SECURITIES
AND EXCHANGE COMMISSIONWashington,
D.C. 20549  FORM
10-Q [x]
     QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED  NOVEMBER 30, 2003   OR [  ]
     TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   Commission
File Number 0-13851  NITCHES,
INC. (Exact name
of registrant as specified in its charter) California
     95-2848021(State of Incorporation)
     (I.R.S. Employer Identification No.)  10280
Camino Santa Fe, San Diego, California 92121(Address of principal executive offices)  Registrants
telephone number: (858) 625-2633  Securities
registered pursuant to Section 12(b) of the Act: Title of each class
     Name of eachexchange on which registeredCommon Stock, no par value
     NASDAQ SmallCap Market Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ] Indicate by
check mark  whether the  registrant  is an  accelerated  filer (as defined in rule 12b-2
of the Exchange  Act).  Yes [ ] No  [X] As of
January 13, 2004 the Registrant had 1,171,169 shares of common stock
outstanding.


---

NITCHES,
INC.

|                                                                                              | Page
|--------------------------------------------------------------------------------------------- | ----
|PART I - FINANCIAL INFORMATION                                                                |     
|                                                                                              |     
|Item 1. Financial Statements                                                                  |     
|                                                                                              |     
|Condensed Consolidated Balance Sheets                                                         |     
|                                                                                              |     
|Consolidated Statements of Income                                                             |     
|                                                                                              |     
|Condensed Consolidated Statements of Cash Flows                                               |     
|                                                                                              |     
|Notes to Condensed Consolidated Financial Statements                                          |     
|                                                                                              |     
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |     
|                                                                                              |     
|Item 4. Controls and Procedures                                                               |     
|                                                                                              |     
|PART II - OTHER INFORMATION                                                                   |     
|                                                                                              |     
|Item 1. Legal Proceedings                                                                     |     
|                                                                                              |     
|Item 6. Exhibits and Reports on Form 8-K                                                      |     
|                                                                                              |     
|Signatures                                                                                    |     
|                                                                                              |     
|Exhibit Index                                                                                 |     

2

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PART
I  FINANCIAL INFORMATION

Item 1.
Financial Statements

NITCHES,
INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets

|ASSETS                                                            
|------------------------------------------------------------------
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Current
      assets:                                             
|Cash
      and cash equivalents                                   
|Receivables:                                                      
|Trade
      accounts, less allowances                             
|Due
      from affiliates and employees                           
|                                                                  
|Total
      receivables                                           
|                                                                  
|Refundable
      income taxes                                     
|Inventories                                                       
|Deferred
      income taxes                                       
|Other
      current assets                                        
|                                                                  
|Total
      current assets                                        
|                                                                  
|Gain
      on equity investment                                   
|Furniture,
      fixtures and equipment, net                      
|Deferred
      income taxes                                       
|Other
      assets                                                
|                                                                  
|                                                                  
|                                                                  
|LIABILITIES
      AND SHAREHOLDERS EQUITY                        
|Current
      liabilities:                                        
|Accounts
      payable                                            
|Accrued
      expenses                                            
|                                                                  
|Total
      current liabilities                                   
|                                                                  
|Long
      term liabilities:                                      
|Loss
      on equity investment                                   
|                                                                  
|Shareholders
      equity:                                       
|Preferred
      stock, no par value; 25,000,000 shares authorized,
|no
      shares issued or outstanding                             
|Common
      stock, no par value; 50,000,000 shares authorized;   
|1,171,169
      shares issued and outstanding                     
|Retained
      earnings                                           
|                                                                  
|Total
      shareholders equity                                  
|                                                                  
|                                                                  
|                                                                  

The
accompanying notes are an integral part of these financial statements.

3

---

NITCHES,
INC. AND SUBSIDIARIESConsolidated
Statements of Income(Unaudited)

