SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

                Annual Report Pursuant to Section 13 or 15(d) of

                       the Securities Exchange Act of 1934

                   For the fiscal year ended December 31, 2005

                           Commission File No. 0-23379

                           I.C. ISAACS & COMPANY, INC.

               (Exact name of registrant as specified in charter)

            Delaware                                             52-1377061
 (State or other jurisdiction of                                (IRS employer
 incorporation or organization)                              identification no.)

 3840 Bank Street, Baltimore, Maryland                           21224-2522
(Address of principal executive office)                          (Zip code)

       Registrant's telephone number, including area code: (410) 342-8200

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:

                                 Title of Class:

                    Common Stock, $.0001 par value per share

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. |_| Yes |X| No

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. |_|

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. |X| Yes |_| 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. |_|

Indicate by check mark if Registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). |_| Yes |X| No

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

  Large accelerated filer |_|  Accelerated filer |_|   Non-accelerated filer |X|

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

The aggregate market value of the voting common stock held by  non-affiliates of
the  Registrant  as of the last business day of the  Registrant's  most recently
completed second fiscal quarter, at June 30, 2005, was approximately $40,565,000
based on the average  closing  price of the Common  Stock as reported by the OTC
Bulletin Board on that day. Solely for purposes of the foregoing calculation all
of the  Registrant's  directors  and officers are deemed to be  affiliates.  The
Registrant does not have outstanding any non-voting common stock.

As of March 30, 2006, 11,996,485 shares of Common Stock were outstanding.

                       Document Incorporated by Reference

None


                                       1

<PAGE>


                           I.C. ISAACS & COMPANY, INC.

                                    FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                       Page
                                                                                                       ----
                                                       PART I
<S>          <C>                                                                                         <C>
  ITEM 1.    BUSINESS                                                                                     4
  ITEM 1A    RISK FACTORS                                                                                10
  ITEM 1B    UNRESOLVED STAFF COMMENTS                                                                   14
  ITEM 2.    PROPERTIES                                                                                  14
  ITEM 3.    LEGAL PROCEEDINGS                                                                           14
  ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                         15

                                                      PART II
  ITEM 5.    MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                                                                                                         16
  ITEM 6.    SELECTED FINANCIAL DATA                                                                     17
  ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                                                                                         19
  ITEM 7A.   QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                    31
  ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                 31
  ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE        31
  ITEM 9A.   CONTROLS AND PROCEDURES                                                                     31
  ITEM 9B.   OTHER INFORMATION                                                                           32

                                                      PART III
  ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                                             33
  ITEM 11.   EXECUTIVE COMPENSATION                                                                      40
  ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                              44
  ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                              46
  ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES                                                      47
                                                      PART IV

  ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                     48

SIGNATURES                                                                                               53

</TABLE>


                                       2

<PAGE>




     "I.C.  Isaacs" and "I.G.  Design" are trademarks of I.C.  Isaacs & Company,
Inc. All other trademarks or service marks, including "Girbaud" and "Marithe and
Francois Girbaud", appearing in this Annual Report on Form 10-K are the property
of their respective owners and are not the property of the Company.

     The various  companies  that hold and license the Girbaud  trademarks,  and
that engage in the design and licensing of Girbaud branded  apparel,  as well as
the affiliates and associates of those companies,  are hereinafter  collectively
referred to as "Girbaud."


           IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains  forward-looking  statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended. Those statements include
statements  regarding the intent,  belief or current expectations of the Company
and its management,  including the Company's  belief regarding the prominence of
branded,  licensed apparel, in general, and the Girbaud brand, in particular, in
the Company's future, its expectations regarding the renewal of its licenses for
men's and women's sportswear and jeanswear by Girbaud, and its expectations that
substantially all of its net sales will come from sales of Girbaud apparel,  the
Company's beliefs regarding the relationship with its employees,  the conditions
of its facilities, number of manufacturers capable of supplying the Company with
products  that meet the  Company's  quality  standards,  the  Company's  beliefs
regarding its ordering  flexibility  as a result of  transferring  production to
Asia,  and  the  basis  on  which  it  competes  for  business,   the  Company's
environmental  obligations and its expectations  regarding the Company's product
offerings.  Words  such  as  "believes,"  "anticipates,"  "expects,"  "intends,"
"plans,"  and similar  expressions  are  intended  to  identify  forward-looking
statements but are not the exclusive means of identifying such statements.  Such
statements  are  forward-looking  statements  which are  subject to a variety of
risks and uncertainties,  many of which are beyond the Company's control,  which
could cause actual results to differ materially from those  contemplated in such
forward-looking  statements,  including in particular  the  following  risks and
uncertainties  (i)  changes  in the  marketplace  for  the  Company's  products,
including  customer  tastes,  (ii) the  introduction  of new products or pricing
changes by the Company's  competitors,  (iii)  changes in the economy,  and (iv)
termination  of one or more of its  agreements for use of the Girbaud brand name
and images in the manufacture and sale of the Company's  products.  Existing and
prospective  investors  are  cautioned  not to  place  undue  reliance  on these
forward-looking statements,  which speak only as of the date hereof. The Company
undertakes no obligation to update or revise the  information  contained in this
Annual  Report on Form  10-K,  whether  as a result of new  information,  future
events or circumstances or otherwise.

Access to Company Reports

Investors  may read and copy any  document  that the  Company  files  under  the
Securities  and Exchange  Act of 1934  (including  annual  reports on Form 10-K,
quarterly  reports on Form 10-Q,  current reports on Form 8-K and all amendments
to these  reports)  at the  Securities  and  Exchange  Commission  (SEC)  Public
Reference Room at 100 F Street, NE, Washington,  DC 20549. In addition,  the SEC
maintains  an  internet  site at  www.sec.gov  that  contains  reports and other
information regarding issuers that can be accessed  electronically.  The Company
maintains a website at  www.icisaacs.com  that  contains some of the more recent
(but not all of the) 10-K,  10-Q and 8-K reports  about the Company  that may be
found at the SEC's website.


                                       3

<PAGE>


                                     PART I

ITEM 1. BUSINESS

Introduction

     I.C. Isaacs & Company, Inc. ("Isaacs"),  together with its predecessors and
subsidiaries,  including  I.C.  Isaacs & Company  L.P.  (the  "LP"),  and Isaacs
Design, Inc.  (collectively the "Company") is a designer and marketer of branded
jeanswear and  sportswear.  Founded in 1913, the Company  offers  collections of
men's and women's  jeanswear  and  sportswear  under the  Marithe  and  Francois
Girbaud  designer  brand  ("Girbaud  brand" or "Girbaud  branded") in the United
States and Puerto  Rico.  The  Girbaud  brand is an  internationally  recognized
designer  label with a distinct  European  influence.  Sales of Girbaud  branded
products accounted for all of the Company's net sales in 2005 and 2004.

Products

     The Company has positioned its Girbaud branded line with a broad assortment
of products,  styles and fabrications  reflecting a contemporary  European look.
The Company markets a full  collection of men's  jeanswear and sportswear  under
the Girbaud brand,  including a broad array of bottoms, tops and outerwear.  The
Company also offers a women's  sportswear  collection  under the Girbaud  brand,
which also includes a wide  assortment  of bottoms,  tops and  outerwear.  These
collections  are  targeted to  consumers  who are seeking  quality,  fashionable
products  at  competitive  prices.  Girbaud  is  an  internationally  recognized
designer  brand.  The Company  markets  innovative  European-inspired  men's and
women's  jeanswear  and  sportswear  collections  under the Girbaud  brand.  The
Company's Girbaud branded  collections  include full lines of bottoms consisting
of jeans and casual pants in a variety of fabrications, including denim, stretch
denim,  cotton twill and nylon,  cotton  t-shirts,  polo shirts,  knit and woven
tops,  sweaters,  outerwear  and  leather  sportswear.  Reflecting  contemporary
European  design,  each of these  collections  is  characterized  by  innovative
styling and  fabrication  and is targeted to consumers ages 16 to 40.  Estimated
retail  prices  range  from  $29 to $39 for  t-shirts,  $49 to $100 for tops and
bottoms, $60 to $128 for sweaters and $80 to $300 for outerwear.

Customers and Sales

     The Company's  products are sold in approximately  2,100 specialty  stores,
specialty  store chains and  department  stores.  The  Company's  Girbaud  brand
products are sold and marketed  domestically  under the direction of a 16 person
sales  force   headquartered   in  New  York.   The  Company   uses  both  sales
representatives   and  distributors   for  the  sale  of  its  products.   Sales
representatives  include  employees  of  the  Company  as  well  as  independent
contractors.  Each of the Company's  non-employee sales  representatives  has an
agreement with the Company pursuant to which the sales representative  serves as
the sales representative of specified products of the Company within a specified
territory.  The  Company  does  not  have  long-term  contracts  with any of its
customers.  Instead,  its customers  purchase the Company's products pursuant to
purchase  orders  and are  under no  obligation  to  continue  to  purchase  the
Company's products.

     The Company began  marketing  men's  sportswear  under the Girbaud brand in
early 1998 and  introduced  a women's  sportswear  collection  under the Girbaud
brand in the second  quarter of 1998.  The Company's  Girbaud men's products are
sold to  approximately  1,650  stores in the  United  States  and  Puerto  Rico,
including major department stores such as Federated  Department  Stores,  Dayton
Hudson,  Dillards, Belk Stores and Bon Ton Stores (formerly Carson Pirie Scott),
and many prominent  specialty stores. The Company's Girbaud women's line is sold
to approximately 450 stores.  None of the Company's  customers accounted for 10%
or more of sales in 2005 or 2004. As of December 31, 2005 and 2004,  the Company
had one  customer  that  represented  11.4%  and 13.1% of  accounts  receivable,
respectively.


                                       4

<PAGE>


Design and Merchandising

     The  Company's  designers and  merchandisers  are provided with the Girbaud
collections  from  Europe  twice a year and they  collaborate  with  Marithe and
Francois  Girbaud and their staff in the  development  of the Company's  Girbaud
branded  product  lines  for  sale  in the  United  States.  Merchandisers  also
regularly  meet with sales  management  to gain  additional  market  insight and
further  refine  the  products  to be  consistent  with the needs of each of the
Company's  markets.  The Company's  in-house  design and product  development is
carried out by  merchandising  departments  in New York.  Many of the  Company's
products are  developed  using  computer-aided  design  equipment,  which allows
designers  to view  and  easily  modify  images  of a new  design.  The  Company
currently  has  15  people  on  the  design  staff  in  New  York  City.  Design
expenditures were approximately $3.6 million in 2005 and $3.1 million in 2004.

Advertising and Marketing

     The Company  communicates and reinforces the brand and image of its Girbaud
products through creative and innovative  advertising and marketing efforts. The
Company's  advertising  and  marketing  strategies  are directed by its New York
sales office and developed in collaboration  with advertising  agencies and with
Girbaud's   European  offices  and  Paris  advertising   agency.  The  Company's
advertising  strategy is geared toward its youthful and contemporary  consumers,
whose  lifestyles are influenced by music,  sports and fashion.  Its advertising
campaigns  have  evolved  from  trade  magazines  to a wide  variety  of  media,
including  billboards,  fashion  magazines and special events. In 2005 and 2004,
the Company  continued to utilize  advertising  media to promote its products at
moderate  levels  of  spending.   The  Company's   advertising  and  promotional
expenditures were approximately $1.6 million,  or 1.9% of net sales, in 2005 and
$1.8 million, or 2.2% of net sales, in 2004.

Product Sourcing

     General

     The  manufacturing  and  sourcing  of the  Company's  products  in 2005 was
predominately  done by foreign  independent  contractors.  Each of the Company's
independent  contractors and independent buying agents has an agreement with the
Company whereby it performs manufacturing or purchasing services for the Company
on a non-exclusive  basis. The Company evaluates its contractors  frequently and
believes that there are a number of manufacturers  capable of producing products
that meet the Company's quality standards. The Company's production requirements
account  for a  significant  portion  of  many  of its  contractors'  production
capacity. The Company has the ability to terminate its arrangements with each of
its contractors at any time. A change in suppliers, however, could cause a delay
in  manufacturing  and a possible  loss of sales  which could  adversely  affect
operating results.

     Asia and Africa

     Virtually all of the Company's  sportswear products other than t-shirts are
produced by approximately  17 different  manufacturers in nine countries in Asia
and 2  manufacturers  in  Africa.  During  2005,  three of the  Company's  Asian
contractors  accounted for approximately  42%, 8% and 4%,  respectively,  of the
Company's  total unit production and its two African  contractors  accounted for
approximately  9% of the Company's total unit  production.  The Company has well
established relationships with many of its contractors; however, it is not bound
by any long term contracts or minimum purchase  agreements.  The Company retains
independent  buying agents in various  countries in Asia and Africa to assist in
selecting and overseeing  independent  manufacturers,  sourcing fabric, trim and
other materials and monitoring  quotas.  Independent  buying agents also perform
quality  control  functions  on  behalf  of the  Company,  including  inspecting
materials and manufactured  products prior to accepting  delivery.  The sourcing
and  merchandising  staffs in the Company's  New York offices  oversee Asian and
African fabric and product development, apparel manufacturing, price negotiation
and  quality  control,  as well as the  research  and  development  of new Asian
sources of supply.  Asian and African production  represented  approximately 72%
and 9% of the Company's total unit production in 2005  respectively.  Purchasing
from these contractors requires the Company to estimate sales and issue purchase
orders  for  inventory  well in  advance  of  receiving  firm  orders  from  its


                                       5

<PAGE>


customers.  A risk to the Company is that its  estimates  may differ from actual
orders.  If this  happens,  the Company may miss sales  because it did not order
enough, or it may have to sell excess inventory at reduced prices.

     The  Company  seeks to  achieve  the most  efficient  means for the  timely
delivery of its high quality  products.  With rare exceptions,  the Company does
not purchase  fabrics but instead  negotiates a finished  garment price from its
contractors in Asia. All of the Company's products  manufactured abroad are paid
for in United States  dollars.  Accordingly,  the Company does not engage in any
currency hedging transactions.

     United States and Mexico

     The  Company  utilizes a supplier  in Mexico to provide  both full  service
packaging  services  for  finished  T-shirts  and to drop ships  T-shirt  blanks
directly  to various  independent  contractors  within  the United  States to be
screen  printed,  embroidered  or both,  before  being sent to the  Company as a
finished product to fulfill orders. T-shirt production represented approximately
19% of the  Company's  total unit  production in 2005.  During 2005,  one of the
Company's domestic contractors  accounted for approximately 16% of the Company's
total unit  production.  The Company also utilizes two other factories in Mexico
to  produce   sportswear   products   other  than  t-shirts   which   represents
approximately 2% of its total unit production.

Warehousing and Distribution

     The Company services its United States customers  utilizing a 70,000 square
foot Company-owned and operated  distribution center in Milford,  Delaware.  The
Company has  established  a  computerized  "Warehouse  Management  System"  with
real-time internal tracking information and the ability to provide its customers
with  electronically  transmitted  "Advance  Shipping  Notices." The accuracy of
shipments  is  increased  by the  ability to scan coded  garments at the packing
operation.  This process also  provides  for  computerized  routing and customer
invoicing. The vast majority of shipments are handled by UPS, common carriers or
parcel post.

Quality Control

     The Company's quality control program is designed to ensure that all of the
Company's  products  meet its high  quality  standards.  Visits  are made by the
Company's agents to outside  contractors to ensure compliance with the Company's
quality standards. Audits are also performed by quality control personnel at the
Milford, Delaware distribution center on all categories of incoming merchandise.

     All garments  produced for the Company must be produced in accordance  with
the Company's  specifications.  The Company's  import quality control program is
designed to ensure that the Company's  products meet its high quality standards.
The Company  monitors the quality of fabrics prior to the production of garments
and inspects  prototypes of products before  production  runs are commenced.  In
some cases, the Company requires its agents or manufacturers to submit fabric to
an independent  outside laboratory for testing prior to production.  The Company
requires  each agent to perform both in-line and final  quality  control  checks
during and after production before the garments leave the contractor.  Personnel
from the  Company's  New York  office  also visit  factories  to  conduct  these
inspections.

Backlog and Seasonality

     The Company's  business is impacted by the general seasonal trends that are
characteristic of the apparel and retail industries. In the Company's segment of
the  apparel  industry,  sales  are  generally  higher  in the  first  and third
quarters. Historically, the Company has taken greater markdowns of its inventory
sell-offs  in the second and fourth  quarters.  The Company  generally  receives
orders for its  products up to five months  prior to the time the  products  are
delivered  to stores.  The  backlog of orders at any given time is affected by a
number of factors,  including  seasonality,  weather  conditions,  scheduling of
manufacturing and shipment of products.  As the time of the shipment of products
may vary from year to year,  the results for any  particular  quarter may not be


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<PAGE>


indicative of the results for the full year. The Company had unfilled  orders of
$17.4  million at December  31, 2005  compared to $27.4  million at December 31,
2004. The planned exit from women's urban department  stores,  combined with the
exit from various  underperforming men's department stores as well as the timing
of inventory  receipts and shipments of orders is reflected in the reduced order
backlog.


Licenses and Other Rights Agreements

     Girbaud Domestic Licenses

     In November 1997, the Company entered into an exclusive  license  agreement
(the "Girbaud  Men's  Agreement")  with Girbaud  Design,  Inc. and its affiliate
Wurzburg  Holding S.A.  ("Wurzburg") to manufacture and market men's  jeanswear,
casualwear and outerwear under the Girbaud brand and certain related  trademarks
(the  "Girbaud  Marks") in all channels of  distribution  in the United  States,
including  Puerto Rico and the U.S. Virgin  Islands.  In March 1998, the Girbaud
Men's Agreement was amended and restated to include active influenced sportswear
as a licensed  product  category and to name  Latitude  Licensing  Corp.  as the
licensor  (  "Latitude").  Also in  March  1998,  the  Company  entered  into an
exclusive license agreement (the "Girbaud Women's  Agreement" and, together with
the  Girbaud  Men's  Agreement,  the  "Girbaud  Agreements")  with  Latitude  to
manufacture and market women's  jeanswear,  casualwear and outerwear,  including
active  influenced  sportswear,  under  the  Girbaud  Marks in all  channels  of
distribution  in the United States,  including  Puerto Rico and the U.S.  Virgin
Islands.  The Girbaud Agreements,  as amended,  include the right to manufacture
the licensed products in a number of foreign countries through 2007.

     The terms of the Girbaud  Agreements  will  expire at the end of 2007.  The
Company  has the  option  to extend  the terms of either or both of the  Girbaud
Agreements through the end of 2011. The Girbaud  Agreements  generally allow the
Company to use the  Girbaud  Marks on apparel  designed by or for the Company or
based on designs  and  styles  previously  associated  with the  Girbaud  brand,
subject to quality  control by Latitude  over the final designs of the products,
marketing  and  advertising  material and  manufacturing  premises.  The Girbaud
Agreements  provide that they may be terminated by Latitude upon the  occurrence
of certain  events,  including,  but not  limited to, a breach by the Company of
certain  obligations  under the agreements that remain uncured following certain
specified grace periods.

     Under the  Girbaud  Men's  Agreement  as amended the Company is required to
make royalty  payments to Latitude in an amount equal to 6.25% of the  Company's
net  sales of  regular  licensed  merchandise  and  3.0% in the case of  certain
irregular and closeout licensed merchandise. The Company is obligated to pay the
greater of actual  royalties  earned or minimum  guaranteed  annual royalties of
$3,000,000  through  2007.  On a monthly  basis during the term,  the Company is
obligated to pay 8.3% of the minimum  guaranteed  royalties  for that year. On a
quarterly  basis during the term, the Company is required to pay the amount that
the actual  royalties  exceed the total  minimum  guaranteed  royalties for that
quarter.  The Company is required to spend the greater of an amount  equal to 3%
of Girbaud men's net sales or a minimum of $500,000 in  advertising  and related
expenses  promoting the men's  Girbaud  brand  products in each year through the
term of the Girbaud  men's  agreement.  The  Company has agreed to increase  the
minimum annual amount of these expenditures under the Girbaud Men's Agreement by
$200,000  in each of the  years  2007,  2008 and 2009 in order to,  among  other
things,  facilitate and support a repositioning  of the Girbaud brand for better
store distribution.

     Under the Girbaud Women's Agreement as amended,  the Company is required to
make  royalty  payments to Latitude in an amount  equal to 6.25% of net sales of
regular licensed merchandise and 3.0% of certain irregular and closeout licensed
merchandise.  The Company is  obligated  to pay the greater of actual  royalties
earned or minimum  guaranteed annual royalties of $1,500,000  through 2007. On a
monthly  basis  during the term,  the  Company is  obligated  to pay 8.3% of the
minimum  guaranteed  royalties for that year. On a yearly basis,  the Company is
required to pay the amount that the actual  royalties  exceed the total  minimum
guaranteed royalties for that year. The Company is required to spend the greater
of an amount  equal to 3% of Girbaud  women's net sales or a minimum of $400,000
in advertising and related expenses promoting the women's Girbaud brand products
in each year through the term of the Girbaud Women's Agreement.  The Company has


                                       7

<PAGE>


agreed to increase the minimum  annual  amount of these  expenditures  under the
Girbaud  Women's  Agreement by $200,000 in each of the years 2007, 2008 and 2009
in order to, among other things,  facilitate and support a repositioning  of the
Girbaud brand for better store distribution.  In addition,  over the term of the
Girbaud  Women's  Agreement the Company is required to  contribute  $190,000 per
year to Latitude's  advertising  and  promotional  expenditures  for the Girbaud
brand.


     During  each of the six years  ended  December  31,  2005,  the  amounts of
advertising  and  related  expenses  incurred by the  Company in  marketing  the
Girbaud brand products were less than the amounts required under the agreements.
In each of the various  amendments to the men's and women's  license  agreements
which were  executed in 2002 - 2004,  Latitude and the Company  confirmed to one
another that neither party was in default to the other in the performance of any
of the  obligations  owed by either  of them to the  other.  On March 29,  2006,
Latitude also waived the Company's failure to spend the minimum amounts required
under the men's and women's license agreements in 2005.


     The Company is obligated  to pay a minimum of $6.5  million  during 2006 in
the  form  of  minimum  royalty  payments,  fashion  show  and  advertising  and
promotional expenses pursuant to the Girbaud Agreements and in subordinated note
payments.  In 2006, the Company expects that  substantially all of its net sales
will come from apparel  manufactured  under the licenses granted pursuant to the
Girbaud Agreements.

     In connection  with the  refinancing  of the Company's  credit  facility in
December  2004,  Latitude  and the Company  agreed to defer  approximately  $2.3
million of the 2004 minimum and  additional  royalty  payments to 2005. In 2005,
all 2004  deferred  royalty  payments  were  paid in full  and all 2005  royalty
payments  were paid when they  became due. In 2005,  the  Company  made  royalty
payments of $7.1 million.

     Licensor Ownership

     In 2002, Textile Investment International S.A. ("Textile"), an affiliate of
Latitude,  acquired  666,667  shares of common stock,  preferred  stock which it
converted into 3,300,000 shares of common stock and a note payable issued by the
Company, from a former licensor. As a result of those transactions,  Textile and
Wurzburg (which owned 582,500 shares of the Company's  common stock prior to the
transactions)  own  approximately  38%  of  the  common  stock  of  the  Company
outstanding as of the date of filing of this Report.


Credit Control

     The Company  manages its own credit and collection  functions and has never
used a factoring  service or outside  credit  insurance.  The  Company  sells to
approximately  1,100 accounts  throughout the United States and Puerto Rico. All
of the functions  necessary to service this large volume of accounts are handled
by the Company's in-house credit department in Baltimore,  Maryland. The Company
extends credit to its customers.  Accordingly,  the Company may have significant
risk in  collecting  accounts  receivable  from its  customers.  The Company has
credit  policies  and  procedures  which it uses to minimize  exposure to credit
losses.  The Company currently employs three people in its credit department and
believes  that managing its own credit gives it unique  flexibility  as to which
customers the Company  should sell and how much business it should do with each.
The Company obtains and periodically updates information regarding the financial
condition and credit histories of customers.  The Company's collection personnel
evaluate  this  information  and,  if  appropriate,  establish a line of credit.
Credit  personnel  track  payment  activity for each customer  using  customized
computer  software and  directly  contact  customers  with  receivable  balances
outstanding  beyond 30 days. If these collection  efforts are unsuccessful,  the
Company may discontinue  merchandise  shipments until the outstanding balance is
paid. Ultimately,  the Company may engage an outside collection  organization to
collect past due accounts.  Timely  contact with customers has been effective in
minimizing the Company's credit losses.


                                       8

<PAGE>


Competition

     The apparel  industry is highly  competitive  and  fragmented.  The Company
competes against numerous apparel brands and distributors.

Principal competitive factors include:

     o    developing  quality products with consistent fits,  finishes,  fabrics
          and style;

     o    anticipating  and responding to changing  consumer demands in a timely
          manner;

     o    Providing compelling value in our products for the price;

     o    continuing to generate competitive margins and inventory turns for our
          retail customers by providing timely delivery;  and

     o    providing strong effective marketing support.

The Company believes its competitive  strengths lie in the quality of its design
and its ability to provide compelling value for products.

Management Information Systems

     The  Company   believes  that   information   processing  is  essential  to
maintaining its competitive position. The Company's systems provide, among other
things,  comprehensive order processing,  production,  accounting and management
information for the marketing, selling, production and distribution functions of
the Company's business. The Company's software programs allow it to track, among
other things, orders, production schedules, inventory and sales of its products.
The programs include centralized  management  information systems, which provide
the  various  operating  departments  with  financial,   sales,   inventory  and
distribution  related  information.  The Company is able to ship orders received
via electronic data  interchange,  from inventory on hand, to certain  customers
within 24 to 72 hours from the time of order receipt.

Employees

     As of the date of filing of this Report,  the Company had approximately 110
full-time  employees.  The Company is not a party to any labor  agreements,  and
none of its employees is represented by a labor union. The Company considers its
relationship  with its employees to be good and has not experienced any material
interruption of its operations due to labor disputes.

Environmental Matters

     The Company is subject to federal,  state and local laws,  regulations  and
ordinances  that (i)  govern  activities  or  operations  that may have  adverse
environmental  effects (such as emissions to air,  discharges to water,  and the
generation,  handling,  storage and disposal of solid and  hazardous  wastes) or
(ii)  impose  liability  for the  costs  of clean  up or  other  remediation  of
contaminated  property,  including  damages  from  spills,  disposals  or  other
releases of hazardous  substances or wastes,  in certain  circumstances  without
regard to fault.  Certain of the  Company's  operations  routinely  involve  the
handling of chemicals  and waste,  some of which are or may become  regulated as
hazardous substances.  The Company has not incurred any significant expenditures
or liabilities for environmental matters. Although the Company believes that its
environmental  obligations  will  not  have a  material  adverse  effect  on its
financial condition or results of operations,  environmental  compliance matters
are subject to inherent risks and uncertainties.


                                       9

<PAGE>


ITEM 1A.   RISK FACTORS

     An investment  in the  Company's  common stock  involves  risks.  Investors
should read and carefully consider the following risk factors in addition to all
other  information  in this Report  before making an investment in the Company's
common stock.

Because the Company has a history of losses and fluctuating  operating  results,
it can not assure prospective  investors that it will operate profitably or will
generate positive cash flow in the future.

     Although the Company has operated  profitably  since the end of 2003,  that
has not always been the case.  During the five year period  ended  December  31,
2003, it incurred aggregate losses of approximately  $37,000,000.  The Company's
operating  results in the future may be subject to significant  fluctuations due
to many  factors  not  within  the  Company's  control,  such as demand  for the
Company's   products,   and  the  level  of  competition  and  general  economic
conditions.

If the Company fails to identify and respond  appropriately to changing consumer
demands  and  fashion  trends,  consumer  acceptance  of its  products  could be
adversely  affected  and  that  could  have a  material  adverse  effect  on the
Company's financial condition and results of operations.

     The  apparel  industry  is highly  competitive,  fragmented  and subject to
rapidly changing consumer demands and preferences. The Company believes that its
success depends in large part upon its ability to anticipate,  gauge and respond
to changing  consumer demands and fashion trends in a timely manner and upon the
continued  appeal to consumers of the Girbaud brand name.  The Company  competes
with numerous apparel manufacturers and distributors, many of which have greater
financial resources than it possesses.  The Company's products also compete with
a substantial number of designer and non-designer lines.  Although the level and
nature of competition differ among the Company's product categories, the Company
believes  that it competes  primarily  on the basis of brand  image,  quality of
design  and  value  pricing.   Increased  competition  by  existing  and  future
competitors  could  result in  reductions  in sales or  prices of the  Company's
products,  which could have a material adverse effect on the Company's financial
condition and results of operations.  In addition, there is no assurance that it
will be able to introduce competitive lines of Girbaud branded or other products
or that such  products  will achieve  market  acceptance.  The apparel  industry
historically  has  been  subject  to  substantial  cyclical  variations,  and  a
recession in the general  economy or  uncertainties  regarding  future  economic
prospects that affect  consumer  spending  habits could have a material  adverse
effect on the Company's financial condition or results of operations.

The Company is completely  dependent upon licenses granted to it by an affiliate
of the  Company's  controlling  stockholders  for  all of the  revenues  that it
generates.  The Company's  inability to renew those  licenses upon terms that it
would  consider to be  commercially  reasonable  could place it in a  materially
adverse position financially and operationally.

