INNOVO GROUP INC - 10-K Annual Report

Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 1998

OR

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

For the transition period from _____ to _____
Commission file number: 0-18926

INNOVO GROUP INC.
(Exact name of registrant as specified in its charter)

Delaware 11-2928178
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

1808 North Cherry Street, Knoxville, Tennessee 37917
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (423) 546-1110

Securities registered pursuant to Section 12 (b) of the Act:
NONE

Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.10 par value per share

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

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

As of February 16, 1999, 5,432,113 shares of common stock were
outstanding. The aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $10 million at the close of
business on February 16, 1999.

Documents incorporated by reference:

Registrant's definitive Proxy Statement for its 1999 Annual Meeting of
Stockholders to be filed with the Commission within 120 days of November 30,
1998 is incorporated by reference into Part III of this Report.

INNOVO GROUP INC.
FORM 10-K
TABLE OF CONTENTS

PART I Page

Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12

PART II

Item 5. Market for the Company's Common Equity and Related
Stockholder Matters 12
Item 6. Selected Consolidated Financial Data
13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 8. Financial Statements and Supplementary Data
18
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosures 40

PART III

Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 42
Item 12. Security Ownership of Certain Beneficial Owners
and Management 40
Item 13. Certain Relationships and Related Transactions 40

PART IV

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 41

SIGNATURES 47

PART I

ITEM 1. BUSINESS

Introduction

Innovo Group Inc. ("Innovo Group"), operating through its wholly-owned
subsidiaries (which, collectively with Innovo Group are referred to as the
"Company"), designs, manufactures and domestically markets and distributes
various cut and sewn canvas and nylon consumer products, such as tote bags and
insulated lunch bags and coolers, along with aprons and vests, for sale in the
premium and advertising specialty market and to retailers including Wal-Mart, K-
Mart, Michael's, Hobby Lobby, Dollar General, Goody's and Joanne's. The
Company internationally markets and distributes sport bags, backpacks
waistpacks and other stationary bags. Many of the Company's products include
licensed NFL, NBA, NHL, Major League Baseball, collegiate teams and NASCAR
drivers, custom artwork and other artwork designed in house. The Company's
overseas products also include bags utilizing the characters of Walt Disney Co.
and Warner Bros. Looney Tunes and the new NFL European football teams under a
new license with NFL Europe. From April 1996 through September 1998, the
Company also manufactured and domestically marketed ladies ready-to-wear,
at-home sleep and lounge wear for sale to retailers and through mail order
distribution.

The Company's operations were classified into two industry segments
prior to its fiscal year ended November 30, 1998: "Canvas and Nylon Consumer
Products" and "Apparel Products." See Note 13 of Notes to Consolidated
Financial Statements for financial information on industry segments. The
Company discontinued all operations relating to the Apparel Products segment in
September 1998 as described below in "Discontinued Operations." See Note 11 of
Notes to Consolidated Financial Statements for financial information on industry
segments.

The principal executive offices of the Company are located at 1808 North
Cherry Street, Knoxville, Tennessee 37917. Its telephone number is
(423) 546-1110.

Principal Operating Subsidiaries

The Company's continuing operations are currently conducted primarily
through two wholly owned subsidiaries:

Innovo, Inc. ("Innovo") designs, markets and distributes domestically cut
and sewn canvas and nylon consumer products for the utility, craft, sports
licensed and advertising specialty markets. Innovo's products are primarily
domestically manufactured at facilities owned or leased by the Company,
although some products are obtained from foreign suppliers.

NASCO Products International, Inc. ("NP International") markets and
distributes overseas, principally in Europe and the Middle East, products
similar to some of those marketed domestically by Innovo, as well as licensed
sports bags and backpacks, which the Company generally obtains from foreign
suppliers.

Products

Domestic Product Lines. Innovo designs, manufactures, markets and
distributes a wide variety of cut and sewn canvas and nylon consumer products
in the United States. Following are the principal products that Innovo
manufactures and distributes in the United States to the utility, craft and
licensed product markets:

Utility Craft Licensed

tote bags tote bags travel and tote bags

gift bags aprons and smocks waist packs
laundry bags banners duffel bags
shoe bags vests stadium totes/cushions
duffel bags Christmas stockings insulated lunch bags
and soft coolers
aprons and smocks Stonewashed denim Backpacks

Product Design. Innovo develops the designs and artwork
for its utility market products in-house. Innovo manufactures its craft market
products without artwork to be sold (sometimes packaged with paints or other
supplies)for finishing by retail craft customers. Innovo's licensed products
are produced with the logos or other designs licensed from the four major
professional sports leagues and colleges. Beginning in September 1998, the
Company added a licensed NASCAR driver product line. See "Licensing
Agreements" below.

International Product Lines. NP International designs and distributes
licensed sports products internationally, principally in Europe and the Middle
East, to distributors that in turn sell to sporting goods, department and mass
merchandise chains, hypermarkets, through mail order and to grocery and drug
store chains. Its line of products consists of a variety of insulated soft
lunch bags and coolers, backpacks and sport, gym, equipment and duffel bags.
NP International's products are generally imprinted or embroidered with logos
licensed from the four major professional sports leagues, colleges, the
characters licensed from Walt Disney and Warner Bros. or, beginning in
September 1998, motor sports logos and artwork. Sales to foreign customers,
principally in Europe, accounted for 21.2%, 19.4% and 14.8% of net sales in
fiscal 1998, 1997 and 1996, respectively.

Advertising Specialty Market. Innovo also markets each of its products
to the advertising specialty market. Those products include the customer's
logo, design or slogan for use in connection with a customer or employee
promotion or as a premium sale item.

Licensing Agreements

The Company's sports-licensed, Walt Disney Co. and Warner Bros.
Studios Looney Tunes products display logos, insignia, names, slogans or
cartoon characters licensed from the various licensors. Innovo and NP
International hold licenses for the use of the logos and names of the teams of
the National Football League, the National Basketball Association, Major
League Baseball, the National Hockey League, NFL Europe and over 130 colleges
on various products. For the year ended November 30, 1998, the sale of licensed
products represented 35.65% of the Company's net sales.

During September 1998, the Company entered into an agreement with the
Fan Fueler division of Action Performance Companies, Inc. ("AP") providing the
Company with exclusive manufacturing and non-exclusive distribution rights with
respect to seat cushions, soft lunch bags and coolers, waist packs, tote bags
and backpacks bearing motorsports-related trademarks and copyrights under AP's
control. Among the NASCAR drivers represented by AP are Dale Earnhardt, Dale
Earnhardt, Jr., Jeff Gordon, Rusty Wallace and Dale Jarrett.

The following sets forth certain information concerning the license
agreements currently held by the Company.

Licensor Types of Products Geographical Areas

National Basketball Tote, lunch, shoe and laundry bags; United States;
Association stadium seat cushions, European Union
Coolers, garment bags
Backpacks, sportbags and ("UK")
waistpacks.

Major League Baseball Tote, lunch, shoe and laundry bags, United States;
stadium seat cushions, UK;
Sport bags and backpacks. EU

National Football Tote, lunch, shoe and laundry bags, United States;
League stadium seat cushions, UK;
Sports bags and backpacks. EU

National Hockey Tote, lunch, shoe and laundry bags, United States;
League stadium seat cushions. UK;
Sports bags and backpacks. EU

Colleges/logos of Tote, lunch, shoe and laundry bags; United States;
approximately 130 seat cushions; sports bags and UK;
colleges backpacks. EU

Walt Disney/Walt Tote, sport, gym and other bags; UK;
Disney characters backpacks, waistpacks; wallets and
other stationary bags

Warner Bros Tote, sport, gym and other bags; EU; Middle East
backpacks and waistpacks.

Fan Fueler Seat cushions; soft lunch bags and United States; EU
coolers; waist packs; tote bags and
backpacks.

Each license agreement grants the Company either an exclusive or non-
exclusive license for use in connection with specific products and/or specific
territories. The license agreements with the major professional sports
licensing organizations are generally non-exclusive. However, the Company's
experience has been that while the licenses are non-exclusive, the licensing
entities generally limit the number of licenses they grant for any particular
line of products. Thus, direct competition is limited by the availability of
licenses.

Typically, a license agreement is effective for a one or two-year term for
the use of particular characters or designs of the licensor on some or all of
the Company's products. A royalty is paid to the licensor that is usually a
percentage of net sales, with a minimum annual guarantee for the license period.
The royalty rates range from 9% to 17% and the minimum annual guarantees range
from $5,000 to $200,000. Some license agreements grant the licensor broad
termination rights, and most of the license agreements grant the licensor the
right to terminate the license in the event minimum sales targets are not
reached, if the Company does not diligently market the licensed products, or for
the breach of any material term of the license agreement by the Company. The
Company believes that it is in substantial compliance with the terms of all
material licenses.

The expiration dates of most of the current license agreements range from
1999 to 2000. Generally, the renewal provisions of the license agreements
provide that the licensee may, at its option, renew the license for an
additional one- or two-year term, provided certain conditions are satisfied.
Historically, licenses have been terminated by the Company due to decreased
sales or popularity, rather than by the licensors, and to date the Company has
generally been able to obtain the renewal of licenses it wished to continue.
The Company believes that it will continue to be able to obtain the renewal of
all material licenses; however, there can be no assurance that competition for
an expiring license from another entity, or other factors will not result in the
non-renewal of a license.

Company History

Innovo began operations in April 1987. In August 1990, Innovo merged
into Elorac Corporation, a so called "blank check" company that changed its
name to "Innovo Group Inc." pursuant to the merger. In fiscal 1991, the
Company acquired the business of NASCO, Inc., a manufacturer, importer and
distributor of sports-licensed sports bags, backpacks and other sporting goods
that had its headquarters approximately 30 miles north of Nashville in
Springfield, Tennessee.

NASCO, Inc., which was subsequently renamed "Spirco", was also
engaged in the marketing of fundraising programs to school and youth
organizations. The fundraising programs involved the sale of magazines, gift
wraps, food items and seasonal gift items. Effective April 30, 1993, the
Company sold Spirco's youth and school fundraising business. Its business of
importing and distributing sports-licensed products was retained by NASCO
Products, Inc. ("NASCO Products"), a wholly-owned subsidiary.

Spirco had incurred significant trade debt and losses during its 1992
fiscal year in its fundraising business and from undisclosed liabilities
incurred by Spirco prior to its acquisition. On August 27, 1993, Spirco filed
for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Innovo Group
and its other subsidiaries were not parties to the filing. Spirco's plan of
reorganization was confirmed by the court on August 5, 1994, and became
effective on November 7, 1994.

Under the Spirco plan of reorganization, administrative claims were paid
in cash from funds borrowed under the Company's bank credit facility. Leasall
Management, Inc. ("Leasall"), a newly formed subsidiary of Innovo Group,
acquired Spirco's equipment and plant and assumed the related equipment and
mortgage debt (which Innovo Group had previously guaranteed), and Spirco was
merged into Innovo Group. Spirco claims were paid either by issuing common
stock of the Company to creditors or, in the case of claims for federal,
state and local taxing authorities, by issuing shares to a trust
which sold the stock and distributed the proceeds to such claimants. Unsecured
claims did not receive any distribution and were extinguished under the plan of
reorganization.

On July 31, 1995, NASCO Products sold to Accessory Network Group,
Inc. ("ANG") its business of importing into and distributing within the United
States sports bags, backpacks and equipment bags bearing the logos of the teams
of the four major professional sports leagues. NASCO Products discontinued all
of its operations following the sale to ANG. For the licenses, ANG paid NASCO
Products $750,000 in installments through December 1997. In addition, ANG will
make ongoing annual payments for up to forty years to NASCO Products of 2% of
sales under each of the National Football League, Major League Baseball and
National Hockey League licenses, and 1% of sales under the NBA license, up to
aggregate sales of $15 million, and 1.5% and 0.5% of sales, respectively,
thereafter. The payments will continue unless a license expires or is
terminated and is not renewed or reinstated within twelve months.

In April 1996, the Company acquired Thimble Square, Inc. ("Thimble
Square"). Thimble Square manufactured and marketed ladies' ready-to-wear at-
home, sleep and lounge wear and provided "sew-only" manufacturing for other
distributors of private-label sleep and lounge wear. It had three
manufacturing facilities, one facility it owned in Pembroke, Georgia, and two
leased facilities in Baxley, Georgia. See "Discontinued Operations" below.

Discontinued Operations

From 1996 through 1998, Thimble Square contributed a declining
percentage of the Company's net sales, from approximately 18.5% in 1996 to
16.5% and 13.0% in 1997 and 1998, respectively. At the same time, the Thimble
Square apparel products segment of the Company's business generated operating
losses of approximately $110,000 in fiscal 1997 and $346,000 in fiscal 1998.
See Notes 11 of Notes to Consolidated Financial Statements.

Based on Thimble Square's deteriorating operating results, an ongoing
operating capital drain of more than $20,000 per month and management's need to
focus on the Company's core business, on September 13, 1998 the Company
entered into an agreement with Confident Colors LLC (a company formed by a
former officer of the Company, the chief operating officer of Thimble Square
and others) ("Confident Colors") to lease to Confident Colors one of Thimble
Square's Baxley, Georgia facilities and equipment and to allow it to succeed to
all of Thimble Square's business and operations. Upon execution of the lease,
Thimble Square discontinued all operations. In October 1998, the lease on
Thimble Square's second Baxley facility expired. The Company sold Thimble
Square's Pembroke facility on December 10, 1998 for net proceeds of $122,354 and
the equipment in the Baxley facility for $30,000 on January 13, 1999. The
Company recorded losses totaling $1,400,165 (including $639,000 of goodwill) as
the result of the sale of Thimble Square during the fourth quarter of fiscal
1998.

Summary of Significant 1998 Developments

1998 brought numerous changes to the Company. In March, Sam Furrow
joined the Board of Directors of the Company. Jay Furrow joined the Company as
Vice President of Corporate Development and in-house counsel in August. Later
in August, Robert Talbott joined the Board. Also in August, the Board directed
management to dispose of all non-core product lines and assets of the Company in
order to concentrate the Company's capital and its management efforts on core
business operations.

In early September 1998, a reverse stock split of which one share of new
Common Stock was exchanged for ten shares of old Common Stock, was
effectuated in order to help maintain the Company's Nasdaq listing. In mid-
September, the business of Thimble Square was discontinued. Thimble Square's
principal Baxley, Georgia manufacturing facility and equipment were leased to
Confident Colors and Confident Colors' succeeded to Thimble Square business.
In October, the lease on Thimble Square's second Baxley, Georgia facility
expired.

In early October 1998, the Company leased an office, warehouse and
manufacturing facility in Knoxville, Tennessee from Furrow-Holrob Development
II, LLC, a company owned by Board members Sam Furrow and Robert Talbott.
The facility had previously been used by Levi Strauss for manufacturing and
distribution of its products. A few weeks later, a capital infusion of
$1,798,000 was made through the purchase of 899,000 shares of Common Stock at
$2.00 per share by Furrow-Holrob Development II, LLC.

In November 1998, the Company began the move of its offices, warehouse
and manufacturing operations from Springfield to the Knoxville facility.
Also in November, Bradley White, CPA, joined the Company as Controller, and
Patricia Anderson-Lasko, the founder of Innovo and Company President, was
authorized to focus solely on Company sales, marketing and product development
functions. Finally, George Bell was employed in November as Southeastern
Regional Sales Manager for the Company.

Significant Recent Developments

In December 1998, the Company's move to its Knoxville facility was
completed and is expected to provide the Company with a more efficient
manufacturing facility. In addition, Thimble Square's Pembroke facility was
sold. Finally, in December, Karen Thomas was employed as National Sales Manager
for the Company.

During February 1999, the Company obtained from Sam Furrow, the
Company's CEO, and Dan Page, the Company's COO, separate lines of credit in the
amount of $50,000 each. Additionally, these officers, together with other
principals, have committed to provide additional credit as may be needed from
time to time of up to an aggregate of $500,000. The lines will remain
available until June, 1999, a time of year during which the Company would
normally experience greater cash flow and liquidity due to the seasonal nature
of the Company's business. See "Seasonality."

Growth Strategy and Product Development

The Company believes that growth in its business can be accomplished
both by the expansion of the sales of its existing products with new and
existing customers, and through the development or acquisition of new product
designs and the acquisition of new licenses.

The Company also continually evaluates the market potential for the sale
of products bearing licensed logos, characters or artwork. Those evaluations
involve both situations where a license has been offered to the Company, and
where the Company itself identifies a logo or character that may have market
potential. Where such an evaluation indicates a sufficient likelihood of market
acceptance, the Company attempts to negotiate and obtain a license from the
owner of the logo or character. In general, a period of from four to six months
is required, once a license is obtained, to develop and obtain the approval for
the art and the products for the new license, to produce samples and to begin
marketing. The Company began the product development for its Action Performance
Fan Fueler licenses in the fourth quarter of fiscal 1998. Shipments under these
new licenses began in January 1999. However, there can be no assurance that the
Company will be able to obtain other new licenses or renew existing licenses on
favorable terms in the future.

Marketing and Customers

During fiscal 1998, the Company's Innovo operations sold products to a
mix of mass merchandisers such as K Mart and Wal-Mart, department, sporting
goods, grocery, craft and drug store chains, mail order retailers and other
retail accounts. NP International's operations sold to 12 foreign distributors
which in turn resell to retail accounts. The Company estimates that its
products are carried in over 8,000 retail outlets in the United States and
numerous retail outlets in Europe.

Generally the Company's domestic accounts are serviced by the
Company's sales personnel working with marketing organizations that have sales
representatives which are compensated on a commission basis. NP
International's marketing is conducted by the Company's European Sales and
Marketing Manager selling directly to foreign distributors for resale to its
retail customers which NPII assists in presentations to European retailers.

In marketing its products the Company attempts to emphasize the
competitive pricing and quality of its products, its ability to assist customers
in designing marketing programs, its short lead times, and the high sell-through
its products have historically achieved. To assist customers in achieving a
higher sell-through of its sports team (professional and college) logoed
products, the Company tracks the retail sales by team logo for various
geographic areas. The Company then uses this information to assist customers in
selecting the optimum mix of team logos for their market. The Company has an
electronic data interchange system that allows certain larger customers to place
orders directly.

The Company also continues to solicit customers whose buying seasons
are contrary to the Company's existing seasonality. See "Seasonality."

For fiscal 1998, two customers accounted for sales in excess of 10% of net
sales: Wal-Mart, a customer of Innovo which accounted for 37.4% of net sales,
and Crown-Tex, a customer of Thimble Square, accounted for 92.0% of its sales.
The loss of Wal-Mart as a customer would have a material adverse effect on the
Company.

Backlog

Although the Company may at any given time have significant business
booked in advance of purchase orders, customers' purchase orders are typically
filled and shipped within two to six weeks. As of November 30, 1998, there
were no significant backlogs.

Seasonality

The Company's business is seasonal. The majority of the marketing and
sales activities take place from late fall to early spring. The greatest volume
of shipments and sales are generally made from late spring through the summer,
which coincides with the Company's second and third fiscal quarters and the
Company's cash flow is strongest in its third and fourth fiscal quarters. See
Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Seasonality."

Manufacturing

Innovo's products are either manufactured domestically in facilities
operated by the Company or obtained from foreign suppliers through
manufacturing agreements. The Company manufactures its domestic products from
an inventory of unfinished fabric rolls using cutting, sewing and finishing
equipment owned or leased by the Company. Innovo utilizes silk-screening
machines to permanently imprint designs onto its various products. Using its
in-house design staff and its computer graphic equipment, the Company has the
capacity to rapidly produce new products.

The principal materials used in Innovo's products include denim, canvas,
plain and printed rolls of nylon, polyester and cotton, mesh and webbing. The
Company buys raw materials in bulk for the products it manufactures
domestically. The Company has generally concentrated its purchases of each type
of raw materials for domestic manufacturing among a small number of suppliers,
and during fiscal 1998 purchased the majority of each type of raw material it
used from one or two suppliers. Although the Company does not have any
long-term agreements with these or other suppliers, it has to date been able to
obtain supply to satisfy its raw material requirements. Management believes
that if its current suppliers were unable to supply the necessary raw materials
in sufficient quantities or on acceptable price terms, alternative suppliers
would be available on comparable price terms and delivery schedules. In the
event the Company was unable to find such alternative suppliers at competitive
prices and on a timely basis, its operations could be materially adversely
affected.

The sport and gym bags and backpacks marketed overseas by NP
International and lunch bags, coolers and sport bags for Innovo for domestic
distribution are generally obtained from overseas manufacturers in order to
reduce the cost of these labor intensive products. The independent overseas
contractors that manufacture these products are responsible for obtaining the
necessary supply of raw materials and for manufacturing the products to the
Company's specifications. The Company generally uses one independent contractor
to fulfill all of its requirements in order to maximize its control over
production quality and scheduling. Although the Company uses this, and other
methods, to reduce the risk that the independent contractor will fail to meet
the Company's requirements, the use of independent overseas contractors does
reduce the Company's control over production and delivery and exposes the
Company to the other usual risks of sourcing products abroad. The Company does
not have any long-term supply agreements with independent overseas contractors,
but believes that there are a number of contractors that could fulfill the
Company's requirements.

The Company has generally utilized overseas contractors that employ
production facilities located in China. As a result, the products manufactured
for the Company are subject to export quotas and other restrictions imposed by
the Chinese government. To date the Company has not been adversely affected by
such restrictions; however, there can be no assurance that future changes in
such restrictions by the Chinese government would not adversely affect the
Company, even if only temporarily while the Company shifted production to other
countries or regions such as Mexico, Korea, Taiwan or Latin America. In the
past, substantially all of the products manufactured overseas for the Company
were shipped directly to customers outside the United States, but the Company is
now importing more products for domestic distribution. It is anticipated that
in fiscal 1999 more than 50% of the Company's domestic sales will be imported
products which are subject to United States import quotas, inspection or duties.

In 1998, the Company entered into a manufacturing arrangement with
Sunwaki Industrial Company LTD pursuant to which Sunwaki provided a $500,000
trade credit to Innovo. Management expects this arrangement to substantially
lower receiving, packing and shipping costs on those orders handled by
Sunwaki. See also Item 7- Management's Discussion and Analysis -- Liquidity
and Capital Resources.

Competition

The industries in which the Company operates are fragmented and highly
competitive. The Company competes against a large number of baggage
manufacturers and importers, and other generally small companies that
distribute products similar to Innovo's and NP International's. NP
International's sports-licensed products also compete with those of sporting
goods manufacturers, such as Reebok, Nike and Adidas, that produce or license
the manufacture of sports bags bearing their names and logos. The Company does
not hold a dominant competitive position, and its ability to sell its products
is dependent upon the anticipated popularity of its designs, the logos or
characters its products bear, the price and quality of its products and its
ability to meet its customers' delivery schedules.

The Company believes that it is competitive in each of the above-
described areas with companies producing goods of like quality and pricing, and
that new product development, product identity through marketing, promotions
and low price points will allow it to maintain its competitive position. In
addition, the Company's ability to manufacture its products domestically and
fill orders more promptly than companies whose sole or predominant source of
products are outside the United States is an important aspect of remaining
competitive. However, some of the Company's competitors possess substantially
greater financial, technical and other resources than the Company, including the
ability to implement more extensive marketing campaigns.

Intellectual Property

Innovo's utility line includes tote bags imprinted with the E.A.R.T.H.
("EVERY AMERICAN'S RESPONSIBILITY TO HELP") BAG trademark.
E.A.R.T.H. Bags are marketed as a reusable bag that represents an
environmentally conscious alternative to paper or plastic bags. Sales of
E.A.R.T.H. Bags, while significant in Innovo's early years, have not been
significant in the last five years. The Company still considers the trademark
to be a valuable asset, and has registered it with the United States Patent and
Trademark Office.

Employees

As of February 18, 1999, the Company employed 83 full-time personnel
at the Knoxville, Tennessee facility, comprised of 4 persons in management, 14
persons in general administration and 65 persons in manufacturing and
production. The Company continued to employ 1 full-time management employee in
Springfield, Tennessee. Due to varying seasonal demands and redesign of the
Company's manufacturing facilities, the Company's total work force reached a
high of 356 employees during 1998, including 164 Thimble Square employees prior
to discontinuing those operations. Management considers its relationship with
its employees to be excellent. None of the Company's employees is party to a
collective bargaining agreement. There has never been any material interruption
of operations due to labor disagreements.

ITEM 2. PROPERTIES

The Company's headquarters, manufacturing and distribution facilities
were located in Springfield, Tennessee, where Leasall owned three buildings
throughout fiscal 1998 and until December 1998. The main Springfield complex
was situated on seven acres of land with approximately 220,000 square feet of
usable space, including 30,000 square feet of office space and 35,000 square
feet of cooled manufacturing area. A warehouse annex contained 30,000 square
feet. First Independent Bank of Gallatin, Tennessee holds a First Deed of Trust
on the real property located in Springfield. The Springfield facilities are
currently held for lease or sale, and approximately 25% of the facilities had
been leased as of February 15, 1999.

The Company's headquarters and manufacturing and distribution facilities
were moved to a 78,000 square foot facility located in Knoxville, Tennessee
during November and the first half of December 1998. The Knoxville facility
provides approximately 65,000 square feet for manufacturing and distribution
operations, as well as approximately 13,000 square feet of office spaces.

The Company believes that the Knoxville facilities are adequate for its
current and anticipated executive, administrative, sales and domestic
manufacturing and distribution needs. Manufacturing capacity could be increased
by approximately 50% in the Knoxville facility. To the extent that additional
manufacturing capacity is required, management believes that additional
facilities and capacity are available at reasonable cost, both domestically and
overseas.

Innovo also leased a 5,000 square foot sewing facility in Red Boiling
Springs, Tennessee under a three year lease having an annual rental of $24,000
and expiring in August 1999. The facility was used to allow the Company to
avoid the effects of labor shortages through the second quarter of fiscal 1997.
In August 1997, as the result of increases in the production efficiencies of the
Company's main plant in Springfield, Tennessee, the Company idled this
additional plant. The Red Boiling Springs facility has been subleased at a
monthly rent of $1,000 through the term of Innovo's lease.

Thimble Square leased two facilities in Baxley, Georgia. The principal
facility was a 21,000 square foot manufacturing facility with an annual rental
of $36,000. The lease runs through August 2000 and provided Thimble Square
with a purchase option. The second lease was for a 7,000 square foot cutting
facility with annual lease payments of $10,000 which expired in October 1998.
The primary Baxley facility was sub-leased to Confident Colors on September 14,
1998 as part of the discontinuation of the former Thimble Square operations by
the Company. The terms of the lease provide for a $3,500 rental payable monthly
and an option to purchase the 21,000 square foot facility. In addition, the
lessees have exercised a right to purchase the production equipment located in
the Baxley facilities for $30,000.

Thimble Square also owned a 40,000 square foot manufacturing and
distribution facility in Pembroke, Georgia, which was subject to liens held by
the First Bank of Coastal Georgia, the Bryan County Development Authority, Inc.
and the Business Development Corporation of Georgia, Inc. This plant was idled
and sewing capacity was absorbed by Baxley in August 1997. In December 1997,
the Pembroke, Georgia cutting operation was moved to Baxley. The Pembroke
property was sold in December 1998 for approximately $122,000 net of selling
expenses.

The Company acquired a Florida retail property with approximately
32,000 square feet of rentable space, operated as the "Good Deal Mall," in
fiscal 1995. Through August 1997 the Company was engaged in readying the
property to operate as an indoor multiple vendor open space mall in which
retailers operate from permanent booths. The property was initially opened in
August 31, 1997 with approximately 24% of its available space leased. After
several lease terminations the Company closed the facility in November 1997.
The property is currently held for lease.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to lawsuits in the ordinary course of its business.
While the damages sought in some of these actions are material, the Company
does not believe that it is probable that the outcome of any individual action
will have a material adverse effect, or that it is likely that adverse outcomes
of individually insignificant actions will be sufficient enough, in number or
magnitude, to have a material adverse effect in the aggregate.

In May 1996, a foreign manufacturer that had previously supplied
imported products to NASCO Products filed suit against NASCO Products asserting
that it is owed approximately $470,000, which is $300,000 in excess of the
amount presently recorded on the books of NASCO Products (Pannoy Enterprises
Corporation v. NASCO Products, Inc., Case No. 12948, in the Chancery Court for
Robertson County, Tennessee). The Company contends that NASCO Products and
the supplier had previously reached an agreement on the balance owed (which is
the balance recorded), as well as an arrangement under which the schedule for
NASCO Products' payments reducing the balance would be based on future purchases
by NP International. The Company has denied the supplier's claims, and has
asserted affirmative defenses, including the supplier's late shipment of the
original products, the supplier's refusal to accept and fill NP's International
orders on agreed terms, and the supplier's agreement to a lesser balance owed
and a payment arrangement. NASCO Products sold its operations in July 1995, and
has no ongoing business operations. See Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations - General and -
Liquidity and Capital Resources."

In December 1991, a former employee filed suit against the Company,
Patricia Anderson-Lasko and others alleging breach of an employment agreement
and conversion of his interest in certain property rights (Michael J. Tedesco v.
Innovo, Inc.., et al., Case No. 91-64033, District Court of Harris County,
Texas, 164th Judicial Circuit). Following an appeal and a second trial, a final
judgment was rendered against Innovo for $194,045.62 on August 17, 1998.
Thereafter, 20,000 shares of Common Stock which has been held in the registry of
the court, as security during the appeal and subsequent trial, were released to
the plaintiff. If the sale of that stock does not generate sufficient net
proceeds to pay the judgment, then Innovo will be liable for any shortfall.

In July 1992, a former employee filed suit against the Company and Spirco
for alleging breach of an employment agreement and asserting other related
claims (Wayne Copelin v. Innovo Group, Inc., et al., Case No. 11950, in the
Chancery Court of Robertson County, Tennessee). When Spirco went into
bankruptcy in August 1993, the case proceeded against Innovo Group and a summary
judgment of $100,000 was entered against it in March 1995. However, because the
Copelin judgment was classified as a Class 8 Claim in the Spirco bankruptcy, the
Company believed that the judgment was fully paid when it issued 35,211 shares
of Common Stock to Copelin, in compliance with the confirmed Plan of
Reorganization. When Copelin sought to enforce the judgment, Innovo Group, as
the successor by merger to Spirco, brought a motion in the Spirco bankruptcy to
enforce the terms of the Plan of Reorganization against Copelin. The bankruptcy
judge granted the motion and permanently enjoined Copelin from enforcing the
judgment in an order entered on October 18, 1996. Copelin appealed to the
United States District Court and on April 13, 1998, the District Court reversed.
The case is now on appeal to the United States Third Circuit Court of Appeals.
Unless the Circuit Court reverses, Innovo Group will be liable for $100,000 plus
accrued interest since March 1995.

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

No matters were submitted to a vote of security holders during the
Company's fourth fiscal quarter.

PART II

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

The Common Stock is currently traded on the Nasdaq SmallCap Market
maintained by The Nasdaq Stock Market, Inc under the symbol
"INNO." The following sets forth the high and low bid quotations for the Common
Stock in such market for the periods indicated. This information reflects
inter-dealer prices, without retail mark-up, mark-down or commissions, and may
not necessarily represent actual transactions. No representation is made by the
Company that the following quotations necessarily reflect an established public
trading market in the Common Stock. The following information (as all other
information herein) is adjusted to reflect a reverse stock split in which one-
share of new Common Stock with a par value of $.10 per share was exchanged for
every ten shares of old common stock having a par value of $.01 per share (the
"Reverse Split"). The Reverse Stock Split was completed effective September 11,
1998).
Fiscal 1997 High Low

First Quarter $5.00 $1.5625
Second Quarter 3.125 1.5625
Third Quarter 9.6875 1.40625
Fourth Quarter 8.4375 4.6875

Fiscal 1998

First Quarter $6.875 $5.625
Second Quarter 6.25 4.063
Third Quarter 4.375 1.875
Fourth Quarter 2.813 1.156

As of February 25, 1999, there were approximately 862 record holders of
the Common Stock.

The Company has never declared or paid a cash dividend and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
In deciding whether to pay dividends on the Common Stock in the future, the
Company's Board of Directors will consider factors it deems relevant, including
the Company's earnings and financial condition and its capital expenditure
requirements.

