**United
      States**


**Securities
      and Exchange Commission**


**Washington,
      D.C. 20549**




**____________________________________**





**FORM
      10-Q**








[X]
      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934


For
      the
      Quarterly Period Ended **March 31, 2006**





OR




[
      ]
      Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act
      of 1934




For
      the
      Transition Period From **________** to **________** .





Commission
      file number 0-10593








**ICONIX
      BRAND GROUP, INC.**




(Exact
      name of registrant as specified in its charter)


**Delaware**
              
              **11-2481903***(State
                  or other jurisdiction*
              
              *(I.R.S.
                  employer identification no.)**of
                  incorporation or organization)*




1450
      Broadway, New York, NY10018


(Address
      of principal executive offices)  (Zip
      Code)








**(212)
      730-0030**


(Registrant’s
      telephone number, including area code)




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





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter periods that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. Yes X No .




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act):





Large
      accelerated filer ___   Accelerated
      filer _X__   Non-accelerated
      filer ___





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes ___ No.
      _X__





Indicate
      the number of shares outstanding of each of the issuer’s classes of Common
      Stock, as of the latest practicable date.





Common
      Stock, $.001 Par Value - 39,045,565 shares as of April 28, 2006





**INDEX**





**FORM
      10-Q**





**Iconix
      Brand Group, Inc. and Subsidiaries**





Page
                  No.Part
                  I.
              Financial
                  InformationItem
                  1.
              Financial
                  Statements – (Unaudited)Condensed
                  Consolidated Balance Sheets – March 31, 2006 and December 31,
                  2005
              3Condensed
                  Consolidated Income Statements – Three Months EndedMarch
                  31, 2006 and 2005
              4Condensed
                  Consolidated Statement of Stockholders’ Equity – Three Months
                  EndedMarch
                  31, 2006
              5Condensed
                  Consolidated Statements of Cash Flows – Three Months EndedMarch
                  31, 2006 and 2005
              6Notes
                  to Condensed Consolidated Financial Statements
              7Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results
                  ofOperations
              18Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              23Item
                  4.
              Controls
                  and Procedures
              23Part
                  II.
              Other
                  InformationItem
                  1.
              Legal
                  Proceedings
              24Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              24Item
                  6.
              Exhibits
              24Signatures
              
              25












-
          2
          -

















Part
      I.  Financial
      Information





Item
      1.
      FINANCIAL STATEMENTS





**Iconix
      Brand Group, Inc. and Subsidiaries**


**Consolidated
      Balance Sheets**


**(in
      thousands, except par value)**





March
                31,
            December
                31,2006
            2005**Assets**
            (Unaudited)Current
                Assets:Cash
                (including restricted cash of $538 in 2006 and $4,094 in
                2005)
            $7,757
            $11,687Marketable
                securities
            627
            553Accounts
                receivable, net of reserve of $235 in 2006 and $260 in
                2005
            6,976
            3,532Due
                from affiliate
            28
            193Deferred
                income taxes
            5,586
            3,716Prepaid
                advertising and other
            2,420
            2,664Total
                Current Assets
            23,394
            22,345Property
                and equipment, at cost:Furniture,
                fixtures and equipment
            2,503
            2,027Less:
                Accumulated depreciation and amortization
            (1,222)
            (1,175)1,281
            852Other
                Assets:Restricted
                cash
            5,386
            4,982Goodwill
            32,835
            32,835Other
                intangibles, net
            139,189
            139,281Deferred
                financing costs, net
            3,449
            3,597Long
                term deferred income taxes
            12,180
            11,978Other
            1,538
            1,374194,577
            194,047Total
                Assets
            $
                219,252
            $
                217,244**Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable and accrued expenses
            $2,809
            $3,360Accounts
                payable, subject to litigation
            4,886
            4,886Deferred
                revenue
            1,114
            4,782Current
                portion of long-term debt
            28,920
            13,705Total
                current liabilities
            37,729
            26,733Deferred
                income taxes
            4,917
            4,201Long-term
                debt, less current maturities
            68,016
            85,414Contingencies
                and commitments
            -
            -Stockholders'
                Equity:Common
                stock, $.001 par value-shares authorized 75,000;shares
                issued 35,635 and 35,540 respectively
            37
            36Additional
                paid-in capital
            137,178
            136,842Retained
                deficit
            (27,958)
            (35,315)Less:
                Treasury stock - 198 shares at cost
            (667)
            (667)Total
                stockholders’ equity
            108,590
            100,896Total
                Liabilities and Stockholders' Equity
            $
                219,252
            $
                217,244





*See
      accompanying notes to consolidated financial statements.*







-
          3
          -




**Iconix
      Brand Group, Inc. and Subsidiaries**




**Consolidated
      Statements of Income - Unaudited**


**(in
      thousands, except earnings per share data)**





Three
                Months Ended March 31,2006
            
            2005Licensing
                and commission revenue
            $
                13,269
            
            $
                4,300Selling,
                general and administrative expenses(net
                ofrecovery
                pursuant to an agreement of $296 in 2005)
            4,815
            
            2,679Special
                charges
            556
            
            379Operating
                income
            7,898
            
            1,242Other
                expenses:Interest
                expense - net of $161 ofinterest
                income in 2006 and$14
                in 2005, respectively.
            1,813
            
            445Income
                before income taxes
            6,085
            
            797Provision
                (benefit) for income taxes
            (1,272)
            
            10Net
                income
            $
                7,357
            
            $
                787Earnings
                per share:Basic
            $
                0.21
            
            $
                0.03Diluted
            $
                0.18
            
            $
                0.03Weighted
                average number of common shares outstanding:Basic
            35,719
            
            28,429Diluted
            41,169
            
            29,982














*See
      accompanying notes to consolidated financial statements.*


-
          4
          -


**Iconix
      Brand Group, Inc. and Subsidiaries**





Condensed
      Consolidated Statement of Stockholders’ Equity


(Unaudited)





Three
      Months Ended March 31, 2006


***(*** in
      thousands ***)***


AdditionalCommon
                Stock
            Paid
                - in
            Retained
            TreasuryShares
            Amount
            Capital
            Deficit
            Stock
            TotalBalance
                at January 1, 2006
            35,540
            $
                36
            $
                136,842
            $
                (35,315)
            $
                (667)
            $
                100,896Exercise
                of stock options
            95
            1
            296
            -
            -
            297Option
                compensation expense recognized
            -
            -
            40
            -
            -
            40Net
                income
            -
            -
            -
            7,357
            -
            7,357Balance
                at March 31, 2006
            35,635
            $
                37
            $
                137,178
            $
                (27,958)
            $
                (667)
            $
                108,590
















See
      Notes
      to Condensed Consolidated Financial Statements.





-
          5
          -


**Iconix
      Brand Group, Inc. and Subsidiaries**





**Consolidated
      Statements of Cash Flows (in thousands)**


**Unaudited**





Three
                Months Ended March 31,2006
            2005Net
                cash (used in) provided by operating activities
            $(715)
            $
                2,496Cash
                flows used in investing activities:Purchases
                of fixed assets
            (476)
            -Purchase
                of equity securities of other entities
            (167)
            -Purchase
                of trademarks
            (223)
            (71)Net
                cash used in investing activities
            (866)
            (71)Cash
                flows (used in) provided by financing activities:Repayment
                of loans from related parties
            -
            (2,000)Proceeds
                from exercise of stock options and warrants
            297
            262Payment
                of long-term debt
            (2,242)
            (712)Restricted
                cash - Current
            3,556
            209Restricted
                cash - Non Current
            (404)
            -Net
                cash provided by (used in) financing activities
            1,207
            (2,241)Net
                (decrease) increase in cash and cash equivalents
            (374)
            184Cash
                and cash equivalents, beginning of period
            7,593
            268Cash
                and cash equivalents, end of period
            $
                7,219
            $
                452Balance
                of restricted cash - Current
            538
            321Total
                cash and cash equivalents including restricted cash, end of
                period
            $7,757
            $773





**Supplemental
      disclosure of cash flow information:**


Three
                Months Ended March 31,2006
            2005Cash
                paid during the year:Interest
            $1,853
            $466


*See
      accompanying notes to consolidated financial statements.*


-
          6
          -


**Iconix
      Brand Group, Inc. and Subsidiaries**





Notes
      to
      Condensed Consolidated Financial Statements


(Unaudited)





March
      31,
      2006





NOTE
      A  BASIS OF
      PRESENTATION




The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles for interim
      financial information and with the instructions to Form 10-Q and Article 10
      of
      Regulation S-X. Accordingly, they do not include all the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments (consisting
      primarily of normal recurring accruals) considered necessary for a fair
      presentation have been included. Operating results for the three month (“Current
      Quarter”) ended March 31, 2006 are not necessarily indicative of the results
      that may be expected for a full fiscal year.





Beginning
      in January 2005, the Company changed its business practices with respect to
      Bright Star Footwear, Inc (“Bright Star”), a subsidiary of the Company, which
      resulted in Bright Star acting only as an agent of the Company. Accordingly
      after January 1, 2005 Bright Star net commissions are recognized as revenue
      rather than gross product sales which were recognized prior to that date.





The
      Candie’s and Bongo trademarks had previously been amortized on a straight-line
      basis over their estimated useful lives of approximately 20 years. Effective
      July 1, 2005, the Company changed for accounting purposes, the estimated useful
      lives of the Candie’s and Bongo trademarks to be an indefinite life.
      Accordingly, the recorded value of these trademarks will no longer be amortized,
      but instead will be tested for impairment on an annual basis. Amortization
      expense recorded in the quarter ended March 31, 2005, prior to this change
      in
      estimate, totaled $296,000.




Impairment
      losses are recognized for long-lived assets, including certain intangibles,
      used
      in operations when indicators of impairment are present and the undiscounted
      cash flows estimated to be generated by those assets are not sufficient to
      recover the assets' carrying amount. Impairment losses are measured by comparing
      the fair value of the assets to their carrying amount.





