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, 2003

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. Yes     No  X
                                                             ---    ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |_|

     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, 2003, was $2,903,019
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 26, 2004, 11,134,657 shares of Common Stock were outstanding.

                       Document Incorporated by Reference

     Specified portions of the definitive Proxy Statement for the 2004 Annual
Meeting of Stockholders of I.C. Isaacs & Company, Inc. for the year ending
December 31, 2003 are incorporated by reference into Part III hereof.

<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 2.   PROPERTIES                                                               11
  ITEM 3.   LEGAL PROCEEDINGS                                                        11
  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                      11

                                           PART II
  ITEM 5.   MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                                                                                     12
  ITEM 6.   SELECTED FINANCIAL DATA                                                  13
  ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS                                                   15
  ITEM 7A.  QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK                 22
  ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                              23
  ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE                                                    23
  ITEM 9A.  CONTROLS AND PROCEDURES                                                  23

                                           PART III
*ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY                          24
*ITEM 11.   EXECUTIVE COMPENSATION                                                   24
*ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT           24
*ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                           24
*ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES                                   24
                                           PART IV

  ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
                                                                                     25

SIGNATURES                                                                           27
</TABLE>



___________

*        Incorporated  by reference to the  Registrant's  definitive  Proxy
         Statement on Schedule 14A (the "Proxy  Statement") for the 2004 Annual
         Meeting of  Stockholders.  The Proxy  Statement will be filed not later
         than 120 days after the end of the fiscal year covered by this Annual
         Report on Form 10-K.


                                       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.

<PAGE>

                                     PART I

ITEM 1. BUSINESS

Introduction

     I.C.  Isaacs  &  Company,   Inc.,   together  with  its   predecessors  and
subsidiaries,  including I.C.  Isaacs & Company L.P.,  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,  Puerto Rico and
Canada. The Girbaud brand is an internationally recognized designer label with a
distinct European influence. 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.  In August 1998, the Company  introduced a women's
sportswear  collection  under the  Girbaud  brand,  which  also  includes a wide
assortment of bottoms,  tops and outerwear.  Sales of Girbaud  branded  products
accounted for all of the Company's net sales in 2003 and 2002.

Products

     The Company's jeanswear and sportswear  collections under the Girbaud brand
include a broad range of product offerings for young men and women,  including a
variety of tops,  bottoms  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 label. The Girbaud  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 50. Estimated  retail prices range from $24 to $30 for t-shirts,  $50
to $90 for  tops  and  bottoms,  $60 to $90  for  sweaters  and $80 to $300  for
outerwear.

Customers and Sales

     The Company's  products are sold in over 2,300 specialty stores,  specialty
store chains and department stores. 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
February 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  1,600  stores in the  United  States  and  Puerto  Rico,
including major department stores such as Macy's East,  Macy's West,  Dillard's,
Burdines,  Dayton Hudson,  Saks, Inc, and Carson Pirie Scott, and many prominent
specialty stores such as The Lark. The Company's Girbaud women's line is sold to
more than 1,100  stores.  None of the Company's  customers  accounted for 10% or
more of sales in 2003 or 2002. The Company's Girbaud brand products are sold and
marketed   domestically   under  the  direction  of  a  12  person  sales  force
headquartered in New York.

                                       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
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 8 people on
the design staff in New York City. Design  expenditures were  approximately $1.4
million in 2003 and $1.2 million in 2002.

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, radio and special events. In 2003, the
Company continued to utilize advertising media to promote its products,  but did
so at a  substantially  reduced  levels of spending.  The Company's  advertising
expenditures were approximately $0.6 million,  or 0.9% of net sales, in 2003 and
$2.0 million, or 2.9% of net sales, in 2002.

Product Sourcing

         General

     All of the  manufacturing  and sourcing of the  Company's  products in 2003
were done by domestic and foreign independent contractors. Each of the Company's
independent  contractors and independent buying agents has an agreement with the
Company pursuant to which 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 all or 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

     Virtually all of the Company's  sportswear products other than t-shirts are
produced by approximately  17 different  manufacturers in six countries in Asia.
During  2003,   three  of  the  Company's   Asian   contractors   accounted  for
approximately  33%, 10% and 7% of the Company's  total unit  production in 2003.
The Company has well  established  relationships  with many of its  contractors,
although it does not have  written  agreements  with them.  The Company  retains
independent  buying  agents in various  countries in Asia 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 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  production  represented  approximately  62% of the  Company's  total unit
production in 2003.  Purchasing from Asian  contractors  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
estimates may differ from actual orders.  If this happens,  the Company may miss

                                       5
<PAGE>

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. The  contractor  must then purchase the approved  fabric as
part of the package. 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

     To take advantage of the shorter  production  time  associated with T-shirt
products,  the Company purchases  substantially all of its T-shirt blanks from a
supplier in Mexico.  This supplier  maintains T-shirt blanks at its location and
provides  both full service  packaging  services for finished  T-shirts and also
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  39% of the Company's  total unit production in 2003.
During  2003,  two  of  the  Company's   domestic   contractors   accounted  for
approximately 30% and 7% of the Company's total unit production in 2003.

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 and product  development staff 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  in  Asia  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
Asia 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.  The Company generally  receives orders for its products three to five
months  prior  to the time the  products  are  delivered  to the  stores.  As of
December  31,  2003,  the Company had an order  backlog of  approximately  $18.3
million,  compared to approximately  $10.5 million of such orders as of December
31,  2002.  The  backlog of orders at any given time is  affected by a number of
factors, including seasonality, weather conditions,  scheduling of manufacturing

                                       6
<PAGE>

and  shipment  of  products.  All such orders are  subject to  cancellation  for
reasons such as late delivery.

Licenses and Other Rights Agreements

     Girbaud

     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  (the  "Licensor").  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 the Licensor 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  include the right to manufacture the licensed
products in a number of foreign  countries,  and both had  initial  terms of two
years.

     Stock Ownership by a Former Licensor

     Prior to 2002,  the Company  issued to a former  licensor of the Company an
aggregate of 3.3 million  shares of Series A Convertible  Preferred  Stock,  par
value  $.0001 per share,  of the  Company  (the  "Preferred  Stock") and 666,667
shares of the Company's  common stock.  Except as required by law, the Preferred
Stock was not entitled to vote on any matters, and had a liquidation  preference
of $1.00 per share plus any declared but unpaid  dividends.  The Preferred Stock
also  provided  for  certain  redemption  rights  to  the  Company  and  certain
conversion  rights to the  holder of the  Preferred  Stock.  Prior to 2002,  the
Company also issued to this former  licensor a subordinated  secured  promissory
note of the Company in the principal amount of $7.2 million,  with principal and
interest  at an  annual  rate of 8%  payable  in  varying  installments  through
December 2006 (the "Original Note").

     Girbaud Transaction

     On May 6, 2002,  Textile  Investment  International  S.A.  ("Textile"),  an
affiliate of the Licensor,  acquired the Preferred  Stock, the 666,667 shares of
common stock and the  Original  Note from the former  licensor.  Pursuant to the
terms of a Framework  Agreement  entered  into on May 14,  2002 by the  Company,
Textile, the Licensor and Wurzburg (the "Framework Agreement"), the Company:

     --   amended the terms of the Preferred Stock so that the Preferred Stock
          became immediately convertible, but only into common stock of the
          Company. In November 2002, Textile converted all the Preferred Stock
          into 3.3 million shares of common stock of the Company,

     --   granted Textile warrants to purchase 500,000 shares of the Company's
          Common Stock for $0.75 per share,

     --   entered into a Stockholders' Agreement with Textile establishing
          certain terms and conditions regarding the acquisition and disposition
          of the Company's securities as well as certain corporate governance
          matters, and

     --   amended the Girbaud Agreements to

          --   add an additional option for the Company to extend the term by
               four additional years through 2011 and

                                       7
<PAGE>

          --   provide for the payment to the Licensor of consulting fees of
               $125,000 per agreement for calendar year 2002, and $150,000 per
               agreement for each remaining calendar year under the term of each
               agreement (the "Consultants' Fees").

     As a result of those transactions, Textile and Wurzburg (which owns 500,000
shares of the  Company's  common stock) own  approximately  40% of the Company's
common stock and, as the Company's largest stockholders, they may designate five
of the nine nominees for election as directors of the Company.

     The Company's business is dependent upon its use of the Girbaud brand names
and images,  which are in turn dependent upon the existence and  continuation of
certain licenses as described below.

     Girbaud Domestic Licenses

     Unless  extended  in  accordance  with the  options  added  to the  Girbaud
Agreements  pursuant  to the  Framework  Agreement,  the  terms  of the  Girbaud
Agreements  will  expire at the end of 2007.  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 the Licensor over the final designs of the
products,  marketing and advertising  material and manufacturing  premises.  The
Girbaud  Agreements provide that they may be terminated by the Licensor 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 the  Licensor  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 $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.

     Under the Girbaud Women's Agreement as amended,  the Company is required to
make  royalty  payments to the Licensor 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  $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. In addition, over the term of the Girbaud Women's
Agreement  the  Company  is  required  to  contribute  $190,000  per year to the
Licensor's advertising and promotional expenditures for the Girbaud brand.

     The Girbaud  Women's  Agreement  initially  required  the Company to open a
Girbaud  flagship store for the sale of the Company's  Girbaud men's and women's
lines  and other  Girbaud  licensed  merchandise  in New York City by the end of
1998. In December 1998, the Girbaud Women's  Agreement was amended to defer this
requirement  for one  year  and to  provide  that  the  Company  would  spend an
additional  $1.8 million on enhanced  sales and  marketing  in 1999.  In August,
1999,  the Company  issued  500,000  shares of  restricted  common  stock to the
Licensor (which was subsequently  transferred to Wurzburg) in connection with an
amendment of the Girbaud  Women's  Agreement to further defer the  obligation to
open a Girbaud  retail store.  Under the new  agreement,  if the Company had not
signed a lease  agreement for a Girbaud  retail store by July 31, 2002, it would
become obligated to pay the Licensor an additional $500,000 in royalties. During
2001,  the Company  decided not to sign a lease  agreement for a Girbaud  retail

                                       8
<PAGE>

store and paid $175,000 of this royalty, the remainder of which was paid by July
31, 2002. The entire amount was expensed in the fourth quarter of 2001.

     The Company is obligated  to pay a minimum of $6.1  million  during 2004 in
the  form  of  minimum  royalty  payments,  fashion  show  and  advertising  and
promotional  expenses pursuant to the Girbaud license  agreements.  In 2004, the
Company expects that  substantially  all of its net sales will come from apparel
associated with the Girbaud licenses.

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  2,300 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.  In 2003 and 2002, the Company's credit
losses were $0.3 million and $0.5 million, respectively and the Company's actual
credit losses as a percentage of net sales were 0.5% and 0.7%, respectively.

Competition

     The apparel industry is highly competitive and fragmented and is subject to
rapidly changing consumer demands and preferences. The Company believes that its
continued  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.  The Company
competes with numerous apparel brands and distributors (including Diesel, Enyce,
Ecko,  Rocawear and Sean John).  Many of the Company's  competitors have greater
financial  resources  than  the  Company.  Although  the  level  and  nature  of
competition  differ among its product  categories,  the Company believes that it
competes on the basis of its brand image,  quality of design and value  pricing.
The  Company  continued  to  experience  intense  competition  in 2003 from many
established and new competitors at both the specialty store and department store
channels of distribution.