     The Company's  business is completely  dependent  upon the Company's use of
the  Girbaud  brand  names  and  images,  which are in turn  dependent  upon the
existence and continuation of two license  agreements granted to it by Latitude.
Latitude is an affiliate of Wurzburg and Textile. Those two companies, which are
wholly  owned by  Francois  Girbaud and Marithe  Bachellerie,  collectively  own
approximately 38% of the Company's common stock. The Company's  licenses for use
of the Girbaud brand names and images are limited to certain specified  products
in the United States,  Puerto Rico and the U.S. Virgin  Islands,  extend through
December 31, 2007, and may be renewed through December 31, 2011. There can be no
assurance  that the Company  will be able to retain the right to use the Girbaud
brand names and images or enter into comparable arrangements upon the expiration
of the current  agreements.  In addition,  each of the Company's Girbaud license
agreements  contains  provisions that, under certain  circumstances  (not all of
which are under the Company's  control),  could permit Latitude to terminate the
agreements.  Such  provisions  include,  among other things (i) a default in the
payment of certain amounts payable under the applicable agreement that continues
beyond  the  specified  grace  period and (ii) the  failure  to comply  with the
covenants  contained  in the  applicable  agreement.  Any  termination  of these


                                       10

<PAGE>


agreements would result in loss of the Company's rights to use the Girbaud brand
names and  images  and would have a  material  adverse  effect on the  Company's
financial condition and results of operations.

Because the Company extends credit to its customers,  it is subject to the risks
inherent in  ordering  and paying for goods  before it receives  any payment for
them.

     The Company  extends credit to its customers based on an evaluation of each
customer's financial condition and credit history and, due to growth,  continues
to  experience  increases in the amount of the  Company's  outstanding  accounts
receivable. In 2005 and 2004, the Company's provision for doubtful accounts were
$1.0 million and $0.4  million,  respectively,  and as a percentage of net sales
were  1.2% and 0.5%,  respectively.  Its  accounts  receivable  write-offs  as a
percentage  of net  sales  during  each of those  periods  were  0.8% and  0.3%,
respectively.  There can be no assurance  that the Company's  credit losses will
continue at these levels.  The failure to accurately assess the credit risk from
the  Company's  customers,  changes in  overall  economic  conditions  and other
factors could cause the Company's credit losses to increase,  which could have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.

The Company's dependence on unaffiliated manufacturers for the production of all
of  the  products  that  it  sells  makes  it   susceptible   to  financial  and
customer-related  problems  that could  arise from  shipment  delays and product
quality issues.

     All of the  Company's  manufacturing  and sourcing  needs are currently met
through  domestic and foreign  independent  contractors.  The Company  currently
contracts with approximately 20 manufacturers in 11 countries.  The Company does
not  have  long-term   contracts  with  any  manufacturers  and  most  of  those
manufacturers  supply the Company on a non-exclusive  basis pursuant to purchase
orders.  During 2005 and 2004,  approximately  81% of the  Company's  total unit
production  came from Asia and Africa,  and  approximately  19% of the Company's
total  unit  production  came  from  the  US  and  Mexico.  The  inability  of a
manufacturer  to ship the  Company's  products in a timely manner or to meet the
Company's  quality  standards  could adversely  affect the Company's  ability to
deliver products to its customers in a timely manner.  Delays in delivery caused
by manufacturing  delays,  disruption in services of delivery  carriers or other
factors could result in cancellations of orders,  refusals to accept  deliveries
or a reduction in purchase  prices,  any of which could have a material  adverse
effect on the Company's financial condition or results of operations.

The Company's  complete  reliance on foreign sourcing of its goods also subjects
it to  financial  and  customer-related  problems  that  could  arise from trade
disputes and disruptions in the countries in which the Company's contractors are
located.

     The Company's operations may be affected adversely by political instability
resulting in the disruption of trade with the countries in which its contractors
are located,  the imposition of additional  regulations relating to imports, the
imposition  of  additional   duties,   tariff  and  other  charges  on  imports,
significant  fluctuations in the value of the dollar against foreign  currencies
or restrictions on the transfer of funds. Such factors have not previously had a
material  adverse  effect on the  Company's  financial  condition  or results of
operations  but there can be no assurance  that such will remain the case in the
future.

     The  Company's  imported  products  are  subject to United  States  customs
duties,  which  comprise a material  portion of the cost of the  merchandise.  A
substantial  increase in customs duties could have a material  adverse effect on
its  financial  condition  or results of  operations.  The United  States or the
countries in which the  Company's  products are produced may, from time to time,
impose new quotas,  duties,  tariffs or other restrictions,  or adversely adjust
prevailing  quota,  duty or tariff  levels,  any of which  could have a material
adverse effect on the Company's financial condition or results of operations.

     The Company's policy is to notify the Company's  independent  manufacturers
through the Company's agents of the expectation that such manufacturers  operate
in compliance with applicable laws and regulations. While the Company's policies
promote ethical business practices and the Company's staff  periodically  visits
and monitors the operations of its independent  manufacturers,  the Company does
not control such manufacturers or their labor practices.  The violation of labor


                                       11

<PAGE>


or other laws by an independent manufacturer or the divergence of an independent
manufacturer's  labor practices from those generally  accepted as ethical in the
United States could have a material  adverse  effect on the Company's  financial
condition or results of operations.

The seasonality of the Company's  business,  periodic changes in customer tastes
and quarterly fluctuations in the Company's sales require it to make predictions
about consumer demands for the Company's products that can turn out to be wrong.
The Company's financial condition can be materially adversely affected when that
occurs.

     The  Company's  business is subject to  significant  seasonal and quarterly
fluctuations that are characteristic of the apparel and retail  industries.  The
Company's backlog of orders and overall results of operations may fluctuate from
quarter to quarter as a result of, among other things,  variations in the timing
of product orders by customers,  weather conditions that may affect purchases at
the wholesale and retail levels, the amount and timing of shipments, advertising
and marketing expenditures and increases in the number of employees and overhead
to support growth. In the Company's  segment of the apparel industry,  sales are
generally higher in the first and third quarters.  Historically, the Company has
taken greater markdowns in the second and fourth quarters. Errors by the Company
in  predicting  customer  acceptance or consumer  demand for its products  might
result  in  significant  unrecoupable   expenditures  on  inventory  that  could
materially  adversely affect the Company's  financial condition or its operating
results.

Because the Company is  effectively  controlled by two  stockholders  affiliated
with  the  Company's  licensor,  it may be  difficult  for the  Company's  other
investors to influence or  implement  changes in  governance  and control of the
company.

     Wurzburg  and  Textile,  both of whom are  affiliated  with  Latitude,  the
company that has licensed the  Company's  use of the Girbaud  trademarks,  brand
names and images,  beneficially  own an  aggregate of  approximately  38% of the
Company's  outstanding common stock. Such  concentration of ownership,  together
with the  anti-takeover  effects of certain  provisions of the Company's Amended
and Restated  Certificate  of  Incorporation  (the "Restated  Certificate")  and
Amended and Restated  By-laws (the "Restated  By-laws"),  may have the effect of
delaying or preventing a change in control of the company.

Various  anti-takeover  provisions  of the  Company's  Restated  Certificate  of
Incorporation  and  Restated  By-laws may impact upon an  investor's  ability to
maximize his investment in the Company's common stock.

     The Company's Restated  Certificate and Restated By-laws include provisions
that may have the  effect  of  discouraging  a  non-negotiated  takeover  of the
company and preventing certain changes of control. These provisions, among other
things (i) permit the Company's Board of Directors,  without further stockholder
approval,  to issue up to 5.0 million shares of preferred  stock with rights and
preferences  determined by the Board of Directors at the time of issuance,  (ii)
require a 66.7% vote of the  Company's  stockholders  to approve any  amendment,
addition or termination  of the Restated  By-laws and (iii) restrict the ability
of  stockholders  to  call  special  meetings  of  the  stockholders,   nominate
individuals  for  election  to the  Board of  Directors  or  submit  stockholder
proposals.  The provisions of the Restated  Certificate and the Restated By-laws
might, therefore, have the effect of inhibiting stockholders' ability to realize
the  maximum  value for their  shares of common  stock that might  otherwise  be
realized  because  of a merger  or other  event  affecting  the  control  of the
company.

The Company's stock may be a penny stock.  Trading of the Company's stock may be
restricted by the SEC's penny stock  regulations which may limit a stockholder's
ability to buy and sell the Company's stock.

     Although the price of the Company's  stock has recently  traded above $5.00
per share, during most of the past several years, the Company's stock has fallen
within the SEC's  definition  of a penny  stock.  The SEC has adopted Rule 15g-9
which  generally  defines  "penny  stock" to be any equity  security  that has a
market price (as defined) less than $5.00 per share or an exercise price of less


                                       12

<PAGE>


than $5.00 per share, subject to certain exceptions. As of the date of filing of
this  Report,  the  Company's  securities  are covered by the penny stock rules,
which impose additional sales practice  requirements on broker-dealers  who sell
to persons other than established customers and "accredited investors". The term
"accredited  investor" refers generally to institutions with assets in excess of
$5,000,000  or  individuals  with a net worth in excess of  $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules  require a  broker-dealer,  prior to a  transaction  in a penny  stock not
otherwise  exempt  from the rules,  to deliver a  standardized  risk  disclosure
document in a form prepared by the SEC which  provides  information  about penny
stocks  and the  nature  and  level of  risks in the  penny  stock  market.  The
broker-dealer  also  must  provide  the  customer  with  current  bid and  offer
quotations for the penny stock,  the compensation of the  broker-dealer  and its
salesperson in the transaction and monthly account statements showing the market
value of each penny  stock  held in the  customer's  account.  The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the  customer  in  writing  before  or with the  customer's
confirmation.  In  addition,  the penny  stock  rules  require  that  prior to a
transaction  in a penny  stock  not  otherwise  exempt  from  these  rules,  the
broker-dealer must make a special written  determination that the penny stock is
a suitable  investment  for the  purchaser and receive the  purchaser's  written
agreement to the transaction.  These disclosure requirements may have the effect
of reducing the level of trading  activity in the secondary market for the stock
that is subject to these  penny  stock  rules.  Consequently,  these penny stock
rules  may  affect  the  ability  of   broker-dealers  to  trade  the  Company's
securities.  The Company  believes that, in the past, the penny stock rules have
discouraged  investor  interest  in and have  limited the  marketability  of the
Company's common stock.

NASD sales practice  requirements may also limit a stockholder's  ability to buy
and sell the Company's stock.

     In  addition  to the "penny  stock"  rules  described  above,  the NASD has
adopted rules that require that in recommending  an investment to a customer,  a
broker-dealer  must have reasonable grounds for believing that the investment is
suitable  for  that  customer.  Prior to  recommending  speculative  low  priced
securities  to  their  non-institutional  customers,  broker-dealers  must  make
reasonable efforts to obtain information about the customer's  financial status,
tax status,  investment objectives and other information.  Under interpretations
of these  rules,  the  NASD  believes  that  there  is a high  probability  that
speculative  low  priced  securities  will not be  suitable  for at  least  some
customers.  The NASD requirements  make it more difficult for  broker-dealers to
recommend that their customers buy the Company's  common stock,  which may limit
your ability to buy and sell the Company's  stock and have an adverse  effect on
the market for the Company's shares.

Trading  on the OTC  Bulletin  Board may be  sporadic  because it is not a stock
exchange, and stockholders may have difficulty reselling their shares.

     The Company's common stock is quoted on the OTC Bulletin Board.  Trading in
stock quoted on the OTC Bulletin Board is often thin and  characterized  by wide
fluctuations in trading  prices,  due to many factors that may have little to do
with the Company's operations or business prospects.  Moreover, the OTC Bulletin
Board is not a stock  exchange,  and trading of  securities  on the OTC Bulletin
Board is often  more  sporadic  than  the  trading  of  securities  listed  on a
quotation  system  like  Nasdaq  or a stock  exchange  like the New  York  Stock
Exchange.

Investors may experience dilution of their ownership interests and the Company's
stock price may be adversely  affected  due to its future  issuance of common or
preferred  stock, or securities that are convertible  into,  exchangeable for or
exercisable for shares of common or preferred stock.

     The Company may in the future  issue  previously  authorized  and  unissued
securities,  resulting in the dilution of the ownership interests of its present
stockholders.  The Company is currently authorized to issue 50 million shares of
common  stock and 5 million  shares of preferred  stock with such  designations,
preferences and rights as may be determined by the Company's board of directors.
As of the date of filing of this Report,  11,996,485 shares of common stock were
outstanding. In addition, the Company reserved:


                                       13

<PAGE>


     o    2,200,000  shares  of  common  stock  for  issuance  pursuant  to  the
          Company's  Amended and Restated  Omnibus  Stock Plan, of which 655,433
          shares  have been  issued,  1,174,167  shares  underlying  outstanding
          options and 370,400 shares remain available for future grants, and

     o    450,000 shares of common stock for issuance  pursuant to the Company's
          2005 Non-Employee Directors Stock Option Plan, none of which have been
          issued and options to purchase 120,000 shares are outstanding.


     The  potential  issuance of additional  shares of the Company's  common and
preferred  stock, as well as securities  convertible  into,  exchangeable for or
exercisable for shares of the Company's  common or preferred  stock,  may create
downward  pressure on the  trading  price of the  Company's  common  stock.  The
Company may also issue  additional  shares of common  stock or other  securities
that are  convertible  into,  exchangeable  for or  exercisable  for  common  or
preferred stock in connection with the hiring of personnel, future acquisitions,
future issuances of the Company's securities for capital raising purposes or for
other business  purposes.  Future sales of substantial  amounts of the Company's
common or preferred stock, or the perception that sales could occur,  could have
a material adverse effect on the price of the Company's common stock.

ITEM 1B  UNRESOLVED STAFF COMMENTS

None


                                       14

<PAGE>


ITEM 2.   PROPERTIES

     Certain information  concerning the Company's  principal  facilities is set
forth below:

<TABLE>
<CAPTION>

                        Leased or                                             Approximate Area
          Location       Owned                     Use                        in Square Feet
-------------------   -----------  ---------------------------------------    -----------------
<S>                     <C>        <C>                                             <C>
                                   Administrative Headquarters and Office
Baltimore, MD             Owned                  Facilities                        40,000

                                   Management, Sales, Merchandising,
New York, NY              Leased           Marketing and Sourcing                  13,500

Milford, DE               Owned   Distribution Center                              70,000

</TABLE>

     The Company  believes that its existing  facilities are well maintained and
in  good   operating   condition.   See  "ITEM  1.   Business--Warehousing   and
Distribution".


ITEM 3. LEGAL PROCEEDINGS

     On February  14, 2006,  without  admitting  or denying any  liability,  the
Company settled the arbitration  proceedings commenced against it and its wholly
owned  subsidiary,  I.C.  Isaacs  &  Company,  L.P.  (the  "L.P.")  by a  former
executive. Pursuant to the settlement, the Company paid the sum of $1.75 million
in February  2006 and  recorded  this  settlement  as a charge to expense in the
fourth quarter of 2005.

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

     During the fourth  quarter of 2005,  there were no matters  submitted  to a
vote of the Company's stockholders.


                                       15

<PAGE>


                                     PART II

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

     The market for the Company's common stock is not an exchange but is the OTC
Bulletin  Board,  an  established  quotation  service  regulated by the National
Association of Securities  Dealers. As of the date of filing of this Report, the
Company had approximately 1,000 beneficial holders of its common stock.

     Shares of the Company's  common stock are traded on the OTC Bulletin  Board
under the ticker  symbol  "ISAC.OB".  The reported last sale price of the common
stock on the OTC  Bulletin  Board on March 28,  2006 was $4.95.  The table below
sets forth the high and low bid  prices of the  Company's  common  stock for the
periods  indicated,  as quoted by the OTC Bulletin Board Research Service.  Such
quotations  reflect  inter-dealer  prices,  without retail  markup,  markdown or
commission, and may not represent actual transactions.

Quarter Ended        High              Low         High              Low
-------------        ----              ---         ----              ---
                              2005                          2004
                  --------------------------------------------------------------

March 31             $8.33            $3.98        $1.01            $0.70
June 30              $8.00            $5.50        $1.35            $0.36
September 30         $6.95            $5.13        $3.60            $1.07
December 31          $5.25            $4.00        $4.55            $2.65


     The Company  anticipates  that all of its earnings will be retained for the
foreseeable  future  for  use  in the  operation  of its  business.  Any  future
determination  as to the payment of dividends  will be at the  discretion of the
Company's  Board of  Directors  and will  depend upon the  Company's  results of
operations, financial condition, restrictions in its credit facilities and other
factors deemed relevant by the Board of Directors.

     On May 15, 1997,  the Board of  Directors of the Company and the  Company's
stockholders  adopted the 1997  Omnibus  Stock Plan (the  "Plan").  The Plan was
amended and restated pursuant to authority granted by the Company's stockholders
at the 2003 annual  meeting of  stockholders  to  increase  the shares of Common
Stock that may be issued  with  respect to awards  granted  under the Plan to an
aggregate of 2.2 million shares.  The Plan is  administered by the  Compensation
Committee of the Board of  Directors.  Participation  in the Plan is open to all
employees,  officers,  directors  and  consultants  of the Company or any of its
affiliates,  as may be selected by the Compensation Committee from time to time.
The Plan allows for stock  options,  stock  appreciation  rights,  stock awards,
phantom  stock awards and  performance  awards to be granted.  The  Compensation
Committee will determine the prices,  vesting  schedules,  expiration  dates and
other  material  conditions  upon which  such  awards  may be  exercised.  As of
December 31, 2005,  options to purchase  1,174,167  shares remained  outstanding
with a weighted average exercise price of $1.96 per share.  Through December 31,
2005,  options  to  purchase  655,433  shares had been  exercised  at a weighted
average  exercise price of $0.97 per share. As of December 31, 2005,  options to
purchase 370,400 shares remain available for future grants. The issuance of such
stock options was exempt from the  registration  requirements  of the Securities
Act of 1933,  as  amended,  pursuant  to Section  4(2)  thereunder.  The Company
previously filed a Registration  Statement on Form S-8 to register the shares of
its common stock issuable pursuant to awards granted under the Plan.

     In June 2005,  the Board of  Directors  of the  Company  and the  Company's
stockholders  adopted  Non-Employee  Directors Stock Option Plan (the "Directors
Plan")  non-employee  directors  receive automatic grants of options to purchase
common stock in amounts that are specified by such plan. The exercise  prices of
all options  granted  under the  Directors  Plan are fixed at 100% of the market
price of the common stock on each grant date.  The Company has reserved  450,000
shares of common  stock  for  issuance  under the  Directors  Plan.  Options  to
purchase  120,000 shares of common stock with a weighted  average exercise price
of $5.60 per share were granted  under the  Directors  Plan during 2005,  all of
which were outstanding and unexercised at December 31, 2005.


                                       16

<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

     The selected  financial data set forth below and on the following page have
been derived from the consolidated  financial  statements of the Company and the
related notes  thereto.  The  statement of  operations  data for the years ended
December 31, 2005,  2004 and 2003 and the balance  sheet data as of December 31,
2005 and 2004 are derived  from the  consolidated  financial  statements  of the
Company  which have been audited by BDO  Seidman,  LLP,  independent  registered
public accountants,  included elsewhere herein. The statement of operations data
for the years ended  December 31, 2002 and 2001 and the balance sheet data as of
December 31, 2003,  2002 and 2001 are derived  from the  consolidated  financial
statements of the Company, which have been audited but are not contained herein.
The following  selected  financial data should be read in  conjunction  with the
Company's  consolidated  financial  statements and the related notes thereto and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," which are included elsewhere herein.

<TABLE>
<CAPTION>

                                                     As of December 31,
                             ----------------------------------------------------------------
                                2005         2004         2003         2002         2001
                             -----------  -----------  ------------ ------------ ------------
<S>                              <C>          <C>           <C>          <C>          <C>
Balance Sheet Data:                                   (in thousands)
Working capital                 $13,086       $8,595        $4,578       $6,154      $11,154
Total assets                     27,143       27,833        20,090       22,448       22,333
Total debt                        4,620        6,781        10,782       11,588        6,841
Redeemable preferred stock           --           --            --           --        3,300
Stockholders' equity             13,144       12,154         5,547        7,242        8,816

</TABLE>

                                       17

<PAGE>


<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                     -----------------------------------------------------------------------
                                        2005           2004          2003           2002           2001
                                     -----------    -----------   ------------   ------------   ------------
<S>                                     <C>            <C>            <C>            <C>            <C>
Statement of Operations Data:                         (in thousands except per share data)
Net sales                               $83,289        $80,649        $64,305        $63,521        $81,189
Cost of sales                            49,070         49,583         43,706         41,776         55,108
                                     -----------    -----------   ------------   ------------   ------------

                        Gross profit     34,219         31,066         20,599         21,745         26,081
Selling expenses                         10,834         10,413          9,525         11,486         11,246
License fees                              5,114          5,330          4,163          5,018          5,211
Distribution and shipping expenses        2,247          1,968          2,062          2,393          2,976
General and administrative expenses       8,604          7,532          5,244          7,115          7,374
Litigation settlement                     1,750             --             --             --             --
Loss on sale of property                     --             --           (415)            --             --
                                     -----------    -----------   ------------   ------------   ------------

Operating income (loss)                   5,670          5,823           (810)        (4,267)          (726)
Interest, net                              (436)          (729)        (1,009)          (657)        (1,307)
Loss from sale of property                   --             --           (415)            --             --
Other income (expense)                       --             26            124            (39)          (149)
                                     -----------    -----------   ------------   ------------   ------------

      Income (loss) from continuing
      operations before income taxes      5,234          5,120         (1,695)        (4,963)        (2,182)
Income tax  benefit, net                  1,178          1,045             --              --            --
                                     -----------    -----------   ------------   ------------   ------------

       Income (loss) from continuing
                          operations      6,412          6,165         (1,695)        (4,963)        (2,182)
                                     -----------    -----------   ------------   ------------   ------------

Loss from operations of
discontinued subsidiary                       --             --             --             --        (1,310)
Loss from sale of discontinued
subsidiary                                    --             --             --             --        (1,182)
                                     -----------    -----------   ------------   ------------   ------------

Loss from discontinued operations             --             --             --             --        (2,492)
                                     -----------    -----------   ------------   ------------   ------------

                   Net income (loss)      6,412          6,165         (1,695)        (4,963)        (4,674)
                                     -----------    -----------   ------------   ------------   ------------

Preferred stock deemed dividend               --             --             --          (596)            --
                                     -----------    -----------   ------------   ------------   ------------

Net income (loss) attributable to
common stockholders                      $6,412         $6,165        $(1,695)       $(5,559)       $(4,674)
                                     ===========    ===========   ============   ============   ============

Basic income (loss) per share from
continuing operations                     $0.55          $0.55         $(0.15)        $(0.61)        $(0.28)

Basic loss per share from
discontinued operations                      --             --             --             --          (0.32)

Preferred stock deemed dividend              --             --             --          (0.07)            --

                                     -----------    -----------   ------------   ------------   ------------
Basic income (loss) per share             $0.55          $0.55         $(0.15)       $( 0.68)       $( 0.60)
                                     ===========    ===========   ============   ============   ============

       Basic weighted average common
                  shares outstanding     11,729         11,264         11,135          8,160          7,854

Diluted income (loss) per share           $0.48          $0.46       $( 0.15)       $( 0.68)       $( 0.60)
                                     ===========    ===========   ============   ============   ============

     Diluted weighted average common
                  shares outstanding     13,397         13,355         11,135          8,160          7,854
</TABLE>

     Basic and  diluted  loss per share are the same for the years 2000  through
2003 as dilutive  securities  were excluded from the computation of net loss per
share as their inclusion would have been anti-dilutive.

     The  Statement  of  Operations  Data  includes  a one time  charge of $1.75
million to settle an arbitration  proceeding  commenced against the Company by a
former executive of the Company.


                                       18

<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following  discussion and analysis  should be read in conjunction  with
the  "Selected  Financial  Data"  and  the  Company's   consolidated   financial
statements and the related notes thereto, which are included elsewhere herein.

Overview

     The  Company,  which  operates in one business  segment,  is a designer and
marketer of branded jeanswear and sportswear.  The Company offers collections of
Girbaud branded jeanswear and sportswear for men and women in the United States,
Puerto Rico and the US Virgin Islands.  The Girbaud brand is an  internationally
recognized  designer label with a distinct European  influence.  The Company has
positioned  its Girbaud brand line with a broad  assortment of products,  styles
and fabrications  reflecting a contemporary European look. The Company markets a
full collection of men's and women's  jeanswear and sportswear under the Girbaud
brand,  including  a broad  array of bottoms,  tops and  outerwear.  The Company
focuses its efforts on the Girbaud brand  exclusively which provided all its net
sales in 2005, 2004 and 2003.

Critical Accounting Policies and Estimates

     The Company's  significant  accounting policies are more fully described in
its  Summary of  Accounting  Policies  set forth in the  Company's  consolidated
financial  statements  and the notes thereto which  accompany  this Report.  The
preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States  requires  management to make estimates
and  assumptions in certain  circumstances  that affect amounts  reported in the
accompanying   financial  statements  and  related  notes.  In  preparing  these
financial  statements,  management  has made its best estimates and judgments of
certain amounts included in the financial  statements,  giving due consideration
to  materiality.  The Company does not believe there is a great  likelihood that
materially  different  amounts  would  be  reported  related  to the  accounting
policies  described below;  however,  application of these  accounting  policies
involves  the  exercise  of  judgment  and the use of  assumptions  as to future
uncertainties  and,  as  a  result,  actual  results  could  differ  from  these
estimates.

     The Company  evaluates the adequacy of its allowance for doubtful  accounts
at the end of each quarter. In performing this evaluation,  the Company analyzes
the  payment  history of its  significant  past due  accounts,  subsequent  cash
collections  on  these  accounts  and  comparative   accounts  receivable  aging
statistics.  Based on this information,  along with consideration of the general
strength  of the  economy,  the  Company  develops  what  it  considers  to be a
reasonable   estimate  of  the   uncollectible   amounts  included  in  accounts
receivable. This estimate involves significant judgment by the management of the
Company. Actual uncollectible amounts may differ from the Company's estimate.

     Net revenue is recognized  upon the transfer of title and risk of ownership
to customers.  Revenue is recorded net of discounts,  as well as provisions  for
estimated  returns and allowances.  On a seasonal basis, the Company  negotiates
price  adjustments  with its retail customers as sales  incentives.  The Company
estimates  the  cost  of  such  adjustments  on  an  ongoing  basis  considering
historical  trends,  projected  seasonal  results and an  evaluation  of current
economic conditions. These costs, which have been recorded as a reduction to net
revenue, were $3,710,000, $3,777,000 and $1,920,000 for the years ended December
31, 2005, 2004 and 2003, respectively.

     Sales are  recognized  upon shipment of products.  Allowances for estimated
returns are provided by the Company when sales are recorded by reviewing  trends
and  returns  on a  historical  basis.  Shipping  and  handling  fees  billed to
customers  are  classified  in net  sales  in  the  consolidated  statements  of
operations.  Shipping and handling costs incurred are classified in distribution
and shipping in the consolidated statements of operations.


                                       19

<PAGE>


     The Company  includes in cost of goods sold all costs and expenses  related
to obtaining  merchandise incurred prior to the receipt of finished goods at the
Company's distribution facilities.  These costs include, but are not limited to,
product  cost,   inbound  freight  charges,   purchasing  and  receiving  costs,
inspection  costs,  warehousing  costs and internal  transfer  costs, as well as
insurance,  duties,  brokers' fees and consolidators' fees. The Company includes
in selling, general and administrative expenses costs incurred subsequent to the
receipt of finished goods at its  distribution  facilities,  such as the cost of
picking and packing  goods for  delivery to  customers.  In  addition,  selling,
general and  administrative  expenses include product design costs,  selling and
store service costs, marketing expenses and general and administrative expenses.

     The Company  estimates  inventory  markdowns  based on customer orders sold
below its  inventory  cost that will be  shipped  in the  following  period  and
estimates  an amount for similar  unsold  inventory  at period end.  The Company
analyzes  recent  sales  and  gross  margins  on  unsold  inventory  in  further
estimating inventory  markdowns.  These specific markdowns are reflected in cost
of sales and the related  gross  margins at the  conclusion  of the  appropriate
selling season. This estimate involves significant judgment by the management of
the Company.  Actual gross margins on sales of excess  inventory may differ from
the Company's estimate.

Results of Operations

                                              Year Ended December 31,
                                      ----------------------------------------
                                         2005          2004           2003
                                      -----------    ----------    -----------

Net sales                                 100.0%        100.0%         100.0%
Cost of sales                              58.9%         61.5%          68.0%
                                      -----------    ----------    -----------

Gross profit                               41.1%         38.5%          32.0%
                                      -----------    ----------    -----------

Selling expenses                           13.0%         12.9%          14.8%
License fees                                6.1%          6.6%           6.5%
Distribution and shipping expenses          2.6%          2.5%           3.3%
General and administrative expenses        10.3%          9.3%           8.1%
Litigation settlement                       2.2%             --              --
Loss on sale of property                       --             --           0.6%
                                      -----------    ----------    -----------

Operating income (loss)                     6.9%          7.2%         (1.3%)
                                      ===========    ==========    ===========


Year Ended  December 31, 2005 Compared to Year Ended December 31, 2004 Net sales
and gross profit.

