INNOVO GROUP INC, S-3/A, 1996-10-02

INNOVO GROUP INC
S-3/A, 1996-10-02
MISCELLANEOUS FABRICATED TEXTILE PRODUCTS

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As filed with the Securities and Exchange Commission on October 2, 1996.
Registration No. 333-12527

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
_________________________
FORM S-3/A
Amendment No. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________

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

Delaware 5199 11-2928178
(State of other jurisdiction Primary Standard Industrial (IRS Employer Identi-
of incorporation or organization) Classification Code Number) fication Number)

27 North Main Street
Springfield, Tennessee 37172
(615) 384-0100
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)

Patricia Anderson-Lasko
INNOVO GROUP INC.
27 North Main Street
Springfield, Tennessee 37172
(615) 384-0100
(Address, including zip code, and telephone number,
including area code, of agent for service)
_________________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after effective date of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant
to dividend or interest investment plans, please check the following box. [ ]

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

Calculation of Registration Fee
<TABLE>
<CAPTION>
Title of each class of Amount to Proposed Maximum Proposed Maximum Amount of
securities to be be Offering Price Aggregate Offering Registration Fee
registered Registered Per Share Price
</CAPTION>
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share, for Selling
Stockholders 2,742,058 $.40625 $1,113,961 (1) $384.12
Total 2,742,058 $1,113,961 $384.12 (2)
</TABLE>
(1) Pursuant to Rule 457(c), calculated on the basis of $.40625 per share,
representing the average of the closing bid and asked prices of the common stock
on September 19, 1996.

(2) Paid with initial filing.

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.<PAGE>
Legend for Preliminary Prospectus

Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation of sale would be unlawful prior to registration or
qualification under the securities laws of any such State.<PAGE>
PROSPECTUS
Preliminary Prospectus Dated October 2, 1996
Subject to Completion

INNOVO GROUP INC.
Common Stock

2,742,058 Shares by the Selling Stockholders

This Prospectus relates to a total of 2,742,058 shares of the common
stock, $.01 par value (the "common stock") of Innovo Group Inc. (the
"Company") to be offered for sale to the public by certain stockholders
(the "Selling Stockholders"). Of such 2,742,058 shares, (i) 2,321,176
shares were issued in the Company's acquisition of Thimble Square, Inc.,
(ii) 220,882 shares were issued in fiscal 1996 in exchange for the
extinguishment of certain debt, and (iii) 200,000 shares were issued in
a private placement in fiscal 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and "Selling
Stockholders.

The holders of 2,425,490 shares of the common stock being offered
hereby have agreed to certain restrictions on the resale of those shares
which in general limit the resales by such Selling Stockholders to, in
the aggregate, 50,000 shares in any one week on a non-cumulative basis.
See "Selling Stockholders," and "Shares Eligible for Future Sale."

The distribution of the shares of common stock by the Selling
Stockholders may be effected in one or more transactions that may take
place through the over-the-counter market, including broker's
transactions, privately negotiated transactions or through sales to one
or more dealers for resale of such shares as principals at market prices
prevailing at the time of the sale or at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the
Selling Stockholders in connection with sales of the shares of common
stock. Certain Selling Stockholders have agreed to certain restrictions
on the resale of such shares over certain periods. See "Shares Available
for Future Sale".

The Company will not receive any of the proceeds from the sale of the
shares of common stock by the Selling Stockholders. All costs incurred
in the registration of the Selling Stockholders' shares of common stock
are being borne by the Company. See "Selling Stockholders". (continued)

See "RISK FACTORS", beginning at page thirteen, regarding matters that
should be carefully considered by investors.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY PRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is __________, 1996<PAGE>
The Selling Stockholders, directly or through agents, dealers or
underwriters to be designated from time to time may sell the shares of
common stock being offered by the Selling Stockholders from time to time
on terms to be determined at the time of sale. To the extent required,
the number of shares of common stock to be sold by the Selling
Stockholders, the respective purchase price and public offering price,
the name of any agent, dealer or underwriter and any applicable
commissions or discounts with respect to a particular offer are set forth
herein. The Selling Stockholders reserve the sole right to accept or
reject, in whole or in part, any proposed purchases of the shares of
common stock being offered by them pursuant thereto. The Selling
Stockholders and any agents, dealers, or underwriters that participate
with the Selling Stockholders in the distribution of the shares of common
stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended ("Securities Act"), any commissions
received by them and any profits on the resale of the common stock may be
deemed to be underwriting commissions or discounts under the Securities
Act. Under applicable rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
person engaged in a distribution of securities may not simultaneously bid
for or purchase securities of the same class for a period of two business
days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Stockholders will be subject
to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-2, 10b-
5, 10b-6 and 10b-7, in connection with transactions in the shares of
common stock during the effectiveness of the Registration Statement of
which this Prospectus is a part. All of the foregoing may affect the
marketability of the shares of common stock. In connection with the
offer and sale of the shares of common stock, if any, by the beneficial
owners thereof, such beneficial owners have undertaken to deliver this
Prospectus to the purchasers of such securities in accordance with the
Securities Act and to comply with applicable provisions of the Exchange
Act, including, without limitation, Rule 10b-6 thereunder, in connection
with transactions in the Company's securities during the effectiveness of
the Registration Statement of which this Prospectus is a part.

The Common Stock of the Company is currently quoted on the NASDAQ
SmallCap Market ("NASDAQ") under the symbol "INNO". On October 1,
1996, the closing bid price and asked price of the Common Stock as
reported by NASDAQ were $1/2 and $9/16 per share, respectively.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("the Exchange Act"), and in
accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other filed
information can be inspected and copied, at prescribed rates, at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549-1004, and the
following regional offices of the Commission: New York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048; and Chicago
Regional Office, 3190 Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies thereof can also be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.

The Company has filed with the Commission a Registration Statement on
Form S-3, of which this Prospectus constitutes a part, under the
Securities Act of 1933 ("the Securities Act"), with respect to the shares
of common stock offered hereby. This Prospectus does not contain all of
the information included in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the
company and the shares of common stock, reference is hereby made to the
Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus concerning the provisions or
contents of any contract, agreement or any other document referred to
herein are summaries that are not necessarily complete. With respect to
each such contract, agreement or document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more
complete description of the matters involved, and each such statement
shall be deemed qualified in its entirety by such reference to the copy
of the applicable document filed with the Commission. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C., and copies of all or any part thereof may be
obtained from such office, upon payment of the fees prescribed by the
Commission.

The Company furnishes its security holders with annual reports
containing consolidated audited financial statements as soon as
practicable after the end of each fiscal year and such interim reports as
the Company may determine. The Company's fiscal year ends on November
30.<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents or portions thereof filed by the Company with
the Commission pursuant to the Exchange Act are incorporated herein by
reference:

(i) The Company's Annual Report on Form 10-K for the year ended
October 31, 1995;

(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
February 29, 1996;

(iii) The Company's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1996;

(iv) The Company's Current Report on Form 8-K dated January 29, 1996;

(v) The Company's Current Report on Form 8-K dated April 12, 1996, as
amended by Form 8-K/A; and

(vi) The Company's Current Report on Form 8-K dated September 23,
1996.

All documents subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after
the date hereof, but prior to the filing of a post-effective amendment to
this Registration Statement which indicates that all securities offered
have been sold or which deregisters all such securities remaining unsold,
shall be deemed to be incorporated by reference into this Registration
Statement. Each document incorporated into this Registration Statement
by reference shall be deemed to be a part hereof from the date of filing
such document with the Commission until the information contained therein
is superseded or updated by any subsequently filed document which is
incorporated by reference into this Registration Statement.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the request
of such person, in writing or orally, a copy of any or all documents
which are incorporated by reference in this Prospectus, but not delivered
herewith, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into the information that this
Prospectus incorporates). Written or telephone requests should be
directed to Schren L. Head, Secretary, Innovo Group Inc., 27 North Main
Street, Springfield, Tennessee, 37172, telephone 615-384-0100.<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements, including the
notes thereto, appearing elsewhere or incorporated by reference in this
Prospectus. Certain references appearing below are to more detailed
descriptions appearing in the indicated section of documents incorporated
by reference.

The Company

Innovo Group Inc. ("Innovo Group" or "the Company"), through its
operating subsidiaries, designs, manufactures and domestically markets
various canvas and nylon products, principally tote bags, sports bags,
back packs, lunch bags, stadium totes, and craft products for sale to
various retailers and in the premium and advertising specialty market.
The Company also internationally markets and distributes sports bags and
backpacks.

The Company incurred losses from continuing operations of $67,000,
$7,905,000 and $661,000 in fiscal 1995, 1994 and 1993, and a loss from
continuing operations of $597,000 for the six months ended May 31, 1996.
Cash flows from operations were negative $406,000 and $642,000 in fiscal
1994 and 1993, respectively, and at May 31, 1996 the Company has an
accumulated deficit of $18.1 million. The Company is taking steps which
it believes will allow it to return to profitability and positive
operating cash flows. However, the Company may experience further losses
and negative cash flows before these measures have a material effect, and
there can be no assurance that the Company will in fact operate
profitably. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

Innovo, Inc. ("Innovo"), a wholly owned subsidiary, manufactures and
distributes utility, craft, fashion, sports and advertising specialty
products. Innovo's utility line is made up of canvas and nylon products,
such as tote bags, laundry, duffle and shoe bags and gift bags that are
designed as consumable products that respond to needs consumers encounter
in every day life. These products are generally produced with company
designed artwork. For the craft market Innovo produces canvas tote and
laundry bags, aprons, children's smocks and Christmas stockings with no
design, which are sold (sometimes packaged with paints or other
materials) for sale as a craft project supply. The fashion line features
company designed canvas back packs, "day packs" (which combine the
features of a purse and a back pack), and tote bags, that attempt to
combine style and convenience to capitalize on the increasing trend
towards more casual dress.

Innovo's sports line consists of tote bags, lunch bags, fanny packs,
laundry, shoe and duffle bags and stadium totes. The majority of these
products display logos, insignia, names, mascots and other identifying
characteristics of professional or collegiate sports teams, or the United
States Olympic Committee ("U.S.O.C."), under licenses, which are
generally non-exclusive, held by Innovo from various licensing entities
including the National Football League, the NBA, the National Hockey
League, Major League Baseball, the U.S.O.C., and approximately 130
colleges and universities. For the year ended October 31, 1995, 46% of
the Company's sales from continuing operations represented the sale of
products bearing logos licensed by the colleges and universities, the
professional sports teams and the U.S.O.C. In fiscal 1996 Innovo will
add products that display the "Louisville Slugger" name and logo to its
sports line, and the Company is currently developing products, which will
be marketed beginning in the fourth quarter of fiscal 1996, under
recently obtained or agreed to licenses for the U.S. and international
use of the logos, trademarks and slogans of Anheuser-Busch Cos., Inc. and
the European use of the Warner Bros. Studios Looney Tunes characters.
See "Business - Products," and "Business -Licenses."

For the premium and advertising specialty markets the Company
produces both products that display professional sports team logos, and
products that bear the name, logo, slogan and/or design specifically
requested by the customer, who frequently provides the artwork to be used
on such products. Advertising specialty and premium customers are
generally companies purchasing products for distribution in promotions to
employees and customers or for sale as premium items. During the third
quarter of fiscal 1994 the Company began to also provide domestic
manufacturing for other distributors of tote and sport bags. See
"Business - Products".

During October 1994 the Company began steps designed to reduce its
operating expenses and capital requirements. The Company relocated to
its owned facility in Springfield, Tennessee the manufacturing operations
it had previously conducted in leased facilities in Sugarland, Texas.
This consolidation allowed the Company to eliminate the expense of the
leased space in Texas, and also allowed the elimination of certain
shipping and duplicative supervision costs. On July 31, 1995, the
Company executed an agreement with Accessory Network Group ("ANG") under
which ANG succeeded to all of the rights held by the Company's wholly
owned subsidiary, NASCO Products, Inc. ("NASCO Products") to market and
distribute in the United States the National Football League, NBA, Major
League Baseball and National Hockey League logoed sports bags, back packs
and equipment bags previously imported to and distributed in the U.S. by
NASCO Products. The agreement did not cover the international rights
under the National Football League, NBA, Major League Baseball and
National Hockey League licenses. NASCO Products International, Inc.
("NPI International") continues to sell products internationally.
Additionally, the agreement has no effect on Innovo's marketing and sale
of its domestically manufactured sports-licensed products, and the
Company retained all the domestic rights to the United States Olympic
Committee, college and Major League Baseball Players Association
products, which are now being manufactured domestically by Innovo and
marketed as part of its product line.