Management Information Systems

     The Company believes that advanced  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,  retailing 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.  Via electronic data  interchange,  the
Company is able to ship orders,  from  inventory on hand,  to certain  customers
within 24 to 72 hours from the time of order receipt.

                                       9
<PAGE>

Employees

     As  of  March  26,  2004,  the  Company  had  approximately  100  full-time
employees.  The Company is not a party to any labor agreements,  and none of its
employees  are  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.  The Company also engaged
the services of Peter J Rizzo as its Chief  Executive  Officer in December 2003,
and the  services of Jesse de la Rama as its Vice  President  of  Merchandise  &
Retail Development in March 2004.

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.


                                       10
<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
----------------------------------------------------------------------------------------------
                                        Administrative Headquarters and
<S>                                                                                    <C>
Baltimore, MD              Owned        Office Facilities                              40,000

                                        Management, Sales,
                                        Merchandising, Marketing and
New York, NY              Leased        Sourcing Headquarters                          11,800

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

         The Company is not presently a party to any litigation.

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

         During the fourth quarter of 2003, there were no matters submitted to a
vote of the Company's stockholders.

                                       11
<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 March 26, 2004, the Company had
approximately 1,000 holders of record 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 29, 2004 was $0.74. The table below
sets forth, for the periods indicated, 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.:

<TABLE>
<CAPTION>

Quarter Ended               High              Low              High              Low
-------------               ----              ---              ----              ---
                                     2003                               2002
                      ----------------------------------------------------------------------

<S>   <C>                   <C>              <C>               <C>              <C>
March 31                    $0.70            $0.51             $0.45            $0.32
June 30                     $0.40            $0.75             $1.57            $0.37
September 30                $1.12            $0.21             $2.01            $1.15
December 31                 $1.10            $0.70             $1.41            $0.56
</TABLE>


     The Company anticipates that all earnings of the Company will be retained
for the foreseeable future for use in the operation of the Company's 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 the
Company's 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 purpose of
the Plan is to promote the long-term growth and profitability of the Company by
providing key people with incentives to improve stockholder value and contribute
to the growth and financial success of the Company, and by enabling the Company
to attract, retain and reward the best-available persons for positions of
substantial responsibility. The maximum number of shares of Common Stock that
could be issued with respect to awards granted under the Plan was 500,000. The
Company's stockholders approved an increase in the shares of Common Stock that
may be issued with respect to awards granted under the Plan to an aggregate of
1.1 million shares, at the 1999 annual meeting of stockholders, approved an
additional increase to an aggregate of 1.6 million shares at the 2002 annual
meeting of stockholders and approved an additional increase to an aggregate of
2.2 million shares at the 2003 annual meeting of stockholders. 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. Through December 31, 2003, the Company had granted
stock options under the Plan exercisable upon vesting for an aggregate of
2,070,250 stock options. The weighted average exercise price of such options is
$1.08 per share. Through December 31, 2003, none of those stock options had been
exercised. 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
(the "Form S-8") to register shares of Common Stock issuable pursuant to awards
granted under the Plan.

                                       12
<PAGE>

     On May 6, 2002, Textile acquired the Preferred Stock, 666,667 shares of
common stock and the Original Note from a former licensor. In December 2002,
Textile converted all the Preferred Stock into 3.3 million shares of Common
Stock of the Company. See, "Business - Licenses and Other Rights Agreements -
Girbaud Transaction. In September 2002, the Company, pursuant to the terms of
the Framework Agreement, granted Textile warrants to purchase 500,000 shares of
the Company's Common Stock for $0.75 per share. The warrants were valued using
the Black-Scholes option-pricing model and recorded as a preferred stock
dividend at the time of issuance.


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, 2003, 2002 and 2001 and the balance sheet data as of December 31,
2003 and 2002 are derived from the consolidated financial statements of the
Company which have been audited by BDO Seidman, LLP, independent certified
public accountants, included elsewhere herein. The statement of operations data
for the years ended December 31, 2000 and 1999 and the balance sheet data as of
December 31, 2001, 2000 and 1999 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,
                                     -----------------------------------------------------------------------
                                        2003           2002          2001           2000           1999
                                     -----------    -----------   ------------   ------------   ------------
Balance Sheet Data:                                              (in thousands)
<S>                                      <C>            <C>           <C>            <C>            <C>
Working capital                          $4,578         $6,154        $11,154        $16,777        $22,610
Total assets                             20,090         22,448         22,333         36,430         40,435
Total debt                               10,782         11,588          6,841         14,813          3,651
Redeemable preferred stock                   --             --          3,300          3,300          2,000
Stockholders' equity                      5,547          7,242          8,816         13,503         27,751
</TABLE>



                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                     -----------------------------------------------------------------------
                                        2003           2002          2001           2000           1999
                                     -----------    -----------   ------------   ------------   ------------
Statement of Operations Data:                         (in thousands except per share data)
<S>                                     <C>            <C>            <C>            <C>            <C>
Net sales                               $66,224        $65,798        $82,312        $95,861        $83,463
Cost of sales                            43,706         41,776         55,108         67,031         60,956
                                     -----------    -----------   ------------   ------------   ------------

    Gross profit                         22,518         24,022         27,204         28,830         22,507
Selling expenses                         11,444         13,763         12,369         14,464         12,330
License fees                              4,163          5,018          5,211          8,343          6,977
Distribution and shipping expenses        2,062          2,393          2,976          3,192          2,790
General and administrative expenses       5,244          6,715          6,648          7,229          7,754
Termination of license agreement             --             --             --          8,068             --
Provision for severance                      --            400            726            385            750
Impairment of intangibles                    --             --             --            743             --
                                     -----------    -----------   ------------   ------------   ------------

    Operating loss                        (395)        (4,267)          (726)       (13,594)        (8,094)
Interest, net                             1,009            657          1,307          1,337          1,624
Loss from sale of property                  415             --             --             --             --
Other income (expense)                      124           (39)          (149)            139            353
                                     -----------    -----------   ------------   ------------   ------------

    Loss from continuing operations
    before income taxes                 (1,695)        (4,963)        (2,182)       (14,792)        (9,365)

Income tax (provision)/benefit               --             --             --             48          (110)
                                     -----------    -----------   ------------   ------------   ------------

Loss from continuing operations         (1,695)        (4,963)        (2,182)       (14,744)        (9,475)
                                     -----------    -----------   ------------   ------------   ------------

Loss from operations of
discontinued subsidiary                      --             --        (1,310)          (503)          (737)
Loss from sale of discontinued
subsidiary                                   --             --        (1,182)             --             --
                                     -----------    -----------   ------------   ------------   ------------

Loss from discontinued operations            --             --        (2,492)          (503)          (737)
                                     -----------    -----------   ------------   ------------   ------------

Net loss                                (1,695)        (4,963)        (4,674)       (15,247)       (10,212)
                                     -----------    -----------   ------------   ------------   ------------

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

Net loss attributable to common
stockholders                           $(1,695)       $(5,559)       $(4,674)      $(15,247)      $(10,212)
                                     ===========    ===========   ============   ============   ============

Basic and diluted loss per share
from continuing operations              $(0.15)        $(0.61)        $(0.28)        $(1.93)        $(1.37)

Basic and diluted loss per share
from discontinued operations                 --             --         (0.32)         (0.07)         (0.10)

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

                                     -----------    -----------   ------------   ------------   ------------
Basic and diluted net loss per share   $( 0.15)       $( 0.68)       $( 0.60)        $(2.00)        $(1.47)
                                     ===========    ===========   ============   ============   ============

Weighted average common shares
outstanding                              11,135          8,160          7,854          7,639          6,935
</TABLE>


                                       14
<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

     Over the past several years, the Company has shifted its focus from various
brands to the Girbaud brand exclusively. In 2000, the Company terminated its
license for use of the BOSS brand and it did not renew its Beverly Hills Polo
Club licensing agreements in the United States and Puerto Rico when those
licenses expired on December 31, 2001. During 2003 and 2002, the Company focused
all of its resources on the Girbaud men's and women's lines. The Company's
brand-driven market strategy has been evidenced by the increase of licensed,
branded apparel as a percentage of the Company's net sales. In 2003 and 2002,
all of the Company's net sales were from the Girbaud brand. This compares to
84.9%, 8.6% and 2.4% of net sales for the Girbaud, Beverly Hills Polo Club and
BOSS brands in 2001 respectively.

Significant 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 within 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 judgments 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 judgement by the management of
the Company. Actual uncollectible amounts may differ from the Company's
estimate.

     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 judgement by the management
of the Company. Actual gross margins on sales of excess inventory may differ
from the Company's estimate.

                                       15
<PAGE>

<TABLE>
<CAPTION>

Results of Operations

                                                              Year Ended December 31,
                                                      ----------------------------------------
                                                         2003          2002           2001
                                                      -----------    ----------    -----------

<S>                                                       <C>           <C>            <C>
Net sales                                                 100.0%        100.0%         100.0%
Cost of sales                                              66.0%         63.5%          67.0%
                                                      -----------    ----------    -----------

Gross profit                                               34.0%         36.5%          33.0%
                                                      -----------    ----------    -----------

Selling expenses                                           17.2%         21.0%          15.0%
License fees                                                6.3%          7.6%           6.3%
Distribution and shipping expenses                          3.2%          3.6%           3.6%
General and administrative expenses                         7.9%         10.2%           8.1%
Provision for severance                                       --          0.6%           0.9%
                                                      -----------    ----------    -----------

Operating loss                                            (0.6%)        (6.5%)         (0.9%)
                                                      ===========    ==========    ===========
</TABLE>


Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Net Sales.

     Net sales increased 0.6% to $66.2 million in 2003 from $65.8 million in
2002. Whereas net sales did not significantly change in 2003 compared to 2002,
net sales trended up towards the second half of 2003 compared to the second half
of 2002. Net sales were $16.5 million, $16.2 million, $16.4 million and $17.1
million in the first, second, third and fourth quarters of 2003 respectively
compared to $20.2 million, $17.0 million $16.3 million and $12.3 million for the
same quarters of 2002 respectively. Net sales of Girbaud men's sportswear
increased $1.0 million or 1.8% to $57.2 million. Net sales of Girbaud women's
sportswear decreased $0.6 million or 6.3% to $9.0 million.

Gross Profit.

     Gross profit decreased 6.2% to $22.5 million in 2003 from $24.0 million in
2002. Gross profit as a percentage of net sales decreased to 34.0% from 36.5%
over the same period. The decrease in gross profit resulted from sales to
off-price retailers at reduced selling prices and an increase in air freight
costs affecting gross profit margins in 2003. In an effort to decrease the
inventory level and to generate cash for first quarter 2003 working capital
needs, the Company generated significant sales early in 2003 to a mass retailer
at gross profit margins significantly below the margins on goods that are sold
to department and specialty stores. To properly reflect inventory at its net
realizable value at the end of the prior year, the Company had an inventory
writedown of $1.8 million at December 31, 2002. Accordingly, this generated
minimal gross profit associated with these sales to the mass retailer in the
first quarter of 2003. The Company's inventory writedown at the end of 2003 was
$0.3 million. To help identify inventory shortages as well as excess inventory,
the Company monitors inventory levels by product category on a weekly basis.
Personnel look at recent sales data and order backlog to help identify slow
moving inventory items. Further, sales managers continually discuss product
turnover and sales forecasts with sales personnel to aid in identifying product
shortages and overages. Based on the information available, the Company believes
the inventory writedowns were appropriate at December 31, 2003 and 2002,
respectively.

Selling, Distribution, General and Administrative Expenses.