For
      further information, refer to the consolidated financial statements and
      footnotes thereto included in the Company’s annual report on Form 10-K for the
      year ended December 31, 2005.





NOTE
      B **** STOCK
      OPTIONS





Under
      the
      Company's various stock option plans, options to purchase common shares of
      the
      Company may be granted to any person, including, but not limited to, employees,
      directors, independent agents, consultants, attorneys and advisors of the
      Company by the Board of Directors or by the Company's Governance Committee.
      As
      of March 31, 2006, 9.5 million stock options were outstanding under the
      Company’s option plans. The term of options range from five to ten years with a
      vesting period up to five years. The exercise price for options is the trading
      price of the common shares of the Company on the NASDAQ National Market on
      the
      day of the grant.





Effective
      January 1, 2006, the Company adopted Statement No. 123(R), “Accounting for
      Share-Based Payment” (“SFAS 123(R)”), which requires companies to measure and
      recognize compensation expense for all stock-based payments at fair value.
      Under
      SFAS 123(R), using the modified prospective method, compensation expense is
      recognized for all share-based payments granted prior to, but not yet vested
      as
      of, January 1, 2006.





In
      December 2005, the Company’s Board of Directors approved the accelerated vesting
      of all employee service-based stock options previously granted under the
      Company’s various non-qualified stock option plans, which would have been
      unvested as of December 31, 2005. As a result, all options granted as of
      December 31, 2005, except certain options based on performance became
      exercisable immediately. The number of shares, exercise prices and other terms
      of the options subject to the acceleration remain unchanged. The acceleration
      of
      such option vesting resulted in an additional $446,000 of compensation expense
      reflected in pro-forma net income for the prior year, an amount that would
      have
      otherwise been recorded as compensation expense in the years ending December
      31,
      2006 and 2007, but had no impact on compensation recognition in 2005 as the
      options would have been unexpired.





-
          7
          -


The
      following table includes summary information for stock options for employees
      and
      non-employee directors for the quarter ended March 31, 2006:


Weighted-Average
            Aggregate
                IntrinsicShares
            Exercise
                Price
            ValueOutstanding
                at December 31, 2005
            9,573,292
            $
                5.09Granted
            -
            -Canceled
            (17,750)
            2.28Exercised
            (94,500)
            3.26Expired
            -
            -Outstanding
                at March 31, 2006
            9,461,042
            $
                5.11
            $89,313,346Exercisable
                at March 31, 2006
            8,096,042
            $
                4.51
            $81,667,446





The
      intrinsic value of options exercised during the quarter ended March 31, 2006
      was
      based on the closing prices of the Company’s common stock on the dates of
      exercise. The aggregate intrinsic value for options outstanding and exercisable
      at March 31, 2006 was based on the closing price of the Company’s common stock
      at March 31, 2006, which was $14.55.





Options
      outstanding and exercisable at March 31, 2006 were as follows:









Options
                Outstanding
            Options
                ExercisableWeighted
                Average
            Weighted
            
            WeightedRange
                of
            Number
            Average
            Average
            Number
            AverageExercise
                Prices
            Outstanding
            Contractual
                Life
            Exercise
                Price
            Exercisable
            Exercise
                Price$0.24-1.14
            426,625
            4.25
            $1.07
            426,625
            $1.07$1.15-1.50
            385,500
            4.71
            $1.25
            385,500
            $1.25$1.51-2.50
            1,003,500
            6.79
            $1.98
            1,003,500
            $1.98$2.51-3.50
            2,471,750
            4.52
            $3.13
            2,471,750
            $3.13$3.51-5.00
            1,371,750
            8.73
            $4.63
            1,336,750
            $4.63$5.01-10.19
            3,801,917
            9.23
            $8.24
            2,471,917
            $7.959,461,042
            7.26
            $5.11
            8,096,042
            $4.51





In
      the
      Current Quarter, the Company recorded a $40,000 compensation expense for options
      granted to non-employees previously with a vesting term from the dates of grants
      through December 2007. Compensation costs have not been offset by a related
      income tax benefit, consistent with the manner in which the Company currently
      records its provision for income taxes. The fair value for these options was
      estimated previously at the date of grant using a Black-Scholes option-pricing
      model. The key assumptions used in determining the fair value of the stock
      options awarded in 2005 were: expected life ranging from 3-5 years, risk-free
      interest rate from 3.0-4.24%, expected volatility from 30-55%, and expected
      dividend yield of 0%. The Company considers the following factors when
      estimating the expected lives of options: vesting period of the award, expected
      volatility of the underlying stock, employees’ historical exercise behavior and
      external data. The risk-free interest rate reflects the interest rate on
      zero-coupon U.S. government bonds available at the time each option was granted
      having a remaining life approximately equal to the option’s expected life. When
      making assumptions on the expected volatilities, the Company considered the
      historical volatilities of the Company’s common stock, the volatilities of its
      peers’ stocks, as well as the judgment of the Company’s management. Based on
      these assumptions, the weighted-average fair value of each stock option granted
      was $2.63 for 2005. During the first quarter of 2006, the Company did not grant
      any stock options.





Prior
      to
      the adoption of SFAS 123(R), the Company accounted for its stock-based
      compensation plans under the recognition and measurement principles of
      Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued
      to Employees”, and related interpretations. Accordingly, the compensation cost
      for stock options had been measured as the excess, if any, of the quoted market
      price of the Company’s stock at the date of the grant over the amount the
      employee must pay to acquire the stock. In accordance with the modified
      prospective transition method, the consolidated financial statements have not
      been restated to reflect the impact of SFAS 123(R). The following table
      illustrates the effect on net income and earnings per share if the Company
      had
      applied the fair value recognition provisions of SFAS 123 to options granted
      under the Company’s stock option plans for the three months ended March 31,
      2005.





-
          8
          -


Three
                months ended March 31,2006
            2005Net
                income - as reported
            $7,357
            $787Add:
                Stock-based employee Compensation included in reported net
                income
            40
            -Deduct:
                Stock-based employee compensation determined under the fair value
                based
                method
            (40)
            (1,706)Pro
                forma net income (loss)
            $7,357
            $(919)Basic
                earnings (loss) per share:As
                reported
            $0.21
            $0.03Pro
                forma
            $0.21
            $(0.03)Diluted
                earnings (loss) per share:As
                reported
            $0.18
            $0.03Pro
                forma
            $0.18
            $(0.03)








NOTE
      C  FINANCING AGREEMENTS




*Asset-Backed
      Notes*





In
      August
      2002, IP Holdings, LLC (“IPH”), a subsidiary of the Company, issued in a private
      placement $20 million of asset-backed notes secured by intellectual property
      assets (trade names, trademarks, license agreements and payments and proceeds
      with respect thereto) of IPH (such notes and all other notes issued by IPH,
      the
“Asset-Backed Notes”). The Asset-Backed Notes had a 7-year term with a fixed
      interest rate of 7.93% with quarterly principal and interest payments of
      approximately $859,000. After funding a liquidity reserve account in the amount
      of $2.9 million, the net proceeds of the Asset-Backed Notes ($16.2 million)
      were
      used by the Company to reduce amounts due by the Company under its then-existing
      revolving credit facilities. In April 2004, IPH issued an additional $3.6
      million in subordinated Asset-Backed Notes secured by its intellectual property
      assets. The additional borrowing had a maturity date of August 2009, with a
      floating interest rate of LIBOR + 4.45% and quarterly principal and interest
      payments and $500,000 of interest prepaid at closing. The net proceeds of $2.9
      million were used by the Company for general working capital purposes. As of
      July 22, 2005, the total principal on these notes was approximately $17.5
      million, which were refinanced in connection with the Joe Boxer acquisition
      described below.





In
      the
      fiscal quarter ended September 30, 2005, the Company acquired the Joe Boxer
      brand from Joe Boxer Company, LLC and its affiliates, and the Rampage brand
      from
      Rampage Licensing, LLC. See Notes I and J. The financing for the acquisitions
      was accomplished through two private placements by IPH of Asset-Backed Notes,
      secured by the intellectual property assets owned by IPH. The combined proceeds
      of the Asset-Backed Notes, totaled $103 million, were used as follows:
      approximately $17.5 million was used to refinance previously issued Asset-Backed
      Notes, $40.0 million was paid to the sellers of Joe Boxer, approximately $25.8
      million was paid to the sellers of Rampage, $1.7 million was placed in a reserve
      account as required by the holder of the Asset-Backed Notes, approximately
      $1.8
      million was used to pay costs associated with the debt issuance, approximately
      $200,000 was paid to legal professionals associated with the acquisitions,
      approximately $4.0 million was available to the Company for working capital
      purposes, and $12 million was deposited in an escrow account for the benefit
      of
      the holder of the Asset-Backed Notes, to be used by IPH solely for the purchase
      of certain intellectual property assets. IPH redeemed $12 million of the
      Asset-Backed Notes without penalty as the purchase of the assets did not occur.
      Costs associated with the debt issuances of approximately $1.8 million have
      been
      deferred and are being amortized using the interest method over the 7 year
      life
      of the Asset-Backed Notes.





Subject
      to terms of the Asset-Backed Notes, if by April 1, 2006, the Company had not
      entered into or renewed certain licensing agreement(s) with respect to the
      Joe
      Boxer brand that guarantees certain royalty thresholds, the Company is required
      to make additional quarterly principal payments of $3.75 million in the next
      7
      quarters, without penalty. As of April 1, 2006, the Company had not entered
      into
      or renewed such licensing arrangements with respect to the Joe Boxer brand,
      accordingly, the Company reclassified $15 million from long-term debt to current
      on its balance sheet. If the Company subsequently enters into or renews such
      licensing arrangements, the requirement to pay the additional quarterly payments
      will cease and the Company will adjust the related debt reclassification on
      its
      balance sheet appropriately.





