operating subsidiaries, Joe's, Innovo,  and IAA,  entered
into a financing agreement with CIT for the  factoring of
the Company's accounts receivables. Pursuant to the terms
of the agreements  the Company,  at its option,  can sell
its accounts receivables to CIT and then borrow up to 85%
of the  amount  factored  against  the  receivables on  a
non-recourse  basis,  provided  that  CIT  approves   the
receivables in advance.  The  Company may  at  its option
also factor non-approved receivables on a recourse basis.
The Company continues to  be  obligated in  the  event of
product defects  and  other  disputes, unrelated  to  the
credit worthiness of the customer.   The  agreements call
for a 0.8% factoring fee  on invoices factored  with  CIT
and a per annum rate equal to  the  greater of the  Chase
prime  rate  plus 0.25%  on  funds  borrowed  against the
factored receivables or 6.5% per annum.

  In  August  2002,  Joe's  and  Innovo   amended   their
factoring agreements with CIT  to  include  an  inventory
based line of credit.   According  to  the  terms of  the
agreements, amounts loaned against inventory are to  bear
an interest rate equal to the greater  of the Chase prime
rate plus 0.75%  or  6.5%  per  annum.   The  Company  is
currently restricted in regards to how much CIT will loan
against the inventory.  The restrictions currently  limit
the  amount  Joe's  and  Innovo  can  borrow against  its
inventory at $400,000 for each subsidiary.

  As of November 30, 2002, the Company  had  borrowed the
maximum  amount  available  to  the  Company  under   the
inventory  line  from CIT.  The  CIT  agreements  may  be
terminated by CIT with 60 days notice by CIT,  or  on the
anniversary date, by the Company provided 60 days written
notice is given.   The agreements with CIT expire on June
1, 2003.  The Company believes that  it  will be  able to
renew the agreements with CIT or  will  be  able to  find
similar financing with  another financing organization on
similar terms.  The Company  is  currently reviewing  its
cash requirements and availability on the factoring lines
with CIT.

  Based on the Company's anticipated  internal  growth in
2003, the Company believes that it  will be necessary  to
obtain additional  working  capital sources  in  order to
meet the operational needs associated  with  such growth.
The Company believes that it will address these  needs by
increasing  the  availability  of  funds  offered to  the
Company under its financing agreements with  CIT or other
financial institutions.  The Company is currently seeking
additional working  capital  if  it  can be  obtained  at
suitable terms.  The Company may  be required  to  obtain
additional capital through debt or equity financing.

  The Company believes that  any  additional capital,  to
the extent  needed, may  be  obtained  from  the  sale of
equity securities or  through short-term  working capital
loans.  However, there can be  no assurance  that this or
other  financing  will  be   available  if  needed.   The
inability  of  the  Company  to  be able  to fulfill  any
interim  working  capital  requirements  would force  the
Company to constrict its operations.  The Company intends
to pursue acquisitions that  may result  in  the  Company
raising   additional  capital  through  debt  or   equity
financing.    The Company believes  that  the  relatively
moderate rate of inflation  over the past  few years  has
not had a significant impact on the Company's revenues or
profitability.



Crossman Loan

  On February 7, 2003 the  Company  entered into  a loan
agreement with Marc Crossman, a member of  the Company's
Board of Directors.  The loan was funded  in  two phases
of $250,000 each  on  February 7, 2003  and February 13,
2003 for an aggregate loan value  of  $500,000.   In the
event  of  default,  each  phase  is  collateralized  by
125,000 shares of the Company's common  stock as well as
a  general   claim  on   the   assets  of  the  Company,
subordinate to existing lenders.  Each phase matures six
months  and  one  day from  the date  of its  respective
funding, at which point  the  principal  amount  and any
accrued interest is due in full. The loan  carries an 8%
annualized interest rate with interest due on  a monthly
basis.  The loan may  be  repaid by  the Company  at any
time  during  the  term  of  the  loan  without penalty.
 Further, the Company has the option  to extend the term
of the loan for an additional period  of  six months and
one day at anytime before maturity.   The  disinterested
directors  of  the  Company  approved   the   loan  from
Mr. Crossman.

Long-Term Debt

Long-term   debt   consists   of   the   following   (in
thousands):


                                       2002         2001
                                       ----         ----

First mortgage loan on Springfield
 property                             $  558      $  625
Promissory note to Azteca                786       1,000
Promissory note to Azteca              2,043       2,600
                                       -----       -----
Total long-term debt                   3,387       4,225
Less current maturities                  756         845
                                       -----       -----
                                      $2,631      $3,380
                                       -----       -----
                                       -----       -----

  The first mortgage loan is  collateralized by a  first
deed of trust on real property  in Springfield, TN (with
a carrying value  of $1,220,000  at  November 30, 2002),
and by an assignment of key-man life  insurance  on  the
President of the Company, Pat Anderson, in the amount of
$1 million.  The loan bears  interest at 2.75% over  the
lender's  prime  rate  per  annum  (which  was  7.50% at
November 30, 2002  and  December 1, 2001)  and  requires
monthly  principal   and  interest  payments  of  $9,900
through February 2010.  The loan is also  guaranteed  by
the Small Business Administration (SBA). In exchange for
 the SBA guarantee, the Company, Innovo,  NPII,  and the
President of the Company, Pat Anderson, have also agreed
to act as guarantors for the obligations  under the loan
agreement.  See Note 9 "Long Term Debt" in  the Notes to
the Consolidated Financial Statements.

  In  connection  with  the   acquisition  of  the  knit
division from  Azteca,  the  Company  issued  promissory
 notes in the face  amounts  of $1.0  million  and  $2.6
million,  which  bear  interest  at  8.0% per annum  and
require   monthly  payments  of   $20,276  and  $52,719,
respectively. The notes have  a  five-year term  and are
unsecured. See Note 3 "Acquisitions" in the Notes to the
Consolidated Financials.

  The $1.0 million note was subject to adjustment in the
event that the sales of the knit division did  not reach
$10.0 million during  the  18-month term  following  the
closing of the Acquisition.  The principal amount was to
be reduced by an amount equal to the sum of $1.5 million
less 10% of the net sales  of  the  knit division during
the  18  months  following  the  Acquisition.   For  the
18-month  period  following  the  closing  of  the  knit
acquisition, nets  sales for the knit division  exceeded
the $10 million threshold.

  In the event that the Company determines, from time to
time, at  the  reasonable  discretion  of  the Company's
management, that its available funds are insufficient to
meet the needs of its business, the Company may elect to
defer the payment of principal due under  the promissory
notes for as many as six months in any one year (but not
more  than  three  consecutive months) and  as  many  as
eighteen months, in the aggregate, over  the term of the
notes.   The term  of  the  notes shall automatically be
extended by one  month for each month  the  principal is
deferred, and interest shall  accrue accordingly.  As of
November 30, 2002, the Company has  not elected to defer
any payments due under the promissory notes.



  At  the  election  of  Azteca,  the   balance  of  the
promissory notes may  be offset  against  monies payable
by Azteca  or  its  affiliates  to  the Company  for the
exercise of issued and outstanding stock  warrants  that
are   owned  by  Azteca  or  its  affiliates  (including
Commerce).

  The  following  table   sets   forth   the   Company's
contractual obligations  and  commercial  commitments as
of November 30, 2002:



CONTRACTUAL                     PAYMENTS DUE BY PERIOD
OBLIGATIONAL


                        Total     Less than     1-3 years      4-5      After 5
                                    1 year                     years      years
                                                            
Long Term Debt          $3,387     $  756       $1,700         $  884    $   86
Operating Leases           662        138          239            285        --
Other Long Term          1,394         71          898            425        --
Obligations-Minimum
Royalties



Critical Accounting Policies

  Management's  discussion  and  analysis of  our financial
 condition and  results  of  operations are  based upon our
consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted
in the United States of America.   The preparation of these
financial  statements requires  us  to  make  estimates and
judgments  that  affect  the  reported  amounts  of assets,
liabilities, revenues and expenses, and related disclosures
of contingent assets and  liabilities. On an ongoing basis,
the Company evaluates estimates, including those related to
returns,  discounts,  bad  debts,  inventories,  intangible
assets, income taxes, and contingencies and litigation. The
Company bases its estimates on historical experience and on
various  other  assumptions   that   are  believed   to  be
reasonable under the  circumstances, the results  of  which
form the  basis  for  making  judgments about  the carrying
values of  assets  and  liabilities  that  are  not readily
apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

  The Company believes  the  following critical  accounting
policies  affect   our   more  significant  judgments   and
estimates  used  in  the  preparation  of  our consolidated
financial  statements.   For  a  further discussion  on the
application of these  and  other  accounting policies,  see
Note 2 "Critical Accounting Policies" to  the  Notes to the
Consolidated Financials.

Revenue Recognition

  Revenues are recorded on the accrual  basis of accounting
when the Company  ships  products to its customers.   Sales
returns must be approved by  the  Company and are typically
only  allowed   for  damaged  goods.   Such   returns  have
historically not been material.

  During the years ended  November 30, 2002 and December 1,
2001, allowances  for co-op and  other advertising programs
when calculated as a percentage of sales to a customer have
been recorded as a reduction of gross sales. In prior years
all advertising allowances were recorded as a components of
selling, general and administrative expenses.

Shipping and Handling Costs

  During  the  year  ended  November 30, 2002, the  Company
outsourced its distribution function to Commerce.  Shipping
and handling costs include costs to warehouse,  pick,  pack
and deliver inventory to customers.   In certain  cases the
Company is responsible for the cost  of  freight to deliver
goods to the customer.   Shipping  and  handling costs were
approximately  $588,000  and  $172,000  for  the year ended
November 30, 2002 and  December 1, 2001, respectively,  and
are  included   in   selling,  general  and  administrative
expenses.



Accounts  Receivable-Allowance  for  Returns, Discounts and
Bad Debts

  The Company  evaluates  the  collectibility  of  accounts
receivable  and  chargebacks  (disputes  from the customer)
based upon  a  combination  of  factors.  In  circumstances
where  the  Company  is  aware  of  a  specific  customer's
inability   to   meet   its  financial  obligations  (e.g.,
bankruptcy  filings,  substantial   downgrading  of  credit
sources), a specific reserve for bad debts is taken against
amounts due to reduce the net  recognized receivable to the
amount reasonably expected to be collected.   For all other
customers, the  Company  recognizes reserves for  bad debts
and   chargebacks   based   on   the  Company's  historical
collection    experience.     If    collection   experience
deteriorates (i.e., an  unexpected material  adverse change
in  a   major customer's  ability  to  meet  its  financial
obligations  to  the  Company),   the   estimates   of  the
recoverability  of  amounts  due us could  be  reduced by a
material amount.

  As of November 30, 2002, the balance in the allowance for
returns, discounts  and  bad  debts  reserves was $383,000,
compared to $164,000 at December 1, 2001.

Inventory

  The Company's inventories are valued at the lower of cost
or market.  Under certain  market conditions, estimates and
judgments regarding the valuation of inventory are employed
by the Company to properly value inventory.

Valuation of Long-lived and Intangible Assets and  Goodwill

  The  Company  assesses  the  impairment  of  identifiable
intangibles, long-lived assets and goodwill whenever events
or changes in  circumstances  indicate  that  the  carrying
value may not be recoverable.  Factors considered important
that  could  trigger  an   impairment  review   include the
following:

  a  significant  underperformance  relative  to   expected
historical or projected future operating results;
  a significant change in  the  manner  of  the use of  the
acquired asset or the strategy  for  the overall  business;
or
  a significant negative industry or economic trend.

  When the Company determines  that the  carrying  value of
intangibles, long-lived  assets  and  goodwill  may  not be
recoverable based upon the existence  of one or more of the
above indicators  of  impairment, the Company  will measure
any impairment based on  a  projected discounted  cash flow
method using a discount rate determined by  our management.
No impairment indicators existed as of November 30, 2002.

  In 2002, the Statement of  Financial Accounting Standards
(SFAS)  No. 142  "Goodwill  and  Other  Intangible Assets,"
became effective.   This  statement  establishes  financial
accounting and reporting  for  acquired goodwill  and other
intangible  assets  and  supersedes  APB  Opinion  No.  17,
Intangible  Assets.   The  Company  adopted  SFAS  No.  142
beginning  with  the  first quarter of 2002.   SFAS No. 142
requires that  goodwill  and  intangible  assets  that have
indefinite  useful  lives not  be  amortized but,  instead,
tested  at  least  annually for impairment while intangible
assets  that  have  finite  useful  lives  continue  to  be
amortized over their respective useful lives.  Accordingly,
the Company has not amortized goodwill.

  SFAS No. 142 requires that goodwill and other intangibles
be tested for  impairment using  a  two-step process.   The
first step is to determine the fair value of  the reporting
unit, which may be calculated  using a discounted cash flow
methodology, and compare this  value to its carrying value.
If the fair  value  exceeds  the carrying value, no further
work  is  required  and   no  impairment  loss   would   be
recognized. The second step is  an  allocation of  the fair
value of the reporting unit to all of the  reporting unit's
assets and liabilities under a  hypothetical purchase price
allocation.



Income Taxes

  As  part  of  the  process  of  preparing  the  Company's
consolidated  financial statements,  management is required
to estimate income  taxes in each  of  the jurisdictions in
which it operates.   The process involves estimating actual
current  tax  expense  along   with   assessing   temporary
differences resulting from differing treatment of items for
book and tax purposes.   These timing differences result in
deferred tax assets and liabilities,  which are included in
the  Company's  consolidated   balance  sheet.   Management
records a valuation allowance  to  reduce its  deferred tax
assets to the amount that  is  more likely  than  not to be
realized.  Management has considered  future taxable income
and ongoing  tax  planning strategies in assessing the need
for the valuation allowance.   Increases  in  the valuation
allowance result  in  additional  expense  to  be reflected
within the tax provision in  the  consolidated statement of
income.  Reserves  are  also  estimated  for ongoing audits
regarding Federal,  state and international issues that are
currently unresolved.   The Company routinely  monitors the
potential impact of these  situations and  believes that it
is properly reserved.

Contingencies

  The Company accounts for contingencies in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 5,
"Accounting for Contingencies".   SFAS No. 5  requires that
the  Company  record  an   estimated  loss  from   a   loss
contingency when information available prior to issuance of
the Company's  financial  statements indicates  that  it is
probable that an asset has been impaired or a liability has
been incurred at the date of the  financial  statements and
the  amount  of  the  loss  can  be  reasonably  estimated.
Accounting for contingencies such as legal  and income  tax
matters requires management to use judgment.  Many of these
legal and tax contingencies can  take years to be resolved.
Generally, as  the  time  period increases  over  which the
uncertainties are resolved,  the likelihood  of  changes to
the estimate of the ultimate outcome increases.  Management
believes that the accruals for these matters are adequate.

New Accounting Pronouncements

  In August 2001, the FASB issued SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets."  This
standard sets  forth  the impairment of long-lived  assets,
whether they are held and used or are disposed  of  by sale
or  other  means.   It  also   broadens  and  modifies  the
presentation of discontinued operations.  The standard will
be effective for the  Company's  fiscal year 2003, although
early  adoption  is  permitted,   and  its  provisions  are
generally to be applied prospectively.   The Company is  in
the process of  evaluating the adoption  of  this standard,
but does not believe it will have a material impact on  its
consolidated financial statements.