     Net sales  increased  3.3% to $83.3  million in 2005 from $80.6  million in
2004.  Net sales of the Girbaud men's product line  increased  $3.5 million,  or
5.3%,  to $69.3  million,  while net sales of the Girbaud  women's  product line
decreased $0.8 million, or 5.4%, to $14.0 million.

     Gross profit increased 10.0% to $34.2 million in 2005 from $31.1 million in
2004. Gross margin,  or gross profit as a percentage of net sales,  increased to
41.1% from 38.5% over the same period.

     Gross units sold  increased  19.4% to 4.3 million units in 2005 compared to
3.6 million units in 2004. Gross sales (sales before  adjustment for returns and
allowances) increased 2.8% to $91.1 million in 2005 compared to $88.6 million in
2004.  The  related  gross  margins on these sales  (unadjusted  for returns and
allowances)  increased  $1.6 million to $38.6 million in 2005 from $37.0 million
in 2004.  Returns and  allowances  decreased to 8.6% of gross sales in 2005 from
9.0% in 2004 based on the increase in sales during 2005.


                                       20

<PAGE>


     The main contributing  factors to the increase in gross sales, gross profit
and gross margin were as follows:

     o    Unit sales of goods sold at regular  prices - Unit sales of goods sold
          at regular prices (both T-Shirts and Jeans & Tops) remained relatively
          unchanged at 2.6 million  units in 2005 and 2004.  Whereas  these unit
          sales  volumes  of  regular  priced  merchandise  remained  relatively
          unchanged,  the resulting gross sales and the related gross profit and
          gross margins were as follows:

               o    an 8.1% or $6.0  million  decrease  to $68.3  million in the
                    sales dollar  volume of regular  priced  merchandise  during
                    2005 (from $74.3 million in 2004);

               o    an 8.5%  increase to 52.4% in gross profit  margins  (before
                    adjustments  for returns and  allowances)  during 2005 (from
                    48.3%  in  2004)  as a result  of the  Company  raising  its
                    initial  markups on its products in the second half of 2004,
                    and which, despite the reduced sales dollar volume, resulted
                    in only a slight  decrease of 0.3% or $0.1  million to $35.8
                    million in gross profit  during 2005 (from $35.9  million in
                    2004).

     o    Unit sales of goods sold at in-season promotional prices and off-price
          liquidations  - An  increase  of 70.0% in unit  sales of goods sold at
          in-season promotional prices and off-price liquidations (both T-Shirts
          and Jeans & Tops) to 1.7 million units in 2005 compared to 1.0 million
          units in 2004. This was due to the liquidation of unsold  inventory as
          the Company  realigned  its sales  planning  and  product  procurement
          processes.  The Company believes that the restructuring of this aspect
          of its business is mostly  complete and, going forward,  expects lower
          end of season inventory liquidations.  The increase in unit volumes of
          merchandise  sold  at  in-season   promotional  prices  and  off-price
          liquidations  translated  into resulting gross sales and related gross
          profit and gross margins as follows:

               o    a 60.6% or $8.6  million  increase  to $22.8  million in the
                    sales dollar  volume of goods sold at in-season  promotional
                    prices and  off-price  liquidations  (from $14.2  million in
                    2004);

               o    an increase  to 12.7% in gross  profit  margins  during 2005
                    (from 7.7% in 2004) which, coupled with the increased dollar
                    sales  volumes of these  goods,  resulted  in an increase of
                    163.6%  or $1.8  million  to $2.9  million  in gross  profit
                    during 2005 (from $1.1 million in 2004).


               Comparison of the relative  changes in sales of T-Shirts,  on the
     one hand, and Jeans & Tops on the other, revealed, the following:

     o    Gross unit sales of T-Shirts at regular prices (average  selling price
          of $12-$16 per unit)  increased to 0.8 million  units in 2005 compared
          to 0.7  million in 2004 and  represented  a $0.5  million  increase in
          goods sold at regular prices in 2005. The gross margin associated with
          these sales  increased to 55.6% in 2005  compared to 51.8% in 2004 and
          represented a gross profit increase of $0.7 million in 2005 over 2004.

     o    Gross unit sales of Jeans & Tops at regular  prices  (average  selling
          price of $28-$34 per unit)  decreased by 5.3% to 1.8 million  units in
          2005  compared to 1.9 million  units in 2004,  and  represented a $6.6
          million  decrease  in goods  sold at  regular  prices in 2005 over the
          sales of those  products  made at  regular  prices in 2004.  The gross
          margin associated with these sales increased to 51.8% in 2005 compared
          to 47.6% in 2004 and represented a decrease in gross profit of 2.7% or
          $29.3 in 2005 compared to $30.1 million in 2004.


                                       21

<PAGE>


Selling, Distribution, General and Administrative Expenses.

     Operating  expenses  increased  13.1% to $28.5  million  in 2005 from $25.2
million in 2004. As a percentage of net sales,  operating  expenses increased to
34.2% from 31.3% over the same  period.  As the result of the  settlement  of an
arbitration proceeding commenced against the Company by a former executive,  the
Company  recorded as operating  expense a $1.8 million  charge during 2005.  The
remaining  increase in operating expenses resulted primarily from higher selling
expenses,  higher  shipping  expenses  associated  with  the  increase  in units
shipped,  and an increase  in  administrative  expenses.  These  increases  were
partially offset by a decrease in license fees which primarily resulted from the
increase in off-price discount sales.

     Selling expenses  increased $0.4 million to $10.8 million in 2005 primarily
as a result of higher design expenses and commissions.  Design expense increased
to $3.6 million in 2005  compared to $3.1 million in 2004  primarily as a result
of increased  personnel costs and sample expense. In 2005, the Company completed
the plan it had commenced in 2004 to reorganize its design department for better
internal  stability.  The Company  expects its sample  expense to return to more
reasonable levels in 2006 and future years. Commission expense increased to $2.9
million in 2005  compared  to $2.8  million  in 2004 as a result of greater  net
sales. Advertising and promotional related expenses decreased to $1.6 million in
2005  compared  to $1.8  million in 2004.  The  Company is required to spend the
greater  of an  amount  equal to 3% of  Girbaud  net  sales or $0.9  million  in
advertising  and related  expenses  promoting the Girbaud brand products in each
year of the terms of the Girbaud agreements.  During each of the six years ended
December 31, 2005, the amounts of advertising and related  expenses  incurred by
the Company in marketing the Girbaud  brand  products were less than the amounts
required under the  agreements.  In each of the various  amendments to the men's
and women's license agreements which were executed in 2002 - 2004,  Latitude and
the Company  confirmed to one another  that neither  party was in default to the
other in the performance of any of the obligations owed by either of them to the
other.  On March 29, 2006,  Latitude also waived the Company's  failure to spend
the minimum amounts  required under the men's and women's license  agreements in
2005.

     License  fees  decreased  $0.2  million  to $5.1  million in 2005 from $5.3
million in 2004. As a percentage of net sales, license fees decreased to 6.1% in
2005  compared to 6.6% in 2004.  The decrease in license fees as a percentage of
net sales was  primarily  due to the  increase  in  product  sales of  in-season
promotional prices and off-price  liquidations which generate lower license fees
than sales of regular priced  merchandise.  Distribution and shipping  increased
$0.2  million to $2.2  million in 2005 from $2.0  million in 2004 as a result of
higher shipping expenses associated with the increase in units shipped.  General
and  administrative  expenses  increased 14.7% to $8.6 million in 2005 from $7.5
million  in 2004.  The  increase  was  mainly  attributable  to an  increase  in
provisions  provided for bad debt and additional legal expenses  associated with
the  arbitration.  The provision for doubtful  accounts was $1.0 million in 2005
compared to $0.5 million in 2004.  Legal fees were $0.8 million in 2005 compared
to $0.4 million in 2004.

Operating Income.

     Operating  income  remained  relatively  unchanged  at $5.7 million in 2005
compared to $5.8  million in 2004 as the  increase in gross profit was offset by
the increase in selling, distribution, general and administrative expenses.

Interest Expense.

     Interest  expense  decreased  to $0.4  million in 2005 from $0.7 million in
2004 as a result of decreased  borrowings  under the Company's  revolving credit
facility as a result of the Company's ability to finance its operations  through
internally generated funding.

Income Taxes.

     As of December 31, 2005, the Company had net operating  loss  carryforwards
of approximately $34.7 million, which begin to expire in 2014. In years prior to
2004, no tax benefit was allowed due to the uncertainty of the Company's ability


                                       22

<PAGE>

to generate  future  taxable  income at that time. As a result of the income the
Company generated in 2005 and 2004, the Company's management reevaluated its net
operating  losses and the related  valuation  reserves and has  recognized a net
income tax benefit of $1.2 million in 2005.

Year Ended  December 31, 2004 Compared to Year Ended December 31, 2003 Net Sales
and gross profit.

     Net sales  increased  25.3% to $80.6  million in 2004 from $64.3 million in
2003.  Net sales of the Girbaud men's product line increased  $10.4 million,  or
18.8%,  to $65.8 million while the Girbaud  women's  product line increased $5.9
million, or 66.3%, to $14.8 million.

     Gross profit increased 51.0% to $31.1 million in 2004 from $20.6 million in
2003. Gross margin,  or gross profit as a percentage of net sales,  increased to
38.5% from 32.0% over the same period.  Higher  gross  profit and gross  margins
were due to better  product  performance,  improved  delivery to retailers and a
higher  percentage  of sales to  customers  at full price in 2004, a year during
which unit sales of  off-price  goods as a percentage  of total sales  decreased
significantly to 19%, compared to 33% for 2003.  Beginning with shipments in the
third quarter of 2004, the Company's management raised the selling prices of its
products  in order to  increase  its gross  margin to a level  that it viewed as
being consistent with other companies in the industry. In the absence of further
price  increases  (which   management  does  not  expect  to  implement  in  the
foreseeable  future),  it is not likely that gross  profit and gross margin will
increase  in 2005 and future  years as  significantly,  if at all,  as the gross
profit and gross margin changes that occurred in 2004 due to the price increases
discussed below.

     Gross units sold remained relatively unchanged at 3.6 million units in 2004
and 2003.  Gross sales  (sales  before  adjustment  for returns and  allowances)
increased  29.3% to $88.6 million in 2004 compared to $68.5 million in 2003. The
related gross  margins on these sales  (unadjusted  for returns and  allowances)
increased  $12.5  million to $37.0  million in 2004 from $24.5  million in 2003.
Returns  and  allowances  increased  to 9.0% of gross sales in 2004 from 6.1% in
2003 as the Company provided more price adjustments to its retail stores in 2004
compared to 2003. The main contributing  factors to the increase in gross sales,
gross profit and gross margin  notwithstanding the comparatively  unchanged unit
volume of sales were as follows:

     o    Increases  in the unit and  dollar  volumes  of goods  sold at regular
          prices - An  increase  of 23.8% in unit sales of goods sold at regular
          prices (both  T-Shirts and Jeans & Tops) to 2.6 million  units in 2004
          compared to 2.1 million  units in 2003.  That increase in unit volumes
          of regular priced merchandise resulted in

               o    a 43.2% or $22.4  million  increase  (from $51.9  million in
                    2003)  in the  dollar  volume  of sales  of  regular  priced
                    merchandise;

               o    a 51.5% or $12.2  million  increase  in gross  profit  (from
                    $23.7 million in 2003); and

               o    a 2.6% increase to 48.3% in gross profit margins (from 45.7%
                    in 2003).

     o    Reductions  in the unit and dollar  volumes of goods sold at in-season
          promotional prices and off-price liquidations - A decrease of 33.3% in
          unit sales of goods sold at in-season promotional prices and off-price
          liquidations  (both T-Shirts and Jeans & Tops) to 1.0 million units in
          2004  compared to 1.5 million  units in 2003.  That  reduction in unit
          volumes  of  merchandise  sold at  in-season  promotional  prices  and
          off-price liquidations translated into

               o    a 14.5% or $2.4  million  decrease  (from  $16.6  million in
                    2003) in the dollar  volumes of those  sales;

               o    an 37.5% or $0.3 million increase in gross profit (from $0.8
                    million in 2003; and


                                       23

<PAGE>


               o    a 2.9%  increase to 7.7% in gross profit  margins (from 4.8%
                    in 2003).

     o    A price increase in the second half of 2004. The Company increased the
          selling  prices  of all of its  merchandise  by  approximately  5% (on
          average)  during the second half of 2004. This resulted in an increase
          in sales (which is included in the increase of dollar volume increases
          discussed above) and in gross profit of approximately  $2.2 million in
          2004.


     Comparison of the relative  changes in sales of T-Shirts,  on the one hand,
and Jeans & Tops on the other, revealed, the following:

     o    Gross unit sales of T-Shirts at regular prices (average  selling price
          of $12-$15  per unit)  remained  relatively  unchanged  at 0.7 million
          units in 2004  and 2003 and  represented  $1.8  million  of the  total
          increase  in goods sold at regular  prices in 2004.  The gross  margin
          associated  with these sales  increased  to 51.8% in 2004  compared to
          46.8% in 2003 and  represented a gross profit increase of $1.4 million
          in 2004 over 2003.

     o    Gross unit sales of Jeans & Tops at regular  prices  (average  selling
          price of $28-$33 per unit)  increased by 35.7% to 1.9 million units in
          2004  compared to 1.4 million  units in 2003,  and  represented  $20.6
          million of the total  increase in goods sold at regular prices in 2004
          over the sales of those  products made at regular  prices in 2003. The
          gross margin  associated  with these sales  increased to 47.6% in 2004
          compared to 45.4% in 2003 and  represented a gross profit  increase of
          $10.8 million in 2004 over 2003.


Selling, Distribution, General and Administrative Expenses.

     Operating  expenses  increased  20.0% to $25.2  million  in 2004 from $21.0
million in 2003.  As a percentage  of net sales,  operating  expenses  decreased
slightly to 31.3% from 32.7% over the same  period.  The  increase in  operating
expenses  resulted  primarily  from higher  selling  expenses and licensing fees
associated with higher sales as well as an increase in administrative  expenses.
Selling expenses  increased $0.9 million to $10.4 million in 2004 primarily as a
result of higher commissions earned on higher net sales.  Commission expense was
$2.8 million in 2004 compared to $2.2 million in 2003. Sales salaries  increased
$0.3  million to $1.2  million in 2004 over 2003.  Advertising  and  promotional
related expenses remained relatively unchanged at $1.8 million in 2004 and 2003.
License fees increased $1.1 million to $5.3 million in 2004 from $4.2 million in
2003. As a percentage of net sales,  license fees remained relatively  unchanged
at 6.6% compared to 6.5% during the same  periods.  The increase in license fees
was  primarily  due to the  increase in net sales  levels  resulting  in royalty
payment  obligations in excess of the 2004 minimum  guaranteed royalty payments.
Distribution  and shipping  decreased  $0.1 million to $2.0 million in 2004 from
$2.1 million in 2003.  General and  administrative  expenses  increased 44.2% to
$7.5 million in 2004 from $5.2 million in 2003. The increase was attributable to
an increase in personnel  and related  costs in 2004.  The increase in personnel
costs was the result of a $1.0 million increase in salaries  associated with the
restructuring of the Company's management in 2003 and bonuses paid or accrued of
$1.3 million based on the Company's 2004 performance.

Operating Income.

     Operating  income was $5.8 million in 2004 compared to an operating loss of
$0.8 million in 2003. This improvement was due to the overall increases in sales
and in the gross profit margin and was partially  offset by the higher operating
expenses as noted above.

Interest Expense.

     Interest expense  decreased 30.0% to $0.7 million in 2004 from $1.0 million
in 2003 as a result of decreased borrowings under the Company's revolving credit
facility. The decrease in borrowings was the result of improved cash flow due to
increased accounts receivable and inventory turnover.  Interest income earned in
2004 and 2003 was insignificant.


                                       24

<PAGE>


Income Taxes.

     As of December 31, 2004, the Company had net operating  loss  carryforwards
of approximately  $41.3 million,  which begin to expire in 2013. In prior years,
no tax benefit was allowed due to the  uncertainty  of the Company's  ability to
generate  future  taxable  income at that  time.  As a result of the  income the
Company  generated  in  2004,  the  Company's  management  reevaluated  its  net
operating  losses and the related  valuation  reserves and has  recognized a net
income tax benefit of $1.0 million in 2004.

Liquidity and Capital Resources

     The Company has relied  primarily on asset based  borrowings,  trade credit
and internally generated funds to finance its operations.  The Company increased
its accounts  receivable  $5.5 million and decreased  its inventory  $3.0 during
2005.  Accounts  payable and accrued  liabilities  decreased $1.3 million during
2005. Cash and cash equivalents held by the Company decreased to $0.9 million at
December  31,  2005  compared  to $1.0  million at  December  31, 2004 while its
working  capital  increased  to $13.1  million at  December  31,  2005 from $8.6
million at December 31, 2004.  A decrease in demand for the  Company's  products
could have a material adverse effect on the Company's working capital.

Cash Flow.

     Cash provided by  operations  totaled $2.7 million in 2005 compared to $6.2
million in 2004.  The  decrease in 2005 was due  primarily  to the  increases in
accounts receivable plus the decreases in accounts payable and other liabilities
(which included pay down of $2.3 million of deferred royalty payments) partially
offset by a decrease in  inventories.  Inventories  decreased  $3.0 million from
December 31, 2004 to December 31, 2005,  compared to an increase of $4.5 million
from December 31, 2003 to December 31, 2004.

     Cash used in  investing  activities  totaled  $1.3 million in 2005 and $1.9
million in 2004 and,  for both  years,  was  mainly due to capital  improvements
associated  with  the new  offices  and  showrooms  in New  York.  Cash  used in
financing  activities  totaled  $1.5  million and $4.1  million in 2005 and 2004
respectively. In 2005, cash used in financing activities primarily resulted from
the principal  payments on long term debt of $1.9 million and revolving  line of
credit of $0.2 million  partially  offset by an increase in  overdrafts  of $0.4
million and cash received on issuance of common stock of $0.2 million.

Credit Facilities

     On December 30, 2004, the Company entered into a three year credit facility
(the "Credit Facility") with Wachovia Bank, National  Association  ("Wachovia").
The Credit Facility  provides that the Company may borrow,  using as collateral,
up to 85% of eligible accounts  receivable and a portion of eligible  inventory,
both as defined by the Credit Facility. Borrowings under the Credit Facility may
not exceed  $25.0  million  including  outstanding  letters of credit  which are
limited to $8.0 million at any one time. There were  approximately  $1.8 million
of   outstanding   letters  of  credit  at  December  31,  2005.  The  Company's
availability  at December 31, 2005 was  approximately  $7.8 million.  The Credit
Facility  accords to the Company the right,  at its  election,  to borrow  these
amounts  as either  Prime  Rate  Loans or LIBOR  Loans.  Prime  Rate  Loans bear
interest  at the prime rate plus the  applicable  margin in effect  from time to
time. LIBOR Loans are limited to three in total, must be a minimum of $1,000,000
each and in integral  multiples of $500,000 in excess of that  amount,  and bear
interest  at the LIBOR rate plus the  applicable  margin in effect  from time to
time. The applicable margins, as defined by the Credit Facility,  fluctuate from
0.00% to 0.75% for the Prime  Loans  and  2.00% to 2.75%  for LIBOR  Loans.  The
applicable  margins  are  inversely  affected by  fluctuations  in the amount of
"excess  availability"  - the unused portion of the amount  available  under the
facility - which are in staggered increments from less then $2.5 million to $7.5
million.  The Prime Rate and the LIBOR Rate were 7.00% and 4.82% respectively at
December  31,  2005.  All the  amounts  borrowed  under the Credit  Facility  at
December 31, 2005 were Prime Rate Loans and the effective rate was 7.25% at that
time.  Starting in 2005, the Credit Facility also required the Company to comply
with certain  covenants  expressed as fixed charge  coverage ratios and tangible
liability to net worth ratios. As collateral  security for its obligations under
the Credit Facility, Isaacs and the LP granted a first priority security


                                       25

<PAGE>


interest in all of their respective assets to Wachovia.  In January and February
2006,  the Company was in violation of the fixed charge  coverage ratio covenant
of the  Credit  Facility  and has  received  a waiver  from  Wachovia  for these
violations.  The Company can not assure its investors with regard to its ability
to comply with its covenant obligations under the Credit Facility in the future.


     On May 6, 2002,  Textile,  an affiliate  of  Latitude,  the licensor of the
Company,  acquired a note that the Company had issued to a former  licensor.  On
May 21, 2002,  Textile  exchanged  that note for an amended and restated note in
the amount of  $6,557,909  bearing  interest  at the rate of 8% per annum,  (the
"Replacement  Note"). The Replacement Note, which subordinated  Textile's rights
under the note to the  rights of the  holder  of a  revolving  line of credit in
existence  prior to the Credit  Facility  with  Wachovia,  deferred the original
note's  principal  payments and  extended  the  maturity  date of the note until
December 31, 2007. In connection with the execution of the Credit Facility,  the
Replacement  Note was further  amended and  restated  to  subordinate  Textile's
rights to the rights of Wachovia  under the Credit  Facility  (the  "Amended and
Restated  Replacement Note" and together with the Replacement Note, the "Textile
Notes").  Pursuant to the  subordination  provisions of the Textile  Notes,  the
Company was obligated to defer the payments that  otherwise  would have been due
thereunder  during each  calendar  quarter  commencing  with the  quarter  ended
December 31, 2002 and continuing  through March 31, 2005. Also,  pursuant to the
provisions of the Textile Notes,  the non-payment and deferral of those payments
did not constitute a default  thereunder.  Pursuant to amendments to the Girbaud
Agreements  executed in December 2004, the payment of approximately $2.3 million
of minimum and additional  royalties  that otherwise  would have been payable in
2004 was deferred,  and the payment thereof became due and payable during the 18
month period which  commenced in June 2005 (see Note 8 to the audited  financial
statements appearing elsewhere in this Report). Pursuant to an intercreditor and
subordination  agreement entered into by Wachovia and Textile in connection with
the  consummation  of the Credit  Facility,  Textile was  permitted  to elect to
authorize the Company to defer the payment of quarterly  amounts that  otherwise
would have been due and payable under the Amended and Restated  Replacement Note
and apply such  amount in  payment of  deferred  royalties  under the  licensing
agreements. As of June 30, 2005, all 2004 deferred royalty payments were paid in
full. The obligations under the Textile Notes have been classified as current or
long-term based upon the respective original due dates of the quarterly payments
specified in the Replacement Note or the Amended and Restated  Replacement Note,
as the  case may be.  Accordingly,  each  deferred  quarterly  payment  has been
classified  as current  even though the payment  thereof may not be made until a
future year. As allowed under the Credit  Facility,  the Company  resumed making
payments on the Textile  Notes in the third  quarter of 2005 and made a total of
$2,090,000 in principle and interest payments on those notes in 2005.


     Following  is a schedule  of the  current  and  non-current  portion of the
Textile Notes'  principal and accrued  interest  payments due as of December 31,
2005:

<TABLE>
<CAPTION>

     Accrued interest and principal payments related to         Accrued             Principal
     the Textile Notes at December 31, 2005:                   Interest             Payments
                                                           ------------------   -----------------
<S>                                                             <C>                 <C>
     Deferred note payments                                     $  1,312,134        $  1,427,866
     Principal note payments (current)                                     --           1,465,262
                                                           ------------------   -----------------

              Subtotal current                                     1,312,134           2,893,128
     Principal note payments (non-current)                                 --           1,726,466
                                                           ------------------   -----------------

              Total current & non-current                       $  1,312,134         $ 4,619,594
                                                           ==================   =================

</TABLE>

     The Company extends credit to its customers.  Accordingly,  the Company may
have significant risk in collecting accounts receivable from its customers.  The
Company has credit policies and procedures which it uses to minimize exposure to
credit losses. The Company's  collection  personnel  regularly contact customers
with receivable balances outstanding beyond 30 days to expedite  collection.  If
these  collection   efforts  are  unsuccessful,   the  Company  may  discontinue
merchandise  shipments until the outstanding  balance is paid.  Ultimately,  the
Company  may  engage an outside  collection  organization  to  collect  past due
accounts.  Timely  contact with  customers has been  effective in minimizing its
credit losses.  In 2005 and 2004, the Company's account  receivable  write-off's
were $0.5 million and $0.2  million,  respectively,  and as a percentage  of net
sales were 0.8% and 0.3%, respectively.


                                       26

<PAGE>


     The  Company  had the  following  contractual  obligations  and  commercial
commitments as of December 31, 2005:


Schedule of contractual obligations:

<TABLE>
<CAPTION>

                                                  Payments Due By Period
                     --------------------------------------------------------------------------------
                         Total       Less than 1      1-3 years       4-5 years       After 5 years
                                         year
                     -------------- -------------- --------------- ---------------- -----------------
<S>                      <C>              <C>             <C>              <C>             <C>
Revolving line of
 credit              $          --  $          --  $           --  $            --  $             --
Long term debt  (*)      6,238,690      4,420,000       1,818,690               --                --
Operating leases         4,390,641        519,665         929,131          910,353         2,031,492
Employment agreements    2,563,500      1,296,500       1,267,000               --                --
Girbaud license
 obligations             9,388,265      4,888,265       4,500,000               --                --
Girbaud fashion shows      825,000        525,000         300,000               --                --
Girbaud creative &
 advertising fees          410,000        220,000         190,000               --                --
Promotional expense
 license requirement     2,200,000        900,000       1,300,000               --                --
                      -------------  -------------  --------------  ---------------  ----------------
Total contractual
 cash obligations    $  26,016,096  $  12,769,430  $   10,304,821  $       910,353  $      2,031,492
                      =============  =============  ==============  ===============  ================

</TABLE>

(*)      Includes principal and accrued interest payments due as of December 31,
         2005 as well as interest to accrue through the maturity date of the
         note payable.

<TABLE>
<CAPTION>

Schedule of commercial commitments:
                                        Amount of Commitment Expiration Per Period
                         Total       Less than 1      1-3 years       4-5 years       After 5 years
                                         year
                     -------------- -------------- --------------- ---------------- -----------------
<S>                      <C>              <C>             <C>              <C>             <C>
Line of credit  *
 (including letters
 of credit)          $  25,000,000  $  25,000,000  $           --  $            --  $             --
                      -------------  -------------  --------------  ---------------  ----------------

Total commercial
 commitments         $  25,000,000  $  25,000,000  $           --  $            --  $             --
                      =============  =============  ==============  ===============  ================

</TABLE>

(*)  At  December  31,  2005,  the Company  had no  borrowings  under the Credit
     Facility other than  outstanding  letters of credit of  approximately  $1.8
     million.

     The Company believes that current levels of cash and cash equivalents ($0.9
million at December  31,  2005)  together  with cash from  operations  and funds
available  under its Credit  Facility  will be  sufficient  to meet its  capital
requirements for the next 12 months.

Inflation

     The  Company  does  not  believe  that  the  relatively  moderate  rates of
inflation  experienced  in the  United  States  over  the last  year  have had a
significant  effect on its net sales or profitability.  Although higher rates of
inflation have been  experienced  in a number of foreign  countries in which the
Company's products are manufactured, the Company does not believe that they have
had a material effect on the Company's net sales or profitability.


                                       27

<PAGE>


Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board, or FASB, issued
Statement No. 123(R),  Share-Based  Payment, or SFAS 123(R), which is a revision
of SFAS 123.  SFAS 123(R)  requires all  share-based  payments to employees  and
directors  to be  recognized  in the  financial  statements  based on their fair
values,  using prescribed  option-pricing  models.  SFAS 123(R) is effective for
public companies for annual periods beginning after June 15, 2005.  Accordingly,
the Company  adopted SFAS 123(R) with effect on January 1, 2006.  From and after
that date,  pro forma  disclosure  will no longer be an alternative to financial
statement  recognition.  Accordingly,  the adoption of SFAS  123(R)'s fair value
method may have a significant impact on the Company's results of operations. The
impact of adoption of SFAS 123(R) and its  approximated  impact on prior periods
had the Company  adopted SFAS 123(R) in prior periods,  is further  described in
the disclosures  included in the Summary of Accounting Policies - Stock Options.
SFAS 123(R) also requires the benefits of tax deductions in excess of recognized
compensation  cost to be reported as a  financing  cash flow,  rather than as an
operating cash flow as required under current literature.  This requirement will
reduce net operating cash flows and increase net financing cash flows in periods
after adoption.


     In May 2005,  The FASB issued  Statement  No. 154,  Accounting  Changes and
Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3,
or SFAS 154.  SFAS 154,  effective for  accounting  changes and  corrections  of
errors made in fiscal years  beginning  after  December  15, 2005,  replaces APB
Opinion No. 20, Accounting  Changes,  and Statement No. 3, Reporting  Accounting
Changes in Interim  Financial  Statements,  and changes the requirements for the
accounting  for and  reporting  of a change in  accounting  principle.  SFAS 154
applies to all  voluntary  changes in  accounting  principle and also applies to
changes required by an accounting pronouncement in the unusual instance that the
pronouncement  does  not  include  specific   transition   provisions.   When  a
pronouncement includes specific transition  provisions,  those provisions should
be followed.  SFAS 154 requires retrospective  application (the application of a
different  accounting principle to prior accounting periods as if that principle
had  always  been used) to prior  periods'  financial  statements  of changes in
accounting  principle,  unless  it is  impracticable  to  determine  either  the
period-specific effects or the cumulative effect of the change. The Company does
not believe SFAS 154 will have a material effect on its financial statements.