-
          9
          -


Cash
      on
      hand in the bank account of IPH is restricted at any point in time up to the
      amount of the next debt payment required under the Asset-Backed Notes.
      Accordingly, $538,000 and $4.1 million as of March 31, 2006 and December 31,
      2005, respectively, have been disclosed as restricted cash within the Company’s
      current assets. Further, a reserve account required by the holder of the
      Asset-Backed Notes has been established and the funds on deposit in such account
      will be applied to the last debt payment. Accordingly, $5.4 million and $5.0
      million as of March 31, 2006 and December 31, 2005, respectively, have been
      disclosed as restricted cash within the Company’s other assets.





Interest
      rates and terms on the Asset-Backed Notes are as follows: $63 million principal
      amount bears interest at a fixed interest rate of 8.45% with a 7-year term,
      $28
      million principal amount of the Asset-Backed Notes bears interest at a fixed
      rate of 8.10% with a 7- year term, and $12 million principal amount of the
      Asset-Backed Notes bore interest at a floating interest rate of LIBOR + 0.7%.
      IPH redeemed the $12 million portion of the Asset-Backed Notes in November
      2005
      without penalty. Neither the Company nor any of its subsidiaries (other than
      IPH) is obligated to make any payment with respect to the Asset-Backed Notes,
      and the assets of the Company and its subsidiaries (other than IPH) are not
      available to IPH’s creditors. The assets of IPH are not available to the
      creditors of the Company or its subsidiaries (other than IPH).





*The
      Kmart Note*





In
      connection with the acquisition of Joe Boxer in July, 2005, the Company assumed
      a promissory note, dated August 13, 2001 in the amount of $10.8 million that
      originated with the execution of the exclusive license with Kmart Stores, Inc.
      by the former owners of Joe Boxer (the “Kmart Note”).   The Kmart Note
      provides for interest at 5.12% and is payable in three (3) equal annual
      installments, on a self-liquidating basis, on the last day of each year
      commencing on December 31, 2005 and continuing through December 31, 2007. 
Payments due under the note may be off-set against any royalties owed under
      the
      Kmart License.  As of March 31, 2006, the outstanding balance of the note
      was $7.4 million. The note may be pre-paid without penalty.




NOTE
      D  EARNINGS
      PER SHARE




Basic
      earnings per share includes no dilution and is computed by dividing earnings
      attributable to common shareholders by the weighted average number of common
      shares outstanding for the period. Diluted earnings per share reflects, in
      periods in which they have a dilutive effect, the effect of common shares
      issuable upon exercise of stock options and warrants. As a result of the
      Company’s decision to accelerate the vesting of options granted as of December
      31, 2005, all options except certain options based on performance became
      exercisable immediately and were included in the calculation of dilution. At
      March 31, 2006, 9.5 million stock options were outstanding under the Company’s
      option plans.





The
      following is a reconciliation of the shares used in calculating basic and
      diluted earnings per share:





Three
                month ended March 31,2006
            2005Basic
            35,719
            28,429Effect
                of assumed conversions of employee stock options
            5,450
            1,553Diluted
            41,169
            29,982







NOTE
      E  INCOME
      TAXES




The
      Company accounts for income taxes in accordance with Statement of Financial
      Accounting Standards No. 109, (“SFAS 109”) “Accounting for Income Taxes.” Under
      SFAS No. 109, deferred tax assets and liabilities are determined based on
      differences between the financial reporting and tax basis of assets and
      liabilities and are measured using the enacted tax rates and laws that will
      be
      in effect when the differences are expected to reverse. A valuation allowance
      is
      established when necessary to reduce deferred tax assets to the amount expected
      to be realized. In determining the need for a valuation allowance, management
      reviews both positive and negative evidence pursuant to the requirements of
      SFAS
      No. 109, including current and historical results of operations, the annual
      limitation on utilization of net operating loss carry forwards pursuant to
      Internal Revenue Code section 382, future income projections and the overall
      prospects of the Company’s business. Based upon management’s assessment of
      information which became available in the Current Quarter, management concluded
      in the Current Quarter that it is more likely than not that a portion of
      previously unrecognized deferred income tax benefits will be realized.
      Accordingly, the Company reduced a portion of the related valuation allowance
      which resulted in a $1.3 million net tax benefit for the Current Quarter. Based
      on current estimates of pre-tax income for the year ended December 31, 2006,
      the
      management anticipates a net income tax expense for that period.







-
          10
          -





NOTE
      F  CONTINGENCIES




*Unzipped
      litigation*





On
      August
      5, 2004, the Company, along with its subsidiaries, Unzipped Apparel, LLC
      (“Unzipped”), Michael Caruso & Co., Inc. (“Caruso & Co.”) and IPH
      (collectively, “Plaintiffs”), commenced a lawsuit in the Superior Court of
      California, Los Angeles County, against Unzipped's former manager, former
      supplier and former distributor, Sweet Sportswear, LLC (“Sweet”), Azteca
      Production International, Inc, (“Azteca”) and Apparel Distribution Services, LLC
      (“ADS”), respectively; and a principal of these entities and former member of
      the Company’s Board of Directors, Hubert Guez (collectively, “Defendants”).
      Plaintiffs amended their complaint on November 22, 2004. In the amended
      complaint, Plaintiffs allege that certain Defendants fraudulently induced them
      to purchase Sweet's 50% interest in Unzipped for an inflated price, that Sweet
      and Azteca committed material breaches of certain agreements between Unzipped
      and Defendants (“Sweet Agreements”), and that Mr. Guez materially breached his
      fiduciary obligations to the Company while serving as a member of its Board
      of
      Directors. Also, Plaintiffs allege that Defendants have imported, distributed
      and sold goods bearing the Company’s Bongo trademarks in violation of federal
      and California law.  Plaintiffs seek damages in excess of $50 million, as
      well as their litigation costs, punitive and exemplary damages, and the
      establishment of a constructive trust for their benefit. Defendants filed a
      motion to dismiss certain of the claims asserted by the Plaintiffs in the
      amended complaint, which was denied by the Court in its entirety on February
      7,
      2005.





On
      March
      10, 2005, Sweet, Azteca and ADS (collectively, “Cross-Complainants”), filed an
      answer to Plaintiffs' amended complaint and a cross-complaint against Plaintiffs
      and the Company’s chief executive officer, Neil Cole (collectively,
“Cross-Defendants”), seeking compensatory, punitive and exemplary damages and
      litigation costs, as well as the establishment of a constructive trust for
      their
      benefit. The Cross-Complainants alleged that some or all of the Cross-Defendants
      breached the Sweet Agreements; that IPH and Mr. Cole interfered with Sweet's
      performance under a management agreement relating to the operations
      of Unzipped (the “Management Agreement”), and that the Company, Caruso
& Co., IPH and Mr. Cole interfered with Cross-Complainants' relationships
      with Unzipped and caused Unzipped to breach its agreements with Azteca and
      ADS.  Cross-Complainants also alleged that some or all of the Company,
      Caruso & Co. and Mr. Cole fraudulently induced Sweet to sell its 50%
      interest in Unzipped to the Company for a deflated price and accept the 8%
      senior subordinated note in the principal amount of $11 million that the Company
      issued to it in connection therewith (the “Sweet Note”).




Cross-Defendants
      filed a motion to dismiss certain of the claims asserted in the cross-complaint,
      and, on June 28, 2005, the Court granted Cross-defendants' motion in part.
      On
      July 22, 2005, Cross-Complainants amended their cross-complaint, omitting their
      previously asserted claim that some or all of the Company, Caruso & Co. and
      Mr. Cole fraudulently induced Sweet to sell its 50% interest in Unzipped for
      a
      deflated price and accept the Sweet Note.  Although the amended
      cross-complaint no longer seeks relief for this purported fraud, the substance
      of the allegations remained largely unchanged.


Cross-Defendants
        filed a motion to dismiss certain of the claims asserted in the amended
        cross-complaint, and, on October 25, 2005, the Court granted Cross-Defendants’
motion in part, dismissing all claims asserted against Mr. Cole along with
        the
        Cross-Complainants' sole remaining fraud claim. The remaining Cross-Defendants
        deny Cross-Complainants' allegations and intend to vigorously defend against
        the
        amended cross-complaint.


The
      Company had previously entered into the Management Agreement with Sweet wherein
      Sweet guaranteed that the net income of Unzipped, as defined, would be no less
      than $1.7 million for each year during the term (the “Guarantee”). In the event
      that the Guarantee was not met, Sweet was obligated to pay the difference
      between the actual net income, as defined, and the Guarantee, such difference
      referred to as the “Shortfall Payment”. The cross-complaint alleged that the
      Company breached its obligations to Sweet arising under the Sweet Note by,
      among
      other things, understating Unzipped's earnings for the fiscal year ended January
      31, 2004 (“Fiscal 2004”) and its fiscal year ended January 31, 2005 for the
      purpose of causing Unzipped to fall short of the Guarantee for these periods,
      and improperly offsetting the Shortfall Payment against the Sweet Note. Lastly,
      the cross-complaint alleged that the understatements in Unzipped's earnings
      and
      offsets against the Sweet Note were incorporated into the Company’s public
      filings for the periods identified above, causing it to overstate materially
      its
      earnings and understate its liabilities for such periods with the effect of
      improperly inflating the public trading price of the Company’s common
      stock.





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          11
          -


In
      a
      related litigation, on November 5, 2004, Unzipped commenced a lawsuit in the
      Supreme Court of New York, New York County, against Unzipped's former president
      of sales, Gary Bader, alleging that Mr. Bader breached certain fiduciary duties
      owed to Unzipped as its president of sales, unfairly competed with Unzipped
      and
      tortiously interfered with Unzipped's contractual relationships with its
      employees. On October 5, 2005, Unzipped amended its complaint to assert
      identical claims against Bader's company, Sportswear Mercenaries, Ltd.
      (“SMI”).  On October 14, 2005, Bader and SMI filed an answer containing
      counterclaims to Unzipped's amended complaint, and a third-party complaint
      against the Company and Mr. Cole, seeking unspecified damages in excess of
      $4
      million.