  In April 2002,  the FASB issued SFAS No. 145, "Rescission
of FASB Statements No. 4,  44,  and 64,  Amendment  of FASB
Statement  No.  13,  and   Technical  Corrections."    This
Statement  rescinds  or   modifies  existing  authoritative
pronouncements  including  FASB  Statement No. 4 "Reporting
Gains and Losses from Extinguishment of Debt."  As a result
of the issuance  of  SFAS No. 145, gains  and  losses  from
extinguishment   of   debt    should   be   classified   as
extraordinary items  only  if  they  meet  the criteria  in
Opinion 30. "Reporting the Results  of Operations-Reporting
the Effects of Disposal of a  Segment  of  a Business,  and
Extraordinary,  Unusual  and  Infrequently Occurring Events
and Transactions." Applying  the  provisions of  Opinion 30
will distinguish transactions that  are part of an entity's
recurring  operations   from  those  that  are  unusual  or
infrequent or that meet  the criteria for classification as
an extraordinary item.   The provisions  of  this Statement
related to the rescission  of  Statement 4 shall be applied
in fiscal years beginning after May 15, 2002.   Any gain or
loss on extinguishment of  debt that  was  classified as an
extraordinary item in prior periods presented that does not
meet the criteria  in  Opinion 30 for classification  as an
extraordinary item shall be reclassified. Early application
of  the  provisions  of  this  Statement  related   to  the
rescission  of  Statement  4  is  encouraged.    Innovo  is
currently  evaluating  the impact that  this  statement may
have on any potential future extinguishments of debt.  Upon
adoption  of  SFAS No. 145,  Innovo  will reclassify  items
previously reported as  extraordinary items as  a component
of operating  income  on  the  accompanying  statements  of
income.

  During 2002, the FASB  issued  SFAS No. 148,  "Accounting
for Stock Based Compensation -Transaction and  Disclosure,
an amendment  to  FASB Statement  No. 123."  This Statement
requires more extensive interim disclosure related to stock
based compensation for all companies and for companies that
elect to  use  the  fair  value method  for employee  stock
compensation, permits additional  transition methods.  This
statement  is  effective  for  fiscal  years  ending  after
December 15, 2002,  with  early  adoption  regarding annual
disclosure encouraged.  Innovo  is currently evaluating the
impact of adoption of this standard.



  In June 2002,  the FASB  issued  Statement  of  Financial
Accounting   Standards  No.  146,    Accounting  for  Costs
Associated with Exit or  Disposal Activities (Statement No.
146).  Under  Statement  No. 146,  it  addresses  financial
accounting and reporting for costs associated  with exit or
disposal  activities  and  nullifies  Emerging  Issues Task
Force (EITF)  Issue  No. 94-3, "Liability  Recognition  for
Certain Employee  Termination Benefits  and Other  Costs to
Exit  an  Activity (including Certain Costs  Incurred in  a
Restructuring)."   The provisions  of  this  Statement  are
effective  for   exit   or  disposal  activities  that  are
initiated after  December 31, 2002, with  early application
encouraged. The Company will adopt Statement No. 146 in the
first quarter of 2003  and  do not expect  the  adoption to
have  a  material  effect  on  its results  of  operations,
financial position or cash flows.

  In December 2002,  the  Financial  Accounting  Standards
Board issued Statement  of  Financial Accounting Standards
 No. 148   "Accounting   for   Stock-Based   Compensation-
Transition and Disclosure" (SFAS 148),  which  amends SFAS
No. 123,   "Accounting   for   Stock-Based  Compensation".
Statement 148 provides  alternative methods of  transition
for a voluntary change to the fair value  based method  of
accounting  for  stock-based  employee  compensation.   In
addition, Statement 148 amends the disclosure requirements
of Statement 123  to  require  more  prominent  and   more
frequent  disclosures in  financial  statements  about the
effects  of  stock-based  compensation.    The  transition
guidance and annual disclosure provisions of Statement 148
are effective for fiscal years ending  after  December 15,
2002, with  earlier  application   permitted   in  certain
circumstances.   The  interim  disclosure  provisions  are
effective  for   financial  reports  containing  financial
statements   for    interim   periods    beginning   after
December 15, 2002.  The Company does not plan  on changing
its  method  of  accounting   for   stock-based   employee
compensation  and  will  comply  with  the  new disclosure
requirements beginning with  its  annual report  and  Form
10-K for the year ending November 29, 2003. The Company is
in  the  process  of  evaluating  the   adoption  of  this
standard, but does  not  believe it  will  have a material
impact on its consolidated financial statements.

ITEM 7A.  QUANTITATIVE  AND  QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

  The Company is exposed to certain  market  risks arising
from transactions  in  the  normal course of its business,
and  from  debt  incurred  in  connection  with  the  knit
acquisition. See Note 3 "Acquisitions" in the Notes to the
Consolidated   Financials .   Such   risk  is  principally
associated  with  interest  rate   and   foreign  exchange
fluctuations, as  well  as changes in the Company's credit
standing.

Interest Rate Risk

  The  Company's  long-term debt  bears  a fixed  interest
rate.   However,  because the Company's  obligations under
its receivable  and  inventory  financing  agreements bear
interest at floating rates (primarily JPMorgan Chase prime
rate), the Company is sensitive  to changes in  prevailing
interest rates.   A  10% increase  or  decrease  in market
interest  rates  that  affect  the   Company's   financial
instruments would have  a  material impact  on  earning or
cash flows during the next fiscal year.

Foreign Currency Exchange Rates

  Foreign  currency  exposures  arise  from  transactions,
including  firm  commitments  and  anticipated  contracts,
denominated   in  a  currency  other  than   an   entity's
functional currency, and from foreign-denominated revenues
translated into U.S. dollars. Our primary foreign currency
exposures relate to  the Joe's Jeans Japan subsidiary  and
resulting Yen  Investments.  The Company  believes that  a
10.0% adverse change in the Yen rate in  respect to the US
dollar would not have a material impact on earning or cash
flows  during  the  next  fiscal  year  because   of   the
 relatively small  size  of the subsidiary compared to the
rest of the Company.

  The Company  generally  purchases  its  products in U.S.
dollars. However, the Company sources most of its products
overseas and, as such, the cost  of  these products may be
affected  by  changes  in  the   value  of   the  relevant
currencies.  Changes  in  currency exchange rates may also
affect the relative prices at which   the  Company and its
foreign competitors sell products in the same market.  The
Company currently does not hedge  its  exposure to changes
in foreign currency  exchange rates.   The  Company cannot
assure  that foreign currency fluctuations will not have a
material  adverse  impact  on   the  Company's   financial
 condition and results of operations.



ITEM 8.  FINANCIAL STATEMENTS

  See "Item 15. Exhibits,  Financial  Statement Schedules
and Reports  on Form 8-K"  for  the  Company's  financial
statements and notes thereto, and the financial statement
schedule filed on part of this report.

ITEM 9.  CHANGES AND DISAGREEMENTS  WITH  ACCOUNTANTS  ON
ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable

                         PART III

  The information required by Part III (Item 10-Directors
and Executive Officers, Item 11-Excecutive  Compensation,
Item 12-Security Ownership  of  Certain Beneficial Owners
and  Management  and  Item 13-Certain  Relationships  and
Related Transactions) is incorporated herein by reference
to our definitive proxy statement to be filed pursuant to
Regulation 14A  relating  to  our 2003 annual  meeting of
stockholders.

ITEM 14.  CONTROLS AND PROCEDURES

  (a) Evaluation of disclosure controls  and  procedures.
Our  chief  executive  officer/chief  financial  officer,
after  evaluating  the  effectiveness  of  the  Company's
"disclosure controls and  procedures" (as defined  in the
Securities Exchange Act of 1934 Rules 13a-14(c) and  15d-
14(c)) as  of  a  date (the "Evaluation Date") within  90
days before the filing date of  this annual report,  have
concluded that as of the Evaluation Date,  our disclosure
controls and procedures  were  adequate  and  designed to
ensure that material information relating to  us  and our
consolidated subsidiaries would be made known to  them by
others within those entities.

  (b) Changes  in  internal  controls.   There  were  no
significant changes in our  internal  controls or to our
knowledge, in  other  factors  that could  significantly
affect our disclosure controls and procedures subsequent
to the Evaluation Date.

                         PART IV

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

  (a) Financial Statements and Schedules.   Reference is
made to the Index to  Financial Statements  and Schedule
on page F-1 for a list  of financial  statements and the
financial statement  schedule  filed  as  part  of  this
report.  All other schedules  are  omitted because  they
are not applicable or the  required information is shown
in the Company's  inancial  statements  or  the  related
notes thereto.

  (b) Reports on Form 8-K

      None

  (c) Exhibits






Exhibit
Number      Description                                                    Reference No.
                                                                          
3.1	      Fifth of Amended and Restated Certificate of Incorporation
             of Registrant.                                                      10.73
3.2	      Amended and Restated Bylaws of Registrant.*                           4.2 (5)
4.1         Article Four of the Registrant's Amended and Restated
             Certificate of Incorporation (included in Exhibit 3.1)*
4.2         Certificate of Resolution of Designation, Preferences and
             Other Rights, $100  Redeemable  8%  Cumulative  Preferred
             Stock,  Series  A  dated April 4, 2002
4.3         Amendment to Certificate of Resolution of Designation,
             Preferences and Other Rights, $100 Redeemable 8%
             Cumulative Preferred Stock, Series A, dated April 14, 2002.
10.1        Registrant's 1991 Stock Option Plan.*	                           10.5 (2)
10.3        Note executed by NASCO, Inc. and payable to First Independent
             Bank, Gallatin, Tennessee in the principal amount of $950,000
             dated August 6, 1992.*				                           10.21 (2)
10.4	      Deed of Trust between NASCO, Inc. and First Independent Bank,
             Gallatin, Tennessee dated August 6, 1992.*		               10.22 (2)
10.5	      Authorization and Loan  Agreement from the U.S. Small Business
             Administration, Nashville, Tennessee dated July 21, 1992.*	         10.23 (2)
10.6	      Indemnity Agreement between NASCO, Inc. and First Independent
             Bank, Gallatin, Tennessee.*                                         10.24(2)
10.7	      Compliance Agreement between NASCO, Inc. and First
             Independent Bank, Gallatin, Tennessee dated August 6, 1992.         10.25 (2)
10.8	      Assignment of Life Insurance Policy issued by Hawkeye National
             Life Insurance Company upon the life of Patricia Anderson-Lasko
             to First Independent Bank, Gallatin, Tennessee dated July 31,
             1992.*                                                              10.26 (2)
10.9        Guaranty of Patricia Anderson-Lasko on behalf of NASCO, Inc. in
             favor of First Independent Bank, Gallatin, Tennessee dated August
             6, 1992.*                                                           10.27 (2)
10.10	      Guaranty of Innovo Group Inc. on behalf of NASCO, Inc. in favor
             of First Independent Bank, Gallatin, Tennessee dated August 6,
             1992.*                                                              10.28 (2)
10.11	      Guaranty of Innovo, Inc. on behalf of NASCO, Inc. in favor of
             First Independent Bank, Gallatin, Tennessee dated August 6,
             1992.*                                                              10.29 (2)
10.12       Guaranty of NASCO Products, Inc. on behalf of NASCO, Inc. in
             favor of First Independent Bank, Gallatin, Tennessee dated August
             6, 1992.*	                                                         10.30 (2)
10.22	      Form of Common Stock Put Option.*                                    10.61 (6)
10.28	      License Agreement dated January 24, 1994 between NFL
             Properties Europe B.V. and NASCO Marketing, Inc.*	               10.66 (9)
10.29	      License Agreement dated July 7, 1997 between National Football
             League Properties, Inc. and Innovo Group Inc.
10.32	      Form of Amendment to Common Stock Put Option.*                       10.72 (9)
10.33	      Agreement dated July 31, 1995 between NASCO Products, Inc.
             and Accessory Network Group, Inc.*                                  10.1 (11)
10.36	      License Agreement dated August 9, 1995 between Innovo, Inc. and
             NHL Enterprises, Inc.*                                              10.49 (12)
10.37       License Agreement dated August 9, 1995 between NASCO
             Products International, Inc. and NHL Enterprises, B.V.*             10.50 (12)
10.38	      License Agreement dated December 15, 1995 between Major
             League Baseball Properties, Inc. and Innovo Group Inc.*             10.51 (12)
10.39	      License Agreement dated October 6, 1995 between Major League
             Baseball Properties and NASCO Products International, Inc.*	   10.52 (12)



10.40       omitted
10.41       omitted
10.42	      Merger Agreement dated April 12, 1996 between Innovo Group
             Inc. and TS Acquisition, Inc. and Thimble Square, Inc. and the
             Stockholders of Thimble Square, Inc.*                               10.1 (13)
10.43       Property Acquisition Agreement dated April 12, 1996 between
             Innovo Group Inc., TS Acquisition, Inc. and Philip Schwartz and
             Lee Schwartz.*                                                      10.2 (13)
10.45	      License Agreement between Innovo Group Inc. and Warner Bros.
             dated June 25, 1996.*                                               10.45(15)
10.46	      License Agreement between Innovo Group Inc. and Walt Disney
             dated September 12, 1996.*                                          10.46(15)
10.47       Indenture of Lease dated October 12, 1993 between Thimble
             Square, Inc. and Development Authority of Appling County,
             Georgia*                                                            10.47(15)
10.48       Lease dated October 1, 1996 between Innovo, Inc. and John F.
             Wilson, Terry Hale, and William Dulworth*                           11.48(15)
10.49	      Incentive Stock Option between Samuel J. Furrow, Jr. and
             Innovo Group Inc.*                                                  10.49(16)
10.50       Incentive Stock Option between Samuel J. Furrow and Innovo
             Group Inc.*                                                         10.50(16)
10.51       Incentive Stock Option between Robert S. Talbott and Innovo
             Group Inc.*                                                         10.51(16)
10.53       Manufacturing and Distribution Agreement between Nasco
             Products International and Action Performance  Companies, Inc.*	   10.53(16)
10.56       Sale Agreement of property in Pembroke, GA between
             Thimble Square and H.N. Properties, L.L.C.*                         10.56(16)
10.57       Lease Agreement between Furrow-Holrob Development, L.L.C.
             and Innovo Group, Inc.*                                             10.57(16)
10.58       Promissory Note dated October 29, 1999 between Innovo Group
             Inc. and Samuel J. Furrow*                                          10.58(17)
10.59       Promissory Note dated November 22, 1999 between Innovo Group
             Inc. and Samuel J. Furrow*                                          10.59(17)
10.61	      License Agreement with Roundhouse*	                                 10.61(17)
10.62       License Agreement with Paws, Inc.*                                   10.62(17)
10.63       Commerce Investment Group, LLC Common Stock and Warrant
             Purchase Agreement*                                                 10.63(18)
10.64       Commerce Investment Group, LLC Purchase Warrant Agreement*           10.64(18)
10.65       Investor Rights Agreement pertaining to the Commerce Investment
             Group, LLC Common Stock and Warrant Purchase Agreement*             10.65(18)
10.66       Commerce Investment Group, LLC Purchase Warrant Agreement*           10.66(18)
10.67       Legal Opinion of Sims, Moss, Kline and Davis, LLP*                   10.67(18)
10.68	      Business Plan*	                                                   10.68(18)
10.69       Transfer Instructions pertaining to the delivery of the Common
             Stock and Warrants purchased by Commerce Investment Group,
             LLC*                                                                10.69(18)
10.70	      Disclosure Schedule*                                                 10.70(18)
10.71       Samuel Furrow, Jr. Stock Purchase Agreement*                         10.71(18)
10.72       Samuel Furrow, Sr. Common Stock Purchase Agreement*                  10.72(18)
10.73       Fifth of Amended and Restated Certificate of  Incorporation of
             Registrant*                                                         10.73(22)
10.74       Mizrachi Group Stock Purchase Agreement*	                           10.74(22)
10.75       Mizrachi Group Investor Rights Agreement*	                           10.75(22)
10.76       Mizrachi Group Warrant Agreement A*                                  10.76(22)
10.77       Mizrachi Group Warrant Agreement B*                                  10.77(22)
10.78	      Mizrachi Group Transaction Disclosure Schedule*                      10.78(22)
10.79       JD Design, LLC Common Stock and Warrant Purchase
             Agreement*                                                          10.79 (20)
10.80       JD Design, LLC Stock Purchase Warrant*                               10.80 (20)



10.81       Employment Agreement, Joe Dahan*                                     10.81(20)
10.82       Option Agreement, Joe Dahan*                                         10.82 (20)
10.83       Joe's Jeans Licensing Agreement*                                     10.83 (20)
10.84       Innovo-Azteca Apparel, Inc. Purchase Agreement*                       2.1 (21)
10.85       Form of Investment Letter*                                           10.85(23)
10.86       Form of Limited Partnership Agreement*	                           10.86(23)
10.87       Form of Sub-Asset Management Agreement*                              10.87(23)
10.88       Distribution  of  Cash  Flow  and  Capital  Events  Proceeds Letter
             Agreement dated April 5, 2002, by and between  Innovo Realty,
             Inc., Innovo  Group  Inc., Income  Opportunity  Realty  Investors,
             Inc., Transcontinental  Realty  Investors,  Inc.,  American  Realty
             Investors, Inc., and Metra Capital, LLC*                            10.88(23)
10.89       Distribution of Capital Events Letter Agreement dated April 5,
             2002, by and between Metra Capital, LLC, Innovo Realty, Inc.,
             Innovo Group Inc., Income  Opportunity Realty  Investors, Inc.,
             Transcontinental Realty Investors, Inc., and American Realty
             Investors, Inc.*                                                    10.89(23)
10.90       Reimbursement of Legal Fees Letter Agreement dated April 5,
             2002, by and between  Innovo  Realty,  Inc., Innovo Group Inc.,
             Income Opportunity Realty Investors, Inc.,  Transcontinental
             Realty Investors, Inc., American  Realty  Investors,  Inc., and
             Third Millennium Partners, LLC*                                     10.90(23)
10.91       Short Form Licensing Agreement with Mattel for Hot Wheel
             License                                                             10.91
10.92       Bongo  License Agreement Extension	                                 10.92
10.93	      License Agreement for Lil Bow Wow Trademark                          10.93
10.94       Canadian Distribution Agreement with Sophistowear                    10.94
21          Subsidiaries of the Registrant*                                      21 (13)
23.1        Consent of Ernst & Young, LLP
99.1        Certification Pursuant to 18 U.S.C. Section 1350, as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2        Certification Pursuant to 18 U.S.C. Section 1350, as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



  Certain of the exhibits  to this  Report, indicated  by an
asterisk, are  incorporated by reference to  other documents
on file with  the  Securities and Exchange  Commission  with
which they were physically filed, to  be  part hereof  as of
their  respective dates.  Documents  to  which reference  is
made are as follows:

(1) Amendment No. 4 Registration Statement on Form S-18 (No.
33-25912-NY) of ELORAC Corporation filed October 4, 1990.