     In May 2005,  The FASB  released  FASB  Interpretation  No.  47, or FIN 47,
Accounting for Conditional  Asset Retirement  Obligations,  an interpretation of
FASB  Statement  No. 143.  FIN 47 is  effective  for fiscal  years  ending after
December  15, 2005 and  clarifies  that the term  conditional  asset  retirement
obligation as used in FASB Statement No. 143,  Accounting  for Asset  Retirement
Obligations,  refers  to a legal  obligation  to  perform  an  asset  retirement
activity in which the timing and (or) method of settlement are  conditional on a
future  event  that may or may not be within  the  control  of the  entity.  The
obligation to perform the asset retirement activity is unconditional even though
uncertainty  exists about the timing and (or) method of  settlement.  Thus,  the
timing and (or)  method of  settlement  may be  conditional  on a future  event.
Accordingly,  an entity is required to recognize a liability  for the fair value
of a conditional asset retirement  obligation if the fair value of the liability
can be reasonably  estimated.  The fair value of a liability for the conditional
asset retirement  obligation should be recognized when incurred,  generally upon
acquisition,  construction, or development and (or) through the normal operation
of the asset.  Uncertainty  about the timing and (or) method of  settlement of a
conditional asset retirement  obligation should be factored into the measurement
of the liability when sufficient information exists.  Statement 143 acknowledges
that in some cases,  sufficient  information  may not be available to reasonably
estimate the fair value of an asset retirement  obligation.  This Interpretation
also  clarifies when an entity would have  sufficient  information to reasonably
estimate the fair value of an asset retirement  obligation.  FIN 47 did not have
an effect on the Company's financial statements.


     In February 2006, the FASB issued FASB Statement No. 155,  "Accounting  for
Certain Hybrid  Financial  Instruments"  (SFAS155) , which  nullifies and amends
various  accounting  guidance relating to accounting for derivative  instruments
and  securitization  transactions.  In general,  these  changes  will reduce the


                                       28

<PAGE>


operational  complexity  associated with bifurcating embedded  derivatives,  and
increase the number of beneficial interests in securitization transactions. This
statement is effective  for all financial  instruments  acquired or issued after
the  beginning of our first fiscal year that begins  after  September  15, 2006.
Because we do not have any material  derivative  instruments  or  securitization
transactions,  we believe  there  will be no  material  impact on our  financial
condition, results of operations or cash flows upon adoption.


                                       29

<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  principal  market  risk  results  from  changes in floating
interest  rates on short-term  debt. The Company does not use interest rate swap
agreements to mitigate the risk of adverse  changes in the prime  interest rate.
The impact of a 100 basis point change in interest rates affecting the Company's
short-term  debt would not be material  to the  Company's  income,  cash flow or
working capital.  The Company does not hold long-term  interest sensitive assets
and therefore is not exposed to interest rate  fluctuations for its assets.  The
Company  does not hold or purchase  any  derivative  financial  instruments  for
trading purposes.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated  financial statements of the Company and the report of the
independent registered public accounting firm thereon are set forth on pages F-1
through F-22 hereof.


ITEM 9.   CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE


          None.


ITEM 9A. CONTROLS AND PROCEDURES


     In accordance  with  management's  responsibilities  for  establishing  and
maintaining  adequate internal control over the Company's  financial  reporting,
the Company  maintains  disclosure  controls and procedures that are designed to
provide reasonable assurance that:

     o    information  required to be  disclosed in the  Company's  Exchange Act
          reports
          o    is recorded,  processed,  summarized and reported within the time
               periods specified in the SEC's rules and forms,
          o    is  accumulated  and  communicated  to the Company's  management,
               including  its  Chief  Executive   Officer  and  Chief  Financial
               Officer,  as  appropriate,  to allow timely  decisions  regarding
               required disclosure,
     o    the Company's transactions are properly authorized;
     o    the Company's assets are safeguarded against  unauthorized or improper
          use; and
     o    the Company's transactions are properly recorded and reported,


all  to  permit  the  preparation  of  the  Company's  financial  statements  in
conformity with generally accepted accounting principles.

     The Company  conducted an evaluation,  under the  supervision  and with the
participation of the Company's management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the  Company's  disclosure  controls and  procedures as of the end of the period
covered by this Report on Form 10-K. Among other matters,  the Company sought by
that evaluation to determine whether there were any significant  deficiencies or
material  weaknesses in the Company's  disclosure  controls and procedures,  and
whether  it had  identified  any acts of fraud  involving  personnel  who have a
significant role in the implementation of those controls and procedures.

     Based upon that evaluation,  the Company's CEO and CFO have concluded that,
the  Company's  disclosure  controls and  procedures  were  effective to provide
reasonable  assurance that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed,  summarized and reported within the
time periods specified by the SEC, and that material information relating to the
Company and its consolidated subsidiaries is made known to management, including
the  Company's  CEO and CFO,  particularly  during the period when the Company's
periodic reports are being prepared.

     There were no changes in the Company's  internal  controls  over  financial
reporting  during the fourth quarter of 2005 that materially  affected,  or that


                                       30

<PAGE>


were reasonably likely to materially affect, the Company's internal control over
financial reporting.

ITEM 9B. OTHER INFORMATION

         None.


                                       31

<PAGE>


                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The  Board of  Directors  is  currently  composed  of nine  directors.  The
Company's  directors  are  elected to serve for terms that expire at each annual
meeting of stockholders  and when their  respective  successors are duly elected
and shall have  qualified.  The following  table sets forth certain  information
about the Company's current directors:

Peter J. Rizzo                               Mr.  Rizzo has  worked  within  the
Age 53                                       apparel industry during the past 27
Chief Executive Officer of the Company       years.   He  became  the  Company's
Director since February 2004                 Chief    Executive    Officer    in
                                             December,  2003,  and was appointed
                                             to  the  Board  in  February  2004.
                                             During  the  two  years   prior  to
                                             joining the Company,  Mr. Rizzo was
                                             a consultant  to the Neiman  Marcus
                                             Group.  He was  President  and Vice
                                             Chairman of Bergdorf  Goodman  from
                                             1999 to 2002.  From  1997 to 1999 ,
                                             he  served  as  President  of  Polo
                                             Retail at Polo Ralph  Lauren.  From
                                             1978 to 1997, he was Executive Vice
                                             President   and  Head  Merchant  of
                                             Barneys New York.

Olivier Bachellerie                          Mr.  Bachellerie  has served  since
Age: 45                                      1997  as  President   and  Director
Director since 2002                          General   of   GI   Promotion   and
President and Director General of GI         Cravatatakiller    S.A.,   and   as
   Promotion and Cravatatakiller S.A.        President  of Fashion  Services  of
                                             America,  Inc.,  each of  which  is
                                             beneficially   owned   by   Marithe
                                             Bachellerie  and Francois  Girbaud.
                                             Mr.   Bachellerie  is  the  son  of
                                             Marithe  Bachellerie,  who together
                                             with Mr.  Girbaud,  indirectly  own
                                             and   possess  the  right  to  vote
                                             approximately  38% of the Company's
                                             outstanding shares of common stock.

Rene Faltz                                   Mr. Faltz has  practiced law in the
Age: 52                                      Grand  Duchy  of  Luxembourg  since
Director since 2002                          1976.  He  has  been  with  Cabinet
Senior Partner, Cabinet D'Avocats            D'Avocats  Rene Faltz  since  March
Rene Faltz                                   2000  after  leaving  the  firm  of
                                             Faltz & Kremer. Mr. Faltz is one of
                                             the  Managing   Directors  of,  and
                                             serves  as  counsel   to,   several
                                             companies  that,  since 2002,  have
                                             been beneficially  owned by Marithe
                                             Bachellerie and Francois Girbaud in
                                             connection   with  the  conduct  of
                                             their   business    activities   as
                                             designers and marketers of clothing
                                             and other items bearing the various
                                             Girbaud trademarks.

Neal J. Fox                                  Mr. Fox has held senior  management
Age: 71                                      positions    at   Neiman    Marcus,
Director since 1998                          Bergdorf  Goodman  and  I.  Magnin.
Consultant                                   From 1983 to 1988,  he was employed
                                             by  Garfinkel's,  Raleigh & Co., or
                                             its  predecessor,  most recently as
                                             Chairman   and   Chief    Executive
                                             Officer,  and was also a  principal
                                             shareholder  of that company.  From
                                             1989  through  March 1999,  Mr. Fox
                                             served as the  President  and Chief
                                             Executive   Officer  of  Sulka,  an
                                             international menswear retailer. In
                                             1999,    Mr.   Fox    founded   NJF
                                             Associates,     Incorporated,     a
                                             consulting  firm   specializing  in
                                             brand   management   and   business
                                             development    for   the   apparel,
                                             accessories    and   luxury   goods


                                       32

<PAGE>


                                             industries.  Mr.  Fox  served  as a
                                             director of Today's  Man, a 30 unit
                                             menswear retailer.  In March, 2003,
                                             Today's Man filed a petition  under
                                             Chapter  11 of  the  US  Bankruptcy
                                             Code.


 Francois Girbaud                            Mr.  Girbaud,   an  internationally
 Age: 61                                     renowned  designer and manufacturer
 Director since 2004                         of   clothing,   and   licensor  of
                                             clothing designs and trademarks for
                                             more than 25 years,  became  one of
                                             the Company's  directors in October
                                             2004  Pursuant to  agreements  that
                                             the  Company  has  with   companies
                                             co-owned  directly or indirectly by
                                             Mr.     Girbaud     and     Marithe
                                             Bachellerie,  the Company  licenses
                                             the Girbaud  trademarks and designs
                                             for use in the manufacture and sale
                                             of  various  items of  clothing  in
                                             North America.

 Jon Hechler                                 Mr.  Hechler was employed by Ira J.
 Age: 53                                     Hechler    and    Associates,    an
 Director since 1984                         investment  company,  from  1980 to
 President, T. Eliot, Inc.                   1999.  He is President of T. Eliot,
                                             Inc.,   manufacturer  of  the  Sani
                                             Seat(R)    hygienic   toilet   seat
                                             system.

 Robert Stephen Stec                         Mr.  Stec was a Division  President
 Age: 51                                     of  VF  Corporation  and  had  sole
 Director since 2002                         responsibility   for  VF's  Girbaud
 Chairman and Chief Executive Officer of     division in the United  States from
    Lexington Home Brands                    1989  through  1993.  From  1996 to
                                             1998,  he  served as  President  of
                                             London  Fog  Industries,   Inc.,  a
                                             leading  manufacturer  and marketer
                                             of branded  outerwear.  During 1997
                                             and  1998,  Mr.  Stec  served  as a
                                             part-time   consultant  to  Girbaud
                                             Design,  Inc.  and  certain  of its
                                             affiliates.   In  1999,   Mr.  Stec
                                             served  as a  consultant  to London
                                             Fog for  several  months.  Mr. Stec
                                             has been  employed as President and
                                             Chief    Executive    Officer    of
                                             Lexington  Home  Brands,  a leading
                                             branded     marketer     of    home
                                             furnishings, since 1999.

 John McCoy II                               Mr.  McCoy has  worked  within  the
 Age: 59                                     apparel industry during the past 38
 Director since 2005                         years.  In 1970,  he began  working
 President of Components by John McCoy, Inc. for    Pierre     Cardin's    sales
                                             operations and held the position of
                                             Executive Vice  President--Clothing
                                             when  he left  that firm in 1977 to
                                             found  Fitzgerald by John McCoy,  a
                                             US  manufacturer of European styled
                                             clothing.   In  1985,   Mr.   McCoy
                                             founded  Components  by John McCoy,
                                             Inc.,    a     manufacturer     and
                                             distributor   of  luxury   clothing
                                             brands,   including   Gran   Sasso,
                                             Mason's,   Coast,  Moncler,   Lenor
                                             Romano and Alfred Dunhill.


                                       33

<PAGE>


     Principal Executive Officers of the Company Who Are Not Also Directors

         The following table sets forth the names and ages of the Company's
principal executive officers who are not directors. The table also provides a
description of the positions of employment held by each of such executives for
at least the past five years.

 Jesse de la Rama                            Mr. de la Rama began his employment
 Age: 51                                     with the  Company  in March 2004 as
 Chief Operating Officer of the Company      Vice   President   of   Merchandise
                                             Planning and Retail Development. In
                                             December  2004, he began serving as
                                             the   Company's   Chief   Operating
                                             Officer.  Mr. de la Rama engaged in
                                             business  during  the  period  from
                                             1997  through  February  2004  as a
                                             consultant  to the  fashion  retail
                                             industry    and   other    clients,
                                             including   Calvin   Klein,   Inc.,
                                             Lambertson/Truex   and   Sotheby's,
                                             Inc.,   as  president  of  his  own
                                             company,  Jesse  de la  Rama,  Inc.
                                             Between 1994 and October 1997,  Mr.
                                             de  la   Rama   was   Senior   Vice
                                             President  -  Retail  of  Bally  of
                                             Switzerland.   Between   1979   and
                                             September  1994, he was employed by
                                             Barney's  New  York and  served  in
                                             various    executive    capacities,
                                             including  Vice  President - Outlet
                                             Division and Warehouse  Sales (1992
                                             -  1994)  and  Vice   President   -
                                             Merchandise Planning (1983 - 1992).

 Gregg A. Holst                              Mr. Holst began his employment with
 Age: 47                                     the Company in December 2005. Prior
 Executive Vice President and Chief          to   the    commencement   of   his
 Financial Officer                           employment by  Registrant's  wholly
                                             owned  subsidiary,   I.C.  Iaacs  &
                                             Company LP (the  "LP"),  Mr.  Holst
                                             served (from 2003 - December  2005)
                                             as  Chief  Financial  Officer,  The
                                             Americas, for BBDO Worldwide,  Inc.
                                             During 2000 - 2002,  Mr.  Holst was
                                             Executive Vice  President,  Finance
                                             for the Warnaco  Group,  Inc.  From
                                             1992  to  2000,   Mr.   Holst  held
                                             several finance  positions with the
                                             General  Electric company and prior
                                             to 1992 he was  employed in the New
                                             York  office of Arthur  Andersen  &
                                             Co. Mr. Holst is a certified public
                                             accountant.


Directors' Compensation

     Directors  who  are  employed  by the  Company  or any of its  subsidiaries
receive no compensation for serving on the Board of Directors. Directors who are
not so employed  (the  "Outside  Directors")  receive an annual  retainer fee of
$10,000 for their  services and  attendance  fees of $750 per Board or committee
meeting  attended.  The Chairman of the Audit  Committee  receives an additional
$10,000  for the  services  he  renders  in that  capacity.  All  directors  are
reimbursed  for expenses  incurred in  connection  with  attendance  at Board or
committee meetings. In addition,  members of the Board of Directors are eligible
to  participate  in the Company's  Amended and Restated  Omnibus Stock Plan (the
"Plan"). In 2002, Outside Directors were awarded  non-qualified stock options to
purchase an aggregate of 210,000  shares of common stock at an exercise price of
$0.58 per share.  Those options  vested in December 2004.  Also,  members of the
Board of Directors  who are not  employees  are eligible to  participate  in the
Non-Employee  Directors  Stock Option Plan (the  "Directors  Plan").  Options to
purchase  120,000 shares of common stock at an exercise price of $5.60 per share
were granted and fully vested under the Directors Plan during 2005.


                                       34

<PAGE>


Board Committees and Meetings

     The Board of Directors  currently  has  standing  Audit,  Compensation  and
Nominating Committees.

     The Audit  Committee  has a written  charter  approved  by the Board.  Only
independent  directors,  as that term is defined by the Marketplace Rules of The
Nasdaq Stock Market, may serve as members of the Audit Committee.

     The members of the Audit Committee are Neal J. Fox (Chairman),  Jon Hechler
and Robert Stec.

     The Audit Committee assists the Board of Directors in its general oversight
of the Company's  financial  reporting,  internal  controls and audit functions.
During 2005, the Audit Committee held eight meetings. The Board of Directors has
determined  that the Neal J. Fox,  the  Chairman of the Audit  Committee,  is an
"audit committee financial expert," as such term is defined under applicable SEC
regulations.

     The members of the Compensation  Committee are Messrs.  Hechler (Chairman),
Fox and Stec.

     The Compensation  Committee  administers the Plan, including the review and
grant of stock  options to  officers  and other  employees  under the Plan.  The
Compensation   Committee  also  reviews  and  approves   various  other  company
compensation  policies and matters,  and reviews and approves salaries and other
matters relating to compensation of the executive  officers of the company.  The
Compensation Committee held eight meetings during 2005.

     The members of the Nominating  Committee are Messrs.  Stec (Chairman),  Fox
and Hechler. The Nominating Committee held four meetings in 2005.

     The Board of Directors  held three meetings  during 2005.  Each director is
expected  to attend  each  meeting of the Board and the  committees  on which he
serves.  In addition to meetings,  the Board and its  committees  review and act
upon matters through written consent procedures.

      Employment Contracts, Termination of Employment And Change In Control
                                  Arrangements

Peter J. Rizzo
--------------

     Peter J. Rizzo, the Company's Chief Executive  Officer,  is employed by the
LP,  pursuant to an  employment  agreement  dated  December  9, 2003,  which was
amended on October 19, 2004. That agreement, as amended, provides:

     o    for an  initial  term  that  will end on  December  9,  2007,  and for
          automatic one year renewals of the agreement unless either party gives
          notice of its  non-renewal  not later than June 30, 2007 or June 30 of
          the then current renewal year;

     o    for payment of an annual  base  salary of $500,000  during the initial
          term increasing by 10% per year during each one year renewal term, and
          incentive  compensation  provisions,  subject to a  guaranteed  annual
          minimum of $175,000,  that are based upon the Company's achievement of
          pre-determined earnings, cash flow and inventory turns targets;

     o    for the  issuance  under  the Plan of a five year  option to  purchase
          500,000  shares of common stock at an exercise price of $.95 per share
          vesting ratably on December 9, 2004 and December 9, 2005;


                                       35

<PAGE>


     o    for the issuance under the Plan of a ten year option to purchase up to
          100,000 shares of common stock at an exercise price of $3.10 per share
          on or after December 9, 2007;

     o    that,  as long as the  Nominating  Committee  of the  Company's  Board
          continues to approve Mr.  Rizzo as a director,  he will be included on
          the slate of nominees  that the Company  will  propose for election as
          directors throughout the term of his employment agreement;

     o    that, if (a) Mr. Rizzo is not appointed as Chairman of the Board or he
          is removed from that  position,  (b) his duties as CEO are  materially
          adversely changed or reduced,  (c) his employment is terminated by the
          LP without  cause or if, as a result of the  occurrence  of any of the
          events  described  in  clauses  (a) or  (b),  he  resigns,  he will be
          entitled to receive the following severance benefits:

          o    If such  termination  occurs on or before  December 31, 2006,  he
               will be  entitled to receive  severance  in an  aggregate  amount
               equal to 1.5 times his base salary and incentive compensation for
               the  immediately  preceding  year (a minimum of $937,500 up to as
               much as $1,275,000),

          o    If such  termination  occurs after  December 31, 2006, he will be
               entitled to receive severance in an aggregate amount equal to his
               base salary plus a pro-rata portion of any incentive compensation
               that  otherwise  would have  become due and payable to him if his
               employment had not been  terminated  prior to the end of the year
               (a minimum of $625,000 up to as much as $850,000) and

          o    All  unvested  options  granted to Mr.  Rizzo under the Plan will
               immediately  vest in full  and will be  exercisable  by him for a
               period of one year after his employment is terminated.

     The maximum amount of incentive compensation that Mr. Rizzo may earn in any
year of the initial term and any renewal year is $350,000.

Jesse de la Rama
----------------

Jesse de la Rama, the Company's Chief Operating Officer,  is employed by the LP,
pursuant to an employment  agreement  dated March 1, 2004,  which was amended on
August 1, 2005. That agreement, as amended, provides:

     o    for an  initial  term  that will end on  February  28,  2006,  and for
          automatic one year renewals of the agreement unless either party gives
          notice of its non-renewal not later than December 31, 2005 or December
          31 of the then current renewal year;

     o    for  payment  of an annual  base  salary of  $275,000,  and  incentive
          compensation  provisions  that  are  based  upon  the  achievement  of
          pre-determined earnings, cash flow and inventory turns targets;

     o    for the  issuance  under  the Plan of a five year  option to  purchase
          25,000  shares of common stock at an exercise  price of $.86 per share
          which shall vest ratably on March 1, 2005, 2006 and 2007;

     o    for the  issuance  under  the Plan of a ten year  option  to  purchase
          75,000 shares of common stock at an exercise  price of $6.00 per share
          which shall vest ratably on February 10, 2006, 2007 and 2008;

     o    that,  in the event  that Mr. de la Rama's  employment  is  terminated
          without cause,  he shall receive  severance  payments  ranging between
          three and 12 months salary  depending on the length of his  employment
          at the time of termination.


                                       36

<PAGE>


     The maximum amount of incentive  compensation  that Mr. de la Rama may earn
in 2005 and any renewal year is $175,000.

Gregg A. Holst
--------------

Gregg A. Holst,  the Company's Chief Financial  Officer,  is employed by the LP,
pursuant to an employment  agreement  dated  December 19, 2005.  That  agreement
provides:

     o    for an  initial  term  that will end on  December  31,  2008,  and for
          automatic one year renewals of the agreement unless either party gives
          notice of its  non-renewal  not later than June 30, 2008 or June 30 of
          the then current renewal year;

     o    for payment of an annual base salary of $275,000,  a signing  bonus of
          $50,000 payable in 2006 and incentive compensation provisions, subject
          to a  guaranteed  annual  minimum of $96,250,  that are based upon the
          achievement of pre-determined  earnings, cash flow and inventory turns
          targets;

     o    for the  issuance  under  the Plan of a five year  option to  purchase
          100,000 shares of common stock at an exercise price of $4.40 per share
          which shall vest ratably on December 27, 2006, 2007 and 2008;

     o    that, in the event that Mr. Holst's  employment is terminated  without
          cause, he shall receive  severance  payments ranging between three and
          12 months salary depending on the length of his employment at the time
          of termination.

     The maximum  amount of  incentive  compensation  that Mr. Holst may earn in
2006 and any renewal year is $192,500.

Eugene Wielespki

     In April  2002,  the LP entered  into an amended  and  restated  employment
agreement  with Eugene  Wielepski who was then the Company's  Vice President and
Chief Financial Officer. In March 2003, the LP and Mr. Wielepski entered into an
amendment of that agreement. As so amended, the agreement provides:

     o    that Mr.  Wielepski  shall  serve as Vice  President  - Finance for an
          initial term that will end on May 15, 2006, and for automatic one year
          renewals of the  agreement  unless  either  party gives  notice of its
          non-renewal  not later  than  March  16,  2006 or March 16 of the then
          current renewal year;

     o    for payment of a base salary of $180,000 per year;

     o    for the  issuance  under the Plan of a fully vested ten year option to
          purchase  10,000 shares of common stock at an exercise  price of $1.71
          per share;

     o    that, if Mr. Wielepski's  employment is terminated without cause after
          May 15,  2005,  the LP must pay him an amount equal to one year of his
          base salary; and

     o    that,  if the LP decides not to renew the  agreement,  it must pay Mr.
          Wielepski an amount equal to one year of his current base salary.


                                       37

<PAGE>


     In December, 2005, Mr. Wielepski retired after 32 years of service with the
Company.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers,  directors and persons who beneficially own more than 10% of
the Company's  common stock to file initial  reports of ownership and reports of
changes in ownership with the SEC. Such persons are required by SEC  regulations
to furnish us with  copies of all Section  16(a)  forms  filed by such  persons.
Based solely on the Company's  review of the forms  furnished to it, the Company
believes  that  all of  those  filing  requirements  were  complied  with by the
Company's executive officers, directors and holders of 10% or more of its common
stock during 2005, except as follows:

     On May 4, 2005,  Wurzburg  filed an amendment to its initial  filing on SEC
Form 3 to disclose  that it had  inadvertently  failed to  disclose  that it had
purchased 82,500 shares of common stock on February 2, 2000.

     Although the  conversion  by Wurzburg of 3,300,000  shares of the Company's
Series A  Convertible  Preferred  Stock into an equal number of shares of common
stock had been previously disclosed in the Company's Reports on Form 10-K and in
its definitive proxy  statements,  due to an oversight,  such conversion was not
disclosed in any Form 4 or Form 5 filing made by Wurzburg until May 4, 2005.

     Although the issuance on September  18, 2002 to Textile of two common stock
purchase  warrants  entitling it to purchase an  aggregate of 500,000  shares of
common stock had been previously disclosed in the Company's Reports on Form 10-K
and in its definitive proxy statements, due to an oversight, such conversion was
not disclosed in any Form 4 or Form 5 filing made by Wurzburg until May 4, 2005.

Codes of Ethics

     The Company has  adopted a Code of Ethics for Senior  Financial  Executives
that  applies to every  employee  or officer  who holds the office of  principal
executive officer,  principal financial officer,  principal  accounting officer,
treasurer or controller, or any person performing similar functions. The Company
also has  adopted a Code of Ethics and  Business  Conduct  that  applies to each
officer,  director and employee of the Company and each of its  subsidiaries.  A
copy of each of those codes will be provided  by the Company  without  charge to
any person requesting same. All such requests should be sent by first class mail
to I.C.  Isaacs & Company,  Inc., 3840 Bank Street,  Baltimore,  Maryland 21224,
Attention - Investor Relations Department.


                                       38

<PAGE>


ITEM 11.          EXECUTIVE COMPENSATION

     The  following   table  sets  forth  certain   information   regarding  the
compensation  paid during each of the  Company's  last three fiscal years to its
Chief  Executive  Officer and to each of its executive  officers  other than the
Chief  Executive  Officer whose total annual  salary and bonus  amounted to more
than  $100,000  and who (except for Mr.  Wielepski)  were  serving as  executive
officers at the end of 2005 (collectively,  the "Named Executive Officers").  No
compensation that would qualify as payouts pursuant to long-term incentive plans
("LTIP  Payouts")  or "All  Other  Compensation"  was  paid to any of the  Named
Executive  Officers during the three year period ended on December 31, 2005, and
the Company did not issue any SARs during that period of time.


                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                                       Long Term Compensation
                                                              Annual Compensation (1)                          Awards
                                                   ----------------------------------------------   -----------------------------
                                                                                     Other Annual    Restricted      Securities
                                                                                     Compensation       Stock        Underlying
           Name and Principal Position               Year       Salary($)  Bonus($)       ($)        Awards ($)     Options (#)
-------------------------------------------------- ---------   ----------- --------- ------------   -------------  --------------
<S>                                                    <C>        <C>       <C>          <C>     <C>   <C>          <C>
Peter J. Rizzo, CEO                                    2005       497,307   350,000      151,575 (3)     --             --
                                                       2004       490,761     --         --              --              100,000
                                                       2003 (2)    28,846     --         --              --              500,000
Jesse De La Rama, Sr. VP and COO                       2005       250,000    54,858      --              --               75,000
                                                       2004 (5)   136,694     --         --              --               25,000
Gregg A. Holst, Sr. VP and CFO                         2005 (6)    --         --         --              --              100,000
Eugene C. Wielepski, Vice President                    2005       200,000    40,000      181,504 (3)     --             --
                                                       2004       181,393     --         --              --             --
                                                       2003       184,571     --         --              --             --
Daniel  J. Gladstone, Acting CEO (2003), Former
 President--Girbaud Division (2002 and 2004)           2005 (7)   114,400     --         --              --             --
                                                       2004       340,922   100,000      339,896 (3)     --             --
                                                       2003       357,091   207,895      --              --             --
                                                       2005        --         --         727,013 (8)     --             --
Robert J. Conologue, Former COO and CFO                2004 (4)   315,757    40,000      625,342 (3)     --             --
                                                       2003       273,828     --         --              --              375,000
</TABLE>
--------------

(1)  The LP also provided  various  perquisites  and other benefits that did not
     exceed the lesser of $50,000 or 10% of the aggregate  amounts  reflected in
     the salary and bonus columns for each of the Named Executive Officers.
(2)  Mr.  Rizzo  was  only  employed  for a  period  of 23 days  (from  December
     9-December 31) in 2003.
(3)  Compensation resulting from exercise of Plan Option.
(4)  Mr.  Conologue's  employment was  terminated  without cause on November 29,
     2004.
(5)  Mr. de la Rama started his employment on March 1, 2004.
(6)  Mr. Holst started his employment on December 27, 2005.
(7)  Mr. Gladstone's employment was terminated in April 2005.
(8)  Other  Annual  Compensation  resulted  from the  exercise  of Plan  Options
     ($251,243) and severance paid in 2005 ($475,770).


                                       39

<PAGE>


                      Option/SAR Grants in Last Fiscal Year

     The Company did not grant any SARs to any of the Named  Executive  Officers
during  the year  ended  December  31,  2005.  The  following  table  sets forth
information  regarding  grants  of  options  made by the  company  to the  Named
Executive Officers during 2005.