On
      December 2, 2005, the Company, together with Unzipped and Mr. Cole, filed
      motions seeking the dismissal of all claims asserted against them by Bader
      and
      SMI. In response to this motion, on January 13, 2006, Bader and SMI filed an
      amended answer containing counterclaims to Unzipped’s amended complaint (the
“Amended Answer”), and withdrew certain of the claims asserted in the
      third-party complaint against the Company and Mr. Cole. Bader and SMI continue
      to seek unspecified damages in excess of $4 million. By agreement of the
      parties, the motions filed by the Company, Unzipped and Mr. Cole on December
      2,
      2005, were made applicable to Bader’s/SMI’s third-party complaint, as well as
      all but one counterclaim asserted in Bader’s/SMI’s Amended Answer. The sole
      counterclaim not addressed by the motions filed by the Company, Unzipped and
      Mr.
      Cole on December 2, 2005 seeks damages in the amount of $72,000 for Unzipped’s
      alleged failure to pay wages and commissions allegedly due to Bader and SMI.
      The
      motions are currently pending, and the Company, Mr. Cole and Unzipped intend
      to
      vigorously defend against any and all counter-claims asserted against
      them.





*Redwood
      litigation*





In
      January 2002, Redwood Shoe Corporation, one of the Company’s former footwear
      buying agents, filed a complaint in the United States District Court for the
      Southern District of New York, alleging that the Company breached various
      contractual obligations to Redwood and seeking to recover damages in excess
      of
      $24.25 million plus its litigation costs.  The Company filed a motion to
      dismiss certain counts of the complaint based upon Redwood's failure to state
      a
      claim, in response to which Redwood has filed an amended complaint.  The
      Company also moved to dismiss certain parts of the amended complaint.  The
      magistrate assigned to the matter granted, in part, the Company’s motion to
      dismiss.  By Order dated November 28, 2005, the District Court adopted the
      Magistrate's ruling in its entirety, thereby accepting the Company’s position
      that it never agreed to purchase a minimum quantity of footwear from Redwood
      and
      dismissing approximately $20 million of Redwood's asserted claims.





On
      December 14, 2005, the Company filed an answer to Redwood’s four remaining
      claims and asserted 13 counterclaims against Redwood and Redwood's affiliate,
      Mark Tucker, Inc. (“MTI”).   On the same date, it filed a motion to
      have MTI joined with Redwood as a defendant in the action, which motion MTI
      has
      advised the District Court that it will not oppose.  On February 15, 2006,
      Redwood filed a motion seeking the dismissal of certain of the counterclaims
      asserted it by the Company. On March 10, 2006, MTI filed a motion seeking the
      dismissal of all of the counterclaims asserted against it by the Company. On
      March 27, 2006, the Company filed its opposition, seeking to have these motions
      denied in their entirety, and the motions are currently pending. The Company
      intends to vigorously defend the lawsuit, and to vigorously prosecute the claims
      it has asserted against Redwood and MTI.  At March 31, 2006, the payable to
      Redwood totaled approximately $1.8 million, which is subject to any claims,
      offsets or other deductions the Company may assert against Redwood, and was
      reflected in the Company’s consolidated financial statements under “Accounts
      payable, subject to litigation.”





From
      time
      to time, the Company is also made a party to litigation incurred in the normal
      course of business, although there are no such unsettled litigations pending
      at
      this time except as set forth herein.





NOTE
      G  UNZIPPED
      APPAREL, LLC





**Equity
      Investment:**





On
      October 7, 1998, the Company formed Unzipped with joint venture partner Sweet,
      the purpose of which was to market and distribute apparel under the BONGO label.
      The Company and Sweet each had a 50% interest in Unzipped. Pursuant to the
      terms
      of the joint venture, the Company licensed the BONGO trademark to Unzipped
      for
      use in the design, manufacture and sale of certain designated apparel products.





**Acquisition:**





On
      April
      23, 2002, the Company acquired the remaining 50% interest in Unzipped from
      Sweet
      for a purchase price of three million shares of the Company’s common stock and
      $11 million in debt evidenced by the Sweet Note. In connection with the
      acquisition of Unzipped, the Company filed a registration statement with the
      SEC
      for the three million shares of the Company’s common stock issued to Sweet,
      which was declared effective by the SEC on July 29, 2003.





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          12
          -


**Related
      Party Transactions:**





Prior
      to
      August 5, 2004, Unzipped was managed by Sweet pursuant to the Management
      Agreement, pursuant to which Sweet was obligated to manage the operations of
      Unzipped in return for, commencing in Fiscal 2004, a management fee based upon
      certain specified percentages of net income that Unzipped would achieve during
      the three-year term. In addition, Sweet entered into the Guarantee that the
      net
      income, as defined, of Unzipped commencing in Fiscal 2004 would be no less
      than
      $1.7 million for each year during the term. In the event that the Guarantee
      was
      not met, under the Management Agreement, Sweet was obligated to pay to the
      Company the difference between the actual net income of Unzipped, as defined,
      and the Guarantee. The Shortfall Payment could be offset against the amounts
      due
      under the Sweet Note at the option of either Sweet or the Company.





For
      the
      Current Quarter, Unzipped had no operations, as compared to a net loss (as
      defined for the purpose of determining if the Guarantee had been met) of
      $296,000 in the quarter ended March 31, 2005 (the “Prior Year Quarter”).
      Consequently for the Current Quarter there was no Shortfall Payment, as compared
      to a Shortfall Payment of $438,000 in the Prior Year Quarter. The adjusted
      Shortfall Payment had been recorded in the consolidated income statements as
      a
      reduction of Unzipped’s cost of sales (since the majority of Unzipped’s
      operations were with entities under common ownership with Sweet, including
      all
      of the purchases of inventory) and on the balance sheet as a reduction of the
      Sweet Note based upon the right to offset in the Management Agreement. After
      adjusting for the Shortfall Payment in Prior Year Quarter, Unzipped reported
      a
      net loss of $37,500 on sales of $448,000. Due to the immaterial nature of the
      related amounts, the net loss of $37,500 from Unzipped was included in the
      selling, general and administrative expense in the Company’s Condensed
      Consolidated Income Statements for the Prior Year Quarter.





On
      August
      5, 2004, Unzipped terminated the Management Agreement with Sweet, the supply
      agreement with Azteca and the distribution agreement with ADS and commenced
      a
      lawsuit against Sweet, Azteca, ADS and Mr. Guez. See Note F.





At
      March
      31, 2006, the Company included in “accounts payable, subject to litigation”
amounts due to Azteca and ADS of $847,000 and $2.3 million respectively, the
      same as reported as of December 31, 2005. See Note F.





In
      a
      separate transaction concerning Unzipped with Bongo Apparel, Inc. (“BAI”), BAI
      is the licensee of the BONGO jeans wear business formerly managed by Sweet.
      Prior to August 26, 2005, BAI managed the operations of Unzipped following
      the
      termination of Sweet as the manager on August 5, 2004. In connection with BAI’s
      license and this transition, the designees of TKO Apparel (an affiliate of
      BAI)
      purchased one million shares of the common stock of the Company at a price
      of
      $2.20 per share. In a separate transaction, TKO Apparel agreed to lend Unzipped
      $2.5 million, which the Company repaid in 2005.








NOTE
      H -
      SPECIAL CHARGES





During
      the Current Quarter, the Company recorded $556,000 of special charges in
      connection with its litigation related to Unzipped, compared to $379,000 in
      the
      Prior Year Quarter. See Note F.








NOTE
      I  ACQUISITION OF JOE BOXER





On
      July
      22, 2005, the Company acquired the Joe Boxer brand from Joe Boxer Company,
      LLC
      and its affiliates. Joe Boxer is a leading lifestyle brand of apparel, apparel
      accessories and home goods for men, women, teens and children. The Joe Boxer
      brand is currently licensed exclusively to Kmart in the United States and
      internationally to manufacturers in Canada, Mexico and Scandinavia.





The
      aggregate purchase price paid was $88.9 million as detailed in the table below.
      Based on the Company’s assessment of the fair value of the assets acquired,
      approximately $79.8 million has been assigned to the Joe Boxer trademark. Under
      the purchase method of accounting, tangible and identifiable intangible assets
      acquired and liabilities assumed are recorded at their estimated fair values.
      The estimated fair values and useful lives of intangible assets acquired have
      been supported by third party valuation based on a discounted cash flow
      analysis. The Joe Boxer trademark has been determined to have an indefinite
      useful life and accordingly, consistent with FAS 142, no amortization will
      be
      recorded in the Company’s consolidated statements of operations. Instead, the
      related intangible asset will be tested for impairment at least annually, using
      discounted cash flow analysis and estimates of future sales proceeds with any
      related impairment charge recorded to the statement of operations at the time
      of
      determining such impairment.





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          13
          -


Total
      purchase price was comprised as follows (in thousands):


Cash
                paid for acquisition
            $
                40,755Fair
                value of 4,350,000 restricted sharesof
                common stock at $8.33 per share
            36,236Assumption
                of Kmart loan, including$3,509
                due within 12 months
            10,798Accrued
                interest, Kmart loan
            309Value
                of warrants issued as acost
                of the acquisition
            788Total
                cost of acquisition
            $
                88,886





The
      purchase price was allocated to the estimated fair value of the assets acquired
      as follows (in thousands):


Accounts
                receivable
            $
                3,121Deferred
                tax asset
            2,700Licensing
                contracts
            1,333Joe
                Boxer trademark
            79,800Goodwill
            1,932Total
                allocated purchase price
            $
                88,886





The
      $1.3
      million of licensing contracts is being amortized on a straight-line basis
      over
      the remaining contractual period of approximately 29 months. The goodwill of
      $1.9 million is not being amortized but instead is subject to a test for
      impairment on at least an annual basis. Any adjustments resulting from the
      finalization of the purchase price allocations will affect the amounts assigned
      to goodwill.





