|  (Mark      One)                                 |   |                                                                                                        |
|-------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|
| x                                                     |   | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE      SECURITIES EXCHANGE ACT OF 1934         |
| For      the fiscal year ended December 31, 2007 |
| or                                                    |
| o                                                     |   | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF      THE SECURITIES EXCHANGE ACT OF1934 |

|                                 Delaware                                (State      or other jurisdiction of                                incorporation      or organization)                                                                                                                                                                                                                               |         52-1377061  (IRS      Employer Identification      No.)                                                                       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                 475      10th      Avenue, 9th      Floor                                New      York, NY 10018                                (Address      of principal executive offices) |                      10018  (Zip      code) |

----

----

|                                                   |                                                                                                                                                                                                                                                                                                          |                                                                 |
|--------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
|                                                   |                                                                                                                                                                                                                                                                                                          | Page                                                                 |
|                                                   |                                                 PART      I   |                                                                 |
|   ITEM 1.                                    | BUSINESS                                                                                                                                                                                                                                                                                                      | 4                                                                    |
|   ITEM 1A.                                   | RISK FACTORS                                                                                                                                                                                                                                                                                                  | 11                                                                   |
|   ITEM 1B.                                   | UNRESOLVED STAFF COMMENTS                                                                                                                                                                                                                                                                                     | 11                                                                   |
|   ITEM 2.                                    | PROPERTIES                                                                                                                                                                                                                                                                                                    | 11                                                                   |
|   ITEM 3.                                    | LEGAL PROCEEDINGS                                                                                                                                                                                                                                                                                             | 11                                                                   |
|   ITEM 4.                                    | SUBMISSION OF MATTERS TO A VOTE OF SECURITY      HOLDERS                                                                                                                                                                                                                                                      | 12                                                                   |
|                                                   |                                                                                                                                                                                                                                                                                                          |                                                                 |
|                                                   |                                                 PART      II  |                                                                 |
|   ITEM 5.                                    | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES                                                                                                                                                                                       | 13                                                                   |
|   ITEM 6.                                    | SELECTED FINANCIAL DATA                                                                                                                                                                                                                                                                                       | 15                                                                   |
|   ITEM 7.                                    | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION      AND RESULTS OF OPERATIONS                                                                                                                                                                                                              | 16                                                                   |
|   ITEM 7A.                                   | QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET      RISK                                                                                                                                                                                                                                             | 30                                                                   |
|   ITEM 8.                                    | FINANCIAL STATEMENTS AND SUPPLEMENTARY    DATA                                                                                                                                                                                                                                                                | 30                                                                   |
|   ITEM 9.                                    | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING      AND FINANCIAL DISCLOSURE                                                                                                                                                                                                                     | 30                                                                   |
|   ITEM 9A(T).                                | CONTROLS AND PROCEDURES                                                                                                                                                                                                                                                                                       | 30                                                                   |
|   ITEM 9B.                                   | OTHER INFORMATION                                                                                                                                                                                                                                                                                             | 32                                                                   |
|                                                   |                                                                                                                                                                                                                                                                                                          |                                                                 |
|                                                   |                                                 PART      III |                                                                 |
| ITEM 10.                                               | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE      GOVERNANCE                                                                                                                                                                                                                                                   | 33                                                                   |
| ITEM 11.                                               | EXECUTIVE COMPENSATION                                                                                                                                                                                                                                                                                        | 39                                                                   |
| ITEM 12.                                               | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND      MANAGEMENT AND RELATED STOCKHOLDER MATTERS                                                                                                                                                                                                           | 55                                                                   |
| ITEM 13.                                               | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND      DIRECTOR INDEPENDENCE                                                                                                                                                                                                                                | 57                                                                   |
| ITEM 14.                                               | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                                                                                                                                                                                                        | 61                                                                   |
|                                                   |                                                                                                                                                                                                                                                                                                          |                                                                 |
|                                                   |                                                 PART      IV  |                                                                 |
|  ITEM 15.                                         | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                                                                                                                                                                                                                       | 63                                                                   |
|                                                   |                                                                                                                                                                                                                                                                                                          |                                                                 |
|                                                   | SIGNATURES                                                                                                                                                                                                                                                                                |            64 |
|           |                                                                                                                                                                                                                                                                                                          |
|                                                   |                                                                                                                                                                                                                                                                                                          |
|                                                   |                                                                                                                                                                                                                                                                                                          |
|                                                   |                                                                                                                                                                                                                                                                                                          |

----

----

| ITEM 1. | BUSINESS |
|---------|----------|

----

----

----

----

----

Item7.

| ●   | developing      quality products with consistent fits, finishes, fabrics and      style;  |
|---------------------|------------------------------------------------------------------------------------------------|

| ●   | anticipating      and responding in a timely manner to changing consumer      demands;  |
|---------------------|----------------------------------------------------------------------------------------------|

| ●        | providing      compelling product value relative to the price;  |
|---------------------|----------------------------------------------------------------------|

| ●   | continuing      to generate competitive margins and inventory turns for retail customers      by providing timely delivery; and  |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ●   | providing      strong effective marketing support.  |
|---------------------|----------------------------------------------------------|

----

----

|  ITEM 1A. | RISK FACTORS |
|----------------|--------------|

| ITEM 1B. | UNRESOLVED STAFFCOMMENTS |
|----------|--------------------------|

|  ITEM 2. | PROPERTIES |
|---------------|------------|

| Location                |   | Leased      or Owned    |   | Use                                                                            |   | Approximate      Area in Square      Feet |
|-------------------------|--------|-------------------------|--------|--------------------------------------------------------------------------------|--------|-------------------------------------------|
| Baltimore,      MD      |   | Owned                   |   | Administrative      and Office Facilities                                      |   | 35,000                                    |
|  New      York, NY |   | Leased      though 2014 |   |  Executive      Management, Marketing, Merchandising, Sales, and Sourcing |   | 13,500                                    |
| Milford,      DE        |   | Owned                   |   |  Distribution      Center                                                 |   | 70,000                                    |

| ITEM 3. | LEGAL PROCEEDINGS |
|---------|-------------------|

----

| ITEM 4. | SUBMISSION      OF MATTERS TO A VOTE OF SECURITYHOLDERS |
|---------|---------------------------------------------------------|

----

|   ITEM 5. | MARKET      FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER      PURCHASES OF EQUITY SECURITIES |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|

| Quarter Ended     |   | High   |   |   | Low    |   |   | High   |   |   | Low    |   |
|-------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|              |   | 2007   |   |   | 2006   |   |
|              |   |   |   |   |   |   |   |   |   |   |   |   |
| March      31     |   | $      | 4.70   |   |   | $      | 1.97   |   |   | $      | 6.80   |   |   | $ | 4.40 |   |
| June      30      |   | $      | 2.06   |   |   | $      | 0.82   |   |   | $      | 6.20   |   |   | $ | 4.50 |   |
| September      30 |   | $      | 1.24   |   |   | $      | 0.93   |   |   | $      | 6.20   |   |   | $ | 4.70 |   |
| December      31  |   | $      | 1.10   |   |   | $      | 0.30   |   |   | $      | 6.20   |   |   | $ | 4.01 |   |

----

| Plan      Category                                              | Number      of securities to be issued upon exercise of outstanding options, warrants      and rights | Weighted-average      exercise price of outstanding options, warrants and rights | Number      of securities remaining available for future issuance under equity      compensation plans (excluding securities reflected in column      (a)) |
|-----------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                            | (a)                                                                                                   | (b)                                                                              | (c)                                                                                                                                                        |
| Equity      compensation plans approved by security holders     | 1,486,367                                                                                             | $2.24                                                                            | 110,000                                                                                                                                                    |
| Equity      compensation plans not approved by security holders | 110,000                                                                                               | $0.00                                                                            | 490,000                                                                                                                                                    |

----

| ITEM 6. | SELECTED      FINANCIAL DATA |
|---------|------------------------------|

|                            |   | As      of December 31, |   |
|---------------------------------|--------|-------------------------|--------|
|                            |   | 2007                    |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
| Balance      Sheet Data:        |   | (in      thousands)     |   |
| Working      capital            |   | $                       | 4,095  |   |   | $ | 15,151 |   |   | $ | 13,086 |   |   | $ | 8,595 |   |   | $ | 4,578 |   |
| Total      assets               |   |                    | 11,056 |   |   |   | 28,809 |   |   |   | 27,143 |   |   |   | 27,833 |   |   |   | 20,090 |   |
| Total      debt                 |   |                    | 2,805  |   |   |   | 5,493 |   |   |   | 4,620 |   |   |   | 6,781 |   |   |   | 10,782 |   |
| Stockholders’      equity |   |                    | 4,304  |   |   |   | 17,068 |   |   |   | 13,144 |   |   |   | 12,154 |   |   |   | 5,547 |   |

|                                                    |   | Year      Ended December 31,              |    |
|---------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                    |   | 2007                                      |    |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
| Statement      of Operations Data:                      |   | (in      thousands except per share data) |    |
| Net      sales                                          |   | $                                         | 37,214  |   |   | $ | 82,236 |   |   | $ | 83,289 |   |   | $ | 80,649 |   |   | $ | 64,305 |   |
| Cost      of sales                                      |   |                                      | 26,551  |   |   |   | 48,945 |   |   |   | 49,070 |   |   |   | 49,583 |   |   |   | 43,706 |   |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                                       |   |                                      | 10,663  |   |   |   | 33,291 |   |   |   | 34,219 |   |   |   | 31,066 |   |   |   | 20,599 |   |
| Operating      expenses                                 |   |                                      | 26,057  |   |   |   | 27,249 |   |   |   | 28,550 |   |   |   | 25,243 |   |   |   | 21,409 |   |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      (loss) income                            |   |                                      | (15,394 | ) |   |   | 6,042 |   |   |   | 5,669 |   |   |   | 5,823 |   |   |   | (810 | ) |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest,      net and other expenses                   |   |                                      | (173    | ) |   |   | (621 | ) |   |   | (436 | ) |   |   | (703 | ) |   |   | (885 | ) |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)      income before income taxes                  |   |                                      | (15,567 | ) |   |   | 5,421 |   |   |   | 5,233 |   |   |   | 5,120 |   |   |   | (1,695 | ) |
| Income      tax  (expense) benefit, net       |   |                                      | (77     | ) |   |   | (2,814 | ) |   |   | 1,178 |   |   |   | 1,045 |   |   |   | — |   |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) income                                  |   | $                                         | (15,644 | ) |   | $ | 2,607 |   |   | $ | 6,411 |   |   | $ | 6,165 |   |   | $ | (1,695 | ) |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      net (loss) income  per share       |   | $                                         | (1.27   | ) |   | $ | 0.22 |   |   | $ | 0.55 |   |   | $ | 0.55 |   |   | $ | (0.15 | ) |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      weighted average common shares outstanding   |   |                                      | 12,348  |   |   |   | 12,020 |   |   |   | 11,729 |   |   |   | 11,264 |   |   |   | 11,135 |   |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      net (loss) income  per share     |   | $                                         | (1.27   | ) |   | $ | 0.21 |   |   | $ | 0.48 |   |   | $ | 0.46 |   |   | $ | (0.15 | ) |
|                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      weighted average common shares outstanding |   |                                      | 12,348  |   |   |   | 12,692 |   |   |   | 13,397 |   |   |   | 13,355 |   |   |   | 11,135 |   |

----

| ITEM 7. | MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS |
|---------|-------------------------------------------------------------------------------------------------------|

| ●   | The      Company introduced a new line of fashion apparel for men and women called      “Le Jean de Marithé + François Girbaud” (“Le Jean”).  Le Jean is      intended to appeal to a broader customer base than the Company’s existing      line.  The first collection for Le Jean was made available for      shipment in January 2008 and is in a testing phase during      2008. |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | The      Company has taken steps to reduce its cost structures and improve the      effectiveness of its organization.  The steps include headcount      reduction through staff terminations, and attrition from 110 at December      31, 2006 to 68 at December 31, 2007.  The Company expects that      these actions will result in annual cost savings of approximately $2.7      million.  Additionally, the Company has reorganized its design      organization and sales organization to improve  efficiency. |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ●   | In      March 2008, the Company entered into an agreement to sell its Baltimore      facility (approximately 35,000 square feet) for $0.9      million.  The agreement provides the buyer a 30-day feasibility      period and 60 days thereafter to close the sale.  The buyer has      requested, and the Company has agreed, to extend the feasibility period an      additional 45 days.  The buyer has provided the Company a $25,000      escrow deposit that becomes non-refundable after the feasibility period,      as extended.  The agreement also provides that the Company can      remain in the premises for a 90-day period (rent free) after the closing      date with an optional 90-day rental period thereafter.  Once the      sale is complete, the Company plans to find a suitable location      (approximately 5,000 square feet) in the Baltimore area to relocate its      Baltimore staff of approximately 20 people.  The Company      anticipates a net gain of approximately $0.6 million and net proceeds of      approximately $0.8 million after closing costs and broker      commissions.  The net proceeds which will be used to pay down      any balances on the Company’s revolving line of  credit. |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                     |   | Year      Ended December 31, |    |
|------------------------------------------|--------|------------------------------|---------|
|                                     |   | 2007                         |    |   | 2006 |   |   | 2005 |   |
|                                     |   |                         |    |   |   |   |   |   |   |
| Net      sales                           |   |                         | 100.0   | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost      of sales                       |   |                         | 71.3    | % |   |   | 59.5 | % |   |   | 58.9 | % |
|                                     |   |                         |    |   |   |   |   |   |   |   |   |   |
| Gross      profit                        |   |                         | 28.7    | % |   |   | 40.5 | % |   |   | 41.1 | % |
|                                     |   |                         |    |   |   |   |   |   |   |   |   |   |
| Selling      expenses                    |   |                         | 22.3    | % |   |   | 12.7 | % |   |   | 13.0 | % |
| License      fees                        |   |                         | 12.1    | % |   |   | 6.6 | % |   |   | 6.1 | % |
| Distribution      and shipping expenses  |   |                         | 5.3     | % |   |   | 3.0 | % |   |   | 2.6 | % |
| General      and administrative expenses |   |                         | 23.2    | % |   |   | 10.9 | % |   |   | 10.3 | % |
| Litigation      settlement               |   |                         | — |   |   |   | — |   |   |   | 2.2 | % |
| Severance                                |   |                         | 5.4     | % |   |   | — |   |   |   | — |   |
| Loss      on write-off of assets         |   |                         | 2.0     | % |   |   | — |   |   |   | — |   |
| Gain      on sale of trademark           |   |                         | (0.3    | %) |   |   | — |   |   |   | — |   |
|                                     |   |                         |    |   |   |   |   |   |   |   |   |   |
| Operating      income                    |   |                         | (41.3   | %) |   |   | 7.3 | % |   |   | 6.9 | % |

| ●   | Sales      of goods sold at regular prices (including in season promotional      discounts) – Sales of goods sold      at regular prices decreased $45.1 million to $32.4 million in 2007 (from      $77.5 million in 2006).  Gross profit margin on these sales      (before adjustments for returns and allowances) was 48.3% in 2007 compared      to 46.2% in 2006. |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Sales      of goods sold at off-price liquidations to      discount retail stores – Sales of      goods sold at off-price liquidations decreased $1.1 million to $9.3      million in 2007 (from $10.4 million in 2006). Gross profit margin on these      sales (before adjustments for returns and allowances) was a loss      percentage of 10.9% in 2007 compared to a profit percentage of 5.3% in      2006. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | Sales      of goods sold at regular prices (including in season promotional      discounts) – Sales of goods sold at regular prices decreased $5.5      million to $77.5 million in 2006 (from $83.0 million in      2005).  Gross profit margin on these sales (before adjustments      for returns and allowances) was 46.2% in 2006 compared to 48.4% in      2005. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Sales      of goods sold at off-price liquidations to      discount retail stores – Sales of goods sold at off-price      liquidations increased $2.3 million to $10.4 million in 2006 (from $8.1      million in 2005). Gross profit margin on these sales (before adjustments      for returns and allowances) was 5.3% in 2006 compared to a loss percentage      of 19.9% in 2005. |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|   | · | waives      all existing defaults from March 2007 through September    2007; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | extends      the termination date of the Credit Facility from December 28, 2007 to      December 31, 2011; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | ·   | offers      two borrowing options from which the Company can choose.  One      option offers, using as collateral, up to 85% of eligible accounts      receivable minus reserves (both as defined by the Credit Facility), as      designated by Wachovia.  The other option provides, using as      collateral, up to 85% of eligible accounts receivable and a portion of      eligible inventory (not to exceed $8.0 million) minus reserves as      designated by Wachovia.  The Company must maintain excess      availability of $2.0 million ($1.5 million if certain ratios are met)      under this second option; |
|--------|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | adjusts      the applicable margin to fluctuate from (0.25%) to 0.25% for Prime Rate      loans and 2.00% to 2.50% for LIBORloans; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | ·   | eliminates      the financial covenants, such as fixed charge coverage ratios and tangible      liability to net worth ratios, that were required by the Credit      Facility; |
|--------|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | reduces      the amount of capital expenditures the Company can incur for fiscal years      2007 and 2008 from $2.0 million to $0.4 million in the aggregate;      and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | requires      an early termination fee of (i) 1.5% of the revolver commitment if the      termination occurs on or before November 13, 2008 and (ii) 0.75% of the      Revolver Commitment if the termination occurs after November 13, 2008 but      on or before November 13, 2009. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ● |   | The      Amended and Restated Subordinated Secured Promissory Note, dated as of      December 30, 2004, by and between the Company (as borrower) and Textile      (as purchaser and lender), was fully discharged and cancelled such      that approximately $2.9 million, including interest accrued      though May 9, 2008, was converted into approximately 14.3 million of      newly issued shares of the Company’s common stock and sold at a conversion      price of $0.20 per share in a private placement exempt from the      registration requirements of the Securities Act of 1933, as amended (the      “Securities      Act”); |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

| ● |   | Textile and      Messrs. Bachellerie and Faltz collectively purchased, in a private      placement exempt from the registration requirements of the Securities      Act, 10.0 million newly issued shares of the Company’s common      stock at a price of $0.20 per share.  The Company will receive $2.0      million for issuance of these shares; |
|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                            |

|  ● |   | Textile,      Wurzburg, Messrs. Bachellerie and Faltz, and the Company entered into an      investor rights agreement whereby Textile, Wurzburg, and Messrs.      Bachellerie and Faltz were granted certain registration, representation on      the Board of Directors and other rights set forth  therein; |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                               |