<TABLE>
<CAPTION>


                                  Individual Grants                Potential Realizable
                    ---------------------------------------------    Value at Assumed
                     Number of  Percent of                         Annual Rates of Stock
                    Securities     Total    Exercise                 Appreciation for
                    Underlying    Options    Price                    Option Term(1)
                     Options    Granted to    Per     Expiration  -----------------------
       Name           Granted    Employees   Share       Date         5%         10%
------------------- ----------- ----------- -------- ------------ ---------- ------------
<S>                     <C>             <C>   <C>       <C>   <C> <C>        <C>
Jesse De La Rama        75,000          38%   $6.00     02-15-15  $ 283,000  $   717,200
Gregg A. Holst         100,000          51%   $4.40     12-27-10  $ 276,700  $   701,200
</TABLE>
(1) In accordance with U.S. Securities and Exchange Commission rules, these
columns show gains that could accrue for the Named Executive Officer's option,
assuming that the market price of the Company's common stock appreciates from
the date of grant over a period of 10 years at an annualized rate of 5% and 10%,
respectively. If the stock price does not increase above the exercise price at
the time of exercise, realized value to the Named Executive Officer from this
option will be zero.

             Aggregated Option/SAR Exercises In Last Fiscal Year And
                        Fiscal Year-End Option/SAR Values

     The following table sets forth information  concerning the number and value
of unexercised  options to purchase the Company's  common stock held on December
31, 2005 by the Named Executive Officers.

<TABLE>
<CAPTION>

                                                               Number of Securities
                                                              Underlying Unexercised       Value of Unexercised
                                  Shares                            Options at           In-the-Money Options at
                               Acquired on       Value            Fiscal Year-End            Fiscal Year-End
             Name                Exercise       Realized     Exercisable/Unexercisable   Exercisable/Unexercisable
             ----                --------       --------     -------------------------   -------------------------
<S>                               <C>           <C>                <C>     <C>              <C>        <C>
 Peter J. Rizzo..............     21,500        $151,575           311,834/266,666          $1,135,100/$755,700
 Jesse De La Rama............       --              --                  8,333/91,667              $31,000/$62,000
 Gregg A. Holst..............       --              --                     0/100,000                    $0/18,900
 Eugene Wielepski............     44,500        $181,504                 --                          --
 Robert J. Conologue.........     43,000        $251,243                 --                          --
</TABLE>

                          Defined Benefit Pension Plan

     The Company  maintains a defined  benefit pension plan (the "Pension Plan")
for its employees, and the employees of its subsidiaries.  The normal retirement
benefit,  payable at age 65, is 20.0% of base  compensation  up to $10,000  plus
39.5% of base compensation over $10,000 and up to a maximum of $75,000, prorated
for  service  less than 30 years.  A reduced  benefit  is also  payable on early
retirement,  after  attainment of age 55 and  completion of 15 years of service.
The Pension Plan also provides  disability  retirement and death  benefits.  The
Company  pays the full cost of the  benefits  under the Pension Plan through its
contributions to a trust.  The Company's cash  contributions to the Pension Plan
during the year ended December 31, 2005 aggregated approximately $315,000.


                                       40

<PAGE>


     The Pension Plan Table below provides the estimated annual benefits payable
under the Pension Plan upon  retirement in specified  compensation  and years of
service classifications:

<TABLE>
<CAPTION>

                                                            Years of Service
                                         -------------------------------------------------------
                   Remuneration             15         20         25         30          35
                   ------------             --         --         --         --          --
<S>  <C>                                  <C>        <C>       <C>         <C>        <C>
     $100,000..........................   $ 13,838   $ 18,451  $  23,063   $ 27,676   $  27,676
      125,000..........................     13,838     18,451     23,063     27,676      27,676
      150,000..........................     13,838     18,451     23,063     27,676      27,676
      175,000..........................     13,838     18,451     23,063     27,676      27,676
      200,000..........................     13,838     18,451     23,063     27,676      27,676
      225,000..........................     13,838     18,451     23,063     27,676      27,676
      250,000..........................     13,838     18,451     23,063     27,676      27,676
      300,000..........................     13,838     18,451     23,063     27,676      27,676
      400,000..........................     13,838     18,451     23,063     27,676      27,676
      450,000..........................     13,838     18,451     23,063     27,676      27,676
      500,000..........................     13,838     18,451     23,063     27,676      27,676

</TABLE>

     The compensation  considered in determining benefits under the Pension Plan
(as  provided  in  the  column  titled  "Remuneration")  is the  annual  average
compensation  for the five  consecutive  calendar  years  producing  the highest
average.  The  compensation  considered  is limited to  $75,000.  All amounts of
salary,  bonus and other  compensation  as reported in the Summary  Compensation
Table, up to $75,000, are included in compensation  considered under the Pension
Plan.  The amounts  provided in the Pension Plan Table are the benefits  payable
per  year  in  equal  monthly  installments  for  the  life  expectancy  of  the
participants  (i.e.,  straight  life  annuity  amounts).  The  Pension  Plan  is
integrated  with Social  Security,  and its benefit  formula is as follows:  (i)
0.6667% of  compensation,  multiplied  by years of service up to 30 years;  plus
(ii) 0.65% of compensation  in excess of $10,000  multiplied by years of service
up to 30 years.

     The  estimated  credited  years of service for each of the Named  Executive
Officers as of January 1, 2005 were as follows:

                                                           Estimated
                                                            Credited
                                 Name                   Years of Service
       Peter J. Rizzo...............................           2
       Jesse De La Rama.............................           2
       Gregg A. Holst...............................           --
       Eugene Wielepski.............................          32
       Daniel J. Gladstone..........................           6


                                       41

<PAGE>


       Securities Authorized For Issuance Under Equity Compensation Plans

<TABLE>
<CAPTION>

                                                                                                       Number of
                                                      Number of securities     Weighted average        securities
                                                        to be issued upon     exercise price of        remaining
                                                           exercise of           outstanding            available
                                                      outstanding options,    options, warrants       for future
                   Plan Category                       warrants and rights        and rights            issuance
----------------------------------------------------  ---------------------  --------------------  ------------------
<S>                                                              <C>                       <C>               <C>
Equity compensation plans approved by security
 holders  (Omnibus Stock Option Plan)                            1,174,167                 $1.96             370,400
Equity compensation plans approved by security
 holders  (Directors Stock Option Plan)                            120,000                 $5.60             330,000
Equity compensation plans not approved by security
 holders                                                                 0                   N/A                 N/A
Totals                                                           1,294,167                 $2.30             700,400

</TABLE>

   Compensation Committee Interlocks and Insider Participation in Compensation
                                    Decisions

     None of the directors serving on the Compensation  Committee is an employee
of the  Company,  and neither the Chief  Executive  Officer nor any of the Named
Executive  Officers  has served on the  Compensation  Committee.  No director or
executive officer of the Company is a director or executive officer of any other
corporation  that has a director or executive  officer who is also a director or
board committee member of the Company.


                                       42

<PAGE>


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Set forth below is information  concerning the common stock ownership as of
March 28, 2006 by (i) each person who the Company knows owns  beneficially 5% or
more of its outstanding common stock, (ii) the Company's Chief Executive Officer
and each of its other "Named Executive Officers," (iii) each director,  and (iv)
all of the Company's directors and officers as a group:

Name and Address of Beneficial Owner (1)               Shares Beneficially Owned
------------------------------------                 ---------------------------
                                                       Number         Percent(2)
                                                       ------         -------

Wurzburg Holding S.A. (3).....................        4,549,167  (4)      37.9 %
Peter J. Rizzo................................          311,834  (5)       2.5
Jesse de la Rama..............................           41,666  (6)       *
Gregg A. Holst ...............................                -            *
Francois Girbaud (7)                                  4,564,167  (8)      38.0
Olivier Bachellerie (9).......................           45,000  (10)      *
Rene Faltz (11)...............................           45,000  (10)      *
Neal J. Fox...................................           67,000  (12)      *
Jon Hechler...................................          226,091  (13)      1.9
Robert Stephen Stec (14)......................           45,000  (10)      *
John McCoy II (15)............................           15,000  (16)      *
All Officers and Directors as a Group (of 10)         5,360,758  (17)     42.4

Mr. Girbaud, Ms. Bachellerie,  together with Wurzburg,  Latitude and the various
companies that they directly and indirectly control,  are collectively  referred
to as the "Girbaud Group."

-----------------
*    Less than one percent

(1)  All shares are owned beneficially and of record unless indicated otherwise.
     Unless otherwise noted, the address of each stockholder is c/o the company,
     3840 Bank Street, Baltimore, Maryland 21224.

(2)  Based upon 11,996,485 shares outstanding on the date of this report,  plus,
     where  applicable,  any shares  issuable  pursuant  to options or  warrants
     exercisable within 60 days of such date.

(3)  The  address  of  this  stockholder  is  41,  Avenue  de  la  Gare,  L-1611
     Luxembourg.

(4)  Includes  3,966,667  shares  owned  beneficially  and  of  record  by  this
     stockholder's  wholly owned subsidiary,  Textile Investment  International,
     S.A..

(5)  Includes  311,834  shares that Mr. Rizzo may acquire  pursuant to an option
     exercisable by him within 60 days of the date of this report.

(6)  Includes  41,666  shares  that Mr. de la Rama may  acquire  pursuant  to an
     option exercisable by him within 60 days of the date of this report.

(7)  Mr. Girbaud's address is 8 Rue Du Centre Vevey, Switzerland.

(8)  Includes all of the shares owned or controlled by Wurzburg, as to which Mr.
     Girbaud,  as a controlling  shareholder  thereof,  is deemed to possess all
     rights regarding the voting and disposition  thereof.  Also includes 15,000
     shares that Mr.  Girbaud may acquire  pursuant to an option  exercisable by
     him within 60 days of the date of this report.

(9)  Mr. Bachellerie's address is 15 Rue Louis Blanc, 75010 Paris, France.

(10) Includes  45,000 shares that this person may acquire  pursuant to an option
     exercisable by him within 60 days of the date of this report.


                                       43

<PAGE>


(11) Mr.  Faltz's  address is 41 Avenue de la Gare,  Luxembourg,  L-1611,  Grand
     Duchy of Luxembourg.

(12) Includes  67,000  shares  that Mr.  Fox may  acquire  pursuant  to  options
     exercisable by him within 60 days of the date of this report.

(13) Includes  52,000  shares that Mr.  Hechler may acquire  pursuant to options
     exercisable by him within 60 days of the date of this report.

(14) Mr.  Stec's  address is c/o  Lexington  Home  Brands,  411 South  Salisbury
     Street, Lexington, NC.

(15) Mr.  McCoy's  address is c/o  Components by John McCoy,  Inc., 21 West 55th
     Street, New York, NY

(16) Includes  15,000  shares that Mr.  McCoy may acquire  pursuant to an option
     exercisable by him within 60 days of the date of this report

(17) Includes 637,500 shares that may be acquired by Messrs.  Rizzo, de la Rama,
     Bachellerie,  Falz,  Fox,  Girbaud,  Hechler,  McCoy and Stec  pursuant  to
     options exercisable by them within 60 days of the date of this report.


                                       44

<PAGE>


ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In November  1997,  the Company  entered into Girbaud Men's  Agreement with
Girbaud Design,  Inc. and its affiliate,  Wurzburg,  both of which are companies
wholly  owned,   directly  or  indirectly,   by  Francois  Girbaud  and  Marithe
Bachellerie.  The Girbaud  Men's  Agreement  granted to the Company the right to
manufacture and market men's jeanswear, casualwear and outwear under the Girbaud
Marks in all channels of  distribution  in the United States,  including  Puerto
Rico and the U.S. Virgin  Islands.  In January and March 1998, the Girbaud Men's
Agreement  was  amended  and  restated to name  Latitude  another  member of the
Girbaud Group(1) of companies,  as the licensor and to include active influenced
sportswear  as a licensed  product  category.  Also in March  1998,  the Company
entered into Girbaud  Women's  Agreement with Latitude to manufacture and market
women's  jeanswear,   casualwear  and  outerwear,  including  active  influenced
sportswear,  under the  Girbaud  Marks in all  channels of  distribution  in the
United States  including  Puerto Rico and the U.S. Virgin  Islands.  The Girbaud
Agreements,  as amended,  include the right to manufacture the licensed products
in a number of foreign countries through 2007.

     Under the Girbaud Men's Agreement, the Company is required to make payments
to  Latitude  in an amount  equal to 6.25% of its net sales of  regular  license
merchandise  and 3.0% in the case of certain  irregular  and  closeout  licensed
merchandise. Except as noted below, the Company is subject to guaranteed minimum
annual  royalty  payments of $3.0 million each year from 2002 through 2007.  The
Company is  required  to spend the  greater of an amount  equal to 3% of Girbaud
men's net sales or $500,000 ( increased  by $200,000 in 2007,  2008 and 2009) in
advertising and related  expenses  promoting the men's Girbaud brand products in
each year through the term of the Girbaud  Men's  Agreement.  During  2005,  the
Company made royalty  payments  under the Girbaud  Men's  Agreement  aggregating
approximately  $4,931,577  ($1,580,523 of which related to royalty payments that
were due in 2004 but deferred until 2005).

     Under the  Girbaud  Women's  Agreement  the  Company  is  required  to make
payments  to  Latitude  in an amount  equal to 6.25% of its net sales of regular
licensed  merchandise  and 3.0% in the case of certain  irregular  and  closeout
licensed  merchandise.  Except  as  noted  below,  the  Company  is  subject  to
guaranteed  minimum annual royalty  payments of $1.5 million each year from 2002
through 2007. The Company is required to spend the greater of an amount equal to
3% of Girbaud women's net sales of $400,000 (increased by $200,000 in 2007, 2008
and 2009) in  advertising  and related  expenses  promoting the women's  Girbaud
brand products in each year through the term of the Girbaud  Women's  Agreement.
In  addition,  over the term of the  Girbaud  Women's  Agreement  the Company is
required  to  contribute  $190,000  per  year  to  Latitude's   advertising  and
promotional  expenditures  for the Girbaud brand.  During 2005, the Company made
royalty payments to under the Girbaud Women's Agreement  aggregating  $2,125,000
($750,000  of  which  related  to  royalty  payments  that  were due in 2004 but
deferred until 2005).


     During  each of the six years  ended  December  31,  2005,  the  amounts of
advertising  and  related  expenses  incurred by the  Company in  marketing  the
Girbaud brand products were less than the amounts required under the agreements.
In each of the various  amendments to the men's and women's  license  agreements
which were  executed in 2002 - 2004,  Latitude and the Company  confirmed to one
another that neither party was in default to the other in the performance of any
of the  obligations  owed by either  of them to the  other.  On March 29,  2006,
Latitude also waived the Company's failure to spend the minimum amounts required
under the men's and women's license agreements in 2005.

     The Company is obligated  to pay a minimum of $6.5  million  during 2006 in
the  form  of  minimum  royalty  payments,  fashion  show  and  advertising  and
promotional  expenses pursuant to the Girbaud  Agreements.  In 2006, the Company
expects  that  substantially  all  of its  net  sales  will  come  from  apparel
associated with the Girbaud licenses.


                                       45

<PAGE>


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

     The following table shows the fees that the Company paid or accrued for the
audit and other services provided by BDO Seidman, LLP in 2005 and 2004.

                                                   Years Ended
                                                  December 31,
                                            --------------------------
                                            --------------------------
                                               2005          2004
                                               ----          ----
       Audit Fees(1)......................   $  370,800    $  249,000
       Audit-related fees(2)..............       46,300        51,566
       Tax Fees...........................       21,500        15,500
                                            ------------  ------------
                                            ------------  ------------
            Total.........................   $  438,600    $  316,066
                                            ============  ============
--------------

(1)  Includes the audit of the Company's  consolidated  financial statements and
     quarterly  reviews of its financial  statements and related  filings on SEC
     Forms 10-K and 10-Q.

(2)  Includes consultation  regarding accounting and reporting matters, an audit
     of the Company's  employee  benefit plan, and the Company's  preparation of
     registration statements on SEC Forms S-2.


     All  audit  and  audit  related  services  were  pre-approved  by the Audit
Committee, which concluded that the performance of such services by BDO Seidman,
LLP was  compatible  with the  maintenance  of that firm's  independence  in the
conduct of its auditing functions.


                                       46

<PAGE>


                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)1. Financial Statements.  The following financial  statements,  related notes
      and the Report of Independent  Certified Public Accountants,  are included
      in response to Item 8 hereof:

                   Index to Consolidated Financial Statements
<TABLE>
<CAPTION>

                                                                                       Page
                                                                                       ----
<S>                                                                                      <C>
Report of Independent Registered Public Accounting Firm                                F-1
Consolidated Balance Sheets at December 31, 2005 and 2004                              F-2
Consolidated Statements of Operations for the years ended December 31, 2005,
2004 and 2003                                                                          F-3
Consolidated Statements of Stockholders' Equity for the years ended December
31, 2005, 2004 and 2003                                                                F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2005,
2004 and 2003.....                                                                     F-5
Summary of Accounting Policies                                                      F-6 to F10
Notes to Consolidated Financial Statements                                         F-11 to F21
</TABLE>

(a)2. Financial Statements  Schedules.  The following is a list of all financial
      statements schedules filed herewith:

      Schedule II-Valuation and Qualifying Accounts

      Schedules other than those listed above have been omitted because they are
      not required or are not applicable,  or the required  information has been
      included in the Consolidated Financial Statements or the Notes thereto.

(a)3. Exhibits  (numbered in accordance  with Item 601 of Regulation  S-K).  The
      following is a list of Exhibits filed herewith:


Exhibit No.                              Description

3.01           Amended and  Restated  Certificate  of  Incorporation  (a copy of
               which was filed with the Commission on October 3, 1997 as Exhibit
               3.01 to the  Company's  Registration  Statement  on Form S-1 (the
               "S-1 Registration Statement"),  and is hereby incorporated herein
               by this reference).

3.02           Amended  and  Restated  By-laws  (a copy of  which  was  filed as
               Exhibit  3.02 to the S-1  Registration  Statement,  and is hereby
               incorporated herein by this reference).

3.03           Certificate of Designation of the Series A Convertible  Preferred
               Stock  of the  Company  (a copy  of  which  was  filed  with  the
               Commission  on November 15, 1999 as Exhibit 3.03 to the Company's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               1999, and is hereby incorporated herein by this reference).

3.04           Certificate of Amendment to the Certificate of Designation of the
               Series A  Convertible  Preferred  Stock of the Company (a copy of
               which was filed with the  Commission  on April 2, 2001 as Exhibit
               3.04 to the  Company's  Annual  Report  on Form 10-K for the year
               ended  December 31, 2000,  and is hereby  incorporated  herein by
               this reference).

3.05           Second Certificate of Amendment to the Certificate of Designation
               of the Series A  Convertible  Preferred  Stock of the  Company (a
               copy of which was filed with the  Commission on November 14, 2002
               as Exhibit 3.05 to the  Company's  Quarterly  Report on Form 10-Q
               for the quarter  ended  September 30, 2002 (the  "September  2002
               10-Q"), and is hereby incorporated herein by this reference).


                                       47

<PAGE>


3.06           Certificate  of Amendment of Amended and Restated  Certificate of
               Incorporation  (a copy of which was filed with the  Commission on
               August 14, 2003 as Exhibit 3.06 to the Company's Quarterly Report
               on Form 10-Q for the quarter  ended June 30, 2003 (the "June 2003
               10-Q"), and is hereby incorporated herein by this reference).

4.01           Specimen Common Stock Certificate (a copy of which was filed with
               the  Commission  on  October  3,  1997  as  Exhibit  4.01  to the
               Company's   Registration   Statement   on  Form  S-1  (the   "S-1
               Registration  Statement"),  and is hereby  incorporated herein by
               this reference).

4.02           Warrant  No.  1  issued  by the  Company  to  Textile  Investment
               International S.A. ("Textile") for the purchase of 300,000 shares
               of Common Stock (a copy of which was filed with the Commission on
               November 14, 2002 as Exhibit 4.02 to the September 2002 10-Q, and
               is hereby incorporated herein by this reference).

4.03           Warrant No. 2 issued by the Issuer to Textile for the purchase of
               200,000  shares  of  Common  Stock (a copy of which  was filed as
               Exhibit  4.03  to  the  September   2002  10-Q,   and  is  hereby
               incorporated herein by this reference).

4.04           Amended and Restated  Omnibus Stock Plan as in effect on June 30,
               2003 (a copy of which was filed as Exhibit  4.04 to the June 2003
               10-Q, and is hereby incorporated herein by this reference).

4.05           2005  Non-Employee  Directors  Stock Option Plan (a copy of which
               was filed with the  Commission on August 10, 2005 as Exhibit 4.05
               to Amendment  No. 1 to the  Company's  Registration  Statement on
               Form S-2 (the "S-2 Amendment"), and is hereby incorporated herein
               by this reference).

10.01          Form of  Indemnification  Agreement (a copy of which was filed as
               Exhibit 10.09 to the S-1  Registration  Statement,  and is hereby
               incorporated herein by this reference).

10.02          Girbaud  Trademark  License and  Technical  Assistance  Agreement
               dated  November  1,  1997 (a copy of  which  was  filed  with the
               Commission on November 26, 1997 as Exhibit 10.26 to Amendment No.
               2 to the S-1  Registration  Statement ("S-1 Amendment 2"), and is
               hereby incorporated herein by this reference).

10.03          Defined  Benefit  Pension Plan (a copy of which was filed with as
               Exhibit   10.27(a)  to  S-1   Amendment  No.  2,  and  is  hereby
               incorporated herein by this reference).

10.04          First  Amendment to Defined Benefit Pension Plan (a copy of which
               was filed as Exhibit  10.27(b) to S-1  Amendment 2, and is hereby
               incorporated herein by this reference).

10.05          Girbaud  Trademark  License and  Technical  Assistance  Agreement
               dated  January  15,  1998 (a copy of  which  was  filed  with the
               Commission on March 27, 1998 as Exhibit 10.26(a) to the Company's
               Annual  Report on Form 10-K for the year ended  December 31, 1997
               (the  "1997  10-K"),  and is hereby  incorporated  herein by this
               reference).

10.06          Girbaud Trademark License and Technical  Assistance Agreement for
               Women's Collection dated March 4, 1998 (a copy of which was filed
               as Exhibit 10.26(b) to the 1997 10-K, and is hereby  incorporated
               herein by this reference).

10.07          Amendment  No. 1 dated  June 18,  1998 to Girbaud  Trademark  and
               Technical  Assistance Agreement for Women's Collection (a copy of
               which was filed with the Commission on August 12, 1998 as Exhibit
               10.32 to the  Company's  Quarterly  Report  on Form  10-Q for the
               quarter ended June 30, 1998, and is hereby incorporated herein by
               this reference).


                                       48

<PAGE>


10.08          Amendment No. 1 dated November 12, 1998 to Trademark  License and
               Technical  Assistance  Agreement  for  Men's  Collections  by and
               between I.C.  Isaacs & Co., L.P. and Latitude  Licensing Corp. (a
               copy of which was filed with the  Commission on March 30, 1999 as
               Exhibit 10.40 to the Company's Annual Report on Form 10-K for the
               year ended  December  31, 1998 (the "1998  10-K"),  and is hereby
               incorporated herein by this reference).

10.09          Amendment No. 2 dated November 12, 1998 to Trademark  License and
               Technical  Assistance  Agreement for Women's  Collections  by and
               between I.C.  Isaacs & Co., L.P. and Latitude  Licensing Corp. (a
               copy of which was filed as Exhibit 10.41 to the 1998 10-K, and is
               hereby incorporated herein by this reference).

10.10          Executive  Employment  Agreement  by and  between  I.C.  Isaacs &
               Company, Inc. and Daniel Gladstone dated January 21, 1999 (a copy
               of which was filed as Exhibit  10.42 to 1998 10-K,  and is hereby
               incorporated herein by this reference).

10.11          Amendment  No. 1 dated  March 4, 1998 to  Trademark  License  and
               Technical  Assistance  Agreement  for  Men's  Collections  by and
               between the Company and Latitude Licensing Corp. (a copy of which
               was  filed  as  Exhibit  10.56 to the 1998  10-K,  and is  hereby
               incorporated herein by this reference).

10.12          Amendment No. 3 dated December 23, 1998 to Trademark  License and
               Technical  Assistance  Agreement for Women's  Collections  by and
               between the Company and Latitude Licensing Corp. (a copy of which
               was  filed  as  Exhibit  10.57 to the 1998  10-K,  and is  hereby
               incorporated herein by this reference).

10.13          Amendment No. 4 to the Trademark License and Technical Assistance
               Agreement  Covering Women's Products dated August 2, 1999 (a copy
               of which was filed  with the  Commission  on August  13,  1999 as
               Exhibit 10.60 to the Company's  Quarterly Report on Form 10-Q for
               the  quarter  ended  June 30,  1999,  and is hereby  incorporated
               herein by this reference).

10.14          Amendment  No. 2 dated June 21, 2000,  to  Trademark  License and
               Technical  Assistance  Agreement  Covering  Men's  Products dated
               January 15, 1998, by and between  Latitude  Licensing  Corp.  and
               I.C.  Isaacs & Company L.P.  3.03 (a copy of which was filed with
               the  Commission  on  August  14,  2000 as  Exhibit  10.75  to the
               Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
               June 30, 2000 (the "June 2000 10-Q"), and is hereby  incorporated
               herein by this reference).

10.15          Amendment  No. 5 dated June 21, 2000,  to  Trademark  License and
               Technical  Assistance  Agreement  Covering Women's Products dated
               January 15, 1998, by and between  Latitude  Licensing  Corp.  and
               I.C.  Isaacs & Company L.P. (a copy of which was filed as Exhibit
               10.76 to the June 2000 10-Q, and is hereby incorporated herein by
               this reference).

10.16          Amendment  No.3 to  Trademark  License and  Technical  Assistance
               Agreement  Covering  Men's Products Dated May 31, 2001 (a copy of
               which was filed with the  Commission  on April 1, 2002 as Exhibit
               10.92 to the  Company's  Annual  Report on Form 10-K for the year
               ended  December 31, 2001,  and is hereby  incorporated  herein by
               this reference).

10.17          Amended and Restated Executive  Employment  Agreement dated April
               17, 2002,  by and between the Company and Eugene C.  Wielepski (a
               copy of which was filed with the  Commission on April 22, 2002 as
               Exhibit 10.94 to Amendment  No. 1 to the Company's  Annual Report
               on Form 10-K for the year ended December 31, 2001 (the "2001 10-K
               Amendment"),   and  is   hereby   incorporated   herein  by  this
               reference).

10.18          Amended and Restated Executive  Employment  Agreement dated April
               17, 2002,  by and between the Company and Daniel J.  Gladstone (a
               copy of which was filed as Exhibit  10.95 to  Amendment  No. 1 to
               the 2001 10-K  Amendment,  and is hereby  incorporated  herein by
               this reference).


                                       49

<PAGE>

10.19          Amendment No. 4 dated  October 2, 2002 to the  Trademark  License
               and Technical  Assistance Agreement dated January 15, 2002 by and
               between Latitude Licensing Corp. and I.C. Isaacs & Company,  L.P.
               (a copy of which was filed with the  Commission  on November  14,
               2002 as Exhibit 10.102 to the Company's  Quarterly Report on Form
               10-Q for the quarter  ended  September  30, 2002 (the  "September
               2002  10-Q"),   and  is  hereby   incorporated   herein  by  this
               reference).

10.20          Amendment No. 6 dated  October 2, 2002 to the  Trademark  License
               and Technical  Assistance Agreement for Women's Collections dated
               October 2, 2002 by and between Latitude  Licensing Corp. and I.C.
               Isaacs &  Company,  L.P.  (a copy of which was  filed as  Exhibit
               10.103 to the  September  2002 10-Q,  and is hereby  incorporated
               herein by this reference).

10.21          Amendment  no. 7, dated March 31, 2003 to the  Trademark  License
               and  Technical   Assistance  Agreement  for  Women's  Collections
               between  Latitude  Licensing Corp. and I.C. Isaacs & Company L.P.
               (a copy of which was filed with the  Commission  on April 4, 2003
               as Exhibit 10.110 to the Company's Annual Report on Form 10-K for
               the year ended December 31, 2002 (the "2002 10-K"), and is hereby
               incorporated herein by this reference).

10.22          Amendment no. 5 dated March 31, 2003 to the Trademark License and
               Technical Assistance Agreement dated the 1st day of November 1997
               by and between Latitude Licensing Corp. and I.C. Isaacs & Company
               L.P.  (a copy of which  was filed as  Exhibit  10.111 to the 2002
               10-K, and is hereby incorporated herein by this reference).

10.23          Amendment  dated as of May 15th, 2003 to the Amended and Restated
               Employment  Agreement  between  I.C.  Isaacs & Company,  L.P. and
               Daniel  J.  Gladstone  (a  copy  of  which  was  filed  with  the
               Commission  on May 15,  2003 as Exhibit  10.114 to the  Company's
               Quarterly  Report on Form 10-Q for the  quarter  ended  March 31,
               2003 (the "March 2003 10-Q"), and is hereby  incorporated  herein
               by this reference).