|                                                   |  | **Three
      Months Ended
      November 30,**
|-------------------------------------------------- |  | -----------------------------------------------
|                                                   |  |                                                
|                                                   |  | **2003**                                       
|                                                   |  |                                                
|Net
      sales                                    |  | $ 6,796,000                                    
|                                                   |  |                                                
|Cost
      of goods sold                           |  | 5,064,000                                      
|                                                   |  |                                                
|Gross
      profit                                 |  | 1,732,000                                      
|Selling,
      general and administrative expenses |  | 1,687,000                                      
|                                                   |  |                                                
|Income
      from operations                       |  | 45,000                                         
|                                                   |  |                                                
|Interest
      expense                             |  | (11,000                                        
|Income
      from unconsolidated subsidiary        |  | 468,000                                        
|                                                   |  |                                                
|Income
      before income taxes                   |  | 502,000                                        
|Provision/(benefit)
      for income taxes         |  | 13,000                                         
|                                                   |  |                                                
|Net
      income                                   |  | $    489,000                                   
|                                                   |  |                                                
|Earnings
      per share                           |  | $          0.42                                
|                                                   |  |                                                
|Shares
      outstanding                           |  | 1,171,169                                      
|                                                   |  |                                                
|Dividends
      per share                          |  | $                                             
|                                                   |  |                                                

The
accompanying notes are an integral part of these financial statements.

4

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NITCHES,
INC. AND SUBSIDIARIESCondensed
Consolidated Statements of Cash Flows(Unaudited)

|                                                                 |  |                                                
|---------------------------------------------------------------- |  | -----------------------------------------------
|                                                                 |  | **Three
      Months Ended
      November 30,**
|                                                                 |  |                                                
|                                                                 |  | **2003**                                       
|                                                                 |  |                                                
|Net
      income                                                 |  | $ 489,000                                      
|                                                                 |  |                                                
|Non-cash
      income from unconsolidated subsidiary             |  | (468,000                                       
|                                                                 | 
|Cash
      flows from operating activities:                      | 
|Depreciation
      and amortization                              |  | 6,000                                          
|(Increase)
      decrease in accounts receivable                 |  | (667,000                                       
|Decrease
      in inventories and other current assets           |  | 129,000                                        
|Increase
      (decrease) in trade payables and accrued expenses |  | 505,000                                        
|                                                                 |  |                                                
|Net
      cash provided by operating activities                  |  | (6,000                                         
|                                                                 | 
|Cash
      flows from financing activities:                      | 
|Dividends
      paid                                             |  |                                               
|                                                                 |  |                                                
|Net
      increase (decrease) in cash and cash equivalents       |  | (6,000                                         
|                                                                 |  |                                                
|Cash
      and cash equivalents at beginning of period           |  | 110,000                                        
|                                                                 |  |                                                
|Cash
      and cash equivalents at end of period                 |  | $ 104,000                                      
|                                                                 |  |                                                
|Supplemental
      disclosures of cash flow information:         | 
|Cash
      paid (received) during the period:                    | 
|Interest                                                         |  | $   11,000                                     
|Income
      taxes                                               |  | (77,000                                        

The
accompanying notes are an integral part of these financial statements.

5

---

NITCHES,
INC. AND SUBSIDIARIESNotes
to Condensed Consolidated Financial Statements

1.     
Description of Business

Nitches,
Inc. (the Company) is a wholesale importer and distributor of
clothing manufactured to its specifications and distributed in the United States
under Company brand labels and private retailer labels. The Companys
product lines include womens sleepwear and western wear, mens casual
wear and mens and womens performance apparel.

2.     
Condensed Financial Statements:

The
accompanying unaudited consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q. They do not include all
information and footnotes necessary for a fair presentation of financial
position and results of operations and cash flows in conformity with generally
accepted accounting principles in the United States of America. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in the
Companys Annual Report on Form 10-K for the year ended August 31, 2003. In
the opinion of Management, all adjustments considered necessary for a fair
presentation have been included in the interim period. Operating results for the
three months ended November 30, 2003 are not necessarily indicative of the
results that may be expected for the year ending August 31, 2004.

3.     Earnings
Per share:

At
November 30, 2003, there were no stock options or similar instruments
outstanding and therefore no dilutive effect to the number of shares
outstanding.

4.     Inventories:

|                       |  |                                  
|---------------------- |  | ---------------------------------
|                       |  | **November
      30,
      2003**
|                       |  |                                  
|Fabric
      and trim  |  | $1,045,000                       
|Work
      in progress |  | 1,506,000                        
|Finished
      goods   |  | 2,320,000                        
|                       |  |                                  
|                       |  | $4,871,000                       
|                       |  |                                  

5.     Trade
accounts receivable:

Pursuant
to the terms of an agreement between Nitches and a factor, Nitches sells a
majority of its trade accounts receivable to the factor on a pre-approved,
non-recourse basis. The price at which the accounts are sold is the invoice
amount reduced by the factor commission (.3% of the invoice amount) and all
selling discounts. For accounts sold to the factor without recourse, the factor
is responsible for collection, assumes all credit risk, and obtains all of the
rights and remedies against the companys customers. For such accounts,
payment is due from the factor upon the earlier of the payment of the receivable
to the factor by the customer, or the maturity of the receivable (generally 180
days from the date of shipment to the customer). As of November 30, 2003,
non-recourse receivables totaled $4,829,000.