     Selling, distribution, general and administrative ("SG&A") expenses
decreased 19.3% to $18.8 million in 2003 from $23.3 million in 2002. As a
percentage of net sales, SG&A expenses decreased to 28.3% from 35.4% over the
same period due to overall reduced expenses. Selling expenses decreased 17.4% to
$11.4 million from $13.8 million mainly due to decreases in advertising expense
and in commission expense. Distribution and shipping expenses decreased 12.5% to
$2.1 million in 2003 from $2.4 million in 2002 due to efficiencies and cost
reductions achieved at the Company's distribution center. General and

                                       16
<PAGE>

administrative expenses decreased 22.4% to $5.2 million in 2003 from $6.7
million in 2002 due to decreases in professional, consulting and other fees
associated with the 2002 Framework Agreement as well as a decrease in salaries.
There was no provision for severance in 2003 compared to $0.4 million in 2002.

License Fees.

     License fees decreased 16.0% to $4.2 million in 2003 from $5.0 million in
2002. As a percentage of net sales, license fees decreased to 6.3% from 7.6%.
The decrease in license fees as a percentage of net sales was primarily due to
the $0.5 million reduction of the 2003 minimum royalty payments (see below). The
Company is obligated to pay the greater of actual royalties earned on net sales
of the men's and women's Girbaud product offering or minimum guaranteed annual
royalties through 2007 of $3,000,000 for men's and $1,500,000 for women's. In
February 2003, Latitude and the Company agreed to reduce the 2003 minimum
guaranteed annual royalty payments by $450,000. See Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Credit Facilities.

Operating Loss.

     Operating loss decreased to $0.4 million in 2003 from $4.3 million in 2002.
This improvement is due to a decrease in operating expenses offset slightly by a
decrease in gross profit in 2003.

Interest Expense.

     Interest expense increased 42.9% to $1.0 million in 2003 from $0.7 million
in 2002 as a result of increased borrowings on the revolving line of credit as
well as an increase in the interest rate charged by the lender during 2003.
Interest income earned in 2003 and 2002 was insignificant.

Income Taxes.

     The Company has estimated its annual effective tax rate at 0% based on its
estimate of pre-tax loss for 2003. As of December 31, 2003, the Company had net
operating loss carryforwards of approximately $45.6 million, which begin to
expire in 2013, for income tax reporting purposes for which no income tax
benefit has been recorded due to the uncertainty over the level of future
taxable income.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Net Sales.

     Net sales decreased 20.0% to $65.8 million in 2002 from $82.3 million in
2001. The Company believes that the decrease was primarily due to the
discontinuance of the BOSS, Beverly Hills Polo Club and Company-owned and
private label brands, net sales of which represented $12.4 million in 2001, the
sluggish retail environment and a weaker than anticipated consumer response to
the Girbaud fall product offering. Net sales of Girbaud men's sportswear
decreased $1.7 million or 2.9% to $56.2 million. Net sales of Girbaud women's
sportswear decreased $2.5 million or 20.7% to $9.6 million. The Company is
positioning the women's Girbaud collection as two separate collections, one for
streetwear and the other as a contemporary line. While this positioning has had
a negative impact on 2002 sales, the Company believes this repositioning will
improve future growth of the line.

Gross Profit.

     Gross profit decreased 11.8% to $24.0 million in 2002 from $27.2 million in
2001. Gross profit as a percentage of net sales increased to 36.5% from 33.0%
over the same period. The increase in gross profit as a percentage of net sales
was primarily due to the sales of Girbaud jeanswear and sportswear at higher
margins in 2002 compared to 2001 net sales that included sales of the
discontinued product lines of BOSS and Beverly Hills Polo Club sportswear. In an

                                       17
<PAGE>

effort to decrease the inventory level and to generate cash for first quarter
working capital needs, the Company generated significant sales early in 2003 to
a mass retailer at gross profit margins significantly below the margins on goods
that are sold to department and specialty stores. To properly reflect inventory
at its net realizable value, the Company had an inventory writedown of $1.8
million at December 31, 2002, compared to an inventory writedown of $0.3 million
at December 31, 2001, which adversely affected the overall gross margin in 2002.
To help identify inventory shortages as well as excess inventory, the Company
monitors inventory levels by product category on a weekly basis. Personnel look
at recent sales data and order backlog to help identify slow moving inventory
items. Further, sales managers continually discuss product turnover and sales
forecasts with sales personnel to aid in identifying product shortages and
overages. Based on the information available, the Company believes the inventory
writedowns were appropriate at December 31, 2002 and 2001, respectively.

Selling, Distribution, General and Administrative Expenses.

     Selling, distribution, general and administrative ("SG&A") expenses
increased 2.6% to $23.3 million in 2002 from $22.7 million in 2001. As a
percentage of net sales, SG&A expenses increased to 35.4% from 27.6% over the
same period due to reduced net sales levels, higher selling expenses and general
and administrative expenses offset by lower distribution and shipping expenses.
Selling expenses increased 11.3% to $13.8 million from $12.4 million due to
increases in consulting fees associated with the Framework Agreement, sample
purchases and merchandise allowances for chargebacks offset by a decrease in
commission expense associated with reduced net sales levels. Distribution and
shipping expenses decreased 20.0% to $2.4 million in 2002 from $3.0 million in
2001 due to decreased personnel at the Company's distribution facility to
correspond with the decrease in merchandise shipments as a result of decreased
sales. General and administrative expenses increased 1.5% to $6.7 million in
2002 from $6.6 million in 2001 due to increases in professional, consulting and
other fees associated with the Framework Agreement offset by a decrease in
salaries and bad debt expense. The provision for severance decreased 42.9% in
2002 to $0.4 million from $0.7 million in 2001.

License Fees.

     License fees decreased 3.8% to $5.0 million in 2002 from $5.2 million in
2001. As a percentage of net sales, license fees increased to 7.6% from 6.3%.
The increase in license fees as a percentage of net sales is primarily due to
the decrease in net sales levels of the women's Girbaud line without a
corresponding decrease in minimum guaranteed annual royalties of $1,500,000 in
2002. The Company is obligated to pay the greater of actual royalties earned on
net sales of the women's Girbaud product offering or minimum guaranteed annual
royalties of $1,500,000 through 2007.

Operating Loss.

     Operating loss increased to $4.3 million in 2002 from $0.7 million in 2001.
This deterioration is due to a decrease in net sales and the related gross
profit coupled with an increase in certain operating expenses.

Interest Expense.

     Interest expense decreased 46.2% to $0.7 million in 2002 from $1.3 million
in 2001 as a result of lower borrowings on the revolving line of credit during
the first half of 2002. Interest income earned in 2002 and 2001 was
insignificant.

Income Taxes.

     The Company has estimated its annual effective tax rate at 0% based on its
estimate of pre-tax loss for 2002. As of December 31, 2002, the Company has net
operating loss carryforwards of approximately $45.2 million, which begin to
expire in 2013, for income tax reporting purposes for which no income tax
benefit has been recorded due to the uncertainty over the level of future
taxable income.


                                       18
<PAGE>

Liquidity and Capital Resources

     The Company has relied primarily on asset based borrowings, trade credit
and internally generated funds to finance its operations. During 2003, the
Company increased its accounts receivable $1.6 million while inventory decreased
$2.5 during this same period. Accounts payable and accrued liabilities increased
$0.6 million during 2003. Cash and cash equivalents held by the Company
increased to $0.8 million at December 31, 2003 compared to $0.6 million at
December 31, 2002 while its working capital decreased to $4.6 million at
December 31, 2003 from $6.2 million at December 31, 2002. A decrease in demand
for the Company's products could have a material adverse effect on the Company's
working capital.

Operating Cash Flow.

     Cash provided by operations totaled $1.3 million in 2003 compared to cash
used in operations of $5.0 million in 2002. Positive operating cash flow in 2003
was due primarily to a decrease in inventory and an increase in liabilities
partially offset by the net loss and an increase in accounts receivable. Cash
provided by investing activities during 2003 was insignificant, totaling $0.1
million. Cash used in financing activities totaled $1.2 million in 2003
resulting primarily from the pay down of the revolving line of credit and
decrease in checks issued against future deposits.

     Inventories decreased $2.5 million from December 31, 2002 to December 31,
2003, compared to an increase of $1.4 million from December 31, 2001 to December
31, 2002. The decrease in 2003 was partially the result of the Company's efforts
to reduce unsold inventory to more manageable levels. In 2003, the Company also
eliminated the need to carry T-shirt blank raw material inventory by switching
to a vendor in Mexico whom drop ships T-shirt blanks directly to screen printers
or embroidery contractors as requested by the Company . The increase in 2002 was
the result of purchasing inventory for sales that did not materialize in the
fall of 2002, which was a result of the sluggish retail environment and a weaker
than anticipated consumer response to the Company's fall product offering. To
properly reflect unsold inventory at its net realizable value, the Company had
an inventory valuation allowance of $1.8 million at December 31, 2002, compared
to $0.3 million at December 31, 2003.

Credit Facilities

     The Company has an asset-based revolving line of credit (the "Credit
Agreement") with Congress Financial Corporation ("Congress"). In December 2002
and again in March and November 2003, the Credit Agreement was amended to extend
the term through December 31, 2004, to modify the minimum levels of working
capital and tangible net worth the Company is required to maintain and to modify
the rate of interest on borrowings under the Credit Agreement. The amended
Credit Agreement provides that the Company may borrow up to 80.0% of net
eligible accounts receivable and a portion of inventory, as defined in the
Credit Agreement. Borrowings under the Credit Agreement may not exceed $20.0
million including outstanding letters of credit which are limited to $6.0
million from May 1 to September 30 of each year and $4.0 million for the
remainder of each year, and bear interest at Congress' prime rate of interest
plus 2.25% (effectively 6.30% at December 31, 2003). Outstanding letters of
credit approximated $1.4 million at December 31, 2003. In connection with
amending the Credit Agreement in December 2002, the Company had agreed to pay
Congress a financing fee of $250,000, one half of which was paid at the time of
closing and the other half was paid by the Company in February 2003. This
financing fee is being amortized over 24 months which began in January 2003. In
connection with amending the Credit Agreement in March 2003, the Company paid
Congress a financing fee of $75,000. This financing fee was amortized over the
remaining months of 2003. In connection with amending the Credit Agreement in
November 2003, the Company paid Congress a financing fee of $50,000 which was
expensed at the time of payment. In connection with the Company's efforts to
obtain these waivers, and to comply with its covenants, the Licensor and the
Company agreed, in February and November 2003 to:

          --   defer the December 2002 and January 2003 royalty payments of
               $250,000 each under the Girbaud Men's Agreement to October and
               November 2003 respectively. Both these deferred October and
               November 2003 royalty payments of $250,000 each were further
               deferred to May and June 2004 respectively;

                                       19
<PAGE>

          --   defer the December 2002 royalty payment of $125,000 under the
               Girbaud Women's Agreement to October 2003. This royalty payment
               was further deferred to May 2004;

          --   reduce the 2003 minimum guaranteed annual royalty payments by
               $450,000 to $1,050,000 by paying $25,000 in each of the months of
               April and May, 2003; $125,000 in each of the months of June,
               July, August, September, October and December, 2003; and $250,000
               in November 2003. One half of the November royalty payment of
               $250,000, or $125,000 was further deferred to June 2004.

          --   defer payment of approximately $94,000 of Consultants' Fees which
               became due in December 2002 under the Girbaud Men's and Women's
               Agreements and pay $30,000 of that amount in February 2003 and
               the balance in August 2003; and

          --   reduce the Consultants' Fees payable in 2003 from $300,000 to
               $100,000 and waive payment of approximately $97,000 that the
               Company owed for samples provided by Girbaud.