In July 1997, the SEC and Nasdaq announced revised standards for listing
on the Nasdaq SmallCap Market that required that a company's listed securities
trade for not less than $1.00 and that the company have net tangible assets
(total assets, excluding goodwill, minus total liabilities) of at least
$2,000,000. The change became effective in February 1998. On February 27,
1998, Nasdaq notified the Company that it was not in compliance with the revised
standards and was given to May 28, 1998 to come into compliance.

The Common Stock generally traded at prices below $1.00 beginning in
November 1995 and until the Reverse Split was completed effective September 11,
1998. The Company had been able to maintain its Nasdaq SmallCap listing by
complying with an alternative $2,000,000 stockholder's equity requirement
that is no longer available. Under the new Nasdaq requirements, the Company
faced delisting unless the bid price on its stock increased to a minimum of
$1.00 through normal markets or such other steps as deemed necessary by the
Company. Following the Reverse Split, the bid price on the Company's stock has
consistently exceeded $1.00. However, as the result of the losses incurred
during the fourth quarter of fiscal 1998, the Company has net tangible assets of
approximately $1,722,000 as of November 30, 1998 and did not meet the $2,000,000
net tangible asset requirement.

During February 1999, the Company issued an aggregate of 150,000 shares of
Common Stock to two officers, for total aggerate proceeds of $300,000. The
shares were issued pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, and are restricted for purposes of Rule 144
promulgated under that Act. On a pro forma basis, the Company's net tangible
assets as of November 30, 1998 would therefore be approximately $2,022,000
after giving effect to the sale of shares. Although the Company believes that
this sale of shares will forestall any delisting of the Common Stock based on
the Company's net tangible asset level as of November 30, 1998, the Company
expects to incur operating losses during the first quarter of 1999 and that
additional sales of Common Stock or other steps to increase tangible net assets
will be necessary to maintain net tangible assets of at least $2,000,000.
See also Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources.

Although the Company will continually use its best efforts to maintain its
Nasdaq SmallCap listing, there can be no assurance that it will be able to do
so. If in the future, the Company is unable to satisfy the Nasdaq criteria for
maintaining listing, its securities would be subject to delisting, and trading,
if any, the Company's securities would thereafter be conducted in the over-the-
counter market, in the so-called "pink sheets" or on the National Association of
Securities Dealers, Inc. ("NASD") "Electronic Bulletin Board." As a consequence
of any such delisting, a stockholder would likely find it more difficult to
dispose of, or to obtain accurate quotations as to the prices, of the Common
Stock.

During the fourth quarter of fiscal 1998, the Company issued 899,000
shares of Common Stock in a private placement for $1,798,000 in gross cash
proceeds. No commissions or other discounts were paid. The shares were issued
in reliance upon the exemption under Section 4(2) of, and Rule 506 promulgated
under, the Securities Act of 1933.

ITEM 6. SELECTED FINANCIAL DATA

The table below (includes the notes hereto) sets forth a summary of
selected consolidated financial data. The selected consolidated financial data
should be read in conjunction with the related consolidated financial statements
and notes thereto.

Years Ended (3)

11/30/98 11/30/97 11/30/96 10/31/95 10/31/94
(000's except per share data)
Net Sales $6,790 $7,901 $6,023 $5,276 $8,028
Costs of Goods Sold 4,493 5,303 3,981 3,808 5,044
Gross Profit 2,297 2,598 2,042 1,468 2,984
Operating Expenses (5) 4,203 4,007 4,008 3,134 5,389
Income (Loss) from
Operations (1,906) (1,009) (1,966) (1,666) (2,405)
Interest Expense (503) (657) (870) (511) (821)
Other Income
(Expense) (4) 142 337 (147) 2,110 (1,000)
Income (Loss) Before
Income Taxes (2,267) (1,729) (2,983) (67) (7,905)
Income Taxes (6) 0 0 0 0 3,679
Loss from Continuing
Operations (2,267) (1,729) (2,983) (67) (7,905)
Discontinued
Operations (1) (1,747) (110) (105) (626) (685)
Extraordinary Item
(2) 0 524 0 (258) 699
Net Loss $(4,014) $(1,315) $(3,088) $(951) $(7,891)
Loss per share
from Continuing
Operations $ (0.49) $ (0.50) $ (2.19) $(0.26) $(39.92)
Weighted Average
Shares Outstanding 4,618 3,438 1,361 261 198

Balance Sheet Data:
Total Assets $7,232 $9,168 $9,433 $5,667 $11,143
Long-Term Debt 2,234 1,854 3,303 1,565 1,514
Stockholder s' Equity 1,722 3,791 2,275 (230) (2,372)

(1) The amounts for 1998, 1997 and 1996 represent the operations of Thimble
Square. Thimble Square's operations were discontinued during the fourth
fiscal quarter of 1998 and most of its assets have since been leased or
sold. The 1995 and 1994 amounts reflect the operations and July 1995
sale of the import operations of NASCO Products.
(2) Represents gains (losses) from extinguishment of debt.
(3) Effective November 1, 1995 the Company changed its fiscal year to end
on November 30. Previously the Company's fiscal year ended October 31.
(4) Amounts include, $1.9 million from the settlement of litigation in 1995.
(5) Amount includes a $300,000 write down of long-term assets in 1998.
(6) Amount includes $3,679,000 in deferred tax valuation allowance in 1994.

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion analyzes the Company's financial condition and
results of operations for years ended November 30, 1998, 1997 and 1996 and
their likely impact on 1999.

The Company has incurred losses from continuing operations in each of
the last three fiscal years, principally as a result of lower sales and a lack
of adequate working capital. Management is addressing both of these shortfalls
and taking steps to boost sales and the profitability of the Company.

During 1998, the Company shed itself of the assets of Thimble Square,
Inc., effectively taking the Company out of the apparel segment of the
industry. Thimble Square had not achieved profitability since it was acquired
in 1996 and no longer fit into the long-term operating plan of the Company. The
Company also decided to move its operations to Knoxville, Tennessee into a more
efficient and advanced production facility. The move to Knoxville was completed
on December 15, 1998. In addition to the steps to minimize continued operating
losses and cut costs, the Company has created a sales and marketing department
around Patricia Anderson-Lasko. During December 1998 and January 1999, a
National Sales Manager was hired to focus on the grocery and drugstore market
and a National Marketing Manager was hired to facilitate a new product
development program and work closely with the packaging, displaying and sales
materials/promo's for existing products.

Results of Operations

The following table sets forth the Statement of Operations for the years
ended November 30, 1998, 1997 and 1996.

Years Ended
11/30/98 11/30/97 11/30/96
Net Sales $6,790 $7,901 $6,023
Costs of Goods Sold 4,493 5,303 3,981
Gross Profit 2,297 2,598 2,042
Selling, General &
Administrative 3,638 3,740 3,498
Write down of long-term
assets 300 -- --
Depreciation & Amortization 265 267 510
Income (Loss) from
Operations (1,906) (1,009) (1,966)
Interest Expense (503) (657) (870)
Other Income (Expense) 142 337 (147)
Income (Loss) Before
Income Taxes (2,267) (1,729) (2,983)
Income Taxes 0 0 0
Income (Loss)
from Continuing Operations (2,267) (1,729) (2,983)
Discontinued Operations (1,747) (110) (105)
Extraordinary Item 0 524 0
Net Loss $(4,014) $(1,315) $(3,088)

Comparison of Fiscal Year Ended November 30 1998 to Fiscal Year Ended
November 30, 1997

Net Sales for the year ended November 30 decreased $1.1 million or 14%
from $7.9 million in 1997 to $6.8 million in 1998. This decrease is primarily
the result of the loss of programs with two significant customers.

The gross margin percentage increased one point from 32.9% in 1997 to
33.8% in 1998 due to improved material pricing and a reduction in production
costs. The Company anticipates a further reduction in material costs in 1999
from favorable pricing on imported items and domestic goods due to improved
vendor selection and cost reduction strategies.

Selling, General and Administrative costs decreased $100,000 or 2.7%
from 1997 to 1998 due to decreased royalties from the reduced sales. The
reductions in royalties were offset by an increase in legal and professional
fees that resulted from the work performed on two potential acquisitions during
1998 and from a one time charge of $187,000 for the settlement of a lawsuit.

Under the guidelines of SFAS 121 the Company recorded a $300,000
impairment loss representing a valuation adjustment on the Good Deal Mall
facility as of November 30, 1998.

Depreciation and Amortization expenses were not significantly different
from 1997 to 1998 due to the lack of significant purchases of fixed assets and
intangible assets during 1998.

Interest expense for the year ended November 30 decreased $154,000
or 23% from 1997 to 1998 due to the payoff of debt in 1997 from the proceeds
of the private placement to the Smith Group as well as a reduction in
interest rates for new debt instruments placed during 1998.

Comparison of Fiscal Year Ended November 30 1997 to Fiscal Year Ended
November 30, 1996

Net Sales for the year ended November 30 increased $1,900,000 or 31.2%
from $6.0 million in 1996 to $7.9 million in 1997 primary due to the
introduction of new items into the Company's craft product line.

The gross margin percentage decreased one point from 33.9% in 1996 to
32.9% in 1997 due to increases in sewing costs.

Selling, General and Administrative costs decreased $200,000 or 3.9%
from 1996 to 1997 due to reduced head count in the marketing, customer service
and shipping departments.

Depreciation and Amortization expense decreased $300,000 or 55% from
1996 to 1997. The decrease resulted from the disposal of a significant amount
of assets in 1996.

Interest expense for the year ended November 30 decreased $300,000 or
32% from 1996 to 1997 due to the payoff of debt in 1997 from the proceeds of
the private placement to the Smith Group.

Seasonality

The Company's business is seasonal. The majority of the marketing and
sales activities take place from late fall to early spring. The greatest volume
of shipments and sales are generally made from late spring through the summer,
which coincides with the Company's second and third fiscal quarters and the
Company's cash flow is strongest in its third and fourth fiscal quarters.
During the first half of the calendar year, the Company incurs the expenses of
maintaining corporate offices, administrative, sales and production employees,
and developing the marketing programs and designs for and conducting the
majority of its sales campaigns. Inventory levels also increase during the
first half of the year. Consequently, during the first half of each calendar
year, corresponding to the Company's first and second fiscal quarters, the
Company utilizes substantial working capital and its cash flows are diminished,
whereas the second half of the calendar year, corresponding to the Company's
third and fourth fiscal quarters, generally provides increased cash flows and
the build-up of working capital.

Liquidity and Capital Resources

Innovo Group is a holding company and its principal assets are the
common stock of the operating subsidiaries. As a result, to satisfy its
obligations Innovo Group is dependent on cash obtained from the operating
subsidiaries, either as loans, repayments of loans made by Innovo Group to the
subsidiary, or distributions, or on the proceeds from the issuance of debt or
equity securities by Innovo Group. Leasall's first mortgage loan contains
restrictions on its ability to make advances or distributions to Innovo Group;
however, Leasall's activities are limited to the ownership of the Company's real
property and the servicing of the mortgage debt thereon. The debt agreements of
the other subsidiaries do not restrict advances or distributions to Innovo
Group.

Cash flows from operations were a negative $1,238,000 for the year ended
November 30, 1998. The primary reason was a net loss from continuing operations
of $2,267,000, offset by $626,000 of non-cash charges principally for
depreciation and amortization and an asset impairment charge. There were also
decreases in receivables, inventories and prepaid expenses totaling $539,000
which were offset by a corresponding net decrease in payables and accrued
expenses of $273,000.

The Company has continued to generate losses throughout the first quarter of
1999. However, these losses are in line with expectations due to the seasonal
nature of the Company's business (see discussion above). The Company
anticipates improved financial performance for fiscal year 1999 due to
additional product lines and an improved marketing effort. The improved
financial performance should allow the Company to generate positive cash flows
from operations for the year ended November 30, 1999.

The Company's principal credit facility for working capital is its December
1997 factoring agreement with First American National Bank ("First American").
Under this facility, First American advances up to 90% of approved invoices.
There is no established limit on the facility. first American charges Innovo 1%
for the first 15 days an inovice is outstanding and .05% per day thereafter
until paid, up to a maximum of 6%. The facility is secured by a first
position on accounts receiveable and inventory and personal guarantees of
certain members of the Board of Directors and management. Prior to the
agreement with First American, the Company factored its receivables with
another lender. The facility can be terminated upon thirty day written
notice by either party.

The Company has taken a number of steps to improve its liquidity in 1999,
as more fully discussed below, including

Obtaining a trade credit facility of up to $500,000 from a key vendor;
Paying off in December 1998 a $126,000 short term note and a $179,000
long-term note from the proceeds of the sale of the Pembroke facility
as it completed its disposal of the Thimble Square operations;
Obtaining in February 1999 an extension to February 2000 on a $350,000
line of credit that had expired in December 1998;
Obtaining in February 1999 $300,000 in cash from the proceeds of a sale
of common stock to two officers, who also committed to provide an
aggregate of $100,000 in additional credit.

As a reult of recent efforts with vendors, the Company believes it has made
progress in reestablishing normalized trade relationships. In 1998, the Company
entered into an agreement with Sunwaki Industrial Company, Ltd. of Hong Kong to
produce the Company's licensed products for both domestic and international
distribution. Sunwaki has the capability to meet a substantial portion of the
Company's needs for such products. In connection with this arrangement, Sunwaki
agreed to extend up to $500,000 of trade credit to Innovo for fiscal year 1999.
Management expects the arrangement to lower production and other related costs
for 1999.

In connection with the Company's discontinuance of its apparel manufacturing
operations it disposed of its former Thimble Square operations and its assets.
On December 10, 1998, the Company completed the sale of Thimble Square's
Pembroke facility from which it realized net proceeds of approximately $122,000
which together with available cash was used to pay a $179,000 long-term
mortgage and a $126,000 short term note.

In December 1997, the Company negotiated a line of credit at First
Independent Bank for $350,000 collateralized by the equipment of Innovo and
Leasall and the guarantees of certain officers. A total of $349,000 had been
drawn under this facility which matured on December 30, 1998. In February 1999,
the bank renewed the facility extneding its due date to February 27, 2000.

During February 1999, the Company issued $300,000 in Common Stock to Sam
Furrow, the Company's CEO, and Dan Page, the Company's COO. In addition to the
placement of stock, the officers made available to the Company separate lines of
credit in the amount of $50,000 each. the lines will remain available until
June, 1999, a time of year during which the Company would normally experience
greater cash flow and liquidity due to the seasonal nature of the Company's
business. See "Seasonality."

In addition to these steps, the Company has entered into negotiation for an
inventory-based credit facility to supplement its current receivable factoring
facility. The Company believes that the lending base represented by these
assets has not been effectively leveraged in the recent past and that the steps
taken to restore the Company's credit capacity will facilitate these traditional
borrowing sources.

Additionally, the Company is in negotiations to sell a $703,000 promissory
note receivable due from its President which had been received in conneciton
with the President's exercise of a stock purchase award and has been reflected
in the Company's financial statements as a reduction of equity. Proceeds from
the sale of this note receivable would be used to repay an existing not payable
in the amount of $650,000 which would increase the Company's borrowing capacity.
Additionally, collection of the note receivable would serve to increase the
Company's tangible net assets.

Based on the foregoing, the Company believes that working capital will be
sufficient to fund operations and required debt reductions during fiscal 1999.
However, due to the seasonality of the Company's business and likely negative
cash flow during the first half of the year, the Company may be required to
obtain additional capital through debt or equity financing. The Company has
received a commitment from certain of its officers for additional credit in an
amount not to exceed $500,000 to fund short-term cash requirements as may be
required from time to time during 1999. The Company believes that nay
additional capital, to the extent needed, oculd be obtained from the sale of
equity securities or short-term working capital loans. However, there can be
no assurance that this or other financing will be available if needed. The
inability of the Company to be able to fulfill any interim working capital
requirements would force the Company to contrict its operations.

Year 2000

In 1998, the Company assessed its computer systems and determined that much
of the hardware that runs the critical software will need to be updated as well
as the operating systems that support the critical software. The software used
for billing, inventory, job costing and other accounting functions is currently
year 2000 compliant. The Company purchased new computer hardware and operating
systems in December 1998 for approximately $10,000. The Company estimates that
it will spend an additional $20,000 to $30,000 to convert the critical systems
to the new hardware and upgrade end-user equipment. The Company plans to have
the conversion complete by the end of the second quarter or beginning of the
third quarter of 1999. If the Company should not be able to successfully
convert its computer hardware and operating systems to be in compliance with the
year 2000, the Company will use a manual order processing system to continue to
make and order customer product. Due to the mechanical nature of the equipment
used in the production process, no interruption of production is anticipated.

New Accounting Pronouncements

SFAS No. 130, "Reporting Comprehensive Income" is effective for years
beginning after December 15, 1997. This statement establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. This pronouncement is not expected to have a material impact on the
Company's financial statements when adopted.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" is effective for years beginning after December 15, 1997. This
statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements. It
also establishes standards for related disclosures about products and services,
geographic areas, nd major customers. This pronouncement is not expected to
have a material impact on the Company's financial statements when adopted.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities is effective for all fiscal years beginning after June 15, 1999.
This statement requires recognition of all derivative contracts as either assets
or liabilities in the balance sheet and the measurement of them at fair value.
If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of any gains or losses on
the hedge with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income
in the period of change. Historically, the Company has not entered into
derivative contracts either to hedge existing risks or for speculative
purposes. The adoption of the new standard on January 1, 2000 will
not affect the Company's financial statements.

ITEM 8. FINANCIAL STATEMENTS

Innovo Group Inc.
Index to Consolidated Financial Statements

Report of Independent Certified Public Accountants 19

Consolidated Balance Sheets 20

Consolidated Statements of Operations 21

Consolidated Statements of Stockholders' Equity 22 - 23

Consolidated Statements of Cash Flows 24 - 25

Notes to Consolidated Financial Statements 26 - 39

Financial Statement Schedules are included at Item 14.

Report of Independent Certified Public Accountants

Board of Directors

Innovo Group Inc.

We have audited the accompanying consolidated balance sheets of Innovo Group
Inc. and subsidiaries as of November 30, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years ended November 30, 1998, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Innovo
Group Inc. and subsidiaries as of November 30, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
years ended November 30, 1998, 1997 and 1996, in conformity with generally
accepted accounting principles.

/s/BDO SEIDMAN, LLP
BDO SEIDMAN, LLP

Atlanta, Georgia
February 10, 1999, except for Note 13 which is as of March 10, 1999

INNOVO GROUP INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's except for share data)

11/30/98 11/30/97
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 1,078 $ 469
Accounts receivable net of allowance
($67,000 for 1998 and $123,000 for
1997) (Note 5) 708 895
Inventories (Note 5) 1,101 1,582
Prepaid expenses 267 398
TOTAL CURRENT ASSETS 3,154 3,344

PROPERTY, PLANT and EQUIPMENT, net 4,037 5,071
OTHER ASSETS 41 753

TOTAL ASSETS $ 7,232 $ 9,168

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Notes payable (Note 5) $ 914 $ 1,131
Current maturities of long-term debt (Note 6) 270 211
Accounts payable 1,139 1,412
Accrued expenses 906 769
TOTAL CURRENT LIABILITIES 3,229 3,523

LONG-TERM DEBT, less current maturities (Note 6) 2,234 1,854
OTHER 47 -
TOTAL LIABILITIES 5,510 5,377

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY (Note 9)
Common stock, $0.10 par - shares
authorized 7,000,000 in 1998 and 1997;
issued 5,387,113 in 1998 and 4,459,613
in 1997 538 446
Additional paid-in capital 30,282 28,429
Promissory note - officer (703) (703)
Deficit (25,969) (21,955)
Treasury stock (2,426) (2,426)
TOTAL STOCKHOLDERS' EQUITY 1,722 3,791

TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $ 7,232 $ 9,168

See accompanying notes to consolidated
financial statements

INNOVO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's except per share data)

Year Ended November 30,
1998 1997 1996
NET SALES $6,790 $7,901 $6,023
COST OF GOODS SOLD 4,493 5,303 3,981
Gross profit 2,297 2,598 2,042

OPERATING EXPENSES
Selling, general and administrative 3,638 3,740 3,498
Write down of long-term assets 300 -- --
Depreciation and amortization 265 267 510
4,203 4,007 4,008

LOSS FROM OPERATIONS (1,906) (1,009) (1,966)

INTEREST EXPENSE (503) (657) (870)
OTHER INCOME (EXPENSE), net 142 337 (147)

LOSS BEFORE INCOME TAXES (2,267) (1,729) (2,983)

INCOME TAXES (BENEFIT) - - -

LOSS FROM CONTINUING
OPERATIONS (2,267) (1,729) (2,983)

DISCONTINUED OPERATIONS
Results from Thimble Square operations (346) (110) (105)
Loss on disposal of Thimble Square (1,401) - -
(1,747) (110) (105)
LOSS BEFORE EXTRAORDINARY ITEM (4,014) (1,839) (3,088)

EXTRAORDINARY ITEM (Note 7) - 524 -

NET LOSS $ (4,014) $(1,315) $(3,088)

LOSS PER SHARE:
Continuing operations $(0.49) $(0.50) $(2.19)
Discontinued operations $(0.38) $(0.03) $(0.08)
Net loss $(0.87) $(0.38) $(2.27)

WEIGHTED AVERAGE SHARES OUTSTANDING 4,618 3,438 1,361

See accompanying notes to consolidated financial statements

INNOVO GROUP INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's except for share data)

Additional Promissory
Stock Paid-in Note Treasury
Shares Amount Subscription Capital Deficit Officer Stock Total

Balance,
November 30, 1995 387,886 $ 39 $ 292 $ 20,138 $(17,552) $ - $(2,389) $ 528
Issuance of common stock
Cash 731,628 73 - 1,737 - - - 1,810
Subscription agreements 31,136 3 (292) 289 - - - -
Spirco reorganization 31,299 3 - 295 - - - 298
Manufacturing agreement 120,000 12 - 388 - - - 400
Thimble Square acquisition 124,118 12 - 621 - - - 633
Extinguishment of debt 126,947 13 - 410 - - - 423
Conversion of debentures 752,191 75 - 915 - - - 990
Exercise of warrants and options 337,273 34 - 412 - - - 446
Loan fees 10,580 1 - 31 - - - 32
Debt settlement - - - - - - (37) (37)
Issuance of warrants - - - 40 - - - 40
Issuance costs - - - (200) - - - (200)
Net Loss - - - - (3,088) - - (3,088)
Balance, November 30, 1996 2,653,058 265 - 25,076 (20,640) - (2,426) 2,275
Issuance of common stock - - - - - - - -
Smith group purchase 675,000 68 - 1,282 - - - 1,350
Cash 150,000 15 - 660 - - - 675
Conversion of debentures 412,793 41 - 359 - - - 400
Exercise of stock purchase right400,000 40 - 1,085 - (1,125) - -
Conversion of convertible notes 210,000 21 - 383 - - - 404
Exercise of warrants 76,500 8 - 135 - - - 143
Debt settlement 75,000 1 - 50 - - - 51
Other 24,762 2 - 41 - - - 43
Costs of issuance - - - (85) - - - (85)
Retire shares subject to stock
purchase right (150,000) (15) - (407) - 422 - -
Warrant repurchase - - - (150) - - - (150)
Net Loss - - - - (1,315) - - (1,315)
Balance, November 30, 1997 4,459,613 446 - 28,429 (21,955) (703) (2,426) 3,791
Issuance of common stock
Furrow-Holrob Development
purchase 899,000 89 - 1,709 - - - 1,798
Issuance for compensation 16,450 2 - 96 - - - 98
Issuance for debt service 8,550 1 - 55 - - - 56
Exercise of warrants and options 3,500 - - 9 - - - 9
Cost of issuance - - - (16) - - - (16)
Net loss - - - - (4,014) - - (4,014)
Balance, November 30, 1998 5,387,113 $ 538 $ - $30,282 $(25,426) $(703) $(2,426) $1,722
See accompanying notes to consolidated financial statements

INNOVO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's)

Year Ended November 30,
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(4,014) $(1,315) $(3,088)
Adjustment to reconcile net loss to
cash used in operating activities from
continuing operations:
Loss on disposal of discontinued operations 1,401 - -
Loss from discontinued operations 346 520 105
Compensatory stock options 100 - -
Depreciation and amortization 265 267 510
Asset impairment charge 300 - -
Provision for uncollectable accounts (39) (49) 78
Extraordinary gain - (524) -
Other - - 6
Changes in assets and liabilities:
Accounts receivable 226 392 (430)
Inventories 137 167 (406)
Prepaid expenses and other 176 (66) 560
Accounts payable (273) (173) 558
Accrued expenses 137 (134) (598)
Other - (14) (11)
Cash used in operating activities of
continuing operations (1,238) (929) (2,716)
Cash used in operating acivities of
discontinued operations (202) (318) (27)
Cash used in operating activities (1,440) (1,247) (2,743)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18) (469) (379)
Increase (decrease) in other assets - 43 -
Proceeds from sale of discontinued operations - - 257
Disposal of fixed assets - 216 -
Cash used in investing activities (18) (210) (122)

CASH FLOWS FROM FINANCING ACTIVITIES:
Addition of notes payable 7,865 869 -
Repayments of notes payable (8,027) (221) (444)
Additions to long-term debt 650 - 1,675
Debt issue costs - - (285)
Repayments of long-term debt (212) (729) (226)
Proceeds from issuance of common stock 1,807 2,168 2,256
Stock issuance costs (16) (85) (200)
Warrant repurchase - (150) -
Other - 43 -
Cash provided by financing activities 2,067 1,895 2,776

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 609 438 (89)

CASH AND CASH EQUIVALENTS, at beginning of
period 469 31 120

CASH AND CASH EQUIVALENTS, at end of period $1,078 $ 469 $ 31

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
Cash paid for interest 555 767 618
Cash paid for income taxes - - -

See accompanying notes to consolidated financial statements

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Nature of business

Innovo Group Inc. ("Innovo Group") is a holding company, the principal
assets of which are the outstanding securities of three operating subsidiaries,
Innovo, Inc. ("Innovo"), NASCO Products International, Inc. ("NP
International") and Thimble Square, Inc. (Thimble Square"). Certain assets of
Thimble Square were disposed of and its operations ceased on September 13, 1998
(see Note 12). The Innovo Group and its wholly owned subsidiaries are referred
to as "the Company".

Innovo is a domestic manufacturer of cut and sewn canvas and nylon
consumer products, such as tote and other bags and aprons, which are sold to
the utility, craft, sports licensed and advertising specialty markets. Innovo
is also an importer of sports licensed products produced with logos or other
designs licensed from various sports licensors. These items such as coolers,
seat cushions and back packs are sold to the sports licensed and advertising
specialty markets. Innovo grants credit to customers, substantially all of
which are retail merchandisers or are in the premium incentive industry.

NP International distributes in foreign, principally European markets,
nylon sports bags and backpacks, imprinted or embroidered with logos or other
designs licensed from various sports and entertainment related licensors.

Thimble Square manufactured and marketed ladies' ready-to-wear at
home, sleep and lounge wear. Its products were sold to mail order companies,
retailers and through mail order distribution. Thimble Square also provided
"sew-only" manufacturing for other distributors of private-label sleep and
lounge wear; in those instances, the customer provided the raw materials and
Thimble Square manufactured the products to the customer's specifications.

The Company operated in two business segments throughout the majority
of fiscal 1998. See Note 11. Sales to two customers (one a customer of
Innovo, and one a customer of Thimble Square) accounted for 37.4%, and 92.0% of
the net sales of each company respectively for the year ended November 30, 1998.
Sales to foreign customers of Nasco Products Internationa, principally in
Europe, accounted for 18.4%, 16.4% and 12.1% of net sales in fiscal 1998, 1997
and 1996, respectively.

(b) Principles of consolidation

The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

(c) Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and dis-
closure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Estimates most significantly affect the amortization of
goodwill, the evaluation of contingencies, and the determination of allowances
for accounts receivable and inventories.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) Revenue recognition

Revenues are recorded on the accrual basis of accounting when the
Company ships products to its customers. Sales returns must be approved by the
Company and are typically only allowed for damaged goods. Such returns are
typically not material. The Company provides an allowance ($67,000 and $123,000
at year ended November 30, 1998 and 1997, respectively) for estimated losses to
be incurred in the collection of accounts receivable.

(e) Loss per share

Loss per share is computed using weighted average common shares and
dilutive common equivalent shares outstanding. Potentially dilutive securities
consist of outstanding options and warrants. Potentially dilutive securities
were not considered in the computation of weighted average common shares as
their effect would have been antidilutive.

On September 13, 1998 the Company declared a reverse stock split of
which one share of new Common Stock was exchanged for ten shares of old
Common Stock. All share and per share amounts have been restated to reflect the
effects of the reverse stock split.

(f) Capitalization policy

Cost incurred in the issuance of debt securities or to obtain bank
financing are capitalized and are amortized as a component of interest expense
using the level yield method.

The Company charges to expense in the year incurred costs to develop new
products and programs. Amounts charged to expense approximated $ 2,000,
$182,000 and $363,000 in fiscal 1998, 1997 and 1996, respectively.

(g) Financial Instruments

The fair values of the Company's financial instruments (consisting of
cash, accounts receivable, accounts payable, notes payable, long-term debt and
notes payable officer) do not differ materially from their recorded amounts.

The Company neither holds, nor is obligated under, financial instruments
that possess off-balance sheet credit or market risk.

(h) Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

(i) New Accounting Pronouncements

SFAS No. 130, "Reporting Comprehensive Income" is effective for years
beginning after December 15, 1997. This statement establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. This pronouncement is not expected to have a material impact on the
Company's financial statements when adopted.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" is effective for years beginning after December 15, 1997. This
statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. This pronouncement is not expected to
have a material impact on the Company's financial statements when adopted.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities is effective for all fiscal years beginning after June 15, 1999.
This statement requires recognition of all derivative contracts as either assets
or liabilities in the balance sheet and the measurement of them at fair value.
If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of any gains or losses on
the hedge with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. Historically, the Company has not entered into derivative
contracts either to hedge existing risks or for speculative purposes. The
adoption of the new standard on January 1, 2000 will not affect the Company's
financial statements.

NOTE 2 - INVENTORY

Inventories are stated at the lower of cost, as determined by the first-
in, first-out method, or market.

Inventories consisted of the following:
November 30,
1998
1997
(000's) (000's)
Finished goods $ 766 $ 680
Work-in-process 18 246
Raw materials 353 692
1,137 1,618
Less inventory reserve (36) (36)
$1,101 $1,582

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 3 PROPERTY, PLANT & EQUIPMENT

Property, plant and equipment, including assets utilized under capital
leases, are stated at cost. Depreciation and amortization are provided in
amounts sufficient to allocate the cost of depreciable assets to operations over
their estimated useful lives using the straight-line method. Leasehold
improvements are amortized over the lives of the respective leases or the
estimated service lives of the improvements, whichever is shorter. On sale or
retirement, the asset cost and related accumulated depreciation or amortization
are removed from the accounts, and any related gain or loss is included in the
determination of income.

Property and equipment consisted of the following:

Useful
Lives November 30,
(Years) 1998 1997
(000's) (000's)
Buildings, land and improvements 8-38 $ 3,250 $ 4,575
Machinery and equipment 5-10 1,153 1,526
Furniture and fixtures 3-8 637 674
Transportation equipment 5 56 65
Leasehold improvements 5-8 3 3
5,099 6,843
Less accumulated depreciation
and amortization (1,841) (1,772)
3,258 ---
Net property, plant and equipment of
discontinued operations 779 ---

Net property and equipment $4,037 $5,071

The cost and accumulated depreciation for assets utilized under capital
leases were $577,000 and $137,000, respectively, at November 30, 1998.

The Thimble Square facility in Pembroke, Georgia was sold on December
10, 1998 for approximately $122,000 net of selling expenses. This sale resulted
in a $278,000 loss on disposal. Under the provision of SFAS 121, the value of
the Pembroke property was adjusted to net realizable value as of November 30,
1998.