----

|  ● |   | Mr.      Robert S. Stec, the Company’s Chief      Executive Officer, purchased in a private placement exempt from the      registration requirements of the Securities Act, 0.5      million newly issued and unregistered shares of the Company’s common      stock at a price of $0.20 per share.  The Company received $0.1      million for issuance of these shares; |
|---------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                      |

|  ● |   | The      Girbaud Men’s Agreement, dated as of November 1, 1997, by and between      Girbaud Design and I.C. Isaacs & Company, L.P.,  and the Girbaud      Women’s Agreement, dated as of March 4, 1998, by and between Latitude      and I.C. Isaacs & Company, L.P., were both amended to defer the      minimum royalty payments due in the months of February, March, April and      May 2008.  These minimum royalty deferrals, totaling $1.5      million, will accrue interest at a rate of 10% per annum and      will be payable no later than December 31,  2009 ; |
|---------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ●       |   | The      Company agreed that no bonus payments will be paid in 2008 to      its senior management, nor will the Company issue any bonus payments to      senior management with respect to the Company’s financial      performance in fiscal year 2008.  With the prior written      consent of Textile, the Company may provide equity incentive      compensation to senior management in lieu of bonuses for fiscal      year2008; and                                                                                                                                                     |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

| ● |   | Mr.      Stec’s employment agreement was extended through December      2011. |
|---------|--------|-------------------------------------------------------------------------------------|

|   | ● | offers two      additional borrowing base options from which the Company may elect.       Under the first option, the Company may borrow up to 85% of eligible      accounts receivable and a portion of eligible inventory (not to exceed      $500,000) minus reserves (both as defined by the Credit Facility Third      Amendment), as designated by Wachovia.  This option was available to      the Company until the earlier of May 30, 2008 and the consummation of the      Transaction, which consummation occured on May 9, 2008.  As such, the      first option is no longer available to the Company.  Under the second      option, the Company may borrow up to 85% of eligible accounts receivable      and a portion of eligible inventory (not to exceed $8.0 million) minus      reserves, as designated by Wachovia.  The Company must maintain      excess availability of $1.5 million ($1.0 million if certain ratios are      met) under this second option.  This option became available      following the consummation of the Transaction; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | ● | imposes a fixed      charge coverage ratio requirement at all times that the Company elects the      second borrowing option above of not less than (i) 1.00 for the first      three fiscal quarters of 2009 and (ii) 1.20 to 1.00 for each fiscal      quarter thereafter;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   | ● | sets the      applicable margin through January 1, 2009 to 0.25% for Prime Rate      Loans and 2.50% for LIBOR loans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   | ● | reduces the      amount of capital expenditures the Company can incur for each fiscal year      to $250,000 for 2008, $300,000 for 2009, and $500,000 for 2010 and      each fiscal year thereafter;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|   | ● | limits the Company      from entering into any lease or rental payments exceeding $175,000 in any      12 month period; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

|  | ● | requires the      proceeds from the potential sale of the Company’s Baltimore      facility to be used to pay down any existing loans on the revolving line      of credit and to establish a reserve of such amount on all borrowing base      options until 2009 and if the Company must meet certain fixed charge      coverage ratios. |
|--|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Schedule      of contractual obligations: |
|-------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                            |   | Payments      Due by Period |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                            |   | Total                       |       |   | Less      than 1 year |   |   | 1-3      years |   |   | 4-5      years |   |   | More      than 5 years |   |
| Girbaud      license obligations                                                                                                                                                                                                                                                                                                                                                |   | $                           | 31,500,000 |   |   | $ | 4,875,000 |   |   | $ | 8,625,000 |   |   | $ | 9,000,000 |   |   | $ | 9,000,000 |   |
| Promotional      expense license requirement                                                                                                                                                                                                                                                                                                                                    |   |                        | 9,100,000  |   |   |   | 1,300,000 |   |   |   | 2,600,000 |   |   |   | 2,600,000 |   |   |   | 2,600,000 |   |
| Long-term      debt  (*)                                                                                                                                                                                                                                                                                                                                              |   |                        | 3,405,000  |   |   |   | — |   |   |   | 2,400,000 |   |   |   | 1,005,000 |   |   |   | — |   |
| Operating      leases                                                                                                                                                                                                                                                                                                                                                           |   |                        | 3,398,000  |   |   |   | 457,000 |   |   |   | 910,000 |   |   |   | 991,000 |   |   |   | 1,040,000 |   |
| Girbaud      fashion shows                                                                                                                                                                                                                                                                                                                                                      |   |                        | 2,100,000  |   |   |   | 300,000 |   |   |   | 600,000 |   |   |   | 600,000 |   |   |   | 600,000 |   |
| Girbaud      creative & advertising fees                                                                                                                                                                                                                                                                                                                                    |   |                        | 1,820,000  |   |   |   | 260,000 |   |   |   | 520,000 |   |   |   | 520,000 |   |   |   | 520,000 |   |
| Employment      agreements                                                                                                                                                                                                                                                                                                                                                      |   |                        | 1,360,000  |   |   |   | 660,000 |   |   |   | 700,000 |   |   |   | — |   |   |   | — |   |
| Severance      agreements                                                                                                                                                                                                                                                                                                                                                       |   |                        | 872,000    |   |   |   | 872,000 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Total      contractual cash obligations                                                                                                                                                                                                                                                                                                                                         |   | $                           | 53,555,000 |   |   | $ | 8,724,000 |   |   | $ | 16,355,000 |   |   | $ | 14,716,000 |   |   | $ | 13,760,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                            |   |                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (*) Includes      principal and accrued interest payments due as of December 31, 2007, as      well as interest to accrue through the revised payment term of the note      payable. This note, excluding additional interest not yet accrued, is      to be converted into common stock of the Company as outlined in the      definitive agreement discussed above. |   |

----

| Schedule      of commercial commitments:                                                                                                                             |   |                                           |       |   |                  |   |       |           |   |   |           |   |   |                   |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|------------|--------|-----------------------|--------|------------|----------------|--------|--------|----------------|--------|--------|------------------------|---------|
|                                                                                                                                                                 |   | Amount      of Commitment Expiration by Period |       |
|                                                                                                                                                                 |   | Total                                          |       |   | Less      than 1 year |   |       | 1-3      years |   |   | 4-5      years |   |   | More      than 5 years |    |
|   Line of credit  (including      letters of credit) (*)                                                                                                   |   | $                                              | 15,000,000 |   |                  | $      | 15,000,000 |           |   | $      | —        |   |   | $                      | — |   |   | $ | — |   |
|                                                                                                                                                                 |   |                                           |       |   |                  |   |       |           |   |   |           |   |   |                   |    |   |   |   |   |   |
|   Total      commercial commitments                                                                                                                             |   | $                                              | 15,000,000 |   |                  | $      | 15,000,000 |           |   | $      | —        |   |   | $                      | — |   |   | $ | — |   |
|                                                                                                                                                                 |   |                                           |       |   |                  |   |       |           |   |   |           |   |   |                   |    |   |   |   |   |   |
| (*)At      December 31, 2007, the Company had no borrowings under the Credit Facility      and had outstanding letters of credit of approximately $0.1      million. |   |

----

----

| ITEM 7A. | QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK |
|----------|----------------------------------------------------------------|

| ITEM 8. | FINANCIAL      STATEMENTS AND SUPPLEMENTARY DATA |
|---------|--------------------------------------------------|

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

| ITEM      9A(T). | CONTROLS      AND PROCEDURES |
|------------------|------------------------------|

----

----

| ITEM 9B. |  OTHER      INFORMATION |
|----------|------------------------------|

----

| ITEM 10. | DIRECTORS,      EXECUTIVE OFFICERS AND COROPORATEGOVERNANCE |
|----------|-------------------------------------------------------------|

|                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Olivier      BachellerieAge:      47Director      since 2002President      and Director General ofGI      Promotion and Cravatatakiller S.A.President      of Fashion Services of America |   | Mr.      Bachellerie has served since 1997 as President and Director General of GI      Promotion and Cravatatakiller S.A., and as President of Fashion Services      of America, Inc. GI Promotion is beneficially owned by Marithé      Bachellerie and François Girbaud. Cravatatakiller S.A. is owned by Mr.      Bachellerie and Mr. Bachellerie is also the major shareholder of Fashion      Services of America, Inc.  Mr. Bachellerie is the son of Marithé      Bachellerie, who together with Mr. Girbaud, indirectly own and possess the      right to vote approximately 37% of the Company’s outstanding shares of      common stock.                                                                                                                                                                                                                    |   |
|                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
| René      FaltzAge:      54Director      since 2002Senior      Partner of Cabinet D’Avocats René Faltz                                                                    |   | Mr.      Faltz has practiced law in the Grand Duchy of Luxembourg since 1976. He      has been with Cabinet D’Avocats René Faltz since March 2000, after leaving      the law firm of Faltz & Kremer. Mr. Faltz is one of the Managing      Directors of, and serves as counsel to, several companies that, since      2002, have been beneficially owned by Marithé Bachellerie and François      Girbaud in connection with the conduct of their business activities as      designers and marketers of clothing and other items bearing the various      Girbaud trademarks.                                                                                                                                                                                                                                                                                                   |   |
|                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
| Neal      J. FoxAge:      73Non-Executive      Chairman of the BoardDirector      since 1998President      and Chief Executive Officer of  NJF Associates,      Incorporated         |   | Mr.      Fox has served as the Company's Non-Executive Chairman of the Board since      April 2007. Since 1999, he has served as the President and Chief      Executive Officer of NJF Associates, specializing in brand management and      business development in the apparel, accessories, cosmetics, and footwear      industries. In addition, he is the President and Chief Executive      Officer of Mark Cross, a luxury leather goods brand established in      1845. From 1989 through 1999, Mr. Fox served as President and CEO of      Sulka, an international menswear wholesaler and retailer. From      1983 to 1988, he was Chairman, CEO and principal stockholder of      Garfinckel's (including its predecessor Raleigh and Co). Beforehand, Mr.      Fox held senior management positions at Neiman Marcus, Bergdorf Goodman,      and I. Magnin. |   |
|                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |

----

| François      GirbaudAge:      63 Director      since 2004                                                                                                                                                                |   | Mr.      Girbaud, an internationally renowned designer and manufacturer of      clothing, and licensor of clothing designs and trademarks for more than 25      years, became one of the Company’s directors in October 2004. Pursuant to      agreements that the Company has with companies co-owned directly or      indirectly by Mr. Girbaud and Marithé Bachellerie, the Company licenses      the Girbaud trademarks and designs for use in the manufacture and sale of      various items of clothing in North America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Jon      HechlerAge:      55Director      since 1984President      of T. Eliot, Inc.                                                                                                                                                     |   | Mr.      Hechler was employed by Ira J. Hechler and Associates, an investment      company, from 1980 to 1999.  Since March 1994, Mr. Hechler has served      as President of T. Eliot, Inc., a manufacturer of the Sani Seat® hygienic      toilet seat system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
|                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Robert      Stephen StecAge:      53Chief      Executive Officer of the CompanyDirector since 2002Chairman      and Chief Executive Officer of Prestige Brands of North Carolin,      LLCChief Executive Officer of Brand Force One, LLC |   | Mr.      Stec became the Company’s interim Chief Executive Officer in April 2007      making the position permanent in September 2007.  Mr. Stec was a      Division President of VF Corporation and had sole responsibility for VF’s      Girbaud division in the United States from 1989 through 1993. From 1996 to      1998, he served as President of London Fog Industries, Inc., a leading      manufacturer and marketer of branded outerwear. During 1997 and 1998, Mr.      Stec served as a part-time consultant to Girbaud Design, Inc. and certain      of its affiliates.  For several months in 1999, Mr. Stec served      as a consultant to London Fog.  From 1999 to 2006, Mr. Stec was      employed as President and Chief Executive Officer of Lexington Home      Brands, a leading branded marketer of home furnishings.  Mr.      Stec is currently Chairman and Chief Executive Officer and the founder of      Prestige Brands of North Carolina, LLC, a home furnishings company that      focuses on niche opportunities in the furniture industry. He is also the      Chief Executive Officer and the founder of Brand Force One, LLC, a      marketing consulting company. |   |
|                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| John      McCoy IIAge:      60Director      since 2005President      of Components by John McCoy, Inc.                                                                                                                                   |   | Mr.      McCoy has worked within the apparel industry during the past 38 years. In      1970, he began working for Pierre Cardin’s sales operations and held the      position of Executive Vice President – Clothing when he left that firm in      1977 to found Fitzgerald by John McCoy, a U.S. manufacturer of European      styled clothing. In 1985, Mr. McCoy founded Components by John McCoy,      Inc., a manufacturer and distributor of luxury clothing brands, including      Gran Sasso, Mason’s, Coast, Moncler, Lenor Romano and Alfred      Dunhill.  Since Components by John McCoy, Inc.’s inception in      1985, Mr. McCoy has served as itsPresident.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

----

| Timothy      J. TumminelloAge:      50Controller,      Vice President &Interim      Principal Financial Officer |   | In      December 2007, Mr. Tumminello was appointed to the position of interim      Principal Financial Officer of the Company, effective      immediately.   Mr. Tumminello has served as the Company's      Controller since May 2000.  He started his employment with the      Company in May 1997, serving as the Assistant Controller until July      1999.  From July 1999 until May 2000, he served as CFO of      Graphtec, Inc., a subsidiary of Consolidated Graphics,      Inc.  From January 1991 until May 1997, Mr. Tumminello was      employed in the Baltimore office of Deloitte & Touche      LLP.  Mr. Tumminello is a certified public      accountant. |
|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

----

|   | Audit:        |   | Messrs.      Fox (Chair), Hechler and McCoy  |
|--------|---------------|--------|---------------------------------------------------|
|   | Compensation: |   | Messrs.      Hechler (Chair), Fox and McCoy  |
|   | Nominating:   |   | Messrs.      McCoy (Chair), Fox, Hechler     |

----

| 1.   | determining      the compensation of the Company’s Chief Executive Officer and other      executive officers as set forth in thecharter; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | assisting      the Board in discharging its responsibilities related to compensation of      the Company’s directors and other executive  officers; |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | producing      an annual report on executive compensation for inclusion in the Company’s      annual meeting proxy statement in accordance with applicable SEC rules and      regulations; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | addressing      any and all compensation-related issues that may arise in light of the      authority described within thecharter. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ITEM 11. | EXECUTIVE      COMPENSATION |
|----------|-----------------------------|

|   |          ● | is      consistent with the Company’s conservative traditions and cost      structure; |
|--------|---------------------------------|----------------------------------------------------------------------------------------------|

|   |          ● | is      sufficient to attract and retain key executives critical to the success of      the Company; |
|--------|---------------------------------|------------------------------------------------------------------------------------------------------|

|   |          ● | is      reflective of current performance of both the individual officer and the      Company; and |
|--------|---------------------------------|----------------------------------------------------------------------------------------------------|

|   |          ● | rewards successful      long-term strategic management and enhancement of stockholder      values. |
|--------|---------------------------------|----------------------------------------------------------------------------------------------------|

----

|   | ●   | earnings      before interest and taxes (“EBIT”); |
|--------|---------------------|---------------------------------------------------------------|

|   | ●   | cash      provided by operating activities;and |
|--------|---------------------|------------------------------------------------|

|   | ●   | inventory      turns, which is a measure of the level of efficiency employed by the      Company in matching its annual purchases of inventory to the annual sales      of merchandise to its customers. |
|--------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ●   | 50%      of base salary for meeting the budgeted financial targets for each      year; |
|--------|---------------------|----------------------------------------------------------------------------------------|

|   | ●   | 25%      of base salary for meeting 80% of the budgeted financial targets for each      year; and |
|--------|---------------------|---------------------------------------------------------------------------------------------------|

|   | ●   | 150%      of base salary for meeting 300% of the budgeted financial targets for each      year. |
|--------|---------------------|-------------------------------------------------------------------------------------------------|

|   | ●   | the      term of the grant does not exceed tenyears; |
|--------|---------------------|------------------------------------------------------|

|   | ●   | the      grant price is not less than the market price on the date of      grant; |
|--------|---------------------|-----------------------------------------------------------------------------------|

|   | ●   | grants      do not include “reload” provisions;and |
|--------|---------------------|----------------------------------------------------------------|

|   | ●   | options      generally vest after two to three years or ratably over two to three years      beginning with the first anniversary of the date of  grant. |
|--------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | stock      options align the interests of executives with those of the shareholders,      support a pay-for-performance culture, foster employee stock ownership and      focus the management team on increasing value for the      shareholders; |
|--------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | stock      options are performance-based (all the value received by the recipient      from a stock option is based on the growth of the stock price above the      option price); and |
|--------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | the      vesting period encourages executive retention and the preservation of      shareholder value. |
|--------|---------------------|--------------------------------------------------------------------------------------------------------|

----

----

| Name      & Principal Position                                 | Year |   | Salary      ($) |    |   | Bonus      ($) |   |    | Option      Awards ($) (2) |   |   | All      Other Compensation ($) (3) |   |   | Total      ($) |    |
|--------------------------------------------------------------------|------|--------|-----------------|---------|--------|----------------|--------|---------|----------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------|---------|
| Robert      S. StecChief      Executive Officer                    | 2007 |   | $               | 495,000 |   |           | $      | 150,000 |                       |   | $      | 21,821                                        |   |   | $              | 5,513   |   |   | $ | 672,334 |   |
| Timothy      J. TumminelloInterim      Principal Financial Officer | 2007 |   | $               | 126,539 |   |           | $      | — |                       |   | $      | 20,035                                        |   |   | $              | — |   |   | $ | 146,574 |   |
| Peter      J. RizzoFormer      Chief Executive Officer             | 2007 |   | $               | 560,692 |   |           | $      | 175,000 | (1)                        |   | $      | 50,854                                        |   |   | $              | 7,350   |   |   | $ | 793,896 |   |
| Gregg      A. HolstFormer      Chief Financial Officer             | 2006 |   | $               | 317,308 |   |           | $      | 99,250  |                       |   | $      | 44,462                                        |   |   | $              | 3,675   |   |   | $ | 464,695 |   |
| Jesse      de la RamaFormer      Chief Operating Officer           | 2006 |   | $               | 290,867 |   |           | $      | — |                       |   | $      | 55,464                                        |   |   | $              | 3,062   |   |   | $ | 349,393 |   |

| (1)   | Pursuant      to the terms of his employment agreement, Peter J. Rizzo was entitled to      receive a cash bonus equal to the higher of $175,000 and the amount      calculated based on the Company’s performance relative to pre-determined      performance targets.   |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The amounts in this column reflect the      compensation expense recognized for financial statement reporting purposes      for the fiscal year ended December 31, 2007, in      accordance with FAS 123R, of portions of options awards and restricted stock units granted in      and prior to 2007 that vested      during 2007.  The Company values the compensation      expense of these options using the Black-Scholes option-pricing      model.  These amounts reflect the Company’s accounting expense      for these awards and do not correspond to the actual value that will be      recognized by the named executives.  |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)        | Pursuant      to the terms of his employment agreement, the Company paid for Mr. Stec's,      Mr. Rizzo’s, Mr. Holst's and Mr. de la Rama's supplemental medical      reimbursement policy and their supplemental life insurance      policy.  The cost of such benefits paid by the Company for each      did not exceed $10,000.                                                                                                                                                                                                                                                                                                            |

|   | ●   | base      salary; |
|--------|---------------------|-------------------|

|   | ●   | bonus      incentives; |
|--------|---------------------|------------------------|

|   | ●   | stock      option awards; |
|--------|---------------------|---------------------------|

|   | ●   | pension;      and |
|--------|---------------------|-------------------|

|   | ●   | supplemental      insurance. |
|--------|---------------------|------------------------------|

