UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               AMENDMENT NO. 1 TO
                                   FORM 10-K/A

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

                   For the fiscal year ended December 31, 2002

                                       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: 0-26430

                              TARRANT APPAREL GROUP
             (Exact name of registrant as specified in its charter)

           California                                          95-4181026
  (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                         Identification Number)

                         3151 East Washington Boulevard
                          Los Angeles, California 90023
               (Address of principal executive offices) (Zip code)

       Registrant's telephone number, including area code: (323) 780-8250

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

                                      None

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

                                  Common Stock

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

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

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

         As of June 28,  2002,  the  aggregate  market value of the Common Stock
held by  non-affiliates  of the Registrant was  approximately  $38,126,931 based
upon the closing price of the Common Stock on that date.

         Number of shares of Common Stock of the  Registrant  outstanding  as of
March 15, 2003: 15,846,315.

                       DOCUMENTS INCORPORATED BY REFERENCE

         None


<PAGE>


                                 AMENDMENT NO. 1
                   TO THE ANNUAL REPORT ON FORM 10-K FILED BY
                     TARRANT APPAREL GROUP ON APRIL 1, 2003

         The  following  amends the Annual  Report on Form 10-K filed by Tarrant
Apparel  Group on April 1,  2003,  as  permitted  by the rules  and  regulations
promulgated by the Securities and Exchange Commission.  Item 15 of the Form 10-K
is hereby amended in its entirety as set forth herein.



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

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

         (b) Reports on Form 8-K filed: None.

         (c) Exhibits. The following exhibits are filed as part of this report.

EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

3.1          Restated Articles of Incorporation of the Company(1)

3.1.1        Certificate  of  Amendment of Restated  Articles of  Incorporation.
             (26)

3.1.2        Certificate  of  Amendment of Restated  Articles of  Incorporation.
             (26)

3.1.3        Certificate of Determination of Preferences, Rights and Limitations
             of Series A  Preferred  Stock of Tarrant  Apparel  Group.  (28)

3.2          Restated Bylaws of the Company (1)

4.1          Specimen of Common Stock Certificate (2)

10.1         Note in the principal  amount of $2,600,000 dated March 15, 1995 in
             favor of Imperial Bank (1)

10.2         General Security  Agreement dated March 15, 1995 by and between the
             Company and Imperial Bank (1)

10.3         Factoring Agreement effective as of September 28, 1993, as amended,
             by and between the Company and NationsBanc  Commercial  Corporation
             (1) 10.4 1995 Stock Option Plan dated as of May 1, 1995 (1)

10.5         Letter  Agreement  dated February 17, 1995 between  Tarrant Company
             Limited and The Hongkong and Shanghai Banking  Corporation  Limited
             (1)


                                       2


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.6         Letter dated April 18, 1995 from The Hongkong and Shanghai  Banking
             Corporation  Limited  to  Tarrant  Company  Limited  regarding  the
             release of certain security interest (1)

10.7         Commercial Lease dated January 1, 1994 and GET and the Company (1)

10.8         Tenancy  Agreement  dated July 15, 1994 between Lynx  International
             Limited  and  Tarrant  Company  Limited as amended by that  certain
             Supplementary  Tenancy  Agreement  dated December 30, 1994 and that
             certain Second  Supplementary  Tenancy Agreement dated December 31,
             1994 (1)

10.9         Lease  Agreement  dated  June  10,  1994,  between  Yip Sik Kin and
             Tarrant Company Limited (translated from Chinese) (1)

10.10        Tenancy Contract effective as of December 24, 1994, between Khalifa
             Muhairi and Tarrant Trading Co. Ltd. (1)

10.11        Agreement dated as of June 1, 1995, by and among Pret-A-Porter, the
             Company,  French Designers,  Inc.,  Bernard Aidan,  Gerard Guez and
             Todd Kay (5)

10.12        Services  Agreement  dated  as of  April 1,  1995,  by and  between
             F.I.S., Inc. and the Company (2)

10.13        Services  Agreement dated as of October 1, 1994, by and between the
             Company and GET (1)

10.14        Services  Agreement dated as of October 1, 1994, by and between the
             Company and Lynx International Limited (1)

10.15        Indemnification  Agreement dated as of March 14, 1995, by and among
             the Company, Gerard Guez and Todd Kay (2)

10.16        Promissory Note in the initial principal amount of $2 million dated
             February 8, 1996, by Gerard Guez in favor of the Company (2)

10.17        Promissory Note in the initial principal amount of $1 million dated
             February 8, 1995, by Todd Kay in favor of the Company (2)

10.18        Promissory  Note in the  principal  amount of  $1,334,566.71  dated
             December 31, 1994, by P.I.S., Inc. in favor of the Company (2)

10.19        Release  dated as of June 1, 1995,  by and  between the Company and
             certain other parties signatory thereto (2)

10.20        Option  Agreement  dated as of July 28, 1995,  by and among Limited
             Direct Associates, L.P., Gerard Guez, Todd Kay and the Company (5)

10.21        Registration  Rights  Agreement  dated as of July 28, 1995,  by and
             among the Company and Limited Direct Associates, L.P.(5)


                                       3


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.22        Reorganization and Tax  Indemnification  Agreement dated as of June
             13, 1995, by and among the Company and its shareholders (5)

10.23        Employment  Agreement  January 1, 1995,  by and between the Company
             and Gerard Guez (2)

10.23.1      Employment  Agreement effective January 1, 1998, by and between the
             Company and Gerard Guez (13)

10.23.2      First  amendment to  Employment  Agreement  dated as of January 10,
             2000 by and between Gerard Guez and the Company (21)

10.24        Agreement  dated as of January 1, 1995,  by and between the Company
             and Todd Kay (1)

10.24.1      Employment  Agreement effective January 1, 1998, by and between the
             Company and Todd Kay (13)

10.24.2      First  Amendment to  Employment  Agreement  dated as of January 10,
             2000 by and between Todd Kay and the Company

10.25        Employment  Agreement  dated as of January 1, 1994,  by and between
             the Company and Jimmy Esebag, as amended, by that certain Amendment
             No. 1 dated as of June 1, 1995 (2)

10.26        Employment  Agreement dated as of November 18, 1994, by and between
             the Company and Mark B. Kristof (1)

10.27        Employment  Agreement  dated as July 5, 1994,  by and  between  the
             Company and Bradley R. Kenson (1)

10.28        License Agreement dated January 1, 1994, by and between the Company
             and GET (1)

10.29        Assignment  dates  as of June 1,  1995  with  respect  to the  GET!
             trademark, executed by GET in favor of the Company (2)

10.30        Amendment  No. 1 to  Commercial  Lease dated as of April 1, 1995 by
             and between GET and the Company (2)

10.31        Lease  and  Services  Agreement  dated as of June 1,  1995,  by and
             between Tarrant Company Limited and French Designers, Inc. (2)

10.32        Note in the principal  amount of $2,600,000  dated May 15, 1995, by
             the Company in favor of Imperial Bank (2)

10.33        Letter Agreement dated May 17, 1995, by and between Tarrant Company
             Limited and The Hongkong and Shanghai Banking  Corporation  Limited
             (2)

10.34        Buying Agency Agreement  executed as of December 19, 1992,  between
             P.I.S., Inc. and Tarrant Company Ltd. (2)


                                       4


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.35        Buying  Agency  Agreement  executed as of April 4, 1995,  by Azteca
             Production  International,  Inc. and Tarrant Company Ltd., with the
             Company acknowledging as to certain matters (2)

10.36        Tripartite  Agreement  Assignment of Factoring Proceeds  (Advances)
             executed and delivered  June 6, 1995, by the Company,  and accepted
             and agreed to by The  Hongkong  and  Shanghai  Banking  Corporation
             Limited and NationsBanc Commercial Corporation (2)

10.36.1      Amendment to Three Party Special Deposit Account Agreement (8)

10.37        Security Agreement (Guaranty of Tarrant Co. Ltd. Debt) entered into
             as of June 6,  1995,  by and  between  the  Hongkong  and  Shanghai
             Banking Corporation Limited and the Company (2)

10.38        Security Agreement (Tarrant Co. Ltd. Draft Acceptance) entered into
             as of June 6,  1995,  by and  between  The  Hongkong  and  Shanghai
             Banking Corporation Limited and the Company (2)

10.39        Agreement  dated  March  14,  1995,  by and among  Tarrant  Company
             Limited,  Cheung Shing Hong Holding  Ltd.,  Yip Sik Kin and Lam Kin
             Fong (3)

10.40        Agreement  dated  March  17,  1995,  by and among  Tarrant  Company
             Limited,  Cheung Shing Hong Holding  Ltd.,  Yip Sik Kin and Lam Kin
             Fong (3)

10.41        Underwriting  Agreement dated as of July 24, 1995, by and among the
             Company,   Gerard  Guez,   Todd  Kay  and   Prudential   Securities
             Incorporated (5)

10.42        Letter  agreement  dated August 10, 1995,  by and among the Company
             and NationsBanc Commercial Corporation (4)

10.42.1      Amendment dated June 9, 1997 to Factoring Agreement effective as of
             September  28,  1993,  as  amended,  by and between the Company and
             NationsBanc Commercial Corporation (8)

10.43        Letter  agreement  dated January 30, 1996,  by and between  Tarrant
             Company  Limited  and The  Hongkong  Shanghai  Banking  Corporation
             Limited (5)

10.43.1      Letter agreement dated May 28, 1996, by and between Tarrant Company
             Limited and The Hongkong and Shanghai Banking  Corporation  Limited
             (8)

10.43.2      Letter  agreement  dated April 16,  1998,  by and  between  Tarrant
             Company Limited and The Hongkong and Shanghai  Banking  Corporation
             Limited (11)

10.44        Promissory  Note in the principal  amount of $3 million dated March
             25, 1996, by GET in favor of the Company (6)

10.45        Deed of Trust  dated  March  25,  1996 by and  Between  GET and the
             Company (6)


                                       5


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.46        Guaranty,  Pledge & Security Agreement entered into as of March 25,
             1996, by and between Gerard Guez and the Company (6)

10.47        Guaranty,  Pledge & Security Agreement entered into as of March 25,
             1996, by and between Todd Kay and the Company (6)

10.48        Letter  agreement  dated February 22, 1996, by and between  Tarrant
             Company Limited and Standard Chartered Bank (7)

10.49        Letter  agreement  dated  March 8,  1996,  by and  between  Tarrant
             Company Limited and Standard Chartered Bank (7)

10.50        Guarantee  Agreement  entered  into as of August 30,  1996,  by and
             between Standard Chartered Bank and the Company (7)

10.51        Letter of  Undertaking  entered into as of August 30, 1996,  by and
             between Standard Chartered Bank and the Company (7)

10.52        Intercreditor  Agreement  entered  into  as of  November  1,  1996,
             between The  Hongkong  and Shanghai  Banking  Corporation  Limited,
             Standard Chartered Bank and Tarrant Company Limited (7)

10.53        Security  Agreement  entered  into as of November  1, 1996,  by and
             between Standard Chartered Bank and the Company (7)

10.53.1      Termination  Agreement  dated as of March 29, 2002,  by and between
             Standard Chartered Bank and Tarrant Apparel Group (25)

10.54        Amendment to Security Agreement (Guaranty of Tarrant Co. Ltd. Debt)
             entered  into as of November  1, 1996,  between  The  Hongkong  and
             Shanghai Banking Corporation Limited and the Company (7)

10.55        Agreement  dated  January  29,  1997 by and among  Tarrant  Company
             Limited,  Cheung Shing Hong Holding  Ltd.,  Yip Sik Kin and Lam Kin
             Fong (7)

10.56        Form  of  Indemnification  Agreement  with  directors  and  certain
             executive officers (8)

10.57        Special Deposit Account Agreement (8)

10.58        Accounts  Receivable  Financing  Agreement  dated June 13, 1997, by
             between the Company and The CIT GroupCommercial Services, Inc. (8)

10.58.1      Letter   Agreement   dated  October  1,  1997  regarding   Accounts
             Receivable Financing Agreement,  by and between the Company and The
             CIT GroupCommercial Service., Inc. (13)

10.59*       Asset  Purchase  Agreement  dated February 18, 1998, by and between
             Marble Limited and MGI International Limited (10)


                                       6


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.60*       Asset  Purchase  Agreement  dated February 18, 1998, by and between
             the Company and Marshall Gobuty International U.S.A., Inc. (10)

10.61        Employment  Agreement  dated  February 23, 1998, by and between the
             Company and Marshall Gobuty (10)

10.62        Noncompetition  Agreement  dated  February 23, 1998, by and between
             Marshall Gobuty International  U.S.A., Inc. and Marshall Gobuty, on
             the one hand, and the Company, on the other hand (10)

10.63        Noncompetition  Agreement  dated  February 23, 1998, by and between
             MGI International Limited and Marshall Gobuty, on the one hand, and
             the Company, on the other hand (10)

10.64        Loan  Agreement  dated as of July 1, 1998,  between the Company and
             Standard Chartered Bank (12)

10.65        Partnership  Interest Purchase  Agreement dated as of July 2, 1998,
             among  Rocky   Acquisition,   LLC,  the  Company,   Limited  Direct
             Associates,  L.P., Rocky Apparel,  Inc., and Gabriel  Manufacturing
             Company (13)

10.66        Escrow Agreement made as of July 2, 1998, by and among the Company,
             Gabriel Manufacturing Company and Rocky Apparel, Inc. (13)

10.67        Facility Development Agreement dated as of December 2, 1998, by and
             between Tarrant Mexico, S. de R.L. de C.V. and Tex Transas, S.A. de
             C.V. (13)

10.67.1      Letter of Intent to Purchase Twill Mill dated August 30, 2002. (27)

10.68+       Agreement  for Purchase of Assets dated as of February 22, 1999, by
             and among Tarrant Mexico, S. de R.L. de C.V., Jamil Textil, S.A. de
             C.V.,  Inmobiliaria  Cuadros,  S.A.  de C.V.,  Kamel Nacif and Irma
             Benavides Montes De Oca (13)

10.68.1      Final  Agreement for Purchase of Assets dated as of April 18, 1999,
             by and among Tarrant Mexico, S. de R.L. de C.V., Jamil Textil, S.A.
             de C.V.,  Inmobiliaria  Cuadros, S.A. de C.V., Kamel Nacif and Irma
             Benavides Montes De Oca (15)