For each license ANG is paying NASCO Products $187,500 ($750,000 in
the aggregate), of which $100,000 was paid on July 31, 1995. The
remaining $650,000 is being paid, without interest, in monthly
installments equal to 5% of ANG's aggregate sales of the licensed
products, with final payment due July 31, 1998. ANG assumed all of NASCO
Products' obligations under the licenses, including the payment of
royalties and minimum royalties. NASCO Products also transferred to ANG
its existing inventory of these products, for which ANG paid
approximately 67% of NASCO Products' cost, or approximately $307,000.
Such payments were made by ANG over a six month period which ended
August, 1996.

In addition, ANG will make an ongoing annual payment 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
.5% of sales thereafter. The payments will continue for forty years
unless a license expires or is terminated and is not renewed or
reinstated within twelve months.

During fiscal 1993 and 1994 the Company's marketing emphasis was
placed on the U.S. retail market for its sports licensed products. The
Company devoted fiscal 1995 to shifting its emphasis to developing new
products and marketing programs for its products in the fashion, utility
and craft lines and for the premium and advertising specialty markets.
The Company hopes that this will allow it to increase sales and lessen
its dependence on sports licensed products. The Company will also pursue
opportunities to provide domestic manufacturing for other tote and sports
bag distributors. The Company will attempt to achieve growth in the
sales of its sports logoed products through the acquisition of new
licenses, such as the U.S.O.C. license and related cross-licenses for
products that display Warner Bros. "Looney Tunes" characters or the
"Cabbage Patch Kids" characters together with the U.S.O.C. five-ring
Olympic logo, the "Louisville Slugger" license acquired in November,
1995, the Anheuser-Busch and Warner Bros. licenses acquired in fiscal
1996, and by the development of new products and distribution for college
logoed merchandise. Over the longer term the Company is looking to
achieve growth through increase in the sales of the sports logoed bags
and backpacks it designed, under its international license rights, for
the international market, where U.S. professional sports have achieved
increased exposure and popularity, and from the introduction of Innovo's
fashion line in the international market. However, there can be no
assurance that any of these strategies will produce increased sales. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".

The Company estimates that the products sold by its continuing
operations are carried in over 4,500 retail outlets. The Company's
marketing efforts are conducted principally by its own sales and
marketing staff and through its network of approximately 20 marketing
organizations having approximately 60 independent sales representatives.
The Company sells to retail accounts such as mass merchandisers,
department stores, mail order companies, grocery stores and drugstore
chains, including K Mart Apparel Corp., Wal-Mart Stores, Inc., Target,
J.C. Penney Company, Inc., Sears Roebuck and Co., Walgreen Co., and
Michael's Stores, Inc., and advertising specialty accounts. See
"Business - Marketing and Customers".

On April 12, 1996, the Company acquired 100% of the outstanding
common stock of Thimble Square, Inc. ("Thimble Square") for an aggregate
of $1.1 million, paid by the issuance of shares of the restricted common
stock of the Company. In a concurrent transaction, Thimble Square
acquired from its stockholders a plant it had previously leased from them
in exchange for (a) $300,000 paid by the issuance of shares of the
restricted common stock of Innovo Group, and (b) the issuance by Thimble
Square of $200,000 of unsecured notes payable, without interest, on
August 31, 1996 (with certain prepayments required in the event of
certain refinancings or asset sales by Thimble Square).

A total of 2,321,176 shares (after adjustments - see "Recent
Developments") of the Company's common stock were issued to effect the
acquisition. However, at the time of the acquisition Thimble Square
owned 1,080,000 shares of the Company's common stock as a result of the
January, 1996 manufacturing agreement between the companies (see Note 5
of Notes to February 29, 1996 Condensed Consolidated Financial
Statements). As a result of the acquisition, Innovo Group reacquired,
and retired, those shares, and the net increase in the number of shares
of Innovo Group common stock outstanding was 1,241,176 shares.

Thimble Square manufactures and markets ladies' ready-to-wear at-
home, sleep and lounge wear from plants in Pembroke and Baxley, Georgia.
Its products are sold to mail order companies, retailers and through mail
order distribution. Thimble Square also provides "sew-only"
manufacturing for other distributors of private-label sleep and lounge
wear; in those instances, the customer provides the raw materials, and
Thimble Square manufactures the products to the distributor's
specifications. Thimble Square's sales for its fiscal year ended
December 31, 1995 were approximately $3 million. Innovo Group intends to
attempt to increase Thimble Square's sales by using Innovo's marketing
and sales functions to market its products to major mass merchants and
other retailers with whom Innovo already has relationships, and to which
Thimble Square has not had material sales. The Company may also utilize
Thimble Square's mail order distribution to market Innovo's products.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Acquisition of Thimble Square," and Pro Forma
Condensed Consolidated Financial Statements.

Innovo began operations in April, 1987. In August, 1990, Innovo
merged into Elorac Corporation, a so called "blank check" company, which
was renamed Innovo Group. In fiscal 1991 the Company acquired the
business of NASCO, Inc. ("NASCO"), a manufacturer, importer and
distributor located in Springfield, Tennessee, through two separate
transactions. In the first transaction, the retail bag division of NASCO
was acquired by a wholly-owned subsidiary of the Company in June 1991.
The retail bag division of NASCO, renamed NASCO Products upon its
purchase, manufactured and imported a line of canvas and nylon sports
bags, backpacks, equipment bags, fanny packs, athletic caps and other
sporting goods products imprinted or embroidered with emblems and logos
licensed from a variety of licensors, such as Major League Baseball, the
National Hockey League, the National Football League and the NBA.

In the second transaction, all of the outstanding shares of common
stock of NASCO (the assets of which included the 75,000 shares of the
Company's common stock transferred in the prior transaction) were
acquired by the Company in August 1991. NASCO, 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 the youth and school
fundraising business of Spirco to QSP, Inc. ("QSP"), which is a wholly-
owned subsidiary of The Readers Digest Association, Inc. The Company
received initial proceeds of $1.5 million in fiscal 1993, and additional
payments from QSP of $1,445,000 in fiscal 1994.

Spirco had incurred significant trade debt from the fiscal 1992
losses it incurred in marketing fundraising programs, and its continuing
operations of supplying school spirit products to companies that market
such programs was not producing sufficient cash flow to significantly
reduce these obligations and liabilities incurred by Spirco prior to its
acquisition which were not disclosed at that time. On August 27, 1993,
Spirco filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Innovo Group, Innovo and NASCO Products 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
plan, 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 which as a result acquired direct ownership of its other
assets. Spirco claims which had been guaranteed by Innovo Group received
full payment through the issuance of 222,000 shares of Innovo Group
common stock. Additionally, 584,000 shares of Innovo Group common stock
were issued to a trust ("the Class 3 Trust") which is selling those
shares and distributing the proceeds to the Class 3 claimants, which are
federal, state and local taxing authorities that had claims for income,
sales, property and unemployment taxes. In general, Innovo Group will
receive any shares that are not required to satisfy the Class 3 claims.
All claims that ranked below secured claims, including general unsecured
claims and the claims of Innovo Group, Innovo and NASCO Products for
advances to Spirco, received no distribution. The shares of Innovo Group
common stock issued in Spirco's reorganization are freely-tradeable;
however, the plan of reorganization restricted each recipient (including
the Class 3 Trust) to resales of no more than 10 percent of the shares
received during any 30 day period until November 10, 1995. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Reorganization of Spirco".

The principal executive offices of the Company are located at 27
North Main Street, Springfield, Tennessee 37172. Its telephone number is
(615) 384-0100. Unless the context requires otherwise, "the Company"
refers to Innovo Group Inc. and its subsidiaries, and "Innovo Group"
refers to Innovo Group Inc.<PAGE>
The Offering

Common Stock Offered by Selling Stockholders 2,742,058 shares by the Selling
Stockholders

Securities Outstanding
Common Stock (1) 18,818,167 shares
Common Stock Purchase Warrants 1,705,617 warrants

Use of Proceeds The Company will not receive any
of the proceeds from the sale of
the shares offered by the Selling
Stockholders.

NASDAQ Symbol INNO

(1) Excludes (i) 1,705,617 shares of common stock issuable upon the exercise of
outstanding common stock purchase warrants, (ii) 3,988,095 shares issuable upon
the conversion, at the current Conversion Price, of the Company's 8%
Convertible Debentures, (iii) 100,000 shares of common stock reserved for
issuance pursuant to the exercise of options under the Company's Stock Option
Plan, under which 3,000 options are outstanding, (iv) 243,625 shares of
common stock held by trusts established under the Plan of Reorganization of
Spirco, and (v) 200,000 shares of common stock pledged by the Company to
secure its appeal bond in the Tedesco litigation. See "The Company", "Recent
Developments", "Legal Proceedings", "Description of Securities", Note 2 of
Notes to Consolidated Financial Statements and Notes 5 and 6 of Notes to May 31,
1996 Condensed Consolidated Financial Statements.
<PAGE>
Summary Consolidated Financial Data
(In thousands, except per share data)

The following table (including the notes thereto) sets forth a
summary of selected consolidated financial information for the Company.
This summary of selected consolidated financial data is derived from and
qualified in its entirety by reference to the consolidated financial
statements and the notes thereto incorporated by reference in this
Prospectus, and should be read in conjunction therewith, as well as in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Results of operations for interim
periods are not necessarily indicative of results to be expected for a
full year.
<TABLE>
<CAPTION>
Pro Forma
Ten Months Six Months
Ended Six Months Ended Year ended Ended
Year Ended October 31, October 31, May 31, April 30, October 31, May 31,
1995 1994 1993 1992 1991(1) 1996 (7) 1995 1995 (8) 1996 (8)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 5,276 $ 8,028 $12,468 $12,768 $10,437 $ 3,400 $ 2,364 $ 8,322 $ 3,833
Gross Profit 1,468 2,984 5,470 3,869 4,431 1,397 1,230 2,009 1,491
Operating income (loss) (1,666) (2,405)(2) 447 (854) 646 (479) (82) (1,697) (657)
Income (loss) from continuing
operations (67)(3) (7,905)(4) (661)(4) (843) 717 (597) 1,616(3) (200)(3) (809)
Income (loss) from discontinued
operations (5) (626) (685) (7,268) (2,117) 707 - (444)
Extraordinary gain (loss) (6) (258) 699 - - - - -
Net income (loss) (951) (7,891) (7,929) (2,896) 1,424 (597) 1,172
Income (loss) per share from
continuing operations $ (.03) $(3.98) $ (.63) $ (.79) $ .81 $ (.06) $ .67 $ (.04) $ (.08)
Income (loss) per share from
discontinued operations (.24) (.34) (6.92) (1.95) .80 - (.18)
Extraordinary gain (loss) per share (.09) .35 - - - - -
Net income (loss) per share (.36) (3.98) (7.55) (2.74) 1.61 (.06) .49
Weighted average common shares
and common share equivalents
outstanding 2,616 1,982 1,050 1,055 884 9,318 2,407 5,457 9,824
</TABLE>

<TABLE>
<CAPTION>
As of
May 31,
1996
_______
</CAPTION>
<S> <C>
Total Assets $ 10,508
Long-term debt 2,907
Stockholders' Equity 2,977
</TABLE>
_________________________

(1) Includes the effect of the acquisition of NASCO Products and Spirco,
each accounted for by using the purchase method. The Company acquired
NASCO Products in June 1991 and Spirco in August 1991. The fundraising
program marketing operations of Spirco were subsequently sold in May 1993
and the import operations of NASCO Products were sold in July 1995, and
are classified as discontinued operations. See Note 3 of Notes to
Consolidated Financial Statements.
(2) Operating expenses for fiscal 1994 incudes the effect of plant
consolidation charges of $470,000 ($.20 per share) relating to the
consolidation of the Company's manufacturing facilities. See Note 1(j)
of Notes to Consolidated Financial Statements.
(3) Includes other income of $1.9 million from the settlement of
litigation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(4) Includes the effect of additions to the deferred tax valuation
allowance of $3,679,000 ($1.86 per share) and $624,000 ($.59 per share)
in fiscal 1994 and 1993, respectively.
(5) Reflects the operations and July 1995 sale of the import operations
of NASCO Products, the operations and May 1993 sale of the fundraising
program direct marketing operations of Spirco and the operations and loss
from the disposal of NASCO Sportswear, Inc. ("Sportswear"). See Note 3
of Notes to Consolidated Financial Statements.
(6) Represents gain and losses resulting from the Chapter 11
reorganization of Spirco. See Note 2 of Notes to Consolidated Financial
Statements.
(7) Effective November 1, 1995 the Company changed its fiscal year to
end on November 30. Previously the Company's fiscal year ended on
October 31. The results of operations and cash flows for the transition
period of November 1, 1995 to November 30, 1995 are separately presented
in the Company's Quarterly Report on Form 10-Q for the quarter ended
February 29, 1996. See Condensed Consolidated Financial Statements.
(8) Pro forma for the effects of the acquisition of Thimble Square,
which was completed on April 12, 1996. Pro forma income from continuing
operations data is stated as if the acquisition had taken place on
November 1, 1994. The pro forma financial information is not necessarily
indicative of the actual future results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- - Acquisition of Thimble Square," and Pro Forma Condensed Consolidated
Financial Statements.<PAGE>
RISK FACTORS

In evaluating the Company and its business, prospective investors
should carefully consider the following factors in addition to those
discussed elsewhere or incorporated by reference in this Prospectus.
Information contained or incorporated by reference in this Prospectus may
contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking terminology such as "may," "will," "would,"
"could," "expect," "anticipate," "estimate" or "continue", or the
negative thereof, or other variations thereon or comparable terminology.
The following matters constitute cautionary statements identifying
important factors with respect to any such forward-looking statements,
including certain risks and uncertainties, that could cause actual
results to differ materially from those reflected in any such forward-
looking statements.