Trade
accounts receivable not sold to the factor remain in the custody and control of
the Company and the Company maintains all credit risk on those accounts as well
as accounts which are sold to the factor with recourse. The combined credit risk
for non-factored and recourse receivables as of November 30, 2003, totaled
$304,000.

The
Company may request payment from the factor in advance of the collection date or
maturity. Any such advance payments are assessed an interest charge through the
collection date or maturity at the factors prime rate less 1.5% (one and
one half percent) per annum. The companys obligations with respect to
advances from the factor are limited to the interest charges thereon. Advance
payments are limited to a maximum of 85% (eighty-five percent) of eligible
accounts receivable. The factoring agreement also provides for the issuance of
irrevocable letters of credit for the Companys purchase of inventory in
the normal course of its business. Letters of credit are subject to a $6 million
limit. All assets of the company collateralize the advances and letters of
credit. The Companys Chairman has also provided a personal guaranty in
connection with the factoring arrangement.

6

---

NITCHES,
INC. AND SUBSIDIARIESNotes to Condensed Consolidated Financial Statement (continued)

5.     Trade
accounts receivable (continued):

The
status of the Companys trade accounts receivable and letters of credit are
as follows:

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|                                                               |  | **November
      30,
      2003**
|                                                               |  |                                  
|Receivables
      assigned to factor:                          |  |                                  
|Non-recourse                                                   |  | $ 4,829,000                      
|Recourse                                                       |  | 4,000                            
|Advance
      payments from factor                             |  | (3,353,000                       
|                                                               |  |                                  
|Due
      from factor                                          |  | 1,480,000                        
|Non-factored
      accounts receivable                         |  | 300,000                          
|Allowance
      for customer credits and doubtful accounts     |  | (243,000                         
|                                                               |  |                                  
|                                                               |  | $ 1,537,000                      
|                                                               |  |                                  
|Contingent
      liabilities for irrevocable letters of credit |  | $ 3,357,000                      
|                                                               |  |                                  

6.     
Dividends:

The
Company did not pay any dividends during the current period. During fiscal 2003
the Company declared and paid dividends of $.30 per share.

7.     
Significant Customers:

Sales
to two separate customers, Kohls and Mervyns, accounted for 50.0%
and 13.7% respectively of the Companys net sales in the three months ended
November 30, 2003. By comparison, sales to three separate customers
(Kohls, Mervyns and Sears) accounted for 31.0%, 26.9% and 24.2%,
respectively, of the Companys net sales in the three months ended November
30, 2002.

Three
customers, Kohls, Mervyns and Sears, accounted for 48.6%, 16.8% and
11.0% respectively of the Companys trade receivable balance as of November
30, 2003. By comparison, three customers (Kohls, Sears and Mervyns)
accounted for 36.0%, 29.2% and 27.4% respectively of the Companys trade
receivable balance at November 30, 2002.

8.     Equity
Investment:

In
October 2002 the Company acquired a 28% interest in Designer Intimates, Inc.,
which owns 100% of NAP, Inc., a New York-based intimate apparel company.
Designer Intimates had acquired NAP from its founders and obtained a credit line
of approximately $12 million from HSBC, secured by the inventory and accounts
receivable of NAP and the guarantees of shareholders of Designer Intimates.
Nitches guaranteed $3 million of this credit line and this guarantee formed the
consideration from Nitches for its 28% ownership interest in Designer Intimates.
Nitches reports any income or loss from the ongoing operation of Designer
Intimates using the equity method of accounting, whereby Nitches 28%
interest in Designer Intimates is reported as a single line item on the
Consolidated Statement of Income. For the three months ended November 30, 2003,
the Company recognized $468,000 in income from the unconsolidated subsidiary.
This income is reported net of tax and is not taxable to the Company. For that
same period, Designer Intimates had net income of $1,667,000 on sales of $37.1
million.