     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 2003 and 2002, the Company's credit losses were $0.3 million
and $0.5 million, respectively and the Company's actual credit losses as a
percentage of net sales were 0.5% and 0.7%, respectively.

     The Company has the following contractual obligations and commercial
commitments as of December 31, 2003:

<TABLE>
<CAPTION>

 Schedule of contractual obligations:
                                                        Payments Due By Period
                            -------------------------------------------------------------------------------
                                 Total           Less than 1      1-3 years       4-5 years     After 5
                                                    year                                          years
                            -----------------   --------------  --------------  --------------  -----------
<S>                            <C>                <C>                 <C>             <C>            <C>
Revolving line of credit       $   4,224,285      $ 4,224,285         $    --         $    --        $  --
Long term debt                     6,557,908        2,013,977       2,817,465       1,726,466           --
Operating leases                     671,396          386,345         208,864          76,187           --
Employment agreements              3,385,000        1,655,000       1,730,000              --           --
Girbaud license
obligations *                     19,125,000        5,625,000       9,000,000       4,500,000           --
Girbaud fashion shows              1,200,000          300,000         600,000         300,000           --
Girbaud creative &                                                                                      --
advertising fees                     760,000          190,000         380,000         190,000
                            -----------------   --------------  --------------  --------------  -----------

Total contractual cash
obligations                    $  35,923,589     $ 14,394,607    $ 14,736,329     $ 6,792,653        $  --
                            =================   ==============  ==============  ==============  ===========
</TABLE>

(*) Adjusted to account for the deferrals, reductions and waivers of the
    Consultants' Fees, royalty and other payment obligations mentioned above

                                       20
<PAGE>

<TABLE>
<CAPTION>

 Schedule of commercial commitments:
                                           Amount of Commitment Expiration Per Period
                                               Less than 1                                  After 5
                                Total             year         1-3 years     4-5 years       years
                            ---------------  ----------------  -----------   -----------  ------------
Line of credit  **
(including letters of
<S>                           <C>               <C>            <C>           <C>          <C>
credit)                     $   20,000,000   $    20,000,000   $       --    $        --  $         --
                            ---------------  ----------------  -----------   -----------  ------------

Total commercial
commitments                 $   20,000,000   $    20,000,000   $        --   $        --  $         --
                            ===============  ================  ===========   ===========  ============
</TABLE>

(**)At December 31, 2003, the Company had $4.2 million of borrowings under its
    revolving line of credit and outstanding letters of credit of approximately
    $1.4 million under the Credit Agreement.

     The Company believes that current levels of cash and cash equivalents ($0.8
million at December 31, 2003) together with cash from operations and funds
available under its Credit Agreement, 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.

Recent Accounting Pronouncements

     In December 2003, the FASB issued a revision to SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits". This statement
does not change the measurement or recognition aspects for pensions and other
postretirement benefit plans; however, it does revise employee disclosures to
include more information about the plan assets, obligations to pay benefits and
funding obligations. SFAS 132, as revised, is generally effective for financial
statements with fiscal years ending after December 15, 2003. Certain additional
disclosure applicable to foreign defined benefit plans are effective for fiscal
years ending after June 15th, 2004. The Company has adopted the required
provisions of SFAS No. 132, as revised.

     In May 2003, the FASB issued SFAS No.150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," SFAS No. 150
clarifies the definition of a liability as currently defined in FASB Concepts
Statement No. 6, "Elements of Financial Statements, " as well as other planned
revisions. This statement requires a financial instrument that embodies an
obligation of an issuer to be classified as a liability, In addition, the
statement establishes standards for the initial and subsequent measurement of
these financial instruments and disclosure requirements. SFAS 150 is effective
for financial instruments entered into or modified after May 31, 2003 and for
all other matters, is effective at the first interim period beginning after June
15, 2003. The adoption of SFASD 150 did not have a material effect on the
Company's financial position or results of operations.

     In April 2003, the FASB issued SFAS No.149," Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," SFAS No. 149 amends SFAS No. 133
for decisions made by the FASB's Derivatives Implementation Group, other FASB
projects dealing with financial instruments, and in response to implementation
issues raised in relation to the application of the definition of a derivative.
This statement is generally effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designed after June 30, 2003.
The adoption of SFAS 149 did not have material effect on the Company's financial

                                       21
<PAGE>

position or results of operations.

     In January 2003, the FASB issued Interpretation ("FIN") No. 46,
"Consolidation of Variable Interest Entities" and in December 2003, a revised
interpretation was issued (FIN No.46, as revised). In general, a variable
interest entity ("VIE") is a corporation, partnership, trust, or any other legal
structure used for business purposes that either does not have equity investors
with voting rights or has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN 46, as
revised, requires a VIE to be consolidated by a company if that company is
designated as the primary beneficiary. The interpretation applies to VIEs
created after January 31, 2003, and for all financial statements issued after
December 15, 2003 for VIEs in which an enterprise held a variable interest that
it acquired before February 1, 2003. The adoption of FIN 46, as revised, did not
have a material effect on the Company's financial position or results of
operations,

     In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based
Compensation--Transition and Disclosure.' This statement amends SFAS No.
123,"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensations. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company adopted the disclosure provisions of this standard.

     In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others"' ("FIN 45"). FIN 45 addresses the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees, The disclosure requirements
in this Interpretation are effective for financial statements of interim or
annual periods ending after December 15, 2002. The adoption of FIN 45 did not
have a material effect on the Company's financial position or results of
operations.

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.
However, the impact of a 100 basis point change in interest rates affecting the
Company's short-term debt would not be material to the net loss, 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.

                                       22
<PAGE>

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of the Company and the report of
independent certified public accountants thereon are set forth on pages F-1
through F-20 hereof.

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

         None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed

     --   to ensure that information required to be disclosed in the Company's
          Exchange Act reports

          --   is recorded, processed, summarized and reported within the time
               periods specified in the SEC's rules and forms,

          --   is accumulated and communicated to the Company's management,
               including the Company's Chief Executive Officer and Chief
               Financial Officer, as appropriate, to allow timely decisions
               regarding required disclosure.

     --   with the objective of providing reasonable assurance that

          --   the Company's transactions are properly authorized;

          --   the Company's assets are safeguarded against unauthorized or
               improper use; and

          --   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.

     In designing and evaluating the Company's disclosure controls and
procedures, the Company's management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and that
management must apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.

     As of the end of the period, the Company conducted an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Among other matters, the Company sought in the Company's
evaluation to determine whether there were any significant deficiencies or
material weaknesses in the Company's disclosure controls and procedures, or
whether the Company 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,
subject to the limitations described above, the Company's disclosure controls
and procedures are effective to ensure that material information relating to the
Company and its consolidated subsidiary is made known to management, including
the CEO and CFO, particularly during the period when the Company's periodic
reports are being prepared, and that the Company's disclosure controls and
procedures are effective to provide reasonable assurance that the Company's
financial statements are fairly presented in conformity with generally accepted
accounting principles.

     There have been no significant changes in the Company's disclosure controls
and procedures or in other factors that could significantly affect them during
the fourth quarter of 2003.

                                       23
<PAGE>


                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The information appearing in the Company's Definitive Proxy Statement
prepared in connection with the 2004 Annual Meeting of Stockholders (the "Proxy
Statement") under the captions "Proposal 1: Election of Directors", "Principal
Executive Officers of the Company Who Are Not Also Directors", "Section 16(a)
Beneficial Ownership Reporting Compliance", "Board Committees and Meetings" and
"Code of Ethics" are incorporated herein by reference. The Proxy Statement will
be filed not later than 120 days after the end of the fiscal year covered by
this annual report on Form 10-K.

ITEM 11.          EXECUTIVE COMPENSATION

     The information appearing in the Proxy Statement under the caption
"Executive Compensation" is incorporated herein by reference.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information appearing in the Proxy Statement under the caption
"Security Ownership Of Certain Beneficial Owners And Management" and "Securities
Authorized for Issuance Under Equity Compensation Plans" are incorporated herein
by reference.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information appearing in the Proxy Statement under the caption "Certain
Relationships And Related Transactions" is incorporated herein by reference.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

     The information appearing in the Proxy Statement under the caption
"Principal Accounting Fees and Services" is incorporated herein by reference.


                                       24
<PAGE>

                                     PART IV

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

(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:

<TABLE>
<CAPTION>

                   Index to Consolidated Financial Statements                         Page
                                                                                      ----

<S>                                                                                      <C>
Report of Independent Certified Public Accountants                                     F-1
Consolidated Balance Sheets at December 31, 2003 and 2002                              F-2
Consolidated Statements of Operations for the years ended December 31, 2003,
2002 and 2001                                                                          F-3
Consolidated Statements of Stockholders' Equity for the years ended December
31, 2003, 2002 and 2001                                                                F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2003,
2002 and 2001                                                                          F-5
Summary of Accounting Policies                                                      F-6 to F10
Notes to Consolidated Financial Statements                                         F-11 to F20
</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:

     3.06 Certificate of Amendment of the Company's 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, 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 with the Commission on August 14, 2003 as
          Exhibit 4.04 to the Company's Quarterly Report on Form 10-Q, and is
          hereby incorporated herein by this reference).

   10.112 Employment Agreement dated the 31st day of March, 2003 between I.C.
          Isaacs & Company, L.P. and Robert Conologue (a copy of which was filed
          with the Commission on May 15, 2003 as Exhibit 10.112 to the Company's
          Quarterly Report on Form 10-Q, and is hereby incorporated herein by
          this reference).

   10.113 Employment Agreement dated the 15th day of February, 2003 between
          I.C. Isaacs & Company, L.P. and Sandra Finkelstein (a copy of which
          was filed with the Commission on May 15, 2003 as Exhibit 10.113 to the
          Company's Quarterly Report on Form 10-Q, and is hereby incorporated
          herein by this reference).

   10.114 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 Employment Agreement dated the 15th day of February, 2003
          between I.C. Isaacs & Company, L.P. and Sandra Finkelstein (a copy of

                                       25
<PAGE>

          which was filed with the Commission on May 15, 2003 as Exhibit 10.114
          to the Company's Quarterly Report on Form 10-Q, and is hereby
          incorporated herein by this reference).

   10.115 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 with the Commission on May 15,
          2003 as Exhibit 10.115 to the Company's Quarterly Report on Form 10-Q,
          and is hereby incorporated herein by this reference).

   10.116 Consulting Agreement made as of the 31st day of March 31st, 2003
          between I.C. Isaacs & Company, L.P. and Societe de Finance et
          d'Investissement, SA (a copy of which was filed with the Commission on
          May 15, 2003 as Exhibit 10.116 to the Company's Quarterly Report on
          Form 10-Q, and is hereby incorporated herein by this reference).

   10.117 Amendment No. 2 and Waiver to Amendment and Restated Loan and
          Security Agreement, dated November 12, 2003, by and between I. C.
          Isaacs & Company L.P. and Congress Financial Corporation (a copy of
          which was filed with the Commission on November 14, 2003 as Exhibit
          10.112 to the Company's Quarterly Report on Form 10-Q, and is hereby
          incorporated herein by this reference).

   10.118 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
          10.113 to the Company's Quarterly Report on Form 10-Q, and is hereby
          incorporated herein by this reference).

   10.119 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 with the Commission on November 14, 2003 as
          Exhibit 10.114 to the Company's Quarterly Report on Form 10-Q, and is
          hereby incorporated herein by this reference).