10.69        Agreement for Purchase of Assets  effective as of the  twenty-third
             day of March,  1999,  by and among  CMG,  Inc.,  Charles  Ghailian,
             CHAZZZ Acquisition, L.L.C. and the Company (14)

10.70        Employment Agreement effective as of the twenty-third day of March,
             1999,  by and between  Charles  Ghailian and the Company to pay CMG
             Inc. (14)

10.71        Non-Negotiable Promissory Note dated March 23, 1999 to pay CMG Inc.
             (14)

10.71.1      Non-Negotiable  Promissory  Note dated February 14, 2000 to pay CMG
             Inc. (20)


                                       7


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.72        Escrow Agreement,  by and among the Company,  Tarrant Mexico, S. de
             R.L. de C.V. and Jamil  Textil,  S.A. de C.V.  dated as of April 1,
             1999 (14)

10.72.1      Final  Escrow  Agreement  dated as of May 24,  1999,  by and  among
             Tarrant Apparel Group,  Tarrant Mexico,  S. de R.L. de C.V.,  Jamil
             Textil,  S.A. de C.V.,  Inmobiliaria  Cuadros,  S.A. de C.V., Kamel
             Nacif and Irma Benavides Montes De Oca (15)

10.73        Employment Agreement dated as of April 1, 1999 by and between Kamel
             Nacif and Tarrant Mexico, S. de R.L. de C.V. (14)

10.73.1      Amendment to  Employment  Agreement  entered into August 7, 2000 by
             and between Tarrant Mexico, S. de R.L. de C.V. and Kamel Nacif (20)

10.74        Agreement  for Purchase of Stock dated as of August 1, 1999, by and
             among Tag Mex,  Inc.,  NO!  Jeans,  Inc.,  Antonio  Haddad  Haddad,
             Tarrant   Apparel   Group  and  the   shareholders   of  Industrial
             Exportadora  Famian,  S.A. de C.V. and Coordinados  Elite,  S.A, de
             C.V.* (15)

10.75        Noncompetition  Agreement  dated as of August 1, 1999, by and among
             Tag Mex, Inc., NO! Jeans,  Inc.,  Antonio  Haddad,  Tarrant Apparel
             Group and the shareholders of Industrial  Exportadora  Famian, S.A.
             de C.V. and Coordinados Elite, S.A, de C.V. (16)

10.77        Loan  Agreement  dated  September  1, 1999 by and  between  General
             Electric Capital Corporation and Tarrant Apparel Group (16)

10.77.1      Amendment No. 1 to Loan Agreement  dated  September 12, 1999 by and
             between General  Electric  Capital  Corporation and Tarrant Apparel
             Group (16)

10.77.2      Modification  Agreement  entered  into as of June 7,  2002,  by and
             between General  Electric  Capital  Corporation and Tarrant Apparel
             Group. (26)

10.78        Promissory  Note  dated  September  1,  1999 to pay to the order of
             General Electric Capital Corporation the loan amount referred to in
             Exhibit 10.77 (16)

10.79        Corporate Guaranty dated September 1, 1999 by Tarrant Mexico, S. de
             R.L.  de C.V.  in  connection  with loan  agreement  referred to in
             Exhibit 10.77 (16)

10.79.1      Amendment No. 1 to Corporate  Guaranty dated  September 12, 1999 by
             Tarrant  Mexico,  S.  de R.L.  de  C.V.  in  connection  with  loan
             agreement referred to in Exhibit 10.77 (16)

10.80        Master  Security  Agreement  made as of  September  1,  1999 by and
             between General Electric Capital Corporation and Tarrant Mexico, S.
             de R.L. de C.V. in connection  with loan  agreement  referred to in
             Exhibit 10.77 (16)

10.80.1      Amendment No. 1 to Master  Security  Agreement made as of September
             12, 1999 by and between General  Electric  Capital  Corporation and
             Tarrant  Mexico,  S.  de R.L.  de  C.V.  in  connection  with  loan
             agreement referred to in Exhibit 10.77 (16)


                                       8


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.81        Loan  Agreement  dated  December  30, 1999 by and between  Standard
             Chartered Bank and Tarrant Apparel Group (17)

10.82        Factoring Agreement dated November 24, 1999 by and between MTB Bank
             and Rocky Apparel, LLC. (17)

10.83        Machinery and Equipment  Agreement  dated  November 17, 1999 by and
             between  Tarrant  Mexico,  S. de R.L.  de C.V and  Banc of  America
             Leasing & Capital, L.L.C. (17)

10.84        Employment  Agreement  dated as of August  1,  1999 by and  between
             Industrial  Exportadora  Famian,  S.A. de C.V.  and Antonio  Haddad
             Haddad (17)

10.85        Employment  Agreement  dated as of August  1,  1999 by and  between
             Industrial  Exportadora  Famian,  S.A.  de C.V.  and Mario  Alberto
             Haddad Yunes (17)

10.86        Employment  Agreement  dated as of August  1,  1999 by and  between
             Industrial  Exportadora  Famian,  S.A.  de C.V.  and Marco  Antonio
             Haddad Yunes (17)

10.87        Employment  Agreement  dated as of August  1,  1999 by and  between
             Industrial Exportadora Famian, S.A. de C.V. and Miguel Angel Haddad
             Yunes (17)

10.88        Non-Negotiable  Promissory  Note dated August 1, 1999 to pay to the
             order of Antonio Haddad Haddad (17)

10.89        Stock Pledge Agreement dated August 1, 1999 by and between TAG MEX,
             INC. and those individuals whose names appear on the signature page
             (17)

10.90        Revolving  Credit,  Factoring and Security  Agreement dated January
             21, 2000 by and between Tarrant  Apparel Group,  Tag Mex, Inc., and
             GMAC Commercial Credit LLC (17)

10.90.1      First  Amendment  to  Revolving  Credit,   factoring  and  security
             agreement  dated  January 21, 2000 by and between  Tarrant  Apparel
             Group, Tag Mex, Inc. and GMAC Commercial Credit LLC (20)

10.90.2      Second  Amendment  to  Revolving  Credit,  factoring  and  security
             agreement  dated  January 21, 2000 by and between  Tarrant  Apparel
             Group, Tag Mex, Inc. and GMAC Commercial Credit LLC (20)

10.90.3      Third  Amendment  to  Revolving  Credit,   factoring  and  security
             agreement  dated  January 21, 2000 by and between  Tarrant  Apparel
             Group, Tag Mex, Inc. and GMA Commercial Credit LLC (20)

10.90.4      Letter  agreement dated June 29,2001 by and between the Company and
             GMAC Commercial Credit (22)

10.90.5      Waiver agreement dated November 2001 by and between Tarrant Apparel
             Group And GMAC Commercial Credit (24)


                                       9


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.90.6      Letter  Amendment  dated March 2002 by and between  Tarrant Apparel
             Group, Tag Mex, Inc.,  Fashion Resource (TCL), Inc., United Apparel
             Ventures, LLC and GMAC Commercial Credit, LLC. Reference is made to
             Revolving  Credit,  Factoring and Security  Agreement dated January
             21, 2000. (25)

10.90.7      Letter  Amendment  dated January 24, 2003 between  Tarrant  Apparel
             Group, Tag Mex, Inc.,  Fashion Resource (TCL), Inc., United Apparel
             Ventures, LLC and GMAC Commercial Credit, LLC. Reference is made to
             Revolving  Credit,  Factoring and Security  Agreement dated January
             21, 2000. (29)

10.90.8      Waiver dated November 13, 2002 between Tarrant  Apparel Group,  Tag
             Mex, Inc.,  Fashion Resource (TCL),  Inc., United Apparel Ventures,
             LLC and GMAC Commercial Credit, LLC. Reference is made to Revolving
             Credit,  Factoring and Security  Agreement  dated January 21, 2000.
             (29)

10.91        Agreement for Purchase of Assets dated April 12, 2000, by and among
             Harvest Wear,  Inc., a California  corporation  (HW), Mapa Trading,
             LTD, a Hong Kong corporation (Mapa), Needletex,  Inc., a California
             corporation (Needletex),  Patrick Bensimon (the Shareholder),  Jane
             Doe International LLC, (formally Needletex, LLC) a Delaware limited
             liability company (the Purchaser) (19)

10.92        Amendment No. 1 to Facility Development Agreement dated as of March
             30, 2000, by and between Tarrant Mexico, S. de R.L. de C.V. and Tex
             Transas, S.A. de C.V. (18)

10.93        Equipment  Purchase  Agreement dated as of October 16, 2000, by and
             between Tarrant Mexico, S. de R.L. de C.V. and Tex Transas, S.A. de
             C.V. (18)

10.94        Secured  Promissory  Note dated  October  5, 2000 in the  principal
             amount of U.S. $47,702,128 of Tex Transas, S.A. de C.V. (18)

10.94.1      Amended  Secured  Promissory  Note  dated  October  5,  2000 in the
             principal  amount of U.S.  $47,702,128 of Tex Transas,  S.A. de C.V
             (Amended and Restated as of December 18, 2001). (29)

10.94.2      Amendment  No. 2 to Secured  Promissory  Note dated January 2, 2002
             between  Trans  Textil  International,  S.A.  de. C.V.  and Tarrant
             Company Limited and Trade Link Holdings Company. (29)

10.95        Equipment  Lease  dated as of  October  16,  2000,  by and  between
             Tarrant  Mexico,  S. de R.L. de C.V. and Tex Transas,  S.A. de C.V.
             (18)

10.96        Production  Agreement  dated as of October 16, 2000, by and between
             Tag Mex, Inc. and Tex Transas, S.A. de C.V. (18)

10.97        Pledge  Security  Agreement  dated as of October 16,  2000,  by and
             between Tarrant Mexico, S. de R.L. de C.V. and Tex Transas, S.A. de
             C.V. (18)


                                       10


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.98        Promissory  note  dated  February  28,  2001  in the  amount  of US
             $4,119,545.06 to pay to the order of Standard Chartered Bank (20)

10.99        Stock repurchase  agreement entered into July 10, 2000 by and among
             Tarrant Apparel Group and Gabriel Manufacturing Company (20)

10.99.1      Consulting Agreement effective as of October 9, 2001 by and between
             Gabriel Zeitounti and the Company (23)

10.100       Agreement  for Purchase of Assets dated August 1, 2000 by and among
             Tarrant Mexico, S. de R.L. de C.V., Confecciones Jamil, S.A.de R.L.
             de C. and Inmobiliaria Cuadros, S.A. de C.V. (21)

10.101       Limited  Liability  Company  Operating  Agreement of United Apparel
             Ventures, LLC effective as of July 1,2001 (23)

10.101.1     Amendment  to Operating  Agreement  dated as of October 23, 2001 by
             and among Azteca Production International, Inc. ("Azteca") and "TAG
             MEX". (25)

10.101.2     Second amendment to Operating Agreement dated as of January 2, 2002
             by and among Azteca Production  International,  Inc. ("Azteca") and
             "TAG MEX". (25)

10.101.3     Third Amendment to Operating Agreement dated as of July 5, 2002, by
             and between Azteca Production International, Inc, and TAG Mex, Inc.
             (26)

10.102       Employment Agreement effective January 1, 2002 by and between Eddie
             Yuen and the Company (24)

10.103       Employment  Agreement  effective  January  7,  2002 by and  between
             Patrick Chow and the Company (24)

10.103.1     First  Amendment to  Employment  Agreement  dated  January 2, 2003,
             between Patrick Chow and the Company. (29)

10.104       Security  Agreement  entered  in to as of  April  9,  2001,  by and
             between Banco Nacional De Comercio Exterior, Industrial Exportadora
             Famian S.A. and Tarrant Apparel Group (24)

10.105       Guaranty  Agreement  dated as of May 30,  2002 by and  between  UPS
             Capital Global Trade Finance  Corporation and Tarrant Apparel Group
             and Fashion Resource (TCL), Inc. (26)

10.105.1     Conditional  Consent Agreement dated December 31, 2002, between UPS
             Capital  Global  Trade  Finance  Corporation  and Fashion  Resource
             (TCL), Inc. (29)

10.106       Guaranty  Agreement  dated as of May 30,  2002 by and  between  UPS
             Capital Global Trade Finance Corporation and Gerard Guez. (26)


                                       11


<PAGE>


EXHIBIT
NUMBER                                DESCRIPTION
-------      -------------------------------------------------------------------

10.107       Syndicated  Letter of Credit  Facility  dated June 13,  2002 by and
             between  Tarrant  Company  Limited,  Marble  Limited and Trade Link
             Holdings  Limited as Borrowers and UPS Capital Global Trade Finance
             Corporation  as Agent and Issuer and  Certain  Banks and  Financial
             Institutions as Banks. (26)

10.107.1     Charge Over Shares dated June 13, 2002 by Fashion  Resource  (TCL),
             Inc. in favor of UPS Capital Global Trade Finance Corporation. (26)

10.107.2     Syndicated  Composite  Guarantee and Debenture  dated June 13, 2002
             between  Tarrant  Company  Limited,  Marble  Limited and Trade link
             Holdings Limited and UPS Capital Global Trade Finance  Corporation.
             (26)

10.108       Assignment of Promissory  Note by Tarrant  Apparel Group to Tarrant
             Company  Limited and to Trade Link Holdings  Company dated December
             26, 2001. (26)

10.110       Assignment of Promissory  Note for full  settlement of indebtedness
             issued by Tex Transas, S.A. de C.V. due to Tarrant Company Limited,
             Trade Link Holdings Limited dated December 26, 2001. (26)

10.111       Promissory  Note  dated July 1, 2002 by  Tarrant  Apparel  Group in
             favor of Todd Kay. (26)

10.111.1     Amendment to Promissory  Note dated  January 2, 2003,  between Todd
             Kay and the Company. (29)

10.112       Agreement for Purchase of Assets and Stock dated December 31, 2002,
             by and among the Registrant,  Tarrant  Mexico,  S. de R.L. de C.V.,
             Machrima    Luxembourg    International,    Sarl,    Trans   Textil
             International,  S.A. de C.V.,  Inmobiliaria  Cuadros, S.A. de C.V.,
             Rosa  Lisette  Nacif  Benavides,  Gazi Nacif  Borge,  Jorge  Miguel
             Echevarria Vazquez, and Kamel Nacif Borge.+ (28)

23.1         Consent of Ernst & Young LLP

24           Power of Attorney. (29)

99.1         Certification  of  Chief  Executive  Officer  and  Chief  Financial
             Officer  pursuant to 18 U.S.C.  Section 1350 as Adopted Pursuant to
             Section 906 of the Sarbanes-Oxley Act of 2002.