Losses from Operations; Negative Cash Flow; Adverse Operating
History; Possibility of Future Losses and Negative Cash Flows. The
Company had losses from continuing operations of $67,000, $7,905,000 and
$661,000 for the years ended October 31, 1995, 1994 and 1993 and a loss
from continuing operations of $597,000 for the six months ended May 31,
1996. Operating cash flows were a negative $406,000 and $642,000 for
fiscal 1994 and 1993. At May 31, 1996, the Company had an accumulated
deficit of $18.1 million. There can be no assurance that the Company
will operate profitably in the future.

Recent Decrease in Revenues. The Company experienced 34.3% and 35.6%
declines in net sales from continuing operations in fiscal 1995 and 1994,
respectively. The Company believes that these declines in sales have
been due to a weakening of the retail environment, the magnifying effects
of the baseball and hockey strikes, its lack of working capital, which
has prevented it from purchasing the raw materials to fill orders for
domestically produced products and required it to therefore reject or
cancel orders. The Company believes that there is sufficient demand for
its products to allow it to regain its prior sales levels over the long-
term if it is able to obtain sufficient working capital for domestic raw
material purchases and product development. The Company has taken steps
to achieve these arrangements, but there can be no assurance that these
steps will succeed in arresting the decline in sales, or achieving an
increase in sales. Additionally, the completion of the sale of NASCO
Products' domestic operations to ANG produced a decline in revenues and,
initially, operating profits, and continued or further weakening in the
retail environment could result in further declines in sales. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".

Shift in Product Focus. In fiscal 1995 and continuing in fiscal
1996, the Company has shifted its emphasis to developing new products and
marketing programs for its products in the fashion, utility, and craft
lines and for the premium and advertising specialty markets. The Company
hopes that this will allow it to increase sales and lessen its dependence
on sports licensed products. Previously, a significant portion (46% in
fiscal 1995) of the Company's net sales have been of sports licensed
products. There can be no assurance that the Company will be successful
in its attempts to increase sales of other products, and the shift in the
Company's emphasis could result in a decrease in sales of sports licensed
products.

Dependence upon Contractual Relationships and Certain Products. The
Company's sales are dependent to some degree upon the contractual
relationships it establishes with licensors to exploit, on a generally
non-exclusive basis, proprietary rights in well known logos, marks and
characters, as well as league and team logos and marks licensed by Major
League Baseball, the National Football League, the NBA, the National
Hockey League, and major colleges and universities. The sale of products
licensed from professional sports leagues, colleges and universities and
the U.S.O.C. represented 46% of the Company's net sales from continuing
operations in fiscal 1995. Although the Company believes it will
continue to meet all of its material obligations under such license
agreements, there can be no assurance that such licensing rights will
continue or will be available for renewal on favorable terms to the
Company. The Company's failure to obtain new licenses or extensions on
current licenses or the Company's inability to sell such products, for
any reason, could have a significant negative impact on the Company's
business. See "Business - Products" and "Business - Licensing
Agreements."

Need for Additional Financing. The Company's principal working
capital financing is derived from a factoring agreement with Riviera
Finance. Under the agreement Riviera Finance advances 80% of the balance
of assigned accounts receivable of Innovo, up to a maximum of $750,000.
Previously the Company's principal credit facility was with NBD Bank
("NBD") pursuant to an agreement under which NBD advanced specified
percentages of the eligible accounts receivable and inventories of Innovo
and NASCO Products. Innovo repaid its outstanding borrowings in April,
1995 and in April, 1995 entered into an agreement with Riviera Finance
for the factoring of Innovo's accounts receivable. NBD agreed to
continue to advance against the accounts receivable and inventories of
NASCO Products through July 31, 1995, at which time NBD began to retain
all collections on NASCO Products pre-July 31, 1995 sales to satisfy the
outstanding balance. These collections, and the payments the Company
will received from ANG, are pledged to satisfy (i) the outstanding
balance due to NBD, and (ii) the remaining principal due on the Company's
July 1994 working capital loan, which as of May 31, 1996 are
approximately $106,000 and $407,000, respectively. Should those sources
be insufficient to repay those obligations, the Company would be required
to devote other cash resources to their repayment.

To pursue its business plans, the Company needs to obtain a credit
facility having appropriate borrowing rates and limits, either by
obtaining a new facility to replace the current agreement with Riviera
Finance, or by negotiating revised terms with Riviera Finance. Should
the Company be unable to obtain such a credit facility, it might not have
the working capital necessary to finance the inventory and accounts
receivable investments called for by its present or anticipated future
levels of sales. In that case, the Company might have to forgo sales
opportunities, and could lose customers as a result. Substantially all
of the Company's assets are pledged to secure various borrowings. To the
extent the Company's assets continue to be pledged to secure outstanding
indebtedness, such assets are unavailable to secure additional debt
financing, which may adversely affect the Company's ability to borrow in
the future. Accordingly, there is no assurance that the Company will be
able to secure such financing. The Company's failure to obtain such
additional financing could materially adversely affect the Company's
operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

Seasonality. The Company's business is seasonal due to the nature
of many of the Company's products, which are subject to highest consumer
demand in the late summer and early fall. The Company will typically
receive the majority of its orders during the first half of the calendar
year, while the greatest volume of shipments and sales are made in the
late summer and fall. As a result, the Company's cash flow is not
consistent throughout the fiscal year, and the Company's annual earnings
have been and are expected to continue to be dependent on the results of
operations for the third and fourth quarters of its fiscal year.
Unfavorable economic conditions affecting retailers during the fall and
holiday seasons in any year could have a material adverse effect on the
Company's results of operations for the year. The Company is likely to
experience periods of negative cash flow throughout each year and a drop-
off in business commencing each December. There can be no assurance that
the effect of such seasonality will diminish in the future. See
"Managements Discussion and Analysis of Financial Condition and Results
of Operations - Seasonality."

Dependence on Key Management. The Company is substantially dependent
upon the continued employment of Patricia Anderson-Lasko, its Chairman of
the Board, President and Chief Executive Officer. Ms. Anderson-Lasko is
currently employed under a four-year employment contract with the
Company, which expires on October 31, 1997 but which is terminable by
either the Company or Ms. Anderson-Lasko for cause. Although Innovo
currently maintains $3,000,000 in the aggregate of "key-man" life
insurance on the life of Ms. Anderson-Lasko, $950,000 of this key-man
insurance was pledged to collateralize certain loans to the Company.
Pursuant to certain undertakings given to the United States Small
Business Administration ("SBA") in connection with the SBA's guarantee of
a $950,000 loan to Spirco by First Independent Bank, Gallatin, Tennessee,
the Company is prohibited from purchasing any additional key-man
insurance on Ms. Anderson-Lasko without the written consent of the SBA.
The loss of this key executive could materially adversely affect the
Company's operations.

Competition. The marketplace for the Company's products is highly
competitive, and the Company is not a dominant factor in any of the
markets in which it competes. The Company competes with other
manufacturers, importers and distributors of textile products and casual
apparel. Although the manufacture and sale of sports logoed products
such as the Company's requires a license, the Company's licenses are non-
exclusive and the Company does not have any control over the granting of
additional licenses by the licensing entities. Other manufacturers,
importers and distributors with greater financial, research, staff and
marketing resources than the Company could decide to enter the business
of manufacturing, importing and distributing competitive products. There
is no assurance that the Company could compete effectively with such
competitors. The Company's ability to sell its products is dependent
upon the price and quality of its products and its ability to meet its
customers' schedules. See "Business - Competition".

Suppliers. The raw materials for the products produced domestically
by the Company are generally purchased from a small number of suppliers.
During fiscal 1995 the Company utilized single sources to purchase
substantially all of the raw materials for these products. The Company
has no long-term supply agreement with any supplier of domestic raw
materials. The Company believes that alternative sources of supplies are
available in the United States for its unfinished items. However, in the
event the Company was unable to obtain alternative sources of supplies on
comparable terms, the Company's financial condition could be materially
adversely affected. See "Business - Suppliers."

Litigation. The Company is involved from time to time in litigation
arising in the ordinary course of its business or as the result of the
bankruptcy filings by Spirco and Sportswear. With the exception of the
Tedesco litigation discussed below, while the damages sought in some of
these actions are material, on the basis of the nature of the actions,
the amounts sought, and in some cases the lack of prosecution by the
plaintiffs, 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 and magnitude, to have a
material adverse effect in the aggregate. In Michael J. Tedesco v.
Innovo, Inc., Innovo Group Inc., Rick Binet, and Patricia Anderson-Lasko,
f/k/a Patricia M. De Alejandro, the Company appealed a $700,000 judgement
awarded by a jury for employment benefits, including stock compensation,
it found to be due to an ex-employee who it nonetheless found had been
properly terminated for cause. On appeal approximately $350,000 of the
initial judgement was reversed as not supported by the evidence or
improper as a matter of law. In addition, the appeals court ruled that
the trial court erred in not submitting to the jury the question of the
Company's counterclaim of breach of fiduciary duty by Tedesco, ruling
that the trial record indicated that there was evidence of such breach
and damages therefrom. The appeals court remanded the case to the trial
court for trial on, and submission to a jury of, the Company's claim of
breach of fiduciary duty by Tedesco. The Company has filed a motion for the
rehearing by the appeals court on the issue of its decision upholding $200,000
of the original judgement and has also asked the appeals court to stay the final
enforcement of any judgement in favor of Tedesco until such time as the Company
has proceeded on its claims against Tedesco for breach of fiduciary duty, so
that the Company would be able to offset any damages awarded to it as a result
of those claims against any final award to Tedesco (otherwise, the Company
would be required to proceed separately to enforce any such judgement for
damages). The Company intends to further appeal these issues to the Texas
Supreme Court if necessary. The Company is also filing motions with the trial
court for the scheduling of the ordered trial on its claims against Tedesco.
Tedesco has filed rehearing motions with the appeals court opposing the
Company's motions, and asking the appeals court to reverse its decisions
regarding the reversed awards and the Company's claims against Tedesco for
breach of fiduciary duty. As of the date hereof, Tedesco has not indicated
whether he would further appeal to the Texas Supreme Court. If the Company is
not able to substantially reduce the amount of the award to Tedesco that remains
through the further appeal and/or the award of damages on its counterclaim, or
alternatively is unable to achieve a favorable settlement, the satisfaction of
the judgement, which will not be an insurable claim, would have a material
adverse effect on the Company and its financial condition. See "Legal
Proceedings" and "Recent Developments".