     23.1 Consent of BDO Seidman, LLP

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

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

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


(b)  Reports on Form 8-K:

     On November 12, 2003, the Company  furnished a Current Report on Form 8-K
     under Item 12 --  Disclosure of Results of Operations and  Financial
     Condition,  containing  a press  release in which it announced  its
     financial  results for the quarter  ended  September 30, 2003.


                                       26
<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 29, 2004


     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.

Signature                         Title                             Date

/s/ Peter J. Rizzo       Chief (Principal) Executive Officer,   March 29, 2004
    -------------------  Director
    Peter J. Rizzo

/s/ Robert J. Conologue  Chief Operating Officer, Chief         March 29, 2004
    -------------------  (Principal) Financial Officer, Director
    Robert J. Conologue

/s/ Staffan Ahrenberg    Chairman of the Board                  March 29, 2004
    -------------------
    Staffan Ahrenberg

/s/ Daniel J. Gladstone  President                              March 29, 2004
    -------------------
    Daniel J. Gladstone

/s/ Olivier Bachellerie  Director                               March 29, 2004
    -------------------
    Olivier Bachellerie

/s/ Rene Faltz           Director                               March 29, 2004
    -------------------
    Rene Faltz

/s/ Neal J. Fox          Director                               March 29, 2004
    -------------------
    Neal J. Fox

/s/ Jon Hechler          Director                               March 29, 2004
    -------------------
    Jon Hechler

/s/ Roland Loubet        Director                               March 29, 2004
    -------------------
    Roland Loubet

/s/ Robert S. Stec       Director                               March 29, 2004
    -------------------
    Robert S. Stec


                                       27
<PAGE>



               Report of Independent Certified Public Accountants



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


     We have audited the accompanying consolidated balance sheets of I.C. Isaacs
& Company, Inc. and subsidiaries as of December 31, 2003 and 2002 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of I.C. Isaacs
& Company, Inc. and subsidiaries at December 31, 2003 and 2002 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.

                                           BDO SEIDMAN, LLP

Bethesda, Maryland
March 15, 2004

                                      F-1
<PAGE>

                           I.C. Isaacs & Company, Inc.
                           Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                             December 31,
                                                                 --------------------------------------
                                                                       2003                  2002
                                                                 -----------------    -----------------
Assets
Current
<S>                                                                    <C>                  <C>
  Cash, including temporary investments of $168,000 and $82,000     $     782,519        $     600,997
  Accounts receivable, less allowance for doubtful
    accounts of $275,000 and $245,000 (Note 3)                          9,871,110            8,318,693
  Inventories (Notes 1 and 3)                                           3,854,731            6,443,574
  Prepaid expenses and other                                               68,676              206,933
                                                                 -----------------    -----------------

Total current assets                                                   14,577,036           15,570,197
Property, plant and equipment, at cost, less accumulated
   depreciation and amortization (Note 2)                                 777,089            1,780,871
Trademark and licenses, less accumulated amortization of $0 and
   $1,295,122  (Note 9)                                                        --               54,878
Other assets (Note 10)                                                  4,735,635            5,042,204
                                                                 -----------------    -----------------
                                                                    $  20,089,760        $  22,448,150
                                                                 =================    =================

Liabilities and Stockholders' Equity
Current
  Checks issued against future deposits                                $  197,441           $  626,082
  Current maturities of revolving line of credit
  (Note 3)                                                              4,224,285            5,030,453
  Current maturities of long-term debt (Note 3)                         2,013,977              767,372
  Accounts payable                                                      1,039,901              907,520

  Accrued expenses and other current liabilities (Note 4)               2,523,253            2,084,449
                                                                 -----------------    -----------------

Total current liabilities                                               9,998,857            9,415,876

Long-term debt (Note 3)                                                 4,543,931            5,790,536

Commitments and contingencies (Notes 3, 9 and 10)

Stockholders' Equity (Notes 6, 7 and 9)
  Preferred stock; $.0001 par value; 5,000,000 shares
    authorized, none outstanding                                               --                   --
  Common stock; $.0001 par value; 50,000,000 shares authorized;
    12,311,366 shares issued; 11,134,657 shares outstanding                 1,231                1,231
  Additional paid-in capital                                           43,658,853           43,658,853
  Accumulated deficit                                                (35,790,241)         (34,095,475)
  Treasury stock, at cost (1,176,709 shares)                          (2,322,871)          (2,322,871)
                                                                 -----------------    -----------------

Total stockholders' equity                                              5,546,972            7,241,738
                                                                                      -----------------
                                                                 -----------------
                                                                     $ 20,089,760         $ 22,448,150
                                                                 =================    =================
</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,
                                             --------------------------------------------------------------
                                                   2003                  2002                  2001
                                             ------------------    ------------------    ------------------

<S>                                              <C>                   <C>                   <C>
Net sales                                        $  66,224,500         $  65,798,081         $  82,311,654
Cost of sales                                       43,706,398            41,776,131            55,108,041
                                             ------------------    ------------------    ------------------

Gross profit                                        22,518,102            24,021,950            27,203,613
                                             ------------------    ------------------    ------------------

Operating Expenses
  Selling                                           11,444,611            13,763,187            12,369,155
  License fees (Note 9)                              4,163,035             5,017,637             5,210,978
  Distribution and shipping                          2,062,032             2,392,809             2,975,405
  General and administrative                         5,243,916             6,715,285             6,648,167
  Provision for severance (Note 9)                          --               400,000               726,400
                                             ------------------    ------------------    ------------------

Total operating expenses                            22,913,594            28,288,918            27,930,105
                                             ------------------    ------------------    ------------------

Operating loss                                       (395,492)           (4,266,968)             (726,492)
                                             ------------------    ------------------    ------------------

Other income (expense)
  Interest, net of interest income of
    $1,687, $955 and $2,805                        (1,008,744)             (657,189)           (1,307,151)
  Loss on sale of property                           (414,650)                    --                    --
  Other, net                                           124,120              (38,442)             (148,648)
                                             ------------------    ------------------    ------------------

Total other expense                                (1,299,274)             (695,631)           (1,455,799)
                                             ------------------    ------------------    ------------------


Loss from continuing operations                    (1,694,766)           (4,962,599)           (2,182,291)
                                             ------------------    ------------------    ------------------

Discontinued operations (Note 8)
  Loss from operations of discontinued
    subsidiary                                              --                    --           (1,309,610)
  Loss from sale of discontinued subsidiary                 --                    --           (1,182,281)
                                             ------------------    ------------------    ------------------

Loss from discontinued operations                           --                    --           (2,491,891)
                                             ------------------    ------------------    ------------------

Net loss                                           (1,694,766)          (4, 962,599)           (4,674,182)

Preferred stock deemed dividend                             --             (596,252)                    --
                                             ------------------    ------------------    ------------------

Net loss attributable to common stockholders     $ (1,694,766)         $ (5,558,851)         $ (4,674,182)
                                             ==================    ==================    ==================

Basic and diluted net loss per share from
continuing operations                              $    (0.15)           $    (0.61)           $    (0.28)

Basic and diluted net loss per share from
discontinued operations                                     --                    --                (0.32)

Basic and diluted net loss per share from
preferred stock deemed dividend                             --                (0.07)                    --
                                             ------------------    ------------------    ------------------

Basic and diluted net loss per share              $    ( 0.15)          $    ( 0.68)          $    ( 0.60)
                                             ==================    ==================    ==================
Weighted average common shares outstanding          11,134,657             8,160,136             7,853,780

</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>


                            Common Stock      Additional
                         -------------------   Paid-in     Accumulated    Treasury
                           Shares    Amount    Capital        Deficit      Stock        Total
                         ----------- ------- ------------ ------------- ------------ -----------
Balance, at December 31,
<S>                       <C>          <C>   <C>          <C>           <C>          <C>
 2000                     9,011,366    $901  $39,674,931  $(23,862,442) $(2,310,030) $3,503,360
 Net loss                        --      --           --    (4,674,182)          --  (4,674,182)
 Purchase of treasury
  stock                          --      --           --            --      (12,841)    (12,841)
                         ----------- ------- ------------ ------------- ------------ -----------

Balance, at December 31,
 2001                     9,011,366     901   39,674,931   (28,536,624)  (2,322,871)  8,816,337
 Net loss                        --      --           --    (4,962,599)          --  (4,962,599)
 Conversion of Series A
  Preferred Stock         3,300,000     330    3,299,670            --           --   3,300,000
 Officers' compensation
  contribution                   --      --       88,000            --           --      88,000
 Deemed dividend in
  connection with
  preferred stock                --      --      596,252      (596,252)          --          --
                         ----------- ------- ------------ ------------- ------------ -----------

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
                         =========== ======= ============ ============= ============ ===========
</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,
                                             -----------------------------------------
                                                 2003          2002           2001
                                             ------------  ------------  -------------

Operating Activities
<S>                                          <C>           <C>            <C>
  Net loss                                   $(1,694,766)  $(4,962,599)   $(4,674,182)
  Adjustments to reconcile net loss to net
   cash provided by (used in) operating
   activities
    Provision for doubtful accounts              202,111       315,314        880,019
    Write off of accounts receivable            (172,111)     (470,314)    (1,019,727)
    Provision for sales returns and discounts  2,477,904     3,672,100      4,803,384
    Sales returns and discounts               (2,540,904)   (3,744,100)    (4,835,384)
    Depreciation and amortization                756,831     1,219,018      1,176,378
    (Gain) loss on sale of assets                414,650        37,655        (56,340)
    Officers' compensation contribution               --        88,000             --
    Compensation expense on stock options             --            --          3,239
    Loss on sale of subsidiary                        --            --      1,182,281
    (Increase) decrease in assets
       Accounts receivable                    (1,519,417)    1,245,640      4,037,841
       Inventories                             2,588,843    (1,372,772)     8,731,917
       Prepaid expenses and other                138,257       341,129         23,582
       Refundable income taxes                        --        31,192        311,630
       Other assets                              106,569    (1,390,114)      (805,375)
    Increase (decrease) in liabilities
       Accounts payable                          132,381      (182,933)      (216,764)
       Accrued expenses and other current
        liabilities                              438,804       148,299       (900,013)
                                             ------------  ------------  -------------

Cash provided by (used in) operating
 activities                                    1,329,152    (5,024,485)     8,642,486
                                             ------------  ------------  -------------

Investing Activities
  Proceeds from sale of assets                   268,221         3,050        126,397
  Capital expenditures                          (181,042)     (103,880)      (308,364)
                                             ------------  ------------  -------------

Cash provided by (used in) investing
 activities                                       87,179      (100,830)      (181,967)
                                             ------------  ------------  -------------

Financing Activities
  Checks issued against future deposits         (428,641)      277,226       (496,488)
  Purchase of treasury stock                          --            --        (12,841)
  Principal proceeds from (payments on)
   revolving line of credit                     (806,168)    5,030,453     (7,613,109)
  Principal payments on long-term debt                --      (283,179)      (358,913)
  Deferred financing costs                            --      (125,000)            --
                                             ------------  ------------  -------------

Cash (used in) provided by financing
 activities                                   (1,234,809)    4,899,500     (8,481,351)
                                             ------------  ------------  -------------

Increase (decrease) in cash and cash
 equivalents                                     181,522      (225,815)       (20,832)

Cash and Cash Equivalents, at beginning of
 year                                            600,997       826,812        847,644
                                             ------------  ------------  -------------

Cash and Cash Equivalents, at end of year       $782,519      $600,997       $826,812
                                             ============  ============  =============
</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 Europe, S.L. ("Isaacs Europe"), I.C. Isaacs
& Company, L.P. (the "Partnership"), Isaacs Design, Inc. ("Design") and I.C.
Isaacs Far East Ltd. (collectively the "Company"). The Company sold the common
stock of Isaacs Europe, SL in December 2001. I.C. Isaacs Far East Ltd. did not
have any significant revenue or expenses in 2003, 2002 and 2001. 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 Canada.
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 of 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, 2003, 2002 and 2001, sales to one customer were $5,155,655, $5,302,278 and
$4,361,417. These amounts constitute 7.8%, 8.1% and 5.3% of total sales,
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 actual credit losses as a percentage
of net sales were 0.3%, 0.8% and 1.2% for the years ended December 31, 2003,
2002 and 2001, 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.