----

Employment Contracts and Termination of Employment

EMPLOYMENT CONTRACTS AND TERMINATION OFEMPLOYMENT

----

|   | ●   | for      an initial term that ended on February 28, 2006 and for automatic one-year      renewals of the agreement unless either party gave notice of its      non-renewal no later than December 31, 2005 or December 31 of the      then-current renewal year; |
|--------|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | for      payment of an annual base salary of $250,000 and incentive compensation      provisions that were based upon the achievement of pre-determined      earnings, cash flow and inventory turnstargets; |
|--------|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|   | ●   | that,      in the event that Mr. de la Rama’s employment was terminated without cause      or due to a change of control of the Company, he would receive 12 months’      severance. |
|--------|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | for      an initial term that would end on December 31, 2008, and for automatic      one-year renewals of the agreement unless either party gave notice of its      non-renewal no later than June 30, 2008 or June 30 of the then-current      renewal year; |
|--------|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | ●   | for      the issuance under the Omnibus Stock Plan of a five-year option to      purchase 100,000 shares of common stock at an exercise price of $4.40 per      share, which will vested ratably on December 27, 2006, 2007 and 2008;      and |
|--------|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | that,      in the event that Mr. Holst’s employment was terminated without cause, or      due to his death or disability, or if he resigned for a good reason, as      that term is defined in his employment agreement, he would receive      severance payments in the aggregate amount of his base salary, as was in      effect on the date of termination. |
|--------|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | ●   | for      payment of an annual base salary of $500,000 during the initial term of      the employment agreement, increasing by 10% per year during each one-year      renewal term; |
|--------|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | for      payment of incentive compensation provisions, subject to a guaranteed      annual minimum amount of $175,000, that was based upon the Company’s      achievement of pre-determined earnings, cash flow and inventory turns      targets; |
|--------|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ●   | for      the issuance under the Omnibus Stock Plan of a five-year option to      purchase 500,000 shares of common stock at an exercise price of $0.95 per      share, which vested ratably on December 9, 2004 and December 9,      2005; |
|--------|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

|   |   | ●   | if      such termination occurs after December 31, 2006, he will be entitled to      receive severance in an aggregate amount equal to his base salary plus a      pro-rata portion of any incentive compensation that otherwise would have      become due and payable to him if his employment had not been terminated      prior to the end of the year (a minimum of $675,000 and up to as much as      $850,000);  and |
|--------|--------|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | ●   | all      unvested options granted to Mr. Rizzo under the Omnibus Stock Plan will      immediately vest in full and will be exercisable by him for a period of      one year after his employment is      terminated. |
|--------|--------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Options      Awards                                            |
|----------------------------------------------------------------|
| Name                                                           | Number      of Securities Underlying Unexercised Awards (#)Exercisable | Number      of Securities Underlying Unexercised Awards (#)    Unexercisable | Equity      Incentive Plan Awards: Number of Securities Underlying Unexercised      Unearned Options (#) | Award      Exercise Price ($) |   | Award      Expiration Date |
|                                                           |   |   |   |   |   |   |   |
| Robert S. Stec                                                 |  75,000 | (1) |   | — |   | — | $ | 1.33 |   | 4/4/2009 |
| Chief      Executive Officer                                   |  30,000 | (2) |   | — |   | — | $ | 0.58 |   | 12/19/2012 |
|                                                           |  15,000 | (3) |   | — |   | — | $ | 5.60 |   | 6/28/2015 |
|                                                           |  15,000 | (3) |   | — |   | — | $ | 5.80 |   | 6/28/2016 |
|                                                           |   |   |   |   |   |   |   |   |   |   |
| Timothy J Tumminello                                           |  20,000 | (4) |   | 13,333 |   | — | $ | 4.40 |   | 12/1/2011 |
| Interim      Principal  Financial  Officer |  7,500 | (5) |   | 7,500 |   | — | $ | — |   | Date      shares to be issued  8/24/2010 |
|                                                           |   |   |   |   |   |   |   |   |   |   |
| Peter Rizzo                                                    |  412,700 | (6) |   | — |   | — | $ | 0.95 |   |  4/7/2008 |
| Chief      Executive Officer                                   |  100,000 | (7) |   | — |   | — | $ | 3.10 |   | 4/7/2008 |
|                                                           |   |   |   |   |   |   |   |   |   |   |
| Gregg Holst                                                    |  33,333 | (8) |   | — |   | — | $ | 4.40 |   |  12/3/2008 |
| Former      Chief Financial Officer                            |  25,000 | (9) |   | — |   | — | $ | 1.26 |   | 12/3/2008 |
|                                                           |  25,000 | (9) |   | — |   | — | $ | 1.40 |   | 12/3/2008 |
|                                                           |   |   |   |   |   |   |   |   |   |   |
| Jesse      de la Rama                                          |  50,000 | (11) |   | — |   | — | $ | 6.00 |   |  2/28/2009 |
| Chief      Operating Officer                                   |  25,000 | (10) |   | — |   | — | $ | 0.87 |   |   2/28/2009 |

| (1)   | On      April 4, 2007, the Company granted Mr. Stec an option to purchase 75,000      shares of our common stock.  These options vested on April 4,      2008.  |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | In      December 2002, the Company granted Mr. Stec an option to purchase 30,000      shares of our common stock for services rendered as a Company      Director.  These options vested in December 2004.  |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | In      June 2005 and again in June 2006, the Company granted Mr. Stec options to      purchase 15,000 shares each of our common stock for services rendered as a      Company Director.  These options vested on the grant      date.  |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | On      December 20, 2006, the Company granted Mr. Tumminello options to purchase      20,000 shares each of our common stock.  These options vest      ratably on the 1st, 2nd and 3rd anniversaries of the grant      date.  |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | On      August 24th, 2007, Mr. Tumminello was awarded 7,500 restricted stock      units.  These units vest ratably on the 1st, 2nd and 3rd      anniversaries of the grant date and the vested shares will be issued to      Mr. Tumminello on August 24, 2010.  |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (6)   | On      December 9, 2003, the Company granted Mr. Rizzo an option to purchase      500,000 shares of our common stock, with an expiration date of December 8,      2008.  Mr. Rizzo exercised 21,500 options in 2005 and 65,800      options in 2006.  On April 5, 2007, Mr. Rizzo resigned as CEO of      the Company and pursuant to his separation agreement with the Company, Mr.      Rizzo had until April 5, 2008 to exercise the 412,700 outstanding options.      These options were not exercised and had expired as of April 5,      2008.  |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | On      October 14, 2004, the Company granted Mr. Rizzo an option to purchase      100,000 shares of our common stock, with a vesting date of October 14,      2007 and an expiration date of October 14, 2014.  On April 5,      2007, Mr. Rizzo resigned as CEO of the Company and pursuant to the      separation agreement between him and the Company, 100,000 options      became fully vested.  Mr. Rizzo had until April 5, 2008 to      exercise these options.  These options were not exercised and      had expired as of April 5, 2008.  |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8)   | On      December 27, 2005, the Company granted Mr. Holst an option to purchase      100,000 shares of our common stock.  One-third of these options      vested on December 27, 2006.  On December 3, 2007, Mr. Holst      resigned as CFO of the Company and pursuant to the separation agreement      between him and the Company, 66,667 unvested options were forfeited and      Mr. Holst has until December 3, 2008 to exercise the 33,333 vested      options.  |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | On      May 1, 2007 and again on May 3, 2007, the Company granted Mr. Holst      options to purchase 25,000 shares of our common stock.  On      December 3, 2007, Mr. Holst resigned as CFO of the Company and, pursuant      to the separation agreement between him and the Company, these options      vested and Mr. Holst has until December 3, 2008 to exercise the      options.  |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10)   | On      March 1, 2004, the Company granted Mr. de la Rama an option to purchase      25,000 shares of our common stock.  These options vested ratably      on each of March 1, 2005, 2006 and 2007.  On May 9, 2007, Mr. de      la Rama resigned as COO of the Company and pursuant to the separation      agreement between him and the Company, Mr. de la Rama has until February      28, 2009 to exercise the options.  |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11)   | February      10, 2005, the Company granted Mr. de la Rama an option to purchase 75,000      shares of our common stock.  One-third of these options vested      on February 10, 2006 and one-third vested on February 10,      2007.  On May 9, 2007, Mr. de la Rama resigned as COO of the      Company and pursuant to the separation agreement between him and the      Company, 25,000 of the unvested options were forfeited and Mr. de la Rama      has until February 28, 2009 to exercise the  options. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name                      | Plan      Name                |   | Number      of Years Credited Service (#) |   | Present      Value of Accumulated Benefit ($) |   | Payments      During Last Fiscal Year ($) |   |
|---------------------------|-------------------------------|--------|-------------------------------------------|--------|-----------------------------------------------|--------|-------------------------------------------|--------|
| Timothy      J Tumminello | I.C.      Isaacs Pension Plan |   |                                      | 10     |                                          | $      | 30,983                                    |   | $ | — |   |

----

----

----

----

|    Name     |   | Cash      Severance Payments Upon Termination by Executive for Good Reason or by      Company Without Cause |      |   | Cash      Severance Payments Upon Termination by Executive or by Company      Without Cause Following Change of Control |   |      | Estimated      Present Value of Continued Benefits Following Termination by Executive for      Good Reason or by Company Without Cause (1) |   |   |  Cash      Severance Payments upon Death or Disability |   |   | Estimated      Present Value of Continued Benefits Following Death or      Disability |      |
|----------------------------|--------|-------------------------------------------------------------------------------------------------------------|-----------|--------|------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------|-----------|
| Robert      S. Stec        |   | $                                                                                                           | 1,010,000 |   |                                                                                                                         | $      | 1,010,000 |                                                                                                                                       |   | $      | 11,070                                                      | (2)    |   | $                                                                                     | 1,651,667 |   |   | $ | 11,070 |   |
| Timothy      J. Tumminello |   | $                                                                                                           | 87,500    |   |                                                                                                                         | $      | —   |                                                                                                                                       |   | $      | —                                                     |   |   | $                                                                                     | —   |   |   | $ | — |   |

| Name                       |   | Change      of Control |   |   | Termination      on Account of Death or Disability |   |
|----------------------------|--------|------------------------|--------|--------|----------------------------------------------------|--------|
| Robert      S. Stec        |   | $                      | 15,506 | (1)    |                                               | $      | 15,506 |   |
| Timothy      J. Tumminello |   | $                      | 56,045 | (2)    |                                               | $      | 56,045 |   |

|   | (1)        | On      April 4, 2007, the Company granted Mr. Stec an option to purchase 75,000      shares of our common stock.  These options vested on April 4,      2008.  The Company values the compensation expense of these      options using the Black-Scholes option-pricing model.  The      assumptions used in the valuation were an expected life of 1 year, risk      free interest rate of 4.92% and volatility of 110%.  Using these      assumptions, each grant was valued at$0.405. |
|--------|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | (2)        | On      December 20, 2006, the Company granted Mr. Tumminello options to purchase      20,000 shares of our common stock.  These options vest ratably      on the 1st, 2nd and 3rd anniversaries of the grant date. The Company      values the compensation expense of these options using the Black-Scholes      option-pricing model.  The assumptions used in the valuation      were an expected life of 3 years, risk-free interest rate of 4.40% and      volatility of 110%.  Using these assumptions, each grant was      valued at $3.309. On August 24th, 2007, Mr. Tumminello was granted      7,500 restricted stock units.  These units vest ratably on the      1st, 2nd and 3rd anniversaries of the grant date and the vested shares      will be issued to Mr. Tumminello on August 24, 2010.  The      Company values the compensation expense of these restricted stock units at      the fair market value of the stock on the date of grant at      $1.20. |
|--|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| DIRECTOR      COMPENSATION |   |
|----------------------------|--------|
|   Name           |   | Fees      Earned or Paid in Cash ($) |   |   |  Stock      Awards ($) |   |   |  Options      Awards ($)(5) |   |   | Non-Equity      Incentive Plan Compensation |   |   | Change      in Pension Value and Nonqualified Deferred Compensation      Earnings |   |   |  All      Other Compensation ($) |   |   |  Total      ($) |   |
| Neal      J. Fox           |   | $ | 59,750 | (1) |   |   | — |   |   | $ | 24,620 | (6) |   |   | — |   |   |   | — |   |   |   | — |   |   | $ | 84,370 |   |
| Jon      Hechler           |   |   | 31,000 | (2) |   |   | — |   |   |   | 13,083 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 44,083 |   |
| Olivier      Bachellerie   |   |   | 14,500 | (3) |   |   | — |   |   |   | 13,083 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 27,583 |   |
| Robert      Stec           |   |   | 25,750 | (4) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 25,750 |   |
| René      Faltz       |   |   | 12,250 | (3) |   |   | — |   |   |   | 13,083 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 25,333 |   |
| François      Girbaud |   |   | 13,750 | (3) |   |   | — |   |   |   | 13,083 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 26,833 |   |
| John      McCoy            |   |   | 24,250 | (3) |   |   | — |   |   |   | 13,083 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 37,333 |   |
| Total                      |   | $ | 181,250 |   |   |   | — |   |   | $ | 90,035 |   |   |   | — |   |   |   | — |   |   |   | — |   |   | $ | 271,285 |   |

|   | (1)   | Mr.      Fox was paid $33,250 for his services as a non-employee director of the      Company, assuming the Chairman of the Board duties in April 2008 ($28,750      retainer and $750 for attending each of 6 Board Meetings in 2007), $19,000      for his services as Chairman of the Audit Committee ($10,000 retainer and      $750 for attending each of 12 Audit Committee Meetings in 2007), $7,500      for his services as a member of the Compensation Committee ($750 for      attending each of 10 Compensation Committee  Meetings). |
|--------|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2)   | Mr.      Hechler was paid $14,250 for his services as a non-employee director of      the Company ($10,000 retainer and $750 for attending each of 6 Board      Meetings in 2007), $9,000 for his services as a member of the Audit      Committee ($750 for attending each of 12 Audit Committee Meetings in      2007), $7,500 for his services as the Chairman of the Compensation      Committee ($750 for attending each of 10 Compensation Committee      Meetings). |
|--------|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3)   | This      Director was paid for his services as a non-employee director of the      Company ($10,000 retainer and $750 for each Board Meeting attended in      2007). |
|--------|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (4)   | Mr.      Stec was paid $12,250 for his services as a non-employee director of the      Company ($10,000 retainer and $750 for attending each of 6 Board Meetings      in 2007), $6,000 for his services as a member of the Audit Committee ($750      for attending each of 6 Audit Committee Meetings in 2007 prior to assuming      the duties as the Company's CEO in April 2007), $2,250 for his services as      a member of the Compensation Committee ($750 for attending each of 3      Compensation Committee Meetings prior to assuming the duties as the      Company's CEO in April 2007). |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5)   | On      May 30, 2007, each non-employee director was granted 15,000 options under      the Company’s Non-Employee Directors Stock Option Plan with a strike price      of $1.07 each.  The Company values the compensation expense of      these options using the Black-Scholes option-pricing model.  The      assumptions used in the valuation were an expected life of 5 years,      risk-free interest rate of 4.83% and volatility of 110%.  Using      these assumptions, each grant was valued at $0.872  each. |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6)   | On      December 19, 2007, Mr. Fox was granted 25,000 options under the Company’s      Non-Employee Directors Stock Option Plan with a strike price of $0.30      each.  The Company values the compensation expense of these      options using the Black-Scholes option-pricing model.  The      assumptions used in the valuation were an expected life of 5 years,      risk-free interest rate of 3.46% and volatility of 110%.  Using      these assumptions, each grant was valued at $0.461    each. |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ITEM 12. | SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED      STOCKHOLDER MATTERS |
|----------|----------------------------------------------------------------------------------------------------------|

|                                               | Shares      Beneficially OwnedBefore      the Transaction | Shares      Beneficially OwnedAfter      the Transaction |
|----------------------------------------------------|-----------------------------------------------------------|----------------------------------------------------------|
| Name      and Address of Beneficial Owner (1)      | Number                                                    | Percentage                                               | Number |  (2) | Percentage |
| Wurzburg      Holding S.A. (3)                     | 4,549,167                                                 | 33.6                                                     | 23,869,692 | (4) | 62.2 |
| François      Girbaud (8)                     | 4,594,167                                                 | 34.0                                                     | 23,914,692 | (9) | 62.3 |
| Olivier      Bachellerie (10)                      | 75,000                                                    | *                                                        | 2,575,000 | (15) | 6.7 |
| René      Faltz (12)                          | 75,000                                                    | *                                                        | 2,575,000 | (15) | 6.7 |
| Freedom      Capital                               | 1,681,750                                                 | 12.4                                                     | 1,681,750 | (6) | 4.4 |
| PAR      Investment Partners L.P.                  | 1,459,900                                                 | 10.8                                                     | 1,459,900 | (7) | 3.8 |
| Neal      J. Fox                                   | 122,000                                                   | *                                                        | 122,000 | (13) | * |
| Jon      Hechler                                   | 234,081                                                   | 1.7                                                      | 234,081 | (14) | * |
| Robert      Stephen Stec (15)                      | 135,000                                                   | 1.0                                                      | 635,000 | (11) | 1.7 |
| John      McCoy II (16)                            | 45,000                                                    | *                                                        | 45,000 | (17) | * |
| Timothy      J. Tumminello                         | 6,667                                                     | *                                                        | 6,667 | (18) | * |
|                                               |                                                      |                                                     |   |   |   |
| All      Officers and Directors as a Group (of 10) | 8,428,565                                                 | 62.3                                                     | 30,107,440 |   | 78.6 |

| * | Represents      less than one percent of the outstanding shares of common      stock.  |
|---|---------------------------------------------------------------------------------------------|

| (1) | All      shares are owned beneficially and of record unless otherwise      indicated.  Unless otherwise noted, the address of each      stockholder is c/o the Company, 475 10th Avenue, 9th Floor, New York, NY      10018.  |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Based      upon 37,383,943 shares outstanding on May 16, 2008, plus, where      applicable, 365,334 shares issuable pursuant to options exercisable and      restricted stock vested within 60 days of such date.  |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (4) | Includes      23,287,192 shares owned beneficially and of record by this stockholder’s      wholly owned subsidiary, Textile Investment International,      S.A.  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Based      upon 2,500,000 shares outstanding on May 16, 2008, plus, where applicable,      75,000 shares issuable pursuant to options exercisable and restricted      stock vested within 60 days of such date.  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Based      on information set forth in a Schedule 13D/A filed with the SEC on      December 27, 2007, by Freedom Capital Partners Limited and by Earnest      K. Jacquet and Staffan Ahrenberg reporting shared power to vote or direct      the vote of, and shared power to dispose or direct the disposition of,      1,681,750 shares. The address of this stockholder is c/o Logica SA,      P.O. Box 361, 16 Rue Voltaire, 1211 Geneva 13, Switzerland.  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (7) | Based      on information set forth in a Schedule 13G/A filed with the SEC on      January 4, 2008, by PAR Investment Group Management Inc. reporting sole      power to vote or direct the vote of, and sole power to dispose or direct      the disposition of, 1,459,900 shares. The address of this stockholder      is One International Place, Suite 2401, Boston, MA, 02110.  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Mr.      Girbaud’s address is 8 Rue Du Centre, Vevey, Switzerland.  |
|-----|--------------------------------------------------------------------------------|

| (9) | Includes      all of the shares owned or controlled by Wurzburg, as to which Mr.      Girbaud, as a controlling shareholder thereof, is deemed to possess all      rights regarding the voting and disposition thereof.  Also      includes 45,000 shares that Mr. Girbaud may acquire pursuant to an option      exercisable by him within 60 days of the date of this report.  |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Mr.      Bachellerie’s address is 94 Rue Louis Blanc, 75009 Paris,      France.  |
|------|---------------------------------------------------------------------------------------------|

| (11) | Includes      135,000 shares that this person may acquire pursuant to an option      exercisable by him within 60 days of the date of this report.  |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Mr.      Faltz’s address is 41 Avenue de la Gare, Luxembourg, L-1611.  |
|------|-----------------------------------------------------------------------------------|

| (13) | Includes      122,000 shares that Mr. Fox may acquire pursuant to options exercisable by      him within 60 days of the date of this report.  |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Includes      82,000 shares that Mr. Hechler may acquire pursuant to options exercisable      by him within 60 days of the date of this report.  |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Mr.      Stec’s address is 407 W. Greenway, North Greensboro, North      Carolina.  |
|------|------------------------------------------------------------------------------------------------|

| (16) | Mr.      McCoy’s address is c/o Components by John McCoy, Inc., 20 West 55th      Street, New York, New York.  |
|------|---------------------------------------------------------------------------------------------------------------------------|

| (17)             | Includes      45,000 shares that Mr. McCoy may acquire pursuant to an option exercisable      by him within 60 days of the date of this report.  |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| (18)   | Includes      6,667 shares that Mr. Tumminello may acquire pursuant to an option      exercisable by him within 60 days of the date of this  report.  |