Voting Control by Existing Stockholders; Anti-takeover Provisions.
The Company's executive officers, directors and its affiliates
beneficially own or have voting control of approximately 18.6% of the
issued and outstanding common stock. Because of their stock ownership
and/or positions with the Company, these persons have been and will
continue to be in a position to greatly influence the election of
directors and thus control of the affairs of the Company. Additionally,
the Company's by-laws limit the ability of stockholders to call a meeting
of the stockholders. The Company's employment contract with its chief
executive officer contains provisions that could require the payment of
significant compensation in the event employment terminates after a
change in control that is not approved by the board of directors, and the
price at which the Company could be required to repurchase certain shares
of its common stock would significantly increase in the event of such a
change in control. Further, the Certificate of Incorporation authorizes
the board of directors to issue additional shares of common stock, up to
the authorized capitalization of 30 million shares, without further
stockholder approval. The issuance of common stock may have the effect
of delaying, deferring or preventing a change in control of the Company
and may adversely affect the voting and other rights of the holders of
common stock. These contractual obligations and by-law provisions, and
any issuance of common stock, could have the effect of discouraging a
takeover of the Company, and therefore may adversely affect the market
price and liquidity of the Company's securities. The Company is also
subject to a Delaware statute regulating business combinations that may
hinder or delay a change in control of the Company. The anti-takeover
provisions of the Delaware statute may adversely affect the market price
and liquidity of the Company's securities.

Lack of Protection of Intellectual Property. The Company possesses
certain proprietary information with respect to which it currently has no
patent, copyright or trademark protection. With the exception of Ms.
Anderson-Lasko, none of the Company's executive officers, directors or
employees has executed any confidentiality or noncompete agreement with
the Company. There can be no assurance that the Company will be
successful in maintaining the confidentiality of its proprietary
information or barring others from exploitation of intellectual property
rights claimed by the Company. If such proprietary information were to
be disclosed, it could have a materially adverse effect on the Company's
business.

Dividends. The Company has not paid any dividends nor does it
anticipate paying any dividends on its Common Stock in the foreseeable
future. The Company's operating subsidiaries are currently restricted as
to the payment of dividends to the Company. It is the Company's present
policy to retain earnings, if any, for use in the development and
expansion of the Company's business.

Shares Eligible for Future Sale. Of the 18,818,167 shares of common
stock of the Company outstanding as of the date of this Prospectus,
297,546 shares are restricted securities, as that term is defined in Rule
144 promulgated under the Securities Act, and an additional 499,778
shares are owned by affiliates of the Company. Absent registration under
the Securities Act, the sale of such 797,324 shares is subject to Rule
144, as promulgated under the Securities Act. In general, under Rule
144, subject to the satisfaction of certain other conditions, a person,
including an affiliate of the Company, who has beneficially owned
restricted shares of common stock for at least two years is entitled to
sell, within any three-month period, a number of shares that does not
exceed the greater of 1% of the total number of outstanding shares of the
same class, or, if the common stock is quoted on NASDAQ, the average
weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least three
months immediately preceding the sale and who has beneficially owned the
shares of common stock for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the volume limitations
described above. Additionally, (i) the holders of 1,405,617 warrants for
the purchase of shares of common stock hold registration rights which
entitle them to certain demand and "piggy-back" registration of the
shares issuable upon the exercise of such warrants, (ii) the holders of
8% Convertible Debentures that are convertible, on the basis on the
current Conversion Price, into 3,988,095 shares of common stock, hold
certain demand and piggy-back registration rights with respect to the
shares issued upon any conversion thereof, (iii) the Class 3 Trust
established under Spirco's plan of reorganization presently holds 243,625
shares which are freely-tradeable, and which will be sold by the Class 3
Trust to the extent necessary to satisfy Class 3 claims, and (iv) the
Company has secured its appeal bond in the Tedesco litigation with
200,000 shares of its common stock which are fully tradeable and which
the court or the plaintiff would have the right to sell if the Company
losses its appeal and is thus unable to satisfy the judgement through
other means, or otherwise defaults on the bond. No assurance can be made
as to the effect, if any, that sales of shares of common stock or the
availability of such shares for sale will have on market prices
prevailing from time to time. Nevertheless, the possibility that
substantial amounts of common stock may be sold in the public market may
adversely affect prevailing market prices for the Company's securities
and could impair the Company's ability to raise capital in the future
through the sale of equity securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Reorganization of Spirco," "Legal Proceedings," and "Shares Eligible for
Future Sale."

Possible Delisting of Securities from NASDAQ; Risks of Low-Priced
Stocks. The Company's common stock is currently listed on NASDAQ
SmallCap Market. At present, the minimum maintenance criteria for NASDAQ
are $2 million in assets, $1 million in stockholders' equity, a minimum
bid price of $1.00 (or alternatively stockholders' equity of $2 million),
at least one market maker, 300 shareholders, a 100,000 share public
float, and $200,000 in market value for the public float.

Between March, 1995 and July, 1995 the Company's common stock traded on
the NASDAQ SmallCap Market pursuant to a temporary exemption from the
stockholders' equity, bid price and current Exchange Act reporting
criteria. In November, 1995 the Company's common stock traded on the
NASDAQ SmallCap Market pursuant to a temporary exemption from the
stockholders' equity requirement. The Company's stockholders' equity
increased to above the required $1 million during the first quarter of
fiscal 1996, at which time the Company no longer required such exemption,
and, on a pro forma basis reflecting the acquisition of Thimble Square,
was above $2 million as of February 29, 1996.

Additionally, from November, 1995 until May, 1996, the Company's common
stock traded at prices below $1.00. The Company was able to maintain its
NASDAQ listing because, at the end of a grace period provided in the
NASDAQ's rule (in April, 1996) it was able to demonstrate that, on a pro
forma basis including the effect of the acquisition of Thimble Square,
its stockholders' equity was above $2 million. From May 20, 1996 until
July 16, 1996, the Company's common stock traded at prices above $1.00;
however, since July 17, 1996, the Company's common stock has again
generally been trading at prices below $1.00. At May 31, 1996, the
Company's stockholders' equity was $2.98 million. There can be no
assurance that the Company's common stock will again trade at prices
above $1.00, or that, alternatively, the Company will be able to maintain
stockholders' equity in excess of $2 million. If, in the future, the
Company is unable to satisfy NASDAQ maintenance criteria for listing, its
securities would be subject to being delisted, and trading, if any, in
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 Company's common stock. See "Market
for the Company's Securities and Related Stockholder Matters."

Penny Stock Regulation. The Securities and Exchange Commission (the
"Commission") has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks". Penny stocks generally
are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted
on the NASDAQ, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system, or securities of issuers that meet certain net asset or average
revenue tests). The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document prepared by the
Commission that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer must
also provide the customer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and its salesperson in
the transaction, and monthly account statements showing the market value
of each penny stock held in the customer's account. The bid and offer
quotations and broker-dealer and salesperson compensation information
must be given to the customer orally or in writing prior to effecting the
transaction and must be given in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's securities become subject to the
penny stock rules, the holders of its securities may find it more
difficult to sell such securities.

The Company believes that its common stock is outside the definitional
scope of a penny stock because it is listed on the NASDAQ, and because
the Company's net revenues over the last three years have exceeded the
definitional threshold. However, in the event the common stock were
subsequently to become characterized as a penny stock, the market
liquidity for the Company's securities could be severely and adversely
affected. In such event, the regulations on penny stocks could limit the
ability of broker-dealers to sell the Company's securities, and, thus,
the ability of holders to sell their securities in the secondary market.

Board of Directors Ability to Authorize a Reverse Stock Split.
Pursuant to a resolution approved by the Company's stockholders on July
25, 1994, the board of directors has the authority to effect, at its
discretion, one or more reverse splits of the number of shares of common
stock authorized, issued and outstanding. Pursuant to that resolution on
June 8, 1995 the board of directors elected to effect a one-for-ten
reverse stock split, which was effective June 19, 1995. A reverse stock
split effected pursuant to the resolution could have the effect of
reducing the numbers of record and beneficial owners of the Company's
common stock, since any stockholder that, based on the reverse split
ratio selected by the board of directors, was entitled to receive less
than one share would instead receive a cash payment for the fractional
share, and would cease to be a stockholder of the Company. Under the
rules of the Commission, a Company may suspend its obligation to file
periodic and other reports under the Exchange Act if the number of
holders of record of its common stock falls below 300. Although the June
19, 1995 reverse stock split did not, and the Company currently believes
that it is unlikely that any future reverse stock split effected pursuant
to the proposal would, reduce the number of record holders to below 300,
and although the board of directors presently would not plan to
discontinue filing reports under the Exchange Act even if the number of
record holders did fall below 300 for so long as there continued to be a
public market for the common stock, if a reverse stock split effected
pursuant to the resolution did have such an effect, the board of
directors could, at its discretion and without further stockholder
action, elect to suspend filing reports under the Exchange Act. A
suspension of the Company's reporting under the Exchange Act would
decrease the amount of information about the Company available to current
investors, and would exempt the Company from the Commission's
requirements concerning the form of proxy solicitation materials.
Additionally, it would result in the delisting of the Company's common
stock from the NASDAQ, since the listing requirements of the National
Association of Securities Dealers, Inc. ("NASD") require, among other
things, the filing of reports under the Exchange Act. The NASD also
requires, among other things, that there be at least 300 beneficial
owners, and 100,000 publicly held shares, of any class of common stock
traded on the NASDAQ. If the Company's common stock was delisted from
the NASDAQ, it could continue to trade in the over-the-counter market;
however, such market is generally less liquid than the NASDAQ, and the
value and liquidity of a stockholder's investment could be adversely
affected. However, as previously indicated, the board of directors would
not currently plan to discontinue filing reports under the Exchange Act.
Additionally, the Company currently believes that it is unlikely that a
reverse stock split effected pursuant to this resolution would cause the
Company to no longer meet the other NASDAQ listing requirements described
above.
THE COMPANY

The Company, through its operating subsidiaries, designs,
manufactures and domestically markets various canvas and nylon products,
principally tote bags, sports bags, back packs, lunch bags, stadium
totes, and craft products for sale to various retailers and in the
premium and advertising specialty market. The Company also
internationally markets and distributes sport bags and backpacks.

Innovo, a wholly owned subsidiary, manufactures and distributes
utility, craft, fashion, sports and advertising specialty products.
Innovo's utility line is made up of canvas and nylon products, such as
tote bags, laundry, duffle and shoe bags and gift bags that are designed
as consumable products that respond to needs consumers encounter in every
day life. These products are generally produced with company designed
artwork. For the craft market Innovo produces canvas tote and laundry
bags, aprons, children's smocks and Christmas stockings with no design,
which are sold (sometimes packaged with paints or other materials) for
sale as a craft project supply. The fashion line features company
designed canvas back packs, "day packs" (which combine the features of a
purse and a back pack), and tote bags, that attempt to combine style and
convenience to capitalize on the increasing trend towards more casual
dress.

Innovo's sports line consists of tote bags, lunch bags, fanny packs,
laundry, shoe and duffle bags and stadium totes. The majority of these
products display logos, insignia, names, mascots and other identifying
characteristics of professional or collegiate sports teams, or the
U.S.O.C., under licenses, which are generally non-exclusive, held by
Innovo from various licensing entities including the National Football
League, the NBA, the National Hockey League, Major League Baseball, the
U.S.O.C., and approximately 130 colleges and universities. For the year
ended October 31, 1995, 46% of the Company's sales from continuing
operations represented the sale of products bearing logos licensed by the
colleges and universities, the professional sports teams and the U.S.O.C.
In fiscal 1996 Innovo will add products that display the "Louisville
Slugger" name and logo to its sports line, and the Company is currently
developing products, which will be marketed beginning in the fourth
quarter of fiscal 1996, under recently obtained or agreed to licenses for
the U.S. and international use of the logos, trademarks and slogans of
Anheuser-Busch Cos., Inc. and the European use of the Warner Bros.
Studios Looney Tunes characters.

During October 1994 the Company began steps designed to reduce its
operating expenses and capital requirements. The Company relocated to
its owned facility in Springfield, Tennessee the manufacturing operations
it had previously conducted in leased facilities in Sugarland, Texas.
This consolidation allowed the Company to eliminate the expense of the
leased space in Texas, and also allowed the elimination of certain
shipping and duplicative supervision costs. On July 31, 1995, the
Company executed an agreement with ANG under which ANG succeeded to all
of the rights held by the Company's wholly owned subsidiary, NASCO
Products to market and distribute in the United States the National
Football League, NBA, Major League Baseball and National Hockey League
logoed sports bags, back packs and equipment bags previously imported to
and distributed in the U.S. by NASCO Products. The agreement did not
cover the international rights under the National Football League, NBA,
Major League Baseball and National Hockey League licenses. NPI
International continues to sell products internationally. Additionally,
the agreement has no effect on Innovo's marketing and sale of its
domestically manufactured sports-licensed products, and the Company
retained all the domestic rights to the United States Olympic Committee,
college and Major League Baseball Players Association products, which
will now be manufactured domestically by Innovo and marketed as part of
its product line.