Fixed assets and fixed assets to be disposed of are accounted for under
Statement of Financial Accounting Standards ("SFAS") No. 121. Under the
standard, where there is a significant change in use or value of a long-lived
asset, the asset is written down to recoverable value if it is determined that
recoverable value is less than the Company's cost basis. Under the provisions
of SFAS 121, the Florida property's value was adjusted downward by $300,000 in
1998.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 4 OTHER ASSETS

Other assets consisted of the following:

November 30,
1998 1997
(000's) (000's)
Goodwill, net of accumulated
amortization $ --- $ 702
Debt issue costs, net 23 8
Other 18 43
_____ ______
$ 41 $ 753

The goodwill, which arose in the Company's acquisition of Thimble Square, was
written off when Thimble Square was disposed (see Note 11).

NOTE 5 - NOTES PAYABLE

Notes payable consisted of the following:

November 30,
1998 1997
(000's) (000's)

Accounts receivable factoring facility $ 439 $ 504
Bank credit facility 349 273
NP International loan --- 251
Other 126 103
______ ______
$ 914 $1,131

Innovo and Thimble Square previously borrowed under an accounts
receivable factoring facility with Riviera Finance ("Riviera") under which
Riviera advanced 90% and 80% of assigned accounts receivable, respectively.
The factoring facility provided for advances up to $1,500,000. Riviera charged
.75% of each invoice assigned plus 1.5% per month of outstanding advances.
Borrowings under the facility were collateralized by assigned accounts
receivable, which aggregated $603,000 at November 30, 1997.

In December 1997 the Company replaced this factoring facility with a new
accounts receivable factoring facility with First American National Bank
("First American"). Under the facility, First American advances 90% of
approved invoices. There is no established limit on the total facility. First
American charges Innovo 1% for the first 15 days an invoice is outstanding and
.05% per day thereafter until paid, up to a maximum of 6%. Thimble Square was
charged 1.5% for the first 30 days an invoice is outstanding and .033% per day
thereafter, also to a maximum of 6%. The facility is secured by first position
on accounts receivable and inventory and personal guarantees of certain members
of the Board of Directors and management. The agreement with First American
terminates upon thirty day written notice from either party.

As of November 30, 1998, Thimble Square had a note payable to a local bank
that used the Pembroke, Georgia facility as collateral. This loan bears
interest at the rate of 2.75 points over the prime rate per annum. The loan
balance of approximately $126,000 was paid off when the Pembroke facility was
sold in December 1998.
INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 5 - NOTES PAYABLE (continued)

In December 1997 the Company entered into a revolving line of credit
with a bank for $350,000 at a fixed rate of 9.5%. The line is secured by
equipment and the personal guarantees of certain members of management. The
line of credit had an outstanding balance of $349,000 as of November 30, 1998
and expired on December 30, 1998. The Company renewed the line of credit
through February 27, 2000 at an interest rate of 10.75%.

In October 1997 Innovo Group obtained a secured bank line of credit of
$762,000. $273,000 was outstanding on the line at November 30, 1997. This loan
was paid during 1998 from the proceeds of the private placement of common stock.

The weighted average interest rate on outstanding short-term borrowings
was 11.1% and 17.7% at November 30, 1998 and 1997, respectively.

NOTE 6 - LONG-TERM DEBT

Long-term debt consisted of the following:

November 30,
1998 1997
(000's) (000's)

First mortgage loan $ 754 $ 783

Non-recourse first mortgage on
Florida property 727 759

Thimble Square SBA loan 179 194

Thimble Square first mortgage loan ---- 112

Capital lease obligation 194 211

Bank promissory note secured by receivable
from an officer of the Company 650 ----

Other ---- 6
______ ______
Total long-term debt 2,504 2,065

Less current maturities (270) (211)
______ ______
$2,234 $ 1,854

The first mortgage loan is collateralized by a first deed of trust on real
property in Springfield, Tennessee and by an assignment of key-man life
insurance on the president of the Company in the amount of $950,000. The loan
bears interest at 2.75% over the lender's prime rate per annum (which was 8.50%
at November 30, 1998) and requires monthly payments of $9,900. In order for the
loan to be guaranteed by the Small Business Administration ("SBA"), Innovo
Group, Innovo, NASCO Products, and the president of the Company agreed to act
as guarantors for the obligations under the loan agreement.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 6 - LONG-TERM DEBT (continued)

In November 1995 the Company acquired a facility which it developed as
an indoor retail outlet featuring antique and flea market shops. The $1.5
million purchase price was paid by the issuance to the seller of (i) warrants to
purchase 1 million shares of the Company's common stock, exercisable at $.01 per
share through March, 1998, and (ii) an $800,000 first lien non- recourse
mortgage secured by the property. The mortgage is payable $25,500 quarterly;
all unpaid principal, and interest (which accrues at the rate of 9.5% per annum)
is due January, 2006. Construction period interest of $79,000 was capitalized
during fiscal 1996. The stock option was exercised in March, 1996. The Company
also issued a warrant, exercisable for the purchase of 100,000 shares at $.01
per share, as a finder's fee on the property acquisition. The warrant was
exercised in April, 1996.

Thimble Square's SBA loan is collateralized by a lien on that company's
Pembroke, Georgia plant. This loan was repaid in conjunction with the December
1998 sale of the Pembroke facility. The loan bears interest at 2.75%, over the
prime rate and was paid in full in conjunction with the December 1998 sale of
the Pembroke plant. The capital lease obligation represents the lease on
Thimble Square's Baxley, Georgia plant. Interest on the capital lease is
imputed at the rate of 10% per annum.

In April 1998, Innovo Group entered into a secured note with a bank for
$650,000 at a rate of 13.5% per annum. A $703,000 note receivable that the
Company holds from an officer and 250,000 shares owned by Pat Anderson-Lasko
serve as collateral for the note. The secured note is also guaranteed by
certain members of management. The secured note requires monthly payments of
interest only. The principal amount of the secured note is due on
April 1, 2003.

In fiscal 1996, the Company privately placed $1,625,000 of 8%
Convertible Debentures due September 30, 1998. As of November 30, 1996,
$1,205,000 of the debentures had been converted into 752,191 shares of common
stock. During fiscal 1997 the remaining convertible debentures were converted
into 412,793 shares of common stock.

Principal maturities of long-term debt of continuing operations as of
November 30, 1998 are as follows:

Year ending November 30, Amount

1999 90,000
2000 86,000
2001 102,000
2002 112,000
2003 774,000
Thereafter 1,160,000

The current maturities of long term debt for discontinued operations is
$180,000 in 1999.

NOTE 7 - DEBT SETTLEMENTS

In the fourth quarter of 1997 the Company settled debts with 44 creditors
recorded at $930,000. The Company made cash payments totaling $406,000 and
recognized an extraordinary gain in the amount of $524,000.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 8 - INCOME TAXES

No provision for income tax for any of the last three fiscal years has
been provided for, as income tax benefits arising from net operating losses are
offset by corresponding increases in the deferred tax asset valuation.

Net deferred tax assets result from the following temporary differences
between the book and tax bases of assets and liabilities:

November 30,
1998 1997
(000's) (000's)
Deferred tax assets:
Allowance for doubtful accounts $ 23 $ 36
Inventory reserves 12 18
Property and equipment -- 111
Other -- 31
Benefit of net operating loss
carryforwards 3,773 3,664
______ ______
Gross deferred tax assets 3,808 3,860
Deferred tax assets valuation allowance (3,808) (3,860)
______ ______
Net deferred tax assets $ - $ -
______ ______

The reconciliation of the effective income tax rate to the federal
statutory rate is as follows:

Year ended
November 30,
1998 1997 1996
(000's) (000's) (000's)
Computed tax (benefit)
at the statutory rate (34%) (34%) (34%)
State income tax - - -
Change in valuation allowance 34% 34% 34%
______ ______ ______
- - -
______ ______ ______

The Company has consolidated net operating loss carryforwards of
approximately $31.6 million expiring through the year 2013. However, as the
result of "changes in control" as defined in Section 382 of the Internal Revenue
Code, approximately $25 million of such carryforwards may be subject to an
annual limitation, which is currently estimated to be a minimum of $432,000,
subject to adjustment. Such limitation would have the effect of limiting to
approximately $12.7 million the future taxable income which the Company may
offset through the year 2013 through the application of its net operating loss
carryforwards. Any changes in control subsequent to the aforementioned one
may have the effect of further limiting the utilization of the net operating
loss carryforwards. A subsidiary of the Company has state tax net operating
loss carryforwards of approximately $12.1 million to offset state taxable
income. These carryforwards expire in varying amounts between the years 1999
and 2006.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 9 - STOCKHOLDERS' EQUITY

(a) Common Stock

On September 13, 1998, the Company's Board of Directors approved a
reverse ten for one stock split. All references to the number of shares and
price per share have been adjusted to reflect the reverse split.

The Company adopted a Stock Option Plan (the "1991 Plan") in
December 1991 (amended in April 1992) under which 10,000 shares of the
Company's common stock have been reserved for issuance to officers, directors,
consultants and employees of the Company under the terms of the 1991 Plan. The
1991 Plan will expire on December 10, 2001.

In September 1993 the Company issued 18,976 shares of restricted
common stock to extinguish notes payable and accrued interest of $1,423,000.
The holders of such shares hold options ("put options") that allowed them, until
April, 1995, to require that the Company repurchase any or all of the shares at
a price of $75 per share. The put options continue to be exercisable at $300
per share, in the event of certain "changes in control" not approved by the
board of directors. The put options grant the Company a right of first refusal
to purchase any of the related shares upon the payment of the same price offered
to the holders by another party. Also, the Company can cancel the put options
by paying nominal consideration.

During fiscal 1996 the Company issued common stock to acquire Thimble
Square, to extinguish an aggregate of $423,000 in liabilities, as a loan fee
extension, and to convert $1,205,000 of 8% Convertible Debentures (see Notes 4
and 11). The Company also issued warrants and a mortgage note to acquire
property for $1.5 million (see Note 7).

During the third quarter of fiscal 1996, the Company completed a private
placement of 175,152 shares of its common stock for net cash proceeds of
$560,000. The placements included the issuance of warrants for the purchase of
77,576 shares of the Company's common stock exercisable for five years at an
exercise price of $5.20 per share. In connection with the third quarter
fiscal 1996 placements of common stock and the 8% Convertible Debentures, the
Company issued to the placement agent warrants (Class I warrants) for the
purchase of an aggregate of 122,059 shares of its common stock, subject to
adjustment, exercisable for a period of five years at an exercise price of $1.70
per share. In the third quarter of fiscal 1997 all the outstanding Class I
warrants were repurchased by the Company for $150,000.

During the first quarter of fiscal 1997 the Company issued $271,000 in
10% unsecured convertible promissory notes due January 1998. The notes were
convertible into 210,000 shares of common stock. Also, in connection
therewith, the Company issued 50,000 Class J warrants exercisable at $1.25 per
share which expired in January 1998. In the second quarter of fiscal 1997 the
notes were converted and the warrants were exercised for net cash proceeds of
$63,000.

On April 4, 1997 the Company's stockholders approved an increase in the
number of authorized shares of common stock to 7 million.

On August 4, 1997, the Company's president exercised a stock purchase
right (the "Purchase Right") awarded her by the board of directors on February
12, 1997. The Purchase Right entitled her to purchase up to 400,000 shares of
the Company's common stock during the period April 30, 1997, to April 30, 2002
at a price of $2.8125 per share. The president paid for the shares by the
delivery of a non-recourse promissory note, bearing no interest, due April 30,
2002. The promissory note is collateralized by the shares purchased therewith,
which shares would be forfeited to the extent the note is not paid on or before
maturity, and would be payable (including prepayable), in whole or in part, by
the delivery to the Company
INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 9 - STOCKHOLDERS' EQUITY (continued)

of (i) cash or (ii) other shares of the Company's common stock that the
president has owned for a period of at least six months, which shares would be
credited against the note on the basis of the closing bid price for the
Company's common stock on the date of delivery. Any dividends or distributions
made with respect to shares collateralizing any unpaid note will be held in
an escrow to be established for such shares and note until such time, if any, as
the related promissory note is paid. In November 1997, 150,000 shares subject
to this Purchase Right were returned to the Company for a pro-rata reduction
in the note. Concurrently, the President relinquished any further rights to
such 150,000 shares of common stock. At November 30, 1998, $703,000 remains
outstanding under this promissory note. The promissory note, and the shares
securing it, have been pledged by the Company to secure a 650,000 loan. See
Note 6.

On August 13, 1997, the Company issued 675,000 shares of common
stock to a group of investors ("the Smith Group") for $1,350,000 pursuant to a
stock purchase agreement also dated August 13, 1997 between members of the
Smith group, the Company and Patricia Anderson-Lasko. Concurrent with the
execution of the stock agreement and in conjunction with employment agreements
with key executives, the Company granted 292,500 in non-qualified stock options
to those executives. Subject to vesting provisions, the options remain
exercisable until August, 2002 at a price of $3.315 per share. At November 30,
1998 183,000 options were vested.

During the fourth quarter of fiscal 1997, 1,500 Class G warrants and all
25,000 Class E warrants were exercised. In connection therewith, the Company
extinguished $66,000 in indebtedness and received $14,000 in cash.
Additionally, in the fourth quarter of fiscal 1997 the Company received net
proceeds of $645,000 in a private placement for 150,000 shares of common stock.

In fiscal 1997, an aggregate of 427,793 shares of common stock were
issued to extinguish a total of $482,000 in indebtedness, including the
remaining amounts outstanding of the 8% convertible debentures.

During fiscal 1997 the Company issued stock to extinguish an aggregate
of $855,000 of liabilities.

As of November 30, 1998 the Company has outstanding common stock
purchase warrants as follows:

Class Exercise Price Shares Expiration
_____ ______________ ______ __________

H $5.20 77,576 August 2001

On October 8, 1998, the Company sold 899,000 shares of common stock
in a private placement to Furrow-Holrob Development II, L.L.C. for $1,798,000.

During 1998, the Company issued options to acquire 200,000 shares of
common stock to two members of the Board of Directors. These shares are
exercisable at $4.75 per share and vest at the rate of 2,083 per month for 48
months. As of November, 30, 1998, total number of shares vested under these
option agreements was 37,494. These options were accounted for as employee
grants. The options were issued at prices equal to fair market value at the
time of the grant. The fair value of the options granted during the year ended
November 30, 1998 ranges from $1.39 to $1.99 per share.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 9 - STOCKHOLDERS' EQUITY (continued)

During 1998, the Company also issued options to acquire 25,000 shares
of common stock to a member of management. These shares are exercisable at
$3.33 per share and vest at the rate of 2,083 per month for 12 months. As of
November 30, 1998, the total number of shares vested under this option
agreement was 8,332.

The Company has reserved 620,076 shares for issuance upon the exercise
of the outstanding common stock purchase warrants and options.

(b) Stock based compensation plans

The Company follows the guidance set forth in APB No. 25 as it pertains
to the recording of expenses from the issuance of incentive stock options. The
Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recorded in conjunction with options
issued to employees. Had compensation cost been determined based on the fair
value of the options at the grant date, consistent with the method prescribed
y SFAS No. 123, the Company's net earnings would have been reduced to the pro
forma amounts indicated below:
(000's except per share information)
1998 1997

Net income (loss) - as reported $(4,014) $(1,315)
Net income (loss) - pro forma (4,325) (1,496)
Net income (loss) per common share - as
reported (.87) (.38)
Net income (loss) per common share -
pro forma (.94) (.44)

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in 1997; expected volatility of 40%; risk-free interest rate of
5.8%; and expected lives from one to five years. Used for grants in 1998;
expected volatility of 35%; risk-free interest rate of 6.5%; and expected lives
from one to four years.

Stock option activity during the periods indicated is as follows:

Number Weighted-average
of shares exercise price

Balance at November 30, 1996 --- ---
Granted 292,500 $3.32
Forfeited --- ---
Balance at November 30, 1997 292,500 $3.32
Granted 225,000 $4.14
Forfeited --- $ ---
Balance at November 30, 1998 17,500 $3.68

NOTE 10 - COMMITMENTS AND CONTINGENCIES

The Company leases certain property, buildings and equipment. Rental
expense for the years ended November 30, 1998, 1997 and 1996 was approximately
$40,000, $63,000 and $54,000 respectively. The minimum rental commitments
under noncancellable operating leases as of November 30, 1998 are as follows:
1999, $190,000; 2000, $169,055; 2001, $168,000; 2002, $158,000 and 2003,
$158,000. During October of 1998, the Company entered into a lease agreement
with a related party (Furrow-Holrob Development II, L.L.C.) to lease a
production facility. The lease term began December 15, 1998 and runs for five
years at a lease rate of $2 per square foot for 78,900 square feet.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

The Company displays characters, names and logos on its products under
license agreements that require royalties ranging from 7% to 17% of sales. The
agreements expire through 1999 and require annual advance payments (included in
prepaid expenses) and certain annual minimums. Royalties were $346,000,
$363,000 and $441,000 for fiscal 1998, 1997 and 1996, respectively.

Four executive officers of the Company have entered into employment
agreements that expire in August 1999. The Company or the employee may
terminate the agreement at any time for cause, or without cause with 60 days
notice and 12 months severance. Annual salaries under the employment agreements
are $157,500, $70,000, $30,000 and $30,000.

In May, 1996, a foreign manufacturer that had previously supplied
imported products to a nonoperating subsidiary, NASCO Products, filed suit
against NASCO Products asserting that it is owed approximately $470,000, which
was approximatly $300,000 in excess of the amount presently recorded on the
books of NASCO Products. NASCO Products and the supplier had previously reached
an agreement on the balance owed (which is the balance recorded), as well as an
arrangement under which the schedule for NASCO Products' payments reducing the
balance would be based on future purchases from that supplier of products
distributed internationally by NP International. The Company has denied the
supplier's claims, and has asserted affirmative defenses, including the
supplier's late shipment of the original products, and the supplier's refusal to
accept and fill NP International orders on terms contained in the agreement.
NASCO Products sold its operations in July, 1995, and that company currently has
no operations or unencumbered assets. No provisions for the additional amount
sought has been recorded in the consolidated financial statements.

In December 1991, a former employee filed suit against the Company,
Patricia Anderson-Lasko and others alleging breach of an employment agreement
and conversion of his interest in certain property rights (Michael J. Tedesco
v. Innovo, Inc.., et al., Case No. 91-64033, District Court of Harris County,
Texas, 164th Judicial Circuit). Following an appeal and a second trial, a final
judgment was rendered against Innovo for $194,045.62 on August 17, 1998.
Thereafter, 20,000 shares of Common Stock which has been held in the registry of
the court, as security during the appeal and subsequent trial, were released to
the plaintiff. If the sale of that stock does not generate sufficient net
proceeds to pay the judgment, then Innovo will be liable for any shortfall.
The Company will monitor the price of its stock in the market and make
adjustments to the amount recorded in the financial statements if necessary.

In July 1992, a former employee filed suit against the Company and Spirco
for alleging breach of an employment agreement and asserting other related
claims (Wayne Copelin v. Innovo Group, Inc., et al., Case No. 11950, in the
Chancery Court of Robertson County, Tennessee). When Spirco filed for
bankruptcy in August 1993, the case proceeded against Innovo Group and a summary
judgment of $100,000 was entered against it in March 1995. However, because the
Copelin judgment was classified as a Class 8 Claim in the Spirco bankruptcy, the
Company believed that the judgment was fully paid when it issued 35,211 shares
of Common Stock to Copelin, in compliance with the confirmed Plan of
Reorganization. When Copelin sought to enforce the judgment, Innovo Group, as
the successor by merger to Spirco, brought a motion in the Spirco bankruptcy to
enforce the terms of the Plan of Reorganization against Copelin. The bankruptcy
judge granted the motion and permanently enjoined Copelin from enforcing the
judgment in an order entered on October 18, 1996. Copelin appealed to the
United States District Court and on April 13, 1998, the District Court reversed.
The case is now on appeal to the United States Third Circuit Court of Appeals.
Unless the Circuit Court reverses, Innovo Group will be liable for $100,000 plus
accrued interest since March 1995. The Company does not have the $100,000
recorded as a liability as of November 30, 1998. Management feels that the
Circuit Court will revese on the grounds that the claim was released in
bankruptcy.

INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 10 - COMMITMENTS AND CONTINGENCIES (continued)

Management is currently taking steps to improve profits by increasing the
number of marketing personnel, introducing new products and product lines and
by attempting to keep fixed costs low. The Company has also taken several steps
to increase liquidity in 1999. In 1998 the Company obtained a trade credit
facility with a key vendor. In February 1999, the Company obtained an extension
until February 2000 on a $350,000 line of credit that expired in December 1998.
Also in February 1999, the Company received $300,000 of proceeds from the
sale of common stock of two officers who also committed to provide an aggregate
of $100,000 in additional credit. Additionally, the Company received in 1999
a commitment from certain officers to fund short-term cash requirements to the
extent needed up to an amount not to exceed $500,000 in the aggregate. Also,
in 1999 the Company is in negotiations to sell a $703,000 not receivable from an
officer. No assurances can be made that those efforts will be successful or
that the Company will achieve profitability in the near future. The inability
of the Company to achieve the foregoing could require the Company to constrict
its operations.

NOTE 11-SALE OF THIMBLE SQUARE (DISCONTINUED OPERATIONS)

On September 13, 1998 Thimble Square entered into a sale agreement with
Confident Colors, LLC. Under the terms of the agreement, Confident Colors
leased the Baxley, Georgia, facility and equipment for $3,000 monthly and
succeeded to the business of Thimble Square. Thimble Square ceased
all operations following the lease to Confident Colors. The Pembroke, Georgia,
facility was sold on December 10, 1998 to H.N. Properties L.L.C. for $122,354
net of selling expenses. As a result of the cessation of the Thimble Square
business and the sale of the Pembroke, Georgia, building to H.N. Properties,
L.L.C., the Company recorded a loss totaling $1,401,000 including write off of
unamortized goodwill and adjustment of property and equipment and assets under
capital lease to their estimated net realizable values. Thimble Square's
operations for the years ending November 30, 1998, 1997 and 1996 have been
reclassified as discontinued operations on the statement of operations for those
years. In conjunction with the disposition of assets of Thimble Square, the
Company paid off, in December 1998, an aggregate of approximately $306,000 of
debt collateralized by Thimble Square assets. The net assets of Thimble Square
as of 1998 and 1997 are as follows:

1998 1997
Accounts Receivable $ 0 $ 65,000
Inventory 12,000 207,000
Other Current Liabilities 0 61,000
Property, Plant and Equipment 1,020,000 1,526,000
Accumulated Depreciation (241,000) (196,000)
Goodwill 0 702,000
Other Long-term Assets 0 12,000
Current debt (327,000) (287,000)
Accounts Payable (19,000) (45,000)
Accrued Expenses (55,000) (76,000)
Long-term debt (173,000) (365,000)
________ _________
$ 217,000 $2,377,000

NOTE 12 - RELATED PARTY TRANSACTIONS

During 1998, the Company employed a consultant to assist the Company
with its public filings and accounting statements. This consultant was also an
executive of Confident Colors. The person chiefly responsible for the
operations of the Thimble Square was also an officer of Confident Colors. The
transactions between Confident Colors and the Company were arms length and
valued at market.

NOTE 13 - SUBSEQUENT EVENTS

In February 1999, the Company sold 75,000 shares of common stock each to
two officers, or 150,000 shares in the aggregate, for proceeds of $300,000
which approximated fair value of the common stock.

In February 1999, the Company obtained an extension until February 2000 on
a $350,000 line of credit that expired in December 1998.

On March 10, 1999 the Company received a commitment from certain of its officers
to fund short-term cash requirements, in an amount not to exceed $500,000, as
may be required from time to time in fiscal 1999.

ITEM 9. CHANGES IS AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The information set forth under the captions Directors and Executive
Officers contained in the Company's 1999 Proxy Statement is incorporated
herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the captions Compensation and
Employment and Stock Option Agreements contained in the Company's 1999
Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The information set forth under the caption Beneficial Ownership of
Common Stock contained in the Company's 1999 Proxy Statement is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

The information set forth under the caption Certain Relationships and
Related Transactions contained in the Company's 1998 Proxy Statement is
incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K

(a) (1) Financial Statements. See Item 8.

(2) Financial Statement Schedules

Schedule
Page Reference

Report of Independent Certified Public
Accountants on Financial Statement Schedules 76

Schedule II - Valuation and Qualifying Accounts 77

(3) Exhibits

Exhibit
Reference
Number Description
No.

3.1 Form of Amended and Restated Certificate
of Incorporation of Registrant. 3.1 (12)

3.2 Amended and Restated Bylaws of Registrant.* 4.2 (5)

4.1 Article Four of the Registrant's Amended and
Restated Certificate of Incorporation
(included in Exhibit 3.1)*

10.1 Registrant's 1991 Stock Option Plan.* 10.5 (2)

10.2 NASCO, Inc. Amended Stock Bonus Plan dated
as of December 31, 1991.* 10.6 (2)

10.3 Note executed by NASCO, Inc. and payable to
First Independent Bank, Gallatin, Tennessee
in the principal amount of $950,000 dated
August 6, 1992.* 10.21 (2)

10.4 Deed of Trust between NASCO, Inc. and First
Independent Bank, Gallatin, Tennessee dated
August 6, 1992.* 10.22 (2)

10.5 Authorization and Loan Agreement from the
U.S. Small Business Administration, Nashville,
Tennessee dated July 21, 1992.* 10.23 (2)

10.6 Indemnity Agreement between NASCO, Inc. and
First Independent Bank, Gallatin, Tennessee.* 10.24 (2)

10.7 Compliance Agreement between NASCO, Inc. and
First Independent Bank, Gallatin, Tennessee
dated August 6, 1992.* 10.25 (2)

10.8 Assignment of Life Insurance Policy issued
by Hawkeye National Life Insurance Company
upon the life of Patricia Anderson-Lasko to
First Independent Bank, Gallatin, Tennessee
dated July 31, 1992.* 10.26 (2)

10.9 Guaranty of Patricia Anderson-Lasko on behalf
of NASCO, Inc. in favor of First Independent
Bank, Gallatin, Tennessee dated August 6, 1992.* 10.27 (2)

10.10 Guaranty of Innovo Group Inc. on behalf of
NASCO, Inc. in favor of First Independent Bank,
Gallatin, Tennessee dated August 6, 1992.* 10.28 (2)

10.11 Guaranty of Innovo, Inc. on behalf of NASCO,
Inc. in favor of First Independent Bank,
Gallatin, Tennessee dated August 6, 1992.* 10.29 (2)

10.12 Guaranty of NASCO Products, Inc. on behalf of
NASCO, Inc. in favor of First Independent Bank,
Gallatin, Tennessee dated August 6, 1992.* 10.30 (2)

10.13 Note executed by NASCO, Inc. and payable to
ICON Cash Flow Partners, L.P., Series D, in
the principal amount of $750,000 dated
August 7, 1992.* 10.36 (2)

10.14 Security Agreement between NASCO, Inc.
and ICON Cash Flow Partners, L.P., Series
D dated August 7, 1992.* 10.37 (2)

10.15 Guaranty of Innovo Group Inc. on behalf
of NASCO, Inc. in favor of ICON Cash Flow
Partners, L.P., Series D dated July 30, 1992.* 10.38 (2)

10.16 Guaranty of Innovo, Inc. on behalf of NASCO,
Inc. in favor of ICON Cash Flow Partners,
L.P., Series D dated July 30, 1992.* 10.39 (2)

10.17 Guaranty of NASCO Products, Inc. on behalf
of NASCO, Inc. in favor of ICON Cash Flow
Partners, L.P., Series D dated July 30, 1992.* 10.40 (2)

10.18 Guaranty of NASCO Sportswear, Inc. on behalf
of NASCO, Inc. in favor of ICON Cash Flow
Partners, L.P., Series D dated July 30, 1992.* 10.41 (2)

10.19 1993-1996 U.S. Olympic Merchandise Agreement
between United States Olympic Committee and
Innovo Group Inc. dated April 29, 1993.* 10.51 (6)

10.20 Non-Competition and Non-Solicitation Agreement
dated May 10, 1993 among QSP, Inc., NASCO,
Inc. and Innovo Group Inc.* 10.45 (4)

10.21 Employment Agreement dated September 30, 1993
between Innovo Group Inc. and Patricia
Anderson-Lasko.* 10.56 (6)

10.22 Form of Common Stock Put Option.* 10.61 (6)

10.23 Form of Debt Conversion Agreement between
Innovo Group Inc. and certain holders of
notes payable or Subordinated Notes Payable.* 10.63 (6)

10.24 Form of Agreement between Innovo Group Inc.
and Purchasers under the June 11, 1993 Unit
Purchase Agreement.* 10.64 (6)

10.25 Agreement dated April 29, 1994 between C.I.
Sports, Inc. and NASCO Products, Inc.* 10.65 (7)

10.26 Amended Plan of Reorganization of Spirco, Inc.* 10.67 (8)

10.27 $600,000 Secured Promissory Note and Security
Agreement dated July 20, 1994 between Innovo
Group Inc., Innovo, Inc. and NASCO Products,
Inc. and certain individual lenders.* 10.68 (8)

10.28 License Agreement dated January 24, 1994
between NFL Properties Europe B.V. and NASCO
Marketing, Inc.* 10.66 (9)

10.29 License Agreement dated July 7, 1997 between
National Football League Properties, Inc. and
Innovo Group Inc.

10.30 First Amendment to $600,000 Secured Promissory
Note and Security Agreement dated April 15, 1995.* 10.70 (9)

10.31 Security Agreement dated April 28, 1995 between
Innovo, Inc. and Riviera Finance.* 10.71 (9)

10.32 Form of Amendment to Common Stock Put Option.* 10.72 (9)

10.33 Agreement dated July 31, 1995 between NASCO
Products, Inc. and Accessory Network Group, Inc.* 10.1 (11)

10.34 License Agreement dated November 14, 1995 between
Innovo Group Inc., United States Olympic Committee
and Warner Bros. Studios* 10.47 (12)

10.35 Agreement dated December 11, 1995 between Innovo
Group Inc., United States Olympic Committee and
Original Appalachian Artworks, Inc.* 10.48 (12)

10.36 License Agreement dated August 9, 1995 between
Innovo, Inc. and NHL Enterprises, Inc.* 10.49 (12)

10.37 License Agreement dated August 9, 1995 between
NASCO Products International, Inc. and NHL
Enterprises, B.V.* 10.50 (12)

10.38 License Agreement dated December 15, 1995
between Major League Baseball Properties, Inc.
and Innovo Group Inc.* 10.51 (12)

10.39 License Agreement dated October 6, 1995
between Major League Baseball Properties
and NASCO Products International, Inc.* 10.52 (12)

10.40 License Agreement dated August 1, 1997
between NBA Properties, Inc. and Innovo, Inc.

10.41 License Agreement dated August 1, 1997
between NBA Properties, Inc. and NASCO
Products International, Inc.

10.42 Merger Agreement dated April 12, 1996 between
Innovo Group Inc. and TS Acquisition, Inc.
and Thimble Square, Inc. and the Stockholders
of Thimble Square, Inc.* 10.1 (13)

10.43 Property Acquisition Agreement dated
April 12, 1996 between Innovo Group Inc.,
TS Acquisition, Inc. and Philip Schwartz
and Lee Schwartz.* 10.2 (13)

10.44 License Agreement between Innovo, Inc. and
Anheuser-Busch Cos., Inc.* 10.57(14)

10.45 License Agreement between Innovo Group Inc.
and Warner Bros. dated June 25, 1996.* 10.45(15)

10.46 License Agreement between Innovo Group Inc.
and Walt Disney dated September 12, 1996.* 10.46(15)

10.47 Indenture of Lease dated October 12, 1993
between Thimble Square, Inc. and Development
Authority of Appling County, Georgia* 10.47(15)

10.48 Lease dated October 1, 1996 between Innovo,
Inc. and John F. Wilson, Terry Hale, and
William Dulworth* 10.48(15)

10.49 Incentive Stock Option between Samuel J. Furrow, Jr.
and Innovo Group Inc. 10.49

10.50 Incentive Stock Option between Samuel J. Furrow
and Innovo Group Inc. 10.50

10.51 Incentive Stock Option Between Robert S. Talbott
and Innovo Group Inc. 10.51

10.52 Real Property and Asset Lease Agreement between
Thimble Square and Confident Colors 10.52

10.53 Manufacturing and Distribution Agreement between
Nasco Products International and Action Performance
Companies, Inc. 10.53

10.54 Auction Agreement between Innovo Group, Inc.
and Furrow Auction Company 10.54

10.55 Auction Agreement between Innovo Group, Inc.
and Furrow Auction Company 10.55

10.56 Sale Agreement of Property in Pembroke, GA between
Thimble Square and H.N. Properties, L.L.C. 10.56

10.57 Lease Agreement between Furrow-Holrob Development, L.L.C.
and Innovo Group, iNc. 10.57

10.58 Marketing Agreement between Coulver Marketing Group and 10.58
Innovo Group, Inc.

10.59 Amendment to License Agreement with
National Football League 10.59

10.60 Amendment to License Agreement with
Warner Bros. 10.60

21 Subsidiaries of the Registrant 21 (13)

23.1 Consent of BDO Seidman, LLP (incorporated by
reference as Exhibit 23.2 to Registration
Statements No. 33-71576 and No. 333-12527).