10.24          Amendment  dated  as of  March  31st,  2003  to the  Amended  and
               Restated Employment Agreement between I.C. Isaacs & Company, L.P.
               and  Eugene C.  Wielespki  (a copy of which was filed as  Exhibit
               10.115 to the March 2003 10-Q, and is hereby  incorporated herein
               by this reference).

10.25          Amendment No. 8, dated October 29, 2003 to the Trademark  License
               and  Technical   Assistance  Agreement  for  Women's  Collections
               between  Latitude  Licensing Corp. and I.C. Isaacs & Company L.P.
               (a copy of which was filed with the  Commission  on November  14,
               2003 as Exhibit 10.118 to the Company's  Quarterly Report on Form
               10-Q for the quarter  ended  September  30, 2003 (the  "September
               2003  10-Q"),   and  is  hereby   incorporated   herein  by  this
               reference).

10.26          Amendment No. 6, dated October 29, 2003 to the Trademark  License
               and Technical  Assistance Agreement dated the 1st day of November
               1997 by and between  Latitude  Licensing  Corp. and I.C. Isaacs &
               Company L.P. (a copy of which was filed as Exhibit  10.119 to the
               September  2003 10-Q, and is hereby  incorporated  herein by this
               reference).

10.27          Amendment  dated  October  13, 2004 to the  Executive  Employment
               Agreement  dated  December 9, 2003 by and Between  I.C.  Isaacs &
               Company,  L.P. and Peter J. Rizzo (a copy of which was filed with
               the Commission as Exhibit 10.120 to the Company's  Report on Form
               8-K filed on October 22, 2004 (the  "October 22, 2004 Form 8-K"),
               and is hereby incorporated herein by this reference).

10.28          Executive  Employment  agreement  made as of the 1st day of March
               2004,  by and  between  I.C.  Isaacs & Company LP and Jesse de la
               Rama (a copy of which was filed as Exhibit  10.121 to the October
               22,  2004 Form 8-K,  and is  hereby  incorporated  herein by this
               reference).


                                       50

<PAGE>


10.29          Loan and Security  Agreement Dated as of December 30, 2004 by and
               between I.C. Isaacs & Company,  L.P. and Wachovia Bank,  National
               Association  (a copy of which was filed  with the  Commission  as
               Exhibit  10.122  to the  Company's  Report  on Form 8-K  filed on
               January  6,  2005,  and is  hereby  incorporated  herein  by this
               reference).

10.30          Amendment  No. 7,  dated  December  16,  2004,  to the  Trademark
               License and Technical  Assistance  Agreement dated the 1st day of
               November 1997 by and between  Latitude  Licensing  Corp. and I.C.
               Isaacs  &  Company  L.P.  (a copy of  which  was  filed  with the
               Commission  on March 31, 2005 as Exhibit  10.123 to the Company's
               Annual  Report on Form 10-K for the year ended  December 31, 2004
               (the  "2004  10-K"),  and is hereby  incorporated  herein by this
               reference).

10.31          Amendment  No. 9,  dated  December  16,  2004,  to the  Trademark
               License   and   Technical   Assistance   Agreement   for  Women's
               Collections dated March 4, 1998 by and between Latitude Licensing
               Corp.  and I.C.  Isaacs & Company L.P. (a copy of which was filed
               as Exhibit  10.124 to the 2004 10-K,  and is hereby  incorporated
               herein by this reference).

10.32          Assignment of warrant to purchase 300,000 shares of the Company's
               common stock dated  September  28th,  2004 by Textile  Investment
               International S.A. to Rockbrook Investments SA., and consented to
               on April 13,  2005 by the  Company  (a copy of which was filed as
               Exhibit 99.01 to the S-2  Amendment,  and is hereby  incorporated
               herein by this reference).

10.33          Assignment of warrant to purchase 200,000 shares of the Company's
               common stock dated  September  28th,  2004 by Textile  Investment
               International  S.A. to Rockbrook  Investments SA. , and consented
               to on April 13, 2005 by the Company (a copy of which was filed as
               Exhibit 99.02 to the S-2  Amendment,  and is hereby  incorporated
               herein by this reference).

10.34          Executive  Employment  Agreement  dated December 19, 2005 between
               I.C.  Isaacs & Company  L.P.  and Gregg A. Holst (a copy of which
               was filed as Exhibit  10.34 to the  Company's  Report on Form 8-K
               filed on December 29, 2005, and is hereby  incorporated herein by
               this reference).

10.35          Amendment No. 8, dated March 29, 2006,  to the Trademark  License
               and Technical  Assistance Agreement dated the 1st day of November
               1997 by and between  Latitude  Licensing  Corp. and I.C. Isaacs &
               Company L.P.

10.36          Amendment No. 10, dated March 29, 2006, to the Trademark  License
               and Technical  Assistance Agreement for Women's Collections dated
               March 4, 1998 by and between  Latitude  Licensing  Corp. and I.C.
               Isaacs & Company L.P.

14.01          Code of Ethics for Senior Financial Executives

14.02          Code of Ethics and Business Conduct

21.01          List of  Subsidiaries (a copy of which was filed as Exhibit 21.01
               to the S-2 Amendment,  and is hereby  incorporated herein by this
               reference).

23.01          Consent of BDO Seidman, LLP

31.01          Certification  Pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002

31.02          Certification  Pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002

32.01          Certification  Pursuant to Section 1350 of chapter 63 of Title 18
               of the United States Code


                                       51

<PAGE>


                                   SIGNATURES

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


                               I.C. ISAACS & COMPANY , INC. (REGISTRANT)

                               By:  /s/ Peter J. Rizzo
                                  ----------------------------------------------
                                 Peter J. Rizzo
                             Chief Executive Officer
                              Date: March 31, 2006


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

<TABLE>
<CAPTION>

         Signature                                   Title                                  Date
         ---------                                   -----                                  ----
<S>                                         <C>                                         <C>
         /s/  Peter J. Rizzo                Chief (Principal) Executive Officer,
------------------------------------        Chairman of the Board                       March 31, 2006
         Peter J. Rizzo

         /s/ Gregg A. Holst                 Executive Vice President,
------------------------------------        Chief (Principal) Financial Officer         March 31, 2006
         Gregg A. Holst

                                            Director                                    March [  ], 2006
------------------------------------
         Olivier Bachellerie

         /s/ Rene Faltz                     Director                                    March 31, 2006
------------------------------------
         Rene Faltz

         /s/ Neal .J. Fox                   Director                                    March 31, 2006
------------------------------------
         Neal J. Fox

                                            Director                                    March [  ], 2006
------------------------------------
         Francois Girbaud

         /s/ Jon Hechler                    Director                                    March 31, 2006
------------------------------------
         Jon Hechler

         /s/ John McCoy II                  Director                                    March 31, 2006
------------------------------------
         John McCoy II

         /s/ Robert S. Stec                 Director                                    March 31, 2006
------------------------------------
         Robert S. Stec

</TABLE>


                                       52

<PAGE>


             Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders
I.C. Isaacs & Company, Inc.
Baltimore, Maryland

We have audited the  accompanying  consolidated  balance sheets of I.C. Isaacs &
Company,  Inc.  as of December  31,  2005 and 2004 and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period  ended  December  31,  2005.  We have also audited the
schedule listed at Item 15(a)2.  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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and schedule are free of material  misstatement.  The Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audits included consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial statements and schedule,  assessing the accounting principles used
and significant estimates made by management,  as well as evaluating the overall
presentation  of the  financial  statements  and  schedule.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of I.C.  Isaacs &
Company,  Inc. at December 31, 2005 and 2004,  and the results of its operations
and its cash flows for each of the three years in the period ended  December 31,
2005, in conformity with accounting  principles generally accepted in the United
States of America.

Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.


                                                     BDO Seidman, LLP


Bethesda, Maryland
February 24, 2006, except for Note 8
which is as of March 29, 2006


                                      F-1

<PAGE>


                           I.C. Isaacs & Company, Inc.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                             December 31,
                                                                 --------------------------------------
                                                                       2005                 2004
                                                                       ----                 ----
<S>                                                                    <C>                  <C>
Assets
Current
  Cash, including temporary investments of $561,000 and $70,000       $   943,422         $  1,045,905
  Accounts receivable, less allowance for doubtful
    accounts of $700,000 and $316,000 (Note 3)                         14,829,496           10,015,723
  Inventories (Notes 1 and 3)                                           5,287,483            8,317,437
  Deferred tax asset (Note 5)                                           2,517,000            1,193,000
  Prepaid expenses and other                                              404,151              509,503
                                                                 -----------------    -----------------

Total current assets                                                   23,981,552           21,081,568
Property, plant and equipment, at cost, less accumulated
   depreciation and amortization (Note 2)                               2,838,627            2,088,233
Other assets (Note 9)                                                     322,656            4,663,109
                                                                 -----------------    -----------------
                                                                      $27,142,835         $ 27,832,910
                                                                 =================    =================

Liabilities and Stockholders' Equity
Current
  Overdrafts                                                          $   447,001         $         --
  Current maturities of revolving line of credit
  (Note 3)                                                                     --              223,283
  Current maturities of long-term debt (Note 3)                         2,893,128            3,366,180
  Accounts payable                                                      2,063,521            3,097,963

  Accrued expenses and other current liabilities (Note 4)               5,492,104            5,799,574
                                                                 -----------------    -----------------

                         Total current liabilities                     10,895,754           12,487,000

Long-term debt (Note 3)                                                 1,726,466            3,191,728

Minimum pension liability (Note 9)                                      1,377,000                   --

Commitments and contingencies (Notes 3, 8 and 9)

Stockholders' Equity (Notes 6 and 7)
  Preferred stock; $.0001 par value; 5,000,000 shares
    authorized, none outstanding                                               --                   --
  Common stock; $.0001 par value; 50,000,000 shares authorized;
    13,173,194 and 12,790,799 shares issued; 11,996,485 and
    11,614,090 shares outstanding                                           1,317                1,279
  Additional paid-in capital                                           44,294,782           44,100,636
  Accumulated deficit                                                 (23,213,613)         (29,624,862)
  Accumulated other comprehensive income (Note 9)                      (5,616,000)                  --
  Treasury stock, at cost (1,176,709 shares)                           (2,322,871)          (2,322,871)
                                                                 -----------------    -----------------

Total stockholders' equity                                             13,143,615           12,154,182
                                                                 -----------------    -----------------
                                                                    $  27,142,835        $  27,832,910
                                                                 =================    =================

</TABLE>


   See accompanying summary of accounting policies and notes to consolidated
                             financial statements.


                                      F-2

<PAGE>


                           I.C. Isaacs & Company, Inc.
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                  Years Ended December 31,
                                                       -----------------------------------------------
                                                             2005            2004            2003
                                                        --------------  --------------  --------------
<S>                                                    <C>             <C>             <C>
  Net sales                                            $   83,288,935  $   80,649,394  $   64,304,688
  Cost of sales                                            49,070,145      49,583,094      43,706,398
                                                        --------------  --------------  --------------

  Gross profit                                             34,218,790      31,066,300      20,598,290
                                                        --------------  --------------  --------------

  Operating Expenses
    Selling                                                10,834,335      10,412,502       9,524,799
    License fees (Note 8)                                   5,114,319       5,330,523       4,163,035
    Distribution and shipping                               2,247,450       1,968,214       2,062,032
    General and administrative                              8,603,793       7,531,809       5,243,916
    Litigation settlement                                   1,750,000              --              --
    Loss on sale of property                                       --              --         414,650
                                                        --------------  --------------  --------------

  Total operating expenses                                 28,549,897      25,243,048      21,408,432
                                                        --------------  --------------  --------------

  Operating income (loss)                                   5,668,893       5,823,252        (810,142)
                                                        --------------  --------------  --------------

  Other income (expense)
    Interest, net of interest income of $4,994, $6,543
     and $1,687                                              (435,882)       (729,068)     (1,008,744)
    Other, net                                                    238          26,195         124,120
                                                        --------------  --------------  --------------

  Total other expense                                        (435,644)       (702,873)       (884,624)
                                                        --------------  --------------  --------------


  Income (loss) from continuing operations                  5,233,249       5,120,379      (1,694,766)

    Income tax benefit                                      1,178,000       1,045,000              --
                                                        --------------  --------------  --------------

  Net income (loss)                                    $    6,411,249  $    6,165,379  $   (1,694,766)
                                                        ==============  ==============  ==============

  Basic net income (loss) per share                    $         0.55  $         0.55  $        (0.15)

  Basic weighted average shares outstanding                11,729,305      11,264,483      11,134,657

  Diluted net income (loss) per share                  $         0.48  $         0.46  $        (0.15)

  Diluted weighted average shares outstanding              13,397,202      13,355,300      11,134,657

</TABLE>

   See accompanying summary of accounting policies and notes to consolidated
                             financial statements.


                                      F-3

<PAGE>


                           I.C. Isaacs & Company, Inc.
                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>

                                                                                       Accumulated
                                                            Additional                    Other
                                  Common Stock Common Stock  Paid-in      Accumulated  Comprehensive   Treasury
                                     Shares      Amount      Capital        Deficit        Income        Stock         Total
<S>                  <C> <C>       <C>         <C>         <C>          <C>            <C>            <C>           <C>
Balance, at December 31, 2002      12,311,366  $    1,231  $43,658,853  $ (34,095,475) $          --  $ (2,322,871) $  7,241,738
 Net loss                                  --          --           --     (1,694,766)            --            --    (1,694,766)
                                  ------------  ----------  -----------  -------------  -------------  ------------  ------------

Balance, at December 31, 2003      12,311,366       1,231   43,658,853    (35,790,241)            --    (2,322,871)    5,546,972
 Net Income                                --          --           --      6,165,379             --            --     6,165,379
 Issuance of common stock             479,433          48      441,783             --                           --       441,831
                                  ------------  ----------  -----------  -------------  -------------  ------------  ------------

Balance, at December 31, 2004      12,790,799       1,279   44,100 636    (29,624,862)            --    (2,322,871)   12,154,182
                                                                                                                     ------------
 Comprehensive Income:
      Net Income                           --          --           --      6,411,249             --            --     6,411,249
   Recognition of minimum pension
    liability (Footnote 9)                 --          --           --             --     (5,616,000)           --    (5,616,000)
                                                                                                                     ------------
 Total Comprehensive Income                                                                                              795,249
                                                                                                                     ------------

 Issuance of common stock
  associated with exercise of
  stock options                       176,000          18      194,166             --             --            --       194,184
                                                                                                                     ------------
 Issuance of common stock
  associated with exercise of
  stock warrants                      206,395          20          (20)            --             --            --            --
                                  ------------  ----------  -----------  -------------  -------------  ------------  ------------

Balance, at December 31, 2005      13,173,194  $    1,317  $44,294,782  $ (23,213,613) $  (5,616,000) $ (2,322,871) $ 13,143,615
                                  ============  ==========  ===========  =============  =============  ============  ============

</TABLE>


   See accompanying summary of accounting policies and notes to consolidated
                             financial statements.


                                      F-4

<PAGE>


                           I.C. Isaacs & Company, Inc.
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                   Years Ended December 31,
                                                          ----------------------------------------------
                                                              2005            2004            2003
                                                          --------------  --------------  --------------
<S>                                                      <C>             <C>             <C>
Operating Activities
  Net income (loss)                                      $    6,411,249  $    6,165,379  $   (1,694,766)
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities
    Provision for doubtful accounts                           1,016,475         370,387         202,111
    Write off of accounts receivable                           (632,475)       (329,387)       (172,111)
    Provision for sales returns and discounts                 4,198,983       4,088,959       2,477,904
    Sales returns and discounts                              (3,885,776)     (3,578,959)     (2,540,904)
    Valuation allowance-deferred tax asset                   (1,324,000)     (1,193,000)             --
    Depreciation and amortization                               567,000         641,095         756,831
    Loss on sale of assets                                           --              --         414,650
    Officers' compensation contribution                              --              --              --
    (Increase) decrease in assets
       Accounts receivable                                   (5,510,980)       (695,613)     (1,519,417)
       Inventories                                            3,029,954      (4,462,706)      2,588,843
       Prepaid expenses and other                               105,352        (440,827)        138,257
       Other assets                                              74,993         308,155         106,569
    Increase (decrease) in liabilities
       Accounts payable                                      (1,034,442)      2,058,062         132,381
       Accrued expenses and other current liabilities          (307,470)      3,276,321         438,804
                                                          --------------  --------------  --------------

Cash provided by operating activities                         2,709,019       6,207,866       1,329,152
                                                          --------------  --------------  --------------

Investing Activities
  Proceeds from sale of assets                                       --              --         268,221
  Capital expenditures                                       (1,291,090)     (1,858,489)       (181,042)
                                                          --------------  --------------  --------------

Cash (used in) provided by investing activities              (1,291,090)     (1,858,489)         87,179
                                                          --------------  --------------  --------------

Financing Activities
  Overdrafts                                                    447,001        (197,441)       (428,641)
  Net payments on revolving line of credit                     (223,283)     (4,001,002)       (806,168)
  Issuance of common stock                                      194,184         441,831              --
  Principal payments on long-term debt                       (1,938,314)             --              --
  Cash on deposit to secure letter of credit                         --        (250,000)             --
  Deferred financing costs                                           --         (79,379)             --
                                                          --------------  --------------  --------------

Cash (used in) financing activities                          (1,520,412)     (4,085,991)     (1,234,809)
                                                          --------------  --------------  --------------

(Decrease) increase in cash and cash equivalents               (102,483)        263,386         181,522

Cash and Cash Equivalents, at beginning of year               1,045,905         782,519         600,997
                                                          --------------  --------------  --------------

Cash and Cash Equivalents, at end of year                $      943,422  $    1,045,905  $      782,519
                                                          ==============  ==============  ==============

</TABLE>


   See accompanying summary of accounting policies and notes to consolidated
                             financial statements.


                                      F-5

<PAGE>



                           I.C. Isaacs & Company, Inc.
                         Summary of Accounting Policies

Basis of Presentation

     The consolidated  financial statements include the accounts of I. C. Isaacs
& Company, Inc. ("ICI"), I.C. Isaacs & Company, L.P. (the "Partnership"), Isaacs
Design,  Inc.  ("Design")  and I.C.  Isaacs  Far  East  Ltd.  (collectively  the
"Company").  I.C. Isaacs Far East Ltd. did not have any  significant  revenue or
expenses in 2005, 2004 or 2003. All intercompany  balances and transactions have
been eliminated.

Business Description

     The  Company,  which  operates in one business  segment,  is a designer and
marketer of branded jeanswear and sportswear.  The Company offers collections of
jeanswear  and  sportswear  for men and women  under the  Marithe  and  Francois
Girbaud brand  ("Girbaud  brand") in the United  States,  Puerto Rico and the US
Virgin  Islands.  The Girbaud brand is an  internationally  recognized  designer
label with a distinct European influence. The Company has positioned its Girbaud
brand  line  with a  broad  assortment  of  products,  styles  and  fabrications
reflecting a contemporary  European look. The Company  markets a full collection
of men's and women's jeanswear and sportswear under the Girbaud brand, including
a broad array of bottoms, tops and outerwear.

Risks and Uncertainties

     The apparel industry is highly competitive.  The Company competes with many
companies,  including  larger,  well capitalized  companies which have sought to
increase market share through massive consumer advertising and price reductions.
The Company continues to experience increased  competition from many established
and new competitors at both the department store and specialty store channels of
distribution.  The Company  continues to redesign its jeanswear  and  sportswear
lines in an effort to be  competitive  and  compatible  with  changing  consumer
tastes. Also, the Company has developed and implemented marketing initiatives to
promote its  Girbaud  brand.  A risk to the Company is that such a strategy  may
lead to continued pressure on profit margins. In the past several years, many of
the Company's competitors have switched much of their apparel manufacturing from
the United States to foreign  locations such as Mexico,  the Dominican  Republic
and  throughout  Asia. As  competitors  lower  production  costs,  it gives them
greater  flexibility to lower prices.  Over the last several years,  the Company
also switched its production to contractors  outside the United States to reduce
costs.  Since 2001,  the Company has imported  substantially  all its inventory,
excluding  t-shirts,  as finished goods from  contractors in Asia. This shift in
purchasing  requires the Company to estimate sales and issue purchase orders for
inventory well in advance of receiving firm orders from its customers. A risk to
the Company is that its sales  estimates may differ from actual orders.  If this
happens,  the Company may miss sales because it did not order enough  inventory,
or it may have to sell excess  inventory at reduced  prices.  The Company  faces
other risks  inherent in the apparel  industry.  These risks include  changes in
fashion trends and related consumer acceptance and the continuing  consolidation
in the  retail  segment of the  apparel  industry.  The  Company's  ability,  or
inability,  to manage these risk factors could  influence  future  financial and
operating results.

Use of Estimates

     The  preparation  of financial  statements  in  accordance  with  generally
accepted accounting principles requires management to make certain estimates and
assumptions,   particularly  regarding  valuation  of  accounts  receivable  and
inventory,  recognition of liabilities  and disclosure of contingent  assets and
liabilities at the date of the financial statements. Actual results could differ
from those estimates.


                                      F-6

<PAGE>


Concentration of Credit Risk

     Financial   instruments   which   potentially   expose   the   Company   to
concentrations  of credit risk consist  primarily of trade accounts  receivable.
The  Company's  customer  base is not  concentrated  in any specific  geographic
region, but is concentrated in the retail industry. For the years ended December
31, 2005, 2004 and 2003, sales to one customer were $6,419,000,  $7,713,000, and
$5,156,000.  These  amounts  constitute  7.7%,  9.6% and  8.0% of  total  sales,
respectively. As of December 31, 2005 and 2004, the Company had one customer the
represented  11.4% and 13.1% of accounts  receivable  respectively.  The Company
establishes an allowance for doubtful  accounts  based upon factors  surrounding
the credit risk of specific customers,  historical trends and other information.
The Company's account  receivable  write-off's as a percentage of net sales were
0.8%,  0.4% and 0.3% for the  years  ended  December  31,  2005,  2004 and 2003,
respectively.

     The Company is also subject to  concentrations  of credit risk with respect
to its cash and cash equivalents, which it minimizes by placing these funds with
high-quality institutions.  The Company is exposed to credit losses in the event
of nonperformance by the counterparties to letter of credit  agreements,  but it
does not  expect any  financial  institutions  to fail to meet their  obligation
given their high credit rating.

Revenue Recognition

     Net revenue is recognized  upon the transfer of title and risk of ownership
to customers.  Revenue is recorded net of discounts,  as well as provisions  for
estimated  returns and allowances.  On a seasonal basis, the Company  negotiates
price  adjustments  with its retail customers as sales  incentives.  The Company
estimates  the  cost  of  such  adjustments  on  an  ongoing  basis  considering
historical  trends,  projected  seasonal  results and an  evaluation  of current
economic conditions. These costs, which have been recorded as a reduction to net
revenue, were $3,710,000, $3,777,000 and $1,920,000 for the years ended December
31, 2005, 2004 and 2003 respectively.

     Sales are  recognized  upon shipment of products.  Allowances for estimated
returns are provided by the Company when sales are recorded by reviewing  trends
and  returns  on a  historical  basis.  Shipping  and  handling  fees  billed to
customers  are  classified  in net  sales  in  the  consolidated  statements  of
operations.  Shipping and handling costs incurred are classified in distribution
and shipping in the consolidated statements of operations.

Inventory, Cost of Goods Sold and Operating Expenses

     Inventories  are stated at the lower of cost or market.  Inventory  cost is
determined by the first-in,  first-out  (FIFO) method.  The Company  includes in
inventory  costs  and cost of goods  sold all  costs  and  expenses  related  to
obtaining  merchandise  incurred  prior to the receipt of finished  goods at the
Company's distribution facilities.  These costs include, but are not limited to,
product  cost,   inbound  freight  charges,   purchasing  and  receiving  costs,
inspection  costs,  warehousing  costs and internal  transfer  costs, as well as
insurance,  duties,  brokers' fees and consolidators'  fees. The Company did not
experience abnormal amounts of idle facility expense,  freight,  handling costs,
or excessive  spoilage  which  required  treatment as current  period charges in
2005, 2004 nor 2003.

     The Company includes in selling,  general and administrative expenses costs
incurred  subsequent  to the  receipt  of  finished  goods  at its  distribution
facilities,  such as the cost of  picking  and  packing  goods for  delivery  to
customers.  In addition,  selling,  general and administrative  expenses include
product design costs,  selling and store service costs,  marketing  expenses and
general and administrative expenses.

Property, Plant and Equipment

     Property,  plant and equipment are stated at cost. Depreciation is computed
over the  estimated  useful  lives of the  assets by the  straight-line  method.
Leasehold  improvements  are  amortized  using the shorter of the  straight-line
method  over  the  life  of  the  lease  or the  estimated  useful  life  of the
improvement.


                                      F-7

<PAGE>


Asset Impairment

     The Company periodically  evaluates the carrying value of long-lived assets
when events and  circumstances  warrant such a review.  The carrying  value of a
long-lived asset is considered  impaired when the anticipated  undiscounted cash
flow from such asset is  separately  identifiable  and is less than the carrying
value.  In that  event,  a loss is  recognized  based on the amount by which the
carrying  value  exceeds the fair market  value of the  long-lived  asset.  Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved.

Stock Options

     The Company has adopted the  disclosure-only  provisions  of  Statement  of
Financial Accounting Standards No. 148, "Accounting for Stock Based Compensation
Transition  and  Disclosure  - An Amendment  to FAS No. 123" ("SFAS  148"),  but
applies the  intrinsic  value method set forth in  Accounting  Principles  Board
Opinion  No. 25 for stock  options  granted to  employees.  If the  Company  had
elected to recognize  compensation  expense based on the fair value at the grant
dates, consistent with the method prescribed by SFAS No. 148, net loss per share
would have been changed to the pro forma amount indicated below. Effective 2006,
the Company will be required to recognize this compensation expense. The Company
anticipates  2006 expense to be  approximately  $535,000  for options  currently
granted.

     For stock options granted to employees and non-employee  directors in 2005,
2004 and 2003 (see  Footnote  7), the Company  estimated  the fair value of each
option  granted  using the  Black-Scholes  option-pricing  model.  In 2005,  the
Company  used  the  following  assumptions:  risk-free  interest  rate of  4.5%,
expected volatility of 120%, expected average option life of 3 to 6 years and no
dividend payments for 2005 for options to purchase  100,000,  20,000 120,000 and
75,000 shares granted in December,  August, June and February 2005 respectively.
Using these assumptions,  the per share fair value of each of 2005 option grants
ranged from $3.16 to $5.49.  In 2004 and 2003,  the Company  used the  following
assumptions:  risk-free interest rate of 3.04%,  2.75%,  2.46%, 2.78%, and 2.91%
for options to purchase 25,000,  500,000,  175,000,  225,000,  and 25,000 shares
granted in March 2004,  December 2003, July 2003,  March 2003 and February 2003,
respectively, expected volatility of 75%, expected option life of 5 years and no
dividend payments for 2004 or 2003. Using these assumptions,  the per share fair
value of each of such option  grants was $0.55 for the March 2004 grant,  $0.60,
$0.86, $0.42 and $0.42, for the December, July, March and February, 2003 grants,
respectively.

<TABLE>
<CAPTION>

                                                                   Year ended December 31,
                                                         -----------------------------------------------
                                                             2005             2004            2003
                                                         --------------  ---------------  --------------
<S>                                                     <C>             <C>              <C>
Net income (loss) attributable to common stockholders,
 as reported                                            $    6,411,249  $     6,165,379  $   (1,694,766)
       Total stock-based employee compensation expense
        determined under the fair value based method
        for all awards                                        (977,538)        (286,187)       (231,448)
                                                         --------------  ---------------  --------------
Pro forma net income (loss) attributable to common
 stockholders                                           $    5,433,711  $     5,879,192  $   (1,926,214)
                                                         ==============  ===============  ==============

Basic net income (loss) per common share, as reported   $         0.55  $          0.55  $        (0.15)

Basic net income (loss) per common share,  pro forma    $         0.46  $          0.52  $        (0.17)

Diluted net income (loss) per common share, as
 reported                                               $         0.48  $          0.46  $        (0.15)

Diluted net income (loss) per common share,  pro forma  $         0.41  $          0.44  $        (0.17)
</TABLE>


                                      F-8

<PAGE>


Advertising Costs

     Direct  advertising  costs  included in selling  expenses  are  expensed as
incurred and were  $475,152,  $749,908 and $559,966 for the years ended December
31, 2005,  2004 and 2003  respectively.  These are  included in the  promotional
license requirement discussed in Footnote 8.

Cash Equivalents

     For purposes of the  statements of cash flows,  all  temporary  investments
purchased  with a maturity  of three  months or less are  considered  to be cash
equivalents.

Income Taxes

     The Company  accounts  for income  taxes in  accordance  with  Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes" ("SFAS
109").  Under SFAS 109, deferred taxes are determined using the liability method
which requires the recognition of deferred tax assets and  liabilities  based on
differences  between  the  financial  statement  and the income tax basis  using
presently enacted tax rates.

Fair Value of Financial Instruments

Financial instruments of the Company include cash and cash equivalents, accounts
receivable,  short-term investments and long and short-term debt. Fair values of
cash and cash  equivalents,  accounts  receivable,  short-term  investments  and
short-term  debt  approximate  cost due to the short period of time to maturity.
Based upon the current borrowing rates available to the Company,  estimated fair
values of long-term debt approximate their recorded amounts.