As
      part
      of this acquisition, the Company entered into an employment agreement with
      William Sweedler as Executive Vice President of the Company and President of
      the
      Joe Boxer division. As part of his compensation, on July 22, 2005, he was
      granted 1,425,000 stock options of which 225,000 vested immediately, and
      1,200,000 will vest contingent upon achievement by the Joe Boxer division of
      certain revenues levels. The Company also entered into an employment agreement
      with Andrew Tarshis as Senior Vice President Business Development and Associate
      Counsel of the Company. As part of his compensation, on July 22, 2005, he was
      granted 110,000 stock options of which 55,000 vested immediately, and 55,000
      on
      December 31, 2005.





The
      Company obtained $40 million in cash to pay a portion of the purchase price
      for
      the Joe Boxer assets through the debt issuance by IPH of a $63 million
      Asset-Backed Note. Approximately $17.5 million of the proceeds of the
      Asset-Backed Notes were used to refinance previously existing Asset-Backed
      Notes, as described in Note C ,
      $40.0
      million was paid to the sellers, approximately $1.0 million was used to pay
      costs associated with the debt issuance, $310,000 was deposited in a reserve
      account as required by the holder
      of
      the Asset-Backed Note ,
      and
      approximately $4.0 million was available to the Company for working capital
      purposes. Costs associated with the debt issuance of approximately $1.0 million
      have been deferred and are being amortized over the 7-year life of the
      refinanced debt.





UCC
      Capital Corporation (“UCC”) acted as a financial advisor to IPH in connection
      with the Joe Boxer and the Rampage brand acquisitions. On June 7, 2005, the
      Company entered an agreement with UCC to issue UCC a ten-year warrant
      ("Warrant") to purchase an aggregate of 1,000,000 shares of the Company's common
      stock ("Warrant Shares") at a price of $5.98 per share, subject to anti-dilution
      adjustments under certain conditions. Pursuant to the agreement, UCC will act,
      for a 36-month term, as the Company's exclusive advisor in connection with
      providing various advisory services relating to the Company's acquisitions.
      One
      third of the Warrant Shares vest upon consummation of each acquisition, for
      a
      total of three acquisitions. On July 22, 2005, 333,334 of the Warrants Shares
      vested, with a fair value of $788,000, upon consummation of the acquisition
      of
      Joe Boxer.





On
      September 19, 2005, the Company filed with the SEC a registration statement
      covering the resale of certain of the shares of common stock issued in
      connection with the acquisition of Joe Boxer and the resale of the Warrant
      Shares. The registration statement was declared effective by the SEC on October
      12, 2005.








NOTE
      J  ACQUISITION OF RAMPAGE





On
      September 16, 2005, the Company acquired the Rampage brand from Rampage
      Licensing, LLC, a California limited liability company.





The
      purchase price for the acquisition was $47.3 million as detailed in the table
      below. Based on the Company’s preliminary assessment of the fair value of the
      assets acquired, approximately $41.1 million has been assigned to the Rampage
      trademark. Under the purchase method of accounting, tangible and identifiable
      intangible assets acquired and liabilities assumed are recorded at their
      estimated fair values. The estimated fair values and useful lives of the
      intangible assets acquired have been supported by third party valuation. The
      Rampage trademark has been determined to have an indefinite useful life, and
      accordingly, consistent with FAS 142, no amortization will be recorded in the
      Company’s consolidated statements of operations. Instead, the related intangible
      asset will be tested for impairment at least annually, with any related
      impairment charge recorded to the statement of operations at the time of
      determining such impairment.





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          14
          -


Total
      purchase price was determined as follows (in thousands):


Cash
                paid for acquisition
            $
                26,159Fair
                value of 2,171,336 restricted sharesof
                common stock at $9.28 per share
            20,150Value
                of warrants issued as acost
                of the acquisition
            1,653Other
                estimated costs of acquisition
            150Total
                cost of acquisition
            $
                48,112





The
      purchase price was allocated to the estimated fair value of the assets acquired
      as follows (in thousands):





Rampage
                licensing contract
            $
                550Rampage
                domain name
            230Rampage
                non-compete agreement
            600Rampage
                trademark
            41,070Goodwill
            5,662Total
                allocated purchase price
            $
                48,112





The
      licensing contracts are to be amortized on a straight-line basis over the
      remaining contractual period of approximately 3 years, the Rampage domain name
      is to be amortized on a straight-line basis over 5 years, and the value of
      the
      non-compete agreement is to be amortized on a straight-line basis over 2 years.
      The goodwill of approximately $5 million is subject to a test for impairment
      on
      an annual basis. A net adjustment of $669,000 resulted from the finalization
      of
      the purchase price allocations was made in prior year to increase the amounts
      assigned to goodwill previously.





The
      Company obtained $25.8 million in cash to pay a portion of the purchase price
      of
      the Rampage assets through the debt issuance by IPH of a $103 million
      Asset-Backed Note. Approximately $63 million of the proceeds of the Asset-Backed
      Notes were used to refinance the previously issued Asset-Backed Note described
      in Note I, $25.8 million was paid to the sellers, approximately $774,000 was
      used to pay costs associated with the debt issuance, $1.4 million was deposited
      in a reserve account as required by the holder
      of
      the Asset-Backed Note ,
      and $12
      million was deposited in an escrow account for the benefit of the holders of
      the
      Asset-Backed Notes, to be used by IPH only for the purchase of additional
      intellectual property assets from the Company. The purchase did not occur prior
      to November 15, 2005 so IPH redeemed $12 million principal amount of the Asset-Backed
      Notes in
      November 2005 with no penalty. Costs associated with the debt issuance have
      been
      deferred and are being amortized over the 7-year life of the Asset-Backed
      Notes.





In
      accordance with the agreement with UCC (See Note I), an additional 333,333
      of
      the Warrants Shares vested on September 16, 2005 with a fair value of $1.7
      million upon consummation of the Rampage acquisition, for which UCC acted as
      a
      financial advisor to IPH





On
      October 17, 2005, the Company filed with the SEC a registration statement
      covering the resale of the shares of common stock issued in connection with
      the
      acquisition of Rampage. The registration statement was declared effective by
      the
      SEC on October 27, 2005





NOTE
      K  RECENT
      ACCOUNTING STANDARDS





In
      March
      2006, FASB issued SFAS 156, “Accounting for Servicing of Financial Assets”,
      which amends SFAS Statement No.140, "Accounting for Transfers and Servicing
      of
      Financial Assets and Extinguishments of Liabilities", with respect to the
      accounting for separately recognized servicing assets and servicing liabilities.
      The Statement addresses the recognition and measurement of separately recognized
      servicing assets and liabilities and provides an approach to simplify efforts
      to
      obtain hedge-like (offset) accounting. SFAS 156 will be adopted January 1,
      2007,
      as required by the statement. The requirements of SFAS 156 are not expected
      to
      have an effect on the Company's consolidated financial statements.





-
          15
          -


In
      February 2006, FASB Issued SFAS 155, “Accounting for Certain Hybrid Financial
      Instruments—an amendment of FASB Statements No. 133 and 140”. SAFS 155 amends
      SFAS 133, “Accounting for Derivatives and Hedging Activities”, and No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities”, and allows an entity to remeasure at fair value a hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation from the host, if the holder irrevocably elects to account
      for the whole instrument on a fair value basis. Subsequent changes in the fair
      value of the instrument would be recognized in earnings. SFAS 155 will be
      adopted January 1, 2007, as required by the statement. The requirements of
      SFAS
      155 are not expected to have an effect on the Company's consolidated financial
      statements.





In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of Monetary Assets,”
which addresses the measurement of exchanges of nonmonetary assets and
      eliminates the exception from fair value measurement for nonmonetary exchanges
      of similar productive assets and replaces it with an exception for exchanges
      that do not have commercial substance. SFAS No. 153 is effective for nonmonetary
      asset exchanges occurring in fiscal periods beginning after June 15, 2005,
      with
      earlier application permitted. The adoption of SFAS No. 153 on January 1, 2006
      had no impact on the Company’s results of operations or its future financial
      position or results of operations.








NOTE
      L  SUBSEQUENT EVENTS





Acquisition
      of Mudd:





On
      April
      11, 2006 (the “Closing Date”) the Company completed its acquisition of
      substantially all of the assets of Mudd (USA) LLC (the “Seller”) related to the
      Seller’s business of marketing, licensing and managing the Seller’s MUDD brand,
      trademarks, intellectual property and related names worldwide, excluding China,
      Hong Kong, Macau and Taiwan (the “Assets”). As previously reported on a Form 8-K
      filed with the Securities and Exchange Commission on April 6, 2006 and on a
      Form
      8-K filed with the SEC on April 17, 2006, the Company entered into the related
      Asset Purchase Agreement (the “Purchase Agreement”) with the Seller on March 31,
      2006 for the purchase of the Assets.





The
      Company paid the following consideration for the assets: (i) $45 million in
      cash, which was funded from a portion of the proceeds of the Asset-Backed Notes
      issued by IPH, and (ii) the issuance to the Seller of 3,269,231 restricted
      shares of the Company’s common stock, $0.001 par value per share (the “Shares”).
      The Shares were issued without registration under the Securities Act of 1933,
      as
      amended (the “Act”), in reliance upon the exemptions from registration provided
      under 4(2) of the Act. The issuance of the Shares did not involve any public
      offering and the certificates representing the Shares were issued with
      restricted securities legends. Under the purchase method of accounting, tangible
      and identifiable intangible assets acquired and liabilities assumed will be
      recorded at their estimated fair values. The allocations of purchase price
      have
      not been finalized. The Company agreed to file a registration statement to
      allow
      the Seller to publicly sell the Shares and the Seller agreed to certain
      contractual restrictions on the sale of the Shares by it.