For each license ANG will pay NASCO Products $187,500 ($750,000 in
the aggregate), of which $100,000 was paid on July 31, 1995. The
remaining $650,000 is being paid, without interest, in monthly
installments equal to 5% of ANG's aggregate sales of the licensed
products, with final payment due July 31, 1998. ANG assumed all of NASCO
Products' obligations under the licenses, including the payment of
royalties and minimum royalties. NASCO Products also transferred to ANG
its existing inventory of these products, for which ANG paid
approximately 67% of NASCO Products' cost, or approximately $307,000.
Such payments are being made by ANG over a six month period which ended
August, 1996.

During fiscal 1993 and 1994 the Company's marketing emphasis was
placed on the U.S. retail market for its sports licensed products. The
Company devoted fiscal 1995 to shifting its emphasis to developing new
products and marketing programs for its products in the fashion, utility
and craft lines and for the premium and advertising specialty markets.
The Company hopes that this will allow it to increase sales and lessen
its dependence on sports licensed products. The Company will also pursue
opportunities to provide domestic manufacturing for other tote and sports
bag distributors. The Company will attempt to achieve growth in the
sales of its sports logoed products through the acquisition of new
licenses, such as the U.S.O.C. license and related cross-licenses for
products that display Warner Bros. "Looney Tunes" characters or the
"Cabbage Patch Kids" characters together with the U.S.O.C. five-ring
Olympic logo, the "Louisville Slugger" license acquired in November,
1995, and the Anheuser-Busch and Warner Bros. licenses acquired in fiscal
1996, and by the development of new products and distribution for college
logoed merchandise. Over the longer term the Company is looking to
achieve growth through increase in the sales of the sports logoed bags
and backpacks it designed, under its international license rights, for
the international market, where U.S. professional sports have achieved
increased exposure and popularity, and from the introduction of Innovo's
fashion line in the international market. However, there can be no
assurance that any of these strategies will produce increased sales.

On April 12, 1996, the Company acquired 100% of the outstanding
common stock of Thimble Square for an aggregate of $1.1 million, paid by
the issuance of shares of the restricted common stock of the Company. In
a concurrent transaction, Thimble Square acquired from its stockholders
a plant it had previously leased from them in exchange for (a) $300,000
paid by the issuance of shares of the restricted common stock of Innovo
Group, and (b) the issuance by Thimble Square of $200,000 of unsecured
notes payable, without interest, on August 31, 1996 (with certain
prepayments required in the event of certain refinancings or asset sales
by Thimble Square).

Innovo began operations in April, 1987. In August, 1990, Innovo
merged into Elorac Corporation, a so called "blank check" company, which
was renamed Innovo Group. In fiscal 1991 the Company acquired the
business of NASCO, a manufacturer, importer and distributor located in
Springfield, Tennessee, through two separate transactions. In the first
transaction, the retail bag division of NASCO was acquired by a wholly-
owned subsidiary of the Company in June 1991. The retail bag division of
NASCO, renamed NASCO Products upon its purchase, manufactured and
imported a line of canvas and nylon sports bags, backpacks, equipment
bags, fanny packs, athletic caps and other sporting goods products
imprinted or embroidered with emblems and logos licensed from a variety
of licensors, such as Major League Baseball, the National Hockey League,
the National Football League and the NBA.

In the second transaction, all of the outstanding shares of common
stock of NASCO (the assets of which included the 75,000 shares of the
Company's common stock transferred in the prior transaction) were
acquired by the Company in August 1991. NASCO, 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 the youth and school
fundraising business of Spirco to QSP, which is a wholly-owned subsidiary
of The Readers Digest Association, Inc. The Company received initial
proceeds of $1.5 million in fiscal 1993, and additional payments from QSP
of $1,445,000 in fiscal 1994.

Spirco had incurred significant trade debt from the fiscal 1992
losses it incurred in marketing fundraising programs, and its continuing
operations of supplying school spirit products to companies that market
such programs was not producing sufficient cash flow to significantly
reduce these obligations and liabilities incurred by Spirco prior to its
acquisition which were not disclosed at that time. On August 27, 1993,
Spirco filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Innovo Group, Innovo and NASCO Products 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
plan, administrative claims were paid in cash from funds borrowed under
the Company's bank credit facility. 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 which as a result
acquired direct ownership of its other assets. Spirco claims which had
been guaranteed by Innovo Group received full payment through the
issuance of 222,000 shares of Innovo Group common stock. Additionally,
584,000 shares of Innovo Group common stock were issued to the Class 3
Trust which is selling those shares and distributing the proceeds to the
Class 3 claimants, which are federal, state and local taxing authorities
that had claims for income, sales, property and unemployment taxes. In
general, Innovo Group will receive any shares that are not required to
satisfy the Class 3 claims. All claims that ranked below secured claims,
including general unsecured claims and the claims of Innovo Group, Innovo
and NASCO Products for advances to Spirco, received no distribution. The
shares of Innovo Group common stock issued in Spirco's reorganization are
freely-tradeable; however, the plan of reorganization restricted each
recipient (including the Class 3 Trust) to resales of no more than 10
percent of the shares received during any 30 day period until November
10, 1995.

RECENT DEVELOPMENTS

On August 15, 1995, the Court of Appeals for the First District of
Texas ("the Appeals Court") rendered its decision in the Company's appeal
of the trial jury's findings in Michael J. Tedesco v. Innovo, Inc.,
Innovo Group Inc., Rick Binet and Patricia Anderson-Lasko f/k/a Patricia
M. DeAlejandro (see "Legal Proceedings"). The Appeals Court reversed
approximately $350,000 of the initial $700,000 judgement, finding that,
as asserted by the Company, the awards were not supported by the evidence
or improper as a matter of law. As a result, the judgement, including
post judgement interest through August, 1996, has been reduced to
$420,000.

The Appeals Court also ruled that the trial court had erred in
refusing to submit to the jury the Company's counterclaim of breach of
fiduciary duty by Tedesco, ruling that the trial record indicated that
there was evidence of such breach and damages therefrom. The Appeals
Court remanded the case to the trial court for trial on, and submission
to a jury of, the Company's claim of breach of fiduciary duty by Tedesco.

The Company has filed a motion for the rehearing by the Appeals
Court on the issue of its decision upholding $200,000 of the original judgement
(which accounts for $340,000 of the August, 1996 $420,000 amount) and has also
asked the Appeals Court to stay the final enforcement of any judgement in favor
of Tedesco until such time as the Company has proceeded on its claims against
Tedesco for breach of fiduciary duty, so that the Company would be able to
offset any damages awarded to it as a result of those claims against any final
award to Tedesco (otherwise, the Company would be required to proceed separately
to enforce any such judgement for damages). The Company intends to further
appeal these issues to the Texas Supreme Court if necessary. The Company is
also filing motions with the trial court for the scheduling of the ordered trial
on its claims against Tedesco. Tedesco has filed rehearing motions with the
Appeals Court opposing the Company's motions, and asking the Appeals Court to
reverse its decisions regarding the reversed awards and the Company's claims
against Tedesco for breach of fiduciary duty. As of the date hereof, Tedesco
has not indicated whether he would further appeal to the Texas Supreme Court.
The Company may also again seek to settle the litigation if it believes that the
terms of an available settlement are favorable.

During the third quarter of fiscal 1996 the Company completed the
private placement of aggregate of 1,751,516 shares of its common stock
for net cash proceeds of $560,000. The placements included the issuance
of warrants for the purchase of 775,758 shares of the Company's common
stock exercisable for five years at an exercise price of $.52 per share.
Additionally, on August 28, 1996, the Company completed the private
placement of $1.675 million of 8% Convertible Debentures. The 8%
Convertible Debentures are convertible, beginning October 13, 1996, into
shares of the Company's common stock at a per share price ("the
Conversion Price") equal to the lesser of $.42 per share or 70% of the
closing bid price for the five days preceding any election of conversion.
The 8% Convertible Debentures also provide that the Company may call the
debentures, beginning November 12, 1996, by the payment of the value of
the shares of common stock obtainable upon conversion, and may pay the
debentures, together with the accrued interest, at their September 30,
1998 maturity by the issuance of shares of common stock on the basis of
the Conversion Price. In connection with these placements the Company
issued to the placement agent warrants for the purchase of an aggregate
of 482,909 shares of its common stock, subject to adjustment, at an
exercise price of $.43 per share, subject to adjustment. See
"Description of Securities - Common Stock Purchase Warrants," and
Description of Securities - 8% Convertible Debentures".

In August, 1996, the Company received the final appraisals of Thimble
Square's plants and equipment. As a result of the amounts reflected in
those appraisals, and in the audit of Thimble Square's December 31, 1995
financial statement, the number of shares issued in the acquisition of
Thimble Square was reduced by 519,608 shares. The adjustment in the
number of shares issued to affect the acquisition reduced the aggregate
purchase price, for financial reporting purposes, by $265,000. This
reduction in the purchase price, and the finalization of the allocation
of the purchase price, resulted in a decrease in the amount allocated to
property and equipment of $325,000, and an increase in the amount
allocated to goodwill of $60,000, as compared to the amounts reported in
the Company's Quarterly Report on Form 10-Q for the quarter ended May 31,
1996. This change in the amount and allocation of the purchase price did
not have a material effect on the previously reported historical or pro
forma results of operations.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of the
shares of common stock offered by the Selling Stockholders.

DIVIDEND POLICY

The Company has never declared or paid a dividend on its common
stock. The Company intends to retain its earnings to finance the growth
and development of its business and does not expect to declare or pay any
cash dividends on its common stock in the foreseeable future. The
declaration of dividends is within the discretion of the Company's board
of directors, which will review this dividend policy from time to time.
See "Risk Factors - Dividends."
<PAGE>
MARKET FOR THE COMPANY'S SECURITIES
AND RELATED STOCKHOLDER MATTERS

The Company's common stock is currently traded on the NASDAQ SmallCap
Market under the symbol "INNO". The following sets forth the high and low
bid quotations for the Company's common stock in such market for the
periods indicated. This information, which has been adjusted to reflect
the one-for-ten reverse stock split effected in June, 1995, 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 below quotations necessarily reflect an
established public trading market in the Company's common stock.
<TABLE>
<CAPTION>
High Low
Fiscal 1994
</CAPTION>
<S> <C> <C>
First Quarter (November to January) $ 11 7/8 $ 5 5/8
Second Quarter (February to April) 17 1/2 5 5/16
Third Quarter (May to July) 7 3/16 3 1/8
Fourth Quarter (August to October) 4 11/16 2 3/16

Fiscal 1995
First Quarter (November to January) 3 1/8 15/16
Second Quarter (February to April) 4 1/16 1 1/4
Third Quarter (May to July) 2 7/8 1 1/2
Fourth Quarter (August to October) 2 1/4 1

November 1995 (1) 1 1/8 1/2

Fiscal 1996
First Quarter (December to February) 7/8 7/32
Second Quarter (March to May) 2 3/16 17/64
Third Quarter (June to August) 1 3/4 9/16
Fourth Quarter (through October 1, 1996) 5/8 3/8

(1) Effective November 1, 1995 the Company changed its fiscal year to
end on November 30. Previously the Company's fiscal year had ended on
October 31.

As of May 31, 1996, there were approximately 780 record holders of
the Company's common stock.