Inventories

     Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method.

Property, Plant and Equipment

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

Trademark and Licenses

     Included in trademark and licenses is the cost of certain licenses which
allow the Company to produce and market certain branded apparel. The Company
capitalized the cost of obtaining the trademark and licenses, with the cost
being amortized on a straight-line basis over the initial term of the trademark
or license. The Company accrues royalty expense related to the licenses at the
greater of the specified percentage of sales or the minimum guaranteed royalty
set forth in the license agreements.

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. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"), but applies, and plans to continue applying, the
intrinsic value method set forth in Accounting Principles Board Opinion No. 25
for stock options granted to employees. The Company expenses the fair value of
stock options granted to nonemployees. 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. 123, net loss per share would have been
changed to the pro forma amount indicated below.

     For stock options granted to employees, the Company has estimated the fair
value of each option granted using the Black-Scholes option pricing model with

                                      F-7

<PAGE>

the following assumptions: risk-free interest rate of 4.03, 3.96% and 5.93%,
expected volatility of 75%, 75% and 75%, expected option life of 5, 9 and 4.5
years and no dividend payment expected for 2003, 2002 and 2001, respectively.
Using these assumptions, the fair value of the stock options granted is $0..53,
$0.47 and $0.39 for 2003, 2002 and 2001, respectively. There were no adjustments
made in calculating the fair value to account for vesting provisions or for
non-transferability or risk of forfeiture. The weighted average remaining life
for options outstanding at December 31, 2003 is 6 years.

<TABLE>
<CAPTION>
                                                      Year ended December 31,
                                          ------------------------------------------------
                                               2003            2002              2001
                                          --------------  --------------  ----------------


Net loss attributable to common
<S>                                        <C>             <C>             <C>
 stockholders, as reported                 $ (1,694,766)   $ (5,558,851)   $ (4,674,182)
       Less: Stock based employee
        compensation expense included in
        reported net loss                            --              --             3,239
       Add: Total stock-based employee
        compensation expense determined
        under the fair value based method
        for all awards                         (231,448)        (20,332)          (19,946)
                                          --------------  --------------  ----------------
Pro forma net loss attributable to common
 stockholders                               $(1,926,214)   $ (5,579,183)      $(4,690,889)
                                          ==============  ==============  ================

Basic and diluted loss per common share,
 as reported                                     $(0.15)        $ (0.68)           $(0.60)

Basic and diluted loss per common share,
 pro forma                                       $(0.17)        $ (0.68)           $(0.60)
</TABLE>

Revenue Recognition

     Sales are recognized upon shipment of products. Allowances for estimated
returns are provided when sales are recorded. In accordance with EITF 00-10,
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.

Advertising Costs

     Advertising costs, included in selling expenses, are expensed as incurred
and were $559,966, $1,975,405 and $1,767,647 for the years ended December 31,
2003, 2002 and 2001 respectively.

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

                                      F-8

<PAGE>

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.

Loss Per Share

     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. Diluted loss per share reflects the potential dilution of securities
that could share in the earnings of an entity. Basic and diluted earnings per
share are the same during 2003, 2002 and 2001 because the impact of dilutive
securities is anti-dilutive. There were outstanding employee stock options of
2,070,250, 1,306,250 and 1,086,250 and outstanding warrants of 500,000, 500,000
and 0 at December 31, 2003, 2002 and 2001, respectively. These stock options and
warrants were excluded from the computation of 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". The Company has no items of comprehensive income to
report.

Recent Accounting Pronouncements

     In December 2003, the FASB issued a revision to SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits". This statement
does not change the measurement or recognition aspects for pensions and other
postretirement benefit plans; however, it does revise employee disclosures to
include more information about the plan assets, obligations to pay benefits and
funding obligations. SFAS 132, as revised, is generally effective for financial
statements with fiscal years ending after December 15, 2003. Certain additional
disclosure applicable to foreign defined benefit plans are effective for fiscal
years ending after June 15th, 2004. The Company has adopted the required
provisions of SFAS No. 132, as revised.

     In May 2003, the FASB issued SFAS No.150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," SFAS No. 150
clarifies the definition of a liability as currently defined in FASB Concepts
Statement No. 6, "Elements of Financial Statements, " as well as other planned
revisions. This statement requires a financial instrument that embodies an
obligation of an issuer to be classified as a liability, In addition, the
statement establishes standards for the initial and subsequent measurement of
these financial instruments and disclosure requirements. SFAS 150 is effective
for financial instruments entered into or modified after May 31, 2003 and for
all other matters, is effective at the first interim period beginning after June
15, 2003. The adoption of SFASD 150 did not have a material effect on the
Company's financial position or results of operations.


     In April 2003, the FASB issued SFAS No.149," Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," SFAS No. 149 amends SFAS No. 133
for decisions made by the FASB's Derivatives Implementation Group, other FASB
projects dealing with financial instruments, and in response to implementation
issues raised in relation to the application of the definition of a derivative.
This statement is generally effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designed after June 30, 2003.
The adoption of SFAS 149 did not have material effect on the Company's financial
position or results of operations.

     In January 2003, the FASB issued Interpretation ("FIN") No. 46,
"Consolidation of Variable Interest Entities" and in December 2003, a revised
interpretation was issued (FIN No.46, as revised). In general, a variable
interest entity ("VIE") is a corporation, partnership, trust, or any other legal
structure used for business purposes that either does not have equity investors

                                       F-9

<PAGE>

with voting rights or has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN 46, As
revised, requires a VIE to be consolidated by a company if that company is
designated as the primary beneficiary. The interpretation applies to VIEs
created after January 31, 2003, and for all financial statements issued after
December 15, 2003 for VIEs in which an enterprise held a variable interest that
it acquired before February 1, 2003. The adoption of Fin 46, as revised, did not
have a material effect on the Company's financial position or results of
operations,

     In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based
Compensation--Transition and Disclosure.' This statement amends SFAS No.
123,"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensations. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company adopted the disclosure provisions of this standard.

     In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others"' ("FIN 45"). FIN 45 addresses the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees, The disclosure requirements
in this Interpretation are effective for financial statements of interim or
annual periods ending after December 15, 2002. The adoption of FIN 45 did not
have a material effect on the Company's financial position or results of
operations.

                                      F-10

<PAGE>

                           I.C. Isaacs & Company, Inc.
                   Notes to Consolidated Financial Statements

1. Inventories
<TABLE>
<CAPTION>

         Inventories consist of the following:
                                                          December 31,
                                             ---------------------------------------
                                                    2003                 2002
                                             ------------------   ------------------

<S>                                                   <C>              <C>
Raw materials                                     $         --         $  1,418,225
Work-in-process                                        289,407              545,660
Finished goods                                       3,565,324            4,479,689
                                             ------------------   ------------------

                                                  $  3,854,731         $  6,443,574
                                             ==================   ==================
</TABLE>

2. Property, Plant and Equipment
<TABLE>
<CAPTION>

         Property, plant and equipment consists of the following:
                                                          December 31,                    Estimated
                                             ---------------------------------------        Useful
                                                   2003                  2002               Lives
                                             ------------------    -----------------        -----

<S>                                                <C>                  <C>                 <C>
Land                                               $   149,160          $   691,205
Buildings and improvements                           1,262,892            1,403,719          18 years
Machinery, equipment and fixtures                    6,970,708            6,789,665         5-7 years
Other                                                1,239,200            1,239,200           various
                                             ------------------    -----------------

                                                     9,621,960           10,123,789
Less accumulated depreciation and
amortization                                         8,844,871            8,342,918
                                             ------------------    -----------------

                                                   $   777,089         $  1,780,871
                                             ==================    =================
</TABLE>

Depreciation expense for 2003, 2002 and 2001 totaled $501,953, $804,000 and
$686,670 respectively.

3. Long-term Debt

<TABLE>
<CAPTION>

         Long-term debt consists of the following:
                                                         December 31,
                                             --------------------------------------
                                                   2003                 2002
                                             ------------------   -----------------

<S>                                               <C>                  <C>
Revolving line of credit (a)                      $  4,224,285         $ 5,030,453
Notes payable (b)                                    6,557,908           6,557,908
                                             ------------------   -----------------

Total                                               10,782,193          11,588,361

Less current maturities of revolving line
    of credit                                        4,224,285           5,030,453
Less current maturities of long-term debt            2,013,977             767,372
                                             ------------------   -----------------

                                                   $ 4,543,931         $ 5,790,536
                                             ==================   =================
</TABLE>

(a)  The Company has an asset-based revolving line of credit (the "Credit
     Agreement") with Congress Financial Corporation ("Congress"). In December
     2002 and again in March and November 2003, the Credit Agreement was amended
     to extend the term through December 31, 2004, to modify the minimum levels
     of working capital and tangible net worth the Company is required to

                                      F-11

<PAGE>

     maintain and to modify the rate of interest on borrowings under the Credit
     Agreement. The amended Credit Agreement provides that the Company may
     borrow up to 80.0% of net eligible accounts receivable and a portion of
     inventory, as defined in the Credit Agreement. Borrowings under the Credit
     Agreement may not exceed $20.0 million including outstanding letters of
     credit which are limited to $6.0 million from May 1 to September 30 of each
     year and $4.0 million for the remainder of each year, and bear interest at
     the lender's prime rate of interest plus 2.25% (effectively 6.30% at
     December 31, 2003). Outstanding letters of credit approximated $1.4 million
     at December 31, 2003. In connection with amending the Credit Agreement in
     December 2002, the Company had agreed to pay Congress a financing fee of
     $250,000, one half of which was paid at the time of closing and the other
     half was paid by the Company in February 2003. This financing fee is being
     amortized over 24 months beginning January 2003. In connection with
     amending the Credit Agreement in March 2003, the Company paid Congress a
     financing fee of $75,000. This financing fee was amortized over the
     remaining months of 2003. In connection with amending the Credit Agreement
     in November 2003, the Company paid Congress a financing fee of $50,000,
     which was expensed at the time it was paid. The Company is currently in
     compliance with the working capital and tangible net worth covenants,
     however, there can be no assurances that the Company will not be in
     violation of these covenants during 2004 or thereafter. Average short-term
     borrowings and the related interest rates are as follows:

                                            ------------------------------------
                                                  Year Ended December 31,
                                            ------------------------------------
                                                 2003                2002
                                            ----------------    ----------------

Borrowings under revolving line of credit       $ 4,224,285         $ 5,030,453
Weighted average interest rate                        6.30%               5.60%
Maximum month-end balance during year           $ 7,836,492         $ 5,451,316
Average month-end balance during year           $ 5,956,376         $ 2,464,754

(b)  On May 6, 2002, Textile Investment International S.A. ("Textile"), an
     affiliate of the licensor to the Company of the Girbaud brand, acquired a
     note payable issued by the Company from a former licensor. On May 21, 2002,
     Textile exchanged this note for an amended and restated note (the
     "Replacement Note"), which deferred the original note's principal payments
     and extended the maturity date until 2007. The Replacement Note is
     subordinated to the rights of Congress under the Agreement. Due to certain
     availability requirements of the Credit Agreement not being met, the
     December 2002 and the March, June, September and December 2003 Replacement
     Note payments were not required to be made. Under the Replacement Note, the
     fact that these payments were not paid does not put the Replacement Note in
     default. The Replacement Note has been classified as current or long-term
     based upon the scheduled quarterly payments as detailed per the Replacement
     Note agreement. In addition, the scheduled quarterly payments not made
     above have been classified as current.