-------------------------------
* Confidential treatment has been requested for portions of this document.

+     All schedules and or exhibits have been omitted.  Any omitted  schedule or
      exhibit will be furnished  supplementally  to the  Securities and Exchange
      Commission upon request.

(1)   Filed as an exhibit to the  Company's  Registration  Statement on Form S-1
      filed with the Securities and Exchange Commission on May 4, 1995 (File No.
      33-91874).

(2)   Filed as an exhibit to Amendment No. 1 to  Registration  Statement on Form
      S-1 filed with the Securities and Exchange Commission on July 15, 1995.

(3)   Filed as an exhibit to Amendment No. 2 to  Registration  Statement on Form
      S-1 filed with the Securities and Exchange Commission on July 11, 1995.


                                       12


<PAGE>


(4)   Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended June 30, 1995.

(5)   Filed as an exhibit to the  Company's  Annual  Report on Form 10-K for the
      year ended December 30, 1995.

(6)   Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended March 31, 1996.

(7)   Filed as an exhibit to the  Company's  Annual  Report on Form 10-K for the
      year ended December 31, 1996.

(8)   Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended June 30, 1997.

(9)   Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1997.

(10)  Filed as exhibit to the Company's  Annual Report on Form 10-K for the year
      ended December 31, 1997.

(11)  Filed as exhibit to the  Company's  Quarterly  Report on Form 10-Q for the
      quarter ended March 31, 1998.

(12)  Filed as exhibit to the  Company's  Quarterly  Report on Form 10-Q for the
      quarter ended June 30, 1998.

(13)  Filed as an exhibit to the  Company's  Annual  Report on Form 10-K for the
      year ended December 31, 1998.

(14)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended March 31, 1999.

(15)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended June 30, 1999.

(16)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1999.

(17)  Filed as an exhibit to the  Company's  Annual  Report on Form 10-K for the
      year ended December 31, 1999.

(18)  Filed as an exhibit on Form 8K 10/21/2000.

(19)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2000.

(20)  Filed as an exhibit  to the  Company's  Annual  Report on Form 10K for the
      year ending December 31, 2000.

(21)  Filed as an exhibit to the Company's  Quarterly Report on Form 10Q for the
      quarter ending March 31, 2001.

(22)  Filed as an exhibit to the Company's  Quarterly Report on Form 10Q for the
      quarter ending June 30, 2001.

(23)  Filed as an exhibit to the Company's  Quarterly Report on Form 10Q for the
      quarter ending September 30, 2001.

(24)  Filed as an exhibit  to the  Company's  Annual  Report on Form 10K for the
      year ending December 31, 2001.

(25)  Filed as an exhibit to the Company's  Quarterly Report on Form 10Q for the
      quarter ending March 31, 2002.

(26)  Filed as an exhibit to the Company's  Quarterly Report on Form 10Q for the
      quarter ending June 30, 2002.

(27)  Filed as an exhibit to the Company's  Quarterly Report on Form 10Q for the
      quarter ending September 30, 2002.


                                       13


<PAGE>


(28)  Filed as an  exhibit  to the  Company's  Current  Report  on Form 8K dated
      December 31, 2002 and filed on January 15, 2003.

(29)  Filed as an exhibit to the  Company's  Annual  Report on Form 10-K for the
      year ended December 31, 2002.


                                       14


<PAGE>


                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE



                                                                            Page
                                                                            ----

FINANCIAL STATEMENTS

     Report of Independent Auditors..........................................F-2

     Consolidated Balance Sheets--December 31, 2001 and 2002.................F-3

     Consolidated Statements of Operations--Three year period
          ended December 31, 2002............................................F-4

     Consolidated Statements of Shareholders' Equity--Three year
          period ended December 31, 2002.....................................F-5

     Consolidated Statements of Cash Flows--Three year period
          ended December 31, 2002............................................F-6

     Notes to Consolidated Financial Statements..............................F-7

FINANCIAL STATEMENT SCHEDULE

     Schedule II--Valuation and Qualifying Accounts.........................F-28


                                      F-1


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Tarrant Apparel Group

We have audited the accompanying  consolidated balance sheets of Tarrant Apparel
Group  and  subsidiaries  as of  December  31,  2001 and 2002,  and the  related
consolidated statements of operations,  shareholders' equity, and cash flows for
each of the three years in the period ended  December 31, 2002.  Our audits also
included the  financial  statement  schedule  listed in the Index at Item 15(a).
These financial  statements and schedule are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Tarrant Apparel
Group  and  subsidiaries  at  December  31,  2001 and 2002 and the  consolidated
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 2002 in  conformity  with  accounting  principles
generally  accepted in the United  States.  Also,  in our  opinion,  the related
financial  statement schedule when considered in relation to the basic financial
statements,  taken as a whole,  presents  fairly in all  material  respects  the
information set forth therein.

As  discussed  in Note 6 to the  consolidated  financial  statements,  effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142.





                                                      /S/ ERNST & YOUNG LLP


Los Angeles, California
March 14, 2003


                                      F-2


<PAGE>


                              TARRANT APPAREL GROUP

                           CONSOLIDATED BALANCE SHEETS

                                                          DECEMBER 31,
                                                 ------------------------------
                                                     2001             2002
                                                 -------------    -------------
                    ASSETS
Current assets:
  Cash and cash equivalents ..................   $   1,524,447    $   1,388,482
  Accounts receivable, net ...................      58,576,654       65,287,902
  Due from affiliates ........................       2,064,923       10,269,251
  Due from officers ..........................          87,456          456,500
  Inventory ..................................      50,600,584       44,782,154
  Temporary quota ............................         369,849             --
  Current portion of note receivable--
    related party ............................       3,468,490             --
  Prepaid expenses and other receivables .....       6,274,330        5,135,672
  Income taxes receivable ....................         692,868          280,200
                                                 -------------    -------------
Total current assets .........................     123,659,601      127,600,161

  Property and equipment, net ................      90,173,451      159,998,629
  Permanent quota, net .......................          73,978             --
  Note receivable--related party, less
    current portion ..........................      41,430,564             --
  Other assets ...............................       3,932,146        2,539,040
  Excess of cost over fair value of net
    assets acquired, net .....................      29,196,886       28,064,019
                                                 -------------    -------------
Total assets .................................   $ 288,466,626    $ 318,201,849
                                                 =============    =============

     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Short-term bank borrowings .................   $  22,085,349    $  29,326,924
  Accounts payable ...........................      31,560,131       39,142,350
  Accrued expenses ...........................       9,648,389       12,566,475
  Income taxes ...............................       7,177,324       12,640,388
  Deferred tax liabilities ...................         514,913             --
  Due to shareholders ........................       2,307,687          486,875
  Current portion of long-term obligations ...      25,256,628       21,706,502
                                                 -------------    -------------
Total current liabilities ....................      98,550,421      115,869,514

Long-term obligations ........................      63,993,808       55,903,976
Deferred tax liabilities .....................            --            407,751
Minority interest in UAV .....................         757,927        3,205,167
Minority interest in Tarrant Mexico ..........            --         21,654,538

Commitments and contingencies
Shareholders' equity:
Preferred stock, 2,000,000 shares authorized;
  none (2001) and 100,000 shares (2002)
  issued and outstanding .....................            --          8,820,573
Common stock, no par value, 20,000,000 shares
  authorized; 15,840,815 shares (2001) and
  15,846,315 shares (2002) issued and
  outstanding ................................      69,341,090       69,368,239
Contributed capital ..........................       1,434,259        1,434,259
Retained earnings ............................      62,958,375       56,873,094
Notes receivable from shareholders ...........     (12,118,773)      (5,601,804)
Accumulated other comprehensive income (loss)        3,549,519       (9,733,458)
                                                 -------------    -------------
Total shareholders' equity ...................     125,164,470      121,160,903
                                                 -------------    -------------

Total liabilities and shareholders' equity ...   $ 288,466,626    $ 318,201,849
                                                 =============    =============

                             See accompanying notes.


                                      F-3


<PAGE>


                              TARRANT APPAREL GROUP

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                               YEAR ENDED DECEMBER 31,
                                     ------------------------------------------
                                         2000           2001           2002
                                     ------------   ------------   ------------

Net sales .........................  $395,169,020   $330,253,548   $347,390,930
Cost of sales .....................   332,333,227    277,525,010    302,082,144
                                     ------------   ------------   ------------

Gross profit ......................    62,835,793     52,728,538     45,308,786
Selling and distribution expenses .    17,580,135     14,345,356     10,757,029
General and administrative expenses    40,326,636     33,136,008     30,082,061
Amortization of excess of cost over
  fair value of net assets acquired     2,840,505      3,317,428           --
                                     ------------   ------------   ------------

Income from operations ............     2,088,517      1,929,746      4,469,696
Interest expense ..................    (9,849,502)    (7,807,918)    (5,443,995)
Interest income ...................     1,294,909      3,255,843      4,748,144
Minority interest .................     1,312,651       (412,022)    (4,580,766)
Other income ......................     1,350,367      1,853,066      2,647,975
Other expense .....................      (193,359)      (855,994)    (2,004,073)
                                     ------------   ------------   ------------

Loss before provision for income
  taxes and cumulative effect of
  accounting change ...............    (3,996,417)    (2,037,279)      (163,019)
Provision (credit) for income taxes    (1,478,675)       851,977      1,051,018
                                     ------------   ------------   ------------

Loss before cumulative effect of
  accounting change ...............  $ (2,517,742)  $ (2,889,256)  $ (1,214,037)
Cumulative effect of accounting
  change ..........................          --             --       (4,871,244)
                                     ------------   ------------   ------------

Net loss ..........................  $ (2,517,742)  $ (2,889,256)  $ (6,085,281)
                                     ============   ============   ============

Net loss per share - Basic and
  Diluted:
  Before cumulative effect of
    accounting change .............  $      (0.16)  $      (0.18)  $      (0.08)
  Cumulative effect of accounting
    change ........................          --             --            (0.30)
  After cumulative effect of
    accounting change .............  $      (0.16)  $      (0.18)  $      (0.38)

Weighted average shares outstanding:
   Basic and Diluted ..............    15,814,693     15,824,750     15,834,122


                             See accompanying notes.


                                      F-4


<PAGE>

<TABLE>
                              TARRANT APPAREL GROUP

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<CAPTION>
                                                                       Accumulated
                                                                          Other         Notes         Total
                              Preferred      Common      Contributed    Retained    Comprehensive      from       Shareholders'
                                Stock         Stock        Capital      Earnings    Income (Loss)  Shareholders      Equity
                              ----------   -----------   -----------  ------------  -------------  ------------   -------------
<S>                           <C>          <C>           <C>          <C>           <C>            <C>            <C>
Balance at December 31, 1999  $      --    $69,595,141   $ 1,434,259  $68,365,373   $      8,698   $       --     $139,403,471
   Net loss ................         --           --            --     (2,517,742)          --             --       (2,517,742)
   Currency translation ....         --           --            --           --         (727,702)          --         (727,702)
                                                                                                                  ------------
   Comprehensive loss ......         --           --            --           --             --             --       (3,245,444)

   Exercise of stock options         --        198,000          --           --             --             --          198,000
   Repurchase of shares ....         --       (518,525)         --           --             --             --         (518,525)
   Income tax benefit from
     exercise of stock
     options ...............         --         28,067          --           --             --             --           28,067
   Advances to shareholders,
     net ...................         --           --            --           --             --       (5,376,486)    (5,376,486)
                              -----------  -----------   -----------  -----------   ------------   ------------   ------------

Balance at December 31, 2000         --     69,302,683     1,434,259   65,847,631       (719,004)    (5,376,486)   130,489,083
   Net loss ................         --           --            --     (2,889,256)          --             --       (2,889,256)
   Currency translation ....         --           --            --           --        4,268,523           --        4,268,523
                                                                                                                  ------------
   Comprehensive income ....         --           --            --           --             --             --        1,379,267

   Exercise of stock options         --         33,750          --           --             --             --           33,750
   Income tax benefit from
     exercise of stock
     options ...............         --          4,657          --           --             --             --            4,657
   Advances to shareholders,
     net ...................         --           --            --           --             --       (6,742,287)    (6,742,287)
                              -----------  -----------   -----------  -----------   ------------   ------------   ------------

Balance at December 31, 2001         --     69,341,090     1,434,259   62,958,375      3,549,519    (12,118,773)   125,164,470
   Net loss ................         --           --            --     (6,085,281)          --             --       (6,085,281)
   Currency translation ....         --           --            --           --      (13,282,977)          --      (13,282,977)
                                                                                                                  ------------
   Comprehensive loss ......         --           --            --           --             --             --      (19,368,258)

   Exercise of stock options         --         24,135          --           --             --             --           24,135
   Income tax benefit from
     exercise of stock
     options ...............         --          3,014          --           --             --             --            3,014
   Issuance of preferred
     stock .................    8,820,573         --            --           --             --             --        8,820,573
   Repayment from share-
     holders, net ..........         --           --            --           --             --        6,516,969      6,516,969
                              -----------  -----------   -----------  -----------   ------------   ------------   ------------

Balance at December 31, 2002  $ 8,820,573  $69,368,239   $ 1,434,259  $56,873,094   $ (9,733,458)  $ (5,601,804)  $121,160,903
                              ===========  ===========   ===========  ===========   ============   ============   ============
</TABLE>