(2) Amendment No. 2 to the Registration  Statement  on  Form
S-1 (No. 33-51724) of Innovo  Group  Inc. filed November 12,
1992.

(3) Annual Report on Form 10-K  of  Innovo Group  Inc. (file
no. 0-18926) for the year ended October 31, 1993.

(4) Current Report on Form 8-K of  Innovo  Group  Inc. (file
no. 0-18926) dated May 10, 1993 filed May 25, 1993.

(5) Registration Statement  on  Form  S-8 (No. 33-71576)  of
Innovo Group Inc. filed November 12, 1993.

(6) Annual Report on  Form 10-K of Innovo  Group  Inc. (file
0-18926) for the year ended October 31, 1993.



(7) Amendment No. 2 to the  Registration Statement  on  Form
S-1 (No. 33-77984) of Innovo Group Inc. filed July 25, 1994.

(8) Amendment No. 4 to the  Registration  Statement on  Form
S-1 (No. 33-77984) of  Innovo  Group  Inc.  filed August 18,
1994.

(9) Annual Report on Form 10-K of  Innovo  Group Inc. (file
0-18926) for the year ended October 31, 1994.

(10) Registration Statement  on  Form S-8 (No. 33-94880) of
Innovo Group Inc. filed July 21, 1995.

(11) Current Report on Form 8-K of Innovo  Group Inc. (file
0-18926) dated July 31, 1995 filed September 13, 1995.

(12) Annual Report on Form 10-K of  Innovo Group Inc. (file
0-18926) for the year ended October 31, 1995.

(13) Current Report on Form 8-K of  Innovo Group Inc. (file
0-18926) dated April 12, 1996, filed April 29, 1996.

(14) Registration Statement  on Form S-1 (No. 333-03119) of
Innovo Group Inc., as amended June 28, 1996.

(15) Annual Report on Form 10-K of  Innovo Group Inc. (file
0-18926) for the year ended November 30, 1996.

(16) Annual Report on Form 10-K of  Innovo Group Inc. (file
0-18926) for the year ended November 30, 1998.

(17) Annual Report on Form 10-K of  Innovo Group Inc. (file
0-18926) for the year ended November 30, 1999.

(18) Current Report  on  Form 8-K/A  of  Innovo Group  Inc.
(file 0-18926) dated September 15, 2000.

(19) Annual Report on Form 10-K of  Innovo Group Inc. (file
0-18926) for the year ended November 30, 2000.

(20) Quarterly Report  on  Form 10-Q  of  Innovo Group Inc.
(file 0-18926) dated April 15, 2001.

(21) Current Report on Form 8-K  of Innovo Group Inc. (file
0-18926) dated September 10, 2001.

(22) Annual Report on Form 10-K of  Innovo Group Inc. (file
0-18926) for the year ended November 30, 2001.

(23) Quarterly Report  on  Form 10-Q  of  Innovo Group Inc.
(file 0-18926) dated July 25, 2002.



SIGNATURES

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

                            INNOVO GROUP INC.

                            By: /s/ Samuel J. Furrow, Jr.
                               --------------------------
                               Samuel J. Furrow, Jr.
                               Chief Executive Officer

                               March 17, 2003

  KNOW ALL PERSONS BY  THESE  PRESENTS, that  each  person
whose signature appears  below  constitutes  and  appoints
Samuel J. Furrow, Jr., his  or  her attorney-in-fact, each
with  the  power  of substitution  for  him or any and all
capacities, to sign any amendments  to  this Annual Report
on Form 10-K and to  file the  same  with exhibits thereto
and  other  documents  in  connection therewith,  with the
Securities and Exchange Commission,  hereby ratifying and
confirming all that each said attorney-in-fact, or his or
her substitutes, may do  or  cause to be  done  by virtue
hereof.

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

Signature and Title                                 Date

/s/ Samuel J. Furrow, Jr.                 March 17, 2003
-------------------------
Samuel J. Furrow, Jr.
Chief Executive Office, Chief Operating
Officer, Acting Chief Financial Officer
and Director (Principal Executive
Officer and Principal Accounting
Officer)

/s/ Patricia Anderson                    March 17, 2003
---------------------
Patricia Anderson
President and Director


/s/Samuel J. Furrow, Sr.                 March 17, 2003
------------------------
Samuel J. Furrow, Sr.
Chairman of the Board and Director


/s/ Marc B. Crossman                     March 17, 2003
--------------------
Marc B. Crossman
Director


/s/ Daniel Page                          March 17, 2003
---------------
Daniel Page
Director

/s/ Dr. John Looney                      March 17, 2003
-------------------
Dr. John Looney
Director



Form of Certification  Required  by Rules  13a-14  and
15d-14 under the Securities Exchange Act of 1934

CERTIFICATION  BY  SAMUEL  JOSEPH FURROW, JR. AS CHIEF
EXECUTIVE OFFICER

I, Samuel Joseph Furrow, Jr. certify that:

1. I have reviewed this annual report  on Form 10-K of
Innovo Group Inc.;

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

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

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

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

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

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

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

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

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

6. The registrant's  other  certifying  officers and I
have indicated  in this  annual report whether  or not
there were significant changes in internal controls or
in  other  factors  that  could  significantly  affect
internal controls subsequent  to  the date of our most
recent evaluation,  including  any  corrective actions
with regard to significant deficiencies  and  material
weaknesses.


Date: March 17, 2003
                         /s/ Samuel Joseph Furrow, Jr.
                         -----------------------------
                         Samuel Joseph Furrow, Jr.
                         Chief Executive Officer




Form of Certification  Required  by  Rules 13a-14  and
15d-14 under the Securities Exchange Act of 1934

CERTIFICATION BY SAMUEL JOSEPH  FURROW, JR. AS  ACTING
CHIEF FINANCIAL OFFICER  (PRINCIPAL ACCOUNTING OFFICER)

I, Samuel Joseph Furrow, Jr. certify that:

1. I have reviewed this  annual report on Form 10-K of
Innovo Group Inc.;

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

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

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

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

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

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

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

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

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

6. The registrant's other certifying  officers  and I
have indicated in this annual report whether  or  not
there were significant changes  in  internal controls
or in other factors that could  significantly  affect
internal controls subsequent to  the date of our most
recent evaluation, including any  corrective  actions
with regard to significant  deficiencies and material
weaknesses.

                             /s/ Samuel Joseph Furrow
                             ------------------------
                            Samuel Joseph Furrow, Jr.
                       Acting Chief Financial Officer
                        (Principal Accounting Officer)




Innovo Group and Subsidiaries

Index to Consolidated Financial Statements



Audited Financial Statements:	                       Page

Report of Independent Auditors -
 Ernst & Young LLP                                   F-2
Consolidated Balance Sheets at
 November 30, 2002 and December 1, 2001	           F-3
Consolidated Statements of Operations
for the years ended November 30, 2002,
December 1, 2001, and November 30, 2000              F-4
Consolidated Statements of Stockholders'
Equity for the years ended November 30,
 2002, December 1, 2001, and November 30,
 2000	                                               F-6
Consolidated Statements of Cash Flows for
the years ended November 30, 2002, and
December 1, 2001	                                   F-8
Notes to Consolidated Financial Statements	     F-11
Schedule II - Valuation of Qualifying Accounts	     F-38



Report of Independent Auditors

Board of Directors
Innovo Group Inc.

We have audited the accompanying consolidated balance sheets
 of Innovo Group Inc. and  subsidiaries as  of  November 30,
2002 and  December 1, 2001,  and  the  related  consolidated
statements of  operations,  stockholders'  equity, and  cash
flows for each  of  the  three  years  in  the  period ended
November 30, 2002.  Our audits  also included  the financial
statement schedule listed in the index at Item 14(a).  These
financial statements and schedule are the  responsibility of
the Company's management. Our responsibility  is  to express
an opinion on these  consolidated  financial  statements and
schedule based on our audit.

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

  In our opinion, the financial statements referred to above
present fairly, in all material respects,  the  consolidated
financial position of Innovo Group Inc. and  subsidiaries as
of   November 30, 2002   and    December 1, 2001   and   the
consolidated  results  of  their operations  and  their cash
flows for each  of  the  three  years in  the  period  ended
November 30, 2002,  in conformity with accounting principles
generally  accepted  in  the  United States.   Also, in  our
opinion, the  related  financial  statement  schedule,  when
considered in relation  to  the  basic financial  statements
taken as a whole, presents fairly,  in all material respects
the information set forth therein.


                                    /s/  Ernst & Young, LLP


Los Angeles, California
February 4, 2003



Innovo Group Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except per share data)



                                                    November 30     December 1
                                                       2002           2001
                                                    -----------     ----------
                                                                 
Assets
Current assets:
 Cash and cash equivalents                          $      222       $    292
 Accounts receivable and due from factor, net
  of allowance for uncollectible accounts of
  $383 (2002) and $164 (2001)                            2,737         1,466
 Inventories                                             5,710         2,410
 Prepaid expenses and other assets                         279           180
                                                    ----------     ---------
Total current assets                                     8,948         4,348

Property, plant and equipment, net                       1,419           973
Goodwill                                                 4,271         4,271
Intangible assets, net                                     487           655
Other assets                                                18             -
                                                    ----------     ---------
Total assets                                        $   15,143     $  10,247
                                                    ----------     ---------
                                                    ----------     ---------


Liabilities and stockholders' equity
Current liabilities:
 Accounts payable and accrued expenses              $   2,438      $     697
 Due to related parties                                 4,250            806
 Current maturities of long-term debt                     756            845
                                                    ---------      ---------
Total current liabilities                               7,444          2,348

Long-term debt, less current maturities                 2,631          3,380

Commitments and contingencies

8% redeemable preferred stock, $0.10 par value:
 Authorized shares - 5,000 Issued and outstanding
 shares 193,976 (2002) and none (2001)                      -             -

Stockholders' equity:
 Common stock, $0.10 par value:
  Authorized shares - 40,000 Issued and outstanding
   shares - 14,901 (2002) and 14,921 (2001)             1,491          1,491
 Additional paid-in capital                            40,343         40,277
 Accumulated deficit                                  (33,507)       (34,079)
 Accumulated other comprehensive loss                     (19)             -
 Promissory note - officer                               (703)          (703)
 Treasury stock, 58,410 (2002) and 29,410 (2001)       (2,537)        (2,467)
                                                   ----------      ---------
Total stockholders' equity                              5,068          4,519
                                                   ----------      ---------
Total liabilities and stockholders' equity         $   15,143      $  10,247



See accompanying notes.



Innovo Group Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)



                                                               Year ended
                                               November 30     December 1     November 30
                                                  2002            2001           2000
                                               -----------     ----------     -----------

                                                                         

Net sales                                      $    29,609     $    9,292     $     5,767
Cost of goods sold                                  19,839          6,333           5,195
                                                ----------      ---------      ----------
Gross profit                                         9,770          2,959             572

Operating expenses:
 Selling, general and administrative                 8,325          3,191           4,147
 Restructuring and other charges:
  Asset impairment                                       -             -             600
  Other                                                  -             -             116
 Depreciation and amortization                         256            167             250
                                                ----------      ---------      ----------
                                                     8,581          3,358           5,113
                                                ----------      ---------      ----------
Income (loss) from operations                        1,189           (399)         (4,541)

Interest expense                                      (538)          (211)           (446)

Other income (expense), net                             61             81             (69)
                                                ----------     ----------     -----------
Income (loss) before income taxes and
 extraordinary item                                    712           (529)         (5,056)
Income taxes                                           140             89               -
                                                ----------     ----------     -----------
Income (loss) before extraordinary item                572           (618)         (5,056)
Loss on early extinguishments of debt                    -              -          (1,095)
                                                ----------     -----------    -----------
Net income (loss)                               $      572     $      (618)   $    (6,151)
                                                ----------     -----------    -----------
                                                ----------     -----------    -----------





Innovo Group Inc. and Subsidiaries

Consolidated Statements of Operations (continued)

(In thousands, except per share data)
  
                                                                 Year ended
                                                 November 30     December 1     November 30
                                                   2002            2001           2000
                                               -----------     ----------     -----------
                                                                         

Income (loss) per share - basic:
 Income (loss) before extraordinary item       $      0.04     $    (0.04)    $     (0.62)
 Extraordinary item                                      -              -           (0.13)
                                               -----------     ----------     -----------
 Net income (loss)                             $      0.04     $    (0.04)    $     (0.75)
                                               -----------     ----------     -----------
                                               -----------     ----------     -----------

Income (loss) per share - diluted:
Income (loss) before extraordinary item        $      0.04     $    (0.04)    $     (0.62)
Extraordinary item                                       -              -           (0.13)
                                               -----------     ----------     -----------
Net income (loss)                              $      0.04     $    (0.04)    $     (0.75)
                                               -----------     ----------     -----------
                                               -----------     ----------     -----------

Weighted average shares outstanding:
 Basic                                              14,856         14,315           8,163
                                               -----------     ----------     -----------
                                               -----------     ----------     -----------
 Diluted                                            16,109         14,315           8,163

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



See accompanying notes.