27 Financial Data Schedule (appears only in
electronically filed version of this report).
_________________________

* Certain of the exhibits to this Report, indicated by an asterisk, are
incorporated by reference to other documents on file with the Securities and
Exchange Commission with which they were physically filed, to be part hereof as
of their respective dates. Documents to which reference is made are as follows:

(1) Amendment No. 4 Registration Statement on Form S-18 (No. 33-25912-NY) of
ELORAC Corporation filed October 4, 1990.

(2) Amendment No. 2 to the Registration Statement on Form S-1 (No. 33-51724)
of Innovo Group Inc. filed November 12, 1992.

(3) Annual Report on Form 10-K of Innovo Group Inc. (file no. 0-18926) for the
year ended October 31, 1993.

(4) Current Report on Form 8-K of Innovo Group Inc. (file no. 0-18926) dated
May 10, 1993 filed May 25, 1993.

(5) Registration Statement on Form S-8 (No. 33-71576) of Innovo Group Inc.
filed November 12, 1993.

(6) Annual Report on Form 10-K of Innovo Group Inc. (file 0-18926) for the
year ended October 31, 1993.

(7) Amendment No. 2 to the Registration Statement on Form S-1 (No. 33-77984)
of Innovo Group Inc. filed July 25, 1994.

(8) Amendment No. 4 to the Registration Statement on Form S-1 (No. 33-77984)
of Innovo Group Inc. filed August 18, 1994.

(9) Annual Report on Form 10-K of Innovo Group Inc. (file 0-18926) for the
year ended October 31, 1994.

(10) Registration Statement on Form S-8 (No. 33-94880) of Innovo Group Inc.
filed July 21, 1995.

(11) Current Report on Form 8-K of Innovo Group Inc. (file 0-18926) dated
July 31, 1995 filed September 13, 1995.

(12) Annual Report on Form 10-K of Innovo Group Inc. (file 0-18926) for the
year ended October 31, 1995.

(13) Current Report on Form 8-K of Innovo Group Inc. (file 0-18926) dated
April 12, 1996, filed April 29, 1996.

(14) Registration Statement on Form S-1 (No. 333-03119) of Innovo Group Inc.,
as amended June 28, 1996.

(15) Annual Report on Form 10-K of Innovo Group Inc. (file 0-18926) for the
year ended November 30, 1996.

(b) Reports on Form 8-K

1. On September 15, 1998, the Company filed a Current Report on Form 8-K
to report pursuant to Item 5, Other Events, that the Company had completed a
reverse one-for-ten stroke split effective September 11, 1998 and to file the
press release with respect to such reverse split as an exhibit.

2. On October 15, 1998, the Company filed a Current Report on Form 8-K
to report pursuant to Item 5, Other Events, that the Company had entered into an
agreement to dispose of the Thimble Square business, and to file the press
release with respect to such event.

3. On October 15, 1998, the Company filed a Current Report on Form 8-K
to report pursuant to Item 5, Other Events, that the Company would relocate its
operations to Knoxville, Tennessee, and to file the press release with respect
to such event.

4. On October 22, 1998, the Company filed a Current Report on Form 8-K
to report pursuant to Item 5, Other Events, that the Company once again
satisfied the tangible net worth requirements for listing on the Nasdaq SmallCap
Market and to file the press release with respect to such qualification as an
exhibit.

5. On October 22, 1998, the Company filed a Current Report on Form 8-K
to report pursuant to Item 5, Other Events, that the Company had sold 599,000
shares of common stock for aggregate consideration of $1,798,000 and to file the
press release with respect to such sale as an exhibit.

6. On November 3, 1998, the Company filed a Current Report on Form 8-
K/A pursuant to Item 5, Other Events, containing a pro forma balance sheet as of
September 30, 1998 reflecting the effect on the Company's net tangible assets of
the sale of common stock for aggregate proceeds of $1,798,000 and filing the
press release with respect to such pro forma balance sheet as an exhibit.

SIGNATURES

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

INNOVO GROUP INC.

By:_________________________________________
Samuel J. Furrow
Chairman of the Board and Chief Executive
Officer

February 27, 1999

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

Signature and Title
Date

____________________________ Chief Executive Officer March 15, 1999
Samuel J. Furrow
Chairman of the Board,
Chief Executive Officer
and Director

____________________________ March 15, 1999
Dan Page
Chief Operating Officer and Director

____________________________ March 15, 1999
Patricia Anderson-Lasko
President and Director

____________________________ March 15, 1999
J. Eric Hendrickson
Vice President, Treasurer
and Director

____________________________ March 15, 1999
L.E. Smith
Director

____________________________ March 15, 1999
Herb Newton
Director

____________________________ March 15, 1999
Samuel J. Furrow, Jr.
Vice President and Director

____________________________ March 15, 1999
Marc B. Crossman
Director

____________________________ Chief Financial Officer March 15, 1999
Bradley T. White
Controller

____________________________ Chief Accounting Officer March 15, 1999
Bradley T. White
Controller

Report of Independent Certified Public Accountants on Financial Statement
Schedules

Board of Directors
Innovo Group Inc.

The audits referred to in our report to Innovo Group Inc. and subsidiaries,
dated February 9, 1999 which is contained in Item 8, included the audits of the
schedule listed under Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

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

/s/BDO SEIDMAN, LLP
BDO SEIDMAN, LLP

Atlanta, Georgia
February 10, 1999,
except for Note 13 which
is as of March 10, 1999.

INNOVO GROUP INC AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

Additions
Balance at Charged Charged to Balance
Beginning to Costs Other Accounts- Deductions- at End
Description of Period And Expense Describe Describe of Period

Allowance for doubtful accounts:
Year ended November 30, 1998 $ 106,000 $132,000 $ - $ 171,000 (A) $ 67,000
Year ended November 30, 1997 66,000 153,000 - 113,000 (A) 106,000
Year ended November 30, 1996 99,000 78,000 - 111,000 (A) 66,000

Allowance for inventories:
Year ended November 30, 1998 $ 36,000 $ - $ - $ - (B) $ 36,000
Year ended November 30, 1997 73,000 - - 37,000 (B) 36,000
Year ended November 30, 1996 18,000 55,000 - - (B) 73,000

Allowance for deferred taxes:
Year ended November 30, 1998 $ 3,860,000 $ - $ - $ 52,000 $3,808,000
Year ended November 30, 1997 3,415,000 - 445,000 - 3,860,000
Year ended November 30, 1996 8,815,000 - - 5,400,000 3,415,000
Note A - Uncollected receivables written off, net of receivables.
Note B - Recovery of valuation reserve.

EXHIBIT 10.49
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (I) THERE IS AN EFFECTIVE
REGISTRATION COVERING SUCH OPTION OR SUCH SHARES. AS THE
CASE MAY BE, UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE
PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933.

INNOVO GROUP, INC.

NON-QUALIFIED SHARE OPTION AGREEMENT

This Agreement is entered into this day by and between INNOVO GROUP INC., a
Delaware corporation with its offices located at 27 North Main Street,
Springfield, Tennessee 37172, (Corporation), and Samuel J. Furrow, Jr.
(Furrow), a Tennessee resident whose principal residence address is 5817 Toole
Dr., Knoxville Tennessee 37919.

WHEREAS, the Corporation desires to obtain Furrow's services as V.P. of
Corporate Development and Spokesperson;

WHEREAS, this Option will provide equity incentives for Samuel J. Furrow,
Jr. to become and remain a member of the Corporation, by granting such
person options to purchase shares of the Corporation's common stock
(Shares);

WHEREAS, the Board has determined to grant to Furrow a non-qualified
share option (Option) to purchase 250,000 upon and subject to the terms
and conditions stated in this Agreement.

NOW THEREFORE, IT IS AGREED AS FOLLOWS:

Section 1. Grant of Option. Subject to the terms and conditions of this
Agreement, the Corporation hereby grants to Furrow, during the period
ending 5:00 p.m. Springfield, Tennessee time on August 31, 2003
(Expiration Date), the option to purchase from the Corporation, from time
to time, at a price of $0.33 per Share (Exercise Price), up to, but not to
exceed, an aggregate of 250,000 Shares (Option Shares).

Section 2. Exercise of Option.

2.1 Date Exercisable. This Option shall become exercisable by Furrow
with respect to 20,834 Shares per month for the next 12 months after
the date of this Agreement during which Furrow continues to serve
as an employee of the Corporation up to a maximum of 250,000
Shares.

2.2 Manner of Exercise. This Option may be exercised in whole or in
part by delivery to the Corporation, from time to time, of a written
notice in substantially the form set forth in Exhibit A hereto, signed
by Furrow, specifying the number of Option Shares that Furrow then
desires to purchase, together with cash, certified check, or bank draft
payable to the order of the Corporation, or other form of payment
acceptable to the Corporation, for an amount of United States dollars
equal to the Exercise Price of such shares. If the Corporation, in its
sole discretion, elects to allow payment of all or a portion of the
Exercise Price secured by a pledge, also in form satisfactory to the
Corporation, of the Shares purchased by such exercise of this Option.

2.3 Certificates. Promptly after any exercise in whole or in part of this
Option by Furrow, the Corporation shall deliver to Furrow a certificate or
certificates for the number of Option Shares with respect to which this Option
was so exercised, registered in Furrow's name.

2.4 Duration of Option. This Option, to the extent not previously
exercised, shall terminate upon the earliest of the following dates:

2.4.1 the Expiration Date

2.4.2 immediately upon Furrow's resignation from the
Board or upon failure to be re-nominated or reelected
to the Board.

2.4.3 three months after Furrow's termination as an
employee, if such termination is by reason of
Furrow's disability (as defined in IRC 22(e)(3)) or
death.

Section 3. Nontransferability.

3.1 Restriction. This Option is not transferable by Furrow otherwise than
by testamentary will or the laws of descent and distribution and, during
Furrow's lifetime, may be exercised only by Furrow or Furrow's guardian or
legal representative. Except as permitted by the preceding sentence, neither
this Option nor any of the rights and privileges conferred thereby shall be
transferred, assigned, pledged, or hypothecated in any way (whether by operation
of law or otherwise), and no such option, right, or privilege shall be subject
to execution, attachment, or similar process. Upon any attempt to transfer
this Option, or of any right or privilege conferred thereby, contrary to the
provisions hereof, , or upon the levy of any attachment or similar process
upon such option, right, or privilege, this Option and any such rights and
privileges shall immediately become null and void.

3.2 Exercise in Event of Death or Disability. Whenever the word
Furrow is used in any provision of this Agreement under circumstances
when the provision should logically be construed to apply to Furrow's
guardian, legal representative, executor, administrator, or the person or
persons to whom this Option may be transferred by testamentary will or by
the laws of descent and distribution, the word Furrow shall be deemed to
include such person or persons.

3.3. No Rights As Shareholder Prior To Exercise. Furrow shall not, by
virtue hereof, be entitled to any rights of a shareholder in the Corporation,
either at law or equity, unless and until this Option is exercised. The
rights of Furrow are limited to those expressed in this Option and are not
enforceable against the Corporation except to the extent set forth herein.

Section 4. Anti-Dilution Provisions.

4.1 The number and kind of Shares purchasable upon the exercise of this
Option and the Exercise
Price shall be subject to adjustment from time to time as follows:

4.1.1 In case the Corporation shall (i) pay a dividend or make a
distribution on the outstanding
Shares payable in Shares, (ii) subdivide the outstanding Shares into a greater
number of Shares, (iii) combine the outstanding Shares into a lesser number
of Shares, or (iv) issue by reclassification of the Shares any Shares of the
Corporation, Furrow shall thereafter be entitled, upon exercise, to receive the
number and kind of shares which, if this Option had been exercised
immediately prior to the happening of such event, Furrow would have owned
upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, or reclassification. Such adjustment
shall become effective on the day next following (v) the record date of such
dividend or distribution or (vi) the day upon which such subdivision,
combination, or reclassification shall become effective.

4.1.2 In case the Corporation shall consolidate or merge into or with
another corporation, or in
case the Corporation shall sell or convey to any other person or persons all
or substantially all the property of the Corporation, Furrow shall thereafter
be entitled, upon exercise, to receive the kind and amount of shares, other
securities, cash, and property receivable upon such consolidation, merger,
sale, or conveyance by a holder of the number of Shares which might have
been purchased upon exercise of this Option immediately prior to such
consolidation, merger, sale, or conveyance, and shall have no other
conversion rights. In any such event, effective provision shall be made, in
the certificate or articles of incorporation of the resulting or surviving
corporation, in any contracts of sale and conveyance, or otherwise so that, so
far as appropriate and as nearly as reasonable may be, the provisions set forth
herein for the protection of the rights of Furrow shall thereafter be made
applicable.

4.1.3 Whenever the number of Shares purchasable upon exercise of
this Option is adjusted
pursuant to this Section, the Exercise Price per Share in effect immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of Shares purchasable upon exercise of this Option immediately prior
to such adjustment, and of which the denominator shall be the number of
Shares so purchasable immediately after such adjustment, so that the
aggregate Exercise Price of this Option remains the same.

4.1.4 No adjustment in the number of Shares which may be
purchased upon exercise of this
Option shall be required unless such adjustment would require an increase or
decrease of more than 1/100 of a Share in the number of Shares which may
be so purchased, provided, however, that any adjustment which by reason of
this Section is not required to be made shall be carried forward cumulatively
and taken into account in any subsequent calculation. All calculations under
this Section shall be made to the nearest cent or to the nearest one-hundredth
of a Share, as the case may be.

4.1.5 In the event that at any time, as a result of an adjustment made
pursuant to this Section,
Furrow shall become entitled to receive upon exercise of this Option cash,
property, or securities.

4.1.6 Irrespective of any adjustments in the Exercise Price or in the
number or kind of Shares purchasable upon exercise of this
Option, the form of Options theretofore or thereafter issued
may continue to express the same price and number and kind
of shares as are stated in this Option.

Section 5. Officer's Certificate. Whenever the number or kind of
securities purchasable upon exercise of this Option or the Exercise Price shall
be adjusted as required by the provisions of Section 4, the Corporation shall
forthwith file with its Secretary or its Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon exercise of
this Option and the adjusted Exercise Price determined as herein provided and
setting forth in reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by Furrow and the Corporation shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to Furrow.

Section 6. No Effect On Powers of Corporation. The existence of this
Option shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any adjustments, recapitalizations,
reorganization, or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred shares with rights greater than or affecting the
Shares, or the dissolution or liquidation of the Corporation, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

Section 7. No Waiver of Corporation's Right to Terminate Employment.
Nothing in this Agreement shall be construed to confer or shall be deemed
to confer on Furrow any right to continue as an employee of the Corporation,
or to continue any other relationship with, the Corporation or any parent or
subsidiary of the Corporation, or limit in any way the right of the Corporation
or its shareholders to terminate Furrow's employment or other relationship
at any time, with or without cause. If Furrow is terminated without cause,
this agreement shall not be effected by such termination.

Section 8. Compliance With Securities Laws.

8.1 No Exercise Until Compliance. If the Corporation at any time
determines that registration or qualification of the Shares or this
Option under state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable, then this
Option may not be exercised, in whole or in part, until such
registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the
Corporation..

8.2 Investment Interest. If required by the Corporation at the time of any
exercise of this Option as a condition to such exercise, Furrow shall
enter into an agreement with the Corporation in form satisfactory to
counsel for the Corporation by which Furrow (I) shall represent that
the Shares are being acquired for Furrow's own account for
investment and not with a view to, or for sale in connection with, any
resale or distribution of such Shares, and (ii) shall agree that, if
Furrow should decide to sell, transfer, or otherwise, dispose of any of
such Shares, Furrow may do so only if the shares are registered under
the Securities Act of 1933 and the relevant state securities laws,
unless, in the opinion of counsel for the Corporation, such registration
is not required, or the transfer in pursuant to the Securities and
Exchange Commission Rule 144; provided, however, that the
Corporation agrees to use its best efforts to cause a Registration
Statement on Form S-8 with respect to the Shares issuable upon
exercise of this Option to be filed and declared effective as soon as is
practicable, and to maintain the effectiveness of such Registration
Statement until such time as the Option has been fully exercised or
terminated.

Section 9. Violation. Any provision of this Agreement to the contrary
notwithstanding, this Option shall not be exercisable at any time, in whole or
in part, if issuance and delivery of the Option Shares would violate any law
or registration.

Section 10. Representations of Furrow. Furrow represents that he has been
advised that he is not being represented in this transaction by the
corporation's attorneys and that Furrow has been advised to seek separate
legal counsel for advice in this matter.

Section 11. Notices. Any notice under this Agreement shall be in writing
and shall be effective when actually delivered in person or three days after
being deposited in the U.S. mail, registered or certified, postage prepaid and
addressed to the party at the address stated in this Option or such other
address as either party may designate by written notice to the other.

Section 12. Law Governing. This Option shall be governed by and
construed in accordance with the laws of the State of Delaware.

IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the date first above written.
INNOVO GROUP INC.

By:
_________________________________
Sam Furrow, Chairman
and CEO

__________________________________
Samuel J. Furrow, Jr.

EXHIBIT A

INNOVO GROUP INC.
NOTICE OF EXERCISE OF SHARE OF OPTION

I hereby exercise my Non-Qualified Share Option granted by INNOVO
GROUP INC. (Corporation) and seek to purchase _____________
shares of common shares of the Corporation pursuant to said Option. I
understand that this exercise is subject to all the terms and provisions of
my Non-Qualified Share Option Agreement.

Enclosed is my check in the sum of $_________________ in payment for
such shares.

Dated:_____________,________

___________________________
Signature

___________________________
Address

___________________________

___________________________

___________________________
Social Security Number

Receipt is hereby acknowledged of the delivery to me by INNOVO GROUP
INC. of certificates for ______________________ common shares of the
Corporation purchased by me pursuant to the terms and conditions of Non-
Qualified Share Option Agreement referred to above.

Date:_____________,________

__________________________
Signature
EXHIBIT 10.50
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE
BBEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (I) THERE IS AN EFFECTIVE
REGISTRATION COVERING SUCH OPTION OR SUCH SHARES. AS THE
CASE MAY BE, UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE
PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933.

INNOVO GROUP, INC.

NON-QUALIFIED SHARE OPTION AGREEMENT

This Agreement is entered into this day by and between INNOVO GROUP INC., a
Delaware corporation with its offices located at 27 North Main Street,
Springfield, Tennessee 37172, (Corporation), and Samuel J. Furrow (Furrow),
a Tennessee resident whose principal residence address is 5300 Turtle Point
Ln., Knoxville TN, 37919.

WHEREAS, the Corporation desires to obtain Furrow's services as a member
of the Corporation's Board of Directors;

WHEREAS, this Option will provide equity incentives for Samuel J. Furrow
to become and remain a member of the Board of Directors (Board) of the
Corporation, by granting such person options to purchase shares of the
Corporation's common stock (Shares);

WHEREAS, the Board has determined to grant to Furrow a non-qualified
share option (Option) to purchase 1,000,000 upon and subject to the terms
and conditions stated in this Agreement.

NOW THEREFORE, IT IS AGREED AS FOLLOWS:

Section 1. Grant of Option. Subject to the terms and conditions of this
Agreement, the Corporation hereby grants to Furrow, during the period
ending 5:00 p.m. Springfield, Tennessee time on March 31, 2003
(Expiration Date), the option to purchase from the Corporation, from time
to time, at a price of $0.475 per Share (Exercise Price), up to, but not to
exceed, an aggregate of 1,000,000 Shares (Option Shares).

Section 2. Exercise of Option.

2.3 Date Exercisable. This Option shall become exercisable by Furrow
with respect to 20,834 Shares during each of the first 48 calendar
months after the date of this Agreement during which Furrow
continues to serve as a member of the Board up to a maximum of
1,000,000 Shares.

2.4 Manner of Exercise. This Option may be exercised in whole or in
part by delivery to the Corporation, from time to time, of a written
notice in substantially the form set forth in Exhibit A hereto, signed
by Furrow, specifying the number of Option Shares that Furrow then
desires to purchase, together with cash, certified check, or bank draft
payable to the order of the Corporation, or other form of payment
acceptable to the Corporation, for an amount of United States dollars
equal to the Exercise Price of such shares. If the Corporation, in its
sole discretion, elects to allow payment of all or a portion of the
Exercise Price secured by a pledge, also in form satisfactory to the
Corporation, of the Shares purchased by such exercise of this Option.

2.3 Certificates. Promptly after any exercise in whole or in part of this
Option by Furrow, the Corporation shall deliver to Furrow a certificate or
certificates for the number of Option Shares with respect to which this Option
was so exercised, registered in Furrow's name.

2.4 Duration of Option. This Option, to the extent not previously
exercised, shall terminate upon the earliest of the following dates:

2.4.4 the Expiration Date

2.4.5 immediately upon Furrow's resignation from the
Board or upon failure to be re-nominated or reelected
to the Board.

2.4.6 three months after Furrow's termination of
membership on the Board, if such termination is by
reason of Furrow's disability (as defined in IRC
22(e)(3)) or death.

Section 3. Nontransferability.

3.1 Restriction. This Option is not transferable by Furrow otherwise than
by testamentary will or the
laws of descent and distribution and, during Furrow's lifetime, may be
exercised only by Furrow or Furrow's guardian or legal representative.
Except as permitted by the preceding sentence, neither this Option nor any of
the rights and privileges conferred thereby shall be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or
otherwise), and no such option, right, or privilege shall be subject to
execution, attachment, or similar process. Upon any attempt to transfer this
Option, or of any right or privilege conferred thereby, contrary to the
provisions hereof, , or upon the levy of any attachment or similar process
upon such option, right, or privilege, this Option and any such rights and
privileges shall immediately become null and void.

3.2 Exercise in Event of Death or Disability. Whenever the word
Furrow is used in any provision of this Agreement under circumstances
when the provision should logically be construed to apply to Furrow's
guardian, legal representative, executor, administrator, or the person or
persons to whom this Option may be transferred by testamentary will or by
the laws of descent and distribution, the word Furrow shall be deemed to
include such person or persons.

3.4. No Rights As Shareholder Prior To Exercise. Furrow shall not, by
virtue hereof, be entitled to
any rights of a shareholder in the Corporation, either at law or equity, unless
and until this Option is exercised. The rights of Furrow are limited to those
expressed in this Option and are not enforceable against the Corporation
except to the extent set forth herein.

Section 4. Anti-Dilution Provisions.

4.1 The number and kind of Shares purchasable upon the exercise of this
Option and the Exercise
Price shall be subject to adjustment from time to time as follows:

4.1.7 In case the Corporation shall (i) pay a dividend or make a
distribution on the outstanding
Shares payable in Shares, (ii) subdivide the outstanding Shares into a greater
number of Shares, (iii) combine the outstanding Shares into a lesser number
of Shares, or (iv) issue by reclassification of the Shares any Shares of the
Corporation, Furrow shall thereafter be entitled, upon exercise, to receive the
number and kind of shares which, if this Option had been exercised
immediately prior to the happening of such event, Furrow would have owned
upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, or reclassification. Such adjustment
shall become effective on the day next following (v) the record date of such
dividend or distribution or (vi) the day upon which such subdivision,
combination, or reclassification shall become effective.

4.1.8 In case the Corporation shall consolidate or merge into or with
another corporation, or in
case the Corporation shall sell or convey to any other person or persons all
or substantially all the property of the Corporation, Furrow shall thereafter be
entitled, upon exercise, to receive the kind and amount of shares, other
securities, cash, and property receivable upon such consolidation, merger,
sale, or conveyance by a holder of the number of Shares which might have
been purchased upon exercise of this Option immediately prior to such
consolidation, merger, sale, or conveyance, and shall have no other
conversion rights. In any such event, effective provision shall be made, in
the certificate or articles of incorporation of the resulting or surviving
corporation, in any contracts of sale and conveyance, or otherwise so that, so
far as appropriate and as nearly as reasonable may be, the provisions set forth
herein for the protection of the rights of Furrow shall thereafter be made
applicable.

4.1.9 Whenever the number of Shares purchasable upon exercise of
this Option is adjusted
pursuant to this Section, the Exercise Price per Share in effect immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of Shares purchasable upon exercise of this Option immediately prior
to such adjustment, and of which the denominator shall be the number of
Shares so purchasable immediately after such adjustment, so that the
aggregate Exercise Price of this Option remains the same.

4.1.10 No adjustment in the number of Shares which may be
purchased upon exercise of this
Option shall be required unless such adjustment would require an increase or
decrease of more than 1/100 of a Share in the number of Shares which may
be so purchased, provided, however, that any adjustment which by reason of
this Section is not required to be made shall be carried forward cumulatively
and taken into account in any subsequent calculation. All calculations under
this Section shall be made to the nearest cent or to the nearest one-hundredth
of a Share, as the case may be.

4.1.11 In the event that at any time, as a result of an adjustment made
pursuant to this Section,
Furrow shall become entitled to receive upon exercise of this Option cash,
property, or securities.

4.1.12 Irrespective of any adjustments in the Exercise Price or in the
number or kind of Shares purchasable upon exercise of this
Option, the form of Options theretofore or thereafter issued
may continue to express the same price and number and kind
of shares as are stated in this Option.

Section 5. Officer's Certificate. Whenever the number or kind of
securities purchasable upon exercise of this Option or the Exercise Price shall
be adjusted as required by the provisions of Section 4, the Corporation shall
forthwith file with its Secretary or its Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon exercise of
this Option and the adjusted Exercise Price determined as herein provided and
setting forth in reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by Furrow and the Corporation shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to Furrow.

Section 6. No Effect On Powers of Corporation. The existence of this
Option shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any adjustments, recapitalizations,
reorganization, or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred shares with rights greater than or affecting the
Shares, or the dissolution or liquidation of the Corporation, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

Section 7. No Waiver of Corporation's Right to Terminate Employment.
Nothing in this Agreement shall be construed to confer or shall be deemed
to confer on Furrow any right to continue as a member of the Board of, or to
continue any other relationship with, the Corporation or any parent or
subsidiary of the Corporation, or limit in any way the right of the Corporation
or its shareholders to terminate Furrow's membership on the Board or other
relationship at any time, with or without cause.

Section 8. Compliance With Securities Laws.

8.3 No Exercise Until Compliance. If the Corporation at any time
determines that registration or qualification of the Shares or this
Option under state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable, then this
Option may not be exercised, in whole or in part, until such
registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the
Corporation..

8.4 Investment Interest. If required by the Corporation at the time of any
exercise of this Option as a condition to such exercise, Furrow shall
enter into an agreement with the Corporation in form satisfactory to
counsel for the Corporation by which Furrow (i) shall represent that
the Shares are being acquired for Furrow's own account for
investment and not with a view to, or for sale in connection with, any
resale or distribution of such Shares, and (ii) shall agree that, if
Furrow should decide to sell, transfer, or otherwise, dispose of any of
such Shares, Furrow may do so only if the shares are registered under
the Securities Act of 1933 and the relevant state securities laws,
unless, in the opinion of counsel for the Corporation, such registration
is not required, or the transfer in pursuant to the Securities and
Exchange Commission Rule 144; provided, however, that the
Corporation agrees to use its best efforts to cause a Registration
Statement on Form S-8 with respect to the Shares issuable upon
exercise of this Option to be filed and declared effective as soon as is
practicable, and to maintain the effectiveness of such Registration
Statement until such time as the Option has been fully exercised or
terminated.

Section 9. Violation. Any provision of this Agreement to the contrary
notwithstanding, this Option shall not be exercisable at any time, in whole or
in part, if issuance and delivery of the Option Shares would violate any law
or registration.

Section 10. Representations of Furrow. Furrow represents that he has been
advised that he is not being represented in this transaction by the
corporation's attorneys and that Furrow has been advised to seek separate
legal counsel for advice in this matter.

Section 11. Notices. Any notice under this Agreement shall be in writing
and shall be effective when actually delivered in person or three days after
being deposited in the U.S. mail, registered or certified, postage prepaid and
addressed to the party at the address stated in this Option or such other
address as either party may designate by written notice to the other.

Section 12. Law Governing. This Option shall be governed by and
construed in accordance with the laws of the State of Delaware.

IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the date first above written.
INNOVO GROUP INC.

By:
_________________________________
L.E. Smith, Chairman
and CEO

__________________________________
Samuel J. Furrow

EXHIBIT A

INNOVO GROUP INC.
NOTICE OF EXERCISE OF SHARE OF OPTION

I hereby exercise my Non-Qualified Share Option granted by INNOVO
GROUP INC. (Corporation) and seek to purchase _____________
shares of common shares of the Corporation pursuant to said Option. I
understand that this exercise is subject to all the terms and provisions of
my Non-Qualified Share Option Agreement.

Enclosed is my check in the sum of $_________________ in payment for
such shares.

Dated:_____________,________

___________________________
Signature

___________________________
Address

___________________________

___________________________

___________________________
Social Security Number

Receipt is hereby acknowledged of the delivery to me by INNOVO GROUP
INC. of certificates for ______________________ common shares of the
Corporation purchased by me pursuant to the terms and conditions of Non-
Qualified Share Option Agreement referred to above.

Date:_____________,________

__________________________
Signature

EXHIBIT 10.51
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE
BBEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
CORPORATION WILL NOT TRANSFER THIS OPTION OR THE
UNDERLYING COMMON SHARES UNLESS (I) THERE IS AN EFFECTIVE
REGISTRATION COVERING SUCH OPTION OR SUCH SHARES. AS THE
CASE MAY BE, UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATES SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE
PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933.

INNOVO GROUP, INC.

NON-QUALIFIED SHARE OPTION AGREEMENT

This Agreement is entered into this day by and between INNOVO GROUP INC., a
Delaware corporation with its offices located at 27 North Main Street,
Springfield, Tennessee 37172., (Corporation), and Robert S. Talbott
(Talbott), a Tennessee resident whose principal residence address is 7016 Old
Kent Dr., Knoxville Tennessee 37919.

WHEREAS, the Corporation desires to obtain Talbott's services as a member
of the Corporation's Board of Directors;

WHEREAS, this Option will provide equity incentives for Robert S. Talbott
to become and remain a member of the Board of Directors (Board) of the
Corporation, by granting such person options to purchase shares of the
Corporation's common stock (Shares);

WHEREAS, the Board has determined to grant to Talbott a non-qualified
share option (Option) to purchase 1,000,000 upon and subject to the terms
and conditions stated in this Agreement.

NOW THEREFORE, IT IS AGREED AS FOLLOWS:

Section 1. Grant of Option. Subject to the terms and conditions of this
Agreement, the Corporation hereby grants to Talbott, during the period
ending 5:00 p.m. Springfield, Tennessee time on August 31, 2003
(Expiration Date), the option to purchase from the Corporation, from time
to time, at a price of $0.475 per Share (Exercise Price), up to, but not to
exceed, an aggregate of 1,000,000 Shares (Option Shares).

Section 2. Exercise of Option.

2.5 Date Exercisable. This Option shall become exercisable by Talbott
with respect to 20,834 Shares during each of the first 48 calendar
months after the date of this Agreement during which Talbott
continues to serve as a member of the Board up to a maximum of
1,000,000 Shares.