                             See accompanying notes


                                      F-5


<PAGE>

<TABLE>
                              TARRANT APPAREL GROUP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                 ---------------------------------------------
                                                     2000             2001            2002
                                                 -------------   -------------   -------------
<S>                                              <C>             <C>             <C>
Operating activities:
Net loss ......................................  $  (2,517,742)  $  (2,889,256)  $  (6,085,281)
Adjustments to reconcile net loss to net
cash provided by operating activities:
   Deferred taxes .............................       (553,087)      1,273,305        (107,162)
   Depreciation and amortization ..............     12,580,992      14,564,623      10,130,132
   Accrued interest on note receivable ........           --              --        (4,452,490)
   Cumulative effect of accounting change .....           --              --         4,871,244
   (Gain) loss on sale of fixed assets ........        (10,202)         26,861           5,291
   Unrealized (gain) loss on foreign currency .       (411,811)       (103,705)      1,014,696
   Minority interest ..........................     (1,312,650)        757,927       4,426,080
   Gain on legal settlement ...................           --              --          (473,041)
   Provision for returns and discounts ........      1,127,089       1,830,841         453,167
   Changes in operating assets and liabilities:
      Accounts receivable .....................      3,485,045       5,902,995      (7,141,536)
      Due from affiliates .....................     (2,058,234)     (2,102,811)    (10,746,255)
      Inventory ...............................        445,238      10,474,030       5,818,431
      Temporary quota .........................      4,293,572        (142,221)        369,849
      Prepaid expenses and other receivables ..     (4,837,206)      1,385,875       1,551,324
      Accounts payable ........................      1,301,541       2,343,419       7,646,926
      Accrued expenses and income tax payable .      7,806,018      (3,270,616)      8,211,770
                                                 -------------   -------------   -------------

         Net cash provided by operating
            activities ........................     19,338,563      30,051,267      15,493,145

Investing activities:
Purchase of fixed assets ......................    (18,883,236)     (3,918,602)     (2,984,547)
Acquisitions, net of cash .....................     (2,734,828)     (6,750,391)     (2,355,954)
Purchase of permanent quota ...................       (221,934)           --              --
Collection on note receivable .................        766,150       2,036,924            --
(Increase) decrease in other assets ...........     (7,173,379)       (594,660)        509,524
Advances to shareholders/officers .............     (3,194,640)     (6,218,458)     (1,008,591)
Repayments of advances from shareholders/
   officers ...................................           --              --           169,991
                                                 -------------   -------------   -------------

         Net cash used in investing
            activities ........................    (31,441,867)    (15,445,187)     (5,669,577)

Financing activities:
Short-term bank borrowings, net ...............    (11,359,688)    (16,927,528)      7,241,576
Proceeds from long-term obligations ...........     36,746,378      52,894,023     198,551,201
Payment of long-term obligations and bank
   borrowings .................................     (9,608,034)    (40,376,783)   (211,894,730)
Repayments to shareholders/officers ...........    (39,321,130)    (11,543,640)     (2,359,847)
Borrowings from shareholders/officers .........     37,029,219            --              --
Repurchase of shares ..........................       (518,525)           --              --
Exercise of stock options including related
   tax benefit ................................        226,067          38,407          27,149
                                                 -------------   -------------   -------------

         Net cash provided by (used in)
            financing activities ..............     13,194,287     (15,915,521)     (8,434,651)

Effect of changes in foreign currency .........       (681,197)        184,591      (1,524,882)
                                                 -------------   -------------   -------------

Increase (decrease) in cash and cash
   equivalents ................................        409,786      (1,124,850)       (135,965)
Cash and cash equivalents at beginning of
   year .......................................      2,239,511       2,649,297       1,524,447
                                                 -------------   -------------   -------------

Cash and cash equivalents at end of year ......  $   2,649,297   $   1,524,447   $   1,388,482
                                                 =============   =============   =============
</TABLE>

                             See accompanying notes


                                      F-6


<PAGE>


                              TARRANT APPAREL GROUP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF CONSOLIDATION

The accompanying  financial  statements  consist of the consolidation of Tarrant
Apparel Group, a California corporation (formerly "Fashion Resource, Inc.") (the
"Parent Company" or the "Company"),  and its wholly owned  Subsidiaries  located
primarily  in the U.S.,  Mexico,  and  Asia.  The  Company  owns 51% of Jane Doe
International,  LLC ("JDI"),  and 50.1% of United Apparel Ventures ("UAV").  The
Company  consolidates both of these entities and reflects the minority interests
in earnings (losses) of the ventures in the accompanying  financial  statements.
All inter-company amounts are eliminated in consolidation.

The Company serves both specialty  retail and mass  merchandise  store chains by
designing,  merchandising  and  contracting for the  manufacture,  manufacturing
directly and selling of casual,  moderately  priced apparel,  for women, men and
children under private label.  The Company also sources apparel and operates its
own vertically integrated manufacturing facilities.

REVENUE RECOGNITION

Revenue is recognized at the point of shipment for all merchandise sold based on
FOB shipping  point.  For  merchandise  shipped on landed duty paid (LDP) terms,
revenue  is  recognized  at the  point of  either  leaving  Customs  for  direct
shipments or at the point of leaving our warehouse where title is transferred.

SHIPPING AND HANDLING COSTS

Freight  charges  are  included  in selling  and  distribution  expenses  in the
statement of operations  and amounted to  $3,022,000,  $2,509,000 and $2,136,000
for the years ended December 31, 2000, 2001 and 2002, respectively.

CASH AND CASH EQUIVALENTS

Cash equivalents  consist of highly liquid investments with an original maturity
of three months or less when purchased.

ACCOUNTS RECEIVABLE--ALLOWANCE FOR RETURNS, DISCOUNTS AND BAD DEBTS

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

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market.

COST OF SALES

Cost  of  sales  includes   costs  related  to  product  costs,   direct  labor,
manufacturing overhead, duty, quota, freight in, brokerage and warehousing.


                                      F-7


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


SELLING AND DISTRIBUTION EXPENSES

Selling and distribution  expenses  include expenses related to samples,  travel
and entertainment,  salaries, rent and other office expenses, professional fees,
freight out and selling commissions incurred in the sales process.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  include  expenses related to research and
product development,  travel and entertainment,  salaries, rent and other office
expenses, depreciation, professional fees and bank charges.

PRODUCT DESIGN, ADVERTISING AND SALES PROMOTION COSTS

Product design,  advertising and sales promotion costs are expensed as incurred.
Product  design,  advertising  and sales  promotion  costs included in operating
expenses in the  accompanying  statements of operations  (excluding the costs of
manufacturing  samples)  amounted to  approximately  $1,931,000,  $1,621,000 and
$1,340,000 in 2000, 2001 and 2002, respectively.

QUOTA

The Company purchases quota rights to be used in the importation of its products
from certain foreign  countries.  The effect of quota  transactions is accounted
for as a product cost.

Permanent quota entitlements were principally  obtained through free allocations
by the Hong Kong Government  pursuant to an import  restraint  between Hong Kong
and the United States and are renewable on an annual basis, based upon the prior
year utilization. Permanent quota entitlements acquired from outside parties are
amortized over three years on a straight-line  basis,  and amounted to $418,000,
net of  amortization  of $1.8  million at December  31,  2000,  $74,000,  net of
amortization of $2.1 million at December 31, 2001 and $0, net of amortization of
$2.2 million at December 31, 2002.

Temporary  quota  represents  quota rights  acquired from other  permanent quota
entitlement holders on a temporary basis.  Temporary quota has a maximum life of
twelve months. The cost of temporary quota purchased for use in the current year
has been  assigned to  inventory  purchases  while the cost of  temporary  quota
acquired for usage in the year following the balance sheet date is recorded as a
current asset.

PROPERTY AND EQUIPMENT

Property  and  equipment  is recorded at cost.  Additions  and  betterments  are
capitalized  while repair and  maintenance  costs are charged to  operations  as
incurred.  Depreciation  of  property  and  equipment  is  provided  for  by the
straight-line method over their estimated useful lives.  Leasehold  improvements
are amortized using the straight-line  method over the lesser of their estimated
useful lives or the term of the lease.  Upon  retirement or disposal of property
and equipment, the cost and related accumulated depreciation are eliminated from
the accounts and any gain or loss is reflected in the  statements of operations.
Repair and maintenance  costs are charged to expense as incurred.  The estimated
useful lives of the assets are as follows:

         Buildings                                            35 to 40 years
         Equipment                                             7 to 15 years
         Furniture and Fixtures                                 5 to 7 years
         Vehicles                                                    5 years
         Leasehold Improvements                                Term of lease

INTANGIBLES

The excess of cost over fair value of net assets  acquired  was  amortized  over
five to thirty years through December 31, 2001.  Effective  January 1, 2002, the
Company adopted SFAS No. 142, "Goodwill and Other Intangible  Assets." According
to


                                      F-8


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


this statement,  goodwill and other intangible  assets with indefinite lives are
no longer subject to amortization, but rather an annual assessment of impairment
applied on a  fair-value-based  test. The Company adopted SFAS No. 142 in fiscal
2002 and performed its first annual assessment of impairment,  which resulted in
an impairment loss of $4.9 million.

IMPAIRMENT OF LONG-LIVED ASSETS

The carrying value of long-lived  asserts are reviewed when events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  If it is determined  that an impairment loss has occurred based on
the lowest  level of  identifiable  expected  future  cash flow,  then a loss is
recognized in the statement of operations using a fair value based model.

DEFERRED FINANCING COST

Included  in the other  assets are  deferred  financing  costs of  $949,000  and
$638,000 at December 31, 2001 and 2002,  respectively.  These costs of obtaining
financing are being  amortized as interest  expense over the term of the related
debt.

INCOME TAXES

The  Company  utilizes  SFAS No.  109,  "Accounting  for  Income  Taxes",  which
prescribes the use of the liability  method to compute the  differences  between
the tax basis of assets and  liabilities  and the  related  financial  reporting
amounts using currently enacted tax laws and rates.

The Company's Hong Kong corporate affiliates are taxed at an effective Hong Kong
rate of 16%. No domestic tax  provision  has been  provided for $48.7 million of
un-remitted  retained earnings of these Hong Kong  corporations,  as the Company
intends to maintain  these amounts in Hong Kong on a permanent  basis in support
of its working capital requirements.

NET LOSS PER SHARE

Net loss per share has been computed in accordance with SFAS No. 128,  "Earnings
Per Share".  All options have been excluded from the  computation in 2000,  2001
and 2002 as the impact would be anti-dilutive.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of the Mexico and Hong Kong  subsidiaries  are translated
at the rate of exchange in effect on the balance sheet date; income and expenses
are translated at the average rates of exchange  prevailing during the year. The
functional  currencies in which the Company transacts business are the Hong Kong
dollar and the peso in Mexico.

Foreign  currency  gains and losses  resulting  from  translation  of assets and
liabilities are included in other comprehensive income (loss). Transaction gains
or losses, other than inter-company debt deemed to be of a long-term nature, are
included in net income (loss) in the period in which they occur. At December 31,
2002, the Hong Kong  subsidiaries have retained earnings of $67.2 million and an
inter-company receivable due from Tarrant Apparel Group of $19.8 million.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial  instruments  is  determined by reference to various
market data and other valuation techniques as appropriate. Considerable judgment
is required in  estimating  fair values.  Accordingly,  the estimates may not be
indicative  of the amounts that the Company  could  realize in a current  market
exchange.  The carrying  amounts of cash and cash  equivalents,  receivables and
accounts payable  approximate fair values. The carrying amounts of the Company's
variable rate borrowings under the various  short-term  borrowings and long-term
debt arrangements approximate fair value.


                                      F-9


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


CONCENTRATION OF CREDIT RISK

Financial instruments,  which potentially expose the Company to concentration of
credit risk consist primarily of cash equivalents, trade accounts receivable and
amounts due from factor.

The Company's  products are primarily sold to mass  merchandisers  and specialty
retail  stores.  These  customers  can be  significantly  affected by changes in
economic, competitive or other factors. The Company makes substantial sales to a
relatively  few,  large  customers.  In order to minimize the risk of loss,  the
Company assigns certain of its domestic accounts  receivable to a factor without
recourse or requires  letters of credit from its customers prior to the shipment
of  goods.  For  non-factored  receivables,  account-monitoring  procedures  are
utilized to minimize the risk of loss. Collateral is generally not required. The
following table presents the percentage of net sales  concentrated  with certain
customers. Customer A represents a group of customers under common ownership.

                                                    2000       2001        2002
                                                  -----------------------------
Customer A...................................      44.2%       22.8%      22.6%
Customer B (formerly part of A in 2000)......      --          20.5%      17.6%
Customer C...................................       9.1        12.2%       9.7%
Customer D...................................      --           7.8%      17.4%


The Company  maintains demand deposits with several major banks. At times,  cash
balances may be in excess of Federal Deposit Insurance Corporation or equivalent
foreign insurance limits.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

EMPLOYEE STOCK OPTIONS

The Company accounts for employee stock options using the intrinsic value method
rather  than  the   alternative   fair-value   accounting   method.   Under  the
intrinsic-value  method,  if the exercise price of the employee's  stock options
equals the market  price of the  underlying  stock on the date of the grant,  no
compensation  expense is recognized.  No  compensation  cost is reflected in net
income related to our stock option plans for the periods presented.

Pro forma information regarding net income and earnings per share is required by
Statement  148, and has been  determined as if the Company had accounted for its
employee stock options under the fair value method of that  Statement.  The fair
value for these options was estimated at the date of grant using a Black-Scholes
option   pricing   model  with  the  following   weighted-average   assumptions:
weighted-average  risk-free  interest  rate of 6% for 2000 and 2001,  and 4% for
2002; dividend yields of 0% for 2000, 2001 and 2002; weighted-average volatility
factors of the expected  market price of the Company's  Common Stock of 1.28 for
2000, 1.22 for 2001, and 0.65 for 2002; and a weighted-average  expected life of
the option of four years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input  assumptions  can  materially  affect  the fair  value  estimates,  in the
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma information follows:


                                      F-10


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

Pro forma net loss ............   $ (7,445,975)   $ (7,035,501)   $ (9,519,060)
Pro forma compensation expense,
  net of tax ..................   $ (4,928,233)   $ (4,146,245)   $ (3,433,779)
Net loss as reported ..........   $ (2,517,742)   $ (2,889,256)   $ (6,085,281)
Pro forma loss per share
  Basic .......................   $      (0.47)   $      (0.44)   $      (0.60)
  Diluted .....................   $      (0.47)   $      (0.44)   $      (0.60)
Net loss per share
  Basic .......................   $      (0.16)   $      (0.18)   $      (0.38)
  Diluted .....................   $      (0.16)   $      (0.18)   $      (0.38)

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived   Assets".   This  statement  addresses  the  financial
accounting and reporting for the  impairment and disposal of long-lived  assets.
It supercedes and addresses significant issues relating to the implementation of
SFAS No. 121,  "Accounting  for the Impairment of Disposal of Long-Lived  Assets
and For  Long-Lived  Assets to Be Disposed Of". SFAS No. 144 retains many of the
fundamental  provisions  of SFAS No.  121 and  establishes  a single  accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale,  whether  previously held and used or newly acquired.
The Company  adopted  this  standard as of the  beginning  of fiscal  2002.  The
application  of SFAS No.  144 did not have a  material  impact on the  Company's
results of operations or financial position.