Net Income or Loss Per Share

     Net  income or loss per share is based on the  weighted  average  number of
shares of common stock and dilutive common stock equivalents outstanding.  Basic
loss per share includes no dilution and is computed by dividing income available
to  common  shareholders  by  the  weighted  average  number  of  common  shares
outstanding for the period. In 2005 and 2004,  diluted income per share reflects
the  potential  dilution of  securities  that could share in the earnings of the
Company. There were outstanding employee stock options of 1,174,167,  1,590,817,
and 2,070,250, at December 31, 2005, 2004 and 2003, respectively and outstanding
warrants  of  250,000,  500,000  and  500,000 at the end of 2005,  2004 and 2003
respectively  and 120,000  director stock options at December 31, 2005. For 2005
and 2004,  all options and warrants  were included in the diluted net income per
share calculation.  Basic and diluted loss per share are the same during 2003 as
these stock options and warrants were excluded from the  computation of net loss
per share as their inclusion would have been anti-dilutive.

Comprehensive Income

The Company  has  adopted  the  provisions  of  Statement  No.  130,  "Reporting
Comprehensive Income" (See Footnote 9. Retirement Plan).

Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board, or FASB, issued
Statement No. 123(R), Share-Based Payment, which is a revision of Statement 123.
Statement 123(R) requires all share-based payments to employees and directors to
be  recognized  in the financial  statements  based on their fair values,  using
prescribed option-pricing models. SFAS 123(R), is effective for public companies
for annual periods beginning after June 15, 2005. Accordingly,  the Company will
adopt 123(R)  January 1, 2006.  From and after that date,  pro forma  disclosure
will  no  longer  be  an   alternative  to  financial   statement   recognition.
Accordingly,  the  adoption of Statement  123(R)'s  fair value method may have a
significant  impact  on the  Company's  results  of  operations.  The  impact of
adoption of Statement  123(R) and its  approximated  impact on prior periods had
the Company adopted  Statement 123(R) in prior periods,  is further described in


                                      F-9

<PAGE>


the disclosures  included in the Summary of Accounting Policies - Stock Options.
Statement  123(R) also  requires  the  benefits of tax  deductions  in excess of
recognized  compensation  cost to be reported as a financing  cash flow,  rather
than as an  operating  cash flow as  required  under  current  literature.  This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption.


     In May 2005,  The FASB issued  Statement  No. 154,  Accounting  Changes and
Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3.
FASB  Statement No. 154,  effective for  accounting  changes and  corrections of
errors made in fiscal years  beginning  after  December  15, 2005,  replaces APB
Opinion  No.  20,  Accounting  Changes,  and FASB  Statement  No.  3,  Reporting
Accounting Changes in Interim Financial Statements, and changes the requirements
for the accounting for and reporting of a change in accounting  principle.  FASB
Statement No. 154 applies to all voluntary  changes in accounting  principle and
also applies to changes  required by an accounting  pronouncement in the unusual
instance that the pronouncement does not include specific transition provisions.
When a pronouncement includes specific transition  provisions,  those provisions
should be followed.  FASB Statement No. 154 requires  retrospective  application
(the application of a different accounting principle to prior accounting periods
as if  that  principle  had  always  been  used)  to  prior  periods'  financial
statements of changes in accounting  principle,  unless it is  impracticable  to
determine  either the  period-specific  effects or the cumulative  effect of the
change. The Company does not believe FASB Statement No. 154 will have a material
effect on its financial statements.


     In May  2005,the  FASB  released  FASB  Interpretation  No.  47, or FIN 47,
Accounting for Conditional  Asset Retirement  Obligations,  an interpretation of
FASB  Statement  No. 143.  FIN 47 is  effective  for fiscal  years  ending after
December  15, 2005 and  clarifies  that the term  conditional  asset  retirement
obligation as used in FASB Statement No. 143,  Accounting  for Asset  Retirement
Obligations,  refers  to a legal  obligation  to  perform  an  asset  retirement
activity in which the timing and (or) method of settlement are  conditional on a
future  event  that may or may not be within  the  control  of the  entity.  The
obligation to perform the asset retirement activity is unconditional even though
uncertainty  exists about the timing and (or) method of  settlement.  Thus,  the
timing and (or)  method of  settlement  may be  conditional  on a future  event.
Accordingly,  an entity is required to recognize a liability  for the fair value
of a conditional asset retirement  obligation if the fair value of the liability
can be reasonably  estimated.  The fair value of a liability for the conditional
asset retirement obligation should be recognized when  incurred--generally  upon
acquisition,  construction, or development and (or) through the normal operation
of the asset.  Uncertainty  about the timing and (or) method of  settlement of a
conditional asset retirement  obligation should be factored into the measurement
of the liability when sufficient information exists.  Statement 143 acknowledges
that in some cases,  sufficient  information  may not be available to reasonably
estimate the fair value of an asset retirement  obligation.  This Interpretation
also  clarifies when an entity would have  sufficient  information to reasonably
estimate the fair value of an asset retirement  obligation.  FIN 47 did not have
an effect on the Company's financial statements.

     In February 2006, the FASB issued FASB Statement No. 155,  "Accounting  for
Certain Hybrid  Financial  Instruments"  (SFAS155) , which  nullifies and amends
various  accounting  guidance relating to accounting for derivative  instruments
and  securitization  transactions.  In general,  these  changes  will reduce the
operational  complexity  associated with bifurcating embedded  derivatives,  and
increase the number of beneficial interests in securitization transactions. This
statement is effective  for all financial  instruments  acquired or issued after
the  beginning of our first fiscal year that begins  after  September  15, 2006.
Because we do not have any material  derivative  instruments  or  securitization
transactions,  we believe  there  will be no  material  impact on our  financial
condition, results of operations or cash flows upon adoption.


                                      F-10

<PAGE>


                   Notes to Consolidated Financial Statements

1. Inventories
Inventories consist of the following:                 December 31,
                                         ---------------------------------------
                                               2005                 2004
                                         ------------------   ------------------

Work-in-process                               $  1,115,107         $    227,444
Finished goods                                   4,172,376            8,089,993
                                         ------------------   ------------------

                                              $  5,287,483         $  8,317,437
                                         ==================   ==================


2. Property, Plant and Equipment

Property, plant and equipment consists of
the following:

<TABLE>
<CAPTION>

                                                     December 31,                    Estimated
                                          -------------------------------------        Useful
                                              2005                  2004               Lives
                                          ----------------    -----------------        -----
<S>                                             <C>                  <C>            <C>
Land                                         $    149,160         $    149,160
Buildings and improvements                      1,262,892            1,262,892       18 years
Machinery, equipment and fixtures               4,699,117            4,415,628      5-7 years
Leasehold improvements and other                6,046,741            5,652,769        various
                                          ----------------    -----------------

                                               12,157,910           11,480,449
Less accumulated depreciation and
amortization                                    9,319,283            9,392,216
                                          ----------------    -----------------

                                             $  2,838,627         $  2,088,233
                                          ================    =================

</TABLE>

     Depreciation  and  amortization  expense  for 2005,  2004 and 2003  totaled
$540,696, $547,345 and $501,953 respectively.

3. Long-term Debt

Long-term debt consists of the following:              December 31,
                                               -------------------------------
                                                 2005              2004
                                               --------------   --------------

Revolving line of credit (a)(b)                     $      --      $   223,283
Notes payable (c)                                  4,619,594        6,557,908
                                               --------------   --------------

Total                                              4,619,594        6,781,191

Less current maturities of revolving line
    of credit                                              --          223,283
Less current maturities of long-term debt          2,893,128        3,366,180
                                               --------------   --------------

                                                 $ 1,726,466      $ 3,191,728
                                               ==============   ==============

(a)  On December 30, 2004, the Company entered into a three year credit facility
     (the  "Credit   Facility")   with  Wachovia  Bank,   National   Association
     ("Wachovia").  The Credit  Facility  provides  that the Company may borrow,
     using  as  collateral,  up to 85% of  eligible  accounts  receivable  and a
     portion of  eligible  inventory,  both as  defined by the Credit  Facility.
     Borrowings under the Credit Facility may not exceed $25.0 million including


                                      F-11

<PAGE>


     outstanding  letters of credit which are limited to $8.0 million at any one
     time.  There were  approximately  $1.8  million of  outstanding  letters of
     credit at December 31, 2005. The Credit Facility accords to the Company the
     right, at its election,  to borrow these amounts as either Prime Rate Loans
     or LIBOR Loans.  Prime Rate Loans bear  interest at the prime rate plus the
     applicable  margin in effect from time to time.  LIBOR Loans are limited to
     three in  total,  must be a  minimum  of  $1,000,000  each and in  integral
     multiples  of $500,000 in excess of that amount,  and bear  interest at the
     LIBOR  rate plus the  applicable  margin in effect  from time to time.  The
     applicable margins, as defined by the Credit Facility, fluctuate from 0.00%
     to 0.75% for the Prime  Loans  and  2.00% to 2.75%  for  LIBOR  Loans.  The
     applicable  margins are inversely affected by fluctuations in the amount of
     "excess  availability"  - the unused portion of the amount  available under
     the  facility  - which  are in  staggered  increments  from  less then $2.5
     million to $7.5  million.  The Prime Rate and the LIBOR Rate were 7.00% and
     4.8226%  respectively at December 31, 2005. All the amounts  borrowed under
     the credit  facility  at  December  31,  2005 were Prime Rate Loans and the
     effective  rate was  7.25% at that  time.  Starting  in  2005,  the  Credit
     Facility  also  required  the  Company  to comply  with  certain  covenants
     expressed as fixed  charge  coverage  ratios and tangible  liability to net
     worth ratios.  As collateral  security for its obligations under the Credit
     Facility,  ICI and the LP granted a first priority security interest in all
     of their  respective  assets to  Wachovia.  The Company  paid  $79,379 as a
     facility fee to Wachovia in connection with the  consummation of the Credit
     Facility.  That fee is deferred and is being amortized over the life of the
     Credit Facility.  The Company  amortized  $26,480 or these fees in 2005. In
     January and February 2006, the Company was in violation of the fixed charge
     coverage  ratio  covenant of the Credit  Facility and has received a waiver
     from Wachovia for these violations.

(b)  Prior to December 30, 2004, the Company had an  asset-based  revolving line
     of credit (the "Credit  Agreement")  with  Congress  Financial  Corporation
     ("Congress").  This Credit Agreement, as amended, provided that the Company
     could have borrowed up to 80.0% of net eligible  accounts  receivable and a
     portion  of  inventory.  Borrowings  under the Credit  Agreement  could not
     exceed $20.0 million,  including  outstanding  letters of credit which were
     limited to either $4.0 million or $6.0 million at various  times during the
     year. These borrowings bore interest at the lender's prime rate of interest
     plus 2.25%  (effectively  6.50% at December 30, 2004).  In connection  with
     amending  the Credit  Agreement in December  2002,  March 2003 and November
     2003,  the Company  paid and  deferred  certain  financing  fees and either
     expensed as paid or amortized  them over the remaining  life of the amended
     Credit Agreement.  The Company expensed or amortized  $125,000 and $250,000
     of these fees in 2004 and 2003.


     Average  short-term  borrowings  and  the  related  interest  rates  are as
follows:

Substantially all 2004 information relates   ----------------------------------
to the Congress Credit Agreement                 Year Ended December 31,
                                             ----------------------------------
                                                2005                2004
                                             --------------   -----------------

Borrowings under revolving line of credit      $       --          $   223,283
Weighted average interest rate                       6.95%               6.50%
Maximum month-end balance during year          $ 1,879,000         $ 6,433,000
Average month-end balance during year          $ 1,048,000         $ 4,056,270

(c)  On May 6, 2002,  Textile  Investment  International  S.A.  ("Textile"),  an
     affiliate of Latitude  Licensing  Corp.  ("Latitude"),  the licensor of the
     Company,  acquired a note that the Company had issued to a former licensor.
     On May 21, 2002,  Textile  exchanged  that note for an amended and restated
     note  bearing  interest  at the  rate of 8% per  annum,  (the  "Replacement
     Note"), which subordinated Textile's rights under the note to the rights of
     Congress under the Credit Agreement, deferred the original note's principal
     payments  and extended  the  maturity  date of the note until  December 31,
     2007.  In  connection  with  the  execution  of the  Credit  Facility,  the
     Replacement Note was further amended and restated to subordinate  Textile's
     rights to the rights of Wachovia  under the Credit  Facility  (the "Amended
     and Restated  Replacement Note" and together with the Replacement Note, the
     "Textile Notes").  Pursuant to the subordination  provisions of the Textile


                                      F-12

<PAGE>


     Notes, the Company was obligated to defer the payments that otherwise would
     have been due thereunder  during each calendar quarter  commencing with the
     quarter  ended  December 31, 2002 and  continuing  through  March 31, 2005.
     Also,  pursuant to the provisions of the Textile Notes, the non-payment and
     deferral  of  those  payments  did not  constitute  a  default  thereunder.
     Pursuant to  amendments to the  licensing  agreements  executed in December
     2004, the payment of  approximately  $2.3 million of minimum and additional
     royalties that otherwise would have been payable in 2004 was deferred,  and
     the payment thereof became due and payable during the 18 month period which
     commenced  in June 2005  (see Note 8).  Pursuant  to an  Intercreditor  and
     subordination  agreement entered into by Wachovia and Textile in connection
     with the  consummation  of the Credit  Facility,  Textile was  permitted to
     elect to authorize  the Company to defer the payment of  quarterly  amounts
     that  otherwise  would  have been due and  payable  under the  Amended  and
     Restated  Replacement  Note and apply such  amount in  payment of  deferred
     royalties  under the licensing  agreements.  As of June 30, 2005,  all 2004
     deferred  royalty  payments were paid in full.  The  obligations  under the
     Textile Notes have been  classified as current or long-term  based upon the
     respective  original due dates of the quarterly  payments  specified in the
     Replacement Note or the Amended and Restated  Replacement Note, as the case
     may be. Accordingly, each deferred quarterly payment has been classified as
     current  even  though the  payment  thereof  may not be paid until a future
     year.  As allowed under the Credit  Facility,  the Company  resumed  making
     payments on the Textile Notes in the third quarter of 2005 and made a total
     of $2,090,000 in principal and interest payments on those notes in 2005.

     At December 31, 2005, long-term debt maturities were as follows:

              2006            $ 2,893,128
              2007              1,726,466
                          ----------------

                              $ 4,619,594
                          ================

4. Accrued Expenses

<TABLE>
<CAPTION>

Accrued expenses consist of the following:                        December 31,
                                                        ----------------------------------
                                                           2005                2004
                                                        --------------    ----------------
<S>                                                         <C>                 <C>
     Litigation settlement                               $  1,750,000         $        --
     Accrued interest                                       1,312,134           1,136,023
     Royalties & other licensor obligations, Note 8           771,537           2,489,274
     Management & selling bonuses                             470,047           1,087,442
     Property taxes                                           318,607              19,895
     Accrued professional fees                                289,769              51,650
     Accrued rent expense                                     166,603             111,000
     Sales commissions payable                                157,039              51,629
     Accrued compensation                                     145,692             120,871
     Customer credit balances                                  60,224              82,832
     Payroll tax withholdings                                  14,193              71,934
     Severance accrual                                             --             290,570
     Income taxes payable                                          --             148,000
     Other                                                     36,259             138,454
                                                        --------------    ----------------

                                                          $ 5,492,104         $ 5,799,574
                                                        ==============    ================

</TABLE>

5. Income Taxes

     Deferred  income  taxes  reflect the net effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial and income
tax reporting  purposes.  As of December 31, 2005 and 2004,  the Company has net
operating loss carry forwards for income tax reporting purposes of approximately
$34,706,000 and $41,353,000 respectively, which represent deferred tax assets of
approximately  $13,633,000  and  $15,908,000  respectively.  These net operating
losses  begin to expire in 2014.  Through  2003,  no income tax benefit had been
recorded due to the uncertainty  over the Company's  ability to generate taxable
income beyond 2003. As a result of the income the Company  generated in 2005 and
2004,  the Company's  management  reevaluated  its net operating  losses and the


                                      F-13

<PAGE>


related  valuation  allowances  and has recognized a net income tax benefit of $
1,178,000 and $1,045,000 for 2005 and 2004 respectively.

Significant items comprising the Company's deferred tax assets are as follows:

                                                            December 31,
                                                   -----------------------------
                                                      2005            2004
                                                   -------------   -------------

    Net operating loss carry forwards             $  13,633,000   $  15,908,000
    Minimum pension liability                         2,206,000              --
    Depreciation and amortization                       806,000         764,000
    Bonus accrual                                       255,000              --
    Accrued royalty payments                                 --         915,000
    Accrued interest payable                            523,000         446,000
    Capital loss carryforward                           163,000         163,000
    Allowance for doubtful accounts                     216,000         124,000
    Inventory valuation                                  51,000          51,000
    Litigation settlement and accrued severance         735,000         114,000
    Contribution carryovers                              46,000          44,000
    Deferred rent payments                               65,000              --
    State tax accrual                                   106,000              --
    AMT credits                                         272,000              --
    Other                                                21,000          21,000
                                                   -------------   -------------

                                                     19,098,000      18,550,000

    Valuation allowance                             (16,581,000)    (17,357,000)
                                                   -------------   -------------

    Net deferred tax asset                        $   2,517,000   $   1,193,000
                                                   =============   =============


A reconciliation between the statutory and effective tax rates is as follows:

                                                      Year Ended December 31,
                                                --------------------------------
                                                   2005      2004       2003
                                                ---------- -------- ------------

Federal statutory rate                             34.0%     34.0%      (35.0)%
State and local taxes, net of federal benefit       4.5       4.0        (4.0)
Permanent differences                              (4.0)      2.0         1.0
Alternative minimum taxes                           2.0       2.0          --
(Benefit) expense of valuation allowance          (59.0)    (62.4)       38.0
                                                ---------- -------- ------------

                                                  (22.5)%   (20.4)%        -- %
                                                ========== ======== ============

The 2005 net tax benefit is derived from            Year Ended December 31, 2005
the following components:

                         ------------------------------------------------
                              Federal          State         Total
                         ----------------  ------------- ----------------
Current tax expense        $    (146,000)   $        --  $     (146,000)
Deferred tax benefit           1,054,000        270,000       1,324,000
                         ----------------  ------------- ----------------
Net income tax benefit           908,000    $   270,000       1,178,000
                         ================  ============= ================

No  reconciliation  for 2003 was provided as there was no tax expense or benefit
for that year.

6. Stockholders' Equity

     The  Company  currently  holds  1,176,709  of  common  stock  shares in its
treasury at a cost of $2,322,871.

     Prior to 2003, the Company granted  warrants to purchase  500,000 shares of
the  Company's  Common Stock for $0.75 per share to Textile.  On April 13, 2005,
Textile  assigned these warrants to an  unaffiliated  entity.  In December 2005,
this  unaffiliated  entity  exercised its right to purchase  250,000 shares.  In
accordance with the net issuance  formula  contained in the warrants and in lieu
of paying $0.75 per share, the unaffiliated entity gave up the right to purchase


                                      F-14

<PAGE>

43,605  shares  and  received  206,395  shares in the  transaction  based upon a
closing price of $4.30 per share on the exercise date.

7. Stock Options

Omnibus Stock Option Plan

     In May 1997, the Company  adopted the 1997 Omnibus Stock Plan (the "Plan").
Under the Plan,  as amended in 1999,  2002 and as amended and  restated in 2003,
the  Company  may  grant  qualified  and  nonqualified   stock  options,   stock
appreciation rights,  restricted stock or performance awards, payable in cash or
shares  of common  stock,  to  selected  employees.  The  Company  has  reserved
2,200,000 shares of common stock for issuance under the Plan.

A summary of stock options  outstanding and exercisable as of December 31, 2005,
2004 and 2003 is as follows:
<TABLE>
<CAPTION>
 -----------------------------------------------------------------------------------------------------
               Options outstanding at December 31, 2005                    Options exercisable at
                                                                             December 31, 2005
 -----------------------------------------------------------------------------------------------------
                                            Weighted        Weighted                        Weighted
      Range of                              Average         Average                         Average
      Exercise             Number          Remaining        Exercise         Number         Exercise
       Prices            Outstanding      Life (years)       Price        Exercisable        Price
--------------------  -----------------  --------------  --------------  --------------  --------------
<S> <C>      <C>              <C>                <C>           <C>            <C>              <C>
    $0.48 to $0.60            166,667            6.52          $0.570         158,333          $0.575
   $0.87 to $2.125            712,500            3.03          $1.215         529,167          $1.309
    $3.10 to $6.95            295,000            7.30          $4.539               --               --
-------------------  -----------------  --------------  --------------  --------------  --------------
    $0.48 to $6.95          1,174,167            4.60          $1.959         687,500          $1.140
===================  =================  ==============  ==============  ==============  ==============

-----------------------------------------------------------------------------------------------------
              Options outstanding at December 31, 2004                    Options exercisable at
                                                                            December 31, 2004
-----------------------------------------------------------------------------------------------------
                                            Weighted        Weighted                        Weighted
      Range of                              Average         Average                         Average
      Exercise             Number          Remaining        Exercise         Number         Exercise
       Prices            Outstanding      Life (years)       Price        Exercisable        Price
--------------------  -----------------  --------------  --------------  --------------  --------------
    $0.30 to $0.60            364,667            5.80          $0.568         198,000          $0.551
   $0.87 to $2.125          1,226,150            4.35          $1.260         867,817          $1.390
-------------------  -----------------  --------------  --------------  --------------  --------------
   $0.30 to $2.125          1,590,817            4.59          $1.101       1,065,817          $1.234
===================  =================  ==============  ==============  ==============  ==============


-----------------------------------------------------------------------------------------------------
              Options outstanding at December 31, 2003                    Options exercisable at
                                                                            December 31, 2003
-----------------------------------------------------------------------------------------------------
                                            Weighted        Weighted                        Weighted
      Range of                              Average         Average                         Average
      Exercise             Number          Remaining        Exercise         Number         Exercise
       Prices            Outstanding      Life (years)       Price        Exercisable        Price
--------------------  -----------------  --------------  --------------  --------------  --------------
    $0.30 to $0.60            645,000            6.26          $0.193               --             $ --
   $0.90 to $2.125          1,425,250            5.86          $0.978       1,425,250          $1.311
-------------------  -----------------  --------------  --------------  --------------  --------------
   $0.30 to $2.125          2,070,250            5.98          $0.679       1,425,250          $1.311
===================  =================  ==============  ==============  ==============  ==============
</TABLE>


                                      F-15

<PAGE>

                                                                Weighted Average
The following table relates to options activity   Number of      Exercise Price
in 2003, 2004 and 2005 under the Plan:             Options         Per Option
                                                --------------  ----------------

Granted                                               925,000         0.770

Cancelled                                            (161,000)        1.380
                                                --------------

Options outstanding at December 31, 2003            2,070,250         1.076

Cancelled                                             (25,000)        0.600

Granted                                                25,000         0.870

Exercised                                            (479,433)        0.922
                                                --------------

Options outstanding at December 31, 2004            1,590,817         1.101

Cancelled                                            (435,650)        1.423

Granted                                               195,000         5.277

Exercised                                            (176,000)        1.103
                                                --------------

Options outstanding at December 31, 2005            1,174,167         1.959
                                                ==============

Options exercisable at December 31, 2005              687,500         1.140
                                                ==============


Non-employee Directors  Stock Option Plan

     In June 2005,  the Board of  Directors  of the  Company  and the  Company's
stockholders  adopted  Non-Employee  Directors Stock Option Plan (the "Directors
Plan")  non-employee  directors  receive automatic grants of options to purchase
common stock in amounts that are specified by such plan. The exercise  prices of
all options  granted  under the  Directors  Plan are fixed at 100% of the market
price of the common stock on each grant date.  The Company has reserved  450,000
shares of common  stock  for  issuance  under the  Directors  Plan.  Options  to
purchase  120,000 shares of common stock with a weighted  average exercise price
of $5.60 per share were granted  under the  Directors  Plan during 2005,  all of
which were outstanding and unexercised at December 31, 2005.

8. Commitments and Contingencies

Operating Leases

     The Company  rents real and  personal  property  under  leases  expiring at
various  dates  through 2014.  Certain of the leases  stipulate  payment of real
estate taxes and other  occupancy  expenses.  Minimum annual rental  commitments
under  noncancellable  operating  leases  in  effect at  December  31,  2005 are
summarized as follows:

                   Showrooms &         Computer &            Total
                  Office Space      Office Equipment
                 ----------------   -----------------   -----------------

            2006     $   399,043         $   120,622     $       519,665
            2007         409,018              62,862             471,880
            2008         419,244              38,007             457,251
            2009         432,808                  --             432,808
            2010         477,545                  --             477,545
      Thereafter       2,031,492                  --           2,031,492
                 ----------------   -----------------   -----------------

                    $  4,169,150         $   221,491         $ 4,390,641
                 ================   =================   =================


                                      F-16

<PAGE>


     In July 2004,  the Company  signed a 10 year lease to relocate its New York
offices and showrooms.  The Company will expense the rent payments on a straight
line basis in  accordance  with the  provisions of SFAS No. 13  "Accounting  for
Leases"  starting  October  2004,  the date the Company  obtained  access to the
facility.  Also, in connection with this lease,  the Company has provided to the
lessor a $250,000 letter of credit and has provided a deposit for this amount to
the bank as  security  for this  letter of credit.  As the use of these funds is
restricted, this deposit is classified as a non-current asset.

Total rent expense is as follows:              Year Ended December 31,
                                  ---------------------------------------------
                                      2005            2004            2003
                                  -------------   -------------   -------------

Minimum rentals                     $  504,526      $  386,345      $  475,966
Other lease costs                      116,497          40,631         154,437
                                  -------------   -------------   -------------

                                       621,023         426,976      $  630,403
                                  =============   =============   =============

Licenses

Girbaud Men's Licensing Agreement

     The Company has entered into an exclusive  license  agreement with Latitude
to manufacture  and market men's  jeanswear,  casual wear,  outerwear and active
influenced  sportswear under the Girbaud brand and certain related trademarks in
the United States,  Puerto Rico and the U.S.  Virgin  Islands.  The terms of the
agreement  will expire at the end of 2007.  The Company has the option to extend
the terms the agreement through the end of 2011. Under the agreement as amended,
the Company is required to make  royalty  payments to the  licensor in an amount
equal to 6.25% of net sales or regular licensed  merchandise and 3.0% of certain
irregular and closeout licensed merchandise. The Company is obligated to pay the
greater of actual  royalties  earned or minimum  guaranteed  annual royalties of
$3,000,000  through  2007.  The  Company is  required to spend the greater of an
amount  equal to 3% of Girbaud  men's net sales or $500,000 in  advertising  and
related expenses promoting the men's Girbaud brand products in each year through
the term of the Girbaud men's agreement. If Latitude mounts any fashion shows in
the Company's  territory,  the Company also is required to  participate in up to
two of such shows,  and to pay $75,000 to Latitude  with  respect  thereto.  The
Company has agreed to increase the minimum  annual amount of these  expenditures
under the men's  license  agreement by $200,000 in each of the years 2007,  2008
and 2009 in order to, among other things, facilitate and support a repositioning
of the Girbaud brand for better store distribution.

Girbaud Women's Licensing Agreement

     The Company has entered into an exclusive  license  agreement with Latitude
to manufacture and market women's jeanswear,  casual wear, and active influenced
sportswear under the Girbaud brand and certain related  trademarks in the United
States,  Puerto Rico, and the U.S.  Virgin  Islands.  The terms of the agreement
will  expire at the end of 2007.  The Company has the option to extend the terms
the  agreement  through the end of 2011.  Under the  agreement  as amended,  the
Company is required to make royalty  payments to the licensor in an amount equal
to 6.25% of net  sales  or  regular  licensed  merchandise  and 3.0% of  certain
irregular and closeout licensed merchandise. The Company is obligated to pay the
greater of actual  royalties  earned or minimum  guaranteed  annual royalties of
$1,500,000  through  2007.  The  Company is  required to spend the greater of an
amount equal to 3% of Girbaud  women's net sales or $400,000 in advertising  and
related  expenses  promoting  the women's  Girbaud  brand  products in each year
through  the term of the  Girbaud  women's  agreement.  If  Latitude  mounts any
women's fashion shows in the Company's  territory,  the Company also is required
to participate  in up to two of such shows,  and to pay $75,000 to Latitude with
respect thereto. The Company has agreed to increase the minimum annual amount of
these  expenditures  under the women's license  agreement to $200,000 in each of
the years 2007,  2008 and 2009 in order to, among other things,  facilitate  and
support a repositioning of the Girbaud brand for better store  distribution.  In
addition,  while the  agreement  is in effect  the  Company is  required  to pay
$190,000 per year to the licensor for advertising  and promotional  expenditures
related to the Girbaud brand.

     During  each of the six years  ended  December  31,  2005,  the  amounts of
advertising  and  related  expenses  incurred by the  Company in  marketing  the


                                      F-17

<PAGE>


Girbaud brand products were less than the amounts required under the agreements.
In each of the various  amendments to the men's and women's  license  agreements
which were  executed in 2002 - 2004,  Latitude and the Company  confirmed to one
another that neither party was in default to the other in the performance of any
of the  obligations  owed by either  of them to the  other.  On March 29,  2006,
Latitude also waived the Company's failure to spend the minimum amounts required
under the men's and women's license agreements in 2005.