2.6 Manner of Exercise. This Option may be exercised in whole or in
part by delivery to the Corporation, from time to time, of a written
notice in substantially the form set forth in Exhibit A hereto, signed
by Talbott, specifying the number of Option Shares that Talbott then
desires to purchase, together with cash, certified check, or bank draft
payable to the order of the Corporation, or other form of payment
acceptable to the Corporation, for an amount of United States dollars
equal to the Exercise Price of such shares. If the Corporation, in its
sole discretion, elects to allow payment of all or a portion of the
Exercise Price secured by a pledge, also in form satisfactory to the
Corporation, of the Shares purchased by such exercise of this Option.

2.3 Certificates. Promptly after any exercise in whole or in part of this
Option by Talbott, the Corporation shall deliver to Talbott a certificate or
certificates for the number of Option Shares with respect to which this Option
was so exercised, registered in Talbott's name.

2.4 Duration of Option. This Option, to the extent not previously
exercised, shall terminate upon the earliest of the following dates:

2.4.7 the Expiration Date

2.4.8 immediately upon Talbott's resignation from the
Board or upon failure to be re-nominated or reelected
to the Board.

2.4.9 three months after Talbott's termination of
membership on the Board, if such termination is by
reason of Talbott's disability (as defined in IRC
22(e)(3)) or death.

Section 3. Nontransferability.

3.1 Restriction. This Option is not transferable by Talbott otherwise than
by testamentary will or the
laws of descent and distribution and, during Talbott's lifetime, may be
exercised only by Talbott or Talbott's guardian or legal representative.
Except as permitted by the preceding sentence, neither this Option nor any of
the rights and privileges conferred thereby shall be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or
otherwise), and no such option, right, or privilege shall be subject to
execution, attachment, or similar process. Upon any attempt to transfer this
Option, or of any right or privilege conferred thereby, contrary to the
provisions hereof, , or upon the levy of any attachment or similar process
upon such option, right, or privilege, this Option and any such rights and
privileges shall immediately become null and void.

3.2 Exercise in Event of Death or Disability. Whenever the word
Talbott is used in any provision of this Agreement under circumstances
when the provision should logically be construed to apply to Talbott's
guardian, legal representative, executor, administrator, or the person or
persons to whom this Option may be transferred by testamentary will or by
the laws of descent and distribution, the word Talbott shall be deemed to
include such person or persons.

3.5. No Rights As Shareholder Prior To Exercise. Talbott shall not, by
virtue hereof, be entitled to
any rights of a shareholder in the Corporation, either at law or equity, unless
and until this Option is exercised. The rights of Talbott are limited to those
expressed in this Option and are not enforceable against the Corporation
except to the extent set forth herein.

Section 4. Anti-Dilution Provisions.

4.1 The number and kind of Shares purchasable upon the exercise of this
Option and the Exercise
Price shall be subject to adjustment from time to time as follows:

4.1.13 In case the Corporation shall (i) pay a dividend or make a
distribution on the outstanding
Shares payable in Shares, (ii) subdivide the outstanding Shares into a greater
number of Shares, (iii) combine the outstanding Shares into a lesser number
of Shares, or (iv) issue by reclassification of the Shares any Shares of the
Corporation, Talbott shall thereafter be entitled, upon exercise, to receive
the number and kind of shares which, if this Option had been exercised
immediately prior to the happening of such event, Talbott would have owned
upon such exercise and been entitled to receive upon such dividend,
distribution, subdivision, combination, or reclassification. Such adjustment
shall become effective on the day next following (v) the record date of such
dividend or distribution or (vi) the day upon which such subdivision,
combination, or reclassification shall become effective.

4.1.14 In case the Corporation shall consolidate or merge into or with
another corporation, or in
case the Corporation shall sell or convey to any other person or persons all
or substantially all the property of the Corporation, Talbott shall thereafter
be entitled, upon exercise, to receive the kind and amount of shares, other
securities, cash, and property receivable upon such consolidation, merger,
sale, or conveyance by a holder of the number of Shares which might have
been purchased upon exercise of this Option immediately prior to such
consolidation, merger, sale, or conveyance, and shall have no other
conversion rights. In any such event, effective provision shall be made, in
the certificate or articles of incorporation of the resulting or surviving
corporation, in any contracts of sale and conveyance, or otherwise so that, so
far as appropriate and as nearly as reasonable may be, the provisions set forth
herein for the protection of the rights of Talbott shall thereafter be made
applicable.

4.1.15 Whenever the number of Shares purchasable upon exercise of
this Option is adjusted
pursuant to this Section, the Exercise Price per Share in effect immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of Shares purchasable upon exercise of this Option immediately prior
to such adjustment, and of which the denominator shall be the number of
Shares so purchasable immediately after such adjustment, so that the
aggregate Exercise Price of this Option remains the same.

4.1.16 No adjustment in the number of Shares which may be
purchased upon exercise of this
Option shall be required unless such adjustment would require an increase or
decrease of more than 1/100 of a Share in the number of Shares which may
be so purchased, provided, however, that any adjustment which by reason of
this Section is not required to be made shall be carried forward cumulatively
and taken into account in any subsequent calculation. All calculations under
this Section shall be made to the nearest cent or to the nearest one-hundredth
of a Share, as the case may be.

4.1.17 In the event that at any time, as a result of an adjustment made
pursuant to this Section,
Talbott shall become entitled to receive upon exercise of this Option cash,
property, or securities.

4.1.18 Irrespective of any adjustments in the Exercise Price or in the
number or kind of Shares purchasable upon exercise of this
Option, the form of Options theretofore or thereafter issued
may continue to express the same price and number and kind
of shares as are stated in this Option.

Section 5. Officer's Certificate. Whenever the number or kind of
securities purchasable upon exercise of this Option or the Exercise Price shall
be adjusted as required by the provisions of Section 4, the Corporation shall
forthwith file with its Secretary or its Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon exercise of
this Option and the adjusted Exercise Price determined as herein provided and
setting forth in reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by Talbott and the Corporation shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to Talbott.

Section 6. No Effect On Powers of Corporation. The existence of this
Option shall not affect in any way the right or power of the Corporation or its
shareholders to make or authorize any adjustments, recapitalizations,
reorganization, or other changes in the Corporation's capital structure or its
business, or any merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred shares with rights greater than or affecting the
Shares, or the dissolution or liquidation of the Corporation, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

Section 7. No Waiver of Corporation's Right to Terminate Employment.
Nothing in this Agreement shall be construed to confer or shall be deemed
to confer on Talbott any right to continue as a member of the Board of, or to
continue any other relationship with, the Corporation or any parent or
subsidiary of the Corporation, or limit in any way the right of the Corporation
or its shareholders to terminate Talbott's membership on the Board or other
relationship at any time, with or without cause.

Section 8. Compliance With Securities Laws.

8.5 No Exercise Until Compliance. If the Corporation at any time
determines that registration or qualification of the Shares or this
Option under state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable, then this
Option may not be exercised, in whole or in part, until such
registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the
Corporation..

8.6 Investment Interest. If required by the Corporation at the time of any
exercise of this Option as a condition to such exercise, Talbott shall
enter into an agreement with the Corporation in form satisfactory to
counsel for the Corporation by which Talbott (i) shall represent that
the Shares are being acquired for Talbott's own account for
investment and not with a view to, or for sale in connection with, any
resale or distribution of such Shares, and (ii) shall agree that, if
Talbott should decide to sell, transfer, or otherwise, dispose of any of
such Shares, Talbott may do so only if the shares are registered under
the Securities Act of 1933 and the relevant state securities laws,
unless, in the opinion of counsel for the Corporation, such registration
is not required, or the transfer in pursuant to the Securities and
Exchange Commission Rule 144; provided, however, that the
Corporation agrees to use its best efforts to cause a Registration
Statement on Form S-8 with respect to the Shares issuable upon
exercise of this Option to be filed and declared effective as soon as is
practicable, and to maintain the effectiveness of such Registration
Statement until such time as the Option has been fully exercised or
terminated.

Section 9. Violation. Any provision of this Agreement to the contrary
notwithstanding, this Option shall not be exercisable at any time, in whole or
in part, if issuance and delivery of the Option Shares would violate any law
or registration.

Section 10. Representations of Talbott. Talbott represents that he has been
advised that he is not being represented in this transaction by the
corporation's attorneys and that Talbott has been advised to seek separate
legal counsel for advice in this matter.

Section 11. Notices. Any notice under this Agreement shall be in writing
and shall be effective when actually delivered in person or three days after
being deposited in the U.S. mail, registered or certified, postage prepaid and
addressed to the party at the address stated in this Option or such other
address as either party may designate by written notice to the other.

Section 12. Law Governing. This Option shall be governed by and
construed in accordance with the laws of the State of Delaware.

IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the date first above written.
INNOVO GROUP INC.

By:
_________________________________
Sam Furrow, Chairman
and CEO

__________________________________
Robert S. Talbott

EXHIBIT A

INNOVO GROUP INC.
NOTICE OF EXERCISE OF SHARE OF OPTION

I hereby exercise my Non-Qualified Share Option granted by INNOVO
GROUP INC. (Corporation) and seek to purchase _____________
shares of common shares of the Corporation pursuant to said Option. I
understand that this exercise is subject to all the terms and provisions of
my Non-Qualified Share Option Agreement.

Enclosed is my check in the sum of $_________________ in payment for
such shares.

Dated:_____________,________

___________________________
Signature

___________________________
Address

___________________________

___________________________

___________________________
Social Security Number

Receipt is hereby acknowledged of the delivery to me by INNOVO GROUP
INC. of certificates for ______________________ common shares of the
Corporation purchased by me pursuant to the terms and conditions of Non-
Qualified Share Option Agreement referred to above.

Date:_____________,________

__________________________
Signature

EXHIBIT 10.52
REAL PROPERTY AND ASSET LEASE
AGREEMENT

This Real Property and Asset Lease Agreement
(the Lease) is made and entered into this the
14th day of September, 19998, by and between
Thimble Square, Inc. (Lessor) and Confident
Colors, LLC (Lessee).

WITNESSETH

WHEREAS, Lessor is the owner and operator of
a commercial sewing enterprise located in Baxley,
Georgia know as Thimble Square, Inc (the
Business); and

WHEREAS, Lessor desires to lease to Lessee,
and Lessee desires to lease from Lessor upon the
terms and conditions hereto, the Business,
including the real property, physical plant,
equipment, assets, contracts, good will and other
tangible and intangible property associated with
said Business.

NOW, THEREFORE, in consideration of the
following covenants and agreements, the parties
hereby contract and agree as follows;

1. Leased Real Property and Assets. Lessor,
for and in
consideration of the rents, covenants, agreements,
and stipulations hereinafter mentioned, provided
for and contained to be paid, kept and performed
by Lessee, hereby leases, hires and rents unto
Lessee, and Lessee hereby leases, hires, rents and
takes from Lessor upon the terms and conditions
which hereinafter appear, the following real
property and assets, together with all
replacements thereof and additions thereto, as
follows:

(a) Real Property: 230 Frost Industrial
Blvd., Baxley, Georgia 31513, as more specifically set forth
in the legal description attached as Exhibit A hereto
(the Real Property);

(b) Building: all improvements upon the Real Property,
including without limitation that certain building consisting of
approximately 21,000 square feet of space, together with all
systems, fixtures and other improvements located therein, all as
more specifically described in the floor plan attached as Exhibit
B hereto (the Building);

(c) Equipment and Assets: all equipment and other tangible
assets used and useful in the ownership and operation of the
Business [and located at the Plant], including without limitation
all assets identified on Exhibit C hereto (the Tangible
Assets);

(d) Licenses: all of Lessor's right, title and interest in
and to the licenses, permits, authorizations, qualifications,
orders, franchises, certificates, consents and approvals issued to
Lessor by any governmental or regulatory agency or authority,
whether Federal, state or local, and used in connection with the
operation of the Business (the Licenses);

(e) Intangible Assets: all of Lessor's right, title and
interest in and to the copyrights, trademarks, trade names, logos,
service marks and other intangible assets used in connection with
the Business, together with all good will associated with the
Business (the Intangible Assets and, together with the Real
Property, Building, Tangible Assets and Licenses, the Business
Assets); and

(f) Contracts: all of Lessor's rights and privileges under
those contracts, leases and agreements necessary or relating to
Lessor's ownership and operation of the Business, including
Without limitation (I) those contract listed on Exhibit D
(unless specifically excluded therein), (ii) that certain lease
and option agreement for the Real Property and Building dated
October 12, 1993, by and between the Development Authority of
Appling County, Georgia and Thimble Square, Inc., a Georgia
Corporation (the Capital Lease), and (iii) that certain
production agreement between Lessor and Crown Tex (the
Contracts).

2. Term. Lessee shall have and hold the Business Assets for the
term of two (2) years beginning on the _____ day of September,
1998 (the Commencement Date), and ending at midnight on the 30th day of
September, 2000, unless earlier terminated as hereinafter
provided (the Term).

3. Continuation of Business. The Lessee
agrees to continue the Business operations without
interruption and to offer continued employment,
either directly or through an employee leasing
company, to substantially all of the employees of
the Lessor. It is Lessee's current intention to
continue the Business operations throughout the
Term and to expand the Business and operations
conducted on the Real Property and the Building.

4. Capital Lease. As an inducement to Lessee
entering into this Lease, Lessor hereby
represents, warrants and covenants with respect to
the Capital Lease as follows: (i) that the term
of the Capital Lease expires on September 30,
2000; (ii) that Lessor's rental obligation under
the Capital Lease (which includes both the Real
Property and Building) is $3,000 per month; (iii)
that Lessor has the right, which is valid and in
force, to purchase the Real Property and Building
at the expiration of the Capital Lease for
consideration of $158,000; (iv) that Lessor has
paid all rent due and is current on all of its
obligations under the Capital Lease; (v) that no
breaches or violations exist under the terms of
the Capital Lease, and no conditions exist which
do or might cause a default thereunder or
otherwise provide the landlord the right to
terminate the Capital Lease; (vi) that the Capital
Lease is valid and in full force ad effect as of
the date hereof, and will remain so as of the
Effective Date; and (vii) that Lessor shall do all
things necessary to ensure that the Capital Lease
remains in full force and effect during the Term
hereof. Lessor hereby grants to Lessee the
unconditional right to cure any default by Lessor
under the Capital Lease which might occur during
the Term hereof. Upon any exercise by Lessee of
said right to cure, Lessee shall notify
Lessor of the same in writing and may deduct all
costs of said cure from rental payments otherwise
owing to Lessor under Section 5 hereof.
5. Rental; Late Charges. During the Term of
this Lease, Lessee agrees to pay to Lessor, at 27 North Main Street,
Springfield, Tennessee 37172, or any other person
or place at the written direction of Lessor,
without demand, deduction or set off, except as
provided herein, the rental payments set forth
herein, payments being due on the 1st day of each
month in advance during the Term:

(a) On the Commencement Date, Lessee shall
pay Lessor the sum of $3,000 plus a pro-rata
portion of the first month's rent.

(b) During the period beginning on the
first day of the next calendar month immediately
following the Commencement Date, and through the
ten (10) months after the Commencement Date, base
rent of $4,500 per month, payable as follows:
$3,000 paid directly by Lessee to the landlord
under the Capital Lease, and $1,500 paid to Lessor
at the address indicated herein.

(c) During the period beginning on the
first day of the eleventh (11th) calendar month
after the Commencement Date and through the period
including twenty-two (22) months after the
Commencement Date, base rent of $5,000 per month,
payable as follows: 43,000paid directly by Lessee
to the landlord under the Capital Lease, and
$2,000 paid to Lessor at the address indicated
herein.

(d) During the period beginning on the
first day of the twenty-third (23rd) calendar
month after the Commencement Date and through the
period including the expiration of the Term, base
rent of $3,000 per month, payable as follows:
$3,000 paid directly by Lessee to the landlord
under the Capital Lease.

(e) During the Term hereof, in addition to
the base rent specified in paragraphs (a), (b),
(c) and (d) above (Base Rent), Lessee shall also
pay to Lessor additional rental payments
(Percentage Rent) equal to two percent (2%) of
any annual gross revenues in excess of five
Million Dollars ($5,000,000) earned by Lessee from
the operation of the Business during the Term.
The Percentage Rent shall be calculated at the end
of the twelfth (12th) and twenty fourth (24th)
months after the Commencement Date, and shall be
payable two (2) months in arrears. Upon the
payment of any Percentage Rent due hereunder,
Lessee shall provide Lessor with a written
calculation of said Percentage Rate. Lessor shall
also have the right on an annual basis to inspect
the books and records of Lessee to verify same.
The time and place of such inspection shall be
convenient to Lessee ad at Lessee's principle
office.

(f) If Lessor or Lessor's appointed agent
or representative fails to receive any Base Rent
or Percentage Rent payment due hereunder within
ten (10) days after it becomes due, Lessee shall
pay Lessor, as additional rental, a late charge
equal to five percent (5%) of the overdue amount.
An additional five percent (5%) will accrue for
each additional ten (10) days such payment is
late. The parties agree that the Lessor's damages
by reason of late payments will be difficult to
ascertain, that such late charge represents a fair
and reasonable estimate of the costs and damages
Lessor would incur by reason of any such late
payment and represents liquidated damages and not
a penalty.

6. Use of Business Assets. The Business
Assets shall be used by Lessee (or any sublessee)
in the operation of the Business or any lawful
purpose related thereto. The Business Assets
shall not be used by Lessee for any illegal
purposes, nor in any manner to create any nuisance
or trespass, nor in any manner to vitiate the
insurance or increase the rate of insurance on the
Business Assets. Unless approved by Lessor, which
approval shall not be unreasonably withheld,
Lessee and sublessees agree to keep all Tangible
Assets in the operation facilities in Baxley,
Georgia. Lessee hereby assumes all of the
Lessor's obligations under the Licences and the
Contracts and agrees to comply, in all respects,
with the terms and conditions thereof, except only
those obligations which are expressly undertaken
by Lessor hereunder.

7. Utilities. Lessee shall pay all charges
for utilities used in the operation and
maintenance of the Business Assets and Business,
including electricity, light, water, sewer, gas,
heat, fuel, garbage collection, sanitary and other
services relating to the operation of the
Business.

8. Abandonment of Business Assets. Lessee
agrees not to abandon or vacate the Business
Assets during the Term of this Lease, and agrees
to use the Business Assets for the purposes herein
leased until the expiration hereof.

9. Repairs and Maintenance by Lessor.
Lessor agrees to keep in good repair the roof,
foundation and exterior walls of the Building,
including glass and exterior doors, and
underground utility and sewer pipes outside the
exterior wall of the Building, except repairs
rendered necessary by the negligence or
intentional wrongful acts of Lessee, its agents,
employees or invitees. Lessor gives Lessee
exclusive control of the Real Property and
Building, and shall be under no obligation to
inspect the same. Lessee shall promptly report in
writing to Lessor any defective condition on or
about the Real Property or Building known to
lessee which Lessor is required to repair, and
failure to report such conditions shall make
Lessee responsible to lessor for any liability
incurred by Lessor by reason of such conditions.
Lessee agrees to pay any insurance deductible for
any damage caused directly by Lessee.

10. Repairs and Maintenance by Lessee.
Lessee accepts the
business Assets in their present condition as
being suited for the use intended by Lessee.
Lessee shall maintain in good working order and
repair all heating and air conditioning systems
serving the Building (including but not limited to
replacement of parts, compressors, air handling
units and heating units). Further, Lessee shall,
throughout the Term of this Lease, maintain in
good order and repair all of the Business Assets,
and any additions to or replacements thereof,
except those repairs expressly required to be made
by Lessor hereunder. Lessee agrees to return the
Business Assets to Lessor at the expiration or
earlier termination of the Lease in as good
condition and repair as when first received,
ordinary wear and tear, damage by storm, fire,
lightning, earthquake or other casualty alone
excepted.

11. Destruction of or Damages to Business
Assets. If the Business Assets indicated in item
nine (9) above are completely or substantially
destroyed by storm, fire, lightning, earthquake or
other casualty, this Lease shall terminate as of
the date of such destruction and renal shall be
accounted for as between Lessor and Lessee as of
that date. If the Business Assets indicated in
item (9) above are damaged but not wholly or
substantially destroyed by any such casualties,
rental shall abate in such proportion as Lessee's
use of the Business Assets to substantially the
same condition as before said damages occurred as
soon as is practicable, whereupon full retal shall
recommence.

12. Insurance and Indemnification.

(a) Indemnification.

(i) Lessee agrees to, and hereby
does, indemnify and save Lessor harmless against
all claims or damages to persons or property by
reason of Lessee'S use or occupancy of the
Business Assets and operation of the Business from
and after the Commencement Date (exclusive of any
claims or damages resulting from maintenance to be
performed in or on the Business Assets by Lessor
or its agents hereunder), and expenses incurred by
Lessor as a result thereof, including reasonable
attorneys' fees and costs.

(ii) Lessor agrees to, and hereby
does, indemnify and save Lessee harmless against
all claims or damages to persons or property by
reason of Lessee's ownership, use or occupancy of
the Business Assets and the operation of the
Business prior to the Commencement Date, and all
expenses incurred by Lessee as a result thereof,
including reasonable attorneys' fees and costs.

(b) Liability insurance.

(i) Lessee shall, at Lessee's sole
expense, maintain in
effect throughout the Term of this Lease personal
injury liability insurance covering the Business
Assets and its appurtenances in the amount of not
less than Two Hundred Fifty Thousand Dollars
($250,000), for injury to or death of any one
person, and One Million Dollars ($1,000,000)
aggregate for each incident. Such insurance
shall specifically insure Lessee against all
liability assumed by it or by Lessor hereunder, as
well as liability imposed by law upon Lessee or
Lessor, and shall name Lessor as an additional
insured thereunder. Such insurance policy, or
certificate thereof, shall contain an endorsement
expressly waiving any right of the insurer of
subrogation against Lessor, and shall provide that
Lessor will be given ten (10) days written notice
prior to cancellation or expiration of the
insurance evidenced thereby. Within a reasonable
period of time following the Commencement Date,
Lessee shall provide the foregoing certificate and
endorsement required hereby to Lessor.

(ii) Lessor shall, at Lessor's
sole expense, maintain property damage liability
insurance in the amount of Four Hundred Fifty
Thousand Dollars ($450,000). Such insurance shall
specifically insure Lessor against all liability
assumed by it or by Lessee hereunder, as well as
liability imposed by law upon Lessee or Lessor,
and shall name Lessee as an additional insured
thereunder. Such insurance policy, or certificate
thereof, shall contain an endorsement expressly
waiving any right of the insurer of subrogation
against Lessee, and shall provide that Lessee will
be given ten (10) days written notice prior to
cancellation or expiration of the insurance
evidenced thereby. Within a reasonable period of
time following the Commencement Date, Lessor shall
provide the foregoing certificate and endorsement
required hereby to Lessee.

13. Governmental Orders. Lessee agrees, at its own
expense, promptly to comply with all codes, rules,
regulations, ordinances, laws, orders and other requirements
of any legally constituted public authority having
jurisdiction over the Business Assets (requirements) made
necessary by reason of Lessee's occupancy of the Real
property and Building, use of the Business Assets and
operation of the Business. Lessor agrees promptly to comply
with any such requirements if the same are not made
necessary by reason of Lessee's occupancy. It is mutually
agreed, however, between Lessor and Lessee, that if in order
to comply with such requirements, the cost to Lessor or
Lessee, as the case may be, shall exceed a sum equal to one
year's rent hereunder, then the party hereto obligated to
comply with such requirements may terminate this Lease by
giving written notice of termination to the other party,
which termination shall become effective sixty (60) days
after receipt of such notice and which notice shall
eliminate necessity of compliance with such requirements
unless the party giving such notice of termination, shall,
before termination becomes effective, pay to the party
giving notice all costs of compliance in excess of one
year's rent, or secure payment of said sum in any manner
satisfactory to the party giving notice.

Condemnation. If the whole of the Business Assets
shall Be taken under the power of eminent domain by any public or
quasi-public authority, or conveyance shall be made in lieu
thereof, or if a portion of the Business Assets is so taken or conveyed
and the remainder of the Business Assets shall not, in the opinion
of Lessee, be suitable for Lessee's use, or if access to the
remainder of the Business Assets from an adjoining public thoroughfare
shall be eliminated or substantially impaired, this Lease shall
terminate as of the date of such taking or conveyance, the parties
shall be released from any further liability hereunder, and the
rental otherwise due shall be prorated as of such date. If this
Lease is not terminated pursuant to this Section and if a portion of
the Business Assets has been taken or conveyed, rental shall be
reduced by an amount which represents the percentage by which
Lessee's use of the Business Assets, as a whole, is reduced by such
taking or conveyance. If any condemnation proceeding, Lessee and
Lessor shall have the right to seek all compensation and damages
due to each party under the laws of the State of Georgia as a
result of such taking.

15. Assignment and Subletting. Subject to obtaining
the consent of the Lessor under the Capital Lease, Lessee
may sublease portions of the Business Assets to other
persons, provided any such sublessee's operation is either
(i) part of the general operation of the Business, or (ii)
is under the supervision and control of Lessee, and provided
such operation is within the purposes for which the Business
Assets shall be used hereunder; and further provided that
the annual gross revenues of such sublessee shall be
included in the calculation of additional rent under Section
5 (e) hereof, except to the extent such revenues are derived
from sale of goods or services to the Lessee. Except as
provided in the preceding sentence, Lessee shall not,
without the prior written consent of Lessor, which consent
shall not be unreasonably withheld, conditioned, or delayed,
assign this Lease or any interest hereunder or sublet the
Business Assets or any part thereof, or permit the use of
the Business Assets by any party other than Lessee. Consent
by Lessor to any assignment or sublease shall not impair
this provision, and all later assignment or subleases,
except as herein provided, shall be made likewise only on
the prior written consent of Lessor. Assignee of Lessee, at
the option of Lessor, shall become directly liable to Lessor
for all obligation of Lessee hereunder; provided, however,
no sublease or assignment y lessee shall relieve Lessee of
any liability hereunder.

16. Removal of Trade Fixtures and Equipment. At the
termination of this Lease, Lessee may (if not in default
hereunder)remove any of the trade fixtures, equipment and other
unattached items which Lessee may have installed or stored in or on the
Real Property or Building. Lessee shall repair any damage
to the
Business Assets caused by its removal of such items. The
failure of Lessee to remove such items at the end of this
Lease shall be deemed an abandonment thereof at the option
of Lessor. If Lessee fails to so remove such items as
herein provided, or fails to repair any damage caused to the
Business Assets by such removal, then Lessor may do so and
charge Lessee with the cost and expense thereof and all such
cost and expense shall be paid by Lessee to Lessor on
demand. Lessee shall not remove any plumbing or electrical
fixtures or equipment, any central heating, ventilating or
air conditioning equipment, floor coverings, walls or
ceilings, or any other property which may and shall be
deemed to constitute a part of the Real Property and
Building.

17. Peaceful Possession. Upon payment by Lessee of
the rent herein provided, and upon the observance and
performance of all other covenants and conditions on
Lessee's part to be observed and performed, Lessee shall
peaceably ad quietly hold and enjoy the leased Business
Assets for the Term hereby demised, without hindrance or
interruption.

18. Default by lessee. If: (a) Lessee fails to pay
any rental when due, and if such default is not remedied within
ten (10) days after receipt of written notice by lessee from
Lessor; Lessee defaults in any of the other covenants, terms,
conditions, provisions or agreements of this Lease on
the part of the Lessee to be kept, observed or performed and
such default is not remedied within twenty (20) days after
notice from Lessor, provided, however, if the action require
to cure the default is of such a nature that it can not be
cure within twenty (20) days, Lessee shall not be in default
if, within such twenty (20) day period, Lessee commences to
cure such default. The time for Lessee to cure shall be
extended for such reasonable period as may be required to
complete such cure with all diligence; (c) a petition in
bankruptcy is filed by, or against, Lessee; (d) the interest
of Lessee in this Lease is levied upon by execution or other
legal process; (e) the Lessee is declared insolvent
according to law; (f) Lessee makes an assignment to, or for
the benefit of creditors, or petitions any court to make
such an arrangement; (g) Lessee abandons the Business assets
or any material part thereof or vacates the Building; or (h)
a permanent receiver is appointed for Lessee's property and
such receiver is not removed within sixty (60) days after
written notice from Lessor to Lessee to obtain such removal;
then, and in any of such events of default, Lessor shall
have the following rights in addition to the any other
rights or remedies available to Lessor at law, in equity or
under other provisions of this Lease: (i) to terminate this
Lease and to re-enter and repossess the Business Assets, or
(ii) without terminating this Lease, to re-enter and
repossess the Business Assets. If Lessor takes possession
of the Business Assets pursuant tot he preceding option of
this Section 18(ii), Lessor shall rent the Business Assets
at the best rental obtainable by its good faith best efforts
and for any term and on such conditions as Lessor deems
reasonably proper. Lessee shall be liable to Lessor for any
deficiency, if any, between the rental due hereunder and the
remainder of the rent obtained by Lessor upon reletting
after deduction of all expenses reasonable incurred by
Lessor in connection with such reletting. Lessee agrees to
be responsible for any attorney fees incurred by Lessor to
cure any default
hereunder.

19. Default by Lessor. In the event of Lessor's
obligations hereunder, Lessee must give Lessor notice thereof and allow
Lessor thirty (30) days from Lessor's receipt of such notice
to cure such default, or, in the event of a default which
can not be cured within thirty (30) days, to commence
curing such default. In the event of any default by Lessor
under the Capital Lease, Lessee shall have the right to cure
said default on behalf of Lessor pursuant to Section 4
hereof. In the event of any material default by Lessor
hereunder which is not cured by Lessor within 30 days after
Lessor receives notice from lessee, Lessee may, at its sole
option, terminate this Lease at no further liability to
Lessee, and may recover any and all damages entitled to
Lessee under applicable law on account of lessor
default, including without limitation Lessee's actual
attorneys' fees incurred as a result of thereof.

20. Exterior Signs. Lessee shall place no signs upon
the outside walls or roof of the Building except with the written
consent of the Lessor, which consent will not be
unreasonably withheld. Any and all signs placed on the Real
Property by Lessee shall be maintained in compliance with
applicable laws, rules and regulations governing such signs,
and Lessee shall be responsible to Lessor for any damage
caused by installation, use or maintenance of said signs,
and all damages incident to such removal.

21. Representations and Warranties.

Lessor's Representations and Warranties. Lessor hereby
represents and warrants to Lessee, as an inducement to
lessee to enter into this Lease, as follows:

21A.1 Organization; Good Standing. Lessor (i) is
a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Georgia; (ii)
is qualified to do business and is in good standing under
the laws of the State of Georgia; and (iii) has all
requisite corporate power and authority to own and operate
the Business Assets, to carry on its business as now being
conducted, to enter into this Agreement and to perform its
obligations hereunder.

21A.2 Authority. Lessor has the full right and
authority to execute and deliver this Lease, to perform its
obligations hereunder, and to consummate the transactions
provided for herein. All required corporate action with
respect to Lessor has been taken to approve this Agreement
and the transactions contemplated hereby. This Lease has
been duly executed and delivered by Lessor and constitutes
the valid and binding obligation of Lessor, enforceable
against Lessor in accordance with its terms, except as such
enforceability may be limited by bankruptcy and similar laws
affecting the rights of creditors generally and general
principles of equity. Except as expressly provided in this
Agreement, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the
performance by Lessor of this Agreement in accordance with
its terms will not require the approval or consent of or
notice to any foreign, federal, state, county, local or
other governmental, financial or regulatory body.

21A.3 Title to Tangible Assets. Except as set
forth on Exhibit C, Lessor has good and marketable title
to the Tangible Assets, free and clear of all liabilities,
obligations, security interests, liens, rights and
encumbrances of others whatsoever.

21A.4 No Breach or Violation. The execution and
delivery by Lessor of this Lease, the consummation by Lessor
of the transactions contemplated hereby, and compliance by
Lessor with the terms hereof, does not and will not:

(i) violate or result in the breach of or
contravene any of the terms, conditions or provisions of, or constitute a
default under, Lessor's Articles of Incorporation or Bylaws,
or any law, regulation, order, writ, injunction, decree,
determination or award of any court, governmental
department, board, agency or instrumentality, decree,
determination or award of any court, governmental
department, board, agency or instrumentality, domestic or
foreign, or any arbitrator, applicable to Lessor or its
assets and properties; or

(ii) result in prohibited action under any term
or provision of, the material breach of any term or
provision of, the termination of, or the acceleration or
permitting the acceleration of the performance required by
the terms of, or constitute a default under or require the
consent of any party to any loan agreement, indenture,
mortgage, deed of trust or other contract, agreement or
instrument, to which Lessor is a party or by which it is
bound; or

(iii) cause the suspension or revocation of any
authorization, consent, approval or License currently in
effect with respect to Lessor.