Innovo Group Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

(In thousands, except number of shares)



                                                                                        Accumulated
                                                           Additional                 Other    Promissory        Total
                                             Common Stock   Paid-In   Accumulated Comprehensive   Note  Treasury Stockholders'
                                         Shares  Par Value  Capital    Deficit     Loss          Officer   Stock  Equity
                                         ------  ---------  -------    -------     ----          -------   -----  ------
                                                                                            

Balance, November 30, 1999             6,299,032 $  629     $ 31,540  $(27,310)   $  -          $  (703) $(2,426) $ 1,730
Issuance of common stock for debt
 conversion                            1,787,365    179       1,821          -       -                -        -    2,000
Sale of common stock, net of
 offering expenses of $216             5,634,867    563       4,521          -       -                -        -    5,084
Issuance of warrants                           -      -       1,095          -       -                -        -    1,095
Net loss                                       -      -                 (6,151)      -                -        -   (6,151)
                                       ---------  -----      ------     ------    ----          -------     ------- -----
Balance, November 30, 2000            13,721,264  1,371      38,977    (33,461)      -             (703)    (2,426) 3,758
Issuance of common stock for
 acquisitions                          1,200,000  $ 120       1,249    $     -   $   -          $     -     $    - $1,369
Common stock offering expenses                 -      -         (35)         -       -                -          -    (35)
Expense associated with options and
 warrants                                      -      -          86          -       -                -          -      86
Treasury stock purchased                       -      -           -          -       -                -        (41)    (41)
Net loss                                       -      -           -       (618)      -                -          -    (618)
                                       --------- -------    --------   --------    ----         -------    -------   -----
Balance, December 1, 2001             14,921,264   1,491      40,277    (34,079)     (-)           (703)    (2,467)  4,519
Net income                                     -       -           -        572       -               -          -     572
Foreign Currency translation
 adjustment                                    -       -           -          -     (19)              -          -     (19)
Comprehensive Income                           -       -           -          -       -               -          -     553
Common stock offering expenses                 -       -         (25)         -       -               -          -     (25)
Expense associated with options and
 warrants                                      -       -          91          -       -               -          -      91
Cancelled shares                         (20,000)      -           -          -       -               -          -       -
Treasury stock purchased                       -       -           -          -       -               -        (70)    (70)
                                       --------- -------    --------    --------    ----        -------    -------   -----
Balance, November 30, 2002            14,901,264 $ 1,491    $ 40,343	$(33,507)  $ (19)      $  (703)    $(2,537) $5,068
                                       --------- -------    --------    --------    ----       -------     -------   -----



See accompanying notes.



Innovo Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)




                                                                       Year ended
                                                      November 30     December 1     November 30
                                                          2002            2001          2000
                                                      -----------     ----------     -----------
                                                                               

Operating activities
 Net income (loss)                                    $      572	    $     (618)    $   (6,151)
Adjustment to reconcile net income (loss) to cash
 provided by (used in) operating activities
  Loss on early extinguishments of debt                        -               -          1,095
  Stock options and warrants issued for services              91              86              -
  Loss on disposal of fixed assets                            90               2             99
  Depreciation and amortization                              256             167            250
  Asset impairment                                             -               -            600
  Change in allowance for bad debt                           219             128           (117)
  Changes in current assets and liabilities:
   Accounts receivable and due from factor                (1,490)           (882)           566
   Inventories                                            (3,300)            933         (1,375)
   Prepaid expenses and other                               (117)            (86)            45
   Accounts payable and accrued expenses                   1,742          (1,064)           282
   Due to related parties                                  3,444             698            108
   Other                                                      (3)              4              -
                                                     -----------      ----------     ----------
Net cash provided by (used in) operating activities        1,504            (632)        (4,598)

Investing activities
Capital expenditures                                        (622)            (61)           (76)
Net proceeds from sale of fixed assets                         -           1,082             43
Purchase of Knit Division                                      -             (36)             -
Proceeds from real estate investment, distributions
 related to preferred stock                                  436               -             -
Payment of distributions and redemptions related to
 preferred stock                                            (436)              -              -
                                                     -----------     -----------    -----------
Cash provided by (used in) investing activities             (622)            985            (33)
Financing activities
Additional borrowings                                $         -     $         -    $     1,420
Repayments of notes payable and long-term debt              (838)         (1,164)          (644)
Treasury stock purchases                                     (70)            (41)             -
Proceeds from issuance of common stock, net                  (25)            (35)         5,034
                                                     -----------    ------------    -----------
Net cash (used in) provided by financing activities         (933)         (1,240)         5,810
                                                     -----------    ------------    -----------

Effect of exchange rate changes on cash                      (19)              -              -
                                                     -----------    ------------    -----------

Net (decrease) increase in cash and cash equivalents         (70)           (887)         1,179
Cash and cash equivalents, at beginning of year              292           1,179              -
                                                     -----------    ------------    -----------
Cash and cash equivalents, at end of year            $       222    $        292    $     1,179
                                                     -----------    ------------    -----------
                                                     -----------    ------------    -----------

Supplemental disclosures of cash flow information:
 Cash paid for interest                              $       519    $        110    $       415
 Cash paid for taxes                                 $        28    $          -    $         -



During fiscal 2002,  the Company issued 195,295 shares of its
cumulative non-convertible  preferred stock with an 8% coupon
in exchange for real estate partnership interests.

See accompanying notes.




1. Business Description

Innovo  Group  Inc.'s  (the "Company")  principle   business
activity involves  the  design,  development  and  worldwide
marketing of high quality consumer products  for the apparel
and accessory markets.  The Company  operates  its  consumer
products  business  through  three  wholly-owned,  operating
subsidiaries,  Innovo, Inc.  ("Innovo"),   Joe's Jeans, Inc.
("Joe's),  and  Innovo  Azteca  Apparel, Inc.  ("IAA")  with
Innovo   and   Joe's  having   two   wholly-owned  operating
subsidiaries,  Innovo  Hong  Kong  Limited ("IHK") and Joe's
Jeans  Japan,  Inc.  ("JJJ"),  respectively.    All  of  the
Company's   products   are   manufactured    by  independent
contractors located in Los Angeles, Mexico and the Far East,
including, Hong Kong, China, Korea,  Vietnam and India.  The
products are then distributed out of Los Angeles or directly
from the factory to the customer.

In April 2002, the  Company  entered  into  the  real estate
investment  business   by   purchasing  limited  partnership
interests  in  22  limited  partnerships  that  subsequently
acquired  limited  partnerships  in  28  apartment buildings
consisting  of  approximately  4,000  apartment units.   The
Company  also  owns  its  former   headquarters  located  in
Springfield, TN, which it currently leases to third parties.
The Company operates  its real estate  business  through two
wholly-owned  operating  subsidiaries:  Leasall  Management,
Inc. ("LMI")  and  Innovo  Realty  Inc. ("IRI").  See  "Real
Estate  Transactions"  to  the  Notes  to  the  Consolidated
Financials.

During fiscal year 2001, the Company changed its fiscal year
end from November 30 of each year to the Saturday closest to
November 30. For fiscal year 2002 and 2001,  the years ended
on November 30, 2002 and December 1, 2001.

Restructuring of Operations

During   fiscal   2000,   the  Company   restructured   its
operations to focus on its core product categories with the
highest volume and profit margin.   The Company also raised
additional   working   capital   and    converted   certain
indebtedness to equity.  See Note 14. The restructuring was
undertaken as a  condition  to  the  equity  investment  by
Commerce  Investment  Group,  LLC ("Commerce"), a strategic
investment partner. See Note 11.   In an effort  to  reduce
product  costs  and  increase  gross  profit,  the  Company
shifted manufacturing to third-party  foreign manufacturers
and has outsourced the distribution function to Commerce to
increase the effectiveness of the distribution  network and
reduce  freight  costs.   In  September  2000, the  Company
completed   the  closure   of  its   Knoxville,  Tennessee,
manufacturing and  distribution  operations  and  realigned
these functions  in  accordance  with  terms  under certain
supply and distribution agreements with Commerce.

These agreements provide  for  Commerce or  its  designated
affiliates  to  manufacture  and  supply  specified   craft
products to the Company at agreed upon prices. In addition,
Commerce provides distribution services  to the Company for
its  craft  products  for  an  agreed  upon fee,  including
warehousing,   shipping   and   receiving,  storage,  order
processing, billing, customer service, information systems,
maintenance of inventory records,  and all direct labor and
management  services.   These  agreements, which expired in
2002, were renewed for a  two-year term ending 2004 and are
renewable thereafter for  consecutive two-year terms unless
terminated by either  party with 90 days notice.  Purchases
of craft goods and distribution services during the initial
term were subject to  a  minimum  of $3,000,000, which  the
Company purchased from Commerce  during  the  first term of
the agreement.   See Note 14.   No  minimum  obligation  is
required for the renewal periods.




Pursuant   to   the   Commerce   transaction  and  related
agreements,   the   Company   relocated  its  distribution
operations to  Los Angeles,  California, and  transitioned
its  craft  manufacturing   needs  to  Mexican  production
facilities operated  by  an  affiliate  of Commerce.   The
Company continues to maintain a sales  and  administrative
staff in  Knoxville  for  the  operations  of  the  Innovo
subsidiary.

In addition to the foregoing, the  Company also terminated
the  operations  of  Nasco  Products  International,  Inc.
("NPII") during fiscal 2000,  which had  been unprofitable
and approved a plan to dispose  of  certain  real property
which was not central to the Company's ongoing operations.

In connection  with  these  restructuring  activities, the
Company incurred certain one-time charges.   These charges
include the loss on disposal of fixed assets, salaries and
other costs to exit the  Knoxville operations,  relocation
costs,  loss  on  inventory  liquidation   and  impairment
charges related to  real  properties  held  for  disposal.
Inventory   liquidation   losses   totaling  $300,000  are
included  in   cost  of  goods   sold  and  the  loss   on
sale of fixed assets of $99,000 is included as a component
of  other  expense  in   the   accompanying   consolidated
statements  of  operations for the year ended November 30,
2000.   The   remaining  charges  have  been  included  in
Restructuring  and  other  charges   in  the  accompanying
consolidated statements of operations  for  the year ended
November  30,   2000,   no   accruals   related   to   the
restructuring activities remained at November 30, 2002.

The Company has experienced operating losses  and negative
cash flows from operations during the years ended December
1, 2001 and November 30, 2000.  The Company  is  dependent
on  credit arrangements   with   suppliers  and  factoring
agreements for working capital needs.   From time to time,
the Company has obtained short-term  working capital loans
from senior members of   the management and  the Board  of
Directors, and conducted equity financing  through private
placements (See Notes 11 and 14).

During the year ended  November 30, 2002,  the Company had
net income and  had  sales growth  that  resulted  from an
increase   in   Innovo's   accessory   business   and  the
acquisition  of  Joe's  and  IAA  during  the  year  ended
December 1, 2001.

The  Company  is  anticipating  a  continued  increase  in
organic growth during 2003.   The Company believes that it
may need to obtain additional  working capital in order to
meet  the operational  needs associated  with such growth.
The Company believes that it  will  address these needs by
increasing  the  availability  of  funds  offered  to  the
Company under its financing  agreements with CIT  or other
financial institutions.   Nonetheless, the  Company may be
required to  obtain  additional  capital through  debt  or
equity financing.  See "Liquidity  and  Capital Resources"
in  Managements  Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

The Company believes that  any additional capital,  to the
extent needed, may  be  obtained  from the sale of  equity
securities  or  through  short-term working capital loans.
However, there  can  be  no  assurance that  this or other
financing will be available if needed.   The inability  of
the Company to be  able  to  fulfill  any  interim working
capital requirements would force  the Company to constrict
its operations.



2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include
the  accounts  of  the   Company  and  its  wholly   owned
subsidiaries.   All significant  intercompany transactions
and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with
accounting  principles  generally accepted  in  the United
States   requires   management   to   make  estimates  and
assumptions that affect the reported amounts of assets and
liabilities  and  disclosure  of  contingent   assets  and
liabilities at the  date of  the  financial statements and
 the reported amounts of revenues  and expenses during the
reporting period.   The most significant  estimates affect
the evaluation of contingencies,  and the determination of
allowances for accounts receivable and inventories. Actual
results could differ from these estimates.

Revenue Recognition

Revenues are recorded on the  accrual basis of accounting
when  the  Company ships  products  to its  customers and
title to the products transfers to the customers.   Sales
returns must be approved by the Company and are typically
only  allowed  for  damaged  goods.   Such  returns  have
historically not been material  and  are  provided for at
the time the revenue is recognized.

Allowances for co-op and other advertising programs, when
based on a  percentage of sales to a customer,  have been
recorded as a reduction of gross sales.

Shipping and Handling Costs

The  Company  outsources  its  distribution functions  to
Commerce. Shipping  and handling  costs include  costs to
warehouse, pick, pack and deliver inventory to customers.
In certain cases the Company is responsible  for the cost
of freight to deliver goods to the customer. Shipping and
handling costs were approximately $588,000  and  $172,000
for  the  year  ended  November 30, 2002, and December 1,
2001, respectively,  and are included in selling, general
and administrative expenses.

Earnings (loss) Per Share

Net  income  (loss)  per  share  has  been  computed  in
accordance  with  Financial  Accounting  Standard  Board
(FASB) Statement No. 128, "Earnings Per Share."

Comprehensive Income (loss)
Assets and  liabilities  of  the  Japan  and  Hong  Kong
divisions  are  translated at the  rate  of  exchange in
effect on the balance sheet date, income   and  expenses
are  translated   at   the  average  rates  of  exchange
prevailing during the year.  The functional currency  in
which the Company transacts business is the Japanese yen
and Hong Kong dollar.   Comprehensive income consists of
net  income  and  foreign  currency  gains  and   losses
resulting from translation of assets and liabilities.

Advertising Costs

Advertising costs are expensed  as  incurred, except for
brochures   and  catalogues  that  are   capitalized and
amortized over their expected period of future benefits.
 Capitalized costs related to catalogues  and  brochures
are  included  in  prepaid expenses  and  other  current
assets.   Advertising  expenses  included   in  selling,
general and administrative  expenses  were approximately
$287,000, $114,000  and  $8,000  for  the periods  ended
November 30, 2002,  December 1, 2001  and  November  20,
2000, respectively.



Financial Instruments

The fair values of the  Company's financial  instruments
(consisting  of  cash,  accounts  receivable,   accounts
payable and notes payable) do not differ materially from
their recorded amounts because of  the  relatively short
period of time between origination  of  the  instruments
and their expected realization.   Management believes it
is not practicable  to  estimate  the  fair value of the
first mortgage loan  as the  loan has  a fixed  interest
rate secured by real property in Tennessee.  The Company
neither  holds,   nor  is  obligated  under,   financial
instruments  that  possess  off-balance sheet  credit or
market risk.

Impairment of Long-Lived Assets

Long-lived assets  are  reviewed for impairment whenever
events or  changes  in  circumstances indicate that  the
carrying amount of  an  asset may  not  be  recoverable.
Recoverability of assets to be held and used is measured
by a comparison of the carrying amount  of  an  asset to
future net cash flows expected  to  be  generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair
value  of  the  assets.   Assets to  be disposed  of are
reported at  the lower of  the  carrying amount  or fair
value less costs to sell. During the year ended November
30, 2000, the Company recorded  an impairment charge  of
$600,000,  related   to   certain   real   and  personal
properties.

In July 2001, the Financial  Accounting Standards  Board
(FASB)  issued   Statement   of   Financial   Accounting
Standards (SFAS) No. 142 "Goodwill and  Other Intangible
Assets,"  which  establishes  financial  accounting  and
reporting for  acquired  goodwill  and other  intangible
assets and  supersedes  APB  Opinion No. 17,  Intangible
Assets. The Company adopted SFAS No. 142 beginning  with
the first  quarter  of 2002.  SFAS No. 142 requires that
goodwill and  intangible  assets  that  have  indefinite
useful lives not  be  amortized  but, instead, tested at
least annually for  impairment  while  intangible assets
that have finite useful lives continue to  be  amortized
over their respective  useful lives.   Accordingly,  the
Company has not amortized goodwill.

SFAS  No.  142  requires   that   goodwill   and   other
intangibles  be  tested for  impairment using a two-step
process. The first step is to determine  the  fair value
of the reporting unit,  which  may be calculated using a
discounted cash flow methodology, and compare this value
to its carrying value.   If the fair  value exceeds  the
carrying value,  no  further  work  is required  and  no
impairment loss would be recognized.  The second step is
an allocation of the fair value of the reporting unit to
all of the reporting unit's assets and liabilities under
a hypothetical purchase price allocation.  Based on  the
evaluation  performed  by  the  Company,  there  is   no
impairment to be recorded at November 30, 2002.

Cash Equivalents

The Company considers all highly liquid investments that
are both readily convertible into  known amounts of cash
 and mature within 90 days from  their date of  purchase
to be cash equivalents.