7

---

8.     Equity
Investment (continued):

Following
are the unaudited condensed financial statements of Designer Intimates, Inc. as
of November 30, 2003 for the 3 month period then ended:

Designer
Intimates, Inc.Consolidated Balance Sheet(Unaudited)

|                                                 |                                  
|------------------------------------------------ | ---------------------------------
|**ASSETS**                                      
|                                                 | **November
      30,
      2003**
|                                                 |                                  
|Current
      assets:                            |                                  
|Cash
      and cash equivalents                  | $       40,000                   
|Trade
      accounts receivable, less allowances | 5,511,000                        
|Inventories                                      | 4,157,000                        
|Deferred
      income taxes                      | 200,000                          
|Other
      current assets                       | 84,000                           
|                                                 |                                  
|Total
      current assets                       | 9,992,000                        
|                                                 |                                  
|Furniture,
      fixtures and equipment, net     | 829,000                          
|Goodwill                                         | 2,548,000                        
|Other
      intangibles, subject to amortization | 341,000                          
|Other
      assets                               | 96,000                           
|                                                 |                                  
|                                                 | $13,806,000                      
|                                                 |                                  
|**LIABILITIES
      AND SHAREHOLDERS' EQUITY**  
|                                                 |                                  
|Current
      liabilities:                      
|Loan
      payable                               | $  1,179,000                     
|Accounts
      payable                           | 9,567,000                        
|Accrued
      expenses                           | 905,000                          
|Income
      taxes payable                       | 1,327,000                        
|                                                 |                                  
|Total
      current liabilities                  | 12,978,000                       
|                                                 |                                  
|Shareholders
      equity:                     
|Common
      stock                               | 3,000                            
|Retained
      earnings                          | 825,000                          
|                                                 |                                  
|Total
      shareholders equity                 | 828,000                          
|                                                 |                                  
|                                                 | $13,806,000                      
|                                                 |                                  

8

---

8.     Equity
Investment (continued):

Designer
Intimates, Inc.Consolidated Income Statement(Unaudited)

|                                           |                                                      |  
|------------------------------------------ | ---------------------------------------------------- | -
|                                           | **Three
      Months Ended
      November 30, 2003** |  
|                                           |                                                      |  
|Net
      Sales                            | $      37,097,000                                    |  
|Cost
      of sales                        | 29,922,000                                           |  
|                                           |                                                      |  
|Gross
      profit                         | 7,175,000                                            |  
|                                           |                                                      |  
|Operating
      expenses                   | 4,167,000                                            |  
|Amortization
      of intangible assets    | 46,000                                               |  
|                                           |                                                      |  
|Income
      from operations               | 2,962,000                                            |  
|Interest
      expenses                    | 111,000                                              |  
|Other
      (income)                       | (16,000                                              | )
|                                           |                                                      |  
|Income/(loss)
      before income taxes    | 2,867,000                                            |  
|Provision/(benefit)
      for income taxes | 1,200,000                                            |  
|                                           |                                                      |  
|Net
      income/(loss)                    | $        1,667,000                                   |  
|                                           |                                                      |  

9.     New
Accounting Pronouncement:

The
FASB did not issue any new Statements of Financial Accounting Standards during
the current period.

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

CRITICAL
ACCOUNTING POLICIES

Revenue
Recognition.The Company recognizes revenue at the time products are shipped
based on its terms of F.O.B. shipping point, where risk of loss and title
transfer to the buyer at time of shipment. The Company records sales in
accordance with SEC Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements. Under these guidelines, revenue is
recognized when all of the following exist: persuasive evidence of a sale
arrangement exists, delivery of the product has occurred, the price is fixed or
determinable and payment is reasonably assured. Provisions are made currently
for estimated product returns and sales allowances.

Allowances
for Sales Returns, Doubtful Accounts and Other.Sales are recorded net of
estimated future returns, uncollectible accounts receivable and other customer
related allowances. Management analyzes historical returns and bad debt expense,
current economic trends, changes in customer demand and sell-through of our
products when evaluating the adequacy of these allowances. In addition, the
Company may provide warehousing credits and other allowances to certain
customers in accordance with industry practice. These reserves are determined
based on historical experience, budgeted customer allowances and existing
commitments to customers. Although management believes it has established
adequate reserves with respect to these items, actual activity could vary from
managements estimates and such variances could have a material impact on
reported results. At November 30, 2003, trade accounts receivable balance was
$1.5 million, net of allowances of $243,000, as compared to the balance of
$900,000, net of allowances of $549,000 at August 31, 2003. At November 30,
2002, the trade accounts receivable balance was $4.0 million, net of allowances
for doubtful accounts of $522,000.

