INNOVO GROUP INC, S-3/A, 1997-12-05

INNOVO GROUP INC
S-3/A, 1997-12-05
MISCELLANEOUS FABRICATED TEXTILE PRODUCTS

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As filed with the Securities and Exchange Commission on December 5, 1997.
Registration No. 333-35981
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
_________________________
FORM S-3/A-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
of incorporation or organization) Classification Code Number) Identification
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 Amount to Proposed Maximum Proposed Maximum Amount of
of securities to be be Offering Price Aggregate Registration Fee
registered Registered Per Share Offering Price
</CAPTION>
<S> <C> <C> <C> <C>
Common Stock, par 9,500,000 $.5625 (1) $5,343,750 (1) $1,619.32 (2)
value $.01 per share,
for Selling Stockholders

(1) Pursuant to Rule 457(c), calculated on the basis of $.5625 per share,
representing the average of the closing bid and asked prices of the common stock
on September 12, 1997.
(2) Paid at the time of the 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 December 5, 1997
Subject to Completion

INNOVO GROUP INC.
Common Stock

9,500,000 Shares by the Selling Stockholders

This Prospectus relates to a total of 9,500,000 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 9,500,000 shares, (i) 2,100,000
shares were issued in May and July, 1997 upon the conversion of the
Company's Series I and Series II Unsecured Convertible Promissory Notes,
(ii) 500,000 shares were issued in July, 1997 upon the exercise of
certain common stock purchase warrants, (iii) 6,750,000 shares were
issued by the Company in August, 1997 in a private placement to
individuals who in connection therewith joined the management or board of
directors of the Company, and (iv) 150,000 shares were issued in August
and October, 1997 for certain services. See "Recent Developments,"
"Consolidated Financial Statements," "Condensed Consolidated Financial
Statements," "Description of Securities," and "Selling Stockholders."

Of the 9,500,000 shares offered hereby, (i) 1,500,000 shares are
subject to an agreement that restricts any reoffer or resale of such
shares until August, 1998, and (ii) 7,250,000 shares are owned or
controlled by members of the Company's management or board of directors.
See "Recent Developments," "Management," "Principal Stockholders,"
"Selling Stockholders," and "Shares Eligible for Future Sale."

The distribution of the shares of common stock by the Selling
Stockholders may be affected 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.

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", which begins 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 __________, 1997
<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, Regulation M, 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, 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 December 4, 1997,
the closing bid price and asked price of the Common Stock as reported by
NASDAQ were $21/32 and $11/16 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. Such material may also be accessed electronically by means
of the Commission's home page on the Internet at http://www.sec.gov.

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
November 30, 1996;

(ii) The Company's definitive proxy statement dated March 5, 1997;

(iii) The Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1997;

(iv) The Company's Quarterly Report on Form 10-Q for the quarter
ended May 31, 1997;

(v) The Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1997;

(vi) The Company's Current Report on Form 8-K dated March 14, 1997;
and

(vii) The Company's Current Report on Form 8-K dated August 13, 1997.

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"), operating through its wholly-
owned subsidiaries (which, collectively with Innovo Group are referred to
as "the Company"), designs, manufactures and domestically markets various
cut and sewn canvas and nylon consumer products, such as tote bags and
aprons, for sale to various retailers and in the premium and advertising
specialty market, and manufactures and domestically markets ladies ready-
to-wear at-home, sleep and lounge wear for sale to retailers and through
mail order distribution. The Company also internationally markets and
distributes the Company's canvas and nylon products, as well as sport
bags and backpacks. The Company's operations are classified into two
industry segments. See Note 10 of Notes to Consolidated Financial
Statements for financial information on industry segments.

The Company incurred losses from continuing operations of $3,088,000,
$67,000 and $7,905,000 in fiscal 1996, 1995 and 1994, and a loss from
continuing operations of $1,349,000 for the nine months ended August 31,
1997. Cash flows from operations were negative $2,743,000 and $406,000
in fiscal 1996 and 1994, respectively, and at August 31, 1997 the Company
has an accumulated deficit of $22 million. The Company is taking steps
which it believes will allow it to return to profitability and positive
operating cash flows including obtaining additional capital during the
third quarter of fiscal 1997 through the private placement of shares of
common stock, as described below. 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".