----

| ITEM 13. | CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR      INDEPENDENCE |
|----------|-------------------------------------------------------------------------------------|

----

| ●   | The      Amended and Restated Subordinated Secured Promissory Note, dated as of      December 30, 2004, by and between the Company (as borrower) and Textile      (as purchaser and lender), was fully discharged and cancelled such that      approximately $2.9 million, including interest accrued though May 9, 2008,      was converted into approximately 14.3 million of newly issued shares of      the Company’s common stock and sold at a conversion price of $0.20 per      share in a private placement exempt from the registration requirements of      the Securities Act of 1933, as amended (the “Securities    Act”); |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  ●   | Textile and Messrs.      Bachellerie and Faltz collectively purchased, in a private placement      exempt from the registration requirements of the Securities Act, 10.0      million newly issued shares of the Company’s common stock at a price of      $0.20 per share. The Company received $2.0 million for issuance of these      shares; |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Textile,      Wurzburg, Messrs. Bachellerie and Faltz, and the Company entered into an      investor rights agreement whereby Textile, Wurzburg, and Messrs.      Bachellerie and Faltz were granted certain registration, representation on      the Board of Directors and other rights as set forth    therein; |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Mr.      Robert S. Stec, the Company’s Chief Executive Officer, purchased, in a      private placement exempt from the registration requirements of the      Securities Act, 0.5 million newly issued and unregistered shares of the      Company’s common stock at a price of $0.20 per share. The Company received      $0.1 million for the issuance of theseshares; |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ●   | The      Girbaud Men’s Agreement (an exclusive license agreement that the Company      entered into in November 1997 with Girbaud Design and its affiliate,      Wurzburg, to manufacture and market men’s jeanswear, casualwear and      outerwear under the Girbaud brand and certain related trademarks in all      channels of distribution in the United States, including Puerto Rico and      the U.S. Virgin Islands) and the Girbaud Women’s Agreement (an exclusive      license agreement the Company entered into in March 1998 with Latitude to      manufacture and market women’s jeanswear, casualwear and outerwear,      including active influenced sportswear, under the Girbaud brand and      certain related trademarks in all channels of distribution in the United      States, including Puerto Rico and the U.S. Virgin Islands) were both      amended to defer the minimum royalty payments due in the months of      February, March, April and May 2008. These minimum royalty deferrals,      totaling $1.5 million, will accrue interest at a rate of 10% per annum and      will be payable no later than December 31,2009; |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | The      Company agreed that no bonus payments will be paid in      2008 to its senior management, nor will the Company issue any      bonus payments to senior management with respect to the Company’s      financial performance in fiscal year 2008.  With the prior      written consent of Textile, the Company may provide equity incentive      compensation to senior management in lieu of bonuses for fiscal year      2008.; and |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Mr.      Stec’s employment agreement was extended through December      2011. |
|---------------------|-------------------------------------------------------------------------------------|

----

| ●   | the      financial reports and other financial information provided by the Company      to any governmental body or thepublic; |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ●   | the      Company’s systems of internal controls regarding finance, accounting,      legal compliance and ethics that management and the Board have      established; and |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | the      Company’s auditing, accounting and financial reporting processes      generally. |
|---------------------|-------------------------------------------------------------------------------------------------|

----

| ●   | Neal      J. Fox (Chairman); |
|---------------------|------------------------------|

| ●   | Jon      Hechler; and |
|---------------------|-----------------------|

| ●   | John      McCoy. |
|---------------------|------------------|

| ITEM 14. | PRINCIPAL      ACCOUNTING FEES AND SERVICES |
|----------|---------------------------------------------|

|                        |   | Years Ended December 31, |    |
|-----------------------------|--------|--------------------------|---------|
|                        |   | 2007                     |    |   | 2006 |   |
| Audit fees    (1)           |   | $                        | 406,310 |   |   | $ | 375,900 |   |
| Audit-related fees      (2) |   |                     | 19,500  |   |   |   | 18,000 |   |
| Tax fees                    |   |                     | 25,000  |   |   |   | 22,000 |   |
| Total                       |   | $                        | 450,810 |   |   | $ | 415,900 |   |

| (1)   | “Audit      fees” includes the audit of the Company’s consolidated financial      statements and quarterly reviews of its financial statements and related      filings on SEC Forms 10-K and 10-Q. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | “Audit-related      fees” includes an audit of the Company’s employee benefit      plan. |
|-----------------|------------------------------------------------------------------------------------------------------------|

| (3)   | “Tax      fees” includes tax complianceservices. |
|-----------------|--------------------------------------------------------------|

----

----

| ITEM 15.   | EXHIBITS,      FINANCIAL STATEMENT SCHEDULES |
|----------------------|----------------------------------------------|

| 1. | Financial      Statements.  The following financial statements, related notes      and the Report of Independent Registered Public Accounting Firm, are      included in response to Item 15hereof: |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                            | Page             |
|-----------------------------------------------------------------------------------------------------------------|------------------|
| Report of Independent Registered Public Accounting      Firm                                                    | F-1              |
| Consolidated Balance Sheets at December 31, 2007 and      2006                                                  | F-2              |
| Consolidated Statements of Operations for the years ended      December 31, 2007, 2006 and 2005                 | F-3              |
| Consolidated Statements of Stockholders’ Equity for the years      ended December 31, 2007, 2006 and 2005 | F-4              |
| Consolidated Statements of Cash Flows for the years ended      December 31, 2007, 2006 and 2005                 | F-5              |
| Notes to Consolidated Financial    Statements                                                                   | F-6      to F-27 |

| 2. | Financial      Statements Schedules.  The following is a list of all financial      statements schedules filedherewith: |
|----|-----------------------------------------------------------------------------------------------------------------------------------|

Schedule II-Valuationand 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | Exhibits (numbered in accordance with Item 601 of      Regulation S-K). |
|----|-------------------------------------------------------------------------|

|   | The      exhibits listed on the accompanying Exhibit Index are filed as part of      this Report. |
|--------|---------------------------------------------------------------------------------------------------|

----

SIGNATURES

|   |   |                                                   |
|--------|--------|--------------------------------------------------------|
|   |   | I.C.      ISAACS & COMPANY, INC.(REGISTRANT)  |
|   |   | By:                                                    | /s/      Robert S. Stec |
|   |   | Robert      S. StecChief      Executive Officer        |
|   |   | Date:      May 16, 2008                           |

| Signature |   | Title | Date |
|-----------|--------|-------|------|

| /s/      Neal J. Fox             |   | Chairman of the      Board                | May 16,    2008        |
|----------------------------------|--------|-------------------------------------------|------------------------|
| Neal J.      Fox            |   |                                      |                   |
|                             |   |                                      |
| /s/      Timothy J. Tumminello   |   | Interim Principal      Financial Officer, | May 16,    2008        |
|  Timothy J.      Tumminello |   | Controller &      Vice President      |                   |
|                             |   |                                      |
| /s/      Robert S. Stec          |   | Director                                  | May 16,      2008 |
|  Robert S.      Stec        |   |                                      |                   |
|                             |   |                                      |
|                             |   | Director                                  |                   |
|  Olivier      Bachellerie   |   |                                      |                   |
|                             |   |                                      |
|                             |   | Director                                  |                   |
| René      Faltz        |   |                                      |                   |
|                             |   |                                      |
|                             |   | Director                                  |                   |
| François      Girbaud  |   |                                      |                   |
|                             |   |                                      |
| /s/      Jon Hechler             |   | Director                                  | May 16,    2008        |
| JonHechler                       |   |                                      |                   |
|                             |   |                                      |
| /s/      John McCoy II           |   | Director                                  | May 16,      2008 |
| John McCoy    II                 |   |                                      |                   |

----

Report of Independent Registered Public AccountingFirm

Note 8

Note1

----

ConsolidatedBalance Sheets

|                                                                                                                                                                                        |   | December      31, |        |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|--------|
|                                                                                                                                                                                        |   | 2007              |        |   | 2006 |
| Assets                                                                                                                                                                                      |   |              |        |   |   |
| Current      assets                                                                                                                                                                         |   |              |        |   |   |
|         Cash and cash equivalents                                                                                                                                                 |   | $                 | 1,190,694   |   |   | $ | 524,544 |   |   |
|    Accounts receivable,      less allowance for doubtfulaccounts      of $700,000 and $725,000 (Note 4)                                                                      |   |              | 2,479,026   |   |   |   | 13,268,014 |   |   |
|    Inventories (Notes 2 and 4)                                                                                                                                          |   |              | 3,767,652   |   |   |   | 10,492,169 |   |   |
|    Prepaid expenses and      other                                                                                                                                                |   |              | 605,017     |   |   |   | 1,004,170 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
| Total      current assets                                                                                                                                                                   |   |              | 8,042,389   |   |   |   | 25,288,897 |   |   |
|          Property, plant and equipment, net (Note 3)                                                                                                                    |   |              | 2,148,714   |   |   |   | 3,233,047 |   |   |
| Prepaid      pension asset (Note 10)                                                                                                                                                        |   |              | 600,000     |   |   |   | — |   |   |
| Other      assets (Note 9)                                                                                                                                                                  |   |              | 265,284     |   |   |   | 287,258 |   |   |
|                                                                                                                                                                                        |   | $                 | 11,056,387  |   |   | $ | 28,809,202 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
| Liabilities      and Stockholders’ Equity                                                                                                                                             |   |              |        |   |   |   |   |   |   |
| Current      liabilities                                                                                                                                                                    |   |              |        |   |   |   |   |   |   |
|         Bank overdraft                                                                                                                                                            |   | $                 | —     |   |   | $ | 7,582 |   |   |
|         Revolving line of credit (Note 4)                                                                                                                                         |   |              | —     |   |   |   | 3,389,656 |   |   |
|         Note payable (Note 4)                                                                                                                                                     |   |              | —     |   |   |   | 2,103,461 |   |   |
|         Accounts payable                                                                                                                                                          |   |              | 1,606,057   |   |   |   | 2,831,185 |   |   |
|         Accrued expenses and other current liabilities (Note      5)                                                                                                              |   |              | 2,341,689   |   |   |   | 1,806,383 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
|                      Total current liabilities                                                                   |   |              | 3,947,746   |   |   |   | 10,138,267 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
|          Long-term maturities of debt, including accrued interest of $701,280 (Note 4)                                                                                       |   |              | 2,804,741   |   |   |   | — |   |   |
| Pension      liability (Note 10)                                                                                                                                                            |   |              | —     |   |   |   | 1,603,000 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
| Total      liabilities                                                                                                                                                                      |   |              | 6,752,487   |   |   |   | 11,741,267 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
| Commitments      and contingencies (Notes 4, 9and 10)                                                                                                                                       |   |              |        |   |   |   |   |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
| Stockholders’      Equity (Notes 7and      8)                                                                                                                                         |   |              |        |   |   |   |   |   |   |
|         Preferred stock; $.0001 par value; 5,000,000 shares authorized, none      outstanding                                                                                     |   |              | —     |   |   |   | — |   |   |
|         Common stock; $.0001 par value; 50,000,000 shares authorized; 13,740,127      and 13,250,994 shares issued;   12,563,418 and 12,074,285 shares      outstanding |   |              | 1,374       |   |   |   | 1,325 |   |   |
|    Additional paid-in      capital                                                                                                                                                |   |              | 45,811,513  |   |   |   | 45,302,162 |   |   |
|    Accumulated      deficit                                                                                                                                                       |   |              | (36,250,116 | )      |   |   | (20,606,681 | ) |   |
|         Accumulated other comprehensive loss (Note      10)                                                                                                                       |   |              | (2,936,000  | )      |   |   | (5,306,000 | ) |   |
|    Treasury stock, at cost      (1,176,709 shares)                                                                                                                                |   |              | (2,322,871  | )      |   |   | (2,322,871 | ) |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |
| Total      stockholders’ equity                                                                                                                                                       |   |              | 4,303,900   |   |   |   | 17,067,935 |   |   |
|                                                                                                                                                                                        |   | $                 | 11,056,387  |   |   | $ | 28,809,202 |   |   |
|                                                                                                                                                                                        |   |              |        |   |   |   |   |   |   |

----

Consolidated Statements of Operations

|                                                                  |   | Year Ended      December 31, |        |
|-----------------------------------------------------------------------|--------|------------------------------|-------------|
|                                                                  |   | 2007                         |        |   | 2006 |   |   | 2005 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |
|         Net sales                                      |   | $                            | 37,213,730  |   |   | $ | 82,235,994 |   |   | $ | 83,288,935 |   |
| Cost      of sales                                                    |   |                         | 26,550,539  |   |   |   | 48,945,372 |   |   |   | 49,070,145 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                     |   |                         | 10,663,191  |   |   |   | 33,290,622 |   |   |   | 34,218,790 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Operating      expenses                                               |   |                         |        |   |   |   |   |   |   |   |   |   |
| Selling                                                               |   |                         | 8,282,553   |   |   |   | 10,381,649 |   |   |   | 10,834,335 |   |
| License      fees (Note 9)                                            |   |                         | 4,500,000   |   |   |   | 5,403,846 |   |   |   | 5,114,319 |   |
| Distribution      and shipping                                        |   |                         | 1,964,826   |   |   |   | 2,457,342 |   |   |   | 2,247,450 |   |
| General      and administrative                                       |   |                         | 8,632,672   |   |   |   | 9,005,533 |   |   |   | 8,603,793 |   |
| Severance      (Note 9)                                               |   |                         | 2,020,866   |   |   |   | — |   |   |   | — |   |
| Impairment      of assets                                             |   |                         | 756,040     |   |   |   | — |   |   |   | — |   |
| Gain      on sale of trademark                                        |   |                         | (100,000    | ) |   |   | — |   |   |   | — |   |
| Litigation      settlement                                            |   |                         | —     |   |   |   | — |   |   |   | 1,750,000 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Total      operating expenses                                         |   |                         | 26,056,957  |   |   |   | 27,248,370 |   |   |   | 28,549,897 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Operating      (loss) income                                          |   |                         | (15,393,766 | ) |   |   | 6,042,252 |   |   |   | 5,668,893 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Other      income (expense)                                           |   |                         |        |   |   |   |   |   |   |   |   |   |
| Interest,      net of interest income, of $16,694, $11,580 and $4,994 |   |                         | (196,890    | ) |   |   | (627,917 | ) |   |   | (435,882 | ) |
| Other,      net                                                       |   |                         | 24,218      |   |   |   | 6,364 |   |   |   | 238 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Total      other expense                                              |   |                         | (172,672    | ) |   |   | (621,553 | ) |   |   | (435,644 | ) |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| (Loss)      income before income taxes                                |   |                         | (15,566,438 | ) |   |   | 5,420,699 |   |   |   | 5,233,249 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Income      tax (expense) benefit (Note 6)                            |   |                         | (76,997     | ) |   |   | (2,813,767 | ) |   |   | 1,178,000 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
|              Net (loss) income     |   | $                            | (15,643,435 | ) |   | $ | 2,606,932 |   |   | $ |  6,411,249 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Basic      (loss) earnings per share                                  |   | $                            | (1.27       | ) |   | $ | 0.22 |   |   | $ | 0.55 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Basic      weighted average shares outstanding                        |   |                         | 12,347,811  |   |   |   | 12,020,454 |   |   |   | 11,729,305 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Diluted      (loss) earnings per share                                |   | $                            | (1.27       | ) |   | $ | 0.21 |   |   | $ | 0.48 |   |
|                                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
| Diluted      weighted average shares outstanding                      |   |                         | 12,347,811  |   |   |   | 12,692,345 |   |   |   | 13,397,202 |   |