In June 2002, the FASB approved SFAS No. 146,  "Accounting for Costs  Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and  reporting  for  costs  associated  with  exit or  disposal  activities  and
nullifies  EITF Issue No.  94-3,  "Liability  Recognition  for Certain  Employee
Termination  Benefits and Other Costs to Exit an  Activity."  The  provisions of
this statement are effective for exit or disposal  activities that are initiated
after December 31, 2002, with early application encouraged. The impact on future
financial statements will depend on future exit or disposal activities.

In the  current  year,  the  Company  adopted  the  provisions  of SFAS No.  148
"Accounting  for Stock-Based  Compensation--Transition  and  Disclosure",  which
amends SFAS No. 123,  "Accounting for Stock-Based  Compensation"  and Accounting
Principles Board Opinion 28, "Interim Financial Reporting," to require prominent
disclosures in both annual and interim financial  statements about the method of
accounting  for stock  based  compensation  and the effect of the method used on
reported results. The Company has adopted the disclosure  provisions of SFAS No.
148, which require expanded disclosure regarding stock-based compensation in the
accounting  policies  footnote to the  consolidated  financial  statements.  The
expanded  disclosure  will  be  required  in  our  quarterly  financial  reports
beginning in the first quarter of 2003.

CURRENCY RATE HEDGING

The  Company  manufactures  in a  number  of  countries  throughout  the  world,
including  Hong Kong and Mexico,  and, as a result,  is exposed to  movements in
foreign  currency  exchange  rates.  Periodically  the  Company  will enter into
various  currency  rate hedges.  The primary  purpose of the  Company's  foreign
currency hedging activities is to manage the volatility  associated with foreign
currency  purchases of materials and equipment in the normal course of business.
The Company utilizes forward exchange  contracts with maturities of one to three
months. The Company enters into certain foreign currency derivative  instruments
that do not meet hedge  accounting  criteria.  These  primarily  are intended to
protect  against  exposure  related to financing  transactions  (equipment)  and
income from  international  operations.  The net impact of the related gains and
losses was not material.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation.


                                      F-11


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


2. ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

                                                          DECEMBER 31,
                                                -------------------------------
                                                    2001               2002
                                                ------------       ------------

U.S. trade accounts receivable ...........      $ 41,266,134       $ 42,979,762
Foreign trade accounts receivable ........        17,846,606         16,445,868
Due from factor ..........................         1,507,089          4,176,598
Other receivables ........................         4,123,073          6,002,295
Allowance for returns, discounts
   and bad debts .........................        (6,166,248)        (4,316,621)
                                                ------------       ------------
                                                $ 58,576,654       $ 65,287,902
                                                ============       ============


The Debt Facility includes a factoring  arrangement  whereby the Company factors
with GMAC accounts  receivables  from customers with debt ratings below BBB. The
Company does not receive  advances against these  receivables,  and is paid only
upon collection of proceeds. For this credit insurance arrangement,  the Company
pays the factor a commission of 60 basis points.

3. INVENTORY

Inventory consists of the following:

                                                             DECEMBER 31,
                                                     ---------------------------
                                                        2001            2002
                                                     -----------     -----------

Raw materials, fabric and trim accessories .....     $16,708,651     $12,451,447
Raw cotton .....................................       2,096,792       1,017,963
Work-in-process ................................       7,735,827       9,948,700
Finished goods shipments-in-transit ............       3,706,735       4,877,002
Finished goods .................................      20,352,579      16,487,042
                                                     -----------     -----------
                                                     $50,600,584     $44,782,154
                                                     ===========     ===========

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                                          DECEMBER 31,
                                               --------------------------------
                                                   2001               2002
                                               -------------      -------------

Land .....................................     $   1,443,744      $   1,285,267
Buildings ................................        14,798,596         61,697,034
Equipment ................................        89,427,176        120,270,968
Furniture and fixtures ...................         2,442,717          2,428,858
Leasehold improvements ...................        11,719,752         10,657,364
Vehicles .................................         1,246,800          1,099,538
                                               -------------      -------------
                                                 121,078,785        197,439,029
Less accumulated depreciation and
   amortization ..........................       (30,905,334)       (37,440,400)
                                               -------------      -------------
                                               $  90,173,451      $ 159,998,629
                                               =============      =============


Depreciation  expense,  including  amortization of assets recorded under capital
leases,  totaled  $9,352,087,  $10,903,237  and  $10,056,154 for the years ended
December 31, 2000, 2001 and 2002, respectively.


                                      F-12


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


5. ACQUISITIONS

TWILL MILL

On  December  2, 1998,  the Company  contracted  to acquire a fully  operational
facility being constructed in Puebla,  Mexico by Tex Transas, S.A. de C.V. ("Tex
Transas"). Construction of this facility commenced in the third quarter of 1998,
and it was  anticipated  that the Company would take possession of this facility
in fiscal 2000. On October 16, 2000, the Company revised its agreement regarding
the fully operational facility to extend its option to purchase the facility.

On December 31, 2002,  the Company  acquired  certain  assets of this twill mill
located in Puebla,  Mexico from Tex Transas and  Inmobiliaria  Cuadros,  S.A. de
C.V. ("Cuadros"),  both of which are affiliated with Kamel Nacif. The price paid
for the asset  acquisition  consisted of 100,000 shares (the Shares) of Series A
Preferred  Stock of the Company  valued at $8.8  million,  a 25% equity stake in
Tarrant's  wholly-owned  subsidiary,  Tarrant  Mexico  S. de R.L.  de C.V.,  the
cancellation  of  approximately  $56.9  million  of certain  notes and  accounts
receivables  due from the sellers  and their  affiliates  and a cash  payment of
$500.  The  acquisition  of  the  twill  mill  has  been  accounted  for  as the
acquisition of a discrete operating asset. Therefore no amounts were recorded as
goodwill,  but were allocated to either the assets acquired or the consideration
paid based on independent valuations received by the Company.

On December  31, 2002,  the Company  recorded  $4.5 million of interest  income,
which represented accrued interest on one of the canceled notes receivable.  The
interest  was recorded as the cash was  collected.  Pursuant to the terms of the
purchase  agreement,  interest was accrued through  December 31, 2002 as part of
the purchase price.

UNITED APPAREL VENTURES

On July 1, 2001, the Company formed an entity to jointly  market,  share certain
risks and achieve economics of scale with Azteca Production International,  Inc.
("Azteca"),  a corporation owned by the brothers of Gerard Guez, the Chairman of
the Company,  called  United  Apparel  Ventures,  LLC  ("UAV").  This entity was
created to coordinate  the  production  of apparel for a single  customer of the
Company's branded business.  UAV is owned 50.1% by Tag Mex, Inc., a wholly owned
subsidiary  of the  Company,  and 49.9% by Azteca.  The results of UAV have been
consolidated  into  the  Company's  results  commencing  in July  2001  with the
minority  partner's  share of earnings  (losses)  provided for in the  Company's
financial  statements.  Since October 2002,  both parties have  contributed  the
Express relationship and future orders into the entity.

AJALPAN

On March 29, 2001, the Company  completed the  acquisition of a sewing  facility
located in  Ajalpan  Mexico  from  Confecciones  Jamil,  S.A.  de C.V,  which is
majority  owned by Kamel Nacif,  a principal  shareholder  of the Company.  This
facility,  which was newly constructed  during 1999 and commenced  operations in
2000, was used by the Company for  production  during 2000 and 2001. The results
of Ajalpan have been consolidated into the Company's results commencing on March
29, 2001.

The Company paid $11 million for this operating facility. This entire amount had
been paid in cash and the transfer of certain  receivables of the Company to the
seller.  The assets  acquired  include land,  buildings and all equipment.  This
transfer has been  accounted  for as a purchase and the purchase  price has been
allocated  based on the fair market  value of assets  acquired  and  liabilities
assumed.  The  excess of cost over fair value of net  assets  acquired  was $4.7
million.  Included in the SFAS No. 142 charge was a $1.7 million impairment loss
related to Ajalpan.

EXCLUSIVE PRODUCTION AGREEMENT

On June 28, 2000,  the Company  signed an exclusive  production  agreement  with
Manufactures  Cheja ("Cheja") through February 2002. The Company has agreed on a
new contract to extend the agreement  for an additional  quantity of 6.4 million
units  beginning  April 1, 2002,  which was amended on November 8, 2002, for the
manufacturing  of 5.7 million units through  September 30, 2004. The Company has
unrecouped  advances  to Cheja of  approximately  $2.9  million  related  to the
production agreement to be recouped out of future production.


                                      F-13


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


JANE DOE

On April 12, 2000, the Company formed a new company, Jane Doe International, LLC
("JDI").  This  company was formed for the purpose of  purchasing  the assets of
Needletex,  Inc.,  owner of the  Jane Doe  brand.  JDI is owned  51% by  Fashion
Resource (TCL), Inc., a subsidiary of the Company, and 49% by Needletex, Inc. In
March 2001, the Company  converted JDI from an operating  company to a licensing
company  and  entered  into two  licenses  in  regard to the use of the Jane Doe
trademark.  The licensing activities on this trademark have been largely dormant
in 2002 pending the outcome of the litigation with Patrick Bensimon.  See Note 9
for the discussion of this litigation. Included in the SFAS No. 142 charge was a
$3.2 million impairment loss related to JDI.

6.  GOODWILL - ADOPTION OF STATEMENT NO. 142

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

SFAS No.  142  requires  that  goodwill  and other  intangibles  be  tested  for
impairment  using a two-step  process.  The first step is to determine  the fair
value of the reporting  unit,  which may be calculated  using a discounted  cash
flow  methodology,  and compare  this value to its carrying  value.  If the fair
value exceeds the carrying  value, no further work is required and no impairment
loss would be recognized.  The second step is an allocation of the fair value of
the reporting unit to all of the reporting unit's assets and liabilities under a
hypothetical  purchase price  allocation.  Based on the evaluation  performed to
adopt SFAS No. 142 along with continuing  difficulties  being experienced in the
industry,  the Company  recorded a non-cash charge of $4.9 million to reduce the
carrying  value  of  goodwill  to the  estimated  fair  value.  This  charge  is
non-operational  in  nature  and  is  reported  as a  cumulative  effect  of  an
accounting change in the accompanying consolidated statement of operations.  The
Company  utilized the discounted  cash flow  methodology to estimate fair value.
The following table presents the results of the Company on a comparable basis:


                                      F-14


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


                                                YEAR ENDED DECEMBER 31,
                                      -----------------------------------------
                                          2000           2001           2002
                                      -----------    -----------    -----------

Reported net loss .................   $(2,517,742)   $(2,889,256)   $(1,214,037)
Goodwill amortization, net of tax .     1,789,518      2,089,980           --
                                      -----------    -----------    -----------
Adjusted net loss before cumulative
   effect of accounting change ....      (728,224)      (799,276)    (1,214,037)
Cumulative effect of accounting
   change .........................          --             --       (4,871,244)
Adjusted net loss .................   $  (728,224)   $  (799,276)   $(6,085,281)
                                      -----------    -----------    -----------

Basic and diluted earnings per
   common share:
Reported loss before cumulative
   effect of accounting change ....   $     (0.16)   $     (0.18)   $     (0.08)
Goodwill amortization, net of taxes          0.11           0.13           --
                                      -----------    -----------    -----------
Adjusted loss before cumulative
   effect of accounting change ....         (0.05)         (0.05)         (0.08)
Cumulative effect of accounting
   change .........................          --             --            (0.30)
                                      -----------    -----------    -----------

Adjusted net loss .................   $     (0.05)   $     (0.05)   $     (0.38)


The following table displays the change in the gross carrying amount of goodwill
by business units at the end of December 31, 2002:

<TABLE>
<CAPTION>
                                                                   TARRANT        TARRANT      TAG MEX INC.    TAG MEX INC.
                                                                   MEXICO -       MEXICO -        - ROCKY       - CHAZZZ &
                                    TOTAL         JANE DOE         AJALPAN        FAMIAN         DIVISION      MGI DIVISION
                                -------------- --------------- -------------- --------------- -------------- ---------------
<S>                               <C>              <C>            <C>             <C>            <C>             <C>
Balance as of
  December 31, 2001               $29,196,886      $1,904,529     $4,427,843      $7,260,134     $7,521,536      $8,082,844
  Additional purchase
    price                           3,050,000            --             --         2,550,000           --           500,000
  Additional liabilities
    assumed                         1,428,588       1,428,588           --              --             --              --
  Impairment losses                (4,871,244)     (3,182,779)    (1,688,465)           --             --              --
Foreign currency translation         (740,211)           --             --          (740,211)          --              --
                                -------------- --------------- -------------- --------------- -------------- ---------------
Balance as of
   December 31, 2002              $28,064,019     $   150,338     $2,739,378      $9,069,923     $7,521,536      $8,582,844
                                -------------- --------------- -------------- --------------- -------------- ---------------
</TABLE>


                                      F-15


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


7. DEBT

Debt consists of the following:

                                                     2001              2002
                                                 ------------      ------------
Short-term bank borrowings:
  Import trade bills payable ...............     $  4,521,675      $  5,686,327
  Bank direct acceptances ..................       13,838,270        11,272,375
  Other Hong Kong credit facilities ........          361,108         6,206,103
  Other Mexican credit facilities ..........        1,282,593         4,968,309
  Uncleared checks .........................        2,081,703         1,193,810
                                                 ------------      ------------
                                                 $ 22,085,349      $ 29,326,924
                                                 ============      ============

Long-term debt:
  Vendor financing .........................     $ 11,043,449      $  7,257,683
  Equipment financing ......................       13,931,997         9,682,290
  Debt facility ............................       62,863,990        58,193,505
  Other debt (including capital leases) ....        1,411,000         2,477,000
                                                 ------------      ------------
                                                   89,250,436        77,610,478
  Less current portion .....................      (25,256,628)      (21,706,502)
                                                 ------------      ------------
                                                 $ 63,993,808      $ 55,903,976
                                                 ============      ============

IMPORT TRADE BILLS PAYABLE

On June 13, 2002,  the Company  entered into a letter of credit  facility of $25
million with UPS Capital Global Trade Finance Corporation ("UPS") to replace the
credit  facility of The Hong Kong and Shanghai  Banking  Corporation  Limited in
Hong Kong.  Under this  facility,  the Company  may arrange for the  issuance of
letters of credit and acceptances.  The facility is a one-year  facility subject
to renewal on its anniversary and is collateralized by the shares and debentures
of all of the  Company's  subsidiaries  in Hong Kong,  as well as the  Company's
permanent quota holdings in Hong Kong. In addition to the guarantees provided by
Tarrant  Apparel Group and Fashion  Resource  (TCL) Inc and Machrima  Luxembourg
SARL, a new holding company the Company set up during 2002. Mr. Gerard Guez, the
Company's  chairman,  also signed a  guarantee  of $5 million in favor of UPS to
secure  this  facility.  This  facility is also  subject to certain  restrictive
covenants, including no two consecutive quarterly losses, aggregate net worth of
$105  million  and  $109  million  at the end of 2002  and  2003,  respectively;
interest cover of 1.5 times,  fixed charge ratio of 1.25 to 1 and leverage ratio
of 2.1 to1 in 2002 and 1.6 to 1 in 2003. As of December 31, 2002, $24.2 million,
of which $12.9  million  were  letters of credits,  was  outstanding  under this
facility.  The Company was in violation of the fixed charge ratio covenant and a
waiver has been obtained at a fee of $5,000.