2. Summary of Significant Accounting Policies (continued)

Concentration of Credit Risk

Financial  instruments  that  potentially  subject  the
Company to significant  concentrations  of credit  risk
consist principally of  cash,  accounts  receivable and
amounts due from factor. The Company maintains cash and
cash equivalents  with  various financial institutions.
Its  policy is designed  to  limit  exposure to any one
institution.  The Company performs  periodic valuations
of  the  relative  credit  rating  of  those  financial
institutions  that  are  considered  in  the  Company's
investment strategy.

Concentrations of credit risk with respect  to accounts
receivable are limited due to the  number of  customers
comprising  the  Company's customer base.  However,  at
November 30, 2002 and  December 1, 2001, $1,652,000 and
$535,000, respectively  of  total non-factored accounts
receivables,  (or  60%  and 57%)  were  due  from  four
customers. The Company does not  require collateral for
trade accounts  receivable, and,  therefore, is at risk
for up to $2,813,000  and  $949,000 if  these customers
fail to pay.   The Company provides  an  allowance  for
 estimated losses to be incurred  in  the collection of
accounts   receivable   based   upon   the   ageing  of
outstanding  balances  and   other  account  monitoring
analysis.   Such  losses have  historically been within
management's expectations.

Property, Plant and Equipment

Property,  plant  and  equipment  are  stated  at cost.
Depreciation is computed on a  straight-line basis over
the estimated useful  lives of the assets  and includes
capital lease amortization.  Leasehold improvements are
amortized over the lives  of  the  respective leases or
the  estimated  service   lives   of  the improvements,
whichever is shorter.   Routine maintenance and repairs
are  charged  to  expense  as  incurred.   On  sale  or
retirement, the  asset  cost  and  related  accumulated
depreciation  or  amortization  is  removed   from  the
accounts, and any related gain  or loss is included  in
the determination of income.

Reclassifications

Certain reclassifications have been made to  prior year
consolidated financial  statements to  conform  to  the
current year presentation.

Recently Issued Financial Accounting Standards

In April 2002, the FASB issued SFAS No. 145, "Rescission
of FASB Statements No. 4, 44, and 64,  Amendment of FASB
Statement  No. 13,  and  Technical  Corrections."   This
Statement rescinds  or  modifies  existing authoritative
pronouncements including FASB Statement No. 4 "Reporting
Gains and Losses  from  Extinguishment  of  Debt."  As a
result of the issuance of SFAS No. 145, gains and losses
from  extinguishment  of  debt should  be  classified as
extraordinary items only if  they  meet  the criteria in
Opinion  30.   "Reporting  the  Results  of  Operations-
eporting the  Effects  of  Disposal  of  a Segment of  a
Business, and  Extraordinary, Unusual  and  Infrequently
Occurring  Events  and  Transactions."    Applying   the
provisions of Opinion 30 will  distinguish  transactions
that are part of  an entity's  recurring operations from
those that are unusual  or infrequent  or  that meet the
criteria for classification  as  an  extraordinary item.
The  provisions  of  this   Statement  related  to   the
rescission of Statement 4  shall  be  applied  in fiscal
years beginning after May 15, 2002.  Any gain or loss on
extinguishment  of  debt  that   was  classified  as  an
extraordinary item in prior periods presented  that does
not meet the criteria in Opinion 30  for  classification
as an extraordinary item shall  be reclassified.   Early
application of the provisions of this  Statement related
to the rescission of Statement 4 is  encouraged.  Innovo
is currently evaluating the  impact  that this statement
may have on  any  potential  future  extinguishments  of
deb  t.  Upon  adoption  of  SFAS No. 145,  Innovo  will
reclassify  items  previously reported  as  extraordinary
items  as  a  component  of   operating   income  on  the
accompanying statements of income.



2.  Summary of Significant Accounting Policies (continued)

Recently Issued Financial Accounting Standards (continued)

During 2002, the FASB issued SFAS No. 148, "Accounting for
Stock Based Compensation -Transaction and  Disclosure, an
amendment to  FASB  Statement No. 123."    This  Statement
requires  more  extensive  interim  disclosure  related to
stock  based  compensation   for  all  companies  and  for
companies that elect to  use  the  fair  value  method for
employee stock compensation, permits additional transition
methods.  This statement  is  effective  for fiscal  years
ending  after  December  15,  2002,  with  early  adoption
regarding   annual  disclosure   encouraged.   Innovo   is
currently  evaluating  the  impact  of  adoption  of  this
standard.

In August 2001,  the FASB issued SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." This
standard sets forth the impairment  of  long-lived assets,
whether they are held and used or  are disposed of by sale
or  other  means.   It  also  broadens  and  modifies  the
presentation of discontinued operations. The standard will
be effective for  the Company's fiscal year 2003, although
early  adoption  is   permitted, and  its  provisions  are
generally to be applied prospectively.   The Company  does
not  believe  it  will  have  a  material  impact  on  its
consolidated financial statements.

In June 2002,  the  FASB  issued  Statement  of  Financial
Accounting  Standards  No. 146,   Accounting   for   Costs
Associated with Exit or Disposal Activities (Statement No.
146).   Under  Statement No. 146, it  addresses  financial
accounting and reporting for costs associated with exit or
disposal activities  and  nullifies Emerging  Issues  Task
Force (EITF) Issue  No. 94-3, "Liability  Recognition  for
Certain Employee Termination Benefits  and  Other Costs to
Exit an Activity (including Certain  Costs  Incurred in  a
Restructuring)."   The provisions  of  this Statement  are
effective  for  exit  or   disposal  activities  that  are
initiated after December 31, 2002, with  early application
encouraged.   The Company will adopt  Statement No. 146 in
the first quarter of 2003 and does not expect the adoption
to have a material effect  on  its  results of operations,
financial position or cash flows.

In December 2002, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 148
"Accounting for  Stock-Based  Compensation-Transition  and
Disclosure"  (SFAS  148),  which  amends   SFAS  No.  123,
"Accounting for Stock-Based Compensation".   Statement 148
provides alternative methods of transition for a voluntary
change to the fair value  based  method of accounting  for
stock-based employee compensation.  In addition, Statement
148 amends the disclosure requirements of Statement 123 to
require more  prominent and more  frequent  disclosures in
financial  statements  about  the effects  of  stock-based
compensation.   The   transition   guidance   and   annual
disclosure provisions of Statement 148  are effective  for
fiscal years ending after  December 15, 2002, with earlier
application  permitted  in  certain   circumstances.   The
interim disclosure provisions  are effective for financial
reports  containing  financial   statements   for  interim
periods beginning  after  December 15, 2002.   The Company
does not plan on  changing  its method  of  accounting for
stock-based employee compensation and will comply with the
new  disclosure  requirements  beginning  with its  annual
report and Form 10-K  for  the  year  ending  November 29,
2003. The Company is  in  the  process  of  evaluating the
adoption of  this standard, but does  not  believe it will
have  a  material  impact  on  its consolidated  financial
statements.

3. Acquisitions

On August 24, 2001, the Company through  its  newly formed
subsidiary Innovo  Azteca  Apparel Inc., ("IAA") completed
the  first  phase  of  a  two   phase   acquisition   (the
"Acquisition") of Azteca  Production International, Inc.'s
("Azteca") knit apparel division ("Knit Division"). Azteca
is an affiliate of Commerce.  Pursuant to the terms of the
first phase closing, the  Company has purchased  the  Knit
Division's customer list, the  right  to  manufacture  and
market all of  the  Knit  Division's current  products and
entered  into  certain  non-compete  and  non-solicitation
agreements and other intangible assets associated with the
Knit Division (Phase I Assets).   As consideration for the
Phase I Assets, the Company has  issued to Azteca, 700,000
shares of Company's common stock valued at $1.27 per share
based upon the closing price of the common stock on August
24, 2001, and  promissory  notes in  the  amount  of  $3.6
million.



The second phase of the Acquisition called for the Company
to purchase for cash  the inventory  of  the Knit Division
prior to November 30, 2001 , with the consideration not to
exceed $3 million.   The acquisition of  the inventory was
subject to the Company obtaining adequate financing.  Upon
the mutual agreement of both parties,  the Company did not
complete the second phase of the  acquisition prior to the
expiration date due to the Company's in ability to  obtain
the necessary funding.

The Acquisition  was  accounted  for  under  the  purchase
method of accounting for business combinations pursuant to
FAS  141.   Accordingly,   the  accompanying  consolidated
financial statements include the results of operations and
other information for  the  Knit Division for  the  period
from August 24, 2001 through December 1, 2001.

The Acquisition was  consummated  to allow  the Company to
continue  its  expansion  into  various  segments  of  the
apparel  industry.   The   Company   believes   that   the
acquisition of the Knit Division,  its customer  list  and
certain personnel, will permit the  Company to  expand its
customer base and product offerings. In the event that the
sales of the Knit  Division  did  not  reach $10.0 million
during the 18 month period  following the closing  date of
the Acquisition,  any remaining  unpaid principal  of  the
$1.0  million  promissory  note was  to  be reduced  by an
amount equal to the sum  of $1.5 million  less 10% of  the
et sales of the Knit Division during  the 18-month  period
following the closing date.  The $10 million threshold was
met during the 18-month period following the closing date.

The purchase price  of  $4,521,000, including  acquisition
costs of $36,000, have been allocated to  the  non-compete
agreement  ($250,000)  and   the   remainder  to  goodwill
($4,271,000). The non-compete agreement  will be amortized
over two years, based upon the term of the agreement.  The
total amount of the goodwill is  expected to be deductible
for income tax purposes.

The  following table shows  the  Company's  unaudited  pro
forma consolidated results  of  operations for  the fiscal
years  ended  December  1,  2001  and  November  30,  2000
assuming the Acquisition had occurred at the  beginning of
the respective year (in thousands):


                                (Unaudited) Pro Forma
                                      Year Ended
                              December 1     November 30,
                                 2001            2000
                                 ----            ----

Net sales                     $  17,243      $  23,649
Loss before extraordinary
 item                         $    (406)     $  (3,589)

Net loss                      $    (406)     $  (4,684)
Loss per share: basic and
 diluted                      $   (0.03)     $   (0.53)




3.  Acquisitions (continued)

Joe's Jeans License

The  pro  forma  operating  results  do  not  reflect any
anticipated operating efficiencies  or synergies  and are
not necessarily indicative  of the  actual  results which
might have occurred had the operations and  management of
the companies been combined for the fiscal years included
above.

On February 7, 2001, the Company acquired  the  licensing
rights  to  the  Joe's Jeans  label  from  JD Design, LLC
("JD"), along with the  right  to market  the  previously
designed  product  line  and  existing  sales  orders, in
exchange for 500,000 shares of the Company's Common Stock
and, if  certain sales  and gross  margin objectives  are
reached, a warrant,  with  a four year term,  granting JD
the right  to  purchase 250,000 shares  of  the Company's
common  stock at  a  price  of $1.00 per  share.   As  of
November 30, 2002, the sales and gross margin  objectives
had not been reached.

Additionally, the designer of the Joe's Jeans line joined
the Company as an employee  and  has  received an option,
with a four-year term,  to purchase 250,000 shares of the
Company's common stock  at $1.00 per share,  vesting over
24 months. Under the terms of the license, the Company is
required  to  pay  a  royalty of 3% of  net  sales,  with
additional royalty amounts due in  the event  the Company
exceeds  certain   minimum   sales   and   gross   profit
thresholds. The Company recorded $277,000  and $46,000 in
royalty expense  for  the  license  in  the  years  ended
November 30, 2002 and December 1, 2001, respectively.

The purchase price of $480,000 was determined  based upon
the fair value of the 500,000 shares issued in connection
with the acquisition.   The  entire  purchase  price  was
allocated to licensing rights  that  are  being amortized
over the 10-year term of the license.

Joe's Jeans did not have substantial operations prior to.
the acquisition by the Company. The Company's acquisition
of Joe's Jeans was done to  allow  the Company to  expand
its  apparel  offerings  and  to  broaden  the  Company's
customer base to include specialty boutiques and high-end
retail stores.

4. Inventories

Inventories  are  stated  at   the   lower  of  cost,  as
determined by the first-in, first-out method,  or market.
Inventories consisted of the following (in thousands):

                             2002          2001
                             ----          ----

Finished goods               $  5,741      $  2,535
Raw materials                      74             -
                              -------       -------
                                5,815         2,535
Less allowance for
  obsolescence and
  slow moving items              (105)         (125)
                              -------       -------
                             $  5,710      $  2,410
                              -------       -------
                              -------       -------



5.   Real Estate Transaction

IRI,  the   Company's   real-estate   investment  subsidiary
headquartered in Commerce, CA, has  invested  in 22  limited
partnerships. On  April 5,  2002, the Company issued 195,295
shares of its  cumulative,  non-convertible preferred  stock
with an  8%  coupon  ("Preferred Shares"), having  a  stated
redemption value  at  $100  per  share (approximately  $19.5
million), to IRI in exchange for all 1,000 shares  of  IRI's
capital stock.  On that same day, IRI acquired a 30% limited
partner interest in each of 22 separate limited partnerships
(collectively, the "Limited Partnerships") in  exchange  for
the Preferred Shares.

Simultaneous with the acquisition by IRI of its interests in
the Limited Partnerships,  the Limited Partnerships acquired
28 apartment complexes at  various locations  throughout the
United States consisting  of  approximately 4,000  apartment
units (the "Properties").   The aggregate purchase  price of
the Properties  was $98,079,000.  The  Limited  Partnerships
were  organized  for  the  sole  purpose  of  purchasing the
Properties.  Th e Preferred Shares  were transferred  by the
IRI to the sellers of the Properties  in partial  payment of
the purchase price of the Properties.  The allocation of the
Preferred Shares among the Limited  Partnership was based on
the number of Preferred Shares applied to the purchase price
of the Property acquired by  such Limited Partnership.   The
allocation of  Preferred Shares  was based  on  the contract
price  of  the  Property  plus  costs  associated  with  the
transaction  (e.g.   attorney's   fees,   real   estate  tax
prorations, etc.), less the loan amount,  less the cash from
the limited partner, less the buyer's deposit.  The partners
in each of the partnerships are: (i) IRI with  a 30% limited
partnership  interest, (ii) Metra  Capital, LLC  with  a 69%
limited partnership interest and (iii) a 1% general  partner
which is unique to each partnership.

Each   Limited   Partnership   owns  different   Properties.
Approximately 20%  of  the  $98,079,000  aggregate  purchase
price was paid by the transfer  of  Preferred Shares to  the
sellers  in  partial  payment  of  the  purchase price.  The
balance of the purchase price  was funded  by  Metra Capital
LLC and by financing provided by Bank of America.  The  Bank
of  America  Financing  is  in  the  approximate  amount  of
$81,000,000 and is secured by  the Properties,  but  neither
the  Company  nor  IRI  have  any  obligations   under  that
financing.  None of the Company's Board Members or executive
officers  participated  in  the  transaction.   However, Mr.
Hubert Guez  and  Mr. Joseph Mizachi,   both  of  whom   are
affiliates of the Company due to their 10% ownership or more
of Company common stock, were investors in the partnerships.

The Preferred Shares 8% coupon is funded entirely and solely
through partnership distributions  received by  the  Company
from cash flows generated by the operation  and  sale of the
Properties. If sufficient funds  are  not available  for the
payment of a full quarterly 8% coupon, then partial payments
shall be made  to  the  extent  funds are available.  Unpaid
dividends accrue. Partnership distribution amounts remaining
after the payment of all  accrued dividends must  be used by
the Company to redeem outstanding Preferred Shares.