          At December 31, 2003, long-term debt maturities are as follows:

              2004                        $ 2,013,977
              2005                          1,352,203
              2006                          1,465,263
              2007                          1,726,465
                                      ----------------
                                          $ 6,557,908
                                      ================

                                      F-12

<PAGE>

4. Accrued Expenses
<TABLE>
<CAPTION>

         Accrued expenses consist of the following:
                                                              December 31,
                                                   ------------------------------------
                                                        2003                2002
                                                   ----------------    ----------------
<S>             <C>                                    <C>                  <C>
Royalties, Note 9                                      $ 1,153,094          $  375,000
Accrued interest                                           702,628             194,687
Management & selling bonuses                               236,587             313,808
Payroll tax withholdings                                    69,619              52,605
Accrued compensation                                        68,397             115,624
Customer credit balances                                    61,633              85,265
Sales commissions payable                                   60,294              12,283
Accrued professional fees                                   50,000             197,000
Property taxes                                              19,895              46,155
Severance benefits                                              --             426,022
Financing fees                                                  --             125,000
Insurance premium payable                                       --             120,000
Other                                                      101,106              21,000
                                                   ----------------    ----------------
                                                       $ 2,523,253         $ 2,084,449
                                                   ================    ================
</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. The Company has net operating loss carry forwards for
income tax reporting purposes of approximately $45,163,000 for which no income
tax benefit has been recorded due to the uncertainty over the generation of
taxable income in 2004 and thereafter. These net operating loss carryforwards
begin to expire in 2013.
<TABLE>
<CAPTION>

Significant items comprising the Company's deferred
tax assets are as follows:                                     December 31,
                                                   ---------------------------------
                                                        2003             2002
                                                   ---------------- ----------------

<S>                                                   <C>              <C>
Net operating loss carry forwards                     $ 20,490,000     $ 19,512,000
Depreciation and amortization                              773,000          780,000
Capital loss carryforward                                  178,000               --
Allowance for doubtful accounts                            118,000          105,000
Inventory valuation                                         37,000           69,000
Accrued severance                                               --          172,000
Contribution carryovers                                     46,000           33,000
Other                                                       22,000           22,000
                                                   ---------------- ----------------
                                                        21,644,000       20,693,000

Valuation allowance                                   (21,644,000)     (20,693,000)
                                                   ---------------- ----------------
Net deferred tax asset                                     $    --          $    --
                                                   ================ ================
</TABLE>

<TABLE>
<CAPTION>

A reconciliation between the statutory and
effective tax rates is as follows:                          Year Ended December 31,
                                                   ------------------------------------------
                                                     2003           2002            2001
                                                   ----------    ------------    ------------

<S>                                                  <C>             <C>             <C>
Federal statutory rate                               (35.0)%         (35.0)%         (35.0)%
State and local taxes, net of federal benefit         (4.0)           (4.0)           (4.0)
Nondeductible entertainment expense                    1.0             1.0             1.0
Losses for which a benefit is not currently
 available                                            38.0            38.0            38.0
                                                   ----------    ------------    ------------
                                                        -- %            -- %             -- %
                                                   ==========    ============    ============
</TABLE>

                                      F-13

<PAGE>

6. Stockholders' Equity

     In June 1998, the Company's Board of Directors authorized a stock
repurchase program. The Company currently holds 1,176,709 of common stock shares
in its treasury at a cost of $2,322,871.

     On May 6, 2002, Textile acquired from a former licensor of the Company 3.3
million shares of the Company's Series A Convertible Preferred Stock (the
"Preferred Stock"), 666,667 shares of the Company's Common Stock and a
subordinated secured promissory note issued by the Company to this former
licensor in March 2001 in the original principal amount of $7.2 million (the
"Note"). The Preferred Stock held by the former licensor was to become
convertible into either 3.3 million shares of Common Stock of the Company or a
$3.3 million promissory note of the Company in 2003. Pursuant to the terms of
the Framework Agreement entered into on May 14, 2002 (the "Framework
Agreement"), between the Company, Textile and Textile affiliates Latitude
Licensing Corp. ("Latitude") and Wurzburg Holding S.A. ("Wurzburg"), the Company
amended the terms of the Preferred Stock so that the Preferred Stock was
immediately convertible, but only into Common Stock of the Company. In November
2002, Textile converted all of the Preferred Stock into 3.3 million shares of
Common Stock of the Company.

     The Company has also (i) granted Textile warrants to purchase 500,000
shares of the Company's Common Stock for $0.75 per share, (ii) entered into a
Stockholders' Agreement with Textile establishing certain terms and conditions
regarding the acquisition and disposition of the Company's securities as well as
certain corporate governance matters, and (iii) amended the Girbaud licensing
agreement for men's and women's apparel to add an additional option for the
Company to extend the term by four additional years through 2011. The Company
determined the aggregate value of these warrants on the date of grant to be
approximately $596,000, based on the Black-Scholes valuation model, with the
following weighted average assumptions: dividend yield of 0%, expected
volatility of 75%, risk free interest rate of 3.59% and expected term of 9
years. This amount had been recorded as a preferred stock deemed dividend in the
statements of operations and stockholders' equity.

7. Stock Options

     In May 1997, the Company adopted the 1997 Omnibus Stock Plan (the "Plan").
Under the 1997 Omnibus Stock Plan, as amended in 1999, 2002 and 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 1997 Omnibus Stock Plan. Options vest at
the end of the second year and expire 10 years from the date of grant and upon
termination of employment.

     The following table relates to options activity in 2001, 2002 and 2003
under the Plan:
<TABLE>
<CAPTION>

                                                                            Weighted average
                                                        Number of             exercise price
                                                          shares                per share
                                                      ---------------    ------------------------

<S>                             <C> <C>                    <C>                             <C>
Options outstanding at December 31, 2000                   1,020,250                       1.519
Granted                                                       66,000                       0.810
                                                      ---------------

Options outstanding at December 31, 2001                   1,086,250                       1.470

Granted                                                      220,000                       0.580
                                                      ---------------

Options outstanding at December 31, 2002                   1,306,250                       1.226

Granted                                                      925,000                       0.770

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

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

Options exercisable at December 31, 2003                   1,425,250                       1.311
                                                      ===============
</TABLE>

                                      F-14

<PAGE>


A summary of stock options outstanding and exercisable as of December 31, 2003
is as follows:
<TABLE>
<CAPTION>

           -------------------------------------------------------------------------------------------
                                    Options outstanding              |          Options exercisable
           -------------------------------------------------------------------------------------------
                                             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>
    $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>


8. Discontinued Operations

     On December 20, 2001, the Board of Directors voted to sell all of the
outstanding common stock of Isaacs Europe. Subsequently, the Company sold 100%
of the outstanding common stock of Isaacs Europe to a management group of Isaacs
Europe in exchange for repayment of $100,000 of intercompany debt and the
assumption of liabilities.

     The Company had concluded, from the inception of Isaacs Europe, that it did
not meet the criteria for segment reporting under either Statement of Financial
Accounting Standards No. 14 "Financial Reporting for Segments of a Business
Enterprise" or Statement of Financial Accounting Standards No. 131 "Disclosures
about Segments of an Enterprise and Related Information". However, in June 2001,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144") which changed the criteria for reporting
disposals as discontinued operations in the financial statements. The Company
has reviewed the provisions of SFAS 144 and has determined that the sale of
Isaacs Europe meets the two conditions necessary for presentation as
discontinued operations. Those conditions are (a) the operations and cash flow
of the component have been or will be eliminated from the ongoing operations of
the entity as a result of the disposal transaction and (b) the entity will not
have any significant continuing involvement in the operations of the component
after the disposal transaction.

     The sale of Isaacs Europe was effective on December 31, 2001. The Company
recorded a loss from operations of Isaacs Europe of $1,309,610 for the year
ended December 31, 2001. The Company recorded a loss on the sale of Isaacs
Europe of $1,182,281. The loss on the sale of Isaacs Europe was not offset by
the consideration of $100,000 as the ultimate collection of the amount was
uncertain at the time of the transaction. Isaacs Europe subsequently ceased
operations and the Company will not collect the consideration from the sale.
Revenues from Isaacs Europe were insignificant since its inception.

                                      F-15

<PAGE>

9. Commitments and Contingencies

Operating Leases

     The Company rents real and personal property under leases expiring at
various dates through 2008. 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, 2003 are
summarized as follows:

<TABLE>
<CAPTION>

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

<S>                             <C>       <C>                 <C>                 <C>
                                2004      $  271,128          $  115,217          $  386,345
                                2005              --             115,217             115,217
                                2006              --              93,647              93,647
                                2007              --              43,308              43,308
                                2008              --              32,879              32,879
                                     ----------------   -----------------   -----------------

                                          $  271,128          $  400,268          $  671,396
                                     ================   =================   =================


Total rent expense is as follows:                    Year Ended December 31,
                                     --------------------------------------------------------
                                          2003                2002                2001
                                     ----------------   -----------------   -----------------

Minimum rentals                           $  475,966          $  631,925          $  949,204
Other lease costs                            154,437             175,218              22,847
                                     ----------------   -----------------   -----------------

                                          $  630,403          $  807,143          $  972,051
                                     ================   =================   =================
</TABLE>

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, the U.S. Virgin Islands and Canada. In June
2002, the Company notified Latitude of its intention to extend the agreement
through 2007. 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. In
February 2003, Latitude and the Company agreed to defer the December 2002 and
January 2003 royalty payments of $250,000 each to October and November 2003,
respectively. In November of 2003, Latitude and the Company agreed that the
$250,000 royalty payment that had been deferred from December 2002 to October
2003 would be further deferred to May 2004, and the $250,000 royalty payment
that had been deferred from January 2003 to November 2003 would be further
deferred to June 2004. 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.

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. In June 2002, the Company
notified Latitude of its intention to extend the agreement through 2007. Under

                                      F-16

<PAGE>

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. In February 2003,
Latitude and the Company agreed to defer the December 2002 royalty payment of
$125,000 to October 2003 and to reduce the 2003 minimum guaranteed royalty
payments by $450,000 to $1,050,000. The Company will make no minimum royalty
payments under this agreement from February to May 2003. In November of 2003,
Latitude and the Company agreed that the $125,000 royalty payment that had been
deferred from January 2003 to October 2003 would be further deferred to May
2004, and that one half of the $250,000 payment due in the month of November
2003 with respect to the minimum royalties to be paid in 2003 would be paid in
that month and the $125,000 balance thereof shall be deferred to June 2004. 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. 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.