On
      the
      Closing Date, IPH entered into a license agreement (the “License Agreement”)
      with the Seller in which it granted the Seller the exclusive right to use the
      Mudd trademark in connection with the design, manufacture, sale and distribution
      of women’s and children’s jeans wear and related products in the United States.
      The Seller has guaranteed for two years minimum licensing revenues from the
      Assets and royalties under the License Agreement. The guarantee and certain
      obligations to the Company under the Purchase Agreement are secured by the
      pledge by the Seller of a portion of the cash consideration and Shares.





The
      financing for the purchase of the Assets by IPH from the Company was
      accomplished through the issuance on April 11, 2006 by IPH of Asset-Backed
      Notes
      that raised $49 million in new financing at a variable interest rate of LIBOR
      +
      4% in the first year of the 5-year term and a fixed interest rate of applicable
      treasury rate + 4.5% for the remaining 4 years, secured by the Assets, as well
      as by other intellectual property assets owned by IPH. The applicable treasury
      rate is the rate charged for a United States treasury security maturing on
      a
      date closest to the expected average life of this portion of the Asset-Backed
      Note. There are no principal payments with respect to $49 million in new
      financing in the first year. As a result of this new financing, the principal
      amount of the outstanding Asset-Backed Notes is $136 million. UCC acted as
      a
      financial advisor to IPH in connection with the acquisition.





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          16
          -


Execution
      of Merger Agreement with Mossimo and Agreement with Cherokee:





On
      April
      3, 2006, the Company announced that it had entered into a definitive agreement
      (“Merger Agreement”) to acquire Mossimo, Inc. (“Mossimo”), a public company in
      the business of licensing the MOSSIMO brand. Subject to the terms of the Merger
      Agreement, the Company will acquire all of the outstanding shares of Mossimo
      through a merger (the “Merger”) in consideration for cash and common stock of
      the Company worth $7.50 per Mossimo share, totaling approximately 15.9 million
      Mossimo shares as of March 31, 2006, provided, however that if the Company’s
      common stock does not close at or above $18.71 during a specified period
      following the Merger, the Company will issue additional shares of the Company’s
      common stock such that the total value of the cash and common stock of the
      Company issued to the Mossimo shareholders in connection with the Merger will
      be
      worth $8.50 per Mossimo share.





On
      April
      27, 2006, the Company entered into a termination and settlement agreement with
      Cherokee Inc. (“Cherokee”) providing for the termination of the finders
      agreement between Cherokee and Mossimo dated March 27, 2000 (“Mossimo Finders
      Agreement”) in exchange for the Company’s agreement to pay Cherokee $33 million
      in cash payable upon the Company closing on the Merger Agreement to acquire
      Mossimo. As part of the termination agreement, Cherokee agreed to withdraw
      its
      previously announced offer to acquire all the outstanding shares of Mossimo.
      The
      Mossimo Finders Agreement provides for Cherokee to receive 15% of all earned
      royalties received from Mossimo's license with Target Stores in perpetuity
      in
      exchange for finding and brokering the license agreement.


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          17
          -


**Item
      2.**  **Management’s
      Discussion And Analysis Of Financial Condition And Results Of Operations**





*Safe
      Harbor Statement under the Private Securities Litigation Reform Act of
      1995* .
      The
      statements that are not historical facts contained in this report are forward
      looking statements that involve a number of known and unknown risks,
      uncertainties and other factors, all of which are difficult or impossible to
      predict and many of which are beyond the control of the Company, which may
      cause
      the actual results, performance or achievements of the Company to be materially
      different from any future results, performance or achievements expressed or
      implied by such forward looking statements. These risks are detailed in the
      Company's Form 10-K for the fiscal year ended December 31, 2005 and other SEC
      filings. The words "believe", "anticipate," "expect", "confident", "project",
      provide "guidance" and similar expressions identify forward-looking statements.
      Readers are cautioned not to place undue reliance on these forward looking
      statements, which speak only as of the date the statement was made.





*Executive
      Summary.* The
      Company is in the business of owning, licensing and marketing a growing and
      diversified portfolio of consumer brands that are sold across every major
      segment of retail distribution from the luxury market to the mass market. During
      the Current Quarter, the Company owned five brands, CANDIE'S®, BONGO®, BADGLEY
      MISCHKA®, JOE BOXER® and RAMPAGE®, and on April 11, 2006 acquired a sixth brand,
      MUDD®. The Company licenses its brands to retailers and wholesalers worldwide
      for use in connection with a broad variety of consumer products including
      apparel, footwear, accessories, fragrance and beauty products and home
      accessories. The Company’s business model is designed to allow the Company to
      focus on its core competency of marketing and managing brands without the risk,
      complexity and investment inherent under the traditional operating model. The
      Company has long term contracts with minimum guaranteed sales, and therefore
      has
      greater revenue predictability than traditional operating businesses.





The
      Company's growth strategy is focused on increasing licensing revenue from its
      existing portfolio of brands, continuing to acquire new brands that further
      diversify the Company’s portfolio and licensing its brands to a growing network
      of retailers and wholesalers internationally.





***Results
      of Operations***




*For
      the three months ended March 31, 2006*




*Revenue..* The
      first quarter of 2006 was the first time that the Company had comparable year
      over year results under its new brand management business model. Revenue for
      the
      Current Quarter increased to $13.3 million, from $4.3 million in the Prior
      Year
      Quarter. This revenue growth was balanced between expansion of brands we owned
      in the prior year quarter, notably the Company’s Candie’s brand, whose license
      with Kohl’s Department Stores continues to rollout, and new revenue associated
      with the two acquisitions completed in the third quarter of last year, Joe
      Boxer
      and Rampage. .




*Operating
      Expenses.* Selling,
      general and administrative ( **“** SG&A”)
      expenses totaled $4.8 million in the Current Quarter compared to $2.7 million
      in
      the Prior Year Quarter, an increase of $2.1 million. The increase in SG&A
      expense was primarily related to increased advertising obligations connected
      to
      the growth in licensing revenue as well as new executives that joined the
      Company in the Joe Boxer and Rampage transactions.. Included in the Current
      Quarter’s SG&A was $132,000 amortization of deferred financing cost,
      compared to $104,000 in the Prior Year Quarter. Included in the Prior Year
      Quarter’s SG&A expense was $37,500 for Unzipped’s net loss which was related
      to the Company’s transition of the Bongo jeanswear business into a licensing
      business. For the Current Quarter and Prior Year Quarter, the Company’s special
      charges included $556,000 and $379,000 respectively, incurred by the Company
      relating to litigation involving Unzipped.





Operating
      Income for the Current Quarter increased to $7.9 million, or approximately
      60%
      of total revenue compared to $1.2 million or 29% of total revenue in the Prior
      Year Quarter.


.


*Net* *Interest
      Expense* .
      Net
      Interest expense increased by approximately $1.4 million in the Current Quarter
      to $1.8 million, compared to $445,000 in the Prior Year Quarter. This increase
      was due primarily to an increase in the Company’s debt through financing
      arrangements in connection with the acquisitions of Joe Boxer and Rampage.
      See
      Notes I and J of Notes to Condensed Consolidated Financial Statements. . In
      addition, $37,000 in interest expense was included in the Current Quarter from
      the Sweet Note as compared to $38,000 in the Prior Year Quarter. A total of
      $161,000 in interest income for the Current Quarter partially offset the
      increase in interest expense, compared to $14,000 offset in the Prior Year
      Quarter.





*Provision
      (Benefit) for Income Taxes.* The
      Company accounts for income taxes in accordance with Statement of Financial
      Accounting Standards No. 109, (“SFAS 109”) “Accounting for Income Taxes.” Under
      SFAS No. 109, deferred tax assets and liabilities are determined based on
      differences between the financial reporting and tax basis of assets and
      liabilities and are measured using the enacted tax rates and laws that will
      be
      in effect when the differences are expected to reverse. A valuation allowance
      is
      established when necessary to reduce deferred tax assets to the amount expected
      to be realized. In determining the need for a valuation allowance, management
      reviews both positive and negative evidence pursuant to the requirements of
      SFAS
      No. 109, including current and historical results of operations, the annual
      limitation on utilization of net operating loss carry forwards pursuant to
      Internal Revenue Code section 382, future income projections and the overall
      prospects of the Company’s business. Based upon management’s assessment of
      information which became available in the Current Quarter management concluded
      that it is more likely than not that a portion of previously unrecognized
      deferred income tax benefits will be realized. Accordingly, the Company reduced
      a portion of the related valuation allowance which resulted in a $1.3 million
      net tax benefit for the Current Quarter. Based on current estimates of pre-tax
      income for the year ended December 31, 2006, management expects to record a
      net
      income tax expense for that period. See Note E of Notes to Condensed
      Consolidated Financial Statements.





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          18
          -


*Net
      income* .
      The
      Company recorded net income of $7.4 million in the Current Quarter, compared
      to
      net income of $787,000 in the Prior Year Quarter, as a result of the factors
      discussed above.





***Liquidity
      and Capital Resources***




*Liquidity*





The
      Company’s primary sources of liquidity are from cash flows from operations. As
      of March 31, 2006 and December 31, 2005 the Company’s cash and cash equivalents
      totaled $7.8 million and $11.7 million, including $538,000 and $4.1 million
      restricted cash, respectively. The decrease resulted from the timing of receipt
      of certain royalty payments at the year end of 2005.





The
      Company’s cash requirements to support working capital needs, including
      operating expenses, interest payments and its minimal capital expenditures,
      are
      from its existing cash and cash provided from its operations. Based on the
      company’s current internal estimates, the Company believes that the existing
      cash and cash provided from future operations will be adequate to meet its
      cash
      requirements over the next twelve months.