21A.5 Approvals. No authorizations, approvals
or consents from any governmental or regulatory authorities
or agencies are necessary to permit Lessor to execute and
deliver this Agreement and to perform its obligations
hereunder.

21A.6 No Litigation. There are no actions,
suits, investigations or proceedings pending or, to the best
of Lessor's knowledge, threatened against or affecting the
Business Assets, in any court or before any arbitrator, or
before or by any governmental department, commission,
bureau, board, agency or instrumentality, domestic or
foreign, which, if adversely determined, would impair the
ability of Lessor to perform its obligations hereunder or
would impair or hinder the ability or right of Lessee to
operate the Business after the Commencement Date in the
manner heretofore operated by Lessor.

21A.7 Brokerage. Lessor has not dealt with any
broker or finder in connection with any of the transactions
contemplated by this Agreement, and, to the best of Lessor's
knowledge, no other person is entitled to any commission or
finder's fee in connection with any of these transactions.

21A.8 Condition of Tangible Assets. Tangible
Assets are leased as is without any express or implied
warranty of any kind, including without limitation any
warranty of merchantability or fitness for a particular
purpose.

21A.9 Contracts. All of the leases, contracts and
agreements to which Lessor is a party with respect to the
Business are listed on Exhibit D. Lessor has performed
all of its duties and obligations under each of the
Contracts in all material respects, the failure to perform
which would have a material adverse effect on the business,
operations or financial condition of the Business. There
are no material defaults under any of the Contracts by
Lessor or, to best of Lessor's knowledge, by any other
party, or any events, which with notice, the passage of time
or both, would constitute a material default under any of
the Contracts. All Contracts are in full force and effect
and are valid and enforceable in accordance with their
respective terms. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions
contemplated hererby does or will result in a breach or
default under, or permit any party to modify any obligations
under, or cause or permit any termination, cancellation or
loss of benefits under, any of the Contracts. Lessor has
obtained any necessary consent to this Lease required under
the Capital Lease.

21A.10 Personnel. Lessor has performed, in all
material respects, all obligations required to be performed
by it under its agreements and plans with or for the benefit
of its employees at the Business, and is not in material
breach or in material default of any of the terms thereof.
There is no material dispute between Lessor and any of its
former or current employees at the Business related to
compensation, severance pay, vacation or pension benefits,
or discrimination.

21A.11 No Union Contract. Lessor is not a party to
any collective bargaining agreement covering any of its
employees at the Business. Within the past three years, to
the knowledge of Lessor, there have not been any
jurisdictional disputes or organizing activities by or with
respect to the employees of the Business. Within the past
three years, there have not been any, and to the knowledge
of Lessor there are not now any6 threatened strikes,
lockouts, work stoppages, or slowdowns with respect to
employees of the Business.

21A.12 Rights in Intangible Assets. (i) All of the
Intangible Assets are owned by Lessor free and clear of
adverse claims and none of such Intangible Assets infringes
on the rights of others; (ii) no proceedings are pending
against Lessor or, to the best of Lessor's knowledge, are
threatened which challenge the validity of the ownership of
the Intangible Assets by lessor; and (iii) Lessor has not
with respect to the Business violated any of the provisions
of the Copyright Act of 1976, 17 U.S.C. Section 101, et seq.

21A.13 Compliance with Laws. Lessor has all
licenses, permits or other authorizations of governmental,
regulatory or administrative agencies required to conduct
its business with respect to the Business as currently
conducted. No judgment, decree, order or notice of
violation has been issued by any such agency or authority
which permits, or would permit, revocation, modification or
termination of any of governmental permit, license or
authorization or which results or could result in any
material impairment of any rights thereunder. With respect
4to the Business, Lessor is in compliance with all applicable
federal, state, local or foreign laws, regulations,
statutes, rules, ordinances, directives and orders and any
other requirements of any governmental, regulatory or
administrative agency or authority or court or other
tribunal applicable to it.

21A.14 Environmental matters. The Real Property and
Building are free of any substantial amounts of (1) waste or
debris; (2) hazardous waste as defined by the Resource
Conservation and Recovery Act as amended from time to time
(RCRA), or any hazardous substance as defined in the
statutes of Georgia, as amended from time to time, and
regulations promulgated thereunder, or as defined by the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time
(CERCLA), and regulations promulgated thereunder; (3) any
substance the presence of which is prohibited by any law
similar to those set forth in this subparagraph; and (4) any
materials which, under federal, state, or local law,
statute, ordinance or regulation, or court or administrative
order or decree, or private agreement, require special
handling in collection, storage, treatment or disposal (the
wastes, substances and materials referred to in items (1)-
(4) being hereafter collectively referred to as Hazardous
Materials).

21A.15 Insurance. The insurable properties relating
to the Business and the conduct of the Business are, and
will be until the Commencement Date, in the reasonable
judgement of Lessor, adequately insured.

21A.16 Operating Statements. All financial and
operating statements which have been previously provided by
Lessor to Lessee, were prepared in accordance with the books
and records of Lessor in conformity with generally accepted
accounting principles consistent with past practices (except
for normal year-end adjustments) and fairly present the
results of operations of the Business for the respective
periods covered thereby.

21A.17 Bulk Transfers. The provisions of the Bulk
Transfer laws of the State of Georgia will be complied with
by Lessor, if applicable, upon the exercise by Lessee of its
option to purchase under Section 24.

21A.18 Employee Benefits. Schedule 21.18 identifies
each personnel policy, summary plan description, profit
sharing plan or other employee benefit plan or document
(whether written or oral) providing for insurance coverage
or for deferred compensation, bonuses, stock options or
other forms of incentive compensation, severance benefits,
post-retirement compensation or benefits, welfare or similar
plans or profit sharing plans (Benefit Plans) which (i)
are administered, entered into or maintained as the case may
be, by Lessor and (ii) cover any employee of Lessor at the
Business. True and correct copies or descriptions of each
such document (and, if applicable, any related trust
agreements or descriptions, in the case or oral arrangement)
are also attached as part of such Schedule 21.18. Each such
Benefit Plan has been maintained in compliance with the
requirements prescribed by any and all statutes, order,
rules and regulations applicable to it, including, but not
limited to, the Employee Retirement Income Security Act of
1974, as amended (ERISA), and the Internal Revenue Code of
1986, as amended (Code).

21A.19 Accuracy of Information Furnished. No
statement by Lessor contained in this Lease or in any
Schedule or Exhibit hereto contains any material untrue
statement of a material fact, or omits to state any material
fact which is necessary to make the statements contained
herein, in light of the circumstances under which they were
made, not materially misleading.

Lessee's Representations and Warranties. Lessee hereby
represents and warrants to Lessor, as an inducement to
Lessor to enter into this Lease, as follows:

21B.1 Organization; Good Standing. Lessee (i) is a
limited liability company duly incorporated, validly
existing and in good standing under the laws of the State of
Georgia; (ii) is qualified to do business and is in good
standing under the laws of the State of Georgia; and (iii)
has all requisite corporate power and authority to own and
operate the Business Assets, to carry on its business as now
being conducted, to enter into this Agreement and to perform
its obligations hereunder.

21B.2 Authority. Lessee has the full right and
authority to execute and deliver this Lease, to perform its
obligations hereunder, and to consummate the transactions
provided for herein. All required corporate action with
respect to Lessee has been taken to approve this Agreement
and the transactions contemplated hereby. This Lease has
been duly executed and delivered by Lessee and constitutes
the valid and binding obligation of Lessee, enforceable
against Lessee in accordance with its terms, except as such
enforceability may be limited by bankruptcy and similar laws
affecting the rights of creditors generally and general
principles of equity. Except as expressly provided in this
Agreement, the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the
performance by Lessee of this Agreement in accordance with
its terms will not require the approval or consent of or
notice to any foreign, federal, state, county, local or
other governmental, financial or regulatory body.

22. Lessor's Entry of Real Property and Building.
Lessor may card the Real Property and Building For Rent or For Sale
ninety (90) days before the expiration of the Term of this
Lease (subject to Lessee's option to purchase pursuant to
Section 24). Lessor may enter the Real Property and
Building at reasonable hours to exhibit the same to
prospective lessees or purchasers and to make repairs
required of Lessor under the term hereof.
23. Effect of Termination of Lease. No termination
of this Lease prior to the normal ending thereof, by lapse
of time or otherwise, shall effect Lessor's right to collect
rent for the period prior to termination thereof.

24. Purchase Option. At any time during the Term of
this Lease, Lessor hereby grants and Lessee hereby accepts, the option
to purchase all of Lessor's interest in the Business (the
Option), including without limitation the Business Assets
(including all rights under and subject to the terms of the
Capital Lease). In the event Lessee elects to exercise the
Option, Lessee shall provide Lessor with written notice
thereof no later than sixty (60) days, or the required time
period required by the Lessor's Capital Lease, whichever is
longer, prior to the exercise of the Option. The purchase
price for the Option shall be Four Hundred Eighty Thousand
Dollars ($480,000), less thirty-three and one-third percent
(33 1/3%) of all Base Rent and fifty percent (50%) of all
Percentage Rent paid by Lessee during the Term hereof, and
shall be payable by Lessee on the Option Date in U.S. cash
or certified funds or other form of payment reasonably
accepted by Lessor.

In the event Lessee exercises its Option
hereunder, Lessor shall timely notify the landlord under the
terms of the Capital Lease of Lessor's intention to exercise
its option to purchase the Real Property ad Building.
Lessor hereby covenants and agrees to take all actions
necessary to exercise and close upon its option under the
Capital Lease in the time and manner required thereby, in
order that Lessor shall acquire marketable, fee simple title
to the Real Property and Building on or prior to the Option
Date hereunder. On the Option Date, Lessor shall execute
and deliver to Lessee, in form and substance reasonably
acceptable to Lessee, a warranty deed for the Real Property
and Building, a bill of sale for the Tangible Assets, and
such other documents as may reasonably be required by Lessee
to effectuate its exercise of the Option and the transfer of
all the Business Assets to Lessee.

25. Mortgagee's Rights. Lessee's rights hereunder
shall be subject to the Capital lease or any bona fide mortgage or
deed to secure debt which is now in place or to be placed
upon the Business Assets by Lessor. Lessee shall, if
requested by Lessor, execute a separate agreement reflecting
such subordination.

26. No Estate in Land. This Lease shall create the
relationship of Lessor and Lessee between the parties hereto. No estate
shall pass out of Lessor. Lessee has only usufruct not
subject to levy and sale, which is assignable only pursuant
to the terms if this Lease.

27. Holding Over. If lessee remains in possessior of
the Business Assets after expiration of the Term hereof,
with Lessor's acquiescence and without any express agreement
of parties, Lessee shall be a tenant at will at the rental
rate which is in effect at the end of such Term, and there
shall be no renewal of the Lease by operation of law. If
Lessee remains in the Business Assets after expiration of
the Term hereof without Lessor's acquiescence, the Lessee
shall be a tenant at sufferance and commencing on the date
following the date of such expiration, the monthly rental
payable under Section 5 hereof shall, for each month or
fraction thereof during which Lessee so remains in
possession of the Premises, be twice the monthly Base Rent
otherwise payable under Section 5 hereof. Percentage Rent
otherwise due under Section 5 hereof will remain due for any
period Lessee holds over.

28. Attorneys' Fees and Homestead. If any rent or
other sum of owing under this Lease is collected by or
through any attorney, Lessee agrees to pay the reasonable
attorneys' fees incurred by Lessor as a result thereof.
Lessee waives all homestead rights and exemptions which
Lessee may have under any law as against any obligation
owing under this Lease. Lessee hereby assigns Lessor
Lessee's homestead exemption.

29. Rights Cumulative. All rights, powers and
privileges conferred hereunder upon parties hereto shall be cumulative
and no restrictive to those given by law.

30. Notice. All notices required or permitted under
this Lease shall be in writing and shall be personally
delivered or sent by telefax, overnight delivery (next day
service) by a national delivery service, or by U.S.
certified mail, return receipt requested, postage prepaid,
to the following addresses:

Lessor:

Thimble Square, Inc.
27 North Main Street
Springfield, TN 37172
Attn: L.E. Smith, Chairman and CEO
Telefax No. (615) 384-2911

Lessee:

Confident Colors, LLC
230 Frost Industrial Blvd.
Baxley, GA 31513
Attn: Scott Parliament, Vice President and
Treasurer
Telefax No. (912) 367-1320

Either party hereto may, upon written notice to
the other, change such parties' address for notices
hereunder. For purposes of this Lease, any notice received
by Lessor or Lessee from the Lessor under the Capital Lease
shall be deemed to have been received from the other party
to this Lease.

31. Waiver of Rights. No failure to Lessor to
exercise any power given to Lessor hereunder or to insist
upon strict compliance by Lessee of his obligations
hereunder, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of
Lessor's right to demand exact compliance with the terms
hereof.

32. Time of Essence. Time is of the essence in this
Lease.

33. Definitions. Lessor as used in this Lease shall
include first party, its heirs, representatives, assigns,
and successors in title to the Business Assets. Lessee
shall include second party, its heirs and representatives,
and if this Lease shall be validly assigned or sublet, shall
include also Lessee's assignees or sublessees as to the
Business Assets covered by such an assignment or sublease.
Lessor and Lessee include male and female, singular and
plural, corporation, partnership or individual, as may fit
the particular parties.

34. Exhibits. All Exhibits attached to this Lease are
incorporated into, and made a part of, this Lease. In the
event of a conflict between an Exhibit and any of the
foregoing provisions of this Lease, said Exhibit shall
control.

35. Merger. This Lease contains the entire agreement
of the parties hereto, and o representations, inducements, promises
or agreements, oral or otherwise, between the parties not
embodies herein shall be of any force or effect.

36. Governing Law. The terms of this Lease and
interpretation thereof shall be governed by the laws of the State of
Georgia, without reference to conflicts of law principles.

37. Consent of Lessor under Capital Lease. This Lease
shall not be effective unless or until the Lessor under the Capital
Lease gas given its written consent to this Lease and the
subtenancy created hereunder.

IN WINTESS WHEREOF, the parties hereunto have set their
hands and seals, intending to be bound thereby, as of the
date and year first above written.

Signed, sealed and delivered as
to Lessor, in the presence of: LESSOR:
Thimble Square,
Inc.

/s/ Scott Parliament By: /s/ L.E. Smith
CEO
-------------------- --------------

(Unofficial Witness) Name
Title

/s/ Jennifer Gregory
--------------------
Notary Public

Signed, sealed and delivered as
to Lessor, in the presence of: LESSEE:
Confident Colors,
LLC

/s/ Scott Parliament /s/ L. Winston Biggs
-------------------- --------------------
Unofficial Witness Name
Title

/s/ Jennifer Gregory
--------------------
Notary Public

EXHIBIT A

LEGAL DESCRIPTION

EXHIBIT B

BUILDING FLOOR PLAN

EXHIBIT C

LIST OF TANGIBLE ASSETS

EXHIBIT D

LIST OF CONTRACTS

MUTUAL RELEASE AGREEMENT

On this 15th day of September, 1998 Thimble Square,
Inc. (Employer) and Jane Silk (Employee) mutually agree
to release each other from any further contractual
obligations related to an Employment Agreement (Agreement)
dated 4/12/96.

This release is conditioned on the binding execution of
a lease agreement for Thimble Square real and personal
property between Confident Colors, LLC and Thimble Square,
Inc. Such lease is expected to become effective the week of
September 14, 1998.

Subject to the execution of the lease above, this
release shall become effective beginning September 14, 1998.
This release shall include all aspects of the Agreement
including, but not limited to, salary, benefits and
agreement not to compete.

/s/ Jane Silk
- -------------
Employee
Jane Silk

Thimble Square, Inc.
- --------------------
For Employer
L.E. Smith, CEO
/s/ L.E. Smith CEO

MUTUAL RELEASE AGREEMENT

On this 15th day of September, 1998 Thimble Square,
Inc. (Employer) and Ron Silk (Employee) mutually agree
to release each other from any further contractual
obligations related to an Employment Agreement (Agreement)
dated 4/12/96.

This release is conditioned on the binding execution of
a lease agreement for Thimble Square real and personal
property between Confident Colors, LLC and Thimble Square,
Inc. Such lease is expected to become effective the week of
September 14, 1998.

Subject to the execution of the lease above, this
release shall become effective beginning September 14, 1998.
This release shall include all aspects of the Agreement
including, but not limited to, salary, benefits and
agreement not to compete.

/s/ Ronald Silk
- ---------------
Employee
Ron Silk

Thimble Square, Inc.
- --------------------
For Employer
L.E. Smith, CEO
/s/ L.E. Smith CEO

CERTIFICATE OF ORGANIZATION

I, Lewis A. Massey, the Secretary of State from the State of
Georgia, do hereby certify under the seal of my office that

CONFIDENT COLORS, L.L.C.
A GEORGIA LIMITED LIABILITY
COMPANY

Has been duly organized under the laws of the State of
Georgia on the effective date stated above by the filing of
articles of organization in the office of the Secretary of
State and by the paying of fees as provided by Title 14 of
the Official Code of Georgia Annotated.

WITNESS my hand and official seal in the City of Atlanta and
the State of Georgia on the date set forth above.

/s/ Lewis A. Massey
- -------------------
Lewis A. Massey
Secretary of State

ARTICLES OF ORGANIZATION
OF
CONFIDENT COLORS, L.L.C.

Pursuant to Section 14-11-100 et seq. Of the Georgia
Limited Liability Act (the Act), the following Articles of
Organization for the instant Georgia limited liability
company (the Company) are set forth as follows:

Article I.

The name of the Company is Confident Colors, L.L.C.".

Article II.

The initial registered office of the Company is 230
Frost Industrial Blvd., Baxley, Georgia 31513. The
Company's initial registered agent for service of process is
Scott Parliament, an individual resident of the State of
Georgia, who is located at the same address as the initial
registered office of the Company.

Article III.

The purpose for organization of the Company is to
engage in any and all lawful business in which corporations
for profit formed in the State of Georgia may engage.

Article IV.

The principal office of the Company where the records
required by Section 14-11-313 of the Act will be maintained
is located at 230 Frost Industrial Blvd., Baxley, Georgia
31513.

Article V.

The period of duration for the Company shall be until
(i) the date of dissolution thereof pursuant to either
Section 14-11-602 of the Act or the Company's effective
operating agreement, or (ii) December 31, 2028, whichever
date first occurs.

Article VI.

Management of the Company shall be vested in one (1)
manager, who shall be selected and shall govern the
operations of the Company in accordance with the provisions
of the Company's Operating Agreement to be executed by the
Members following the effective date hereof.

Article VII.

In accordance with the provisions of O.C.G.A. Section
14-11-306, the Company shall indemnify and hold harmless
each of its Members and Manager from and against any and all
claims, demands and liabilities whatsoever arising in
connection with the Company; provided, however, that the
Company shall not indemnify any Member or Manager for any
liability arising out of or relating to (i) intentional
misconduct or a knowing violation of law by said Member or
Manager, or (ii) any transaction for which said Member or
Manager received a personal benefit in violation or breach
of any provision of the Company's written Operating
Agreement then in effect.

The foregoing Articles executed this 10th day of
September, 1998.

/s/ Jay D. Brownstein
- ---------------------
Jay D. Brownstein
Organizer

CONFIDENT COLORS, LLC

Unanimous Consent

The undersigned, representing all members of Confident
Colors, LLC, hereby agree unanimously to the following:

That Winston Biggs is authorized as Manager and
President of Confident Colors, LLC to execute a certain
lease agreement between Thimble Square, Inc. and Confident
Colors, LLC as to certain real estate and equipment located
in Baxley, Georgia, to be dated at or near September 14,
1998.

/s/ Winston Biggs 9/15/98
- ----------------- -------
Winston Biggs

/s/ Scott Parliament 9/15/98
- -------------------- -------
Scott Parliament

/s/ Jane Silk 9/14/98
- ------------- -------
Jane Silk

/s/ Jerry Stewart 9/15/98
- ----------------- -------
Jerry Stewart

MEMO
TO: Scott Parilament
FROM: Eric Hendrickson
SUBJECT: Authorization for the negotiation and lease of
Thimble Square, Inc.

This memorandum is to affirm that Mr. L.E. Smith, CEO
and Chairman for Innovo Group, Inc., and subsidiaries, has
been authorized to negotiate and consummate the
lease/purchase of the Thimble Square, Inc. land, building
and equipment. Following is the appropriate section from
the August 31, 1998 Board of Directors meeting authorizing
the transaction:

Smith introduced a proposal from Scott Parliament for
the lease/purchase of the Thimble Square, INC. land,
building and equipment. The discussed proposal is attached
and is made a part of the corporate minutes. Authorization
to further negotiate and consummate the transaction was
given to Smith. The motion was made by Furrow and seconded
by Anderson. The affirmative vote was unanimous.

Eric Hendrickson----------------
Eric Henrickson, Secretary, Treasurer and V.P.

CORPORATE SEAL

EXHIBIT 10.53
THIS AGREEMENT is made this 20th day of
August, 1998, between, NASCO PRODUCTS
INTERNATIONAL, INC., INNOVO GROUP, INC., and any
and all subsidiaries, successors and assigns
(hereinafter referred to as Innovo), whose
business address is 27 North Main Street,
Springfield, Tennessee 37172, and ACTION
PERFORMANCE COMPANIES, INC. and any and all
subsidiaries, successors and assigns (hereinafter
referred to as AP), whose business address is
4707 E. Baseline Road, Phoenix, AZ 85040.

WHEREAS, Innovo is a manufacturer and
distributor, as well as a seller and marketer, of
various products;
WHEREAS, AP operates a division known as Fan
Fueler, and has requested that Innovo manufacture
and distribute certain products it produces in the
manner herein provided;
WHEREAS, Fan Fueler is a discrete business
unit of AP, separate and distinct from AP's other
business units, including, but not limited to,
such operations currently known as Sports Image,
Action Racing Collectibles and Image Works;
WHEREAS, Fan Fueler maintains its own methods
of product distribution maintained by each of AP's
other business units;

NOW, THEREFORE, in consideration of the
mutual promises contained herein, Innovo and AP
agree as follows:

1. Exclusive Distributorship/Manufacturing
Rights. AP hereby appoints Innovo as exclusive
manufacturer and as a non-exclusive distributor
along with AP's own Fan Fueler division, or any
successor thereof, and its method of distribution;
and AP hereby grants to Innovo an exclusive right
to manufacture and a right to distribute certain
Products (as defined in Section 3, below) within
the Territory (as defined below).

In consideration for the rights granted to
Innovo by AP, Innovo shall not distribute, or
manufacture for distribution, within the
Territory, any products which are the same as, or
substantially similar to, Products and which bear
any trademark, copyright or other mark or any
driver, team, team sponsor or sanctioning body
involved in Motorsports. For purposes of this
Agreement, Motorsports shall mean any
international or domestic professional motorsports
association including, but not limited to, NASCAR,
NHRA, IRL, CART, Formula One, World of Outlaws,
AMA, IHRA, Slim Jim, ARCA, Goody's Dash Series and
USAC.

2. Sale. Innovo hereby agrees, as the
exclusive manufacturer and as a distributor of
Products, to manufacture, sell and distribute
Products to retailers, during the term of this
Agreement, in accordance with the provisions of
this Agreement, in the quantities set forth in
purchase orders submitted to Innovo, at the
prices, subject to the provision of Section 9,
Possible Price Modifications, specified in Exhibit
A, attached hereto (hereinafter referred to as a
Retail Sale); Innovo shall also be the exclusive
manufacturer for sales to AP, competitively priced
with the market, of the Products referred to
herein, during the term of this Agreement, in
accordance with the provisions of this Agreement,
in quantities set forth in purchase orders
submitted to Innovo at the prices also specified
in Exhibit B (hereinafter referred to as a Sale
to AP). All division of AP will purchase the
various Products at the price contained in Exhibit
B, except for AP's Fan Fueler division, or any
successor thereof, which will pay the prices
listed as the "Selling Price in Exhibit A.

3. Products. As used in this Agreement, the
term Products shall include the products,
bearing motorsports related trademarks and
copyrights under the control of AP, manufactured
and/or sold by Innovo in the following categories:
Cush-n-Carry
Cooler
Lunch Pack
Waist Pack
Tote Bag
Back Pack

Products, as defined by this section shall, from
time to time, be subject to the deletion of the
product categories listed above and the addition
of other product categories, as the parties many
agree, in writing, during the term of this
Agreement.

4. Territory. Innovo shall have the right to
distribute Products throughout the United States
and, to the extent allowed by reference to
individual license agreements through which AP
controls the trademarks and copyrights, additional
countries throughout the European Union
Territory. Innovo shall not distribute, or
manufacture for distribution, Products outside the
Territory.

5. Method and Place of Delivery. With regard
to retail Sales, Innovo, as manufacturer/distributor, shall be responsible
for negotiating terms for delivery and the payment
thereof with each retailer. In a Sale to AP, AP
shall be responsible for all shipping and delivery
charges.

6. Allocation of Risk. All risks arising
under this Agreement with respect to any casualty
to the goods in a Sale to AP as defined herein are
to be borne by the titleholder of the goods. Once
title passes, as defined by the terms of each
sale, risk passes therewith. Allocation of risk in
a Retail Sale made by Innovo shall be negotiated
between Innovo and the retailer as described in
paragraph 4 above.

7. Right of Inspection. For each driver, AP
shall have the right to inspect each new Product,
including new designs of existing product (New
Product), and any and all artwork including, but
not limited to advertisements, packaging and
promotion materials (Artwork) pertaining to said
New Product. Within ten (10) days of receipt, AP
shall approve or disapprove of said New Product
and Artwork. Grounds for disapproval include, but
are not limited to, failure of any New Product to
meet AP's production specification requirements or
failure of any Artwork to meet the stated artistic
requirements of AP. AP shall specify in detail the
basis of any disapproval. In the event that AP
disapproves of any New Product or Artwork, Innovo
shall promptly work to modify such submittal to
conform to the requirements of AP and shall
resubmit such New Product or Artwork for review
and approval of AP. Innovo shall not manufacture,
distribute, market, sell or use New Product or
Artwork prior to approval by AP. AP shall not
unreasonably withhold approval of New Product or
Artwork. Unreasonable delay in approval or
disapproval of New Product or Artwork by AP shall
constitute approval of the New Product submission
provided Innovo gives AP ten (10) days written
notice of its intent to deem delay as constituting
an approval.

Notwithstanding the preceding paragraph,
Innovo acknowledges that, in accordance with the
terms and conditions of their license agreements,
AP is obligated to provide samples, in certain
cases pre-production samples as well as production
samples (Samples), of any and all New Product
and Artwork to the impacted licensors (Impacted
Licensors) for their review and approval. AP
shall be allowed a reasonable period of time, as
determined by reference to the individual
agreements with Impacted Licensors, to obtain the
requisite approval of Impacted Licensors, in
addition to the ten (10) days provided for in the
preceding paragraph for AP to review and approve
said New Product and Artwork on its own behalf.
Innovo shall provide, at no additional cost to AP,
two (2) Samples of any and all New Product and
Artwork in addition to the number of said New
Product and Artwork that AP is required to provide
to the Impacted Licensors.

If through best efforts AP fails to obtain
approval of New Product or Artwork from the
Impacted Licensors, Innovo agrees to work with AP
to modify such submittal to conform to the
requirements of the Impacted Licensors. In the
even any Impacted Licensor disapproves of any New
Product or Artwork, Innovo shall not manufacture,
distribute, market, sell or use said New Product
of Artwork in any capacity whatsoever. At the
request of any Impacted Licensor, Innovo shall
destroy or turn over to AP any disapproved New
Product or Artwork. AP shall be responsible for
informing Innovo within seven (7) working days of
any and all approvals, disapprovals or other
instruction received from Impacted Licensors
relating to New Product or Artwork.

8. Terms of Payment. Within seven (7) days of
the end of each month, Innovo agrees to issue one
purchase order to AP representing all Retail Sales
and inventory increases of AP items during such
period. With regard to Retail Sales, Innovo shall
make payment, within thirty (30) days of the
issuance of a purchase order, to AP for the
Reimbursement to AP specified in Exhibit A,
attached hereto. With regard to all Sales to AP,
other than Fan Fueler or any successor thereof, AP
shall make payment, within thirty (30) days of
shipment, to Innovo at the price established in
Exhibit B attached hereto.

9. Possible Price Modification. The prices
contained in Exhibit A may be adjusted by Innovo
upon thirty (30) days notice to AP. In the event
that AP does not agree to any price adjustment,
Innovo shall cease to be the exclusive
manufacturer of said Product and AP shall be
entitled to seek any and all alternative means
necessary for the manufacture of said Product.

10. Cancellation of Purchase Orders. In the
event that Any AP purchase order is canceled, AP
hereby agrees to purchase the Product manufactured
by Innovo at the prevailing price at which Innovo
is selling the Product to AP at the time of
cancellation (a Sale to AP). Innovo agrees to
use all efforts to minimize costs to AP in the
event of a canceled AP Sale.

11. Duration of Contract. Except in the case
of Termination of this Agreement as defined in
16, this Agreement shall continue in effect for a
period of three (3) years from the date of the
execution of this Agreement (Initial Term). If
Innovo is not then in default under this Agreement
at the end of the Initial Term, Innovo shall have
the right of first refusal to negotiate for the
extension of the Agreement, on a year-to-year
basis (Extension). Upon Innovo's exercise of its
right(s) of first refusal, the parties hereto
shall use their best efforts to negotiate in good
faith any modification or amendments that may be
reasonably necessary to continue the parties'
rights and obligations under the Agreement. In the
event that Innovo desires to exercise its right(s)
of first refusal, it shall do so by providing
written notice to AP at any time prior to sixty
(60) days before the expiration of the Initial
Term or Extension, as the case may be. If Innovo
is in default under the terms of the Agreement at
the end of any Extension, Innovo shall forfeit its
rights of first refusal for future Extensions and
any Extensions agreed to for future years shall be
null and void.

12. Marketing. Innovo is authorized to enter into
agreements with retailers relating to the Products
identified in this Agreement. Innovo will use its
best efforts to sell Products to retailers.

13. Product Warranty Policies.
a. Innovo's Products are sold to retailers
and AP at prices that contemplate that such
Products are free from defects in manufacture and
workmanship at the time of sale. In the event that
any Product is defective at the time of sale,
neither AP nor any retailer shall be under any
obligation to purchase said Product unless Innovo,
at Innovo's cost, cures any and all defects. With
regard to sales to AP, Innovo and AP shall work
together, in good faith, to determine whether any
Product is defective. With regard to Retail Sales,
Innovo and the retailer shall work together, in
good faith to determine whether any product is
defective. To the extent any Product does not meet
AP's production specification requirements or
stated artistic requirements, upon proof to
Innovo's satisfaction of the defect, that Product
shall be deemed defective.
b. For any and all defective Product
claims or demands made against AP, Innovo agrees
to protect AP and hold AP harmless from any loss
or claim arising out of inherent defects in any of
Innovo's Product existing at the time such Product
is sold by Innovo or any retailer. AP and Innovo
shall give each other immediate notice of any such
loss or claim and cooperate fully with each other
in the handling thereof. AP agrees to protect
Innovo and hold Innovo harmless for any loss or
claim arising out of negligence of AP or AP's
agents.

14. Tooling. All tools or molds created by
Innovo exclusively to produce the Products
referenced herein for AP will be detailed in AP's
purchase orders and the cost of said tools/molds
will be billed to AP. Once purchased by AP, AP
will own the tools and molds, but allow Innovo to
use the tools and molds in the manufacture and
production of the Product. Other tools or molds
may follow and may be specifically added by
agreement of the parties to this Agreement by way
of addendum from time to time. Tools or molds used
by Innovo in the production of AP's Products which
are not used exclusively for AP's Products will
not be billed to AP and will not become the
possession of AP. For any and all tools built
exclusively for and billed to AP, Innovo shall at
no later time use said tools on a non-exclusive
basis without prior permission from AP.