Under the rules of the NASDAQ, a company must, among other things,
maintain total assets of $2 million, stockholders' equity of $1 million,
a minimum bid price of $1 (or alternatively stockholders' equity of $2
million), and must remain current in the filing of reports under the
Securities Exchange Act of 1934 (the "Exchange Act") in order to continue
trading on the NASDAQ SmallCap Market. Between March and June, 1995, and
again in November, 1995, the Company's common stock traded on the NASDAQ
SmallCap Market pursuant to temporary exemptions granted while the
Company took steps to comply, in March 1995 with the stockholders'
equity, bid price and Exchange Act reporting criteria, and in November
1995 with the stockholders' equity requirement. The Company's
stockholders' equity increased to above the required $1 million during
the first quarter of fiscal 1996, at which time the Company no longer
required such exemption, and, on a pro forma basis reflecting the
acquisition of Thimble Square, was above $2 million as of February 29,
1996. Additionally, from November, 1995 until May, 1996, the Company's
common stock traded at prices below $1.00. The Company was able to
maintain its NASDAQ listing because, at the end a grace period provided
in the NASDAQ's rule (in April, 1996) it was able to demonstrate that, on
a pro forma basis including the effect of the acquisition of Thimble
Square, its stockholders' equity was above $2 million. From May 20, 1996
until July 16, 1996, the Company's common stock has traded at prices
above $1.00; however, since July 17, 1996, the Company's common stock has
again generally been trading at prices below $1.00. At May 31, 1996, the
Company's stockholders' equity was $2.98 million. There can be no
assurance that the Company's common stock will again trade at prices
above $1.00, or that, alternatively, the Company will be able to maintain
stockholders' equity in excess of $2 million. If the Company's
stockholders' equity were to fall below $2 million due to operating
losses, or for other reasons, and the Company's stock was not trading at
prices above $1.00, the Company could face delisting unless it took
action to either increase the minimum bid price to $1.00, or to increase
its stockholders' equity to above $2 million. 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 NASDAQ
maintenance criteria for listing, its securities would be subject to
being delisted, and trading, if any, in the Company's securities would
thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" or on the 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 Company's common stock.

The Company has never declared or paid a dividend and does not
anticipate paying 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 working capital expenditure requirements.
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at
May 31, 1996.

</TABLE>
<TABLE>
<CAPTION>
(in thousands)
Actual
________
</CAPTION>
<S> <C>
Notes payable (1) $ 1,705
Long-term debt, including
current maturities of $233 (1) 2,907
_______
Total Debt (1) 4,612
_______
Class 3 Trust (2) 135
_______
Stockholders' Equity:
Common Stock, $.01 par value;
30,000,000 shares authorized,
16,576,283 shares issued (3) 166
Additional paid-in capital 23,386
Deficit (18,149)
Treasury stock (119,691 shares) (2,426)
_______
Total Stockholders' Equity 2,977
_______

Total Capitalization $ 7,724
_______
</TABLE>

(1) See Notes 4 and 5 of Notes to Consolidated Financial Statements for
information regarding the Company's debt.
(2) Represents Class 3 claims in the reorganization of Spirco (with
disputed claims included based on the estimated amount to be
allowed) to be satisfied with the proceeds from the sale of shares
of the Company's common stock held by the Class 3 Trust. See Note
2 of Notes to Consolidated Financial Statements.
(3) Excludes as of May 31, 1996 (i) 446,950 shares of common stock
issuable upon the exercise of outstanding Common Stock Purchase
Warrants, (ii) 100,000 shares of common stock reserved for issuance
pursuant to the exercise of options under the Company's Stock Option
Plan, under which 3,000 options are outstanding, (iii) 308,225
shares of common stock held by trusts established under the Plan of
Reorganization of Spirco, and (iv) 200,000 shares of common stock
pledged by the Company to secure its appeal bond in the Tedesco
litigation. Also excludes 1 million shares issued in March, 1996
upon the exercise of outstanding common stock purchase warrants.
See "The Company", "Legal Proceedings", "Description of Securities",
Note 2 of Notes to Consolidated Financial Statements and Notes 5 and
6 of Notes to May 31, 1996 Condensed Consolidated Financial
Statements.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)

The following selected consolidated financial data as of and for the
fiscal years ended October 31, 1995, 1994, 1993 and 1992, and for the ten
months ended October 31, 1991 are derived from the consolidated financial
statements of the Company, which have been audited by BDO Seidman, LLP,
independent certified public accountants. The selected consolidated
financial data presented below for the six months ended May 31, 1996 and
April 30, 1995 is derived from the Company's unaudited consolidated
financial statements for those periods and reflect, in management's
opinion, all adjustments necessary for a fair presentation of the
consolidated financial position and results of operations for those
periods. Results of operations for interim periods are not necessarily
indicative of results to be expected for the full year. All of the
information presented herein should be read in conjunction with the
consolidated financial statements incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
Pro Forma
Ten Months Six Months
Ended Six Months Ended Year ended Ended
Year Ended October 31, October 31, May 31, April 30, October 31, May 31,
1995 1994 1993 1992 1991(1) 1996(10) 1995 1995 (11) 1996 (11)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 5,276 $ 8,028 $12,468 $12,768 $10,437 $ 3,400 $ 2,364 $ 8,322 $ 3,833
Cost of Goods Sold 3,808 5,044 6,998 8,899 6,006 2,003 1,134 6,313 2,342
Gross Profit 1,468 2,984 5,470 3,869 4,431 1,397 1,230 2,009 1,491
Operating Expenses 3,134 5,389(2) 5,023 4,723 3,785 1,876 1,312 3,706 2,148
Income (loss) from operations (1,666) (2,405) 477 (854) 646 (479) (82) 1,697) (657)
Interest Expense (511) (821) (960) (836) (12) (284) (283) (622) (318)
Income (loss) before income taxes (67)(3) (4,124) (223) (1,622) 1,083 (597) 1,616(3) (200)(3) (809)
Income (loss) from continuing
operations (67)(3) (7,905)(4) (661)(4) (843) 717 (597) 1,616(3) (200)(3) (809)
Income (loss) per share
from continuing operations (.03) (3.99) (.63) (.79) .81 (.06) .67 (.04) (.08)
Supplemental loss per share from
continuing operations (5) - (3.77) (.14) - - - -
Income (loss) from discontinued
operations (6) (626) (685) (7,268) (2,117) 707 - (444)
Income (loss) per share from
discontinued operations (6) (.24) (.34) (6.92) (1.95) .80 - (.18)

Extraordinary gain (loss) (7) (258) 699 - - - - -
Extraordinary gain (loss)
per share (.09) .35 - - - - -

Net income (loss) (951) (7,891) (7,929) (2,896) 1,424 (597) 1,172
Net income (loss) per share (.36) (3.98) (7.55) (2.74) 1.61 (.06) .49

Cash dividends declared
per common shares - - - - - - -
Weighted Average Shares of
Common Stock and Common Stock
Equivalents Outstanding 2,616 1,982 1,050 1,055 884 9,318 2,407 5,457 9,824

Balance Sheet Data:
Total Assets $ 5,667 $11,143 $19,351 $29,957 $19,199 $10,508 $ 8,303
Long-Term Debt 1,565 1,514 1,759 1,962 190 2,907 1,472
Common Stock Issuable (8) - - 2,911 - - - -
Redeemable Common Stock (9) - 1,423 1,423 - - - -
Stockholders' Equity (230) (2,372) 951 7,520 9,953 2,977 1,011
</TABLE>

__________________________

(2) Operating expenses for fiscal 1994 include plant consolidation charges of
$470,000 ($.20 per share) relating to the consolidation of the Company's
manufacturing facilities. See Note 1(j) of Notes to Consolidated Financial
Statements.

(3) Includes other income of $1.9 million from the settlement of litigation.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Results of Continuing Operations".

(4) Includes the effect of additions to the deferred tax valuation allowance of
$3,679,000 ($1.86 per share) and $624,000 ($.59 per share) in fiscal 1994 and
1993, respectively.

(5) Represents net loss per share adjusted to treat as outstanding from the
date of the loans the 229,720 shares of common stock issued in fiscal 1994 to
extinguish certain borrowings. See Note 4 of Notes to Consolidated Financial
Statements.

(6) Reflects the operations and July 1995 sale of the import operations of
NASCO Products, the operations and May 1993 sale of the fundraising program
direct marketing operations of Spirco and the operations and loss from the
disposal of Sportswear. See Note 3 of Notes to Consolidated Financial
Statements.

(7) Represents gains and losses resulting from the Chapter 11 reorganization of
Spirco. See Note 2 of Notes to Consolidated Financial Statements.

(8) Represents obligations extinguished subsequent to October 31, 1993 by the
issuance of common stock. See Note 7(a) of Notes to Consolidated Financial
Statements.

(9) Represents 189,761 shares of common stock, which were issued in September
1993 to extinguish $1,423,000 of debt and accrued interest, which the Company
could have been required to repurchase at $7.50 per share between January 1994
and April 1995. See Note 7(b) of Notes to Consolidated Financial Statements.

(10) Effective November 1, 1995 the Company changed its fiscal year to end on
November 30. Previously the Company's fiscal year ended on October 31. The
results of operations and cash flows for the transition period of November 1,
1995 to November 30, 1995 are separately presented in the Company's Quarterly
Report on Form 10-Q for the quarter ended February 29, 1996. See Condensed
Consolidated Financial Statements.

(11) Pro forma for the effects of the acquisition of Thimble Square, which was
completed on April 12, 1996. Pro forma income from continuing operations data
is stated as if the acquisition had taken place on November 1, 1994. The pro
forma financial information is not necessarily indicative of the actual future
results of operations or financial position. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Acquisition of
Thimble Square," and Pro Forma Condensed Consolidated Financial Statements.<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the
beneficial ownership of the Company's common stock as of the date hereof
by (i) each of the Company's executive officers or directors or who is a
stockholder, (ii) each person known to the Company to be the beneficial
owner of more than five percent of the outstanding shares of the common
stock, and (iii) all directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
________________________________________________
Name Number Percent
_____________________________________________________________________________________
</CAPTION>
<S> <C> <C> <C>
Patricia Anderson-Lasko 376,106 (2) (3) 2.0%
27 North Main Street
Springfield, TN 37172

Alexander K. Miller - -
27 North Main Street
Springfield, TN 37172

Terrance Bond 1,000 (4) *
27 North Main Street
Springfield, TN 37172

Felix Lee 1,050 (5) *
27 North Main Street
Springfield, TN 37172

Reino C. Lanto, Jr. 61,286 (6) *
235 North Garrard St.
Rantoul, Il 61866

Marvin M. Williamson 2,000 *
53 Fitch Lane
New Canaan, CT 06840

Lee Schwartz 1,112,745 (7) 5.9%
206 Early Street
Savannah, GA 31404

Eleanor and Philip Schwartz 2,225,490 (7) (8) 11.8%
23362 Water Circle
Boca Raton, FL 33486

Mathew T. Mulhern 834,000 (9) (10) 4.4%
119 Rockland Ave.
Northvale, NJ 07647

William T. and Virginia C. Williams 1,000,000 5.3%
2800 S. Ocean Blvd.
Boca Raton, FL 33432

All Executive Officers 3,500,932 (2) (3) (4) (5) 18.6%
and Directors as a Group (6) (7) (8) (11)
(6 persons)
_________________
* Less than 1%.
</TABLE>
(1) Pursuant to the rules of the Securities and Exchange Commission,
certain shares of the Company's common stock that a beneficial owner set
forth in this table has a right to acquire within 60 days of the date
hereof pursuant to the exercise of stock options or common stock purchase
warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of that owner but are not deemed outstanding for the
purpose of computing percentage ownership of any other beneficial owner
shown in the table. Shares outstanding and eligible to vote exclude (i)
243,625 shares held by trusts established under Spirco's plan of
reorganization (see Note 2 of Notes to Consolidated Financial Statements)
and (ii) 200,000 shares held as an appeal bond for the Company's appeal
of the Tedesco litigation (see Note 8 of Notes to Consolidated Financial
Statements). Under the terms of the Trust and the bond, such shares are
not eligible to vote.

(2) Includes 79,432 shares owned by DWL International, a corporation in
which Ms. Anderson-Lasko's spouse, Donald W. Lasko, holds a controlling
interest. Ms. Anderson-Lasko has no, and disclaims beneficial ownership
of any, interest in DWL International and the shares owned by it.

(3) Pursuant to a July, 1994 agreement between Mr. Bauman and the
Company and Ms. Anderson-Lasko, Mr. Bauman has agreed to certain
limitations on the number of shares of the Company's common stock he may
resell in any month until August, 1996, and Mr. Bauman has granted to Ms.
Anderson-Lasko an irrevocable proxy to vote any and all shares of the
Company's common stock that he may own at any time. The total for Ms.
Anderson-Lasko includes the 12,666 shares owned by Mr. Bauman that Ms.
Anderson-Lasko has the power to vote pursuant to this agreement.

(4) Consists of 1,000 shares subject to options exercisable by Mr. Bond.

(5) Includes 50 shares currently held by Mr. Lee and 1,000 shares
subject to options exercisable by Mr. Lee.

(6) Consists of 32,735 shares owned by Jeanene Lanto, the wife of Mr.
Lanto, and 28,551 shares owned by a trust for the benefit of Jeanene
Lanto of which Mr. Lanto is the trustee, as to all of which Mr. Lanto
disclaims any beneficial ownership.