----

Consolidated Statements of Stockholders’ Equity

|                                                                                                                                  |   | Common      Stock Outstanding |       |   | Common      Stock Amount |   |    | Additional      Paid-in Capital |   |   | Accumulated      Deficit |   |   | Accumulated      Other Comprehensive Loss |        |   | Treasury      Stock |   |                      | Total  |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|--------|--------------------------|--------|---------|---------------------------------|--------|--------|--------------------------|--------|--------|-------------------------------------------|-------------|--------|---------------------|--------|---------------------------|--------|--------|
|                                                                                                                                  |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |
| Balance,      at December 31, 2004                                                                                                    |   |                          | 11,614,090 |   |                     | $      | 1,279   |                            |   | $      | 44,100      636          |   |   | $                                         | (29,624,862 | )      |                | $      |         — |   |   | $ | (2,322,871 | ) |   | $ |        12,154,182 |   |
|         Comprehensive Income:                                                                                               |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |   |   |   |   |   |   |   |
|            Net Income                                                                                        |   |                          | —    |   |                     |   | — |                            |   |   | —                  |   |   |                                      | 6,411,249   |   |                |   | —                   |   |   |   | — |   |   |   | 6,411,249 |   |
|            Adjustment to minimum pension liability (Note      10)                                            |   |                          | —    |   |                     |   | — |                            |   |   | —                  |   |   |                                      | —     |   |                |   | (5,616,000                | )      |   |   | — |   |   |   | (5,616,000 | ) |
|         Total Comprehensive Income                                                                                          |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |   |   |   |   |   | 795,249 |   |
|         Issuance of common stock associated with exercise of      stock         options  |   |                          | 176,000    |   |                     |   | 18      |                            |   |   | 194,166                  |   |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | 194,184 |   |
|         Issuance of common stock associated with exercise of stock              warrants |   |                          | 206,395    |   |                     |   | 20      |                            |   |   | (20                      | )      |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | — |   |
| Balance,      at December 31, 2005                                                                                                    |   |                          | 11,996,485 |   |                     |   | 1,317   |                            |   |   | 44,294,782               |   |   |                                      | (23,213,613 | )      |                |   | (5,616,000                | )      |   |   | (2,322,871 | ) |   |   | 13,143,615 |   |
|         Comprehensive (loss) income:                                                                                        |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |   |   |   |   |   |   |   |
|            Net income                                                                                        |   |                          | —    |   |                     |   | — |                            |   |   | —                  |   |   |                                      | 2,606,932   |   |                |   | —                   |   |   |   | — |   |   |   | 2,606,932 |   |
| Total      Comprehensive (loss)   income                                                                               |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |   |   |   |   |   | 2,606,932 |   |
|  Adjustment      to minimum pension liability (Note    10)                                                                       |   |                          | —    |   |                     |   | — |                            |   |   | —                  |   |   |                                      | —     |   |                |   | 310,000                   |   |   |   | — |   |   |   | 310,000 |   |
| Stock-based      compensation        expense                                                  |   |                          | —    |   |                     |   | — |                            |   |   | 901,800                  |   |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | 901,800 |   |
| Issuance      of common stock associated with exercise of stock options                                                               |   |                          | 77,800     |   |                     |   | 8       |                            |   |   | 105,580                  |   |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | 105,588 |   |
| Balance,      at December 31, 2006                                                                                                    |   |                          | 12,074,285 |   |                     |   | 1,325   |                            |   |   | 45,302,162               |   |   |                                      | (20,606,681 | )      |                |   | (5,306,000                | )      |   |   | (2,322,871 | ) |   |   | 17,067,935 |   |
|         Comprehensive (loss) income:                                                                                        |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |   |   |   |   |   |   |   |
|       Net      loss                                                                                     |   |                          | —    |   |                     |   | — |                            |   |   | —                  |   |   |                                      | (15,643,435 | )      |                |   | —                   |   |   |   | — |   |   |   | (15,643,435 | ) |
| Adjustment      to minimum pension liability (Note    10)                                                                             |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   | 2,370,000                 |   |   |   |   |   |   |   | 2,370,000 | ) |
| Total      Comprehensive (loss)income                                                                                                 |   |                          |       |   |                     |   |    |                            |   |   |                     |   |   |                                      |        |   |                |   |                      |   |   |   |   |   |   |   | (13,273,435 | ) |
|    Issuance      of common stock associated with Pension Plan                                                          |   |                          | 280,800    |   |                     |   | 28      |                            |   |   | 214,972                  |   |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | 215,000 |   |
|    Stock-based      compensation expense                                                                               |   |                          | —    |   |                     |   | — |                            |   |   | 294,400                  |   |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | 294,400 |   |
|     Issuance      of common stock associated with exercise of stock warrants                                      |   |                          | 208,333    |   |                     |   | 21      |                            |   |   | (21                      | )      |   |                                      | —     |   |                |   | —                   |   |   |   | — |   |   |   | — |   |
| Balance,      at December 31, 2007                                                                                                    |   |                          | 12,563,418 |   |                     | $      | 1,374   |                            |   | $      | 45,811,513               |   |   | $                                         | (36,250,116 | )      |                | $      | (2,936,000                | )      |   | $ | (2,322,871 | ) |   | $ | 4,303,900 |   |

----

Note 11

|                                                                                    |   | Years      Ended December 31, |        |
|-----------------------------------------------------------------------------------------|--------|-------------------------------|-------------|
|                                                                                    |   | 2007                          |        |   | 2006 |   |   | 2005 |   |
|                                                                                    |   |                          |        |   |   |   |   |   |   |
| Operating      Activities                                                               |   |                          |        |   |   |   |   |   |   |
| Net      (loss) income                                                                  |   | $                             | (15,643,435 | ) |   | $ | 2,606,932 |   |   | $ | 6,411,249 |   |
| Adjustments      to reconcile net income to cash provided by operating      activities: |   |                          |        |   |   |   |   |   |   |   |   |   |
| Change      in provision for doubtful accounts                                          |   |                          | (25,000     | ) |   |   | 25,000 |   |   |   | 384,000 |   |
| Change      in provision for sales returns and    discounts         |   |                          | (31,447     | ) |   |   | (404,069 | ) |   |   | 313,207 |   |
| Deferred      tax asset                                                                 |   |                          | —     |   |   |   | 2,517,000 |   |   |   | (1,324,000 | ) |
| Depreciation      and amortization                                                      |   |                          | 778,905     |   |   |   | 621,388 |   |   |   | 567,156 |   |
| Stock-based      compensation                                                           |   |                          | 294,400     |   |   |   | 901,800 |   |   |   | — |   |
| Impairment      of assets, net of gain on sale of trademark                             |   |                          | 656,040     |   |   |   | — |   |   |   | — |   |
| Decrease      (increase) in assets:                                                     |   |                          |        |   |   |   |   |   |   |   |   |   |
| Accounts      receivable                                                                |   |                          | 10,845,435  |   |   |   | 1,940,551 |   |   |   | (5,510,980 | ) |
| Inventories                                                                             |   |                          | 6,724,517   |   |   |   | (5,204,686 | ) |   |   | 3,029,954 |   |
| Prepaid      expenses and other                                                         |   |                          | 399,153     |   |   |   | (600,019 | ) |   |   | 105,352 |   |
| Prepaid      pension asset                                                              |   |                          | (600,000    | ) |   |   | — |   |   |   | — |   |
| Other      assets                                                                       |   |                          | (4,486      | ) |   |   | 8,938 |   |   |   | 74,993 |   |
| (Decrease)      increase in liabilities:                                                |   |                          |        |   |   |   |   |   |   |   |   |   |
| Accounts      payable                                                                   |   |                          | (1,225,128  | ) |   |   | 767,664 |   |   |   | (1,034,442 | ) |
| Accrued      expenses and other current liabilities                                     |   |                          | 1,236,586   |   |   |   | (3,685,721 | ) |   |   | (307,470 | ) |
| Pension      liability                                                                  |   |                          | 982,000     |   |   |   | 536,000 |   |   |   | — |   |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Cash      provided by operating activities                                              |   |                          | 4,387,540   |   |   |   | 30,778 |   |   |   | 2,709,019 |   |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Investing      Activities                                                               |   |                          |        |   |   |   |   |   |   |   |   |   |
| Capital      expenditures                                                               |   |                          | (424,152    | ) |   |   | (989,348 | ) |   |   | (1,291,090 | ) |
| Proceeds      from sale of trademark                                                    |   |                          | 100,000     |   |   |   | — |   |   |   | — |   |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Cash      used in investing activities                                                  |   |                          | (324,152    | ) |   |   | (989,348 | ) |   |   | (1,291,090 | ) |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Financing      Activities                                                               |   |                          |        |   |   |   |   |   |   |   |   |   |
| Net      change in bank overdrafts                                                      |   |                          | (7,582      | ) |   |   | (439,419 | ) |   |   | 447,001 |   |
| Net      (payments) borrowings on revolving line of credit                              |   |                          | (3,389,656  | ) |   |   | 3,389,656 |   |   |   | (223,283 | ) |
| Principal      payments on note payable                                                 |   |                          | —     |   |   |   | (2,516,133 | ) |   |   | (1,938,314 | ) |
| Issuance      of common stock                                                           |   |                          | —     |   |   |   | 105,588 |   |   |   | 194,184 |   |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Cash      (used in) provided by financing activities                                    |   |                          | (3,397,238  | ) |   |   | 539,692 |   |   |   | (1,520,412 | ) |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Increase      (decrease) in cash and cash equivalents                                   |   |                          | 666,150     |   |   |   | (418,878 | ) |   |   | (102,483 | ) |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, at beginning of year                                    |   |                          | 524,544     |   |   |   | 943,422 |   |   |   | 1,045,905 |   |
|                                                                                    |   |                          |        |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, at end of year                                          |   | $                             | 1,190,694   |   |   | $ | 524,544 |   |   | $ | 943,422 |   |

----

Notes to The Consolidated Financial Statements

| 1.   |  Basis      of Presentation and Summary of Accounting  Policies |
|----------------|----------------------------------------------------------------------|

----

| ●   | The      Amended and Restated Subordinated Secured Promissory Note, dated as of      December 30, 2004, by and between the Company (as borrower) and      Textile (as purchaser and lender), was fully discharged and canceleld such      that approximately $2.9 million including interest accrued      though May 9, 2008 was converted into approximately 14.3 million      of newly issued shares of the the Company's common stock and sold at a      conversion price of $0.20 per share in a private placement exempt from the      registration requirements of the Securities Act of 1933, as amended (the      “Securities      Act”); |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Textile and      Messrs. Bachellerie and Faltz collectively purchased, in a private      placement exempt from the registration requirements of the Securities      Act, 10.0 million newly issued shares of the Company's common stock      at a price of $0.20 per share.  The Company will recieve $2.0 million      for issuance of these shares; |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  ●        | Textile, Wurzburg,      Messrs. Bachellerie and Faltz, and the Company entered into an investor      rights agreement whereby Textile, Wurzburg, Bachellerie and Faltz were      granted certain registration, representation on the Board of Directors and      other rights as set forth therein; |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Mr.      Robert S. Stec, the Chief Executive Officer of the Company, will purchase      0.5 million newly issued and unregistered shares of the Company's common      stock.  The Company will recieve $0.1 million for issuance of these      shares; |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | The      Girbaud Men's Agreement, dated as of November 1, 1997, by and between      Girbaud Design and I.C. Isaacs & Company, L.P., and the Girbaud      Women's Agreement, dated as of March 4, 1998, by and between Latitude and      I.C. Isaacs & Company, L.P., were both amended to defer the      minimum royalty payments due in the months of February, March, April and      May 2008.  These minimum royalty deferrals, totaling $1.5 million      will accrue interest at a rate of 10% per annum and will be payable      no later than December 31, 2009; |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | It      is also agreed that no cash bonuses will be paid to management in      2008 or for performance in 2008 will be paid in cash without Textile's      prior written consent, and the Board reserves the right to provide equity      incentive compensation to senior management in lieu of cash payments for      2008 bonuses; |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | The      Company agreed that no bonuses will be paid in 2008 to its      senior management nor will the Company issue any bonuses to senior      management with respect to the Company’s financial      performance in fiscal year 2008. With the prior written consent of      Textile, the Company may provide equity incentive compensation      to senior management in lieu of bonuses for fiscal year      2008; |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Mr.      Stec's employment agreement was extended through December      2011. |
|---------------------|-------------------------------------------------------------------------------|

----

----

----

Note 7

Note 9

----

----

| 2. |        Inventories |
|----|-------------------------|

| Inventoires consist      of the following: |   |   |      |   |   |   |
|--------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                       |   | 2007   |      |   | 2006   |   |
|                                       |   |   |      |   |   |   |
| Work-in-process                            |   | $      | 506,132   |   |   | $      | 1,106,770 |   |
| Finished    goods                          |   |   | 3,261,520 |   |   |   | 9,385,399 |   |
|                                       |   | $      | 3,767,652 |   |   | $      | 10,492,169 |   |

| 3. |        Property, Plant and Equipment |
|----|-------------------------------------------|

| Property,      plant and equipment consists of the following: |   | December      31, |       |   |
|---------------------------------------------------------------|--------|-------------------|------------|--------|
|                                                          |   | 2007              |       |   | 2006 |   | EstimatedUsefulLives |
|                                                          |   |              |       |   |   |   |   |
| Land                                                          |   | $                 | 149,160    |   |   | $ | 149,160 |   |   |
| Buildings      and improvements                               |   |              | 1,262,892  |   |   |   | 1,262,892 |   | 18      years |
| Machinery,      equipment and fixtures                        |   |              | 5,957,824  |   |   |   | 4,921,497 |   | 5-7      years |
| Leasehold      improvements and other                         |   |              | 3,655,943  |   |   |   | 6,813,723 |   | various |
|                                                          |   |              |       |   |   |   |   |   |   |
|                                                          |   |              | 11,025,819 |   |   |   | 13,147,272 |   |   |
| Less      accumulated depreciation and amortization           |   |              | 8,877,105  |   |   |   | 9,914,225 |   |   |
|                                                          |   |              |       |   |   |   |   |   |   |
|                                                          |   | $                 | 2,148,714  |   |   | $ | 3,233,047 |   |   |

----

| 4. | Debt |
|----|------|

|   |                                 |              |
|--------|--------------------------------------|-------------------|
|   | Debt consists of the      following: | December      31, |

|                                                                       |   | 2007   |      |   | 2006   |   |
|----------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                       |   |   |      |   |   |   |
| Revolving      line of credit (a)                                          |   | $      | —   |   |   | $      | 3,389,656 |   |
| Note      payable - current portion(b)                                     |   |   | —   |   |   |   | 2,103,461 |   |
| Total      current portion of long term debt                               |   |   | —   |   |   |   | 5,493,117 |   |
|                                                                       |   |   |      |   |   |   |   |   |
|  Note      payable - long term portion including accrued interest (b) |   |   | 2,804,741 |   |   |   | — |   |
|                                                                       |   |   |      |   |   |   |   |   |
| Total                                                                      |   |   | 2,804,741 |   |   |   | 5,493,117 |   |
|                                                                       |   |   |      |   |   |   |   |   |

|  (a)   | On December 31,      2004, the Company entered into a three-year credit facility (the “Credit      Facility”) with Wachovia Bank, National Association (“Wachovia”).       (The Company has since entered into an amendement to this Credit Facility,      which admendement is discussed below.) The Credit Facility provided that      the Company could borrow, using as collateral, up to 85% of eligible      accounts receivable and a portion of eligible inventory, both as defined      by the Credit Facility.  Borrowings under the Credit Facility were      not to exceed $25.0 million ($15.0 as amended), including oustanding      letters of credit which were limited to $8.0 million at anyone time.       The Credit Facility accorded to the Company the right, at its election, to      borrow these amounts at either Prime Rate Loans or LIBOR Loans.       Prime Rate Loans bear interst at prime rate plus the applicable margin in      effect from time to time.  Pursuant to the Credit Facility, LIBOR      Loans were limited to three in total, had to be a minimum of $1,000,000      each and in integral multiples of $500,000 in excess of that amount, and      had to bear interest at the LIBOR rate plus the applicable margin in      effect from time to time.  The applicable margins, as defined by the      Credit Facility, fluctuated from 0.00% to 0.75% for the Prime Rate Loans      and 2.00% and 2.75% for LIBOR Loans.  The applicable margins were      inversely affected by fluctuations in the amount of "excess availability,"      defined as the unused portion of the amount available under the facility,      which were in staggered increments from less than $2.5 million to $7.5      million.  The Prime Rate and the LIBOR Rate were 7.25% and 4.49%      respectively, at December 31, 2007.  All the amounts that were      borrowed under the Credit Facility at December 31, 2007 were Prime Rate      Loans, and the effective rate was 7.25% at that time.  Prior to being      amended, the Credit Facility also required the Company to comply with      certain covenants expressed as fixed charge coverage ratios and tangible      liability to net worth ratios.  On November 13, 2007, the Company      entered into a Second Amendment to the Credit Facility (the “Second      Amendment Credit Facility”) with      Wachovia Bank.  In summary the Second Amendment Credit Facility did      the following: |
|-----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | waived      all existing defaults from March 2007 through September    2007; |
|---------------------|------------------------------------------------------------------------------|

| ●   | extended      the termination date of the Credit Facility from December 28, 2007 to      December 31, 2011; |
|---------------------|-------------------------------------------------------------------------------------------------------------|

| ●   | reduced the revolver      commitment from $20.0 million to $15.0 million; |
|---------------------|---------------------------------------------------------------------------|

| ●   | offered      two borrowing options, from which the Company can choose.  One      option offers, using as collateral, up to 85% of eligible accounts      receivable minus reserves (both as defined by the Credit Facility), as      designated by Wachovia.  The other option provides, using as      collateral, up to 85% of eligible accounts receivable and a portion of      eligible inventory (not to exceed $8.0 million) minus reserves as      designated by Wachovia.  The Company must maintain excess      availability of $2.0 million ($1.5 million if certain ratios are met)      under this second option; |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|  ●   | adjusted the      applicable margin to fluctuate from (0.25%) to 0.25% for Prime Rate loans      and 2.00% to 2.50% for LIBOR loans; |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ●   | eliminated      the financial covenants, such as fixed charge coverage ratios and tangible      liability to net worth ratios, that were required by the Credit      Facility; |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        ●   | reduces the amout of      capital expenditures the Company can incur for fiscal years 2007 and 2008      from $2.0 million to $0.4 million in the aggregate;  and |
|---------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | required      an early termination fee of (i) 1.5% of the revolver commitment if the      termination occurs on or before November 13, 2008 and (ii) 0.75% of the      Revolver Commitment if the termination occurs after November 13, 2008 but      on or before November 13, 2009. |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  ●              | offers      two additional borrowing base options from which the Company may      elect.  Under the first option, the Company may borrow up to 85%      of eligible accounts receivable and a portion of eligible inventory (not      to exceed $500,000) minus reserves (both as defined by the Credit Facility      Third Amendment), as designated by Wachovia.  This option was      available to the Company until the earlier of May 30, 2008 and the      consummation of the Transaction, which consummation occurred on May 9,      2008.  As such, this first option is no longer available to the      Company.  Under the second option, the Company may borrow up to      85% of eligible accounts receivable and a portion of eligible inventory      (not to exceed $8.0 million) minus reserves, as designated by      Wachovia.  The Company must maintain excess availability of $1.5      million ($1.0 million if certain ratios are met) under this second      option.  This option became available following the consummation      of the Transaction; |
|---------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  ●              | imposes      a fixed charge coverage ratio requirement at all times that the Company      elects the second borrowing option above of not less than (i) 1.00 for the      first three fiscal quarters of 2009 and (ii) 1.20 to 1.00 for each fiscal      quarter thereafter;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  ●              |  sets the applicable      margin through January 1, 2009 for 0.25% for Prime Rate Loans and      2.50% for LIBOR loans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  ●              |  reduces the      amount of capital expenditures the Company can incur for each fiscal year      to $250,000 in 2008, $300,000 in 2009 and $500,000 for 2010 and each      fiscal year thereafter;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   ●        |  limits the      Company from entering into any lease or rental payments exceeding $175,000      in any 12 month period; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  ●              |  requires the      proceeds from the potential sale of the Company’s Baltimore      facility to be used to pay down any existing loans on the revolving line      of credit and to establish a reserve of such amount on all borrowing base      options until  2009 and if the Company must meet certain fixed charge      coverage ratios.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