OTHER MEXICAN CREDIT FACILITIES

As of December 31, 2002, Grupo Famian had a short-term advance from Banco Bilbao
Vizcaya  amounting to $298,000.  This subsidiary also had a credit facility with
Banco Nacional de Comercio  Exterior SNC the Company  guaranteed.  This facility
provided  for a $10  million  credit  line  based  on  purchase  orders  and  is
restricted by certain covenants. As of December 31, 2002, the outstanding amount
was $4.7 million. After the merger of Grupo Famian into Tarrant Mexico, the bank
has  agreed  that  Tarrant  Mexico was to repay the  outstanding  amount of $4.7
million by $523,000 per month starting March 26, 2003.

VENDOR FINANCING

During 2000, the Company financed equipment  purchases for the new manufacturing
facility with certain vendors of the related equipment. A total of $16.9 million
was financed with five-year  promissory notes,  which bear interest ranging from
7.0% to 7.5%,  and are payable in  semiannual  payments  commencing  in February
2000. Of this amount,  $7.3 million was  outstanding as of December 31, 2002. Of
the $7.3  million,  $4.6 million is  denominated  in


                                      F-16


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


the Euro. The remainder is payable in U.S. dollars.  The Company has covered its
exchange risks by forward exchange contracts.

From time to time,  the Company  opens  letters of credit  under an  uncommitted
credit  arrangement  with Aurora  Capital  Associates  who issues these  credits
through Israeli Discount Bank. As of December 31, 2002, $2.3 million are open in
letters of credit under this arrangement.

An  unrealized  gain of $412,000  and $104,000  and an  unrealized  loss of $1.0
million was recorded at December 31, 2000, 2001 and 2002, respectively,  related
to  this  fluctuation  and is  recorded  in  other  income  in the  accompanying
financial statements.  In addition, during the year ended December 31, 2000, the
Company entered into a hedge contract for Euros related to this debt.

Annual  maturities  for the long term debt and  capital  lease  obligations  are
$21,706,502  (2003),  $10,834,036 (2004),  $45,025,284  (2005),  $12,854 (2006),
$13,647 (2007) and $18,155  (thereafter).  The weighted average interest rate on
short-term  bank  borrowing as of December 31, 2002 and 2001 were 4.1% and 6.7%,
respectively.

EQUIPMENT FINANCING

The  Company  has two  equipment  loans with the  initial  borrowings  of $16.25
million and $5.2 million  from GE Capital  Leasing  ("GE  Capital")  and Bank of
America  Leasing  ("BOA"),  respectively.  The leases are  secured by  equipment
located in Puebla and Tlaxcala,  Mexico. The amounts  outstanding as of December
31,  2002 were $7.1  million  due to GE  Capital  and $2.4  million  due to BOA.
Interest  accrues at a rate of 2 1/2% over LIBOR.  The loan from GE Capital will
mature in the year 2005 and the loan from BOA in the year  2004.  The GE Capital
facilities  are  subject to  covenants  on  Tangible  Net Worth  ($30  million),
leverage  ratio of not more than two times  and no  losses  for two  consecutive
quarters.  The Company was in violation of the covenant on consecutive quarterly
losses  and  obtained  a waiver  from the  bank on March  28,  2002 for a fee of
$10,000 and  acceleration  by $25,000 of monthly  repayment  of  principal.  The
Company  has  reclassified  the GE  Capital  obligation  as a current  liability
because of the  potential  that it may violate one of the covenants in the first
quarter  of 2003.  The BOA  facility  is  subject to a  financial  benchmark  on
interest coverage (3 to 1) and a leverage ratio of not more than 2 times.

The Debt Facility with GMAC and the credit  facilities with GE Capital,  UPS and
BOA all carry  cross-default  clauses.  A breach of a financial  covenant set by
GMAC, UPS or GE Capital  constitutes an event of default,  entitling these banks
to demand payment in full of all outstanding amounts under their respective debt
and credit facilities.  Similarly, if the Company breaches a financial benchmark
set by BOA,  the bank can  accelerate  repayment  of all  outstanding  principal
amount to become six equal monthly installments.

DEBT FACILITY

On January 21, 2000, the Company entered into a new revolving credit,  factoring
and  security  agreement  (the  "Debt  Facility")  with a  syndicate  of lending
institutions.  The Debt  Facility  initially  provided a  revolving  facility of
$105.0  million,  including  a letter of  credit  facility  not to exceed  $20.0
million,  and  matures on January  31,  2005.  The Debt  Facility  provides  for
interest at LIBOR plus the LIBOR rate margin  determined  by the Total  Leverage
Ratio  (as  defined).  The  Debt  Facility  is  collateralized  by  receivables,
intangibles,  inventory and various other specified  non-equipment assets of the
Company.  In addition,  the facility is subject to various  financial  covenants
with quarterly targets,  including provisions for tangible net worth of not less
than $98.5 million  subject to adjustment  for the  fluctuation  of the exchange
rate of the Mexican peso at December 31, 2000 or that of the preceding  year-end
fixed  charge  ratio  of 1.1 to 1, and  interest  coverage  ratios  of 3.2 to 1,
leverage  ratio of not more than 1.6 to 1 at year-end and  prohibits the payment
of  dividends.  On March 2, 2001,  the Company  entered into an amendment of our
Debt Facility with GMAC, who solely assumed the facility in 2000. This amendment
reduced the $105.0 million facility to $90.0 million.  The over-advance  line of
$25  million  was  converted  to  a  term  facility  to  be  repaid  by  monthly
installments of $500,000 before August 2001 and $687,500 thereafter.  A total of
$58 million was outstanding under the Debt Facility at December 31, 2002.


                                      F-17


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


As of December 31,  2002,  the Company was in violation of covenants on interest
coverage,  total leverage  ratio and fixed charge under the Debt  Facility.  The
Company  received  a waiver  from GMAC with  respect to its  violation  of these
covenants,  and also  received a waiver from GMAC with respect to  compliance at
March 31, 2003 with all financial covenants under the Debt Facility. The Company
paid GMAC $45,000 for this  waiver.  The Company and GMAC have agreed to set new
financial  covenants  for the  remainder  of fiscal 2003 based on the  Company's
projections before May 1, 2003.

Within  the Debt  Facility,  the  credit  agreement  with  GMAC  provides  for a
factoring  arrangement whereby the Company factor with GMAC accounts receivables
from customers with debt ratings below BBB. The Company did not receive advances
against these  receivables,  and was paid only upon collection of proceeds.  For
this credit insurance  arrangement,  the Company pays the factor a commission of
60 basis points.

8. INCOME TAXES

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

                                              YEAR ENDED DECEMBER 31,
                                -----------------------------------------------
                                    2000              2001              2002
                                -----------       -----------       -----------

Current:
  Federal ................      $(4,661,591)      $(1,272,918)      $  (307,684)
  State ..................            6,503             1,079           293,055
  Foreign ................        3,729,499           850,511         1,162,798
                                -----------       -----------       -----------
                                   (925,589)         (421,328)        1,148,169
Deferred:
  Federal ................         (346,982)          999,201              --
  State ..................         (197,513)          232,821              --
  Foreign ................           (8,591)           41,283           (97,151)
                                -----------       -----------       -----------
                                   (553,086)        1,273,305           (97,151)
                                -----------       -----------       -----------

         Total ...........      $(1,478,675)      $   851,977       $ 1,051,018
                                ===========       ===========       ===========


The source of income (loss) before the provision for taxes and cumulative effect
of accounting change is as follows:

                                             YEAR ENDED DECEMBER 31,
                             --------------------------------------------------
                                 2000               2001               2002
                             ------------       ------------       ------------

Federal ...............      $(18,125,699)      $ (8,582,448)      $(11,061,937)
Foreign ...............        14,129,282          6,545,169         10,898,918
                             ------------       ------------       ------------

         Total ........      $ (3,996,417)      $ (2,037,279)      $   (163,019)
                             ============       ============       ============


Foreign deferred income taxes result primarily from temporary differences in the
recognition  of bad  debt  and  depreciation  expenses  for  tax  and  financial
reporting purposes. The resulting foreign deferred income tax liability amounted
to  approximately  $48,000,  $89,000 and $0 at December 31, 2000,  2001 and 2002
respectively.


                                      F-18


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


A reconciliation of the statutory federal income tax provision  (benefit) to the
reported tax provision (benefit) on income is as follows:

                                               YEAR ENDED DECEMBER 31,
                                      -----------------------------------------
                                          2000          2001            2002
                                      -----------    -----------    -----------
Income tax (benefit) based on
   federal statutory rate .........   $(1,358,782)   $  (713,048)   $(1,761,992)
State income taxes, net of federal
   benefit ........................      (122,246)       152,035        190,486
Effect of foreign income taxes ....      (324,219)     1,494,708      1,162,798
Increase in valuation allowance
   and other ......................       326,572        (81,718)     1,459,726
                                      -----------    -----------    -----------

                                      $(1,478,675)   $   851,977    $ 1,051,018
                                      ===========    ===========    ===========


Deferred income taxes reflect the net effects of temporary  differences  between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts  used for income tax  purposes.  Significant  components  of the
deferred tax assets (liabilities) are as follows:


                                                           DECEMBER 31,
                                                   ----------------------------
                                                      2001             2002
                                                   -----------      -----------
Deferred tax assets:
  Provision for doubtful accounts and
    unissued credits .........................     $ 1,238,401      $   835,980
  Provision for other reserves ...............         976,597        2,608,101
  Net operating loss carry forward ...........            --            850,326
  Deferred compensation and benefits .........         231,245          238,232
  State taxes ................................           1,960             --
                                                   -----------      -----------
         Total deferred tax assets ...........       2,448,203        4,532,639

Deferred tax liabilities:
  Unrealized gain ............................        (583,100)         (80,858)
                                                   -----------      -----------
                                                      (583,100)         (80,858)
Valuation allowance for deferred tax
  assets .....................................      (2,380,016)      (4,859,532)
                                                   -----------      -----------

Net deferred tax liabilities .................     $  (514,913)     $  (407,751)
                                                   ===========      ===========


The Company has ongoing tax audits  related to Federal tax  returns.  Management
believes adequate reserves have been provided for potential claims.

9. COMMITMENTS AND CONTINGENCIES

The Company has entered into various non-cancelable  operating lease agreements,
principally  for  executive  office,   warehousing   facilities  and  production
facilities with unexpired  terms in excess of one year.  Certain of these leases
provided for scheduled  rent  increases.  The Company  records rent expense on a
straight-line  basis  over the  term of the  lease.  The  future  minimum  lease
payments under these non-cancelable operating leases are as follows:


                                      F-19


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


                                                     RELATED PARTY       OTHER
                                                       ----------     ----------
2003 .............................................     $2,180,217     $  950,949
2004 .............................................      1,208,974        601,801
2005 .............................................        898,366        428,691
2006 .............................................        925,317        356,840
2007 .............................................        953,076        356,840
Thereafter .......................................      2,938,808        952,573
                                                       ----------     ----------

         Total future minimum lease payments .....     $9,104,758     $3,647,694
                                                       ==========     ==========


Several of the operating  leases contain  provisions  for additional  rent based
upon increases in the operating costs, as defined, per the agreement. Total rent
expense  under  the  operating  leases  amounted  to  approximately  $2,548,000,
$2,968,000 and $3,166,000 for 2000, 2001 and 2002, respectively.

The Company had open  letters of credit of  $17,778,561  and  $15,458,189  as of
December 31, 2001 and 2002, respectively.

The  Company  has two  employment  contracts  dated  January  1,  1998  with two
executives  providing for base  compensation and other  incentives.  Commitments
under these  agreements for base  compensation  amount to $1,000,000 for each of
the two  executives  annually  through  December 31, 2002.  Each  contract  also
provides for annual  bonuses of up to $2,000,000  for each executive and vesting
of stock options based on attaining specified  performance  criteria.  Effective
January 10,  2000,  these  contracts  were  amended  reducing the base salary to
$500,000 for each of the two executives and extending the term of the agreements
to March 31, 2003.

On April 1, 1999,  the Company  entered into a three-year  employment  agreement
with Mr.  Nacif,  pursuant to which Mr. Nacif  initially was entitled to receive
(i) an annual base salary of $1 million,  (ii)  reimbursement  of all reasonable
and documented business expenses,  (iii) participation in all plans sponsored by
the Company for  employees in general and (iv) the right (the  "Option") for ten
years to  purchase  up to 500,000  shares of the  Company's  Common  Stock at an
exercise price of $25 per share.  The Option vested in three equal  installments
on April 1, 2000, 2001 and 2002. In the event the Company terminates Mr. Nacif's
employment without cause (as defined), the Company shall remain obligated to pay
Mr.  Nacif an amount  equal to his base salary for the  remainder  of the stated
term. In the event Mr.  Nacif's  employment  is terminated  for any other reason
(including death,  disability,  resignation or termination with cause),  neither
party shall have any further  obligation  to the other,  except that the Company
shall pay to Mr.  Nacif,  or his  estate,  all  reimbursable  expenses  and such
compensation as is due prorated  through the date of termination.  As of January
1, 2000, the Company and Mr. Nacif amended Mr. Nacif's  employment  agreement to
reduce his annual salary from $1 million to $250,000 starting in 2000.