The Preferred Shares  have  a  redemption price  of $100 per
share.   In the event  that  the  partnership  distributions
received by  the Company  are insufficient  to  cover the 8%
coupon or the redeem Preferred Shares, the Company will have
no obligation  to  cover  any  shortcomings so  long  as all
distributions from the partnership are  properly  applied to
the payment of dividends  and  the  redemption of  Preferred
Shares.  If, after all of the Properties  are  sold  and the
proceeds of the sale of the Properties and cash flow derived
from such Properties have either been applied to the payment
of the 8% coupon and the redemption  of  Preferred Shares or
deposited into the sinking fund  for  that purpose,  and the
total amount  of  funds  remaining in  the  Sinking Fund  is
insufficient  to  pay  the  full  8%  coupon  and  the  full
Redemption Price for all  then outstanding Preferred Shares,
then the Company (or IRI) shall pay $1.00 in  total into the
Sinking Fund and the Redemption Price shall  be  adjusted so
that it equals (x) the total  amount  in  the  sinking  fund
available for  distribution,  minus (y) all direct  costs of
maintaining  the  Sinking  Fund  and  making   distributions
therefrom,  divided  by (z) the number  of  then outstanding
Preferred Shares. The adjusted Redemption Price shall be and
shall represent full and final payment for the redemption of
all Preferred Shares.



IRI receives partnership distributions on the  occurrence of
Capital Events (property sales) and,  quarterly  "cash flow"
distributions.   Partnership  distributions   are   made  in
descending priority with first priority  going to the  Metra
Capital, LLC, then  to  Third Millennium Partners,  LLC,  an
entity controlled by Mr. Joseph Mizrachi,  then to IRI until
all capital has been returned and certain specified  returns
are achieved.  Thereafter distributions  are divided  70% to
the Metra  Capital, LLC and 30% to IRI.    According to  the
original  terms  of  the  transaction, IRI  is  entitled  to
receive  from  Metra Management LLP  a  sub-management  fees
equal  to  1%  of  the  gross   annual   revenues  from  the
Properties,  plus  an  additional  incentive management  fee
equal to 1% of the gross annual revenue  less administrative
costs, entity maintenance  costs, third  party  professional
fees, travel costs, costs of  property studies, etc.  to the
extent that there is excess cash  flow (i.e., cash remaining
after payment  of  debt  service, all  other  amounts due in
connection with the mortgage and all property  expenses then
due and payable, including, the 1% of gross  annual revenues
the IRI is to receive.  In an effort to simplify the amounts
owed  under  the  Sub Asset  Management Fee  agreement,  the
parties  to  the  sub-asset  management fee  agreement  have
agreed to a quarterly payment of $85,000 as  satisfaction of
amounts owed  to  IRI  under  the  sub-asset management  fee
agreement.  Neither IRI nor the Company have any  obligation
to apply any fees paid to IRI or the Company  under the sub-
asset management  fee agreement  to  the payment  of  the 8%
coupon or the redemption of Preferred Shares.

The Company  has not  given  accounting  recognition to  the
value of its investment in the Limited Partnerships, because
the Company has determined that the asset is  contingent and
will only have value to the extent  that cash flows from the
operations of the properties or  from the sale of underlying
assets is in excess of the 8% coupon  and  redemption of the
Preferred Shares.   The Company is  obligated to  pay the 8%
coupon and redeem the Preferred Shares from  its partnership
distributions, prior to  the  Company being able to  recover
the underlying value  of  its investment.  Additionally, the
Company has determined that the Preferred Shares will not be
accounted for as a  component of equity  as  the  shares are
redeemable outside of the Company's control.  No  value  has
been  ascribed  to  the   Preferred  Shares  for   financial
reporting purposes as the Company is obligated to pay the 8%
coupon or redeem the  shares only  if  the Company  receives
cash flow from the Limited Partnerships adequate to make the
payments.  The Company has included the quarterly management
fee paid to IRI in other  income  using the accrual basis of
accounting.

6. Accounts Receivable

Accounts receivable consist of the following (in thousands):

                                             2002       2001
                                             ----       ----

Nonrecourse receivables assigned to factor,
 net of advances                             $  307   $  681
Nonfactored accounts receivable               2,813      949
Allowance for customer credits and doubtful
 accounts                                      (383)    (164)
                                              -----    -----
                                             $2,737   $1,466
                                              -----    -----
                                              -----    -----


On June 1, 2001, the Company entered into accounts receivable
factoring agreements with  the  CIT Group, Inc. ("CIT") which
may  be  terminated  with  60 days notice by CIT, or  on  the
anniversary  date, by  the  Company  provided 60 days written
notice  is  given.   Under  the  terms of  the agreement, the
Company has the option to factor receivables,  with CIT on  a
non-recourse basis, provided that CIT approves the receivable
in advance.  The Company may at its  option  also factor non-
approved  receivables  on  a  recourse basis.    The  Company
continues to be obligated in the event of product defects and
other disputes,  unrelated to  the  credit worthiness  of the
customer. The Company has  the  ability  to  obtain  advances
against factored receivables up to 85% of  the face amount of
the  factored  receivables.   The  agreement calls for a 0.8%
factoring fee on invoices factored with CIT and  a  per annum
rate equal to the greater of the Chase prime rate  plus 0.25%
or 6.5% on funds borrowed against the factored receivables.



6. Accounts Receivable (continued)

On  August  20,  2002,  the  Company's  Innovo   and   Joe's
subsidiaries  each   entered   into   amendments  to   their
respective   factoring    agreements   which   permit    the
subsidiaries to obtain advances of up to 50% of the eligible
inventory, as defined, up to $400,000 each. According to the
terms of the agreements,  amounts  loaned  against inventory
are to bear an interest rate  equal  to  the greater  of the
Chase prime rate plus 0.75% or 6.5% per annum.

7.  Property, Plant and Equipment

Property, plant and equipment consisted of the following (in
thousands):



                                              Useful
                                              Lives
                                             (Years)       2002      2001
                                              -----        ----      ----
                                                             

Building, land and improvements               8-38         $1,582    $1,248
Machinery and equipment                       5-10            258       120
Furniture and fixtures                        3-8             212       163
Transportation equipment                      5                13        13
Leasehold improvements                        5-8              14         4
                                                            -----     -----
                                                            2,079     1,548
Less accumulated depreciation and
 amortization                                                (660)     (575)
                                                            -----     -----
Net property, plant and equipment                          $1,419    $  973
                                                            -----     -----
                                                            -----     -----



Depreciation expense aggregated $86,000  and $88,000 for the
years ended November 30, 2002 and December 1, 2001.

8.  Intangible Assets

Identifiable intangible assets  resulting from  acquisitions
consist of the following (in thousands):

                                             2002      2001
                                             ----      ----


License rights, net of $88 and $40
 accumulated amortization for 2002 and
 2001, respectively                         $ 392      $ 440
Covenant not to compete, net of $155 and
 $35 accumulated amortization for 2002
 and 2001, respectively                        95        215
                                             ----       ----
                                            $ 487      $ 655
                                             ----       ----
                                             ----       ----

Amortization expense  related  to  the  licensing rights and
covenant not to  compete  total $168 and $75  for  the years
ended November 30, 2002 and December 1, 2001,  respectively.
Aggregate amortization expense will be  approximately  $143,
$48, $48, $48, $48 and $152 for fiscal years ending November
29, 2003   through   November  30,  2007   and   thereafter,
respectively.



9.  Long-Term Debt

Long-term debt consists of the following (in thousands):

                                            2002     2001
                                            ----     ----
First mortgage loan on Springfield
 property                                  $  558  $  625
Promissory note to Azteca                     786   1,000
Promissory note to Azteca                   2,043   2,600
                                            -----   -----
Total long-term debt                        3,387   4,225
Less current maturities                       756     845
                                            -----   -----
                                           $2,631  $3,380
                                            -----   -----
                                            -----   -----

The first mortgage loan is collateralized by a first deed
of trust  on  real  property  in  Springfield, TN (with a
carrying value of $1,220,000  at  November 30, 2002), and
by an assignment of key-man  life insurance on  the chief
executive officer of  the  Company  in  the  amount of $1
million.   The  loan  bears  interest  at  2.75% over the
lender's  prime  rate  per  annum  (which  was  7.50%  at
November  30, 2002  and  December 1, 2001)  and  requires
monthly principal and interest payments of $9,900 through
February 2010. The loan is also guaranteed  by  the Small
Business Administration (SBA).   In exchange for  the SBA
guarantee, the Company, Innovo, NP International, and the
President, Pat Anderson, of the Company have  also agreed
to act as guarantors for  the  obligations under the loan
agreement.

In connection with the acquisition of  the Knit  Division
from Azteca (see Note 3), the  Company issued  promissory
notes  in  the  face  amounts  of $1.0 million  and  $2.6
million,  which  bear  interest  at  8.0% per  annum  and
require   monthly   payments   of   $20,276  and  $52,719,
respectively.   The notes have  a  five-year term  and are
unsecured.

The $1.0 million note  was subject  to  adjustment in  the
event that the sales of the  Knit  Division did not  reach
$10.0 million  during  the  18-month  term  following  the
closing of the Acquisition. The principal amount was to be
reduced by an amount equal to the sum of $1.5 million less
10% of the net sales  of the Knit  Division during  the 18
months following the Acquisition.  For the 18-month period
following the closing of the Knit Acquisition,  nets sales
for the Knit Division exceeded the $10 million threshold.

In the event that the  Company  determines, from  time  to
time,  at  the  reasonable  discretion  of  the  Company's
management, that its  available funds  are insufficient to
meet the needs of its business, the  Company may  elect to
defer the payment of  principal  due under the  promissory
notes for as many as six months in  any one  year (but not
more  than  three  consecutive  months)  and   as  many  a
eighteen months, in the aggregate, over  the  term of  the
notes.   The term of  the  notes  shall  automatically  be
extended by one month  for  each  month  the  principal is
deferred, and interest  shall  accrue accordingly.  As  of
November 30, 2002, the  Company  has  not elected to defer
any payments due under the promissory notes.

At the election of Azteca, the balance of  the  promissory
notes may be offset against  monies payable  by  Azteca or
its affiliates to the Company for  the exercise  of issued
and outstanding stock warrants that are owned by Azteca or
its affiliates (including Commerce).



9. Long-Term Debt (continued)

Principal maturities of long-term debt as  of November 30,
2002 are as follows (in thousands):

2003                 $  756
2004                    816
2005                    884
2006                    736
2007                    109
Thereafter               86
                      -----
Total                $3,387
                      -----
                      -----

10.  Income Taxes

The provision (credit) for  domestic  and  foreign income
taxes is as follows (in thousands):



                                                         Year Ended
                                         November 30,     December 1,     November 30
                                             2002            2001             2000
                                             ----            ----            ----
                                                                      

Current:
Federal                                  $      -         $     -          $     -
State                                          94              89                -
Foreign                                        46               -                -
                                          -------          ------           ------
                                              140              89                -

Deferred:
Federal                                         -               -                -
State                                           -               -                -
Foreign                                         -               -                -
                                          -------          ------           ------
Total                                    $    140         $    89          $     -
                                          -------          ------           ------
                                          -------          ------           ------



The source of income (loss) before the provision for taxes
is as follows (in thousands):


                                  Year Ended
  November 30,   December 1,  November 30,
                      2002          2001          2000
                     ------        ------        ------
Federal            $    599       $  (529)      $(6,151)
Foreign                 113             -             -
                     ------        ------        ------
Total               $   712       $  (529)      $(6,151)
                     ------        ------        ------
                     ------        ------        ------

10.  Income Taxes (continued)

Net deferred tax assets result from the following temporary
differences between the book  and  tax bases of  assets and
liabilities at (in thousands):


                                            2002      2001
                                           ------    ------
Deferred tax assets:
 Allowance for doubtful accounts          $    102   $   66
 Inventory                                     310       87
 Benefit of net operating loss
  carryforwards                             13,129    7,163
 Capital loss carryfowards                     280        -
 Amortization of intangibles                   (77)       -
 Other                                         174        -
                                           -------    -----
Gross deferred tax assets                   13,918    7,316
Valuation allowance                        (13,918)  (7,316)
                                           -------    -----
Net deferred tax assets                   $      -   $    -
                                           -------    -----
                                           -------    -----


The reconciliation of the effective income tax  rate to the
federal statutory rate for the  years  ended is as  follows
(in thousands):


                                            2002      2001      2000
                                            ----      ----      ----
                                                        

Computed tax provision (benefit) at the
 statutory rate                              34%      (34)%     (34)%
State income tax                             13        18         -
Foreign taxes in excess of statutory rate     2         -         -
Utilization of unbenefitted net operating
 loss carryforwards                          45         -         -
Change in valuation allowance                16        34        34
                                             --        --        --
                                             20%       18%        -
                                             --        --        --
                                             --        --        --



The Company has consolidated net operating loss carryforwards
of  approximately  $38.6  million   expiring   through  2020.
However, as the result of "changes in  control" as defined in
Section 382  of  the  Internal  Revenue Code,  a  significant
portion of such carryforwards  may  be  subject to an  annual
limitation. Such limitation would have the effect of limiting
to the  future  taxable  income that  the  Company may offset
through the  year  2014 through  the  application  of its net
operating loss carryforwards.

The Company has been under audit by  the  state of  Tennessee
for the years 1994 through 1999.  The Company believes it has
made adequate provision for taxes that may be due as a result
of the audit.



11.  Stockholders' Equity

Private Placements and Stock Issuance

During fiscal 2002, the Company did not issue  any shares of
common  stock.   During  fiscal  2002,  the  Company  issued
preferred shares in association with the purchase of limited
partnerships in certain real estate properties.  See Note 4.

During 2001, in connection with the Acquisition of  the Knit
Division  from  Azteca  (see  Note  3), the  Company  issued
700,000 shares of its common stock, and  in  connection with
the acquisition  of  the  Joe's Jeans  license  from JD, the
Company issued 500,000 shares of the Company's  common stock
and a warrant to purchase 250,000  shares of  the  Company's
common stock at a price of $1.00 per share, provided certain
sales and gross margin targets are met.

During fiscal 2000, the Company  issued 1,787,365  shares of
common  stock   and   warrants  to  purchase  an  additional
1,500,000 shares of common stock at $2.10  per share to  the
Furrow Group in exchange for  the  Furrow Group's assumption
of $1,000,000 of the Company's debt and the  cancellation of
$1,000,000 of  indebtedness  owed to members of  the  Furrow
Group.   The  issuance  of  the shares  of common  stock and
warrants   resulted   in  a  $1,095,000   charge   for   the
extinguishment of debt.

During fiscal 2000, the Company issued 592,040 shares of its
common stock and warrants to purchase an  additional 102,040
shares at $1.75 per share to private investors for $600,000.
In August and October 2000, the Company issued  an aggregate
of 2,863,637  shares   of   common  stock  to  Commerce  for
$3,000,000 in  cash. In addition, Commerce received warrants
to purchase an additional 3,300,000 shares  of  common stock
with  warrants   for  3,000,000  shares  of   common   stock
exercisable over a three-year period at $2.10 per share. The
remaining warrants for 300,000 shares  of  common stock  are
subject to a two-year vesting  period and  can be  exercised
over a five-year period, once vested at $2.10 per share. The
proceeds were used to purchase inventory  and  services from
Commerce and its affiliates and to repay certain outstanding
debt.  In October and November 2000, the  Company  issued an
aggregate of 2,125,000 shares of common stock  and  warrants
to purchase an additional 1,700,000 shares  of  common stock
in private  placements  to  JAML, LLC,  Innovation, LLC  and
Third Millennium Properties, Inc. (the "Mizrachi Group") for
$1,700,000 in cash. The warrants expire three years from the
date of issuance and are exercisable at $2 per share.



Warrants

The Company has issued warrants in conjunction with  various
private  placements  of  its  common  stock, debt to  equity
conversions, acquisitions and in exchange for services.  All
warrants are currently  exercisable.   At November 30, 2002,
outstanding common stock warrants are as follows:


Exercise
Price             Shares           Issued         Expiration
--------          ------           ------         ----------

$1.75             102,040          July 2000     August 2003
$2.10           4,800,000       October 2000    October 2003
$2.00           1,700,000       October 2000    October 2003
$0.90              20,000      December 2001   December 2005
$1.50             100,000         March 2001      March 2004
$2.00             100,000         March 2001      March 2004
$2.50              50,000         March 2001      March 2004
$2.75             100,000           May 2002        May 2004
$2.50              75,000          June 2002        May 2004
$3.00              75,000          June 2002        May 2004
               ----------
                7,122,040
               ----------
               ----------


All grants  from  1996-2000  were  made  in  connection with
private placements of the Company's common stock  except for
warrants to purchase  1,500,000 shares  at  $2.10 per  share
issued  in  October  2000.   These warrants  were issued  in
connection  with  the  extinguishment   of   the   Company's
indebtedness and were valued  at $0.73 per share  using  the
Black-Scholes method on the date of grant.