The Company has the following contractual obligations as of December 31, 2003:

<TABLE>
<CAPTION>

 Schedule of contractual obligations:                           Payments Due By Period
                                             -------------------------------------------------------------
                                Total           Current         1-3 years        4-5 years     After 5
                                                                                                 years
                            ---------------  ---------------  ---------------  --------------  -----------
<S>                            <C>              <C>              <C>
Employment agreements          $ 3,385,000      $ 1,655,000      $ 1,730,000              --           --
Girbaud license                 19,125,000        5,625,000        9,000,000       4,500,000           --
obligations *
Girbaud fashion shows            1,200,000          300,000          600,000         300,000           --
Girbaud creative &
advertising fees                   760,000          190,000          380,000         190,000           --
                            ---------------  ---------------  ---------------  --------------  -----------
Total contractual
obligations                 $   24,470,000      $ 7,770,000     $ 11,710,000     $ 4,990,000           --
                            ===============  ===============  ===============  ==============  ===========

(*) Adjusted to account for the deferrals, reductions and waivers of the Consultants'
     Fees and royalty obligations mentioned above.
</TABLE>

Employment Agreements

     Robert J. Arnot, former Chairman of the Board, Chief Executive Officer and
President of the Company and Daniel Gladstone, President of the Girbaud Division
of the Company, each entered into a consulting agreement with Latitude beginning
May 17, 2002 and terminating on December 31, 2005 or when the consultant is no
longer employed by the Company, whichever occurs first. Under the terms of the
consulting agreements, each will serve on an advisory committee to assist in
developing global strategy and a plan for the Marithe and Francois Girbaud brand
and will attend regular meetings of the committee. If the committee is not
established or is disbanded, each will be required to meet in Europe with
representatives of Latitude from time to time. As compensation, each is to
receive an annual consulting fee of $100,000, except for the year 2002, for
which the consulting fee was to be $66,000. During 2002, Latitude paid Messrs.
Arnot and Gladstone $44,000 each and the consulting agreements were terminated.
While not paid by the Company, the Company concluded that consulting services
performed by these two senior executives will ultimately benefit its operations
and accordingly recorded the amounts received by these officers as consulting
expense and contributed capital.

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

     In December 2002, Robert J Arnot and the Board of Directors agreed that he
would not continue to serve as Chief Executive Officer and President. On
February 3, 2003, Mr. Arnot resigned as a director, Chief Executive Officer and

                                      F-17

<PAGE>

President of the Company effective as of February 6, 2003. In connection with
his resignation, Mr. Arnot agreed to terminate his employment agreement and
enter into a separation agreement. The separation agreement provided that Mr.
Arnot serve as a paid consultant to the Company between February 6, 2003 and May
2, 2003 and thereafter had received severance payments until December 15, 2003.
The Company recognized severance expense of $400,000 in December 2002.

     The Company engaged the services of Peter J Rizzo as its Chief Executive
Officer in December 2003.

10. 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, 2003.
Pension expense for 2003, 2002 and 2001 was approximately $349,000, $244,000 and
$190,000 respectively, and includes the following components:

<TABLE>
<CAPTION>

                                                                     Years Ended December 31,
                                                      --------------------------------------------------------
                                                            2003                2002                2001
                                                      -----------------    ----------------   -----------------
<S>                                                          <C>                 <C>                <C>
Service cost of current period                               $  54,000           $  88,000          $  106,000
Interest on the above service cost                               4,000               6,000               8,000
                                                      -----------------    ----------------   -----------------

                                                                58,000              94,000             114,000
Interest on the projected benefit obligation                   450,000             458,000             485,000
Expected return on plan assets                               (519,000)           (575,000)           (599,000)
Amortization of prior service cost                              43,000              43,000              43,000
Amortization of loss                                           317,000             224,000             147,000
                                                      -----------------    ----------------   -----------------

Pension cost                                                $  349,000          $  244,000          $  190,000
                                                      =================    ================   =================

The following table sets forth the Plan's funded                     Years ended December 31,

status and amounts recognized at December 31, 2003,
2002 and 2001:
                                                      --------------------------------------------------------
                                                           2003                2002                2001
                                                      ----------------    ----------------    ----------------

Vested benefits                                           $ 5,764,000         $ 5,756,000         $ 6,110,000
Nonvested benefits                                             30,000              35,000              63,000
                                                      ----------------    ----------------    ----------------

Accumulated benefit obligation                              5,794,000           5,791,000           6,173,000
Effect of anticipated future compensation levels and
other events                                                  245,000             297,000             457,000
                                                      ----------------    ----------------    ----------------

Projected benefit obligation                                6,039,000           6,088,000           6,630,000
                                                      ----------------    ----------------    ----------------

Fair value of assets held in the plan                       7,396,000           7,092,000           7,093,000
                                                      ----------------    ----------------    ----------------

(Excess)/deficit of projected benefit obligation
over plan assets                                            1,357,000           1,004,000             463,000
Unrecognized net loss from past experience different
from that assumed                                           3,150,000           3,509,000           2,900,000
Unrecognized prior service cost                                85,000             128,000             171,000
                                                      ----------------    ----------------    ----------------

Net prepaid periodic pension cost                         $ 4,592,000         $ 4,641,000         $ 3,534,000
                                                      ================    ================    ================
</TABLE>

                                      F-18

<PAGE>

With respect to the above table, the weighted average discount rate used to
measure the projected benefit obligation and net prepaid periodic pension cost
was 7.5% for 2003, 2002 and 2001; the rate of increase in future compensation
levels is 3%; and the expected long-term rate of return on assets is 8%. The net
prepaid periodic pension cost is included in other assets in the accompanying
consolidated balance sheets.

<TABLE>
<CAPTION>

The following sets forth the Plan's change in
benefit obligation for 2003 and 2002:                       Years Ended December 31,
                                                      -------------------------------------
                                                            2003                2002
                                                      -----------------    ----------------
<S>                                                       <C>                 <C>
Benefit obligation at beginning of year                   $  6,088,000        $  6,677,000
Service cost                                                    58,000              94,000
Interest cost                                                  450,000             458,000
Benefits paid                                                (927,000)         (1,141,000)
Actuarial loss                                                 370,000                  --
                                                      -----------------    ----------------

Benefit obligation at end of period                       $  6,039,000        $  6,088,000
                                                      =================    ================

The following sets forth the Plan's change in plan
assets for 2003 and 2002:                                   Years Ended December 31,
                                                      -------------------------------------
                                                            2003                2002
                                                      -----------------    ----------------
Fair value of plan assets at beginning of year            $  7,092,000        $  7,093,000
Return on plan assets                                          519,000             575,000
Employer contributions                                         300,000           1,350,000
Benefits paid                                                (927,000)         (1,141,000)
Assets gain/loss deferred                                      412,000           (785,000)
                                                      -----------------    ----------------

Fair value of plan assets at end of year                  $  7,396,000        $  7,092,000
                                                      =================    ================

The Company's pension plan weighted-average asset
allocations at December 31, 2003 and 2002, by asset
category are as follows:                                           December 31,
                                                      -------------------------------------
                                                            2003                2002
                                                      -----------------    ----------------
    Equity Securities                                              65%                 58%
    Debt Securities                                                30%                 29%
    Cash Accounts                                                   5%                 13%
                                                      -----------------    ----------------

                                                                  100%                100%
                                                      =================    ================
</TABLE>

<TABLE>
<CAPTION>

The following benefit payments, which reflect expected future               Pension
services, as appropriate, are expected to be paid:                          Benefits
                                                                       -----------------
<S> <C>                                                                     <C>
    2004                                                                    $   145,038
    2005                                                                        149,380
    2006                                                                        173,659
    2007                                                                        211,149
    2008                                                                        239,898
    Years 2009-2013                                                           1,574,021

                                                                       -----------------
                                                                              1,574,021

                                                                       =================

</TABLE>

                                      F-19

<PAGE>

11. Supplemental Disclosures of Cash Flow Information

     Cash paid during the year for interest amounted to $499,166, $463,457 and
$1,309,956 for 2003, 2002 and 2001, respectively.

<TABLE>
<CAPTION>

         Non-cash effect of restructuring BOSS trademark and licensing arrangement:

                                                            2003              2002              2001
                                                      -----------------------------------------------------
<S>                                                            <C>            <C>                 <C>
        Conversion of redeemable preferred stock to            $     --       $ 3,300,000         $     --
        common stock
        Officers' compensation contribution                          --            88,000               --
        Deemed dividend in connection with preferred
        stock                                                        --           596,252               --

12. Quarterly Financial Data (Unaudited)
</TABLE>

<TABLE>
<CAPTION>

Summarized quarterly financial data for 2003 and 2002 is as follows:

                                                                       Quarter
------------------------------------------------------------------------------------------------------------------
2003                                      First              Second               Third              Fourth
------------------------------------------------------  ------------------  ------------------  ------------------
<S>                                     <C>                 <C>                 <C>                 <C>
Net sales                               $  16,543,702       $  16,230,043       $  16,371,906       $  17,078,849
Gross profit                                4,670,896           5,695,656           5,961,612           6,189,939
Net (loss) income attributable to
common stockholders                         (641,625)             471,322           (545,429)           (979,034)
Basic and diluted (loss) earnings
per share                                      (0.06)                0.04             ( 0.05)              (0.09)
                                     =================  ==================  ==================  ==================


                                                                       Quarter
------------------------------------------------------------------------------------------------------------------
2002                                      First              Second               Third              Fourth
------------------------------------------------------  ------------------  ------------------  ------------------
Net sales                               $  20,156,508       $  16,987,156       $  16,348,297       $  12,306,120
Gross profit                                8,470,246           7,093,332           6,238,796           2,219,576
Net income (loss) attributable to           1,642,307             243,319           (510,399)         (6,934,078)
common stockholders
Basic and diluted earnings (loss)
per share                                        0.21                0.03             ( 0.07)              (0.76)
                                     =================  ==================  ==================  ==================
</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.   During the fourth quarter of 2002, the Company wrote down its inventory by
     approximately $1.8 million, which had the effect of increasing the net loss
     per share by $0.20.

                                      F-20

<PAGE>
               Report of Independent Certified Public Accountants
                        on Financial Statement Schedules

I.C. Isaacs & Company, Inc.


     The audits referred to in our report to I.C. Isaacs & Company, Inc. dated
March 15, 2004, which is contained in Item 8 of this Form 10-K, include the
audit of the financial statement schedule listed in the accompanying index for
each of the three years in the period ended December 31, 2003. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.

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

                                                              BDO SEIDMAN, LLP

Bethesda, Maryland
March 15, 2004

                                      F-21

<PAGE>


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

<TABLE>
<CAPTION>

Description                                     Balance        Charged to       Deduction         Balance at
                                              Beginning of      Costs and
                                                the Year        Expenses                          End of Year
                                             ---------------  --------------  --------------     --------------
Year Ended December 31, 2001
<S>                                                 <C>             <C>         <C>         <C>        <C>
      Allowance for doubtful accounts               630,000         880,000     (1,110,000) (1)        400,000
      Reserve for sales returns and
      discounts                                     230,000       4,803,000     (4,835,000)            198,000
Year Ended December 31, 2002
      Allowance for doubtful accounts               400,000         315,000       (470,000)            245,000
      Reserve for sales returns and
      discounts                                     198,000       3,672,000     (3,744,000)            126,000
Year Ended December 31, 2003
      Allowance for doubtful accounts               245,000         202,000       (172,000)            275,000
      Reserve for sales returns and
      discounts                                     126,000       2,477,000     (2,540,000)             63,000

</TABLE>

(1)  This amount includes a $90,000 reduction in the allowance for doubtful
     accounts due to the sale of the common stock of Isaacs Europe in the fourth
     quarter of 2001.

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