|                                           |   | Year      Ended December 31, |      |
|------------------------------------------------|--------|------------------------------|-----------|
|                                           |   | 2007                         |      |   | 2006 |   |
|                                           |   |                         |      |   |   |   |
| Borrowings      under revolving line of credit |   | $                            | -         |   |   | $ | 3,389,656 |   |
| Weighted      average interest rate            |   |                         | 8.00      | % |   |   | 9.20 | % |
| Maximum      month-end balance during year     |   | $                            | 1,936,000 |   |   | $ | 9,792,000 |   |
| Average      month-end balance during year     |   | $                            | 270,000   |   |   | $ | 4,409,000 |   |

| (b)   | In      May 2002, Textile Investment      International S.A. (“Textile”), an affiliate of Latitude Licensing      Corp. (“Latitude”), the licensor of the      Company, acquired a note that the Company had issued to a former      licensor.  On May 21, 2002, Textile exchanged that note for an      amended and restated note bearing interest at the rate of 8% per annum,      (the “Replacement Note”), which subordinated Textile’s rights under the      note to the rights of the Credit Agreement, deferred the original note’s      principal payments and extended the maturity date of the note until      December 31, 2007.  In connection with the execution of the      Credit Facility, the Replacement Note was further amended and restated to      subordinate Textile’s rights to the rights of Wachovia under the Credit      Facility (the “Amended and Restated Replacement Note” and together with      the Replacement Note, the “Textile Notes”).  Pursuant to the      subordination provisions of the Textile Notes, the Company was obligated      to defer the payments, both principal and interest, that otherwise would      have been due thereunder during each calendar quarter commencing with the      quarter ended December 31, 2002 and continuing through March 31,      2005.  Also, pursuant to the provisions of the Textile Notes,      the non-payment and deferral of those payments did not constitute a      default thereunder. The      obligations under the Textile Notes have been classified as current or      long-term based upon the respective original due dates of the quarterly      payments specified in the Replacement Note or the Amended and Restated      Replacement Note, as the case may be.  Accordingly, each      deferred quarterly payment has been classified as current even though the      payment thereof may not be paid until a future year.  Payments      under the Textile Note totaled $3,510,000 in principal and interest in      2006.  The Company did not make any payments in      2007.   |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| 5. | Accrued      Expenses |
|----|-----------------------|

| Accrued      expenses consist of the following:             |   | December 31, |      |
|-------------------------------------------------------------|--------|--------------|-----------|
|                                                        |   | 2007         |      |   | 2006 |   |
| Severance                                                   |   | $            | 872,014   |   |   | $ |  — |   |
| Royalties      & other licensor obligations (Note    9) |   |         | 466,851   |   |   |   | 135,152 |   |
| Accrued      rent expense                                   |   |         | 247,998   |   |   |   | 212,289 |   |
| Customer      credit balances                               |   |         | 239,653   |   |   |   | 98,012 |   |
| Accrued      compensation & related withholdings        |   |         | 212,589   |   |   |   | 189,309 |   |
| Accrued      professional fees & legal                  |   |         | 171,518   |   |   |   | 190,723 |   |
| Property      taxes                                         |   |         | 97,939    |   |   |   | 165,394 |   |
| Sales      commissions payable                              |   |         | 33,127    |   |   |   | 107,500 |   |
| Accrued      interest (Note 4)                              |   |         | —   |   |   |   | 533,004 |   |
| Management      & selling bonuses                       |   |         | —   |   |   |   | 175,000 |   |
|                                                        |   | $            | 2,341,689 |   |   | $ | 1,806,383 |   |

| 6. | Income      Taxes |
|----|-------------------|

----

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

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

|                                                                                                  |   | December      31, |        |
|-------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|
|                                                                                                  |   | 2007              |        |   | 2006 |   |
|                                                                                                  |   |              |        |   |   |   |
| Net      operating loss carryforwards                                                                 |   | $                 | 19,161,000  |   |   | $ | 12,630,000 |   |
| Minimum      pension liability                                                                        |   |              | 1,429,000   |   |   |   | 2,295,000 |   |
|     Allowance      for doubtful accounts, returns and merchandise                 |   |              | 693,000     |   |   |   | 285,000 |   |
| Depreciation      and amortization                                                                    |   |              | 631,000     |   |   |   | 644,000 |   |
| Accrued      severance                                                                                |   |              | 343,000     |   |   |   | — |   |
| Alternative      minimum tax credits                                                                  |   |              | 279,000     |   |   |   | 346,000 |   |
| Accrued      interest payable             |   |              | 275,000     |   |   |   | 213,000 |   |
| Capital      loss carryforwards                                                                       |   |              | 163,000     |   |   |   | 163,000 |   |
| Deferred      rent payments                                                                           |   |              | 98,000      |   |   |   | 84,000 |   |
| Inventory      valuation                                                                              |   |              | 71,000      |   |   |   | 83,000 |   |
| State      tax accrual                                                                                |   |              | 39,000      |   |   |   | 65,000 |   |
| Other                                                                                                 |   |              | 21,000      |   |   |   | 21,000 |   |
| Bonus      accrual                                                                                    |   |              | —     |   |   |   | 69,000 |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
|                                                                                                  |   |              | 23,203,000  |   |   |   | 16,898,000 |   |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Valuation      allowance                                                                              |   |              | (23,203,000 | ) |   |   | (16,898,000 | ) |
|                                                                                                  |   |              |        |   |   |   |   |   |
| Net      deferred tax asset                                                                           |   | $                 | —     |   |   | $ | — |   |

| A reconciliation      between the statutory and effective tax rate is as follows: |   |
|-----------------------------------------------------------------------------------|--------|

|                                               |   | Year      Ended December 31, |    |
|----------------------------------------------------|--------|------------------------------|---------|
|                                               |   | 2007                         |    |   | 2006 |   |   | 2005 |   |
|                                               |   |                         |    |   |   |   |   |   |   |
| Federal      statutory rate                        |   |                         | 34.0    | % |   |   | 34.0 | % |   |   | 34.0 | % |
| State      and local taxes, net of federal benefit |   |                         | 6.4     |   |   |   | 6.0 |   |   |   | 4.5 |   |
| Permanent      differences                         |   |                         | (0.6    | ) |   |   | 5.2 |   |   |   | (4.0 | ) |
| Alternative      minimum taxes                     |   |                         | — |   |   |   | 2.0 |   |   |   | 2.0 |   |
| Change      in valuation allowance                 |   |                         | (40.5   | ) |   |   | 5.7 |   |   |   | (59.0 | ) |
|                                               |   |                         |    |   |   |   |   |   |   |   |   |   |
|                                               |   |                         | (0.7    | )% |   |   | 52.9 | % |   |   | (22.5 | )% |

| The net tax expense      (benefit) is derived from the following components:                               |   |                              |      |
|------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                                                                       |   | Year      Ended December 31, 2007 |      |
| The net tax expense      (benefit) is derived from the following components:                               |   | Federal                           |      |   | State |   |   | Total |   |
|                                                                                                       |   |                              |      |   |   |   |   |   |   |
| Current tax      expense                                                                                   |   | $                                 | —   |   |   | $ | 76,997 |   |   | $ | 76,997 |   |
| Deferred tax      expense                                                                                  |   |                              | —   |   |   |   | — |   |   |   | — |   |
|                    Net income tax expense |   | $                                 | —   |   |   | $ | 76,997 |   |   | $ | 76,997 |   |
|                                                                                                       |   |                              |      |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   | Year Ended December 31,      2006 |      |
|                                                                                                       |   | Federal                           |      |   | State |   |   | Total |   |
| Current tax      expense                                                                                   |   | $                                 | 110,000   |   |   | $ | 187,000 |   |   | $ | 297,000 |   |
| Deferred      tax benefit                                          |   |                              | 2,139,000 |   |   |   | 378,000 |   |   |   | 2,517,000 |   |
|                    Net income tax expense |   | $                                 | 2,249,000 |   |   | $ | 565,000 |   |   | $ | 2,814,000 |   |
|                                                                                                       |   |                              |      |   |   |   |   |   |   |   |   |   |

----

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

|                                                                                                                  |   | Year Ended December 31,      2005 |       |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                                                             |   | Federal                           |       |   | State |   |   | Total |   |
| Current tax      expense                                                                                         |   | $                                 | 146,000    |   |   | $ | — |   |   | $ | 146,000 |   |
| Deferred tax      benefit                                                                                        |   |                              | (1,054,000 | ) |   |   | (270,000 | ) |   |   | (1,324,000 | ) |
|                     Net income tax benefit |   | $                                 | (908,000   | ) |   | $ | (270,000 | ) |   | $ | (1,178,000 | ) |
|                                                                                                             |   |                              |       |   |   |   |   |   |   |   |   |   |

| 7. | Stockholders'      Equity |
|----|---------------------------|

| 8. | Equity Awards and Stock-Based      Compensation |
|----|-------------------------------------------------|

----

| The      following table summarizes equity award activity in 2007, 2006 and      2005: |   | Number      ofEquity      Awards |      |   | Weighted      Average Exercise PricePer      Equity Award |   |
|----------------------------------------------------------------------------------------|--------|----------------------------------|-----------|--------|-----------------------------------------------------------|--------|
|                                                                                   |   |                             |      |   |                                                      |   |
| Equity      awards outstanding at December 31, 2005                                    |   |                             | 1,564,167 |   |                                                      | $      | 2.090 |   |
| Granted                                                                                |   |                             | 190,000   |   |                                                      |   | 5.115 |   |
| Exercised                                                                              |   |                             | (77,800   | )      |                                                      |   | 1.131 |   |
| Forfeited                                                                              |   |                             | (10,000   | )      |                                                      |   | 6.950 |   |
|                                                                                   |   |                             |      |   |                                                      |   |   |   |
| Equity      awards outstanding at December 31, 2006                                    |   |                             | 1,666,367 |   |                                                      | $      | 2.451 |   |
| Granted                                                                                |   |                             | 370,000   |   |                                                      |   | 0.730 |   |
| Exercised                                                                              |   |                             | (208,333  | )      |                                                      |   | 0.750 |   |
| Forfeited                                                                              |   |                             | (231,667  | )      |                                                      |   | 3.741 |   |
|                                                                                   |   |                             |      |   |                                                      |   |   |   |
| Equity      awards outstanding at December 31, 2007                                    |   |                             | 1,596,367 |   |                                                      | $      | 2.086 |   |
|                                                                                   |   |                             |      |   |                                                      |   |   |   |
| Equity      awards exercisable at December 31, 2007                                    |   |                             | 1,403,034 |   |                                                      | $      | 2.261 |   |

----

|  Summary      of assumptions used in the valuation of compensation      expense: |   |
|--------------------------------------------------------------------------------------------|--------|
|                                                                                       |   | Years Ended December 31, |   |
|                                                                                       |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Expected      volatility                                                                   |   |   | 110%-120 | % |   |   | 110%-120 | % |   |   | 120 | % |
| Risk      free interest rates                                                              |   |   | 3.5%      – 4.8 | % |   |   | 4.1%      - 5.2 | % |   |   | 4.3%      - 4.5 | % |
| Expected      lives in years                                                               |   |   | 1.0      – 5.0 |   |   |   | 3.3      – 5.0 |   |   |   | 4.0      – 6.5 |   |
| Expected      forfeiture rate                                                              |   |   | 10%      - 50 | % |   |   | 3.5 | % |   |   | 5.0 | % |
| Weighted      average grant fair value per option                                          |   | $ | 0.88 |   |   | $ | 4.03 |   |   | $ | 4.57 |   |

|                                                                                                                  |   | Year      Ended December 31, 2005 |      |
|-----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|
| Net      income attributable to common stockholders, as reported                                                      |   | $                                 | 6,411,249 |   |
| Total      stock-based employee compensation expense determined under the fair value      based method for all awards |   |                              | (977,538  | ) |
| Pro      forma net income attributable to common stockholders                                                         |   | $                                 | 5,433,711 |   |
|                                                                                                                  |   |                              |      |   |
| Basic      net income per common share, as      reported                                                              |   | $                                 | 0.55      |   |
|                                                                                                                  |   |                              |      |   |
| Basic      net income per common share, pro      forma                                                                |   | $                                 | 0.46      |   |
|                                                                                                                  |   |                              |      |   |
| Diluted      net income per common share, as      reported                                                            |   | $                                 | 0.48      |   |
|                                                                                                                  |   |                              |      |   |
| Diluted      net income per common share, pro      forma                                                              |   | $                                 | 0.41      |   |

----

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

| 9. | Commitments      and Contingencies |
|----|------------------------------------|

| Years      Ended December 31, |   | Showrooms      & Office Space |      |   | Office      Equipment |   |    | Total  |   |
|-------------------------------|--------|-----------------------------------|-----------|--------|-----------------------|--------|---------|--------|--------|
|                          |   |                              |      |   |                  |   |    |   |   |
| 2008                          |   | $                                 | 419,244   |   |                  | $      | 38,007  |   |   | $ | 457,251 |   |
| 2009                          |   |                              | 432,808   |   |                  |   | — |   |   |   | 432,808 |   |
| 2010                          |   |                              | 477,545   |   |                  |   | — |   |   |   | 477,545 |   |
| 2011                          |   |                              | 489,484   |   |                  |   | — |   |   |   | 489,484 |   |
| 2012                          |   |                              | 501,721   |   |                  |   | — |   |   |   | 501,721 |   |
| 2013      to 2014             |   |                              | 1,040,287 |   |                  |   | — |   |   |   | 1,040,287 |   |
|                          |   |                              |      |   |                  |   |    |   |   |   |   |   |
|                          |   | $                                 | 3,361,089 |   |                  | $      | 38,007  |   |   | $ | 3,399,096 |   |

| Total      rent expense is as follows: |   | Years      Ended December 31, |    |
|----------------------------------------|--------|-------------------------------|---------|
|                                   |   | 2007                          |    |   | 2006 |   |   | 2005 |   |
|                                   |   |                          |    |   |   |   |   |   |   |
| Minimum      rentals                   |   | $                             | 463,223 |   |   | $ | 519,665 |   |   | $ | 504,526 |   |
| Other      lease costs                 |   |                          | 165,968 |   |   |   | 114,958 |   |   |   | 116,497 |   |
|                                   |   |                          |    |   |   |   |   |   |   |   |   |   |
|                                   |   | $                             | 629,191 |   |   | $ | 634,623 |   |   | $ | 621,023 |   |

| ·   | cover      the territory comprising the United States, Puerto Rico and the U.S.      Virgin Islands; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | provide      for royalty payments to Latitude, subject to the minimum obligations in      the amounts of $3.0 million and $1.5 million for men’s and women’s license      agreements, respectively, of 6.25% of net sales of regular licensed      merchandise and 3.0% of certain irregular and closeout licensed      merchandise; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | provide      for expenditure of 3% of net sales in each of 2007, 2008 and 2009, subject      to the minimum payment obligations of $700,000 and $600,000 for the men’s      and women’s license agreements, respectively, on advertising and related      expenses promoting Girbaud brand products for  each. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                          |   |   |       |   | Payments      Due By Period |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|-----------------------------|--------|
|                                                                                                                                                                          |   | Total  |       |   | Current                     |   |   | 1-3      years |   |   | 4-5      years |   |   | More      than 5 years |   |
| Licensing      agreement fee obligations (*)                                                                                                                                  |   | $      | 31,500,000 |   |                        | $      | 4,875,000 |   |   | $ | 8,625,000 |   |   | $ | 9,000,000 |   |   | $ | 9,000,000 |   |
| Promotional      expense license requirement (*)                                                                                                                              |   |   | 9,100,000  |   |                        |   | 1,300,000 |   |   |   | 2,600,000 |   |   |   | 2,600,000 |   |   |   | 2,600,000 |   |
| Operating      leases                                                                                                                                                         |   |   | 3,398,000  |   |                        |   | 457,000 |   |   |   | 910,000 |   |   |   | 991,000 |   |   |   | 1,040,000 |   |
| Licensing      agreement fashion show obligations (*)                                                                                                                         |   |   | 2,100,000  |   |                        |   | 300,000 |   |   |   | 600,000 |   |   |   | 600,000 |   |   |   | 600,000 |   |
| Licensing      agreement creative & advertising fee obligations (*)                                                                                                       |   |   | 1,820,000  |   |                        |   | 260,000 |   |   |   | 520,000 |   |   |   | 520,000 |   |   |   | 520,000 |   |
| Employment      agreements                                                                                                                                                    |   |   | 1,360,000  |   |                        |   | 660,000 |   |   |   | 700,000 |   |   |   | — |   |   |   | — |   |
| Severance      agreement                                                                                                                                                      |   |   | 872,000    |   |                        |   | 872,000 |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Total      contractual obligations                                                                                                                                            |   | $      | 50,150,000 |   |                        | $      | 8,724,000 |   |   | $ | 13,955,000 |   |   | $ | 13,711,000 |   |   | $ | 13,760,000 |   |
|                                                                                                                                                                          |   |
| (*)      License agreement obligations include amounts accrued but unpaid at      December 31, 2007 as well as obligation commitments for years subsequent      to that date. |   |

----

----

| 10. | Retirement      Plan |
|-----|----------------------|

|                                              |   | Years      Ended December 31, |     |
|---------------------------------------------------|--------|-------------------------------|----------|
|                                              |   | 2007                          |     |   | 2006 |   |   | 2005 |   |
| Service      cost of current period               |   | $                             | —  |   |   | $ | 117,000 |   |   | $ | 77,000 |   |
| Interest      on the above service cost           |   |                          | —  |   |   |   | 7,000 |   |   |   | 6,000 |   |
|                                              |   |                          | —  |   |   |   | 124,000 |   |   |   | 83,000 |   |
| Interest      on the projected benefit obligation |   |                          | 471,000  |   |   |   | 521,000 |   |   |   | 520,000 |   |
| Expected      return on plan assets               |   |                          | (533,000 | ) |   |   | (556,000 | ) |   |   | (584,000 | ) |
| Amortization      of prior service cost           |   |                          | —  |   |   |   | — |   |   |   | 43,000 |   |
| Amortization      of loss                         |   |                          | 444,000  |   |   |   | 449,000 |   |   |   | 336,000 |   |
|                                              |   |                          |     |   |   |   |   |   |   |   |   |   |
| Pension      expense                              |   | $                             | 382,000  |   |   | $ | 538,000 |   |   | $ | 398,000 |   |

| The      following table sets forth the pension plan’s funded status and amounts      recognized at December 31, 2007, 2006 and 2005: |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|

|                                                                        |   | Years      Ended December 31, |       |
|-----------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                        |   | 2007                          |       |   | 2006 |   |   | 2005 |   |
|                                                                        |   |                          |       |   |   |   |   |   |   |
| Vested      benefits                                                        |   | $                             | 6,918,000  |   |   | $ | 8,553,000 |   |   | $ | 8,727,000 |   |
| Nonvested      benefits                                                     |   |                          | 73,000     |   |   |   | 47,000 |   |   |   | 26,000 |   |
|                                                                        |   |                          |       |   |   |   |   |   |   |   |   |   |
| Accumulated      benefit obligation                                         |   |                          | 6,991,000  |   |   |   | 8,600,000 |   |   |   | 8,753,000 |   |
| Effect      of anticipated future compensation levels and other events      |   |                          | —    |   |   |   | — |   |   |   | (1,549,000 | ) |
|                                                                        |   |                          |       |   |   |   |   |   |   |   |   |   |
| Projected      benefit obligation                                           |   |                          | 6,991,000  |   |   |   | 8,600,000 |   |   |   | 7,204,000 |   |
|                                                                        |   |                          |       |   |   |   |   |   |   |   |   |   |
| Fair      value of assets held in the plan                                  |   |                          | 7,591,000  |   |   |   | 6,997,000 |   |   |   | 7,376,000 |   |
|                                                                        |   |                          |       |   |   |   |   |   |   |   |   |   |
| Excess/(deficit)      of projected benefit obligation over plan assets      |   |                          | 600,000    |   |   |   | (1,603,000 | ) |   |   | 172,000 |   |
| Unrecognized      net loss from past experience different from that assumed |   |                          | (2,936,000 | ) |   |   | 5,306,000 |   |   |   | 4,067,000 |   |
| Minimum      liability adjustment                                           |   |                          | 2,936,000  |   |   |   | (5,306,000 | ) |   |   | (5,616,000 | ) |
|                                                                        |   |                          |       |   |   |   |   |   |   |   |   |   |
| Net      prepaid pension asset and liability                           |   | $                             | 600,000    |   |   | $ | (1,603,000 | ) |   | $ | (1,377,000 | ) |