During 2002, the  Company issued  warrants  to companies  in
exchange for certain services. Warrants to purchase 100,000,
75,000 and 75,000  shares  exercisable  at $2.75,  $2.50 and
$3.00 per share, respectively, which were vested on the date
of issuance and have a term  of  two years,  were  issued in
exchange for services to  be  rendered over three, four  and
four year terms, respectively.

During 2001, the Company issued  a  warrant  related  to the
Joe's License to purchase 250,000 shares of  common stock at
a price of $1.00 per share, in the event that certain future
sales and gross margin performance  criteria  are met.  This
warrant has not been  included  in  the table above  as  the
performance criteria has not been met.

During 2001, the Company also  issued warrants to  a company
in exchange  for  certain services.   Warrants  to  purchase
20,000, 100,000, 100,000 and 50,000,  shares  exercisable at
$0.90, $1.50, $2.00 and $2.50 per share, respectively, which
were vested on the date of issuance and have a term of three
years, were issued in exchange for  services which are to be
rendered over a four-year term.

Stock Based Compensation

In March 2000, the Company adopted the  2000 Employee  Stock
Option   Plan   ("2000  Employee  Plan").    Incentive   and
nonqualified options for up to  1,000,000 shares  of  common
stock may be granted to employees,  officers,  directors and
consultants.  The 2000 Employee  Plan limits  the  number of
shares that can be granted to any employee  in  one year and
th e total  market  value   of  common  stock  that  becomes
exercisable for  the  first time  by  any  grantee  during a
calendar year. Exercise price for incentive  options may not
be less than the fair market value  of  the Company's common
stock on the date of grant and the  exercise period  may not
exceed ten  years.   Vesting  periods and  option  terms are
determined by the Board of Directors. The 2000 Employee Plan
will expire in March 2010.



In September 2000, the  Company adopted the  2000  Director
Stock  Incentive  Plan ("2000 Director Plan"), under  which
nonqualified options for  up  to 500,000  shares of  common
stock may be granted.  Upon appointment  to  the  board and
annually thereafter during their term, each  director  will
receive options for common stock with aggregate  fair value
of $10,000.  These options  are  exercisable beginning  one
year  from  the  date  of grant  and expire  in ten  years.
Exercise price is set at 50% of  the  fair market  value of
the common stock  on the  date  of grant.   The discount is
ieu of cash director fees.   The 2000  Director  Plan  will
expire in September 2010.

During 2001, options were granted to purchase 832,564 shares
of the Company's common stock exercisable at $0.39 per share
for members of the Board of Directors and $1.00 to $1.25 per
share for  employees. Exercise price is at or above the fair
value of the common stock on the date  of  grant and  ranges
from $0.39  to  $4.75 per share.   Options  are  subject  to
vesting periods of zero to 48 months.   In  addition, during
April 1998, an option to purchase 25,000 shares  was granted
to an employee of a finance company as additional collateral
for a $650,000 loan to the Company.   This option expires in
2003.

The Company follows the guidance set forth in  APB No. 25 as
it pertains to the recording of expenses  from the  issuance
of incentive stock  options.   The Company has  adopted  the
disclosure-only provisions of SFAS No. 123.  Accordingly, no
compensation expense has been recorded  in  conjunction with
options issued  to  employees.   Had compensation  cost been
determined based on the fair value  of  the  options at  the
grant date and amortized  over the option's  vesting period,
consistent with the method prescribed  by  SFAS No. 123, the
Company's net income (loss)  would  have  been (in thousands
except per share information):



                                                2002       2001        2000
                                               ------     ------      ------
                                                               
Net income (loss) -as reported               $  572     $  (618)    $(6,151)
Net income (loss) - pro forma                    432      (1,072)     (6,241)
Net income (loss) per common share -
 as reported: Basic                             0.04       (0.04)      (0.75)
              Diluted                           0.04       (0.04)      (0.75)
Net income (loss) per common share -
 pro forma:  Basic                              0.03       (0.08)      (0.76)
             Diluted                            0.03       (0.08)      (0.76)



The fair value of  each option granted  is  estimated on the
date of grant using the  Black-Scholes option-pricing  model
with  the  following  assumptions used  for  grants in 2002,
2001, and 2000;  expected  volatility  of 38%, 68%  and 35%;
risk-free interest rate of  6.0%, 6.0%  and  6.17%; expected
lives from one to four years  and  expected dividends of 0%.
The Black-Scholes model was developed for use in  estimating
the fair value  of  traded  options, which  have no  vesting
restrictions and are fully transferable. In addition, option
valuation models  require  the  input  of  highly subjective
assumptions including the expected  stock  price volatility.
Because   the   Company's  employee   stock   options   have
characteristics significantly different from those of traded
options,  and  because  changes  in  the   subjective  input
assumptions can materially affect the  fair value  estimate,
in  management's  opinion,  the  existing   models  do   not
necessarily provide a  reliable single measure  of  the fair
value of its employee stock options.



Stock option activity during  the  periods indicated  is  as
follows:




                                 2002                   2001                   2000
                         --------------------  ---------------------     ------------------
                                     Weighted                Weighted               Weighted
                                      Average                 Average                Average
                                     Exercise                Exercise               Exercise
                          Options     Price       Options      Price       Options   Price
                         --------------------   --------------------      ------------------
                                                                    

Outstanding at
 beginning of year       1,517,981    $  2.33      685,417   $  3.89        685,417   $  3.89
Granted                     40,000       1.00      832,564      1.06              -         -
Exercised                        -          -            -         -              -         -
Forfeited                 (300,000)     (3.28)           -         -              -         -
                         ---------     ------      --------    -----        --------    ------
Outstanding at end of
 year                    1,257,981    $  2.07     1,517,981  $  2.33         685,417   $  3.89
                         ---------     ------     ---------   ------        --------    ------
                         ---------     ------     ---------   ------        --------    ------

Exercisable at end of
 year                    1,220,452                1,305,443                  541,667
                         ---------                ---------                 --------
                         ---------                ---------                 --------

Weighted average per
 option fair value of
 options granted
 during the year                      $  1.26                $  0.59                    $	    -
Weighted average
 contractual life
 remaining                            3.7 years              3.4 years



Exercise prices for options outstanding as  of November 30,
2002 are as follows:

               Number of
                Options        Exercise Price
               ---------       --------------

                  25,000         $     0.10
                 102,564               0.39
                 770,000          1.00-1.25
                 360,417          3.31-4.75
                 -------          ---------
               1,257,981
               ---------
               ---------



Earnings (Loss) Per Share

Earnings (loss)  per  share  are  computed  using  weighted
average common shares and dilutive common equivalent shares
outstanding.  Potentially  dilutive  securities consist  of
outstanding options and warrants.   A reconciliation of the
numerator and denominator of  basic  earnings per share and
diluted earnings per share is as follows:



                                                          Year Ended
                                          November 30     December 1     November 30
                                              2002           2001           2000
                                             ------         ------         ------
                                                                    

Basic EPS Computation:
Numerator                                   $   572,000   $  (618,000)    $(6,151,000)
Denominator:
 Weighted average common shares
  outstanding                                14,856,000    14,315,000       8,163,000

Total shares                                 14,856,000    14,315,000       8,163,000

Basic EPS                                   $      0.04   $     (0.04)    $     (0.75)

Diluted EPS Computation:
 Numerator                                  $   572,000   $   (618,000)   $(6,151,000)
Denominator:
 Weighted average common shares
  outstanding                                14,856,000     14,315,000      8,163,000
Incremental shares from assumed exercise
 of options and warrants                      1,253,000              -              -

Total shares                                 16,109,000     14,315,000      8,163,000

Diluted EPS                                 $      0.04    $     (0.04)    $    (0.75)



Potentially dilutive options  and  warrants in  the aggregate
of 8,397,000 and  7,372,000 in  2001  and 2000,  respectively
have been excluded from the calculation of  the diluted  loss
per share for each of  the two  years ended  December 1, 2001
as their effect would have been anti-dilutive.

12.  Commitments and Contingencies

Leases

The Company leases certain  property, buildings,  a  showroom
and equipment.  Rental expense for the years ended 2002, 2001
and 2000 was approximately $136,000,  $107,000 and  $160,000,
respectively. During September 2000, the Company entered into
a lease agreement with a related party, which is owned by the
Company's  Chairman,  Sam Furrow, to  lease  office  space in
Knoxville, TN.   The  lease  rate  is $3,500  per  month  for
approximately  5,000  square  feet  of  office  space, has  a
ten-year term  and  is  cancelable  with  six months  written
notice.



12.  Commitments and Contingencies (continued)

The future minimum rental commitments under operating  leases
as of November 30, 2002 are as follows (in thousands):

2003                                    $  138
2004                                       123
2005                                       116
2006                                       118
2007 and thereafter                        167
                                         -----
Total future minimum lease payments     $  662
                                         -----
                                         -----
License Agreements

On February 7, 2001, in connection with the acquisition of the
Joe's Jeans licensing rights, the Company entered into a  ten-
year license agreement that requires the  payment of a royalty
based upon 3%  of  net  sales, subject  to  additional royalty
amounts in the event certain sales and gross profit thresholds
are met on an annual basis.

On  March 26,  2001,  the  Company  entered  into  a licensing
agreement with Candies Inc. ("Candies") pursuant  to which the
Company   obtained  the  right  to  design,  manufacture   and
distribute bags, belts and small leather/pvc goods bearing the
Bongo trademark.   The agreement was amended  on July 26, 2002
that extended the term of the licensing  agreement  commencing
as of April 1, 2003  and  continuing  through  March 31, 2007,
unless the Bongo brand is sold in  its entirety, in which case
the  licensing  agreement  would  terminate immediately.   The
Company pays  Candies  a  5% royalty  on  net  sales and  a 2%
advertising  fee  on  the  net sales  of  the Company's  goods
bearing the Bongo trademark. The Company is  obligated to  pay
minimum royalties based  upon the annual term of  the  royalty
agreement in accordance with the following schedule:

2004                                     $  50,000
2005                                        75,000
2006                                        87,500
2007                                       100,000
                                          --------
Total future minimum royalty payments    $ 312,500
                                          --------
                                          --------

Innovo's collegiate sports-licensed accessory products display
logos, insignias, names, or slogans licensed  from the various
collegiate licensors. Innovo holds licenses for the use of the
logos and names of over 130  colleges  for  various  products.
Each of  the  collegiate  licensing  agreements grants  Innovo
either  an  exclusive  or  non-exclusive license  for  use  in
connection with specific products and/or specific territories.
The agreements are generally for a twelve to twenty four month
period and generally call for Innovo to pay  an  eight percent
royalty on goods sold bearing the marks.

Innovo had entered into a licensing agreement with Major League
Baseball, which  expired  on  December 31, 2002.  Subsequently,
Innovo  has  reached  a  verbal  agreement  with  Major  League
Baseball for an additional twelve  month  extension period  for
bag related products.   While Innovo  is  in the process of 12.
formally memorializing the agreement, there  are  no guarantees
that Innovo will be able to enter into a written agreement with
Major  League  Baseball.   According   to   the  terms  of  the
understanding between Innovo and Major  League Baseball, Innovo
is to pay an eleven percent royalty on  products  sold  bearing
Major League  Baseball  logos with  Innovo having  the right to
sell  the  products  to  concession,  club  retail  outlets and
premium customers in the United States.



License Agreements (continued)

While Innovo is continuing to develop products bearing the sport
licenses, Innovo  is  placing more  time  and resources  towards
developing more fashion oriented product lines  that the Company
believes will have greater potential in the marketplace.

Innovo's  craft  line  includes  tote  bags  imprinted  with the
E.A.R.T.H.  ("EVERY  AMERICAN'S  RESPONSIBILITY  TO  HELP")  BAG
trademark.  E.A.R.T.H. Bags are marketed as a reusable  bag that
represents an environmentally conscious  alternative to paper or
plastic bags.  Sales of  E.A.R.T.H. Bags, while  significant  in
Innovo's early years, have not been significant in the last five
years.  The  Company  still  considers  the trademark  to  be  a
valuable asset, and  has registered  it with  the United  States
Patent and Trademark Office. The Company has also  applied for a
trademark  for  its  product  lines  known  as  "Friendship" and
"Toteworks".

IAA has entered into a five-year licensing agreement with Mattel,
Inc. to produce Hot Wheels branded adult apparel  and accessories
in the United States, Canada and Puerto Rico.  Under the terms of
the license agreement, IAA  will  produce  apparel and  accessory
products targeted to men and women in the junior and contemporary
markets. The products lines will include active wear, sweatshirts
and pants, outerwear, t-shirts, "baby tee's" for women, headwear,
bags, backpacks and  totes, which  will  be  emblazoned  with the
familiar Hot Wheels flame logo.

The product line, which is scheduled to be released in 2003, will
also include items sporting the Hot Wheels 35th Anniversary logo,
as a part of the brand's celebratory  campaign for the year.  IAA
may terminate the agreement in any  year  by paying the remaining
balance  of  that  years  minimum  royalty  guarantees  plus  the
subsequent years minimum royalty guarantees.   Royalties paid  by
IAA earned in excess of the minimum royalty requirements  for any
one given year, may be credited towards  the  shortfall amount of
the minimum required royalties  in  any subsequent  period during
the term of the licensing agreement.

According to the terms  of  the  agreement, IAA has the  right to
sublicense  the  accessory  product's  category  to  Innovo.  The
agreement calls for a royalty rate of seven percent royalty and a
two percent advertising fee on the net sales of goods bearing the
Hot Wheels trademark. In the event IAA defaults upon any material
terms of the agreement, the  Licensor  shall  have  the right  to
terminate the agreement.

On  August 1,  2002,  IAA  entered  into  an  exclusive  42-month
worldwide agreement for the Lil Bow Wow license, granting IAA the
right  to  produce  and  market  products  bearing  the mark  and
likeness of the popular stage  and  screen performer.    The  IAA
division plans to create and market a  wide range of apparel  and
coordinating  accessories  for  boys   and   girls.  The  license
agreement between  IAA,  Bravado International Group, the  agency
with  the  master  licensing  rights  to  Lil  Bow  Wow,  and LBW
Entertainment, Inc. calls for the performer to make at  least one
public  appearance  every  six  months during  the  term  of  the
agreement to promote the Lil Bow Wow products, as well as use his
best efforts to promote  and  market these  products  on  a daily
basis.

Additional terms of the license  agreement allows IAA  to  market
boys and girls  products  bearing  the  Lil Bow Wow brand  to all
distribution channels, the right of  first refusal  on all  other
Lil Bow Wow  related  product categories  during the term  of the
license agreement, and the right of first of refusal  on proposed
transactions  by  the  licensor  with  third   parties  upon  the
expiration of the agreement.  The agreement calls for IAA to  pay
an eight percent royalty on the nets sales  of  goods bearing Lil
Bow Wow  related  marks.    In the event  IAA  defaults  upon any
material  terms of  the agreement,  the Licensor  shall have  the
right to terminate the agreement.  Furthermore, IAA has the right
to sublicense the accessory product's category to Innovo.



The Company  displays  names  and logos  on  its  products  under
license agreements that require royalties ranging  from 7% to 17%
of sales.   The agreements  expired  through  December  2002  and
require annual advance payments (included  in  prepaid  expenses)
and  certain  annual  minimum  payments.    Royalty  expense  was
$463,000, $132,000 and $373,000 for the years ending November 30,
2002, December 1, 2001, and November 30, 2000, respectively.

Litigation

The Company  is  involved  from time  to  time  in  routine legal
matters  incidental  to  its  business.   In the  opinion of  the
Company's management, resolution of such matters will  not have a
material  effect  on   its   financial  position  or  results  of
operations.