Inventory.The Company marks down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated net realizable value based on assumptions about age of the
inventory, future demand and market conditions. This process provides for a new
basis for the inventory until it is sold. If actual market conditions are less
favorable than those projected by management, additional inventory markdowns may
be required. The Companys inventory balance was $4.9 million, net of
inventory markdowns of

9

---

$142,000 at
November 30, 2003, as compared to an  inventory balance of $5.0 million, net of inventory
markdowns of $140,000, at  August 31, 2003. At November 30, 2002, the inventory
balance was $3.3  million, net of inventory markdowns of $88,000.

Results
of Operations

Three Months
Ended November 30, 2003 Compared to the Three Months Ended November 30, 2002

Net
sales for the three months ended November 30, 2003, decreased approximately $3.7
million as compared to the three months ended November 30, 2002. This was
attributable to a decrease in unit sales in the Companys sleepwear product
line.

Cost
of sales as a percent of net sales declined 7.0%, generating a higher gross
profit margin of 25.5% for the three months ended November 30, 2003 as compared
to 18.5% for the year earlier period. The increase in gross margin came as the
result of reduced unit costs in the Companys sleepwear line. The
Companys product mix constantly changes to reflect customer mix, fashion
trends and changing seasons. Consequently, gross margin is likely to vary on a
quarter-to-quarter basis and in comparison to gross margins generated in the
same period of prior fiscal years.

Selling,
general and administrative expenses for the first quarter of fiscal 2004
declined $115,000 as compared to a year ago, due to a decrease in salaries and
warehouse expenses in line with the reduced sales volume. Expenses included
$603,000 of selling and merchandising expenses and $277,000 of shipping and
warehousing expenses. This compares with $487,000 of selling and merchandising
expenses and $390,000 of shipping and warehousing expenses incurred during the
quarter ended November 30, 2002. Expenses increased as a percent of net sales to
24.8% from 17.3% in the year earlier period, due to the decrease in net sales.

Interest
expense decreased $18,000 in the current quarter to $11,000 as compared to
$29,000 for the three months ended November 30, 2002. This decline was due to
the lower interest rate charged on advances made under the Companys
factoring agreement due to a lower prime interest rate, as well as reduced
borrowings.

The
Companys income tax provision for the three months ended November 30,
2003, reflects a $13,000 tax expense accrued at an estimated 39% tax rate on the
Companys pretax income for the quarter of $34,000, which is net of the
income from the unconsolidated subsidiary. For the three months ended November
30, 2002, the Companys income tax provision reflects the effect of $41,000
accrued tax expense at the 39% estimated rate less the elimination of a deferred
tax reserve in the amount of $109,000, for a net tax benefit of $68,000.

Equity
Investment

In
October 2002 the Company acquired a 28% interest in Designer Intimates, Inc.,
which owns 100% of NAP, Inc., a New York-based intimate apparel company.
Designer Intimates had acquired NAP from its founders and obtained a credit line
of approximately $12 million from HSBC, secured by the inventory and accounts
receivable of NAP and the guarantees of shareholders of Designer Intimates.
Nitches guaranteed $3 million of this credit line and this guarantee formed the
consideration from Nitches for its 28% ownership interest in Designer Intimates.
Nitches reports any income or loss from the ongoing operation of Designer
Intimates using the equity method of accounting, whereby Nitches 28%
interest in Designer Intimates is reported as a single line item on the
Consolidated Statement of Income. For September through November, the Company
recognized $468,000 in income from the unconsolidated subsidiary. This income is
reported net of tax and is not taxable to the Company. For that same period,
Designer Intimates had net income of $1,667,000 on sales of $37.1 million.

Liquidity
and Capital Resources

Working
capital remained at $5.0 million at November 30, 2003 versus $5.0 million at
August 31, 2003. However, the current ratio decreased to 3.3:1 at November 30,
2003 from 3.9:1 at August 31, 2003. At November 30, 2003, the Companys net
trade receivables balance was $1.5 million, an increase of $600,000 from the
receivables balance at August 31, 2003. This increase was due to an increase in
sales in the current period offset partially by an increase in advances from the
factor.