The Company entered into a consulting  agreement with Gabe Zeitouni,  the former
President of the Company's Rocky division,  through December 31, 2002. Under the
terms of this agreement,  Mr. Zeitouni was paid $140,000  through December 2002.
In  conjunction  with this  consulting  agreement,  Mr.  Zeitouni's  Put  Option
Agreement  of July 10, 2000 was amended.  As of December  31, 2002,  the Company
advanced  approximately  $1.1  million to Mr.  Zeitouni.  The  Company  has also
changed  the time  frame of Mr.  Zeitouni's  right to  require  the  Company  to
purchase 80,890 of shares at $18.54 to be the three-month  period  commencing on
January 1, 2003 and ending on March 31, 2003. Mr.  Zeitouni  exercised his right
in February  2003. The cost of the Put Option (excess of $18.54 over the current
market value of the  Company's  stock) is being  amortized  over the  consulting
period.

In connection  with the  establishment  of JDI (see Note 5), JDI entered into an
employment  agreement with Bensimon,  which provided for the payment of a salary
to  Bensimon  and a bonus  tied  to the new  company's  sales  performance.  The
existing lenders to Needletex,  Inc. agreed to the asset transfer in return for,
among other things,  the confirmation of Bensimon's  continuing  guaranty of the
loan  obligations,  the assumption of the loan obligations by JDI and a guaranty
of those  obligations by the Company.  The Company received an express indemnity
by Needletex, Inc. and Bensimon to reimburse us for all amounts we paid to those
lenders for the account of Needletex and Bensimon. Thereafter a dispute arose as
to


                                      F-20


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


whether  Bensimon had performed in accordance  with his terms of employment  set
forth in the Employment  Agreement.  When an amicable resolution of this dispute
could not be achieved,  Bensimon commenced an arbitration  preceding against his
employer (JDI),  Fashion  Resource (TCL),  Inc., the managing member of Jane Doe
International and the Company.  The Company and other respondents  contested and
vigorously opposed the matter.

On January 21, 2003,  after a hearing,  the arbitration  panel issued an interim
award in favor of Bensimon  awarding  him  $1,425,655  for salary and bonus plus
interest accrued thereon and legal fees and costs to be determined.  The Company
has  accrued an  additional  $1.3  million  reserve  for  litigation  in 2002 in
addition to the  previously  recorded  accrual of  $315,000  included in accrued
liabilities.

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

10. EQUITY

The Company has elected to follow  Accounting  Principles Board Opinion No. 25,"
Accounting for Stock Issued to Employees"  (APB 25) and related  interpretations
in accounting for its employee stock options  because,  as discussed  below, the
alternative  fair value  accounting  provided for under FASB  Statement No. 123,
"Accounting  for  Stock-Based  Compensation",  requires use of option  valuation
models that were not developed for use in valuing employee stock options.  Under
APB 25, when the exercise  price of the Company's  employee stock options equals
the market price of the underlying  stock on the date of grant,  no compensation
expense is recognized.

The Company's Employee  Incentive Plan,  formerly the 1995 Stock Option Plan, as
amended  and  restated  in May 1999  (the  "Plan")  and  amended  in  2002,  has
authorized  the grant of both  incentive  and  non-qualified  stock  options  to
officers,  employees,  directors  and  consultants  of  the  Company  for  up to
5,100,000  shares (as  adjusted  for a stock  split  effective  May 1998) of the
Company's Common Stock. The exercise price of incentive options must be equal to
100% of fair market  value of common stock on the date of grant and the exercise
price of non-qualified options must not be less than the par value of a share of
Common Stock on the date of grant. The Plan was also amended to expand the types
of awards,  which may be granted pursuant thereto to include stock  appreciation
rights, restricted stock and other performance-based benefits.

In October 1998, the Company granted 1,000,000  non-qualified  stock options not
under the Plan.  The options were  granted to the Chairman and  President of the
Company at $13.50 per share,  the closing sales price of the Common Stock on the
day of the grant.  The options expire in 2008 and vest over four years,  subject
to certain  performance  criteria.  In May 2002, the Company  granted  3,000,000
non-qualified  stock options not under the Plan. The options were granted to the
Chairman,  President of the Company and Mr. Kamel Nacif at $5.50 per share,  the
closing  sales  price of the Common  Stock on the day of the grant.  The options
expire  in 2012 and vest  over  three  years,  subject  to  certain  performance
criteria.


                                      F-21


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


A summary of the Company's stock option  activity,  and related  information for
the years ended December 31 follows:

<TABLE>
<CAPTION>
                                    2000                        2001                         2002
                          ------------------------    ------------------------     ------------------------
                                         WEIGHTED                    WEIGHTED                     WEIGHTED
                                          AVERAGE                    AVERAGE                       AVERAGE
                                         EXERCISE                    EXERCISE                     EXERCISE
                            OPTIONS        PRICE        OPTIONS        PRICE         OPTIONS        PRICE
                          ----------    ----------    ----------     ---------     ----------    ----------
<S>                        <C>             <C>         <C>             <C>          <C>            <C>
Options outstanding at
   beginning of year       2,876,737       $14.43      2,697,487       $14.29       3,520,737      $11.90
   Granted                    95,750         9.61        955,000         5.18       3,004,000        5.50
   Exercised                 (20,000)        4.28         (8,500)        3.97          (5,500)       4.39
   Forfeited                (255,000)       13.99       (123,250)       12.65        (142,750)      12.14
                          ----------       ------     ----------       ------       ---------      ------
Options outstanding at
   end of year             2,697,487       $14.29      3,520,737       $11.90       6,376,487      $ 8.89
                          ==========       ======     ==========       ======       =========      ======

Exercisable at end of
   year                    1,631,220                   2,173,587                    3,535,487
Weighted average per
   option fair value
   of options granted
   during the year                         $ 7.88                      $ 3.89                      $ 2.89
</TABLE>


The following table summarizes  information  about stock options  outstanding at
December 31, 2002:

                            Options Outstanding            Options Exercisable
                   -----------------------------------    ---------------------
                                 Weighted
                                 Average      Weighted                 Weighted
                                 Remaining     Average                  Average
                      Number    Contractual   Exercise       Number    Exercise
 Exercise Price    Outstanding     Life        Price      Exercisable    Price
------------------------------------------------------    ---------------------
$ 3.00 -   5.09        968,112      7.4        $ 4.89         576,362    $ 4.82
  5.50               3,004,000      9.4          5.50         750,000      5.50
  5.55 -   9.97        718,000      5.4          7.17         602,000      7.39
 13.50 -  15.50      1,026,000      5.7         13.51       1,022,250     13.51
 18.44 -  18.54        116,875      5.5         18.53          41,875     18.49
 25.00                 500,000      6.3         25.00         500,000     25.00
 33.13 -  39.97         41,500      6.2         39.31          41,500     39.31
 45.50                   2,000      6.3         45.50           1,500     45.50
------------------------------------------------------    ---------------------
$ 3.00 -  45.50      6,376,487      7.7        $ 8.89       3,535,487    $11.35
======================================================    =====================



11. PREFERRED STOCK

In connection with the twill mill acquisition, the Company issued 100,000 Series
A Preferred Shares ("Preferred  Shares").  The Preferred Shares accrue dividends
at an annual rate of 7% of the initial stated value of $88.20 per share and have
no voting rights.  The Shares issued will become  convertible into three million
shares  of  common  stock  if the  Company's  common  shareholders  approve  the
conversion  at the 2003 annual  meeting.  If the Company's  shareholders  do not
approve the issuance of the conversion  shares at the next shareholder  meeting,
the  Company  will then have the  right to  redeem  any or all of the  Preferred
Shares  for a price  equal to the  stated  value  plus all  accrued  and  unpaid
dividends.

The  Company  granted  the holder of the shares of common  stock  issuable  upon
conversion  of the  Preferred  Shares  "piggyback"  registration  rights,  which
provide such holder the right, under certain circumstances,  to have such shares
registered  for  resale  under  the  Securities  Act of 1933.  In the event of a
liquidation, dissolution or winding-up of the


                                      F-22


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Company,  the  Preferred  Shares  will be  entitled  to  receive,  prior  to any
distribution  on the common stock,  a  distribution  equal to the initial stated
value of the Preferred Shares plus all accrued and unpaid dividends.

12. SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION


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

Cash paid for interest .............   $ 8,685,000   $ 4,473,000    $ 2,361,000
                                       ===========   ===========    ===========

Cash paid (refunded) for income
   taxes ...........................   $ 3,861,000   $(2,554,000)   $(5,086,000)
                                       ===========   ===========    ===========


During 2000, in a non-cash  transaction,  the Company sold certain equipment and
other assets to a related  party at net book value.  The purchase  price of such
assets,  together with $12.5 million  previously  advanced is  represented  by a
$48.0 million note receivable.  In addition, during 2001 the Company transferred
$5.5 million in  receivables  to the seller in  connection  with the purchase of
Ajalpan. In 2002, the Company acquired certain assets of a twill mill located in
Puebla, Mexico. Included in the consideration paid were 100,000 shares of Series
A  Preferred  Stock  valued at $8.8  million,  a 25% equity  stake in  Tarrant's
wholly-owned  subsidiary,  Tarrant Mexico and the  cancellation of approximately
$56.9 million of certain notes and accounts receivables due from the sellers and
their  affiliates.  These  non-cash  transactions  have been  excluded  from the
respective statements of cash flows.

13. RELATED-PARTY TRANSACTIONS

Related-party  transactions,  consisting  primarily  of  purchases  and sales of
finished goods and raw materials, are as follows:

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

Sales to related parties ..........    $ 4,069,000    $ 8,340,000    $ 4,864,000
Purchases from related parties ....    $20,972,000    $32,095,000    $76,231,000

As of December 31, 2001 and 2002,  related party affiliates were indebted to the
Company in the amounts of $14.2 million and $15.9 million,  respectively.  These
include amounts due from principal  shareholders of the Company of $12.1 million
and $5.6  million at December 31, 2001 and 2002,  respectively,  which have been
shown as  reductions  to  shareholders'  equity  in the  accompanying  financial
statements. Total interest paid by related party affiliates and the Chairman and
President  were $70,000 and  $368,000 for the years ended  December 31, 2001 and
2002,  respectively.  During 2001,  Kamel Nacif  advanced the Company a total of
$18.1 million for working  capital  purposes.  Such advances were short-term and
paid back by the Company  within 30 days of the advance.  No amounts were due to
Mr. Nacif at December 31, 2002.

From time to time,  the Company has borrowed  funds from, and advanced funds to,
certain officers and principal shareholders, including Messrs. Guez and Kay. The
maximum amount of such borrowings  from Mr. Kay during 2002 was $2,317,000.  The
maximum  amount of such  advances  to Mr.  Guez  during  2002 was  approximately
$4,923,000.  As of December 31, 2002, the Company was indebted to Mr. Kay in the
amount of  $487,000.  Mr. Guez had an  outstanding  advance  from the Company of
$4,879,000  as of December  31, 2002.  As of December 31, 2001,  the Company was
indebted to Mr. Kay in the amount of  $2,308,000.  Mr.  Guez had an  outstanding
advance from the Company of  $4,116,000  as of December 31, 2001. As of December
31, 2001 and 2002,  Mr. Kamel Nacif was indebted to the Company for $8.0 million
and $723,000,  respectively.  All advances to, and borrowings from, Mr. Guez and
Mr.  Kay in 2002 bore  interest  at the rate of  7.75%.  All  existing  loans to
officers  and  directors  before  July 30,  2002  are  grandfathered  under  the
Sarbanes-Oxley  Act of 2002. No further  personal loans will be made to officers
and directors in compliance with the Sarbanes-Oxley Act.

Under lease  agreements  entered into between the Company and two entities owned
by the Chairman and President,  the Company paid $1,299,000 in 2000,  $1,299,000
in 2001 and $1,330,000 in 2002 for rent for office and warehouse facilities.  In
addition  during 2000 and 2001, the Company leased an airplane from 477 Aviation
LLC for the purpose of transporting  employees of the Company.  477 Aviation LLC
is wholly owned by the Company's principal shareholder.  Lease payments


                                      F-23


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


amounted to $705,000 for the year ended  December 31, 2000.  The Company did not
lease  the  plane  in 2001  and  2002.  The  Company  reimbursed  the  principal
shareholder fuel and related expenses whenever the Company's executives used the
aircraft for business purposes.

Under lease agreements entered into between the Company and the former owners of
Grupo Famian,  the Company paid $136,000 in 2000,  $832,000 in 2001 and $843,000
in 2002 for rent for sewing and washing facilities in Tehuacan, Mexico.

In 1998,  a  California  limited  liability  company  owned by the  Chairman and
President of the Company purchased  2,300,000 shares of the Common Stock of Tag-
It Pacific,  Inc.  ("Tag-It")  (or  approximately  37% of such Common Stock then
outstanding).  Tag-It is a provider of brand identity  programs to manufacturers
and retailers of apparel and accessories.  Tag-It assumed the responsibility for
managing and sourcing all trim and packaging  used in  connection  with products
manufactured  by or on behalf of the  Company in  Mexico.  This  arrangement  is
terminable  by either the Company or Tag-It at any time.  The  Company  believes
that the terms of this  arrangement,  which is subject to the  acceptance of the
Company's customers, are no less favorable to the Company than could be obtained
from  unaffiliated  third parties.  The Company  purchased $20.9 million,  $17.9
million  and $23.9  million of trim  inventory  from  Tag-it for the years ended
December  31,  2000,  2001 and 2002,  respectively.  As of December 31, 2001 and
2002,  there were $556,000  million and $4.4 million of outstanding  invoices in
Accounts Payable, respectively.

The Company  purchased  $5.8  million and $37.0  million of finished  goods from
Azteca for the years ended December 31, 2001 and 2002, respectively. Total sales
of fabric from the Company to Azteca in 2002 were $2.9 million. Two and one half
percent  of gross  sales as  management  fees  were  paid in 2002 to each of the
members of UAV, per the operating agreement.