----

| The      following sets forth the pension plan’s change in benefit obligation for      2007 and 2006: |   | Years      Ended December 31, |       |
|-------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                                                        |   | 2007                          |       |   | 2006 |   |
| Benefit      obligation at beginning of year                                                                |   | $                             | 8,600,000  |   |   | $ | 7,204,000 |   |
| Changes      in assumptions                                                                                 |   |                          | —    |   |   |   | 2,142,000 |   |
| Service      cost                                                                                           |   |                          | —    |   |   |   | 124,000 |   |
| Interest      cost                                                                                          |   |                          | 471,000    |   |   |   | 521,000 |   |
| Benefits      paid                                                                                          |   |                          | (1,132,000 | ) |   |   | (834,000 | ) |
| Actuarial      (gain) loss                                                                                  |   |                          | (948,000   | ) |   |   | 132,000 |   |
| Plan      curtailment                                                                                       |   |                          | —    |   |   |   | (689,000 | ) |
|                                                                                                        |   |                          |       |   |   |   |   |   |
| Benefit      obligation at end of year                                                                      |   | $                             | 6,991,000  |   |   | $ | 8,600,000 |   |

| The      following sets forth the pension plan's change in plan assets for 2007 and      2006: |   | Years      Ended December 31, |       |
|------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|
|                                                                                           |   | 2007                          |       |   | 2006 |   |
| Fair      value of plan assets at beginning of year                                            |   | $                             | 6,997,000  |   |   | $ | 7,376,000 |   |
| Return      on plan assets                                                                     |   |                          | 1,511,000  |   |   |   | 557,000 |   |
| Employer      contributions                                                                    |   |                          | 215,000    |   |   |   | — |   |
| Benefits      paid                                                                             |   |                          | (1,132,000 | ) |   |   | (834,000 | ) |
| Assets      gain/(loss) deferred                                                               |   |                          | —    |   |   |   | (102,000 | ) |
|                                                                                           |   |                          |       |   |   |   |   |   |
| Fair      value of plan assets at end of year                                                  |   | $                             | 7,591,000  |   |   | $ | 6,997,000 |   |

----

| The      Company's pension plan weighted-average asset allocations at December 31,      2007 and 2006, by asset category are as follows: |   |              |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                                                                                     |   | December      31, |   |
|                                                                                                                                     |   | 2007              |   |   | 2006 |   |
| Equity      Securities                                                                                                                   |   |              | 68     | % |   |   | 70 | % |
| Debt      Securities                                                                                                                     |   |              | 26     | % |   |   | 29 | % |
| Cash      Accounts                                                                                                                       |   |              | 6      | % |   |   | 1 | % |
|                                                                                                                                     |   |              |   |   |   |   |   |   |
|                                                                                                                                     |   |              | 100    | % |   |   | 100 | % |

| The      following benefit payments, which reflect expected future services, as      appropriate, are expected to be paid as follows for the Years Ended      December 31: |   |                  |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|-----------|
|                                                                                                                                                                       |   | Pension      Benefits |      |
| 2008                                                                                                                                                                       |   | $                     | 154,000   |   |
| 2009                                                                                                                                                                       |   |                  | 178,000   |   |
| 2010                                                                                                                                                                       |   |                  | 187,000   |   |
| 2011                                                                                                                                                                       |   |                  | 208,000   |   |
| 2012                                                                                                                                                                       |   |                  | 221,000   |   |
| Years      2013 to 2017                                                                                                                                                    |   |                  | 1,724,000 |   |
|                                                                                                                                                                       |   |                  |      |   |
|                                                                                                                                                                       |   | $                     | 2,672,000 |   |

| 11. | Supplemental      Disclosures of Cash Flow Information |
|-----|--------------------------------------------------------|

| Non-cash      effect of recording minimum pension liability |   | Years      Ended December 31, |      |
|-------------------------------------------------------------|--------|-------------------------------|-----------|
|                                                        |   | 2007                          |      |   | 2006 |   |   | 2005 |   |
|                                                        |   |                          |      |   |   |   |   |   |   |
| Adjustment      (recognition) of minimum pension liability  |   | $                             | 2,370,000 |   |   | $ | 310,000 |   |   | $ | (5,616,000 | ) |
| Pension      plan contribution of restricted common stock   |   | $                             | 215,000   |   |   | $ |  — |   |   | $ |  — |   |

----

| 12. | Quarterly      Financial Data (Unaudited) |
|-----|-------------------------------------------|

| Summarized quarterly      financial data for 2007 and 2006 is asfollows: |
|--------------------------------------------------------------------------|

|                                |   | Quarter |        |
|-------------------------------------|--------|---------|-------------|
| 2007                                |   | First   |        |   | Second |   |   | Third |   |   | Fourth |   |
| Net      sales                      |   | $       | 14,193,837  |   |   | $ | 8,495,835 |   |   | $ | 9,142,571 |   |   | $ | 5,381,487 |   |
| Gross      profit                   |   |    | 4,882,507   |   |   |   | 2,995,045 |   |   |   | 1,863,208 |   |   |   | 922,431 |   |
| Net      loss                       |   |    | (2,106,839  | ) |   |   | (3,379,037 | ) |   |   | (5,219,148 | ) |   |   | (4,938,411 | ) |
| Basic      earnings per share (1)   |   | $       | (0.17       | ) |   | $ | (0.28 | ) |   | $ | (0.42 | ) |   | $ | (0.39 | ) |
| Diluted      earnings per share (1) |   | $       | (      0.17 | ) |   | $ | (      0.28 | ) |   | $ | (      0.42 | ) |   | $ | (      0.39 | ) |
|                                |   |    |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   | Quarter |        |
| 2006                                |   | First   |        |   | Second |   |   | Third |   |   | Fourth |   |
| Net      sales                      |   | $       | 21,263,117  |   |   | $ | 24,040,540 |   |   | $ | 21,276,299 |   |   | $ | 15,656,038 |   |
| Gross      profit                   |   |    | 9,066,413   |   |   |   | 9,770,227 |   |   |   | 8,764,467 |   |   |   | 5,689,515 |   |
| Net      income (loss)              |   |    | 2,544,032   |   |   |   | 2,345,410 |   |   |   | 2,099,885 |   |   |   | (4,382,395 | ) |
| Basic      earnings per share (1)   |   | $       | 0.21        |   |   | $ | 0.20 |   |   | $ | 0.17 |   |   | $ | (0.36 | ) |
| Diluted      earnings per share (1) |   | $       | 0.20        |   |   | $ | 0.19 |   |   | $ | 0.17 |   |   | $ | (      0.36 | ) |

| 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. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

SCHEDULE II

| Description                                  |   | Balance      Beginning of the Year |      |   | Charged      to Costs and Expenses |   |      | Deduction |   |   | Balance      End of Year |   |
|----------------------------------------------|--------|------------------------------------|-----------|--------|------------------------------------|--------|-----------|-----------|--------|--------|--------------------------|--------|
|                                         |   |                               |      |   |                               |   |      |      |   |   |                     |   |
| Year      Ended December 31, 2005            |   |                               |      |   |                               |   |      |      |   |   |                     |   |
| Allowance      for doubtful accounts         |   | $                                  | 316,000   |   |                               | $      | 1,016,000 |      |   | $      | (632,000                 | )      |   | $ | 700,000 |   |
| Inventory      markdown reserve              |   |                               | 600,000   |   |                               |   | 1,339,000 |      |   |   | (1,624,000               | )      |   |   | 315,000 |   |
| Merchandise      allowances                  |   |                               | 1,741,000 |   |                               |   | 3,710,000 |      |   |   | (4,278,000               | )      |   |   | 1,173,000 |   |
| Reserve      for sales returns and discounts |   |                               | 573,000   |   |                               |   | 4,199,000 |      |   |   | (3,886,000               | )      |   |   | 886,000 |   |
|                                         |   |                               |      |   |                               |   |      |      |   |   |                     |   |   |   |   |   |
| Year      Ended December 31, 2006            |   |                               |      |   |                               |   |      |      |   |   |                     |   |   |   |   |   |
| Allowance      for doubtful accounts         |   | $                                  | 700,000   |   |                               | $      | 445,000   |      |   | $      | (420,000                 | )      |   | $ | 725,000 |   |
| Inventory      markdown reserve              |   |                               | 315,000   |   |                               |   | 400,000   |      |   |   | (315,000                 | )      |   |   | 400,000 |   |
| Merchandise      allowances                  |   |                               | 1,173,000 |   |                               |   | 1,900,000 |      |   |   | (2,385,000               | )      |   |   | 688,000 |   |
| Reserve      for sales returns and discounts |   |                               | 886,000   |   |                               |   | 3,503,000 |      |   |   | (3,907,000               | )      |   |   | 482,000 |   |
|                                         |   |                               |      |   |                               |   |      |      |   |   |                     |   |   |   |   |   |
| Year      Ended December 31, 2007            |   |                               |      |   |                               |   |      |      |   |   |                     |   |   |   |   |   |
| Allowance      for doubtful accounts         |   | $                                  | 725,000   |   |                               | $      | 989,480   |      |   | $      | (1,014,480               | )      |   | $ | 700,000 |   |
| Inventory      markdown reserve              |   |                               | 400,000   |   |                               |   | 1,043,000 |      |   |   | (1,018,000               | )      |   |   | 425,000 |   |
| Merchandise      allowances                  |   |                               | 688,000   |   |                               |   | 2,394,696 |      |   |   | (1,538,696               | )      |   |   | 1,544,000 |   |
| Reserve      for sales returns and discounts |   |                               | 482,000   |   |                               |   | 1,767,582 |      |   |   | (1,798,582               | )      |   |   | 451,000 |   |

----

ExhibitIndex

| Exhibit      No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.01        |   | Amended      and Restated Certificate of Incorporation (a copy of which was filed with      the SEC on October 3, 1997 as Exhibit 3.01 to the Company’s Registration      Statement on Form S-1 (the “S-1 Registration Statement”), and is hereby      incorporated herein by this reference).                                                                                                                      |
| 3.02        |   | Amended      and Restated By-laws (a copy of which was filed as Exhibit 3.02 to the S-1      Registration Statement, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                                            |
| 3.03        |   | Certificate      of Designation of the Series A Convertible Preferred Stock of the Company      (a copy of which was filed with the SEC on November 15, 1999 as Exhibit      3.03 to the Company’s Quarterly Report on Form 10-Q for the quarter ended      September 30, 1999, and is hereby incorporated herein by this      reference).                                                                                      |
| 3.04        |   | Certificate      of Amendment to the Certificate of Designation of the Series A Convertible      Preferred Stock of the Company (a copy of which was filed with the SEC on      April 2, 2001 as Exhibit 3.04 to the Company’s Annual Report on Form 10-K      for the year ended December 31, 2000, and is hereby incorporated herein by      this reference.                                                                  |
| 3.05        |   | Second      Certificate of Amendment to the Certificate of Designation of the Series A      Convertible Preferred Stock of the Company (a copy of which was filed with      the SEC on November 14, 2002 as Exhibit 3.05 to the Company’s Quarterly      Report on Form 10-Q for the quarter ended September 30, 2002 (the      “September 2002 10-Q”), and is hereby incorporated herein by this      reference).  |
| 3.06        |   | Certificate      of Amendment of Amended and Restated Certificate of Incorporation (a copy      of which was filed with the SEC on August 14, 2003 as Exhibit 3.06 to the      Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,      2003 (the “June 2003 10-Q”), and is hereby incorporated herein by this      reference).                                                                  |
| 3.07             |   | Amendment      to the Amended and Restated By-laws of I.C. Isaacs & Company, Inc. (a      copy of which was filed with the SEC on April 24, 2007 as Exhibit 3.1 to      the Company’s Current Report on Form 8-K, and is hereby incorporated      herein by this reference).                                                                                                                                                |
| 4.01        |   | Specimen      Common Stock Certificate (a copy of which was filed with the SEC on      October 3, 1997 as Exhibit 4.01 to the Registration Statement on Form S-1      and is hereby incorporated herein by this reference).                                                                                                                                                                                                           |
| 4.02        |   | Warrant      No. 1 issued by the Company to Textile Investment International S.A.      (“Textile”) for the purchase of 300,000 shares of Common Stock (a copy of      which was filed with the SEC on November 14, 2002 as Exhibit 4.02 to the      September 2002 10-Q, and is hereby incorporated herein by this      reference).                                                                                       |
| 4.03        |   | Warrant      No. 2 issued by the Issuer to Textile for the purchase of 200,000 shares      of Common Stock (a copy of which was filed as Exhibit 4.03 to the      September 2002 10-Q, and is hereby incorporated herein by this      reference).                                                                                                                                                                                     |
| 4.04        |   | Amended      and Restated Omnibus Stock Plan as in effect on June 30, 2003 (a copy of      which was filed as Exhibit 4.04 to the June 2003 10-Q, and is hereby      incorporated herein by this reference).                                                                                                                                                                                                                               |
| 4.05        |   | 2005      Non-Employee Directors Stock Option Plan (a copy of which was filed with      the SEC on August 11, 2005 as Exhibit 4.05 to Amendment No. 1 to the      Company’s Registration Statement on Form S-2 (the “S-2 Amendment”), and is      hereby incorporated herein by this reference).                                                                                                                    |
| 10.01            |   | Form      of Indemnification Agreement (a copy of which was filed as Exhibit 10.09      to the S-1 Registration Statement, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                                      |

----

| 10.02  |   | Girbaud      Trademark License and Technical Assistance Agreement dated November 1,      1997 (a copy of which was filed with the SEC on November 26, 1997 as      Exhibit 10.26 to Amendment No. 2 to the S-1 Registration Statement (“S-1      Amendment 2”), and is hereby incorporated herein by this      reference).                                                                                                                                                   |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.03  |   | Defined      Benefit Pension Plan (a copy of which was filed with as Exhibit 10.27(a)      to S-1 Amendment No. 2, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                                                                                                 |
| 10.04  |   | First      Amendment to Defined Benefit Pension Plan (a copy of which was filed as      Exhibit 10.27(b) to S-1 Amendment 2, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                                                                                       |
| 10.05  |   | Girbaud      Trademark License and Technical Assistance Agreement dated January 15,      1998 (a copy of which was filed with the SEC on March 27, 1998 as Exhibit      10.26(a) to the Company’s Annual Report on Form 10-K for the year ended      December 31, 1997 (the “1997 10-K”), and is hereby incorporated herein by      this reference).                                                                                                                   |
| 10.06  |   | Girbaud      Trademark License and Technical Assistance Agreement for Women's      Collection dated March 4, 1998 (a copy of which was filed as Exhibit      10.26(b) to the 1997 10-K, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                       |
| 10.07  |   | Amendment      No. 1 dated June 18, 1998 to Girbaud Trademark and Technical Assistance      Agreement for Women's Collection (a copy of which was filed with the SEC      on August 12, 1998 as Exhibit 10.32 to the Company’s Quarterly Report on      Form 10-Q for the quarter ended June 30, 1998, and is hereby incorporated      herein by this reference).                                                                                                                  |
| 10.08  |   | Amendment      No. 1 dated November 12, 1998 to Trademark License and Technical      Assistance Agreement for Men's      Collections by and between I.C. Isaacs & Co., L.P. and Latitude      Licensing Corp. (a copy of which was filed with the SEC on March 30, 1999      as Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the year      ended December 31, 1998 (the “1998 10-K”), and is hereby incorporated      herein by this reference).  |
| 10.09  |   | Amendment      No. 2 dated November 12, 1998 to Trademark License and Technical      Assistance Agreement for Women's Collections by and between I.C. Isaacs      & Co., L.P. and Latitude Licensing Corp. (a copy of which was filed as      Exhibit 10.41 to the 1998 10-K, and is hereby incorporated herein by this      reference).                                                                                                                                             |
| 10.10  |   | Executive      Employment Agreement by and between I.C. Isaacs & Company, Inc. and      Daniel Gladstone dated January 21, 1999 (a copy of which was filed as      Exhibit 10.42 to 1998 10-K, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                            |
| 10.11  |   | Amendment      No. 1 dated March 4, 1998 to Trademark License and Technical Assistance      Agreement for Men's Collections by and between the Company and Latitude      Licensing Corp. (a copy of which was filed as Exhibit 10.56 to the 1998      10-K, and is hereby incorporated herein by this reference).                                                                                                                                                                        |
| 10.12  |   | Amendment      No. 3 dated December 23, 1998 to Trademark License and Technical      Assistance Agreement for Women's Collections by and between the Company      and Latitude Licensing Corp. (a copy of which was filed as Exhibit 10.57      to the 1998 10-K, and is hereby incorporated herein by this      reference).                                                                                                                                                             |
| 10.13  |   | Amendment      No. 4 to the Trademark License and Technical Assistance Agreement Covering      Women's Products dated August 2, 1999 (a copy of which was filed with the      SEC on August 13, 1999 as Exhibit 10.60 to the Company’s Quarterly Report      on Form 10-Q for the quarter ended June 30, 1999, and is hereby      incorporated herein by this reference).                                                                                                          |