(7) Pursuant to a voting agreement between Lee Schwartz, Eleanor
Schwartz and Philip Schwartz, Lee Schwartz and Philip Schwartz have
granted to Eleanor Schwartz the power to vote any shares owned by them
for so long as Eleanor Schwartz is a member of the Company's board of
directors.

(8) Includes 1,112,745 shares, owned by Lee Schwartz, that Eleanor
Schwartz has the power to vote pursuant to the voting agreement between
Lee Schwartz, Eleanor Schwartz and Philip Schwartz.

(9) Mathew Mulhern ("Mulhern") purchased 834,000 shares of the Company's
common stock from Thimble Square in January, 1996. Pursuant to the
agreement between Thimble Square and Mulhern, Thimble Square may be
required to transfer up to 416,000 shares to Mulhern depending on the
average price for the Company's common stock as reported by the NASDAQ
SmallCap Market for the period February 20, 1996 to December 28, 1996.
As a result of the Company's April, 1996 acquisition of Thimble Square,
the obligation to transfer additional shares has become an obligation of
the Company to issue additional shares to Mulhern. As the result of this
agreement the number of shares and percentage of common stock owned by
Mulhern could increase in the future.

(10) Pursuant to an agreement between the Company and Mulhern, Mulhern
has agreed to vote the shares owned by him in accordance with the
recommendations of the Company's board of directors.

(11) Includes the 834,000 shares held by Mulhern which Mulhern has
agreed to vote in accordance with the recommendations of the Company's
board of directors. See note (10) above.<PAGE>
SELLING STOCKHOLDERS

The following table sets forth (i) the amount and percentage of
shares of common stock beneficially owned by each Selling Stockholder
prior to this offering, (ii) the number of such shares being offered by
each Selling Stockholder to the public from time to time pursuant hereto
and (iii) the amount and percentage of shares of common stock owned
beneficially by each of the Selling Stockholders upon completion of this
offering (assuming the sale by the Selling Stockholders of all the shares
of common stock offered by means of this prospectus).
<TABLE>
<CAPTION>
Shares and
Warrants
Shares and Warrants Beneficially
Beneficially Shares Owned After
Owned Prior to the Offering Being The Offering
Name Shares Warrants Total % Offered Number %
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Canvasco, Inc. 83,266 - 83,266 * 83,266 - -
Eleanor and Philip
Schwartz (1)(2) 1,112,745 (3) - 1,112,745 5.9% 1,112,745 - -
Lee Schwartz (4) 1,112,745 - 1,112,745 5.9% 1,112,745 - -
Josephine Finnegan (5) 200,000 - 200,000 1.1% 200,000 - -
Richard Serbin 16,349 (6) 2,250 18,599 * 16,349 2,250 *
Merritt Family Spendthrift
Trust 95,686 - 95,686 * 95,686 - -
Sonem Partners, L.P. 121,267 - 121,267 * 121,267 - -

* less than 1 percent
</TABLE>
(1) Eleanor Schwartz is a director of the Company, having become a
director in April, 1996 upon the Company's acquisition of Thimble Square.
(2) Philip and Eleanor Schwartz have agreed, as to the 1,112,745 shares
being offered hereby, to limit resales to an aggregate of 20,000 shares
in any one week, exclusive of any resales affected through certain block
trades.
(3) Excludes 1,112,941 shares owned and being offered by Lee Schwartz as
to which Eleanor Schwartz is deemed to be a beneficial owner by virtue of
a voting agreement pursuant to which Lee Schwartz granted to Eleanor
Schwartz the power to vote any shares owned by him for so long as Eleanor
Schwartz is a member of the Company's board of directors.
(4) Lee Schwartz has agreed, as to the 1,112,745 shares being offered
hereby, to limit resales to 20,000 shares in any one week, exclusive of
any resales affected through certain block trades.
(5) Josephine Finnegan has agreed, as to the 200,000 shares being
offered hereby, to limit resales to no more than 10,000 shares in any one
week.
(6) Represents the shares the Company has the right to require Mr.
Serbin to accept in satisfaction of certain indebtedness to Mr. Serbin.
<PAGE>
DESCRIPTION OF SECURITIES

Common Stock

Pursuant to the Certificates of Incorporation, the Company is
authorized to issue 30 million shares of common stock, $.01 par value per
share. As of the date hereof, the Company had outstanding 18,818,167
validly issued, fully paid and nonassessable shares of common stock.

Holders of the common stock are entitled to one vote for each share
held of record in each matter properly submitted to such holders for a
vote. Subject to the rights of the holders of any other outstanding
series of stock the board of directors of the Company may designate from
time to time, holders of common stock are entitled to receive their pro
rata share of (i) any dividends that may be declared by the board of
directors out of assets legally available therefore, and (ii) any excess
assets available upon the liquidation, dissolution, or winding up of the
Company.

The board of directors may issue the additional shares of common
stock, up to the authorization of 30 million shares, without soliciting
additional stockholder approval. The existence of authorized but
unissued shares of the Company's common stock could tend to discourage or
render more difficult the completion of a hostile merger, tender offer or
proxy contest. For example, if in the due exercise of its fiduciary
obligations, the board of directors were to determine that a takeover
proposal was not in the best interest of the Company and its
stockholders, the ability to issue additional shares of stock without
further stockholder approval could have the effect of rendering more
difficult or costly the completion of the takeover transaction, by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in hands that
might support the position of the board of directors, by effecting an
acquisition that might complicate or preclude the takeover, or otherwise.

Preferred Stock

The Company does not presently have an authorized class of preferred
stock.

Common Stock Purchase Warrants

The Company conducted a private placement offering that closed in
June 1992 whereby the Company issued 20 units, each unit consisting of a
$100,000 12% Subordinated Collateralized Note ("Subordinated Notes") and
Class A common stock purchase warrants exercisable for 4,500 shares of
the common stock. As a result of this offering, the Company originally
issued Class A common stock purchase warrants to purchase in the
aggregate 95,000 shares of the Company's Common Stock. Each Class A
common stock purchase warrant originally entitled the holder to purchase
one share of common stock at an exercise price of $45 per share for a
term expiring at 5:00 pm Central time on May 15, 1994. However, as a
result of the delay in the public offering planned for the fall of 1992
(see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources"), the Company
was unable to redeem the Subordinated Notes on or before December 1,
1992, and as a result the exercise price of the Class A common stock
purchase warrants was automatically reduced to $30. In June 1993 the
Company sought extensions of the maturity date of the Subordinated Notes
to March 31, 1994. The holders of an aggregate of $1,125,000 principal
amounts of the Subordinated Notes agreed to such extension, in return for
which the Company (i) extended until July 31, 1996 the expiration date of
the 56,250 Class A common stock purchase warrants originally issued in
the units purchased by such holders and (ii) issued to such holders, on
a pro-rata basis, an additional 5,625 Class A warrants having terms
identical to the common stock purchase warrants. In March, 1994 in
connection with the conversion of Subordinated Notes into shares of
common stock, the Company agreed to extend the expiration date of the
common stock purchase warrants until July 31, 1997.

As of the date hereof, there are outstanding as the result of the
June 1992 private placement offering an aggregate of 93,950 Class A
common stock purchase warrants, of which 91,700 are exercisable at $30
per share, expire on July 31, 1997 and of which 2,250, exercisable at $2
per share, expire March 31, 1997.

In June, 1993 the Company undertook a private placement of units
comprised of one share of restricted common stock and one Class B common
stock purchase warrant, exercisable at $30 per share through July 31,
1996. An aggregate of 55,000 units were sold, resulting in the issuance
of 55,000 Class B common stock purchase warrants. In March, 1994 the
exercise price of 53,000 of these Class B common stock purchase warrants
was reduced to $20 and the period for exercise extended until July 31,
1997.

In April, 1996, in connection with the restructuring of a defaulted
Subordinated Collateralized Note and the settlement of a judgement
obtained by the holder, the Company issued 250,000 Class E common stock
purchase warrants. The Class E common stock purchase warrants are
exercisable at a price of $.30125 per share through April, 1999. The
resale of the shares issuable upon the exercise , if any, of the Class E
common stock purchase warrants has been registered under the Securities
Act.

In May, 1996, the Company issued 50,000 Class G common stock
purchase warrants, together with 187,500 shares of its common stock, in
satisfaction of certain liabilities aggregating approximately $56,000.
The Class G common stock purchase warrants are exercisable at a price of
$.28 per share through May, 1998. The resale of the shares issuable upon
the exercise, if any, of the Class G common stock purchase warrants has
been registered under the Securities Act.

In August, 1996, as part of a private placement of units comprised
of shares of its common stock and common stock purchase warrants, the
Company issued 775,758 Class H common stock purchase warrants exercisable
for five years at a price of $.52 per shares. Under the terms of the
Class H warrants, the Company is not required to reserve or otherwise
keep available from its authorized but unissued common stock shares for
issuance upon the exercise, if any, of the Class H warrants, unless and
until the Company's authorized common stock is increased to 40 million
shares, and prior to any such increase, is only required to allow the
exercise of the Class H warrants if and to the extent there are available
shares of its authorized common stock not already issued and outstanding,
or reserved for the exercise of other then outstanding stock options,
warrants, or conversion rights.

In connection with the August, 1996 private placement of shares of
its common stock and of the 8% Convertible Debentures, the Company
issued to the placement agent Class I common stock purchase warrants that
entitle the holder to purchase, for five years beginning February 28,
1997, an aggregate of $207,500 of common stock at a per share price equal
to 110% of the lowest five day average closing bid price during the
period August 28, 1996 to February 28, 1997. On the basis of the closing
bid prices for the Company's common stock for the period August 28, 1996
through the date hereof, the Class I warrants would entitle the holders
to purchase an aggregate of approximately 482,909 shares of common stock
at a per share price of $.43 per share.

The exercise price of the common stock purchase warrants is subject
to adjustment based on anti-dilution provisions that are triggered upon
a stock dividend, stock split, reverse stock split, reorganization,
reclassification, consolidation, merger or sale of all or substantially
all of the Company's assets. Certain common stock purchase warrants have
certain "demand" and "piggy back' registration rights. See -
"Registration Rights."

8% Convertible Debentures

On August 28, 1996, the Company completed the private placement of
$1.675 million of 8% Convertible Debentures. The 8% Convertible
Debentures are convertible, beginning October 13, 1996, into shares of
the Company's common stock at a per share price ("the Conversion Price")
equal to the lesser of $.42 per share or 70% of the closing bid price for
the five days preceding any election of conversion. The 8% Convertible
Debentures also provide that the Company may call the debentures,
beginning November 12, 1996, by the payment of the value of the shares of
common stock obtainable upon conversion, and may pay the debentures,
together with the accrued interest, at their September 30, 1998 maturity
by the issuance of shares of common stock on the basis of the Conversion
Price. On the basis of a Conversion Price of $.42, the 8% Convertible
Debentures would be convertible into an aggregate of 3,988,095 shares of
common stock.

Certain Provisions Relating to Share Acquisitions

Section 203 of the Delaware General Corporation Law generally
prevents a corporation from entering into certain business combinations
with an interested stockholder (defined as any person or entity that is
the beneficial owner of at least 15% of a corporation's voting stock) or
its affiliates for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless
(i) the transaction is approved by the board of directors of the
corporation prior to such business combination, (ii) the interested
stockholder acquires 85% of the corporation's voting stock in the same
transaction in which it exceeds 15%, or (iii) the business combination is
approved by the board of directors and by a vote of two-thirds of the
outstanding voting stock not owned by the interested stockholder. The
Delaware General Corporation Law provides that a corporation may elect
not to be governed by Section 203. The Company has made no such election
and is therefore governed by Section 203. Such anti-takeover provision
may have an adverse effect on the market for the Company's securities.

Registration Rights

The holders of the Class A and Class B common stock purchase
warrants are entitled to certain demand and piggy-back registration
rights with respect to the share of common stock issuable upon the
exercise of those common stock purchase warrants. These rights provide
generally that upon the request of the holders of a majority of the Class
A common stock purchase warrants and/or the request of holders of a
majority of the Class B common stock purchase warrants, the Company shall
as soon as practicable give written notice of such request to all holders
of such common stock purchase warrants and thus as soon as practicable
thereafter shall file a registration statement covering the number of
shares as to which the holders of such common stock purchase warrants
have requested registration, provided however that the Company is not
obligated to file a registration statement if registration is not
requested for at least 30% of the shares issuable upon its exercise of
the Class A common stock purchase warrants, or 30% of the shares issuable
upon the exercise of the Class B common stock purchase warrants.
Additionally, the holders of the Class A and Class B common stock
purchase warrants are entitled to the "piggy-back" registration of the
underlying shares of common stock if the Company proposed to register any
of its securities under the Securities Act, except that, among other
conditions, the underwriters of any offering have the right to limit the
number of shares included in such registration.