The Company purchased $8.5 million and $12.3 million of fabric from Trans Textil
in 2001 and 2002.  As of December 31, 2001 and 2002,  there was $2.5 million and
$7.0 million outstanding invoices in Accounts Payable, respectively.

As of  December  31,  2000,  Aris  Industries,  Inc.  ("Aris")  owed the Company
approximately $5.8 million for goods manufactured and shipped by the Company. On
February 12, 2001,  Aris and the Company  entered into an agreement  under which
Aris issued to the Company 1.5 million  shares of its common stock and undertook
to repay  either $2.5 million in cash or its  equivalent  in common stock to the
Company on December 31, 2001 in full  satisfaction  of the debt.  As of February
20, 2002,  Aris had issued the Company an  aggregate of 8,117,647  shares of its
common  stock  including  the  1.5  million  shares  previously  issued  in full
satisfaction  of this debt. On March 27, 2002, the Company sold this stock to an
unrelated  third party for an aggregate of $1,785,882.  As of December 31, 2002,
Messrs. Guez and Kay jointly owned approximately 7% of the outstanding shares of
Aris.


                                      F-24


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


14. OPERATIONS BY GEOGRAPHIC AREAS

The  Company   operates   primarily  in  one  industry   segment,   the  design,
manufacturing  and  importation  of private  label,  moderately  priced,  casual
apparel.  Information  about the  Company's  operations in the United States and
Asia is presented below.  Inter-company revenues and assets have been eliminated
to arrive at the consolidated amounts.

<TABLE>
<CAPTION>
                                                                        ADJUSTMENTS
                                                                            AND
                      UNITED STATES         ASIA           MEXICO      ELIMINATIONS         TOTAL
                      -------------    -------------   -------------   -------------    -------------
<S>                   <C>              <C>             <C>             <C>              <C>
2000
Sales .............   $ 368,308,000    $  16,874,000   $   9,987,000   $        --      $ 395,169,000
Inter-company sales      47,632,000      107,860,000      84,664,000    (240,156,000)            --
                      -------------    -------------   -------------   -------------    -------------

Total revenue .....   $ 415,940,000    $ 124,734,000   $  94,651,000   $(240,156,000)   $ 395,169,000
                      =============    =============   =============   =============    =============

Income (loss) from
   operations .....   $  (8,131,000)   $   8,217,000   $   2,003,000   $        --      $   2,089,000
                      =============    =============   =============   =============    =============

Total assets ......   $ 245,165,000    $  97,246,000   $ 159,971,000   $(194,290,000)   $ 308,092,000
                      =============    =============   =============   =============    =============

2001
Sales .............   $ 312,587,000   $   5,952,000   $  11,714,000    $        --      $ 330,253,000
Inter-company sales      12,341,000      86,291,000      77,062,000     (175,694,000)            --
                      -------------   -------------   -------------    -------------    -------------

Total revenue .....   $ 324,928,000   $  92,243,000   $  88,776,000    $(175,694,000)   $ 330,253,000
                      =============   =============   =============    =============    =============

Income (loss) from
   operations .....   $   5,364,000   $   5,369,000   $  (8,803,000)   $        --      $   1,930,000
                      =============   =============   =============    =============    =============

Total assets ......   $ 176,178,000   $  97,175,000   $ 121,188,000    $(106,074,000)   $ 288,467,000
                      =============   =============   =============    =============    =============

2002
Sales .............   $ 332,877,000   $   3,943,000   $  10,571,000    $        --      $ 347,391,000
Inter-company sales      14,474,000      90,830,000      82,531,000     (187,835,000)            --
                      -------------   -------------   -------------    -------------    -------------

Total revenue .....   $ 347,351,000   $  94,773,000   $  93,102,000    $(187,835,000)   $ 347,391,000
                      =============   =============   =============    =============    =============

Income (loss) from
   operations .....   $   6,916,000   $   4,950,000   $  (7,396,000)   $        --      $   4,470,000
                      =============   =============   =============    =============    =============

Total assets ......   $ 185,086,000   $ 107,266,000   $ 202,741,000    $(176,891,000)   $ 318,202,000
                      =============   =============   =============    =============    =============
</TABLE>


15. EMPLOYEE BENEFIT PLANS

On  August  1,  1992,  Tarrant  Hong Kong  established  a  defined  contribution
retirement  plan covering all of its Hong Kong employees whose period of service
exceeds 12 months. Plan assets are monitored by a third-party investment manager
and are segregated from those of Tarrant Hong Kong.  Participants may contribute
up to 5% of  their  salary  to the  plan.  The  Company  makes  annual  matching
contributions.  Costs of the plan charged to operations for 2000,  2001 and 2002
amounted to approximately $119,000, $155,000 and $149,000 respectively.

On July 1, 1994, the Company established a defined contribution  retirement plan
covering all of its U.S.  employees  whose period of service  exceeds 12 months.
Plan assets are monitored by a third-party investment manager and are segregated
from those of the Company.  Participants  may contribute from 1% to 15% of their
pre-tax  compensation  up to  effective  limitations  specified  by the Internal
Revenue  Service.  The  Company's  contributions  to the plan are based on a 50%
(100% effective July 1, 1995) matching of  participants'  contributions,  not to
exceed 6% (5% effective July 1, 1995) of the participants'  annual compensation.
In addition,  the Company may also make a discretionary  annual  contribution to
the plan.  Costs of the plan  charged  to  operations  for  2000,  2001 and 2002
amounted to approximately $257,000, $289,000 and $249,000 respectively.


                                      F-25


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


On December 27, 1995, the Company  established a deferred  compensation plan for
executive  officers.  Participants  may  contribute a specific  portion of their
salary to such plan. The Company does not contribute to the Plan.

On December 20, 1996,  the  Compensation  Committee  of the  Company's  Board of
Directors  established the Incentive  Compensation Plan, which provides for both
discretionary   bonuses  and  bonus  amounts  upon  achieving  certain  earnings
thresholds for certain members of management. The adoption of this plan received
shareholder approval at the 1997 annual meeting.

16. OTHER INCOME AND EXPENSE

Other income and expense consists of the following:

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

Rental income ...........................   $   71,576   $  586,305   $  495,754
Unrealized gain on foreign currency .....      441,811      103,705         --
Realized gain on foreign currency .......         --           --      1,123,076
Royalty income ..........................         --        180,833       62,166
Sales of damaged goods and samples ......         --        192,680         --
Gain on legal settlement ................         --           --        473,041
Other items .............................      836,980      789,543      493,938
                                            ----------   ----------   ----------
Total other income ......................   $1,350,367   $1,853,066   $2,647,975
                                            ==========   ==========   ==========

Royalty expense .........................   $     --     $  500,000   $  655,691
Unrealized loss on foreign currency .....         --           --      1,014,696
Other items .............................      193,359      355,994      333,686
                                            ----------   ----------   ----------
Total other expense .....................   $  193,359   $  855,994   $2,004,073
                                            ==========   ==========   ==========


                                      F-26


<PAGE>


                              TARRANT APPAREL GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly  results of operations for the years
ended December 31, 2001 and 2002:

<TABLE>
<CAPTION>

                                                         QUARTER ENDED                     YEAR
                                       ----------------------------------------------      ENDED
                                       MAR. 31(2)   JUN. 30     SEP. 30     DEC. 31(1)    DEC. 31
                                       ---------   ---------   ---------    ---------    ---------
                                                   (In thousands, except per share data)
<S>                                    <C>         <C>         <C>          <C>          <C>
2001
Net sales ..........................   $  84,330   $  96,126   $  78,175    $  71,622    $ 330,253
Gross profit .......................      14,419      15,814      10,071       12,424       52,728
Operating income (loss) ............         891       3,300      (3,349)       1,088        1,930
Net income (loss) ..................   $     446   $   1,706   $  (4,229)   $    (812)   $  (2,889)
Net income (loss) per common share:
   Basic ...........................   $     .03   $     .11   $    (.27)   $   (0.05)   $   (0.18)
   Diluted .........................   $     .03   $     .11   $    (.27)   $   (0.05)   $   (0.18)
Weighted average shares outstanding:
   Basic ...........................      15,822      15,832      15,824       15,831       15,825
   Diluted .........................      15,825      15,905      15,824       15,831       15,825

2002
Net sales ..........................   $  65,164    $  95,307   $  94,328   $  92,592    $ 347,391
Gross profit .......................       8,419       14,424      14,230       8,236       45,309
Operating income (loss) ............        (831)       4,780       3,626      (3,105)       4,470
Income (loss) before cumulative
   effect of accounting change .....   $  (1,726)   $   1,302   $   1,127   $  (1,917)   $  (1,214)
Net income (loss) ..................   $  (6,597)   $   1,302   $   1,127   $  (1,917)   $  (6,085)
Income (loss) per share before
   cumulative effect of accounting
   change:
   Basic ...........................   $    (.11)   $     .08   $     .07   $   (0.12)   $   (0.08)
   Diluted .........................   $    (.11)   $     .08   $     .07   $   (0.12)   $   (0.08)
Net income (loss) per common share:
   Basic ...........................   $    (.41)   $     .08   $     .07   $   (0.12)   $   (0.38)
   Diluted .........................   $    (.41)   $     .08   $     .07   $   (0.12)   $   (0.38)
Weighted average shares outstanding:
   Basic ...........................      15,832       15,832      15,836      15,836       15,834
   Diluted .........................      15,832       16,099      15,931      15,836       15,834

-----------------------------
<FN>
(1)   In the fourth  quarter of 2000,  the  Company  recorded a book to physical
      adjustment of $3.2 million,  a $965,000 loss on a foreign  currency  hedge
      and the write-off of certain assets of $350,000  related to abandonment of
      leasehold improvements in Mississippi and Mexico.
(2)   Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
      Other Intangible Assets." According to this statement,  goodwill and other
      intangible   assets  with  indefinite  lives  are  no  longer  subject  to
      amortization,  but rather an annual assessment of impairment  applied on a
      fair-value-based test. The Company adopted SFAS No. 142 in fiscal 2002 and
      performed its first annual assessment of impairment,  which resulted in an
      impairment loss of $4.9 million recorded in the first quarter of 2002.
</FN>
</TABLE>



18.   CONSOLIDATED STATEMENTS OF CASH FLOWS

Advances to officers and  shareholders  for the 2000, 2001 and 2002 periods have
been  reclassified in the accompanying  statements of cash flows.  Consequently,
"Net  cash  provided  by  operating   activities"  for  2000  has  changed  from
$14,863,469  to  $19,338,563.  "Net cash used in investing  activities"  for the
2000,  2001 and 2002 periods has changed from  $(28,247,227),  $(9,226,729)  and
$(4,830,977)  respectively,  to  $(31,441,867),  $(15,445,187)  and $(5,669,577)
respectively.   Additionally,   "Net  cash   provided  by  (used  in)  financing
activities"  for the 2000,  2001 and 2002 periods has changed from  $14,474,741,
$(22,133,979), and $(9,273,251) respectively, to $13,194,287,  $(15,915,521) and
$(8,434,651) respectively.


                                      F-27


<PAGE>


                                   SCHEDULE II

                              TARRANT APPAREL GROUP

<TABLE>
                        VALUATION AND QUALIFYING ACCOUNTS


<CAPTION>
                                      Additions   Additions
                          Balance at  Charged to  Charged                  Balance
                          Beginning   Costs and   to Other                 at End
                           of Year    Expenses    Accounts   Deductions    of Year
                          ----------  ----------  ---------  ----------   ----------
<S>                       <C>         <C>         <C>        <C>          <C>
For the year ended
 December 31, 2000
  Allowance for returns
   and discounts......... $2,868,658  $1,024,082  $   --     $    --      $3,892,740
  Allowance for bad debt. $  339,660  $  103,007  $   --     $    --      $  442,667
                          ==========  ==========  =========  ===========  ==========
For the year ended
 December 31, 2001
  Allowance for returns
   and discounts......... $3,892,740  $    --     $(758,754) $  (452,385) $2,681,601
  Allowance for bad debt. $  442,667  $2,283,226  $ 758,754  $    --      $3,484,647
                           ========== ==========  =========  ===========  ==========
For the year ended
 December 31, 2002
  Allowance for returns
   and discounts......... $2,681,601  $  453,167  $   --     $    --      $3,134,768
  Allowance for bad debt. $3,484,647  $    --     $   --     $(2,302,794) $1,181,853
                           ========== ==========  =========  ===========  ==========
</TABLE>


                                      F-28


<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or  15(d)  of the  Exchange  Act  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                              TARRANT APPAREL GROUP

                              By:             /s/ Gerard Guez
                                    ---------------------------------------
                                                Gerard Guez
                                           Chairman of the Board

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

      SIGNATURE                          TITLE                         DATE
      ---------                          -----                         ----

   /S/ GERARD GUEZ          Chief Executive Officer and           May 15, 2003
-----------------------     Chairman of the Board of Directors
     Gerard Guez

          *                 President and Vice Chairman of the    May 15, 2003
-----------------------     Board of Directors
       Todd Kay

          *                 Chief Financial Officer, Treasurer    May 15, 2003
-----------------------     and Director (Principal Financial
     Patrick Chow           and Accounting Officer)


                            Director
-----------------------
      Larry Russ

                            Director
-----------------------
   Stephane Farouze

          *                 Director                              May 15, 2003
-----------------------
   Mitchell Simbal

          *                 Director                              May 15, 2003
-----------------------
      Barry Aved

          *                 Director                              May 15, 2003
-----------------------
   Joseph Mizrachi

          *                 Director                              May 15, 2003
-----------------------
    Milton Koffman

*     By:          /s/ Gerard Guez
            -------------------------------
            Gerard Guez
            Attorney-In-Fact


<PAGE>


                        Certification of CEO Pursuant to
                 Securities Exchange Act Rules 13a-14 and 15d-14
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Gerard Guez, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:    May 15, 2003
                                                        /s/ Gerard Guez
                                                     -------------------------
                                                     Gerard Guez
                                                     Chief Executive Officer


<PAGE>


                        Certification of CFO Pursuant to
                 Securities Exchange Act Rules 13a-14 and 15d-14
                             as Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Patrick Chow, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:    May 15, 2003
                                                        /s/ Patrick Chow
                                                     -------------------------
                                                     Patrick Chow
                                                     Chief Financial Officer