----

| 10.14 |   | Amendment      No. 2 dated June 21, 2000, to Trademark License and Technical Assistance      Agreement Covering Men’s Products      dated January 15, 1998, by and between Latitude Licensing Corp. and I.C.      Isaacs & Company L.P. 3.03 (a copy of which was filed with the SEC on      August 14, 2000 as Exhibit 10.75 to the Company’s Quarterly      Report on Form 10-Q for the quarter ended June 30, 2000 (the “June 2000      10-Q”), and is hereby incorporated herein by this reference).  |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15 |   | Amendment      No. 5 dated June 21, 2000, to Trademark License and Technical Assistance      Agreement Covering Women’s Products      dated January 15, 1998, by and between Latitude Licensing Corp. and I.C.      Isaacs & Company L.P. (a copy of which was filed as Exhibit 10.76      to the June 2000 10-Q, and is hereby incorporated herein by this      reference).                                                                                                                                           |
| 10.16 |   | Amendment      No. 3 to Trademark License and Technical Assistance Agreement      Covering Men’s Products      dated May 31, 2001 (a copy of which was filed with the SEC      on April 1, 2002 as Exhibit 10.92 to the Company’s Annual      Report on Form 10-K for the year ended December 31, 2001, and is      hereby incorporated herein by this reference).                                                                                                                          |
| 10.17 |   | Amended      and Restated Executive Employment Agreement dated April 17, 2002, by and      between the Company and Eugene C. Wielepski (a copy of which was filed      with the SEC on April 30, 2002 as Exhibit 10.94 to Amendment No. 1 to the      Company’s Annual Report on Form 10-K for the year ended December 31, 2001      (the “2001 10-K Amendment”), and is hereby incorporated herein by this      reference.)                                                                                        |
| 10.18 |   | Amended      and Restated Executive Employment Agreement dated April 17, 2002, by and      between the Company and Daniel J. Gladstone (a copy of which was filed as      Exhibit 10.95 to Amendment No. 1 to the 2001 10-K Amendment, and is hereby      incorporated herein by this reference.                                                                                                                                                                                                                                 |
| 10.19 |   | Amendment      No. 4 dated October 2, 2002 to the Trademark License and Technical      Assistance Agreement dated January 15, 2002 by and between Latitude      Licensing Corp. and I.C. Isaacs & Company L.P. (a copy of which was      filed with the SEC on November 14, 2002 as Exhibit 10.102 to the      Company’s Quarterly      Report on Form 10-Q for the quarter ended September 30, 2002 (the      “September 2002 10-Q”), and is hereby incorporated herein by this      reference).     |
| 10.20 |   | Amendment      No. 6 dated October 2, 2002 to the Trademark License and Technical      Assistance Agreement for Women’s Collections dated March 4, 1998 by      and between Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a      copy of which was filed as Exhibit 10.103 to the September 2002 10-Q, and      is hereby incorporated herein by this reference).                                                                                                                                      |
| 10.21 |   | Amendment      No. 7 dated March 31, 2003 to the Trademark License and      Technical Assistance Agreement for Women’s Collections between      Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a copy of      which was filed with the SEC on April 4, 2003 as Exhibit 10.110 to      the Company’s Annual Report on Form 10-K for the year ended December 31,      2002 (the “2002 10-K”), and is hereby incorporated herein by this      reference).                           |
| 10.22 |   | Amendment      No.5 dated March 31, 2003 to the Trademark License and Technical      Assistance Agreement dated the 1st day of November 1997 by and between      Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a copy of      which was filed as Exhibit 10.111 to the 2002 10-K), and is hereby      incorporated herein by this reference).                                                                                                                                                                          |
| 10.23 |   | Amendment      dated as of May 15, 2003 to the Amended and Restated Employment Agreement      between I.C. Isaacs & Company, L.P. and Daniel J. Gladstone (a copy of      which was filed with the SEC on May 15, 2003 as Exhibit 10.114 to the      Company's Quarterly Report on Form 10-Q for the quarter ended March 31,      2003 (the “March 2003 10-Q”), and is hereby incorporated herein by this      reference).                                                                                            |
| 10.24 |   | Amendment      dated as of March 31, 2003 to the Amended and Restated Employment      Agreement between I.C. Isaacs & Company, L.P. and Eugene C. Wielepski      (a copy of which was filed as Exhibit 10.115 to the March 2003 10-Q, and      is hereby incorporated herein by this reference).                                                                                                                                                                                                                                  |

----

| 10.25 |   | Amendment      No. 8, dated October 29, 2003 to the Trademark License and Technical      Assistance Agreement for Women's Collections between Latitude Licensing      Corp. and I.C. Isaacs & Company L.P. (a copy of which was filed with      the SEC on November 14, 2003 as Exhibit 10.113 to the Company's Quarterly      Report on Form 10-Q for the quarter ended September 30, 2003 (the      “September 2003 10-Q”), and is hereby incorporated herein by this      reference).        |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.26 |   | Amendment      No. 6, dated October 29, 2003 to the Trademark License and Technical      Assistance Agreement dated the 1st day of November 1997 by and between      Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a copy of      which was filed as Exhibit 10.114 to the September 2003 10-Q, and is      hereby incorporated herein by this reference).                                                                                                                                       |
| 10.27 |   | Amendment      dated October 13, 2004 to the Executive Employment Agreement dated      December 9, 2003 by and between I.C. Isaacs & Company, L.P. and Peter      J. Rizzo (a copy of which was filed with the SEC as Exhibit 10.120 to the      Company's Report on Form 8-K filed on October 22, 2004 (the “October 22,      2004 Form 8-K”), and is hereby incorporated herein by this      reference).                                                                                      |
| 10.28 |   | Executive      Employment Agreement made as of the 1st day of March 2004, by and between      I.C. Isaacs & Company LP and Jesse de la Rama (a copy of which was      filed as Exhibit 10.121 to the December 10, 2004 Form 8-K, and is hereby      incorporated herein by this reference).                                                                                                                                                                                                                 |
| 10.29 |   | Loan      and Security Agreement dated as of December 30, 2004 by and between I.C.      Isaacs & Company, L.P. and Wachovia Bank, National Association (a copy      of which was filed with the SEC as Exhibit 10.122 to the Company's Report      on Form 8-K filed on January 6, 2005, and is hereby incorporated herein by      this reference).                                                                                                                                                         |
| 10.30 |   | Amendment      No. 7, dated December 16, 2004, to the Trademark License and Technical      Assistance Agreement dated the 1st day of November 1997 by and between      Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a copy of      which was filed with the SEC on March 31, 2005 as Exhibit 10.123 to the      Company’s Annual Report on Form 10-K for the year ended December 31, 2004      (the “2004 10-K”), and is hereby incorporated herein by this      reference).  |
| 10.31 |   | Amendment      No. 9, dated December 16, 2004, to the Trademark License and Technical      Assistance Agreement for Women's Collections dated March 4, 1998 by and      between Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a      copy of which was filed as Exhibit 10.124 to the 2004 10-K, and is hereby      incorporated herein by this reference).                                                                                                                                      |
| 10.32 |   | Assignment      of warrant to purchase 300,000 shares of the Company’s common stock dated      September 28th, 2004 by Textile Investment International S.A. to Rockbrook      Investments SA., and consented to on April 13, 2005 by the Company (a copy      of which was filed as Exhibit 99.01 to the S-2 Amendment, and is hereby      incorporated herein by this reference).                                                                                                                       |
| 10.33 |   | Assignment      of warrant to purchase 200,000 shares of the Company’s common stock dated      September 28th, 2004 by Textile Investment International S.A. to Rockbrook      Investments SA. , and consented to on April 13, 2005 by the Company (a      copy of which was filed as Exhibit 99.02 to the S-2 Amendment, and is      hereby incorporated herein by this reference).                                                                                                                      |
| 10.34 |   | Executive      Employment Agreement dated December 19, 2005 between I.C. Isaacs &      Company L.P. and Gregg A. Holst (a copy of which was filed as Exhibit      10.34 to the Company's Report on Form 8-K filed on December 29, 2005, and      is hereby incorporated herein by this reference).                                                                                                                                                                                                          |
| 10.35 |   | Amendment      No. 8, dated March 29, 2006, to the Trademark License and Technical      Assistance Agreement for Men’s Collections dated January 15, 1998 by and      between Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a      copy of which was filed as Exhibit 10.35 to the 2005 10-K, and is hereby      incorporated herein by this reference).                                                                                                                                   |

----

| 10.36 |   | Amendment      No. 10, dated March 29, 2006, to the Trademark License and Technical      Assistance Agreement for Women's Collections dated March 4, 1998 by and      between Latitude Licensing Corp. and I.C. Isaacs & Company L.P. (a      copy of which was filed as Exhibit 10.36 to the 2005 10-K, and is hereby      incorporated herein by this reference).                                                                                                                                                      |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.37 |   | Executive      Employment Agreement, dated December 9, 2003, by and between I.C. Isaacs      & Company LP and Peter Rizzo (a copy of which was filed with the SEC      on April 2, 2007 as Exhibit 10.37 to the Company’s Annual Report on Form      10-K for the year ended December 30, 2006 (the “2006 10-K”), and is hereby      incorporated herein by this reference).                                                                                                                           |
| 10.38 |   | Nonstatutory      Stock Option Grant Agreement, dated December 6, 2004, by and between I.C.      Isaacs & Company, Inc. and Jesse de la Rama (a copy of which was filed      as Exhibit 10.38 to the 2006 10-K, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                               |
| 10.39 |   | Amendment,      dated as of August 1, 2005, to the Employment Agreement, dated March 1,      2004, by and between I.C. Isaacs & Company LP and Jesse de la Rama (a      copy of which was filed as Exhibit 10.39 to the 2006 10-K, and is hereby      incorporated herein by this reference).                                                                                                                                                                                                                            |
| 10.40 |   | Nonstatutory      Stock Option Grant Agreement, dated August 1, 2005, by and between I.C.      Isaacs & Company, Inc. and Jesse de la Rama (a copy of which was filed      as Exhibit 10.40 to the 2006 10-K, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                                 |
| 10.41 |   | Nonstatutory      Stock Option Grant Agreement, dated December 27, 2005, by and between I.C.      Isaacs & Company, Inc. and Gregg A. Holst (a copy of which was filed      as Exhibit 10.41 to the 2006 10-K, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                                |
| 10.42 |   | I.C.      Isaacs & Company, Inc. 2007 Stock Incentive Plan (a copy of which was      filed with the SEC on June 18, 2007 as Exhibit 10.1 to the Company’s      Current Report on Form 8-K, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                                              |
| 10.43 |   | Amendment      to I.C. Isaacs & Company, Inc.’s Pension Plan, dated and effective as      of February 28, 2007 (a copy of which was filed with the SEC on August 4,      2007 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for      the quarter ended June 30, 2007 (the “June 2007 10-Q”), and is hereby      incorporated herein by this reference).                                                                                                                         |
| 10.44 |   | Separation      Agreement and General Release, dated April 5, 2007, by and between Peter      J. Rizzo and I.C. Isaacs & Co., Inc. (a copy of which was filed as      Exhibit 10.2 to the June 2007 10-Q, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                                     |
| 10.45 |   | Nonstatutory      Stock Option Grant Agreement, dated May 1, 2007, by and between I.C.      Isaacs & Company, Inc. and Gregg A. Holst (a copy of which was filed      as Exhibit 10.4 to the June 2007 10-Q, and is hereby incorporated herein      by this reference).                                                                                                                                                                                                                                                  |
| 10.46 |   | Nonstatutory      Stock Option Grant Agreement, dated May 3, 2007, by and between I.C.      Isaacs & Company, Inc. and Gregg A. Holst (a copy of which was filed      as Exhibit 10.5 to the June 2007 10-Q, and is hereby incorporated herein      by this reference).                                                                                                                                                                                                                                                  |
| 10.47 |   | Separation      Agreement and General Release, dated May 11, 2007, by and between Jesse de      la Rama and I.C. Isaacs & Company, Inc. (a copy of which was filed as      Exhibit 10.6 to the June 2007 10-Q, and is hereby incorporated herein by      this reference).                                                                                                                                                                                                                                                |
| 10.48 |   | Amendment      No. 9 to Trademark and License and Technical Assistance Agreement, dated      November 8, 2007, by and between Latitude Licensing Corp. and I.C. Isaacs      & Company, L.P. covering Men’s Products (a copy of which was filed      with the SEC on November 14, 2007 as Exhibit 10.1 to the Company’s      Quarterly Report on Form 10-Q for the quarter ended September 30, 2007      (the “September 2007 10-Q”), and is hereby incorporated herein by this      reference).  |

----

| 10.49                                                                         |   | Employment      Agreement, dated April 19, 2007, and effective as of April 5, 2007,      between the Company and Robert S. Stec (a copy of which was filed with the      SEC on April 25, 2007 as Exhibit 10.1 to the Company’s Current Report on      Form 8-K/A, and is hereby incorporated herein by this      reference).                                                                    |
|-------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.50                                                                         |   | Amendment      No. 11 to Trademark and License and Technical Assistance Agreement, dated      November 8, 2007, by and between Latitude Licensing Corp. and I.C. Isaacs      & Company, L.P. covering Women’s Products (a copy of which was filed      as Exhibit 10.2 to the September 2007 10-Q, and is hereby incorporated      herein by this reference).                                |
| 10.51                                                                         |   | Second      Amendment to Loan and Security Agreement, dated November 13, 2007, by and      among I.C. Isaacs & Company, L.P., I.C. Isaacs & Company, Inc.,      Isaacs Design, Inc. and Wachovia Bank, National Association (a copy of      which was filed as Exhibit 10.3 to the September 2007 10-Q, and is hereby      incorporated herein by this reference).                             |
| 10.52                                                                         |   | First      Amendment to Intercreditor and Subordination Agreement, dated November 13,      2007 by and among I.C. Isaacs & Company, L.P., I.C. Isaacs &      Company, Inc., Isaacs Design, Inc. and Wachovia Bank, National Association      (a copy of which was filed as Exhibit 10.4 to the September 2007 10-Q. and      is hereby incorporated herein by this reference).                 |
| 10.53                                                                         |   | Employment      Agreement between I.C. Isaacs & Company, Inc. and Robert S. Stec dated      November 13, 2007 (a copy of which was filed as Exhibit 10.5 to the      September 2007 10-Q, and is hereby incorporated herein by this      reference).                                                                                                                                               |
| 10.54*                                                                   |   | Seperation Agreement and General Release, dated      December 18, 2007, by and between Gregg A. Holst and I.C. Isaacs &      Co., Inc.                                                                                                                                                                                                                                                             |
| 10.55                                                                         |   | Agreement      of Purchase and Sale, dated March 14, 2008, between I.C. Isaacs &      Company, L.P. and D&R Realty II, LLC, (a copy of which was filed      with the SEC on March 27, 2008 as Exhibit 10.1 to the Company's Current      Report on Form 8-K, and is hereby incorporated herein by this      reference).                                                              |
| 10.56             |   | Conversion      Agreement, dated May 9, 2008, by and between I.C. Isaacs & Company,      Inc., as borrower and seller, and Textile Investment International S.A.,      as lender and purchaser (a copy of which was filed with the SEC on May 12,      2008 as Exhibit 10.1 to the Company's Current Report on Form 8-K, and is      hereby incorporated by this reference).                       |
| 10.57                                                     |   | Debt      Forgiveness Agreement, dated May 9, 2008, by and between I.C. Isaacs &      Company, Inc., as borrower, and Textile Investment International S.A., as      lender (a copy of which was filed with the SEC on May 12, 2008 as Exhibit      10.2 to the Company's Current Report on Form 8-K, and is hereby      incorporated by this reference).                                          |
| 10.58                                                                         |   | Stock      Purchase Agreement, dated May 9, 2008, by and among I.C. Isaacs &      Company, Inc., Textile Investment International S.A., Olivier Bachellerie      and René Faltz (a      copy of which was filed with the SEC on May 12, 2008 as Exhibit 10.3 to      the Company's Current Report on Form 8-K, and is hereby incorporated by      this reference).                            |
| 10.59                                                                         |   | Investor      Rights Agreement, dated May 9, 2008, by and between I.C. Isaacs &      Company, Inc., Textile Investment International S.A., Wurzburg Holding      S.A., Olivier Bachellerie and René Faltz (a      copy of which was filed with the SEC on May 12, 2008 as Exhibit 10.4 to      the Company's Current Report on Form 8-K, and is hereby incorporated by      this reference).  |
| 10.60                                                                         |   | Stock      Purchase Agreement, dated May 9, 2008, by and among I.C. Isaacs &      Company, Inc. and Robert S. Stec (a copy of which was filed with the SEC      on May 12, 2008 as Exhibit 10.5 to the Company's Current Report on Form      8-K, and is hereby incorporated by this reference).                                                                                                   |
|                                                                          |   |                                                                                                                                                                                                                                                                                                                                                                                                        |

----

| 10.61  |   | Amendment      No. 11, dated May 9, 2008, to the Trademark License and Technical      Assistance Agreement Covering Men's Collections, by and between Latitude      Licensing Corp. and I.C. Isaacs & Company L.P. (a copy of which was      filed with the SEC on May 12, 2008 as Exhibit 10.6 to the Company's      Current Report on Form 8-K, and is hereby incorporated by this      reference).          |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.62  |   | Amendment      No. 13, dated May 9, 2008, to the Trademark License and Technical      Assistance Agreement Covering Women's Collections, by and between      Latitiude Licensing Corp. and I.C. Isaacs & Company L.P. ( a copy of      which was filed with the SEC on May 12, 2008 as Exhibit 10.7 to the      Company's Current Report on Form 8-K, and is hereby incorporated by this      reference).           |
| 10.63  |   | Employment      Extension Agreement, dated May 9, 2008, between Robert S. Stec and I.C.      Isaacs & Company, Inc. (a copy of which was filed with the SEC on May      12, 2008 as Exhibit 10.8 to the Company's Current Report on Form 8-K, and      is hereby incorporated by this reference).                                                                                                                   |
| 10.64  |   | Amendment      and Restated Licensor Agreement, dated May 8, 2008, among Latitude      Licensing Corp., Wachovia Bank, National Association and I.C. Isaacs &      Company, L.P. (a copy of which was filed with the SEC on May 12, 2008 as      Exhibit 10.9 to the Company's Current Report on Form 8-K, and is hereby      incorporated by this reference).                                                      |
| 10.65  |   | Third      Amendment to the Loan and Security Agreement, dated April 21, 2008 by and      among I.C. Isaacs & Company, L.P., I.C. Isaacs & Company, Inc.,      Isaacs Design, Inc. and Wachovia Bank, National Association (a copy of      which was filed with the SEC on May 12, 2008 as Exhibit 10.10 to the      Company's Current Report on Form 8-K, and is hereby incorporated by this      reference).  |
| 14.01  |   | Code      of Ethics for Senior Financial Executives (a copy of which was filed as      Exhibit 14.01 to the 2005 10-K, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                       |
| 14.02  |   | Code      of Ethics and Business Conduct (a copy of which was filed as Exhibit 14.02      to the 2005 10-K, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                                  |
| 21.01  |   | List      of Subsidiaries (a copy of which was filed as Exhibit 21.01 to the S-2      Amendment, and is hereby incorporated herein by this      reference).                                                                                                                                                                                                                                                             |
| 23.01* |   | Consent      of BDO Seidman, LLP.                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.01* |   | Certification      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002.                                                                                                                                                                                                                                                                                                           |
| 31.02* |   | Certification      of Principal Financial Officer Pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                       |
| 32.01* |   | Certification      of Chief Executive Officer and Principal Financial Officer Pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                         |

----