15. Order Processing and Shipment Policies.
Innovo shall use best efforts to meet its delivery
commitments with regard to Retail Sales and shall
at all times conduct its business in a manner
which enhances the reputation of AP and Fan Fueler
in the marketplace. In order to meet these
commitments, Innovo shall build and maintain
within the United States, inventory in amounts
reasonably expected to meet the needs of its
customers, including AP (hereinafter Inventory on
Hand). Innovo will employ its best efforts to
fill AP's orders promptly on acceptance, but
reserves the right to allow Inventory on Hand as
it deems best. However, to the extent that AP's
orders of Product identified in 3 of this
Agreement cannot be fulfilled with Inventory on
Hand, Innovo commits to manufacturing or, upon
written approval of AP, effecting the
manufacturing of said product in quantities
sufficient to fulfill AP's orders prior to
producing additional amounts of the same Product
or Products for purposes of Retail Sales. Innovo
warrants that it shall use best efforts to fulfill
AP's orders within (I) four weeks to the extent
that sufficient quantities of Inventory on Hand
exist to fulfill said orders, or (ii) seventy-five
days to the extent that fulfillment of said orders
specially require overseas production of Products.
Notwithstanding the preceding sentence, Innovo
shall not be liable for failure to ship Innovo's
Products specified in the accepted order because
of strikes, differences with workers, inability to
secure transportation facilities or other
circumstances beyond its control. AP shall not be
liable for failure to accept shipments of Products
ordered from Innovo when such failure is due to
strikes, or any other cause beyond AP's control,
provided Innovo receives notice in writing to
suspend such shipments prior to delivery to
carrier.

16. Termination. The following provisions
shall govern the termination of this Agreement:
a. The parties may terminate this
Agreement by mutual written agreement.
b. If Innovo becomes unable to pay its
debts as they become due, or if Innovo files or
has filed against it a petition in bankruptcy,
reorganization or for the adoption of an
arrangement under any present or future
bankruptcy, reorganization or similar law (which
petition, if filed against Innovo, is not
dismissed within 30 days after the filing date),
or if a receiver, trustee, liquidator or
sequestrator of all or substantially all of
Innovo's property is Appointed, or if Innovo
discontinues its business, this Agreement
automatically shall terminate forthwith upon
written notice to Innovo.
c. If Innovo or AP fail to meet the terms
of payment outlined in Section 8 and continue to fail to
render such payment then due during the 20
business days immediately following written notice
of such default, Innovo or AP, as the case may be,
may terminate this Agreement upon final written
notice to the other party.
d. If Innovo's business is sold or
transferred by operation of law or otherwise, and
if there is a substantial change in Innovo's
management, AP in its sole and absolute
discretion, shall have the right, upon written
notice to Innovo, to convert this Agreement to a
non-exclusive manufacturing and distribution
agreement having a yearly term cancelable by AP
upon written notice given at least 30 days prior
to the end of each calendar year.
e. If (A) Innovo (I) manufactures, offers
to sell, sells, distributes or otherwise disposes
of articles in any way utilizing any of the
Products which are not Approved as provided
herein; (ii) registers or attempts to register any
claim to copyright, trademark, service mark,
design patent or any other right in or to any
element of the Products; (iii) fails to obtain or
maintain insurance coverage as required hereunder;
or (iv) materially breaches the terms and
conditions of this Agreement in any manner, and
(B) Innovo fails to cure any such condition within
30 days written notice of the occurrence thereof
from AP, AP may terminate this Agreement upon
written notice to Innovo.
f. Upon termination of this Agreement, AP
shall purchase from Innovo all new, current,
unused and saleable Product, exclusive of parts,
on hand or in transit that may have been delivered
to AP under this Agreement which are represented
on a current or forthcoming purchase order. The
price to be paid by AP shall be controlled by the
prevailing price in a Sale to AP at the time of
termination, plus transportation costs previously
paid or incurred by Innovo, and less any cash or
other discounts that may have been allowed or paid
by AP. Innovo may dispose of any other remaining
Product through its retail distribution channels.
g. Innovo shall not accept any purchase
orders for the sale of any Products covered by
this Agreement after the termination or expiration
of the distributorship created by this Agreement,
unless Products have previously been manufactured.
However, purchase orders received prior to
termination of this Agreement may be fulfilled
after said termination and shall be governed in
the same manner as are ordinary purchase orders
placed with Innovo pursuant to this Agreement.

17. Notice of Changes or Cancellations. AP
agrees to notify Innovo of any driver changes,
cancellations or any other changes which may have
any affect on Innovo's production, sales,
marketing or distribution of any of the products
which are or shall be the subject of this
Agreement. Said notice shall be given to Innovo no
later than sixty (60) days prior to the close of
each calendar year.

18. Insurance. Innovo and AP, each at its sole
cost, will obtain and maintain throughout the
Initial Term and extensions, and will provide the
Other Party (hereinafter defined) written evidence
from the insurance carrier of commercial general
liability insurance including broad form coverage
for contractual liability, products liability and
personal injury (including bodily injury and
death), and advertiser's liability insurance, each
from a legally qualified insurance company
reasonably acceptable to the Other Party; (1) in
an amount, with respect to the Products Liability
Insurance, not less than $2,000,000 combined
single limited for each single occurrence and with
a deductible no greater than $10,000; (2) in an
amount, with respect to the other general
liability insurance, no less than
$1,000,000/$3,000,000 with a deductible no greater
than $10,000; (3) naming the Other Party (and its
designees from time to time) as an additional
insured and requesting that each such insurance
company shall waive any rights of subrogation
against the Other Party (and its designees from
time to time); (4) non-cancelable except on 30
days prior written notice to the Other Party and
only if replaced so that there is no lapse in
coverage as required herein; (5) providing that
such insurance shall be primary insurance
notwithstanding the existence or coverage of any
other policy of insurance maintained by the Other
Party or by any other insured or third party; (6)
as proof of such insurance, fully paid
certificates of insurance shall be submitted to
the Other Party for their prior written approval
before any product is distributed or sold, not
later than thirty (30) days after the date of this
Agreement. Each such certificate shall provide for
no less than thirty (30) days prior written notice
to the Other Party of any lapse, cancellation or
termination of such insurance, and any proposed
change in any certificate of insurance shall be
submitted to the Other Party for its prior written
approval. For purposes of this section, the term
"Other Party shall, in the case of Innovo, mean
AP and, in the case of AP, mean Innovo.

19. Entire Agreement. This Agreement
constitutes the entire agreement between the
parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous
agreements, representations and understandings of
the parties. No supplement, modification or
amendment of this Agreement shall be binding
unless executed in writing by all the parties to
this Agreement. No waiver of any of the provisions
of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party
making the waiver.

20. Notices. All notices and other
communications hereunder shall be in writing and
shall be delivered personally or shall be sent by
registered mail, certified mail, or express mail
service, postage prepaid and return receipt
requested, or by nationally utilized over night
delivery service, addressed to the parties as
follows:

As to Innovo: Innovo, Inc.
1808 N. Cherry St.
Knoxville, TN 37917

As to AP: Action Performance
Companies, Inc.
Attn: Paul Oursler
4707 E. Baseline Road
Phoenix, AZ 85040

21. Severability and Operation of Law If any
provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws Apply to
this Agreement, that provision is ineffective to
the extent of such prohibition and/or is modified
to conform with such laws, without invalidating
the remaining provisions hereto. Any such
prohibition in any jurisdiction shall not
invalidate such provision in any other
jurisdiction.

22. Attorney Fees. If any legal action or
other proceeding is brought for the enforcement of
this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection
with any of the provisions of this Agreement, the
successful or prevailing party or parties shall be
entitled to recover reasonable attorney fees and
other costs incurred in that AP or proceeding, in
addition to any other relief to which it may be
entitled.

23. Indemnification.
a. Indemnification of AP: Innovo shall
indemnify and hold harmless AP and any of its
affiliates, shareholders, agents, employees or
directors and Innovo hereby indemnifies and holds
harmless AP from and against all damages, claims,
losses, expenses, costs, obligations and
liabilities, including, without limitation,
liabilities for attorney's fees (hereinafter
collectively referred to as Loss and Expense)
suffered or incurred by AP directly or indirectly
as a result of (I) subject to the exception noted
in subparagraph (b)(ii), any injury to or death or
any person or persons directly or indirectly
arising out of or resulting from any goods or
services manufactured, finished, distributed, sold
or offered by Innovo, its employees, agents or
representatives (ii) any damage to or loss of any
property directly or indirectly arising out of or
resulting from any goods or services manufactured,
finished, distributed, sold or offered by Innovo,
its employees, agents or representatives (iii) any
injury or loss to AP resulting from violation of
any of its license agreement directly or
indirectly arising out of or resulting from any
goods or services manufactured, finished,
distributed, sold or offered by Innovo, its
employees, agents or representatives, which are
not approved by AP pursuant to Section 7 of this
Agreement.
b. Indemnification of Innovo: AP shall
indemnify and hold harmless Innovo and any of its
affiliates, partners, shareholders, agents,
employees or directors and AP hereby indemnifies
and holds harmless Innovo from and against any
Loss and Expense suffered or incurred by Innovo
directly or indirectly as a result of any person
making a claim for (I) any injury or damage
arising out of false advertising, trademark or
copyright infringement arising out of Innovo's
manufacture, distribution, marketing, sale or use
of any product and any and all related Artwork so
long as said products and Artwork are approved by
AP in the manner set forth in Section 7 of this Agreement
(ii) any physical injury or death of any officer,
agent or employee of AP, arising out of or in
connection with products to be provided under this
Agreement so long as said injury or death relates
to the products to which title has passed to AP,
or (iii) any injury or damage arising out of
Innovo's use of any tool or mold owned and
provided to Innovo by AP which results from defect
of said tool or mold.

24. Governing Law, Consent to Jurisdiction,
Venue. The parties agree that this Agreement is
made under and governed by the laws of Arizona.
The parties agree and consent to the jurisdiction
of any state or federal court in the State of
Arizona over its person in connection with any AP
or proceeding brought by either party. The parties
also agree that venue for any such AP or
proceeding brought by either party shall be proper
in Maricopa County, Arizona. Such consent to
jurisdiction and acknowledgment of venue shall be
in addition to any other jurisdiction or venue
available at law.

25. Alterations. Unless otherwise state in
this Agreement, this Agreement shall not be
terminated, amended or altered except by written
documentation signed by all parties hereto.

26. Assignability. Upon written agreement of
the parties, this Agreement may be assigned by any
of the undersigned parties. Notwithstanding the
preceding sentence, either party may, upon written
notice to the other party, assign its rights and
obligations hereunder, subject to the same terms
and conditions, to any wholly owned subsidiary of
the party. Notwithstanding the preceding sentence,
AP may assign its rights or obligations hereunder
to any subsidiary owned one hundred percent (100%)
by AP.

27. Counterparts. This Agreement may be
executed in any number of counterparts and such
counterparts, after execution by all parties
hereto shall be treated for all purposes as one
instrument.

28. Authority to Bind. Each person executing
this Agreement hereby warrants that the person has
full and legal authority to execute this agreement
for and on behalf of the respective corporation
and to bind such corporations.

29. Press Releases. The content of all press
releases and other communications relating to this
Agreement shall be subject to the mutual agreement
of AP and INNOVO, and the existence of this
Agreement and the provisions hereof shall not be
disclosed to any person except upon the mutual
agreement of AP and INNOVO; provided, however, the
existence of this Agreement and the provisions
hereof and any other information relating to this
Agreement may be disclosed by AP or INNOVO without
the agreement of the other party (but AP or
INNOVO, as the case may be, shall consult with the
other party regarding the contents of such
disclosure) to the extent determined by AP or
INNOVO to be required by applicable securities
laws or the rules, regulations and interpretations
of the Securities and Exchange Commission or
NASDAQ. From and after the date of this Agreement,
copies of all disclosures made by AP of INNOVO, as
the case may be, with respect to the existence of
this Agreement and the provisions hereof shall be
furnished to the other party at the time of the
disclosure or, if impracticable, promptly
thereafter.

IN WITNESS WHEREOF, the parties hereto have
set their hands and seals on the same day first
written above.

IN THE PRESENCE OF: INNOVO GROUP,
INC.

_____________________________
By:_____________________________

_____________________________
Its:____________________________

ACTION PERFORMANCE COMPANIES, INC.

_____________________________
By:______________________________

_____________________________
Its:_____________________________

EXHIBIT 10.54
DATE THIS AGREEMENT, made the 6th day of October, 1998
by and between Innovo Group, Inc.

MAILING ADDRESS
Attn: Mr. Butch Smith, CEO
27 North Main Street
Springfield, TN 37172
Telephone (561) 833-1661

(hereinafter called OWNER) and FURROW AUCTION
COMPANY, 1022 Elm Street, Knoxville, Tennessee 37921, (423)
546-3206 (hereinafter called AUCTIONEER) witnesseth that it is
agreed by and between the parties as follows;

OWNER does hereby irrevocably commission AUCTIONEER to
sell to the highest bidder(s) the following described property at
Absolute Auction, without minimum or reservation, to wit:

PROPERTIES

Property located at 2425 North Dixie Highway, Lake Worth, Palm
Beach County, FL

LOCATION

said property located at above location
said sale to be held at above location

DATE

and to be sold on or about the 12th day of November, 1998

WARRANTY OF TITLE

OWNER warrants to AUCTIONEER that he is the OWNER of
the above described property, or that he is authorized by the
OWNER thereof to execute this agreement, and further warrants
that he has full authority and right to transfer said property free
and clear of all liens and encumbrances including, without
limitation,unrecorded liens, tax liens, mechanic's and
materialman's liens, and claims of creditor under any BULK
SALES LAW, except Utility and Roadway rights-of-way, zoning by
governmental bodies, and current year property taxes, which will
be prorated as of closing, and mortgages as shown on title
commitment will so transfer said property to the purchaser
thereof when same is sold by AUCTIONEER.
Signing of this Agreement authorizes AUCTIONEER to obtain a
title search/commitment and provide a title commitment at
OWNER'S expense.
OWNER further agrees to indemnify and defend AUCTIONEER
against, and hold AUCTIONEER harmless from, any and all loss
and liability which AUCTIONEER may sustain or incur as a result
of a breach of the foregoing warranty, or a failure by OWNER to
transfer said property free and clear of liens and claims.
AUCTIONEER shall have the right, after receiving his
compensation and expenses as provided herein, to use the
residue of funds to first pay any bona fide liens necessary to give
clear title to property sold.

OWNER further agrees to indemnify and defend AUCTIONEER
against, and hold AUCTIONEER harmless from, any and all loss
and liability which AUCTIONEER may sustain or incur as a result
of any misrepresentations and/or warranties made by OWNER to
AUCTIONEER.

HAZARDOUS WASTE WARRANTY

OWNER warrants to AUCTIONEER and any purchaser that
neither he (it), nor, to his (its) knowledge any predecessor in title to
the property, disposed of or discharged on the property any
hazardous waste or substance, as defined by any federal or state
law. Further, the OWNER warrants that there are not now located
or stored on the property any hazardous wastes or substances,
except, Owner will advise
(description of hazardous waste or substance), which OWNER
warrants will be removed in accordance with law prior to the sale.
OWNER authorizes AUCTIONEER to disclose to any potential
purchaser of the property the fact of the location and storage of
the material on the property, and further agrees to indemnify and
defend AUCTIONEER against, and hold AUCTIONEER harmless
from, any and all loss and liability which AUCTIONEER may
sustain or incur as a result of a breach of the foregoing warranties.

PREPARATION FOR SALE

OWNER agrees to prepare the property for sale to include all
painting, reconditioning, mowing, and repairing at OWNER'S
expense.

SURVEY

OWNER agrees to furnish a current survey of said property at
OWNER'S expense. OWNER shall be responsible for the costs of
any soil mapping, health department evaluation, and related work,
i.e., perk tests, etc.; stakes (large stakes at $2.75/stake; small
stakes at $2.25/stake); parcel signs at $7.50 each.

TITLES

OWNER agrees to furnish deeds of title for all properties sold in
this sale.

MARKETING

OWNER agrees to pay the cost of advertising and promotion of
this sale in the amount of $24,405.01 (PER ATTACHED SCHEDULE "A") and, OWNER
agrees to pay all other expenses as shown on Schedule "A",
which shall be billed at AUCTIONEER'S cost which shall be
substantiated by paid receipts. AUCTIONEER agrees to promote
the attendance of the best buyers for this sale.

SALE LOCATION

OWNER agrees to furnish a location on which the auction sale
can be conducted at OWNER'S expense. Toilet facilities and
refreshments are available upon OWNER'S request and at
OWNER'S expense. Tent and chairs will be furnished at
OWNER'S expense to include cost of erection, dismantling, and
staging not to exceed $ at cost per tent to be paid in full at
closing of the property.

PAYMENT OF AUCTIONEER'S FEE AND EXPENSES

OWNER hereby grants to the AUCTIONEER a first position
security interest in all proceeds of any sale conducted by the
AUCTIONEER to secure the payment of all expenses incurred by
the AUCTIONEER pursuant to this agreement, and to secure the
payment of all commissions earned by the AUCTIONEER under
this agreement. In the event proceeds do not exceed
commissions and expenses, OWNER agrees to reimburse
AUCTIONEER in full.

OWNER agrees to reimburse AUCTIONEER for sale day staff in
the amount of $ @ cost to be paid in full at closing of the
property.

COMMISSIONS

For and in consideration of AUCTIONEER'S service in selling
said property, OWNER agrees to pay to AUCTIONEER'S the
following commissions, to wit: 10(see special conditions) % on
the TOTAL GROSS SALES PRICE of all property sold during the
period covered by this contract to be paid in full at the closing of
the property. This constitutes an exclusive contract to sell and
receive commission on the listed property from date until sold.

CONTINUING AGENCY TO SELL
In the event the auction sale is not confirmed by OWNER, or for
any reason the sale is not closed, AUCTIONEER shall be granted an exclusive
90-day listing in which to continue to offer the property for sale under the
same terms and conditions as herein described at mutually agreeable prices.

BREACH OF AGREEMENT

This contract is irrevocable and OWNER cannot remove any
item from said sale without the express consent of AUCTIONEER.
In the event such consent be given, OWNER agrees to pay to
AUCTIONEER 10 % of the fair market value of the items
withdrawn, as liquidated damages, and agrees that said sum is a
fair amount to be paid to AUCTIONEER for the breach of this
agreement by OWNER. It is further agreed that AUCTIONEER
may institute suit to enforce the performance of such damages
heretofore set out, together with reasonable attorney's fees. The
intent of this paragraph is to make AUCTIONEER the
EXCLUSIVE AGENT for the OWNER, and all transactions
regarding these properties prior to the said sale will be conducted
by and through AUCTIONEER.
OWNER further agrees that should AUCTIONEER'S consent be
given that OWNER will provide AUCTIONEER a letter stating that
OWNER will indemnify and hold AUCTIONEER harmless from
any and all claims arising out of the removal of these items from
said sale.

CANCELLATION

In the event the auction is canceled for any reason ohter than sale of
property to third parties, OWNER shall reimburse AUCTIONEER for all expenses
as outlined, in addition to all out-of-pocket personnel expenses associated
with this auction. OWNER shall also pay AUCTIONEER a cancellation fee of
$ to be determined .OWNER further agrees to indemnify
AUCTIONEER against any and all claims which may arise due to
cancellation.

CLOSING AND SETTLEMENT

All checks shall be drawn payable to Furrow Auction Company,
Escrow Account who shall collect all checks and accounts.
Settlement shall be made within twenty (20) days after sale with
respect to all checks and other items collected at that time. Final
settlement shall not be made until all outstanding checks and
other items have been finally settled.
Closing to be conducted by title company and Buyer to incur
one-half of title company's closing fee. AUCTIONEER'S
fees,expenses, and commissions shall be paid in full at closing.

In the event the property does not sell and/or does not close, all
aforementioned fees shall be paid in full to AUCTIONEER within
twenty (20) days of said sale.

RISK OF LOSS

AUCTIONEER agrees to exercise due care in the protection of
said property while same is under the provisions of this contract.
The risk of fire, damage, and other loss prior to the delivery to the
purchaser thereof shall be with OWNER and OWNER agrees to
obtain insurance or self-insure therefor, and to hold
AUCTIONEER harmless for any such loss.

SPECIAL CONDITIONS

RE: Commission: Auctioneer shall pay listing co-broker a
3% commission from the sale of these assets by auction.

OWNER'S ACCEPTANCE

If fewer than all OWNERS of the Premises have executed this
Agreement, those OWNERs whose signatures appear below
warrant full authority to act for any other OWNERS, accept
personal responsibility and obligate themselves to pay all sale or
lease commissions due AUCTIONEER. This Agreement shall be
binding upon and inure to the benefit of AUCTIONEER and
OWNER and their respective heirs, successors, assigns,
executors and/or administrators. This Agreement applies to all or
any parts of the Premises.

If not executed, the terms and conditions of this contract are void
after thirty (30) days.

SIGNATURES

IN TESTIMONY WHEREOF the parties hereto have caused this
instrument to be executed on the day and year first above written.

OWNER:
FURROW AUCTION COMPANY
____________________________
1022 Elm Street
Knoxville, Tennessee 37921
(423) 546-3206 by________________________________

Title_____________________________

by______________________________

by_______________________________

Title_____________________________

Title_______________________________

EXHIBIT 10.55
DATE THIS AGREEMENT, made the 6th day of October, 1998
by and between Innovo Group, Inc.

MAILING ADDRESS Attn: Mr. Butch Smith, CEO
27 North Main Street
Springfield, TN 37172
Telephone (561) 833-1661

(hereinafter called OWNER) and FURROW AUCTION COMPANY, 1022 Elm
Street, Knoxville, Tennessee 37921, (423) 546-3206 (hereinafter called
AUCTIONEER) witnesseth that it is agreed by and between the parties as
follows;

OWNER does hereby irrevocably commission AUCTIONEER to sell to the
highest bidder(s) the following described property at Absolute Auction, without
minimum or reservation, to wit:

PROPERTIES

Property located in J. Dixie Harn Industrial Park, Pembroke, Bryan County, GA

LOCATION

said property located at above location
said sale to be held at above location

DATE

and to be sold on or about the 11th day of November, 1998

WARRANTY OF TITLE

OWNER warrants to AUCTIONEER that he is the OWNER of the above
described property, or that he is authorized by the OWNER thereof to execute
this agreement, and further warrants that he has full authority and right to
transfer said property free and clear of all liens and encumbrances including,
without limitation,unrecorded liens, tax liens, mechanic's and materialman's
liens, and claims of creditor under any BULK SALES LAW, except Utility and
Roadway rights-of-way, zoning by governmental bodies, and current year property
taxes, which will be prorated as of closing, and mortgages as shown on title
commitment will so transfer said property to the purchaser thereof when same
is sold by AUCTIONEER.
Signing of this Agreement authorizes AUCTIONEER to obtain a title
search/commitment and provide a title commitment at OWNER'S expense.
OWNER further agrees to indemnify and defend AUCTIONEER against, and
hold AUCTIONEER harmless from, any and all loss and liability which
AUCTIONEER may sustain or incur as a result of a breach of the foregoing
warranty, or a failure by OWNER to transfer said property free and clear of
liens and claims. AUCTIONEER shall have the right, after receiving his
compensation and expenses as provided herein, to use the residue of funds to
first pay any bona fide liens necessary to give clear title to property sold.

OWNER further agrees to indemnify and defend AUCTIONEER against, and
hold AUCTIONEER harmless from, any and all loss and liability which
AUCTIONEER may sustain or incur as a result of any misrepresentations and/or
warranties made by OWNER to AUCTIONEER.

HAZARDOUS WASTE WARRANTY

OWNER warrants to AUCTIONEER and any purchaser that neither he (it), nor,
to his (its) knowledge any predecessor in title to the property, disposed of or
discharged on the property any hazardous waste or substance, as defined by
any federal or state law. Further, the OWNER warrants that there are not now
located or stored on the property any hazardous wastes or substances, except,
Owner will advise (description of hazardous waste or substance), which OWNER
warrants will be removed in accordance with law prior to the sale.
OWNER authorizes AUCTIONEER to disclose to any potential purchaser of
the property the fact of the location and storage of the material on the
property, and further agrees to indemnify and defend AUCTIONEER against, and
hold AUCTIONEER harmless from, any and all loss and liability which AUCTIONEER
may sustain or incur as a result of a breach of the foregoing warranties.

PREPARATION FOR SALE

OWNER agrees to prepare the property for sale to include all painting,
reconditioning, mowing, and repairing at OWNER'S expense.

SURVEY

OWNER agrees to furnish a current survey of said property at OWNER'S
expense. OWNER shall be responsible for the costs of any soil mapping, health
department evaluation, and related work, i.e., perk tests, etc.; stakes (large
stakes at $2.75/stake; small stakes at $2.25/stake); parcel signs
at $7.50 each.

TITLES

OWNER agrees to furnish deeds of title for all properties sold in this sale.

MARKETING

OWNER agrees to pay the cost of advertising and promotion of this sale in
the amount of $9,078.63 (PER ATTACHED SCHEDULE "A") and, OWNER agrees to pay
all other expenses as shown on Schedule "A", which shall be billed at
AUCTIONEER'S cost which shall be substantiated by paid receipts.
AUCTIONEER agrees to promote the attendance of the best buyers for this sale.

SALE LOCATION

OWNER agrees to furnish a location on which the auction sale can be
conducted at OWNER'S expense. Toilet facilities and refreshments are available
upon OWNER'S request and at OWNER'S expense. Tent and chairs will be
furnished at OWNER'S expense to include cost of erection, dismantling, and
staging not to exceed $ at cost per tent to be paid in full at closing
of the property.

PAYMENT OF AUCTIONEER'S FEE AND EXPENSES

OWNER hereby grants to the AUCTIONEER a first position security interest in
all proceeds of any sale conducted by the AUCTIONEER to secure the payment
of all expenses incurred by the AUCTIONEER pursuant to this agreement, and
to secure the payment of all commissions earned by the AUCTIONEER under
this agreement. In the event proceeds do not exceed commissions and
expenses, OWNER agrees to reimburse AUCTIONEER in full.

OWNER agrees to reimburse AUCTIONEER for sale day staff in the amount
of $ @ cost to be paid in full at closing of the property.

COMMISSIONS

For and in consideration of AUCTIONEER'S service in selling said property,
OWNER agrees to pay to AUCTIONEER'S the following commissions, to wit:
6% Buyer's Premium to be paid by Buyer (see special conditions) on the TOTAL
GROSS SALES PRICE of all property sold during the period covered by this
contract to be paid in full at the closing of the property. This constitutes an
exclusive contract to sell and receive commission on the listed property from
date until sold.

CONTINUING AGENCY TO SELL

In the event the auction sale is not confirmed by OWNER, or for any reason
the sale is not closed, AUCTIONEER shall be granted an exclusive 90-day listing
in which to continue to offer the property for sale under the same terms and
conditions as herein described at mutually agreeable prices.

BREACH OF AGREEMENT

This contract is irrevocable and OWNER cannot remove any item from said
sale without the express consent of AUCTIONEER. In the event such consent
be given, OWNER agrees to pay to AUCTIONEER 10 % of the fair market
value of the items withdrawn, as liquidated damages, and agrees that said sum
is a fair amount to be paid to AUCTIONEER for the breach of this agreement by
OWNER. It is further agreed that AUCTIONEER may institute suit to enforce the
performance of such damages heretofore set out, together with reasonable
attorney's fees. The intent of this paragraph is to make AUCTIONEER the
EXCLUSIVE AGENT for the OWNER, and all transactions regarding these
properties prior to the said sale will be conducted by and through AUCTIONEER.
OWNER further agrees that should AUCTIONEER'S consent be given that
OWNER will provide AUCTIONEER a letter stating that OWNER will indemnify
and hold AUCTIONEER harmless from any and all claims arising out of the
removal of these items from said sale.

CANCELLATION

In the event the auction is canceled for any reason other than sale of
property to third parties, OWNER shall reimburse AUCTIONEER for all expenses as
outlined, in addition to all out-of-pocket personnel expenses associated with
this
auction. OWNER shall also pay AUCTIONEER a cancellation fee of $ to be
determined. OWNER further agrees to indemnify AUCTIONEER against any
and all claims which may arise due to cancellation.

CLOSING AND SETTLEMENT

All checks shall be drawn payable to Furrow Auction Company, Escrow
Account who shall collect all checks and accounts. Settlement shall be made
within twenty (20) days after sale with respect to all checks and other items
collected at that time. Final settlement shall not be made until all
outstanding checks and other items have been finally settled.
Closing to be conducted by title company and Buyer to incur one-half of
title company's closing fee. AUCTIONEER'S fees,expenses, and commissions shall
be paid in full at closing.

In the event the property does not sell and/or does not close, all
aforementioned fees shall be paid in full to AUCTIONEER within twenty (20)
days of said sale.

RISK OF LOSS

AUCTIONEER agrees to exercise due care in the protection of said property
while same is under the provisions of this contract. The risk of fire, damage,
and other loss prior to the delivery to the purchaser thereof shall be with
OWNER and OWNER agrees to obtain insurance or self-insure therefor, and to hold
AUCTIONEER harmless for any such loss.

SPECIAL CONDITIONS

RE: Commission: Auctioneer shall pay a 2% commission from the sale of
these assets at auction to any qualified broker whose buyer is the high
bidder and consummates the sale.

OWNER'S ACCEPTANCE

If fewer than all OWNERS of the Premises have executed this Agreement,
those OWNERs whose signatures appear below warrant full authority to act for
any other OWNERS, accept personal responsibility and obligate themselves to
pay all sale or lease commissions due AUCTIONEER. This Agreement shall be
binding upon and inure to the benefit of AUCTIONEER and OWNER and their
respective heirs, successors, assigns, executors and/or administrators. This
Agreement applies to all or any parts of the Premises.

If not executed, the terms and conditions of this contract are void after
thirty (30) days.

SIGNATURES

IN TESTIMONY WHEREOF the parties hereto have caused this instrument to
be executed on the day and year first above written.

OWNER:

FURROW AUCTION COMPANY
______________________
1022 Elm Street
Knoxville, Tennessee 37921
(423)546-3206 by____________________

Title_______________________

by__________________________

by____________________

Title___________________

Title_______________________

EXHIBIT 10.56
Brown & Livingston, P.C.
26 North Main Street
Statesboro, GA 30458

GEORGIA, BRYAN COUNTY
WARRANTY DEED

THIS INDENTURE, made this 15th day of December, in the
year One Thousand Nine Hundred Ninety-eight, between THIMBLE
SQUARE, INC., a Georgia corporation, as party of the first
part, hereinafter called Grantor, and H.N. PROPERTIES, L.L.C.,
a Georgia limited liability company, as party of the second
part, hereinafter called Grantee (the words Grantor and
Grantee to include their respective heirs, successors and
assigns where the context requires or permits.)
WITNESSETH that: Grantor, for and in consideration of the
sum of ONE HUNDRED FORTY FIVE THOUSAND SEVEN HUNDRED FIFTY
($145,750.00) DOLLARS and other valuable consideration in hand
paid at and before the sealing and delivery of these presents,
the receipt whereof is hereby acknowledged, has granted,
bargained, sold aliened, conveyed and confirmed, and by these
presents does grant, bargain, sell, alien, convey and confirm
unto the said Grantee, all of the following described property,
to wit:
All that certain tract or parcel of land lying and being
in
the 19th G.M. District of Bryan County, and in the City of
Pembroke, containing 8.24 acres, as depicted on a plat
prepared for Thimble Square, Inc., Furrow Auction Company (Agent),
by Eason Land Surveying, dated October 28, 1998, recorded in Plat
Book ____, Page _____, Bryan County Records, which tract is located
at the northeast corner of intersection of South Industrial Blvd.
and West Industrial Blvd. and fronts westerly on South
Industrial Blvd.
Said tract is bound now or formerly as follows: North by
Property of Bryan County Industrial Authority Road a distance of
500.97';
East by Pembroke Steel Company a distance of 717.26';
South by West Industrial Blvd. a distance of 500.00'; and West by South
Industrial Blvd. a distance of 717.00'.
The aforesaid plat and the description thereon are by
reference incorporated herein and made a part of this description.