The holders of the Class H common stock purchase warrants, and of
the 8% Convertible Debentures, are entitled to certain demand
registration rights upon the exercise, if any, of the Class H warrants or
upon the conversion, if any, of the 8% Convertible Debentures. Those
demand registration rights provide that the Company will, upon the
request of the holders of the shares issued upon any exercise of the
Class H warrants, or upon the demand of the holders of any of the shares
issued upon any conversion of the 8% Convertible Debentures, file a
registration statement for the reoffer and resale of such shares.
However, the Company is only required to file one registration statement
for the reoffer and resale of shares issued upon the exercise of the
Class H warrants, and is only required to file one registration statement
for the reoffer and resale of shares issued upon the conversion of the
8% Convertible Debentures. The holders of the Class H common stock
purchase warrants, and of the 8% Convertible Debentures, are also
entitled to "piggy-back" registration rights, similar to those held by
the holders of the Class A and Class B warrants, with respect to the
shares of common stock issued upon the exercise, if any, of the Class H
warrants or upon the conversion, if any, of the 8% Convertible
Debentures.

The holders of the Class I common stock purchase warrants are
entitled to similar "piggy-back" registration of the shares issuable upon
any6 exercise of the Class I warrants.

None of the "piggy-back" registration rights described above have
been exercised with respect to the registration statement of which this
Prospectus forms a part.

Indemnification and Limitation of Liability

The Company's Amended and Restated Certificate of Incorporation
provides that the Company shall indemnify its officers and directors to
the fullest extent permitted by Delaware law, including some instances in
which indemnification is otherwise discretionary under Delaware law. The
Amended and Restated Certificate of Incorporation also provides that,
pursuant to Delaware law, the Company's directors shall not be liable for
monetary damages for breach of the director's fiduciary duty of care to
the Company and its stockholders. This provision does not eliminate the
duty of care, and , in appropriate circumstances, equitable remedies such
as an injunction or other forms of non-monetary relief would remain
available under Delaware law. In addition, each director will continue
to be subject to liability for breach of the director's duty of loyalty
to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for actions
leading to improper personal benefit to the director and for payment of
dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a
director's responsibilities for environmental laws.

At present, there is no pending litigation or proceeding involving
a director or officer of the Company as to which indemnification is being
sought, nor is the Company aware of any threatened litigation that may
result in claims for indemnification by any officer or director.

Transfer and Warrant Agent

The transfer agent for the Company's common stock is American
Security Transfer, Lakewood, Colorado.<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

As of the date hereof, 18,818,167 shares of common stock are issued
and outstanding, and an additional 5,693,712 shares of common stock are
issuable upon exercise of the common stock purchase warrants or
conversion rights. Of the shares of common stock outstanding, 97,546
shares are "restricted securities" as defined under the Securities Act,
and 5,393,712 of the shares issuable upon the exercise of the common
stock purchase warrants or conversion rights would, when issued, be
restricted securities. Additionally, another 499,778 shares are owned by
affiliates. Such 597,324 shares, and the 5,393,712 of the shares
issuable upon the exercise of such warrants or conversion rights, may not
be sold unless they are registered under the Securities Act or are sold
pursuant to an exemption from registration, such as the exemption
provided by Rule 144 under the Securities Act.

In general, Rule 144 allows a stockholder who has beneficially owned
restricted shares for at least two years (including persons who may be
deemed "affiliates" of the Company under Rule 144) to sell a number of
shares within any three-month period that does not exceed the greater of
1% of the then outstanding shares of the Company's common stock or the
average weekly trading volume in the over-the-counter market during the
four calendar weeks preceding the filing of a Form 144 with respect to
such sale. Sales under Rule 144 are also subject to certain manner-of-
sale provisions and notice requirements, and to the availability of
current public information about the Company. A stockholder who is
deemed not to have been an "affiliate" of the Company for at least 90
days and who has beneficially owned his restricted shares for at least
three years would be entitled to sell his shares under Rule 144 without
regard to these requirements.

As of the date hereof, the two year holding period had been
satisfied with respect of 17,740 restricted shares which could therefore
be sold subject to the volume limitations of Rule 144, and the three year
holding period had been satisfied with respect to 79,806 shares held by
non-affiliates and could therefore be sold without compliance with the
volume restrictions under Rule 144.

On June 27, 1995 the Commission published for public comment
proposed rules that would shorten the two and three year holding periods
under Rule 144 to one and two years, respectively. If such proposed
rules were currently in effect, the number of shares which could be sold
subject to the volume limitations of Rule 144 would not increase, and the
number of shares that could be sold without compliance with the volume
restrictions of Rule 144 would increase by 17,740 shares.

Josephine Finnegan, one of the Selling Stockholders, has agreed as
to the 200,000 shares being offered hereby, to limit resales to no more
than 10,000 shares in any one week. Philip and Eleanor Schwartz, who are
Selling Stockholders, have agreed, as to the 1,112,745 shares being
offered hereby, to limit resales to an aggregate of 20,000 shares in any
one week, exclusive of any resales affected through certain block trades.
Lee Schwartz, who is also a Selling Stockholder, has agreed, as to the
1,112,745 shares being offered hereby, to limit resales to 20,000 shares
in any one week, exclusive of any resales affected through certain block
trades. The Merritt Family Spendthrift Trust, one of the Selling
Stockholders, has agreed, as to 114,286 shares previously registered for
resale under the Securities Act, to limit resales to no more than 12,500
shares in any one week for a period of one year from June 28, 1996.
Mathew Mulhern has agreed, as to 1,000,000 shares previously registered
for resale under the Securities Act, to limit resales to no more than
25,000 shares in any one week for a period of one year from June 28,
1996. William T. and Virginia C. Williams have agreed, as to 800,000
shares previously registered for resale under the Securities Act, to
limit resales to no more than 12,500 shares in any one week for a period
of one year from June 28, 1996.

There has been only a limited public trading public market for the
common stock of the Company. Sales of substantial amounts of shares of
common stock, pursuant to Rule 144, or otherwise, could adversely affect
any market for the common stock.
<PAGE>
EXPERTS

The consolidated financial statements and schedule of the Company,
and the combined financial statements of Thimble Square, incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the
periods set forth in their reports incorporated herein by reference, and
are incorporated herein by reference in reliance upon such reports given
upon the authority of said firm as experts in auditing and accounting.
<PAGE>

No person has been authorized
to give any information or to make
any representation not contained
in this Prospectus in connection
with the offer made hereby and, if
given or made, such information or
representation must not be relied
upon. This Prospectus does not
constitute an offer to sell or the
solicitation of an offer to buy
any securities other than the
securities to which it relates, or
an offer to sell or the
solicitation of an offer to buy
such securities in any
jurisdiction in which such offer
or solicitation may not be legally
made. Neither the delivery of
this Prospectus nor any sale made
hereunder shall, under any
circumstances, create any
implication that the information
contained herein is correct as of
any date subsequent to the date
hereof.

____________________________

TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of
Certain Information
by Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Market for the
Company's Securities
and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . .28
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Selected Consolidated
Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Principal Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . .33
Selling Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . .36
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . .37
Shares Eligible for
Future Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

<PAGE>
2,742,058 Shares
by Selling Stockholders

INNOVO GROUP INC.

PROSPECTUS

__________, 1996

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

SEC registration fee $ 384.12
NASD fee 8,484.96
Accounting fees and expenses 5,000.00
Legal fees and expenses 5,000.00
Printing and engraving expenses 5,000.00
Blue Sky fees and expenses -
Transfer Agent and Register fee -
Miscellaneous expenses 5,000.00
_________

$28,869.08
_________
_________________________________

Item 15. Indemnification of Directors and Officers

Under Section 145 of the Delaware General Corporation Law, a
corporation may indemnify any of its directors and officers against
expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding (i) if any such person
acted in good faith and in a manner reasonably believed to be in or not
opposed to be the best interests of the corporation, and (ii) in
connection with any criminal action or proceeding if such person had no
reasonable cause to believe such conduct was unlawful. In actions
brought by or in the right of the corporation, however, Section 145
provides that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such persons's
duty to the corporation unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in review of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper. Article Nine of the Company's Amended and Restated Certificate
of Incorporation requires that the Company indemnify its directors and
officers for certain liabilities incurred in the performance of their
duties on behalf of the Company to the fullest extent allowed by Delaware
law.

The Company's Amended and Restated Certificate of Incorporation
relieves its directors from personal liability to the Company or to
stockholders for breach of any such director's fiduciary duty as a
director to the fullest extent permitted by the Delaware General
Corporation Law. Under Section 102(b)(7) of the Delaware General
Corporation Law, a corporation may relieve its directors from personal
liability to such corporation or its stockholders for monetary damages
fore any breach of their fiduciary duty as directors except (i) for a
breach of the duty of loyalty, (ii) for failure to act in good faith,
(iii) for intentional misconduct or knowing violation of law, (iv) for
willful or negligent violations of certain provisions of the Delaware
General Corporation Law imposing certain requirements with respect to
stock repurchases, redemptions and dividends, or (v) for any transaction
from which the director derived an improper personal benefit.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling
persons of the Company pursuant to the foregoing provisions, the Company
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.

<PAGE>
Item 16. Exhibits

The following exhibits are filed as part of the Registration
Statement:

Exhibit Index

Exhibit
Number Description Reference
No.
3.1 Form of Amended and Restated Certificate
of Incorporation of Registrant.* 3.1 (2)

3.2 Amended and Restated Bylaws of Registrant.* 4.2 (1)

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

21 Subsidiaries of the Registrant* 21 (3)

23.1 Consent of BDO Seidman

24 Power of Attorney (see Signature Page)* 24 (4)

__________________________

* 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) Current Report on Form 8-K of Innovo Group Inc. (file no. 0-
18926) dated May 10, 1993 filed November 12, 1993.

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

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

(4) Registration Statement on Form S-3 (file 333-12527) of Innovo
Group In. filed September 23, 1996.
<PAGE>

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:

(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information in the
registration statement; and

(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement.

(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-
effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.

(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item
14 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer of controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is assured by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the question has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form
of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4), or 497(h) under the
Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering therein.

(d) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant hereby certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Springfield, Tennessee
on October 2, 1996.

INNOVO GROUP INC.

By: /s/Patricia Anderson-Lasko
Patricia Anderson-Lasko
Chairman of the Board,
President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <S> <S>
SIGNATURE TITLE DATE

/s/Patricia Anderson-Lasko Chairman of the Board, October 2, 1996
Patricia Anderson-Lasko President, Chief Executive
Officer and Director (Principal
Executive and Financial Officer)

/s/Reino C. Lanto, Jr.* Director October 2, 1996
Reino C. Lanto, Jr.

/s/Felix Lee* Director October 2, 1996
Felix Lee

/s/Alexander K. Miller* Director October 2, 1996
Alexander K. Miller

/s/Eleanor V. Schwartz* Director October 2, 1996
Eleanor V. Schwartz

/s/Marvin M. Williamson* Director October 2, 1996
Marvin M. Williamson

/s/Terrance J. Bond* Controller (Principal October 2, 1996
Terrance J. Bond Accounting Officer)

*by /s/Patricia Anderson-Lasko
Patricia Anderson-Lasko
Attorney-in-fact
<PAGE>

</TABLE>

Exhibit 23.1

Consent of Independent Certified Public Accountants

Board of Directors
Innovo Group Inc.

We hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Amendment No. 1 to the Registration
Statement of our reports dated January 26, 1996, relating to the consolidated
financial statements and schedule of Innovo Group Inc. and subsidiaries
appearing in the Company's Annual Report on Form 10-K for the year ended October
31, 1995.

We also hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Amendment No. 1 to the Registration
Statement of our report dated June 20, 1996 relating to the combined financial
statements of Thimble Square, Inc. appearing in the Current Report on Form 8-K
of Innovo Group Inc., dated April 12, 1996, as amended by Form 8-K/A.

We also consent to the references to us under the captions
"Selected Consolidated Financial Data" and "Experts" in the Prospectus.

/s/BDO Seidman, LLP
BDO SEIDMAN, LLP

Atlanta, Georgia
October 2, 1996