*Changes
      in Working Capital*





At
      March
      31, 2006 and December 31, 2005 the working capital ratio (current assets to
      current liabilities) was 0.62 to 1 and 0.84 to 1 respectively. The main driver
      of the decrease is that as
      of
      March 31, 2006, the Company reclassified $15 million in debt from long-term
      to
      current liabilities on its balance sheet as the Company had not entered into
      or
      renewed certain licensing arrangements with respect to the Joe Boxer brand.
      Subject to terms in the Asset-Backed Notes, if by April 1, 2006, the Company
      has
      not entered into or renewed certain licensing agreement(s) with respect to
      the
      Joe Boxer brand that guarantee certain thresholds, the Company would be required
      to make additional quarterly principal payments of $3.75 million in the next
      7
      quarters, without penalty. If the Company subsequently enters into or renews
      such licensing arrangements, above certain royalty thresholds, the requirement
      to pay the additional quarterly payments will cease and the Company will adjust
      the related debt reclassification on its balance sheet appropriately. See Note
      C of
      Notes
      to Condensed Consolidated Financial Statements .
      The
      Company believes that cash from future operations as well as currently available
      cash will be sufficient to satisfy its anticipated working capital requirements
      for the foreseeable future.





*Operating
      Activities*





Net
      cash
      used in operating activities totaled $715,000 in the Current Quarter, as
      compared to $2.5 million of net cash provided in the Prior Year Quarter. The
      difference was primarily due to $3.7 million decrease in deferred revenues
      in
      the Current Quarter, which primarily resulted from the timing of receipt of
      certain royalty payments at the year end of 2005. The Company continues to
      rely
      upon cash generated from licensing and commission operations to finance its
      operations. Further. The Company believes that such cash from operations will
      be
      sufficient to satisfy its anticipated working capital requirements for the
      foreseeable future.





*Investing
      Activities*





Net
      cash
      used for investing activities in the Current Quarter totaled $866,000, as
      compared to $71,000 in the Prior Year Quarter. Capital expenditures in the
      Current Quarter were $476,000, compared to no capital expenditures in the first
      quarter of 2005. Capital expenditures in the first quarter of 2006 were
      primarily attributable to the acquisition of office equipment and the
      performance of leasehold improvements relating to the Company’s relocation of
      its headquarters and the construction of new showrooms in New York City. The
      Company also spent $223,000 in connection with the registration and maintenance
      of its trademarks, compared to $71,000 in the Prior Year Quarter. In the Current
      Quarter, the Company spent $167,000 in purchasing equity securities of other
      public entities.





-
          19
          -


*Financing
      Activities*





Net
      cash
      provided in financing activities was $1.2 million in the Current Quarter,
      compared with $2.2 million net cash used in the Prior Year Quarter, which
      decrease primarily resulted from a reduction of $3.6 million in its current
      restricted cash. Approximately $2.2 million was used for principal payments
      related to Asset-Backed Notes, compared to $712,000 in the Prior Year Quarter.
      The Company also paid $2 million for a loan from TKO Apparel, its then related
      party in the Prior Year Quarter.





*Asset-Backed
      Notes*





In
      August
      2002, IPH issued in a private placement $20 million of Asset-Backed Notes
      secured by intellectual property assets (trade names, trademarks, license
      agreements and payments and proceeds with respect thereto) of IPH. The
      Asset-Backed Notes had a 7-year term with a fixed interest rate of 7.93% with
      quarterly principal and interest payments of approximately $859,000. (See Note
      G of Notes
      to Condensed Consolidated Financial Statements. ).
      After
      funding a liquidity reserve account in the amount of $2.9 million, the net
      proceeds of the Asset-Backed Notes ($16.2 million) were used by the Company
      to
      reduce amounts due by the Company under its then-existing revolving credit
      facilities. In April 2004, IPH issued an additional $3.6 million in subordinated
      Asset-Backed Notes secured by its intellectual property assets. The additional
      borrowing had a maturity date of August 2009, with a floating interest rate
      of
      LIBOR + 4.45% and quarterly principal and interest payments and $500,000 of
      interest prepaid at closing. The net proceeds of $2.9 million were used by
      the
      Company for general working capital purposes. As of July 22, 2005, the total
      principal on these notes was approximately $17.5 million, which were refinanced
      with a new Asset-Backed Note issued in connection with the Joe Boxer acquisition
      described below.





In
      the
      fiscal quarter ended September 30, 2005, the Company acquired the Joe Boxer
      brand from Joe Boxer Company, LLC and its affiliates, and the Rampage brand
      from
      Rampage Licensing, LLC. See Notes I and J of Notes
      to Condensed Consolidated Financial Statements. The
      financing for the acquisitions was accomplished through two private placements
      by IPH of additional Asset-Backed Notes, secured by the intellectual property
      assets owned by IPH. The combined proceeds of Asset-Backed Notes, totaled $103
      million, were used as follows: approximately $17.5 million was used to refinance
      previously issued Asset-Backed Notes, $40.0 million was paid to the sellers
      of
      Joe Boxer, approximately $25.8 million was paid to the sellers of Rampage,
      $1.7
      million was placed in a reserve account as required by the holder of the
      Asset-Backed Notes, approximately $1.8 million was used to pay costs associated
      with the debt issuance, approximately $200,000 was paid to legal professionals
      associated with the acquisitions, approximately $4.0 million was available
      to
      the Company for working capital purposes, and $12 million was deposited in
      an
      escrow account for the benefit of the holder of the Asset-Backed Notes, to
      be
      used by IPH solely for the purchase of certain intellectual property assets.
      IPH
      redeemed $12 million of the Asset-Backed Notes without penalty as such purchase
      did not occur prior to November 15, 2005. Costs associated with the debt
      issuances of approximately $1.8 million have been deferred and are being
      amortized using the interest method over the 7 year life of the Asset-Backed
      Notes.





Subject
      to terms in the Asset-Backed Notes, if by April 1, 2006, the Company had not
      entered into or renewed certain licensing agreement(s) with respect to the
      Joe
      Boxer brand that guarantee certain royalty thresholds, the Company would be
      required to make additional quarterly principal payments of $3.75 million in
      the
      next 7 quarters, without penalty. As of April 1, 2006, the Company had not
      entered into or renewed such licensing arrangements with respect to the Joe
      Boxer brand, accordingly, the Company reclassified $15 million from long-term
      debt to current on its balance sheet. If the Company subsequently enters into
      or
      renews such licensing arrangements, the requirement to pay the additional
      quarterly payments will cease and the Company will adjust the related debt
      reclassification on its balance sheet appropriately.





Cash
      on
      hand in the bank account of IPH is restricted at any point in time up to the
      amount of the next debt payment required under the Asset Backed Notes.
      Accordingly, $538,000 and $4.1 million as of March 31, 2006 and December 31,
      2005, respectively, have been disclosed as restricted cash within the Company’s
      current assets. Further, a reserve account required by the holder of the
      Asset-Backed Notes has been established and the funds on deposit in such account
      will be applied to the last debt payment. Accordingly, $5.4 million and $5.0
      million as of March 31, 2006 and December 31, 2005, respectively, have been
      disclosed as restricted cash within the Company’s other assets.





Interest
      rates and terms on the Asset-Backed Notes are as follows: $63 million principal
      amount of the Asset-Backed Notes bears interest at a fixed interest rate of
      8.45% with a 7 year term, and $28 million principal amount of the Asset-Backed
      Notes bears interest at a fixed rate of 8.10% with a 7 year term, and $12
      million principal amount of the Asset-Backed Notes bore interest at a floating
      interest rate of LIBOR + 0.7%. IPH redeemed $12 million of the Asset-Backed
      Note
      in November 2005 without penalty. Neither the Company nor any of its
      subsidiaries (other than IPH) is obligated to make any payment with respect
      to
      the Asset-Backed Notes, and the assets of the Company and its subsidiaries
      (other than IPH) are not available to IPH’s creditors. The assets of IPH are not
      available to the creditors of the Company or its subsidiaries (other than
      IPH).





As
      of
      April 11, 2006, in connection to the acquisition of Mudd Assets, the
      Asset-Backed Notes have been amended through an issuance by IPH of
      Asset-Backed Notes that raised $49 million in new financing at a variable
      interest rate of LIBOR + 4% in the first year of the 5-year term and a fixed
      interest rate of applicable treasury rate + 4.5% for the remaining 4 years,
      secured by the Assets, as well as by other intellectual property assets owned
      by
      IPH. The applicable treasury rate is the rate charged for a United States
      treasury security maturing on a date closest to the expected average life of
      this portion of the Asset-Backed Note. There are no principal payments with
      respect to $49 million in new financing in the first year. As a result of this
      new financing, the principal amount of the outstanding Asset-Backed Notes is
      $136 million. UCC acted as a financial advisor to IPH in connection with the
      acquisition. See Note L of Notes to Condensed Consolidated Financial
      Statements.





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          20
          -


*Matters
      Pertaining to Unzipped* .





See
      Notes
      F and G of Notes to Condensed Consolidated Financial Statements.





For
      the
      Current Quarter, Unzipped had no operations, as compared to a net loss (as
      defined for the purpose of determining if the Guarantee had been met) of
      $296,000 in the Prior Year Quarter. Consequently for the Current Quarter there
      was no Shortfall Payment, as compared to a Shortfall Payment of $438,000 in
      the
      Prior Year Quarter. The adjusted Shortfall Payment had been recorded in the
      Condensed Consolidated Income Statements as a reduction of Unzipped’s cost of
      sales (since the majority of Unzipped’s operations were with entities under
      common ownership with Sweet, including all of the purchases of inventory) and
      on
      the balance sheet as a reduction of the Sweet Note based upon the right to
      offset in the Management Agreement. After adjusting for the Shortfall Payment
      in
      Prior Year Quarter, Unzipped reported a net loss of $37,500 on sales of
      $448,000. Due to the immaterial nature of the related amounts, the net loss
      of
      $37,500 from Unzipped was included in the SG&A in the Company’s Condensed
      Consolidated Income Statements for the Prior Year Quarter.