THIS PROPERTY IS SOLD AS IS, AS INSPECTED" CONDITION WITH NO
WARRANTIES EITHER IMPLIED OR EXPRESS EXCEPT WARRANTY OF TITLE.
TO HAVE AND TO HOLD the said tract or parcel of land, with
all and singular the rights, members and appurtenances thereof,
to the same being, belonging, or in anywise appertaining, to
the only proper use, benefit and behoof of the said Grantee
forever in FEE SIMPLE.

AND THE SAID Grantor will warrant and forever defend the
right and title to the above described property unto the said
Grantee against the claims of all person whomsoever.

IN WITNESS WHEREOF, the Grantor has signed and sealed this
deed, the day and year above written.

THIMBLE SQUARE, INC.

BY:________________________SEAL

ATTEST:____________________SEAL
Signed, sealed and delivered
in the presence of:
____________________________Witness
____________________________Notary

EXHIBIT 10.57

WAREHOUSE LEASE AGREEMENT

THIS WAREHOUSE LEASE AGREEMENT is made and entered into this _____ day
of ________________, 1998, by and between FURROW-HOLROB DEVELOPMENT II, LLC, a
Tennessee limited liability company (referred to as "Landlord"), and INNOVO
GROUP, INC., a Delaware corporation (referred to as "Tenant").

W I T N E S S E T H:

1. Premises: Landlord hereby leases to Tenant, and Tenant leases and accepts,
the Premises containing approximately 78,900 square feet of warehouse space with
such warehouse space outlined and designated on the site plan attached hereto as
Exhibit A which is incorporated herein by reference (such space is referred to
collectively hereinafter as the "Leased Premises"). The Leased Premises are part
of the approximately 300,000 square foot warehouse complex (which includes the
warehouse space shown on the att

2. Term: The original term of this Lease shall be for a period of five (5) year
(the "Base Term") from the Commencement Date hereinafter provided unless sooner
terminated hereby. Said term, and Tenant's obligation to pay rent, shall
commence on the earlier of the following days (referred to as "Commencement
Date"): (a) the date which is thirty (30) days after Tenant has been notified in
writing by Landlord that the Leased Premises are ready for occupancy, or (b) the
date on which Tenant shall open the Lea

3. Minimum Rent: Tenant shall pay to the Landlord as minimum rent an annual
amount equal to $2.00 times the total square footage of the Leased Premises (the
"Minimum Rent"). All Minimum Rent shall be paid in advance in equal monthly
installments on the first day of each month at the address of the Landlord
stated herein without demand, setoff or deduction. Minimum Rent for any partial
months shall be prorated.

4. Pro-rata Share of Real Estate Taxes, Insurance Premiums and Maintenance
Expenses: Tenant shall remit to Landlord as additional rent its Pro-Rata Share,
as hereinafter defined, multiplied by the Real Estate Taxes, Insurance Premiums,
and Common Expenses incurred by the Landlord in connection with the operation of
the Project. Tenant's "Pro-Rata Share" shall be a fraction, (i) the numerator
of which shall be the number of square feet of the Warehouse leased by Tenant
and (ii) the denominator of which sha

The term "Real Estate Taxes" shall mean all taxes and assessments (special or
otherwise) levied or assessed against the Project (land, buildings and
improvements), and other taxes arising out of the use and/or occupancy of the
Project imposed by federal, state or local governmental authority or any other
taxing authority having jurisdiction over the Project (including expenses
directly incurred by Landlord in contesting the validity of, in seeking a
reduction in, or seeking to prevent an increase in any such tax(es) or
assessment(s)), but shall exclude franchise, capital stock, estate or
inheritance taxes personal in nature to Landlord.

In addition to Tenant's proportionate share of Real Estate Taxes, Tenant
shall pay any and all sales, excise, gross receipts and other taxes (not
including, however, Landlord's income taxes) levied, imposed or assessed by
the state in which the Project is situated or any political subdivision
thereof or other taxing authority (be it federal, state, local or otherwise)
upon any amounts payable hereunder.

The term "Insurance Premiums" shall mean the premiums charged for fire and
extended coverage insurance on the Warehouse and the improvements constructed
as part of the Leased Premises and/or installed by the Landlord in the Leased
Premises and for rent insurance thereon, together with premiums charged for
liability insurance on the common areas in the Project, and any other
reasonable insurance costs related to the Project and incurred in the normal
course of business.

The term "Common Expenses" shall mean the total cost and expense incurred in
operating, maintaining, cleaning and repairing the Common Areas and the
Warehouse including, without limitation, utilities, landscaping and
gardening, maintenance, repair and replacement of the parking lot, line
painting, lighting, sanitary control, removal of snow, trash, rubbish and
garbage, security and police service, maintenance and repair costs of the
plumbing, electrical, sprinkler and HVAC systems in the Project and a
reasonable sum to cover the administravtive and personnel costs relative to the
operation of the said Common Areas.

5. Estimation of Taxes, Insurance and Maintenance Charges: Landlord may, at
its option, estimate for each succeeding calendar year the Tenant's Pro-Rata
Share of the expenses enumerated in Paragraph 4 hereof (the "Tenant's
Estimated Share"), and Landlord may require the Tenant to pay, with each
monthly installment of rent for such succeeding calendar year, one-twelfth
(1/12) of the Tenant's Estimated Share. Within sixty (60) days after the
expiration of such calendar year, the Landlord shall forward to the Tenant an
itemized statement showing the Tenant's actual share of such expenses ("Tenant's
Actual Share"). Should the Tenant's Actual Share differ from the Tenant's
Estimated Share, then, within thirty (30) days after the date of Landlord's
itemized statement, either Landlord shall refund to Tenant any amount paid in
excess of the Tenant's Actual Share, or Tenant shall remit to Landlord any
amount by which the Tenant's Estimated Share was deficient.

6. Triple Net Lease. This Lease is intended to be a "triple net" lease in
favor of Landlord and shall be liberally construed to give effect to such
intention. All expenses borne by Tenant for partial years at the
commencement and end of this Lease shall be appropriately prorated.

7. Tenant's Use and Operation: The Leased Premises shall be used and
occupied by Tenant solely as an office, warehouse and light manufacturing
facility and for no other use without Landlord's prior written consent.
Tenant shall comply with all rules, regulations and laws of any governmental
authority or Landlord with respect to use and occupancy of the Leased
Premises.

8. Utilities: Tenant shall pay promptly as in when the same shall become due
its Pro Rata Share of all water rents, electricity, gas, sewer, heat,
sprinkling systems and all other utilities and all taxes or charges on such
utility services which are used on or attributable to the Leased Premises.
To the extent Landlord provides air conditioning to the Leased Premises, the
Landlord may increase the Tenant's Pro Rata Share of the costs of the
utilities to reflect the providing of such additional utilities based upon
Landlord's good faith estimate of such additional costs.

9. Landlord's Duty to Repair: Landlord shall keep and maintain in good
repair the foundation, exterior walls, HVAC and roof of the Warehouse and the
structural portions of the Warehouse exclusive of doors, door frames, door
checks, windows, and window frames located in exterior building walls.

10. Tenant's Duty to Repair; Alterations: Except for the repairs to be performed
by Landlord, Tenant shall keep and maintain in good order, condition and repair
the Leased Premises.

11. Hazardous Substances: Tenant shall not generate, store, treat, dispose
of, install or otherwise permit any Hazardous Substances on, in, or under or
in any way related to the Leased Premises, or any other portion of the
Project or cause or permit any such generation, storage, treatment, disposal,
installation or other use with respect thereto except in accordance with all
laws, rules and regulations. Tenant shall fully indemnify and hold Landlord
harmless from any liability, damage, cost or expense that Landlord might
otherwise suffer from Tenant's failure to fully comply with this provision.
This indemnity shall survive expiration or other termination of this Lease.
As used herein, "Hazardous Substances" means and inlcudes any substances,
materials, elements or compounds that are listed as Hazardous Substances on any
list adopted or maintained by any federal, state or local governmental authority
or agency.

12. Surrender of Leased Premises: At the termination of the Base Term or any
Option Term, if applicable, the Tenant does agree to deliver the Leased
Premises in the same condition as received by it on the Commencement Date
(subject to the removals hereinafter required), reasonable wear and tear
excepted, and shall surrender all keys for the Leased Premises to Landlord at
the place then fixed for the payment of rent and shall inform Landlord of all
combination locks, safes and vaults, if any, in the Leased Premises. Any items
remaining in the Leased Premises on the termination date of this Lease shall be
deemed abandoned for all purposes and shall become the property of the Landlord
and the latter may dispose of the same without liability of any type or nature.

13. Property of Tenant: Tenant's property on the Leased Premises shall be at
the sole risk and hazard of Tenant. Landlord shall not be liable or
responsible for any loss of or damage to Tenant or Tenant's property.

14. Waiver of Subrogation: If any property owned by Tenant and located on
the Leased Premises is damaged or destroyed by an insured peril, Landlord
shall not have any liability to Tenant, nor to any insurer of Tenant,
for such damage or destruction. Tenant shall require all policies of risk
insurance carried by it on its property on the Leased Premises to contain a
provision in and by which the insurer shall waive its rights of subrogation
against Landlord.

15. Partial Destruction: If the Leased Premises are partially destroyed by
fire or any other casualty (as determined by Landlord), and if two or more
years remain on the Base Term or any Option Term, Landlord shall restore or
repair the Leased Premises with reasonable diligence. In the event of such
restoration or repair, Landlord shall expend such sums as required to repair
or restore the Leased Premises to the condition it was in immediately prior
to the date of the destruction; provided, Landlord shall not be obligated to
expend any sums for repair or replacement of Tenant's property nor shall
Landlord be obligated to expend sums in excess of the insurance proceeds
received by Landlord as a result of such damage or destruction. A just and
proportionate part of the rent payable by Tneant, tot eh extent that such
damage or destruction renders the Leased Premises untenantable, shall abate
from the date of such damage or destruction until the Leased Premises are
repaired.

In the event of a loss from fire or other casualty where the terms of this
Lease do not require the Landlord to restore or repair the Warehouse,
Landlord shall have an election not to rebuild or recondition the Leased
Premises, which election shall be exercised by written notice thereof to
Tenant, given within sixty (60) days from date of said loss. If Landlord
exercises such election, this Lease shall cease and terminate,
effective on the date of such loss, and Tenant shall pay the accrued rent up
to the date of such loss, or Landlord, if the rent has been paid beyond such
date, will refund to Tenant the proportionate part of any such rent prepaid, and
thereupon this lease shall become null and void, with no further obligation on
the part of either party hereto, even though the building may at a later date be
rebuilt, restored or reconditioned. No damage or destruction shall allow Tenant
to surrender possession of the Leased Premises, nor affect Tenant's liability
for the payment of rent, except as speciaically provided in this Lease.

If Landlord is required or elects to repair or rebuild the Leased Premises as
herein provided, Landlord's obligation hereunder shall be limited to that
work specifically designated herein as being Landlord's responsibility.
Tenant shall repair or replace its merchandise, trade fixtures, furnishings, and
equipment.

16. Substantial Destruction: If the Leased Premises are substantially
destroyed by fire or other casualty (as determined by Landlord), then
Landlord shall have the option to terminate this Lease by giving Tenant
written notice within sixty (60) days after such destruction, and any
unearned rent shall be apportioned and returned to Tenant. If Landlord does
not elect to cancel this Lease, then the same shall remain in full force and
effect and Landlord shall proceed with all reasonable diligence to repair the
Leased Premises. In the event of such restoration or repair, Landlord shall
expend such sums as required to repair or restore the building to the condition
it was in immediately prior to the date of destruction; provided, Landlord shall
not be obligated to expend any sums in excess of the inusrance proceeds
received by Landlord as a result of such damage or destruciton. A just and
proportionate part of the rent payable by Tenant, to the extent that such
damage or destruction renders the Leased Premises untenantable, shall abate from
the date of such damage or destruction until the Leased Premises are repaired.

17. Right of Termination: Notwithstanding anything else to the contrary
contained in this Lease, Landlord, at its option, may terminate this Lease on
thirty (30) days' notice to Tenant given within sixty (60) days after the
occurrence of any one of the following: (i) the Leased Premises or the
Warehouse shall be damaged or destroyed as a result of an occurrence that is
not covered by Landlord's insurance; (ii) the Leased Premises or the
Warehouse shall be damaged or destroyed and the cost to repair the same shall
amount to more than twenty-five percent (25%) of the cost of replacement
thereof; (iii) the Leased Premises shall be damaged or destroyed during the last
two (2) years of the Base Term or Option Term, if applicable, or (iv) any or all
of the buildings or Common Areaas of the Project are damaged (whether or not the
Leased Premises are damaged) to such an extent that, in the sole judment of
Landlord, the Warehouse cannot be operated as an economically viable unit.

18. Eminent Domain. If a portion of the Leased Premises shall be taken for
public improvements or otherwise under the exercise of the right of eminent
domain, and the Leased Premises shall continue to be reasonably suitable for
the use which is herein authorized then the rental herein provided shall be
reduced from the date of such taking in direct proportion to the reduction in
usefulness of the Leased Premises. If the Leased Premises, or a part thereof,
sufficient to render the Leased Premises wholly unfit for the use herein
authorized shall be condemned or acquired in the exercise of the right of
eminent domain, Tenant shall have the right, at Tenant's option, to terminate
and cancel this Lease on thirty (30) days' prior written notice to Landlord and
Landlord's lender, such notice to be given within sixty (60) days of the date of
the taking, and Tenant shall be liable only for rents and other charges accrued
and earned to the date of surrender of possession of the Leased Premises to
Landlord and for the performance of other obkigations maturing prior to said
date. Tenant shall not be entitled to participate in or receive any part of the
damages or award which may be paid to or awarded Landlord by reason of a taking
except where said award shall provide for moving or other reimbursable expenses
for Tenant under applicable statute.

19. Rights of Landlord's Lender: Notwithstanding anything contained herein
to the contrary, the obligation of Landlord with respect to repairing or
rebuilding the Leased Premises is subject to the prior right of Landlord's
lender to receive insurance proceeds as a result of a fire or other casualty,
with any obligation of Landlord to be limited to the extent insurance proceeds
are received by Landlord for such repair or rebuilding.

20. Quiet Enjoyment: Landlord agrees that, if the Minimum Rent and other
expenses required to be paid by Tenant pursuant to the terms of this Lease
are being paid in the manner and at the time prescribed and the covenants and
obligations of the Tenant are being all and singularly kept, fulfilled and
performed, Tenant shall lawfully and peaceably have, hold, possess, use and
occupy and enjoy the Leased Premises so long as this Lease remains in force,
without hindrance, disturbance or molestation from Landlord, subject to the
specific provisions of this Lease.

21. Subordination. Subject to the Tenant's rights of quiet enjoyment as
heretofore provided, Tenant hereby subordinates all of its interest under
this Lease to the lien of any deed of trust or mortgage now or hereafter in
force against the real estate or buildings of which the Leased Premises are
a part.

22. Indemnity: Tenant shall indemnify and hold Landlord harmless from and
against all and any liability and expense of any kind, including reasonable
attorneys' fees, arising from injuries or damages to persons or property in,
on or about the Leased Premises arising out of or resulting in any way from
any act or omission of Tenant, its agents, invitees, servants and employees,
in the use of the Leased Premises. Tenant's property on the Premises shall be
at the sole risk and hazard of Tenant. Landlord shall not be liable or
responsible for any loss of or damage to Tenant or Tenant's property.

Landlord shall indemnify and hold Tenant harmless from and against all and any
liability and expense of any kind, including reasonable attorneys' fees,
arising from injuries or damages to persons or property in, on or about the
Leased Premises arising out of or resulting in any way from any act or
omission of Landlord, its agents, invitees, servants and employees, in
connection with its ownership of the Leased Premises.

23. Attorneys' Fees and Expenses. If Landlord or Tenant engages legal counsel
for the enforcement of any of the terms of this Lease as a result of a default
by the other party, whether for suit or other legal services required to
secure compliance on the part of Landlord or Tenant, the defaulting party shall
pay to the non-defaulting party upon demand said reasonable attorneys' fees and
any other reasonable expenses incurred by such non-defaulting party.

24. Tenant Assignment and Subletting: Neither Tenant, any court officer thereof
nor any receiver or trustee in bankruptcy shall assign or transfer this lease or
any part thereof, or interest therein, or sublet the Leased Premises or any
part thereof without Landlord's prior written consent. Tenant shall always
remain liable for any default of any assignee, transferee or subtenant.

25. Events of Default and Remedies. The occurrence of any of the following
shall be an Event of Default:

a. Failure by Tenant to pay in full any rent payment or other sum payable
hereunder within ten (10) days of the date such payment is due;

b. Failure by Tenant to perform of any of the terms or conditions of this
Lease, other than the payment of money, of for a period of thirty (30) days
after notice thereof to Tenant by Landlord;

c. The abandonment of the Leased Premises as a going business by Tenant for
any period exceeding thirty (30) consecutive days, regardless of whether
Tenant continues to pay all rent.

Upon the occurrence of an Event of Default and exercise of such remedies,
Landlord may immediately or at any time thereafter re-enter the Leased
Premises and remove all persons and all or any property therefrom by any
suitable action or proceedings at law or in equity, or by force or otherwise,
without being liable for any prosecution therefor or damages therefrom, and
repossess and enjoy the Leased Premises, together with all additions,
alterations and improvements. Such re-entry shall not relieve Tenant from the
obligation to make the rental payments required by this Lease at any time and in
the manner provided herein. Upon such re-entry Landlord may, but shall not be
required to, repair, remodel and/or change the character of the Leased Premises
as Landlord may see fit, and/or at any time relet the Leased Premises in whole
or in part, as the agent of Tenant, or otherwise, in the name of Landlord or of
Tenant, as Landlord shall see fit, and Landlord may receive the rents therefor,
applying the same first to the payment of such reasonable expenses hereinabove
specified in addition to the payment of the rent required hereunder, and
fulfillment of the covenants of Tenant herein, Tenant shall pay to Landlord such
difference at the end of the each month during the remainder of the term. In
attempting to relet the Leased Premises, Landlord shall be the sole judge as to
whether or not a proposed tenant is suitable and acceptable. Landlord shall
not, by receiving partial payments of rent in arrears, be deemed to have waived
any rights herein for non-pyament of rent, or for any other default on the part
of Tenant. In addition to all of the remedies grnated Landlord in this respect,
Landlord shall also have the right to invoke any remedy allowed at law or
equity to enforce Landlord's rights hereunder or any of them, as if re-entry
and other remedies were nfot herein provided for.

No remedy herein conferred upon or reserved to Landlord is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative, and shall be in addition to every other remedy
given under this agreement or now or hereafter existing at law or in equity
or by statute. No delay or omission by Landlord to exercise any right or
power accruing upon any default of Tenant shall impair any such right or power
or shall be construed to be a waiver thereof, but any such right and power may
be exercised by Landlord at any time, from time to time and as often as may be
deemed expedient. In order to entitle Landlord to exercise any rememdy reserved
to it hereunder, it shall not be necessary to give any notice, other than such
notice as is expressly required by this agreement.

26. Notices: All notices required or permitted by the terms of this Lease must
be given by hand-delivery, by telecopier (confirmed by U.S. Mail delivery) or
United States registered or certified mail addressed to Tenant at the Leased
Premises or as listed below and addressed to Landlord at:

Landlord:

FURROW-HOLROB DEVELOPMENT, LLC
c/o Holrob Leasing and Management Company
2607 Kingston Pike, Suite 3
Knoxville, Tennessee 37919
Telephone: (423) 637-3770
Telecopier: (423) 637-8217

Tenant:

Telephone: (___)
Telecopier: (___)

The date when such notice shall be deemed to have been given shall be the
date when it is deposited in the United States Mail, postage prepaid, in
accordance with the provisions of this paragraph. Any address herein
specified may be changed from time to time by either party by written notice
given to the other party as above provided.

27. Successors: The provisions, covenants and conditions of this Lease shall
bind and inure to the benefit of the legal representatives, successors and
assigns of each of the parties, except that no assignment or subletting by
Tenant without the written consent of Landlord shall vest any right in the
assignee or sublessee of Tenant.

28. Governing Law: The Lease shall be governed by, and construed in accordance
with, the laws of Tennessee

29. Landlord's Exculpatory Clause: In the event of a breach or default by
Landlord of any of its obligations under this Lease, Tenant shall look solely
to any right of offset allowed by law against any amounts due hereunder or to
the equity of the Landlord in the Leased Premises for the satisfaction of
Tenant's remedies, it being understood and agreed that the exculpation of
Landlord (and its successors and assigns) shall be absolute. In the event of
any sale of such land or interest, or assignment of Landlord's rights under this
Lease, Landlord shall be and hereby is released of all obligations of Landlord
hereunder. It shall be deemed, without further agreement between the parties or
their successors in interest, that the successor to landlord's interest has
assumed all obligations of Landlord hereunder. It is specifically understood
and agreed that there shall be no personal liability of Landlord in respect to
any of the covenants, conditions, or provisions of this Lease.

30. Entire and Binding Agreement: This Lease contains all of the agreements
between the parties hereto, and it may not be modified in any manner other
than by agreement signed by all parties hereto or their successors in interest.
The Tenant hereby covenants and agrees not to disclose or discuss with any third
party the provisions, covenants, and conditions of this Lease without the prior
written consent of the Landlord. In the event Tenant violates this covenant,
Landlord reserves the right to either (i) terminate this Lease, or (ii) revoke
any rental or other concessions granted hereunder.

31. Addenda: All addenda and exhibits attached hereto are made a part of this
Lease for all purposes.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and date first above written.

LANDLORD:

FURROW-HOLROB DEVELOPMENT II, LLC

By:
Name: Robert S. Talbott
Title: President

TENANT:

INNOVO GROUP, INC.

By:
Name:
Title:

EXHIBIT 10.58
SALES AND MARKETING
AGREEMENT

THIS SALES AND MARKETING AGREEMENT (the "Agreement") has been entered into as
of the 14th day of January, 1999 (the "Effective Date"), by and between INNOVO
GROUP INC. ("Innovo"), a Delaware corporation with principle offices in
Knoxville, Tennessee and The Coulver Marketing Group ("Coulver"), a Michigan
Limited Liability Company.

RECITALS

WHEREAS, Innovo desires to enter into the Agreement to obtain the services
of Coulver in selling and marketing Innovo's products as specified hereafter;

WHEREAS, the financial relationship between Coulver and Innovo is based
completely on performance;

WHEREAS, this Agreement constitutes the entire agreement between the parties
in regards to all subject matter and supersedes all prior written and oral
agreements and understandings between Innovo and Coulver including but not
limited to an agreement dated July 15, 1998 and titled "Sales Representative
Agreement."

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties agree as follows:

1. Payment. Innovo will pay Coulver $25,000.00 (twenty-five thousand dollars)
pursuant to the aforementioned sales representative agreement dated
July 15, 1998. This payment shall represent the final payment owed to Coulver
under the July 15, 1998 agreement. Furthermore, it is agreed that Innovo has
previously made two payments in the amount of $16,666.66 to Coulver. When
combined with the final payment of $25,000.00 the total payments towards the
draw per the agreement totals $58,333,32. The final payment of $25,000.00
shall be made within 5 (five) business days of the mutual signing of this
Agreement.

2. Commission Rate for Future Earned Commissions. The commission rate for
future earned commissions shall be five-percent (5%) of written special
account pricing for those accounts listed in "Exhibit A." The commission
rate for future earned commissions shall be ten-percent (10%) of written regular
wholesale pricing for these accounts listed in "Exhibit B."

3. Commission Due Date. The commissions owed to Coulver under the Agreement
shall be paid to Coulver upon receipt of payment to Innovo.

4. Coulver's Right to Accounts and Channels of Distribution. Coulver shall
have the exclusive right to the accounts and channels of distribution described
in "Exhibit C," the customers can be expanded but not reduced during the term of
the Agreement or during any extension period without Coulver's written consent.

5. Term of Agreement. The terms of this Agreement shall be for 12 months with
the Agreement commencing on January 1, 1999 and ending on January 1, 2000. This
Agreement can be renewed annually upon the mutual written agreement of Innovo
and Coulver Marketing. Upon the termination of this Agreement, the period
following such termination shall be referred to as the post-termination period
(hereinafter "Post-Termination Period"). Any period prior to the Post-
Termination period shall be referred to as the pre-termination period
(hereinafter "Pre-Termination Period").

6. Commissions upon Termination of the Agreement. Upon termination of this
Agreement, Coulver shall have the right to the commissions associated with the
Post-Termination Period sale of Innovo product to customers generated directly
pursuant to Coulver's marketing efforts during the Pre-Termination Period so
long as the Post-Termination Period sales are a direct product of Coulver's
continuing marketing efforts during the Post-Termination Period. To receive
Post-Termination Period commissions, Coulver must continue to service the Pre-
Termination Period Coulver generated customers materially in the same manner
as during the Pre-Termination Period of this Agreement. If after written notice
from Innovo that Coulver is not properly servicing customers and after Coulver
fails to cure its alleged failure within 60 days, then Coulver shall forfeit
their right to commissions as defined under section 6 of this Agreement. The
Post-Termination Period shall last for no longer than 5 (five) years.

7. Expenses. Coulver shall be responsible for all of Coulver's expenses that
are associated with performing under this Agreement.

8. Confidential Information.

(A) Definition. For purposes of this Agreement, the term "Confidential
Information: shall mean information that Innovo owns or possesses, that it
uses or is potentially useful in its business, that it treats as proprietary,
private, or confidential, and that is not generally known to the public,
including, but not limited to, information relating to Innovo's existing and
contemplated businesses, sales, company financial information, products,
technology, manufacturing techniques, engineering processes, chemical formulae,
marketing, sales methods, techincal service expertise, employees, list of actual
or potential customers, actual and potential customer usage and requirements,
new and existing programs or services, prices and terms, pricing strategy,
sources of supplies and materials, iperating and other cost data, trade secrets,
inventions, patent applications, and other proprietary information as may exist
or be developed from time to time by Innovo or its affiliates.

(B) Information Access and Disclosure. Coulver, its employees, sub-
contractors, associates and affiliates acknowledge that they shall occupy a
position of trust and confidence with Innovo and will potentially have access
to and may develop Confidential Information of actual or potential value to
or otherwise useful to Innovo. Coulver, its employees, sub-contractors,
associates and affiliates shall hold in strictest confidence and not disclose,
without express written authorization from the Officers or the Board of
Directors of Innovo, to any persons or entity, other than Innovo, Innovo's
affiliates and their officers and agents, or use in whole or in part any
Confidential Information that Coulver, its employees, sub-contractors,
associates and affiliates may acquire while this Agreement exists between
Coulver and Innovo.

(C) Innovo Property Return. At the termination of this Agreement, or at any
other time that Innovo may request, Coulver or any one associated with Coulver
shall promptly deliver to Innovo all memoranda, notes, records, reports,
documents, sketches, plans, models, compositions, formulations, computer data,
and other tangible items made or compiled by Coulver or in Coulver's possession
concerning or relating to Innovo or its affiliates and their businesses,
operations or affairs and any Confidential Information that Coulver may posses
or have under their control (Company Property).

9. Governing Law. This Agreement and all performance hereunder shall be
construed and governed by the laws of the State of Tennessee, without regard for
the conflicts of laws principles.

10. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to subject matter of this Agreement and supersedes all
prior written and oral agreements and understandings between Innovo and Coulver
with respect to the subject matter of this Agreement. This Agreement may not be
amended except by a written agreement executed by the party to be charged with
the amendment.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.

INNOVO GROUP INC.

By:

__________________________
Pat Anderson
Title: President, V.P. of Sales

COULVER MARKETING GROUP

By:

__________________________
Herschel S. Wright
Title: President

EXHIBIT 10.59
6TH August 1998

Pat Anderson-Lasko
Nasco Products Int Inc
27 North Main Street
Springfield
Tennessee 37172
USA

Dear Pat

This letter constitutes an amendment to your existing NFL
Agreement numbers NFL172C and GB371.

The original term of these agreements are hereby extended
Until 31st March 2001 with no additional guarantee payments.

Special terms: Outstanding invoice number 97/009 for
$25,000 will be paid in full by 1st August 1999.

All terms and conditions of these license agreements, except
Where specifically amended herein, shall remain in full force
And effect.

Please acknowledge your understanding and acceptance of the
Above by signing all three copies of this letter and returning
Two copies to this office for our records.

Yours sincerely,

Buckley

Sara Buckley
NFL Properties (UK)Ltd

Signed and agreed on behalf of
Nasco Products International Inc: /s/ Pat Anderson, President

Dated: 9/02/98

EXHIBIT 10.60
8th June 1998
INNOVO GROUP INC. trading as NASCO INTERNATIONAL LIMITED
27 North Main Street
Springfield
Tennessee 37172
USA

Dear Sirs

RE: LOONEY TUNES TRADEMARK LICENSE NO. 50541-WBLT

Reference is made to the above Trademark License date 25th June 1996 ("the
Agreement") between WARNER BROS. A DIVISION OF TIME WARNER ENTERTAINMENT
COMPANY L.P. c/o WARNER BROS. CONSUMER PRODUCTS, A TIME WARNER ENTERAINMENT
COMPANY ("Licensor") and INNOVO GROUP INC. trading as NASCO INTERNATIONAL
LIMITED ("Licensee").

It is agreed between Licensor and Licensee that the Agreement is amended as
set forth below:

Paragraph 8, shall have the following deleted: "28th February 1998" which
shall be replaced by: "28th February 1999"

In all other respects the Agreement shall remain in full force and effect
between us.

Please confirm acceptance of the foregoing by countersigning where indicated
below.

This Side Letter shall be of no force and effect unless and until signed by all
parties hereto as specified below.

Your faithfully Accepted and agreed for and on
behalf of
WARNER BROS. A DIVISION OF TIME INNOVO GROUP INC. trading as
WARNER ENTERTAINMENT COMPANY, L.P. NASCO INTERNATIONAL LIMITED

By its agent WARNER BROS. CONSUMER
PRODUCTS, A TIME WARNER ENTERTAINMENT
COMPANY

EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

INNOVO GROUP INC.
Knoxville, Tennessee

We hereby consent to the incorporation by reference of our report dated
February 10, 1999 relating to the consolidated financial statements of
Innovo Group Inc. included in the Company's Annual report on Form 10-K
as of November 30, 1998 and 1997, and for each of the three years in the
period ended November 30, 1998, in the Registration Statement on Form
S-8 pertaining to the Sims Moss Kline & Davis LLP Consulting Agreement and
the Zummo & Perry, LLP Consulting Agreement.

BDO Seidman, LLP

Atlanta, Georgia
March 15, 1999

[PERIOD-TYPE] 12-MOS 12-MOS
[FISCAL-YEAR-END] NOV-30-1998 NOV-30-1998
NOV-30-1998 NOV-30-1998
[CASH] 1078 469
[SECURITIES] 0 0
[RECEIVABLES] 775 1018
[ALLOWANCES] (67) (123)
[INVENTORY] 1101 1582
[CURRENT-ASSETS] 3154 3344
[PP&E] 6119 6843
[DEPRECIATION] (2082) (1772)
[TOTAL-ASSETS] 7232 9168

3229 3523
[BONDS] 2234 1854
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[COMMON] 538 446
[OTHER-SE] 1184 3345
[TOTAL-LIABILITY-AND-EQUITY] 7232 9168
[SALES] 6790 7901
[TOTAL-REVENUES] 6790 7901
[CGS] 4493 5303
[TOTAL-COSTS] 8696 9310
[OTHER-EXPENSES] (142) (337)
[LOSS-PROVISION] 58 26
[INTEREST-EXPENSE] 503 657
[INCOME-PRETAX] (2267) (1729)
[INCOME-TAX] 0 0
[INCOME-CONTINUING] (267) (1729)
[DISCONTINUED] (1747) (110)
[EXTRAORDINARY] 0 0
[CHANGES] 0 0

[EPS-PRIMARY] (0.49) (0.50)
[EPS-DILUTED] (0.49) (0.50)