10

---

Inventories
decreased 2.0% to $4.9 million at November 30, 2003, from $5.0 million at August
31, 2003, primarily due to the decline in sales of the Companys sleepwear
line. The Company believes that its current inventory mix and amounts, combined
with inventory markdown reserves (see Critical Accounting Policies), are
appropriate to respond to anticipated market demand.

The
Company sells substantially all of its trade receivables to a factor (HSBC) on a
pre-approved, non-recourse basis. The Company attempts to make any recourse
shipments on a COD basis or ensure that the customers payments are backed
by a commercial or standby letter of credit issued by the customers bank.
The amount of the Companys receivables that were recourse and were not
made on a COD basis or supported by commercial or standby letters of credit at
November 30, 2003 was approximately $304,000, of which approximately $87,000 had
been collected through December 19, 2003.

Payment
for non-recourse factored receivables is made at the time customers make payment
to HSBC or, if a customer is financially unable to make payment, within
approximately 180 days of the invoice due date. Under the factoring agreement,
the Company can request advances in anticipation of customer collections at
HSBCs prime rate (currently 4.0%) less one and one-half percent (1.5%).
The amount of advances available to the Company is limited to eighty-five
percent (85%) of non-recourse factored receivables.

The
Company may also issue letters of credit through HSBC for the purchase of
inventory in the normal course of its operations. Letters of credit are
subjected to a limit of $6 million. At November 30, 2003, the Company had
outstanding letters of credit of approximately $3.4 million for the purchase of
finished goods, which had been opened through HSBC.

The
factoring agreement does not contain any financial covenants to which the
Company must adhere. Advances are collateralized by all of the assets of the
Company as well as a personal guaranty of the Companys Chairman. The
factoring agreement can be terminated by HSBC on 30-days written notice. The
company believes the factoring agreement with HSBC, along with expected cash
flow from operating activities and current levels of working capital are
adequate to fulfill the Companys liquidity needs for the foreseeable
future.

Contractual
Obligations and Commercial Commitments

|                                      |                                                        |  |                                  |  |                    
|------------------------------------- | ------------------------------------------------------ |  | -------------------------------- |  | -------------------
|                                      | **Payments
      due/Commitments expiring per period**
|                                      | **Total
      Committed**                              |  | **Less
      than
      1 Year** |  | **1-3
      years**
|                                      |                                                       
|Operating
      leases                | $   240,000                                            |  | $   207,000                      |  | $33,000            
|Letters
      of credit               | 3,357,000                                              |  | 3,357,000                        | 
|Guarantees                            | 3,000,000                                              |  |                                  |  |                    
|                                      |                                                       
|Total
      obligations & commitments | $6,597,000                                             |  | $3,564,000                       |  | $33,000            
|                                      |                                                       

Inventory

In
its ordinary course of operations, the Company generally makes some sales below
its normal selling prices or below cost. Based on prior experience, management
believes this will be true for some inventory held on or acquired after November
30, 2003. The amount of such sales depends on several factors, including general
economic conditions, market conditions within the apparel industry, the
desirability of the styles held in inventory and competitive pressures from
other garment suppliers.

The
Companys inventory decreased from $5.0 million at August 31, 2003 to $4.9
million at November 30, 2003. This slight decrease of $100,000 was due to a
decline in sleepwear inventory offset by an increase in menswear inventory. The
Company has established an inventory markdown reserve as of November 30, 2003,
which management believes will be sufficient for current inventory that is
expected to sell below cost in the future. There can be no assurance that the
Company will realize its expected selling prices, or that the inventory markdown
reserve will be adequate, for items in inventory as of November 30, 2003 for
which customer sales orders have not yet been received. The inventory markdown
reserve is calculated based on specific identification of aged goods and styles
that are slow-moving or selling off-price.

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Backlog

The
Company had unfilled customer orders of $15.3 million at November 30, 2003
compared to $7.9 million at November 30, 2002, with such orders generally
scheduled for delivery by May 2004 and May 2003, respectively. The increase of
$7.4 million is due to an increase in orders for the Companys menswear
line, offset partially by a decrease in orders for the Companys sleepwear
line. The amount of unfilled orders at any given time is affected by a number of
factors, including the timing of the receipt and processing of customer orders
and the scheduling of the manufacture and shipping of the product, which may be
dependent on customer requirements.