     Pursuant to  amendments to the  licensing  agreements  executed in December
2004 (see Note 3), the  payment of  approximately  $2.3  million of minimum  and
additional  royalties  that  otherwise  would  have  been  payable  in 2004  was
deferred.  All 2004 deferred  royalty payments were paid in full during 2005 and
all 2005 royalty payments were paid in full when due in 2005.


     Following  is a schedule  of the  Company's  commitment  obligations  as of
December 31, 2005:

<TABLE>
<CAPTION>

Summary schedule of commitments:                                                  Payments Due By Period
                                                                --------------------------------------------------------
                                                    Total          Current      1-3 years      4-5 years   After 5 years
                                              ----------------- ------------- -------------- ------------- -------------
<S>                                            <C>              <C>           <C>            <C>           <C>
Operating leases                               $     4,390,641  $    519,665  $     929,131  $    910,353  $  2,031,492
Employment agreements                                2,563,500     1,296,500      1,267,000            --            --
Licensing agreement fee obligations (*)              9,388,265     4,888,265      4,500,000            --            --
Licensing agreement fashion show
 obligations(*)                                        825,000       525,000        300,000            --            --
Licensing agreement creative & advertising fee
 obligations (*)                                       410,000       220,000        190,000            --            --
Promotional expense license requirement(*)           2,200,000       900,000      1,300,000            --            --
                                                ---------------  ------------  -------------  ------------  ------------
Total contractual obligations                  $    19,777,406  $  8,349,430  $   8,486,131  $    910,353  $  2,031,492
                                                ===============  ============  =============  ============  ============
</TABLE>
(*) License agreement obligations include amounts accrued but unpaid at December
    31, 2005 as well as obligation commitments for years subsequent to that
    date.

Employment Agreements

     The Company is party to employment  agreements  with three  officers  which
provide for specified  levels of compensation  and certain other  benefits.  The
agreements,  which  expire  between 2007 and 2008,  also  provide for  severance
payments from the  termination  date through the  expiration  date under certain
circumstances.


                                      F-18

<PAGE>


9. Retirement Plan

     The  Company   sponsors  a  defined   benefit   pension  plan  that  covers
substantially  all employees  with more than one year of service.  The Company's
policy is to fund  pension  costs  accrued.  Contributions  to the plan  reflect
benefits  attributed to employees'  service to date, as well as service expected
to be earned in the  future.  The  benefits  are based on the number of years of
service and the employee's  compensation  during the three consecutive  complete
years of service prior to or including the year of  termination  of  employment.
Plan assets  consist  primarily of common  stocks,  fixed income  securities and
cash.  The latest  available  actuarial  valuation  is as of December  31, 2005.
Pension expense for 2005, 2004 and 2003 was  approximately  $398,000,  $446,000,
and $349,000 respectively, and includes the following components:

<TABLE>
<CAPTION>

                                                  Years Ended December 31,
                                         -------------------------------------------
                                             2005           2004           2003
                                         -------------  -------------  -------------
<S>                                     <C>            <C>            <C>
Service cost of current period          $      77,000  $      60,000  $      54,000
Interest on the above service cost              6,000          4,000          4,000
                                         -------------  -------------  -------------

                                               83,000         64,000         58,000
Interest on the projected benefit
 obligation                                   520,000        522,000        450,000
Expected return on plan assets               (584,000)      (556,000)      (519,000)
Amortization of prior service cost             43,000         43,000         43,000
Amortization of loss                          336,000        373,000        317,000
                                         -------------  -------------  -------------

Pension cost                            $     398,000  $     446,000  $     349,000
                                         =============  =============  =============

                                                  Years ended December 31,
                                        --------------------------------------------
The following table sets forth the
 Plan's funded status and amounts
 recognized at December 31, 2005, 2004
 and 2003:                                   2005           2004           2003
                                         -------------  -------------  -------------

Vested benefits                         $   8,727,000  $   6,704,000  $   5,764,000
Nonvested benefits                             26,000         30,000         30,000
                                         -------------  -------------  -------------

Accumulated benefit obligation              8,753,000      6,734,000      5,794,000
Effect of anticipated future
 compensation levels and other events      (1,549,000)       425,000        245,000
                                         -------------  -------------  -------------

Projected benefit obligation                7,204,000      7,159,000      6,039,000
                                         -------------  -------------  -------------

Fair value of assets held in the plan       7,376,000      7,438,000      7,396,000
                                         -------------  -------------  -------------

Deficit of projected benefit obligation
 over plan assets                             172,000        279,000      1,357,000
Unrecognized net loss from past
 experience different from that assumed     4,067,000      4,000,000      3,150,000
Adjustment to record minimum liability     (5,616,000)            --             --
Unrecognized prior service cost                    --         43,000         85,000
                                         -------------  -------------  -------------

Net (minimum pension liability) prepaid
 periodic pension cost                  $  (1,377,000) $   4,322,000  $   4,592,000
                                         =============  =============  =============

</TABLE>

     With respect to the above table, the weighted average discount rate used to
measure the projected  benefit  obligation and net (minimum  pension  liability)
prepaid  periodic  pension  cost was  5.75%  for 2005 and 7.5% for both 2004 and
2003; the rate of increase in future compensation levels is 3%; and the expected
long-term rate of return on assets is 8%. At December 31, 2005, the  accumulated
benefit obligation  exceeded the fair value of the Plan's assets which created a
net minimum pension  liability of $1,377,000  which is included as a non-current
liability in the accompanying consolidated balance sheets. Prior to December 31,
2005,  the fair value of the Plan's  assets  exceeded  the  accumulated  benefit
obligation and a net prepaid  periodic pension cost of $4,322,000 and $4,592,000
is included in other assets in the accompanying  consolidated  balance sheets at


                                      F-19

<PAGE>


December  31, 2004 and 2003  respectively.  To  recognize  the  minimum  pension
liability,   the  Company   recorded  an   adjustment  of  $5,616,000  as  other
comprehensive income in the fourth quarter of 2005.


The following sets forth the Plan's change in
 benefit obligation for 2005 and 2004:               Years Ended December 31,
                                                  ------------------------------
                                                           2005            2004
                                                   -------------  --------------
Benefit obligation at beginning of year           $   7,159,000  $    6,039,000
Service cost                                             83,000          64,000
Interest cost                                           520,000          22,000
Benefits paid                                          (664,000)       (779,000)
Actuarial loss                                          106,000       1,313,000
                                                   -------------  --------------

Benefit obligation at end of period               $   7,204,000  $    7,159,000
                                                   =============  ==============

The following sets forth the Plan's change in plan
 assets for 2005 and 2004:                           Years Ended December 31,
                                                  ------------------------------
                                                            2005           2004
                                                   --------------  -------------
Fair value of plan assets at beginning of year    $    7,438,000  $   7,396,000
Return on plan assets                                    584,000        556,000
Employer contributions                                   315,000        175,000
Benefits paid                                           (664,000)      (779,000)
Assets gain/(loss) deferred                             (297,000)        90,000
                                                   --------------  -------------

Fair value of plan assets at end of year          $    7,376,000  $   7,438,000
                                                   ==============  =============

The plan's  fiduciaries  set  investment  policies and strategies for the trust.
Long-term strategic  investment  objectives include preserving the funded status
of the trust and balancing risk and return. The plan's  fiduciaries  oversee the
investment  allocation process,  which includes selecting  investment  managers,
setting  long-term  strategic targets and monitoring asset  allocations.  Target
allocation  ranges  are  guidelines,  not  limitations,  and  occasionally  plan
fiduciaries will approve allocations above or below a target range.

The Company's pension plan weighted-average asset
 allocations at December 31, 2005 and 2004, by
 asset category are as follows:                            December 31,
                                                  ------------------------------
                                                          2005             2004
                                                  -------------   --------------
  Equity Securities                                         67%              70%
  Debt Securities                                           28%              20%
  Cash Accounts                                              5%              10%
                                                  -------------   --------------

                                                           100%             100%
                                                  =============   ==============

The following benefit payments, which reflect expected future
 services, as appropriate, are expected to be paid:            Pension Benefits
                                                               -----------------
                                                          2006 $        113,000
                                                          2007          154,000
                                                          2008          189,000
                                                          2009          211,000
                                                          2010          220,000
  Years 2011-2015                                                     1,628,000

                                                               -----------------
                                                               $      2,515,000
                                                                ================


                                      F-20

<PAGE>


10. Supplemental Disclosures of Cash Flow Information

     Cash paid during the year for interest  amounted to $259,771,  $295,077 and
$499,166 for 2005, 2004 and 2003, respectively. Cash paid during 2005 for income
taxes amounted to $304,000.  The Company did not make any income tax payments in
2004 or 2003.
<TABLE>
<CAPTION>
Non-cash effect of recording minimum pension
liability and exercise of stock warrants                    2005              2004              2003
                                                      -----------------------------------------------------
<S>                                                     <C>                 <C>               <C>
        Recognition of minimum pension liability        $  (5,616,000)      $      --         $      --
        Exercise of stock warrants                                 20              --                --

</TABLE>

11. Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
Summarized quarterly financial data for 2005 and 2004 is as follows:
                                                               Quarter
--------------------------------------------------------------------------------------------------
2005                                    First          Second           Third          Fourth
-------------------------------------------------- --------------- --------------- ---------------
<S>                                <C>             <C>             <C>             <C>
Net sales                          $   23,701,942  $   21,749,284  $   20,296,262  $   17,541,447
Gross profit                            9,951,014       8,842,470       8,796,480       6,628,826
Net income (loss)                       2,503,256       2,019,873       2,271,815        (383,695)
Basic earnings per share           $         0.21  $         0.17  $         0.19  $        (0.03)
Diluted earnings per share         $         0.18  $         0.15  $         0.17  $       ( 0.03)
                                    ==============  ==============  ==============  ==============

                                                               Quarter
--------------------------------------------------------------------------------------------------
2004                                    First          Second           Third          Fourth
-------------------------------------------------- --------------- --------------- ---------------
Net sales                          $   20,764,668  $   19,667,444  $   21,888,273  $   18,329,009
Gross profit                            7,246,289       7,456,847       9,629,472       6,733,692
Net income                                864,581       1,313,466       2,488,531       1,498,801
Basic earnings per share           $         0.08  $         0.12  $         0.22  $         0.13
Diluted earnings per share         $         0.07  $         0.11  $         0.18  $         0.11
                                    ==============  ==============  ==============  ==============

</TABLE>

1.   Earnings (loss) per share  calculations  for each of the quarters are based
     on the weighted average shares  outstanding for each period. The sum of the
     quarters may not  necessarily  be equal to the full year earnings per share
     amounts.

2.   On February  14, 2006,  without  admitting  or denying any  liability,  the
     Company settled the arbitration  proceedings  commenced  against it and its
     wholly owned  subsidiary,  I.C.  Isaacs & Company,  L.P.  (the "L.P.") by a
     former executive.  Pursuant to the settlement,  the Company paid the sum of
     $1.75 million in February 2006 and recorded this  settlement as a charge to
     expense in the fourth quarter of 2005.


                                      F-21

<PAGE>


                                   SCHEDULE II
                          I. C. Isaacs & Company, Inc.
                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

Description                                       Balance        Charged to                       Balance at
                                               Beginning of      Costs and
                                                 the Year         Expenses        Decuction       End of Year
                                              ----------------  --------------  --------------   --------------
<S>                                                 <C>             <C>           <C>                <C>
Year Ended December 31, 2003
      Allowance for doubtful accounts              $  245,000     $   202,000     $ (172,000)        $ 275,000
      Merchandise allowances                        1,558,000       1,920,000     (2,317,000)        1,161,000
      Reserve for sales returns and discounts         126,000       2,477,000     (2,540,000)           63,000

Year Ended December 31, 2004
      Allowance for doubtful accounts              $  275,000     $   370,000     $ (329,000)        $ 316,000
      Merchandise allowances                        1,161,000       3,777,000     (3,197,000)        1,741,000
      Reserve for sales returns and discounts          63,000       4,089,000     (3,579,000)          573,000

Year Ended December 31, 2005
      Allowance for doubtful accounts              $  316,000     $ 1,016,000     $ (632,000)        $ 700,000
      Merchandise allowances                        1,741,000       3,710,000     (4,278,000)        1,173,000
      Reserve for sales returns and discounts         573,000       4,199,000     (3,886,000)          886,000
</TABLE>


                                      F-22

<PAGE>


                                  Exhibit Index
                                  -------------

Exhibit No.                              Description

3.01           Amended and  Restated  Certificate  of  Incorporation  (a copy of
               which was filed with the Commission on October 3, 1997 as Exhibit
               3.01 to the  Company's  Registration  Statement  on Form S-1 (the
               "S-1 Registration Statement"),  and is hereby incorporated herein
               by this reference).

3.02           Amended  and  Restated  By-laws  (a copy of  which  was  filed as
               Exhibit  3.02 to the S-1  Registration  Statement,  and is hereby
               incorporated herein by this reference).

3.03           Certificate of Designation of the Series A Convertible  Preferred
               Stock  of the  Company  (a copy  of  which  was  filed  with  the
               Commission  on November 15, 1999 as Exhibit 3.03 to the Company's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               1999, and is hereby incorporated herein by this reference).

3.04           Certificate of Amendment to the Certificate of Designation of the
               Series A  Convertible  Preferred  Stock of the Company (a copy of
               which was filed with the  Commission  on April 2, 2001 as Exhibit
               3.04 to the  Company's  Annual  Report  on Form 10-K for the year
               ended  December 31, 2000,  and is hereby  incorporated  herein by
               this reference).

3.05           Second Certificate of Amendment to the Certificate of Designation
               of the Series A  Convertible  Preferred  Stock of the  Company (a
               copy of which was filed with the  Commission on November 14, 2002
               as Exhibit 3.05 to the  Company's  Quarterly  Report on Form 10-Q
               for the quarter  ended  September 30, 2002 (the  "September  2002
               10-Q"), and is hereby incorporated herein by this reference).

3.06           Certificate  of Amendment of Amended and Restated  Certificate of
               Incorporation  (a copy of which was filed with the  Commission on
               August 14, 2003 as Exhibit 3.06 to the Company's Quarterly Report
               on Form 10-Q for the quarter  ended June 30, 2003 (the "June 2003
               10-Q"), and is hereby incorporated herein by this reference).

4.01           Specimen Common Stock Certificate (a copy of which was filed with
               the  Commission  on  October  3,  1997  as  Exhibit  4.01  to the
               Company's   Registration   Statement   on  Form  S-1  (the   "S-1
               Registration  Statement"),  and is hereby  incorporated herein by
               this reference).

4.02           Warrant  No.  1  issued  by the  Company  to  Textile  Investment
               International S.A. ("Textile") for the purchase of 300,000 shares
               of Common Stock (a copy of which was filed with the Commission on
               November 14, 2002 as Exhibit 4.02 to the September 2002 10-Q, and
               is hereby incorporated herein by this reference).

4.03           Warrant No. 2 issued by the Issuer to Textile for the purchase of
               200,000  shares  of  Common  Stock (a copy of which  was filed as
               Exhibit  4.03  to  the  September   2002  10-Q,   and  is  hereby
               incorporated herein by this reference).

4.04           Amended and Restated  Omnibus Stock Plan as in effect on June 30,
               2003 (a copy of which was filed as Exhibit  4.04 to the June 2003
               10-Q, and is hereby incorporated herein by this reference).

4.05           2005  Non-Employee  Directors  Stock Option Plan (a copy of which
               was filed with the  Commission on August 10, 2005 as Exhibit 4.05
               to Amendment  No. 1 to the  Company's  Registration  Statement on
               Form S-2 (the "S-2 Amendment"), and is hereby incorporated herein
               by this reference).

10.01          Form of  Indemnification  Agreement (a copy of which was filed as
               Exhibit 10.09 to the S-1  Registration  Statement,  and is hereby
               incorporated herein by this reference).


<PAGE>

10.02          Girbaud  Trademark  License and  Technical  Assistance  Agreement
               dated  November  1,  1997 (a copy of  which  was  filed  with the
               Commission on November 26, 1997 as Exhibit 10.26 to Amendment No.
               2 to the S-1  Registration  Statement ("S-1 Amendment 2"), and is
               hereby incorporated herein by this reference).

10.03          Defined  Benefit  Pension Plan (a copy of which was filed with as
               Exhibit   10.27(a)  to  S-1   Amendment  No.  2,  and  is  hereby
               incorporated herein by this reference).

10.04          First  Amendment to Defined Benefit Pension Plan (a copy of which
               was filed as Exhibit  10.27(b) to S-1  Amendment 2, and is hereby
               incorporated herein by this reference).

10.05          Girbaud  Trademark  License and  Technical  Assistance  Agreement
               dated  January  15,  1998 (a copy of  which  was  filed  with the
               Commission on March 27, 1998 as Exhibit 10.26(a) to the Company's
               Annual  Report on Form 10-K for the year ended  December 31, 1997
               (the  "1997  10-K"),  and is hereby  incorporated  herein by this
               reference).

10.06          Girbaud Trademark License and Technical  Assistance Agreement for
               Women's Collection dated March 4, 1998 (a copy of which was filed
               as Exhibit 10.26(b) to the 1997 10-K, and is hereby  incorporated
               herein by this reference).

10.07          Amendment  No. 1 dated  June 18,  1998 to Girbaud  Trademark  and
               Technical  Assistance Agreement for Women's Collection (a copy of
               which was filed with the Commission on August 12, 1998 as Exhibit
               10.32 to the  Company's  Quarterly  Report  on Form  10-Q for the
               quarter ended June 30, 1998, and is hereby incorporated herein by
               this reference).

10.08          Amendment No. 1 dated November 12, 1998 to Trademark  License and
               Technical  Assistance  Agreement  for  Men's  Collections  by and
               between I.C.  Isaacs & Co., L.P. and Latitude  Licensing Corp. (a
               copy of which was filed with the  Commission on March 30, 1999 as
               Exhibit 10.40 to the Company's Annual Report on Form 10-K for the
               year ended  December  31, 1998 (the "1998  10-K"),  and is hereby
               incorporated herein by this reference).

10.09          Amendment No. 2 dated November 12, 1998 to Trademark  License and
               Technical  Assistance  Agreement for Women's  Collections  by and
               between I.C.  Isaacs & Co., L.P. and Latitude  Licensing Corp. (a
               copy of which was filed as Exhibit 10.41 to the 1998 10-K, and is
               hereby incorporated herein by this reference).

10.10          Executive  Employment  Agreement  by and  between  I.C.  Isaacs &
               Company, Inc. and Daniel Gladstone dated January 21, 1999 (a copy
               of which was filed as Exhibit  10.42 to 1998 10-K,  and is hereby
               incorporated herein by this reference).

10.11          Amendment  No. 1 dated  March 4, 1998 to  Trademark  License  and
               Technical  Assistance  Agreement  for  Men's  Collections  by and
               between the Company and Latitude Licensing Corp. (a copy of which
               was  filed  as  Exhibit  10.56 to the 1998  10-K,  and is  hereby
               incorporated herein by this reference).

10.12          Amendment No. 3 dated December 23, 1998 to Trademark  License and
               Technical  Assistance  Agreement for Women's  Collections  by and
               between the Company and Latitude Licensing Corp. (a copy of which
               was  filed  as  Exhibit  10.57 to the 1998  10-K,  and is  hereby
               incorporated herein by this reference).

10.13          Amendment No. 4 to the Trademark License and Technical Assistance
               Agreement  Covering Women's Products dated August 2, 1999 (a copy
               of which was filed  with the  Commission  on August  13,  1999 as
               Exhibit 10.60 to the Company's  Quarterly Report on Form 10-Q for
               the  quarter  ended  June 30,  1999,  and is hereby  incorporated
               herein by this reference).

10.14          Amendment  No. 2 dated June 21, 2000,  to  Trademark  License and
               Technical  Assistance  Agreement  Covering  Men's  Products dated
               January 15, 1998, by and between  Latitude  Licensing  Corp.  and
               I.C.  Isaacs & Company L.P.  3.03 (a copy of which was filed with
               the  Commission  on  August  14,  2000 as  Exhibit  10.75  to the
               Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
               June 30, 2000 (the "June 2000 10-Q"), and is hereby  incorporated
               herein by this reference).


<PAGE>


10.15          Amendment  No. 5 dated June 21, 2000,  to  Trademark  License and
               Technical  Assistance  Agreement  Covering Women's Products dated
               January 15, 1998, by and between  Latitude  Licensing  Corp.  and
               I.C.  Isaacs & Company L.P. (a copy of which was filed as Exhibit
               10.76 to the June 2000 10-Q, and is hereby incorporated herein by
               this reference).

10.16          Amendment  No.3 to  Trademark  License and  Technical  Assistance
               Agreement  Covering  Men's Products Dated May 31, 2001 (a copy of
               which was filed with the  Commission  on April 1, 2002 as Exhibit
               10.92 to the  Company's  Annual  Report on Form 10-K for the year
               ended  December 31, 2001,  and is hereby  incorporated  herein by
               this reference).

10.17          Amended and Restated Executive  Employment  Agreement dated April
               17, 2002,  by and between the Company and Eugene C.  Wielepski (a
               copy of which was filed with the  Commission on April 22, 2002 as
               Exhibit 10.94 to Amendment  No. 1 to the Company's  Annual Report
               on Form 10-K for the year ended December 31, 2001 (the "2001 10-K
               Amendment"),   and  is   hereby   incorporated   herein  by  this
               reference).

10.18          Amended and Restated Executive  Employment  Agreement dated April
               17, 2002,  by and between the Company and Daniel J.  Gladstone (a
               copy of which was filed as Exhibit  10.95 to  Amendment  No. 1 to
               the 2001 10-K  Amendment,  and is hereby  incorporated  herein by
               this reference).

10.19          Amendment No. 4 dated  October 2, 2002 to the  Trademark  License
               and Technical  Assistance Agreement dated January 15, 2002 by and
               between Latitude Licensing Corp. and I.C. Isaacs & Company,  L.P.
               (a copy of which was filed with the  Commission  on November  14,
               2002 as Exhibit 10.102 to the Company's  Quarterly Report on Form
               10-Q for the quarter  ended  September  30, 2002 (the  "September
               2002  10-Q"),   and  is  hereby   incorporated   herein  by  this
               reference).

10.20          Amendment No. 6 dated  October 2, 2002 to the  Trademark  License
               and Technical  Assistance Agreement for Women's Collections dated
               October 2, 2002 by and between Latitude  Licensing Corp. and I.C.
               Isaacs &  Company,  L.P.  (a copy of which was  filed as  Exhibit
               10.103 to the  September  2002 10-Q,  and is hereby  incorporated
               herein by this reference).

10.21          Amendment  no. 7, dated March 31, 2003 to the  Trademark  License
               and  Technical   Assistance  Agreement  for  Women's  Collections
               between  Latitude  Licensing Corp. and I.C. Isaacs & Company L.P.
               (a copy of which was filed with the  Commission  on April 4, 2003
               as Exhibit 10.110 to the Company's Annual Report on Form 10-K for
               the year ended December 31, 2002 (the "2002 10-K"), and is hereby
               incorporated herein by this reference).

10.22          Amendment no. 5 dated March 31, 2003 to the Trademark License and
               Technical Assistance Agreement dated the 1st day of November 1997
               by and between Latitude Licensing Corp. and I.C. Isaacs & Company
               L.P.  (a copy of which  was filed as  Exhibit  10.111 to the 2002
               10-K, and is hereby incorporated herein by this reference).

10.23          Amendment  dated as of May 15th, 2003 to the Amended and Restated
               Employment  Agreement  between  I.C.  Isaacs & Company,  L.P. and
               Daniel  J.  Gladstone  (a  copy  of  which  was  filed  with  the
               Commission  on May 15,  2003 as Exhibit  10.114 to the  Company's
               Quarterly  Report on Form 10-Q for the  quarter  ended  March 31,
               2003 (the "March 2003 10-Q"), and is hereby  incorporated  herein
               by this reference).

10.24          Amendment  dated  as of  March  31st,  2003  to the  Amended  and
               Restated Employment Agreement between I.C. Isaacs & Company, L.P.
               and  Eugene C.  Wielespki  (a copy of which was filed as  Exhibit
               10.115 to the March 2003 10-Q, and is hereby  incorporated herein
               by this reference).


<PAGE>


10.25          Amendment No. 8, dated October 29, 2003 to the Trademark  License
               and  Technical   Assistance  Agreement  for  Women's  Collections
               between  Latitude  Licensing Corp. and I.C. Isaacs & Company L.P.
               (a copy of which was filed with the  Commission  on November  14,
               2003 as Exhibit 10.118 to the Company's  Quarterly Report on Form
               10-Q for the quarter  ended  September  30, 2003 (the  "September
               2003  10-Q"),   and  is  hereby   incorporated   herein  by  this
               reference).

10.26          Amendment No. 6, dated October 29, 2003 to the Trademark  License
               and Technical  Assistance Agreement dated the 1st day of November
               1997 by and between  Latitude  Licensing  Corp. and I.C. Isaacs &
               Company L.P. (a copy of which was filed as Exhibit  10.119 to the
               September  2003 10-Q, and is hereby  incorporated  herein by this
               reference).

10.27          Amendment  dated  October  13, 2004 to the  Executive  Employment
               Agreement  dated  December 9, 2003 by and Between  I.C.  Isaacs &
               Company,  L.P. and Peter J. Rizzo (a copy of which was filed with
               the Commission as Exhibit 10.120 to the Company's  Report on Form
               8-K filed on October 22, 2004 (the  "October 22, 2004 Form 8-K"),
               and is hereby incorporated herein by this reference).

10.28          Executive  Employment  agreement  made as of the 1st day of March
               2004,  by and  between  I.C.  Isaacs & Company LP and Jesse de la
               Rama (a copy of which was filed as Exhibit  10.121 to the October
               22,  2004 Form 8-K,  and is  hereby  incorporated  herein by this
               reference).

10.29          Loan and Security  Agreement Dated as of December 30, 2004 by and
               between I.C. Isaacs & Company,  L.P. and Wachovia Bank,  National
               Association  (a copy of which was filed  with the  Commission  as
               Exhibit  10.122  to the  Company's  Report  on Form 8-K  filed on
               January  6,  2005,  and is  hereby  incorporated  herein  by this
               reference).

10.30          Amendment  No. 7,  dated  December  16,  2004,  to the  Trademark
               License and Technical  Assistance  Agreement dated the 1st day of
               November 1997 by and between  Latitude  Licensing  Corp. and I.C.
               Isaacs  &  Company  L.P.  (a copy of  which  was  filed  with the
               Commission  on March 31, 2005 as Exhibit  10.123 to the Company's
               Annual  Report on Form 10-K for the year ended  December 31, 2004
               (the  "2004  10-K"),  and is hereby  incorporated  herein by this
               reference).

10.31          Amendment  No. 9,  dated  December  16,  2004,  to the  Trademark
               License   and   Technical   Assistance   Agreement   for  Women's
               Collections dated March 4, 1998 by and between Latitude Licensing
               Corp.  and I.C.  Isaacs & Company L.P. (a copy of which was filed
               as Exhibit  10.124 to the 2004 10-K,  and is hereby  incorporated
               herein by this reference).

10.32          Assignment of warrant to purchase 300,000 shares of the Company's
               common stock dated  September  28th,  2004 by Textile  Investment
               International S.A. to Rockbrook Investments SA., and consented to
               on April 13,  2005 by the  Company  (a copy of which was filed as
               Exhibit 99.01 to the S-2  Amendment,  and is hereby  incorporated
               herein by this reference).

10.33          Assignment of warrant to purchase 200,000 shares of the Company's
               common stock dated  September  28th,  2004 by Textile  Investment
               International  S.A. to Rockbrook  Investments SA. , and consented
               to on April 13, 2005 by the Company (a copy of which was filed as
               Exhibit 99.02 to the S-2  Amendment,  and is hereby  incorporated
               herein by this reference).

10.34          Executive  Employment  Agreement  dated December 19, 2005 between
               I.C.  Isaacs & Company  L.P.  and Gregg A. Holst (a copy of which
               was filed as Exhibit  10.34 to the  Company's  Report on Form 8-K
               filed on December 29, 2005, and is hereby  incorporated herein by
               this reference).

10.35          Amendment No. 8, dated March 29, 2006,  to the Trademark  License
               and Technical  Assistance Agreement dated the 1st day of November
               1997 by and between  Latitude  Licensing  Corp. and I.C. Isaacs &
               Company L.P.


<PAGE>


10.36          Amendment No. 10, dated March 29, 2006, to the Trademark  License
               and Technical  Assistance Agreement for Women's Collections dated
               March 4, 1998 by and between  Latitude  Licensing  Corp. and I.C.
               Isaacs & Company L.P.

14.01          Code of Ethics for Senior Financial Executives

14.02          Code of Ethics and Business Conduct

21.01          List of  Subsidiaries (a copy of which was filed as Exhibit 21.01
               to the S-2 Amendment,  and is hereby  incorporated herein by this
               reference).

23.01          Consent of BDO Seidman, LLP

31.01          Certification  Pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002

31.02          Certification  Pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002

32.01          Certification  Pursuant to Section 1350 of chapter 63 of Title 18
               of the United States Code