13. Segment Disclosures

Current Operating Segments

Prior to  November  30, 2000,  the  Company  had  two  reportable
segments based on the business activities from  which they earned
revenues or incurred expenses.  The revenue-generating operations
were segregated into  the  domestic  and  international  segments
based on the geographic markets in which  the  Company's products
were sold.  These  reportable  segments  were  managed separately
because they had different customers  and  distribution processes
or had different business activities.   During 2000, the  Company
significantly reduced its international sales efforts  and ceased
to operate as two reportable segments.

During 2002, the Company operated  in  two segments,  Accessories
and Apparel.   The Accessories segment  represents  the Company's
historical line of business as conducted by Innovo.   The Apparel
segment is comprised of the operations of Joe's and IAA,  both of
which began in 2001, as a result of acquisitions.   The Company's
real  estate  segment  is  represented  by  the  operations   and
investments  of  the  Company's  LMI  and  IRI subsidiaries.  The
operating segments have been classified  based upon the nature of
their respective operations,  customer base and the nature of the
products sold.

The Company evaluates performance and  allocates  resources based
on gross profits,  and  profit  or  loss  from  operations before
interest and  income  taxes.   The  accounting  policies  of  the
reportable  segments  are  the  same  as  those  described in the
summary of significant accounting policies.

Information for each reportable segment during  the  three  years
ended November 30, 2002, are as follows (in thousands):



November 30, 2002                        Accessories         Apparel      Other (A)      Total
                                         -----------         -------      ---------       -----
                                                                               

Revenues, net                             $   12,072        $ 17,537      $       -   $  29,609
Gross profit                                   3,502           6,268              -        9,770
Depreciation and amortization                     21             183             52          256
Interest expense                                 140             339             59          538

Segment assets                                 3,820           9,343          1,980       15,143
Expenditures for segment assets                   70              97            455          622



(A)  Other  includes  corporate expenses and assets and expenses
related to real estate investments.






December 1, 2001                            Accessories     Apparel    Other (B)    Total
                                            -----------     -------    --------    -------
                                                                         

Revenues, net                               $  5,642        $  3,650  $      -    $  9,292
Gross profit                                   1,751           1,208         -      2,959
Depreciation and amortization                     45              35        87         167
Interest expense                                  32              79       100         211

Segment assets                                 2,705           6,658       884      10,247
Expenditures for segment assets                   32               -       29          61



(B)  Other includes corporate expenses and assets and expenses
related to real estate investments.



November 30, 2000                             Domestic (C)     International       Total
                                              -----------      -------------       -----
                                                                           

Revenues, net                                 $    5,686       $         81       $  5,767
Gross profit                                         558                 14            572
Depreciation and amortization                        250                  -           250
Interest expense                                     446                  -            446
Extinguishment of debt                             1,095                  -          1,095

Segment assets                                     7,413                  3          7,416
Expenditures for segment assets                       76                  -             76



(C) Segment  operating  results  include  $600,000  charge for
impairment of long-lived assets held  for  sale related to the
Lake Worth, Florida, real estate property.

Operations by Geographic Areas

Information about  the  Company's  operations  in  the  United
States and Asia  is  presented  below  (in thousands).  Inter-
ompany revenues and assets have been  eliminated  to arrive at
the consolidated amounts.





                                                   Adjustments and
November 30, 2002      United States     Asia       Eliminations       Total
                                                             

Sales                  $    27,707      $  1,902     $        -       $  29,609
Inter-company
 sales                       2,228             -         (2,228)              -
                        ----------       -------      ---------        --------

Total revenue          $    29,935      $  1,902      $  (2,228)         29,609
                        ----------       -------       --------        --------
                        ----------       -------       --------        --------

Income from
 operations            $     1,558      $    115      $    (524)      $   1,189
                        ----------       -------       --------        --------
                        ----------       -------       --------        --------

Total assets           $    13,693      $  1,974      $    (524)      $  15,143
                        ----------       -------       --------        --------
                        ----------       -------       --------        --------

December 1, 2001

Sales                  $     9,292      $      -      $       -       $  9,292
Inter-company
 sales                           -            -              -              -
                        ----------       -------       --------        -------
                        ----------       -------       --------        -------

Total revenue          $     9,292      $      -       $      -       $  9,292
                        ----------       -------        -------        -------
                        ----------       -------        -------        -------

Income (loss) from
 operations            $      (399)     $      -       $      -       $   (399)
                        ----------       -------        --------       -------
                        ----------       -------        --------       -------

Total assets           $    10,247      $      -       $       -      $  10,247
                        ----------       -------        --------       --------
                        ----------       -------        --------       --------

November 30, 2000

Sales                  $     5,767      $      -        $      -      $   5,767
Inter-company
 sales                           -             -               -              -
                        ----------       -------          -------      --------
                        ----------       -------          -------      --------

Total revenue          $     5,767      $      -         $      -     $    5,767
                        ----------       -------          -------      ---------
                        ----------       -------          -------      ---------

Income (loss) from
 operations            $    (4,541)     $      -         $      -     $   (4,541)
                        ----------       -------          -------      ---------
                        ----------       -------          -------      ---------

Total assets           $     7,416      $      -         $      -     $    7,416
                        ----------       -------          --------     ---------
                        ----------       -------          --------     ---------




14. Related Party Transactions

The Company has adopted a policy requiring that any material
transactions between  the  Company and  persons  or entities
affiliated   with   officers,   directors    or    principal
stockholders of the Company be on terms no less favorable to
the Company than  reasonably  could  have  been  obtained in
arms' length transactions with independent third parties.

Anderson Stock Purchase Agreement

Pursuant to a Stock Purchase Right Award  granted in February
1997, the  Company's  president  purchased 250,000  shares of
common  stock (the Award Shares)  with  payment  made  by the
execution of a non-recourse note (the Note) for  the exercise
price of $2.81 per share ($703,125  in  the aggregate).   The
Note was due, without interest,  on  April 30, 2002, and  was
collateralized by the 1997 Award Shares. The Note may be paid
or  prepaid  (without penalty)  by  (i)  cash,  or  (ii)  the
delivery of the Company's  common stock (other than the Award
Shares) held for  a  period  of  at  least six months,  which
shares would be credited against the Note on the basis of the
closing bid price  for  the  common  stock  on  the  date  of
delivery.

On July 18, 2002, the Board of  Directors voted  in favor  of
extending  the  term  of  Note  until  April 30,  2005.   The
remaining  provisions  of the  Note  remained  the  same.  At
November 30, 2002, $703,000  remains  outstanding  under this
promissory note.



Sam Furrow and Affiliate Loans

During the period from  January 1999 to June 2000, Sam Furrow
(Chairman of the Board of Directors) and affiliated companies
made a total of 24 loans in an aggregate amount of $1,933,000
to the Company, primarily to finance the  import  of products
from Asia  and  general  operations.   Each of the loans  was
unsecured and provided for interest compounding annually at a
rate of from 8.5% to 10.0%. Most of the loans provided  for a
six-month term. Of the amounts loaned  by  Sam Furrow and his
affiliates, $1,200,000 has been exchanged for common stock in
2000 and  1999  as  described  below  under "Debt  to  Equity
Conversions."  As of  December 15, 2000, all amounts  owed by
the Company  to  Sam  Furrow  and  affiliated  companies were
repaid.

Debt to Equity Conversions

On February 28, 2000, notes  payable  to Sam Furrow  totaling
$500,000 were converted to 423,729 shares of common stock  at
$1.18 per share,  which approximated  its  fair value on  the
date of  conversion.   Sam and Jay  Furrow (collectively  the
Furrow  Group)  also  assumed  $1,000,000  of  the  Company's
outstanding debt previously guaranteed  by  Sam Furrow.   The
debt consisted of $650,000 owed to Commerce Capital, Inc.  (a
Nashville, TN, based finance company)  and  $350,000 owed  to
First Independent Bank of Gallatin.   On August 11, 2000, the
Furrow Group converted the $1,000,000 of assumed indebtedness
and $500,000 of  notes payable  to  Sam Furrow for  1,363,637
shares of common stock  at $1.10  per share (its  approximate
fair value) and warrants to  purchase an additional 1,500,000
shares. The warrants are exercisable  over a three-year  term
at $2.10 per share.   The fair value of the warrants totaling
$1,095,000 was recorded as a charge for the extinguishment of
debt and  a  corresponding  increase  in  additional  paid-in
capital. The conversion of the debt to equity was required by
Commerce as a condition to its investment in the Company.

With respect to  the  debt  to  equity  conversions discussed
above, the Board of Directors determined  that the  purchases
of common stock were made on  fair terms  and  conditions and
were in the Company's best interests in order to increase the
Company's net tangible assets for  NASDAQ  listing compliance
purposes.  The per share  price approximated  recent  trading
prices  with  a  reasonable  discount due  to the  restricted
nature of  the  issued  shares.   All  of the  shares  issued
pursuant  to  the  debt  conversions are restricted  and  are
subject to registration rights.

Purchases of Goods and Services

  As required under the terms of the Commerce investment, the
Company's Innovo  subsidiary  purchased  its  craft goods and
distribution and operational services from Commerce in fiscal
2002 and fiscal 2001.  The  services  purchased included  but
were not limited to accounts receivable  collections, certain
general  accounting   functions,  inventory   management  and
distribution logistics.    The following schedule  represents
Innovo's purchases  from  Commerce  during  fiscal  2002  and
fiscal 2001 (in thousands):

                                           Innovo
                                   2002      2001      2001
Goods                            $ 3,317   $ 2,320   $ 3,108
Distribution Services                644       362       196
Operational Services                 203       112        --
                                  ------    ------    ------
Total                            $ 4,164   $ 2,794   $ 3,304
                                  ------    ------    ------
                                  ------    ------    ------

During fiscal 2002 and  fiscal 2001, Joe's  and IAA purchased
goods and services from Commerce.    Joe's  and  IAA did  not
purchase  goods  or  services  from  Commerce  in 2000.   The
purchases were made based on Joe's and IAA's needs during the
period and were not made pursuant to contractual obligations.
The distribution expenses are reflected in  the cost of goods
sold in the  Company's  financial statements.   The following
schedule represents Joe's and IAA's purchases  from  Commerce
(in thousands):



                                  Joe's              IAA
                               2002   2001       2002   2001
                               ----   ----       ----   ----
Goods                         $6,102 $1,102     $6,171 $1,794
Distribution Services            107     20         --     --
                               -----  -----      -----  -----
Total                         $6,209 $1,122     $6,171 $1,794
                               -----  -----      -----  -----
                               -----  -----      -----  -----

Additionally, the Company is  charged  an  allocation expense
from  Commerce  for  expenses  associated  with  the  Company
occupying space in  Commerce's Commerce,  California facility
and the use of general  business machines  and  communication
services.   These expenses totaled  approximately $25,000 for
fiscal 2002 and fiscal 2001.

The Company from time to time will advance  or  loan funds to
Commerce for use in the production process  of  the Company's
goods or for  other  expenses  associated with the  Company's
operations.  The Company believes  that all the  transactions
conducted between the Company and Commerce  were completed on
terms that where competitive and at market rates.

JD Design, LLC

Pursuant to the license agreement entered into with JD Design,
LLC under which the Company obtained  the licensing  rights to
Joe's Jeans, Joe's is obligated to pay a 3% royalty on the net
sales of all products bearing the Joe's Jeans or  JD trademark
or logo. For fiscal 2002 and   2001,   this   amount   totaled
$277,000 and $46,000, respectively.

Azteca Production International, Inc.

In the  third quarter  of  fiscal 2001, the  Company  acquired
Azteca  Productions  International, Inc.'s Knit  Division  and
formed the subsidiary Innovo-Azteca Apparel, Inc.  Pursuant to
equity  transactions  completed  in  2000,  the  principals of
Azteca Production International, Inc. became affiliates of the
Company.   The Company purchased the Division's customer list,
the right to manufacture and market all of the Knit Division's
current products and entered into certain non-compete and non-
solicitation agreements and other intangible assets associated
with the Knit Division.   As consideration, the Company issued
to Azteca, 700,000 shares  of Company's common stock valued at
$1.27 per share based upon  the closing  price  of  the common
stock on August 24, 2001,  and  promissory notes in the amount
of  $3.6  million.  Included in  due  to  related  parties  is
$2,250,000  at November 30, 2002 relating  to  amounts  due to
Commerce for goods and services described above.

15.  Quarterly Results of Operations (Unaudited)

The  following  is  a  summary  of  the quarterly  results  of
operations for the two  years  (in thousands, except per share
amounts)




2002                                                Quarter ended
                                   March 2    June 1    August 31    November 30
                                   -------    ------     -------       -------
                                                             

Net sales                          $ 3,201   $ 6,802     $10,148       $ 9,458
Gross profit                           912     2,345       3,357         3,156
Income (loss) before
 income taxes                         (475)      223         932            32
Net income (loss)                     (496)      207         820            41

Income (loss) per share:
 Basic                             $ (0.03)  $  0.01      $ 0.06       $  0.00
 Diluted                           $ (0.03)  $  0.01      $ 0.05       $  0.00






2001                                                Quarter ended
                                   March 3    June 2      September 1   December 1
                                   -------    ------       --------      --------
                                                               

Net sales                          $ 1,153   $ 1,968       $ 2,625       $ 3,546
Gross profit                           499       746           951           763
Income (Loss) before
 income taxes                         (103)       41           (16)         (451)
Net income (loss)                     (103)       41           (16)         (540)

Income (loss) per share
 (basic and diluted):              $ (0.01)  $  0.00       $  0.00       $ (0.04)



16.  Subsequent Events (unaudited)

Crossman Loan

On February 7, 2003 the Company entered into a loan agreement
with Marc  Crossman,  a  member  of  the  Company's Board  of
Directors. The loan was funded in two phases of $250,000 each
on February 7, 2003 and  February 13, 2003 for  an  aggregate
loan value of $500,000. In the event of default,  each  phase
is collateralized by 125,000 shares of  the  Company's common
stock as  well  as  a  general  claim  on the  assets  of the
Company, subordinate to existing lenders.  Each phase matures
six months  and  one  day  from  the date  of its  respective
funding, at which point the  principal amount and any accrued
interest is due in full.   The loan carries an 8%  annualized
interest rate with interest due on a monthly basis.  The loan
may be repaid by the Company at any time during  the  term of
the loan without penalty. Further, the Company has the option
to extend the term of the loan for  an  additional period  of
six months and one  day  at  anytime  before  maturity.   The
disinterested directors of the Company approved the Loan from
Mr. Crossman.

Employee Benefits

On December 1, 2002, the Company established a  tax qualified
defined contribution 401(k) Profit Sharing Plan (the "Plan").
All  employees  who  have  worked  for  the  Company  for  30
consecutive days may participate in the 401(k) Profit Sharing
Plan.    The  Company's  contributions  may  be  made  on   a
discretionary basis.  All employees who have worked 500 hours
qualify for profit sharing in  the  event  at the end of each
year the Company decides to do so.




Innovo Group Inc. and Subsidiaries

Schedule II
Valuation of Qualifying Accounts




                                                  Additions
                                   Balance at     Charged to
                                  Beginning of     Costs and     Charged to                  Balance at End
Description                          Period         Expense    Other Accounts   Deductions    of Period
-----------                          ------         -------       ---------      --------     ---------
                                                                                  

Allowance for doubtful accounts:
 Year ended November 30, 2002       $  164,000     $   56,000    $ 163,000(A)   $       -    $   383,000
 Year ended November 30, 2001           36,000        128,000            -              -        164,000
 Year ended November 30, 2000          153,000         99,000            -        216,000(B)      36,000

Allowance for inventories:             125,000         19,000                     (39,000)       105,000
 Year ended November 30, 2002          125,000                                                   105,000
 Year ended November 30, 2001           78,000         47,000            -              -        125,000
 Year ended November 30, 2000          104,000         60,000            -         86,000         78,000

Allowance for deferred taxes:
 Year ended November 30, 2002        7,316,000      6,602,000                                  13,918,00
 Year ended November 30, 2001        6,032,000      1,284,000            -               -     7,316,000
 Year ended November 30, 2000        4,267,000      1,765,000            -               -     6,032,000



(A)  Uncollected receivables written off, net of recoveries.
(B)  Amounts charged to sales returns and allowances