Backlog
amounts include both confirmed orders and unconfirmed orders that the Company
believes, based on industry practice and past experience, will be confirmed.
While cancellations, rejections and returns have generally not been material in
the past, there can be no assurance that such action by customers will not
reduce the amount of sales realized from the backlog of orders at November 30,
2003.

Impact of
Exchange Rates

While
the Company purchases over 90% of its products from foreign manufacturers, all
of its purchases are denominated in United States dollars. Because the
Companys products are sold primarily in the United States, in dollar
denominated transactions, the Company does not engage in hedging or other
arbitrage to reduce currency risk. An increase in the value of the dollar versus
foreign currencies could enhance the Companys purchasing power for new
purchase orders and reduce its cost of goods sold. Conversely, a decrease in the
value of the dollar relative to foreign currencies could result in an increase
in the Companys cost of manufacturing for new purchase orders and costs of
goods sold.

Impact of
Inflation and Deflation

Management
does not believe that inflation has had any material impact upon the
Companys revenues or income from operations to date. The apparel sector in
which the Company operates has been in a period of deflation, contrary to the
modest inflation experienced in the economy in general. The persistence of the
consumer to buy on sale merchandise has put pressure on retail gross
margins, which in turn has led to downward pressure from retailers on wholesale
gross margins, in the form of selling cost adjustments taken as deductions
against invoices issued by the Company. In the apparel industry, these are
commonly referred to as markdown allowances or chargebacks. Without a
corresponding decrease in fabric and labor prices, these markdown allowances
have led to a decline in wholesale gross margins. Management believes these
deflationary pressures will continue into the foreseeable future.

Future
Operating Results

Business
conditions in the apparel sector continue to be characterized by weak consumer
demand and discounting of merchandise by retailers to encourage sales. In
general, retailers have to sell more units in order to achieve sales equal to
last year. In light of this continuing trend and the mixed indicators regarding
the health of the broader economy, the Company does not expect significant
improvement in business conditions in the apparel sector for the remainder of
the current fiscal year.

Item  4.
Controls and Procedures

As
of November 30, 2003 the Chief Executive and Financial Officer evaluated the
effectiveness of the design and operation of the Companys disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, he concluded that the disclosure controls and procedures of the
Company are effective in timely alerting of the material information required to
be included in the periodic filings with the Securities and Exchange Commission
and that the information required to be disclosed in these filings is recorded,
processed, summarized, and reported within the time periods specified in the
rules and forms of the Commission.

There
have been no significant changes in the Companys internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of this evaluation.

12

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Cautionary
Statement under the Private Securities Litigation Reform Act of 1995

Statements
in the quarterly report on Form 10-Q under the caption Managements
Discussion and Analysis of Financial Condition and Results of Operations,
as well as oral statements that may be made by the Company or by officers,
directors or employees of the Company acting on the Companys behalf, that
are not historical fact constitute forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements involve known and unknown risks and uncertainties that may cause the
Companys actual results in future periods to differ materially from
forecasted results. Those risks include a softening of retailer or consumer
acceptance of the Companys products, pricing pressures and other
competitive forces, or unanticipated loss of a major customer. In addition, the
Companys business, operations and financial condition are subject to
reports and statements filed from time to time with the Securities and Exchange
Commission.

PART
II.  OTHER INFORMATION

Item 1.
Legal Proceedings

There
were no material legal proceedings to which the Company or any of its
subsidiaries was a party in the three months ended November 30, 2003.

Item 6.
Exhibits and Reports on Form 8-K

The
Company filed a Current Report on Form 8-K on November 28, 2003, for its
earnings press release dated November 28, 2003.

SIGNATURES

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

|                       |     | NITCHES,
      INC.                                                                              
|---------------------- | --- | -------------------------------------------------------------------------------------------------
|                       |     |                                                                                                  
|                       |     | Registrant                                                                                       
|                       |     |                                                                                                  
|January
      14, 2004 | By: | /s/
      Steven P. Wyandt                                                                       
|                       |     |                                                                                                  
|                       |     | Steven
      P. Wyandt
      As Principal Financial Officer and on
      behalf of the Registrant

13

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EXHIBIT
INDEX

|                     | 
|-------------------- | 
|Exhibit
      Number | 
|                     | 
|31                   | 
|                     | 
|32                   | 

14

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