***Other*** ***Matters***





*Summary
      of Significant Accounting Policies.*





The
      condensed consolidated financial statements include the accounts of the Company
      and its wholly-owned subsidiaries. All significant intercompany transactions
      and
      items have been eliminated in consolidation. The Company acquired the Joe Boxer
      brand on July 22, 2005 and the Rampage brand on September 16, 2005. All
      acquisitions have been accounted for using purchase price accounting. The
      purchase method of accounting requires that the total purchase price of an
      acquisition be allocated to the assets acquired and liabilities assumedbased
      on
      their fair values on the date of the business acquisition. Any excess of the
      purchase price over the estimated fair values of the net assets acquired is
      recorded as goodwill. See Notes I and J of Notes to Condensed Consolidated
      Financial Statements.





The
      preparation of the condensed consolidated 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 Company reviews all significant
      estimates affecting the financial statements on a recurring basis and records
      the effect of any adjustments when necessary.





In
      June
      2001, the FASB issued Statement of Financial Accounting Standards No. 142 (SFAS
      No. 142), “Goodwill and Other Intangible Assets,” which changes the accounting
      for goodwill and other intangible assets without determinable lives from an
      amortization method to an impairment-only approach. The Candie’s and Bongo
      trademarks had previously been amortized on a straight-line basis over their
      estimated useful lives of approximately 20 years. Effective July 1, 2005 the
      Company had a change in estimate of the useful lives of both the Candie’s and
      Bongo trademarks to indefinite life. The impact of this change in estimate
      for
      the Current Quarter was a reduction in amortization expense relating to the
      Candie’s and Bongo trademarks totaling $295,000. As of March 31, 2006, the net
      book value of the Candie’s and Bongo trademarks totaled $14.3 million.
      Impairment losses are recognized for long-lived assets, including certain
      intangibles, used in operations when indicators of impairment are present and
      the undiscounted cash flows estimated to be generated by those assets are not
      sufficient to recover the assets' carrying amount. Impairment losses are
      measured by comparing the fair value of the assets to their carrying amount.





The
      Company has entered into various trade name license agreements that provide
      revenues based on minimum royalties and additional revenues based on a
      percentage of defined sales. Minimum royalty revenue is recognized on a
      straight-line basis over each period, as defined, in each license agreement.
      Royalties exceeding the defined minimum amounts are recognized as income during
      the period corresponding to the licensee’s sales. Beginning January 2005, the
      Company changed its business practices with respect to Bright Star Footwear,
      Inc
      (“Bright Star”), a subsidiary of the Company, which resulted in a change in
      revenue recognition for the Current Year. Bright Star now acts as an agent,
      therefore only net commission revenue is recognized commencing January 1, 2005.
      Revenue is recognized upon shipment with related risk and title passing to
      the
      customers. Allowances for chargebacks, returns, and other charges are recorded
      at the sales date based on customer specific projections as well as historical
      rates of such allowances.





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          21
          -


Effective
      January 1, 2006, the Company adopted Statement No. 123(R), “Accounting for
      Share-Based Payment” (“SFAS 123(R)”), which requires companies to measure and
      recognize compensation expense for all stock-based payments at fair value.
      Under
      SFAS 123(R), using the modified prospective method, compensation expense is
      recognized for all share-based payments granted prior to, but not yet vested
      as
      of, January 1, 2006. In
      December 2005, the Company’s Board of Directors approved the accelerated vesting
      of all employee service-based stock options previously granted under the
      Company’s various non-qualified stock option plans, which would have been
      unvested as of December 31, 2005. As a result, all options granted as of
      December 31, 2005, except certain options based on performance became
      exercisable immediately. The number of shares, exercise prices and other terms
      of the options subject to the acceleration remain unchanged. The acceleration
      of
      such option vesting resulted in an additional $446,000 of compensation expense
      reflected in pro forma net income for the prior year, an amount that would
      have
      otherwise been recorded as compensation expense in the years ending December
      31,
      2006 and 2007, but had no impact on compensation recognition in 2005 as the
      options would have been unexpired. Prior to the adoption of SFAS 123(R), the
      Company accounted for its stock-based compensation plans under the recognition
      and measurement principles of Accounting Principles Board (APB) Opinion No.
      25,
“Accounting for Stock Issued to Employees”, and related interpretations.
      Accordingly, the compensation cost for stock options had been measured as the
      excess, if any, of the quoted market price of the Company’s stock at the date of
      the grant over the amount the employee must pay to acquire the stock. In
      accordance with the modified prospective transition method, the consolidated
      financial statements have not been restated to reflect the impact of SFAS
      123(R). The
      impact on the Company's financial condition and results of operations of
      adopting FAS No. 123(R) will depend on the number and terms of stock options
      granted in future years under the modified prospective method, the amount of
      which can not currently be estimated by management.





On
      July
      1, 2005, the Company changed its corporate name to Iconix Brand Group, Inc.
      and
      its NASDAQ symbol to ICON.





*Seasonal
      and Quarterly Fluctuations* .





The
      Company's results may fluctuate quarter to quarter as a result of its licensees'
      sales and business generally, which can be impacted by holidays, weather, the
      timing of product shipments, market acceptance of the applicable branded
      product, the mix, pricing and presentation of the product and general economic
      conditions beyond the Company’s control. Accordingly, the results of operations
      in any quarter will not necessarily be indicative of the results that may be
      achieved for a full fiscal year or any future quarter.





*Other
      Factors*





The
      Company continues to seek to expand and diversify the types of licensed products
      being produced under its various brands, as well as diversify the distribution
      channels within which licensed products are sold, in an effort to reduce
      dependence on any particular retailer, consumer or market sector. The success
      of
      the Company, however, will still largely remain dependent on its ability to
      contract with and retain key licensees, its licensee’s ability to predict
      accurately upcoming fashion trends among its customer base, to build and
      maintain brand awareness and to fulfill the product requirements of the retail
      channel within a global marketplace. Unanticipated changes in consumer fashion
      preferences, slowdowns in the United States economy, changes in the prices
      of
      supplies, gasoline, consolidation of retail establishments, among other factors
      noted herein and the Company’s other filing with the SEC, could adversely affect
      the Company's licensees’ from meeting and/or exceeding their contractual
      commitments to the Company and thereby adversely impact the Company’s future
      operating results.





*Effects
      of Inflation.* The
      Company does not believe that the relatively moderate rates of inflation
      experienced over the past few years in the United States, where it primarily
      competes, have had a significant effect on its revenues or
      profitability.


-
          22
          -


**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**




There
      have been no material changes to the information set forth in Item 7A of the
      Company’s Report on Form 10-K for the fiscal year ended December 31, 2005.








**Item
      4.**  **Controls
      and Procedures**





The
      Company maintains “disclosure controls and procedures, “ as such term is defined
      under Rule 13a-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”),
      that are designed to ensure that information required to be disclosed in the
      Company’s Exchange Act reports is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and forms, and that such
      information is accumulated and communicated to its management, including its
      Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
      timely decisions regarding required disclosures. In designing and evaluating
      the
      disclosure controls and procedures, the Company’s management recognized that any
      controls and procedures, no matter how well designed and operated, can provide
      only reasonable assurance of achieving the desired control objectives and the
      Company’s management necessarily was required to apply its judgment in
      evaluating the cost-benefit relationship of possible controls and procedures.
      The Company has carried out an evaluation, as of the end of period covered
      by
      this report, under the supervision and with the participation of the Company’s
      management, including its Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the design and operation of the Company’s disclosure
      controls and procedures. Based upon the management’s evaluation and subject to
      the foregoing, the Chief Executive Officer and Chief Financial Officer concluded
      that the Company’s disclosure controls and procedures were effective in ensuring
      that material information relating to the Company that is required to be
      disclosed in the Company’s Exchange Act reports is made known to the Chief
      Executive Officer and Chief Financial Officer by others within the Company
      in a
      timely manner.




There
      have been no significant changes in the Company’s internal controls over
      financial reporting (as defined in Exchange Act Rule 13a-15(f)) that occurred
      during the quarter ended March 31, 2006 that have materially affected, or
      are reasonably likely to materially affect, the Company’s internal controls over
      financial reporting.














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PART
      II.
      Other Information








**Item
      1.**  **Legal
      Proceedings**





See
      Note
      F of Notes to Condensed Consolidated Financial Statements.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





In
      addition to the sales of unregistered securities previously reported on Form
      8-K, during the quarter ended March 31, 2006, the Company issued 798 shares
      of
      its Common Stock to an option holder in connection with an exercise of options
      in a private transaction that was exempt from registration under Section 3(a)(9)
      of the Securities Act of 1933, as amended.





**Item
      6.**  **Exhibits**





2.1
      Merger Agreement dated as of March 31, 2006 by and among the Company, Moss
      Acquisition Corp., Mossimo, Inc, and Mossimo Giannuli Company (incorporated
      by
      reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K for the
      event dated March 31, 2006 (SEC accession No. 0000950117-06-001668))





2.2
      Asset
      Purchase Agreement dated as of March 31, 2006 between the Company and Mudd
      (USA), LLC. (Incorporated by reference to Exhibit 2.1 of the Company’s Current
      Report on Form 8-K for the event dated March 31, 2006 (SEC Accession No.
      0000950117-06-001669)





31.1
      Certification of Chief Executive Officer Pursuant To Rule 13a-14 or 15d-14
      of
      The Securities Exchange Act of 1934, As Adopted Pursuant To Section 302 Of
      The
      Sarbanes-Oxley Act of 2002.





31.2
      Certification of Chief Financial Officer Pursuant To Rule 13a-14 or 15d-14
      of
      The Securities Exchange Act of 1934, As Adopted Pursuant To Section 302 Of
      The
      Sarbanes-Oxley Act of 2002.





32.1
      Certification of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350,
      As
      Adopted Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002.





32.2
      Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350,
      As
      Adopted Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002.





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**Signatures**








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






Iconix
                  Brand Group, Inc.(Registrant)Date:
              10-May-05
              
              /s/
                  Neil ColeNeil
                  ColeChairman
                  of the Board, PresidentAnd
                  Chief Executive Officer(on
                  Behalf of the Registrant)Date:
              10-May-05
              
              /s/
                  Warren ClamenWarren
                  ClamenChief
                  Financial Officer













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