On August 13, 1997 the Company issued 6,750,000 shares of common
stock in a private placement to a group of four investors ("the Smith
Group"). Proceeds, after the payment of related expenses, were
approximately $1,300,000, of which $150,000 was utilized to repurchase
and retire the Company's outstanding Class I common stock purchase
warrant and the remainder was used to reduce operating liabilities and
increase working capital. In connection therewith three members of the
Smith Group became executive officers of the Company, and all four
members of the Smith Group became members of the Company's board of
directors. In November, 1997, the Company raised an additional $675,000
of equity capital through the private placement of 1.5 million shares of
common stock. Concurrently the Company obtained the return of 1.5
million shares previously issued as the result of the exercise by the
Company's president of the 1997 Stock Purchase Award; as a result, the
private placement did not result in a net increase in outstanding shares.
See "Recent Developments."

Innovo, Inc. ("Innovo"), a wholly owned subsidiary, manufactures and
domestically distributes cut and sewn canvas and nylon consumer products
for the utility, craft, sports licensed and advertising specialty
markets. Innovo's products are domestically manufactured at facilities
owned or leased by the Company.

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

The products comprising Innovo's sports licensed line, and those
distributed by NP International, display logos, insignia, names, slogans
or characters licensed from various licensors. Innovo and NP
International hold licenses for the use of the logos and names of the
teams of the National Football League, the National Basketball
Association, Major League Baseball, the National Hockey League, and over
130 colleges, as well as the slogans and taglines of Anheuser-Busch Cos.
and the drawings of sports artist Gary Patterson. In the second half of
fiscal 1996 NP International obtained licenses for the use of the Walt
Disney Co. ("Walt Disney") cartoon characters, and the Warner Bros.
Studios ("Warner Bros.") Looney Tunes cartoon characters, on sports bags,
backpacks, fanny packs and other products it markets in Europe and the
Middle East. NP International will begin selling the Walt Disney and
Warner Bros. products in fiscal 1997. For the year ended November 30,
1996, 39.9% of the Company's net sales represented the sale of products
produced pursuant to such licenses.

Thimble Square, Inc. ("Thimble Square"), which Innovo Group acquired
in April, 1996, manufactures and markets ladies' ready-to-wear at-home,
sleep and lounge wear. Thimble Square also provides "sew-only"
manufacturing for other distributors of private-label sleep and lounge
wear.

The Company also operates a retail mall facility in Florida. See
"Recent Developments."

During fiscal 1994 the Company began restructuring its operations to
concentrate on domestic manufacturing and the international distribution
of licensed products, which the Company views as its strategic strengths.
In October, 1994 the Company relocated to its owned facility in
Springfield, Tennessee the manufacturing operations it had previously
conducted in leased facilities in Sugarland, Texas to eliminate the
expense of the leased space in Texas and also eliminate certain shipping
and duplicative supervision costs. On July 31, 1995, NASCO Products,
Inc. ("NASCO Products"), a wholly-owned subsidiary, sold to Accessory
Network Group, Inc. ("ANG") its operations of importing to and
distributing in the United States sports bags, backpacks and equipment
bags bearing the logos of the teams of the four major professional sports
leagues. The sale did not include the products distributed by Innovo or
NP International. For the licenses ANG paid NASCO Products $750,000. In
addition, ANG will make an ongoing annual payment, for up to forty years,
of certain percentages of sales under each of the National Football
League, Major League Baseball, National Hockey League licenses, and
National Basketball Association licenses. See Note 3 of Notes to
Consolidated Financial Statements.

During fiscal 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 and to
preparing marketing plans for its U.S. Olympic Team products for the 1996
Summer Games. As a result of the Company's fiscal 1995 efforts, Innovo
increased its sales of craft products in fiscal 1996. However, the
Company's increase in net sales was limited by shortages of raw
materials, which were caused by a lack of working capital, and by labor
shortages, each of which prevented the Company from accepting certain
orders. The Company raised additional working capital in the second and
third quarters of fiscal 1996 which was used, in part, to increase raw
materials levels to more desirable levels, and in October, 1996 the
Company obtained a three year lease of an additional sewing facility.
The additional facility was used to allow the Company to avoid the
effects of labor shortages through the second quarter of fiscal 1997. In
August, 1997, as the result of increases in the production efficiencies
of the Company's main plant in Springfield, Tennessee, the Company idled
this additional plant. However, the additional plant remains available
to offset labor shortages should they occur again.

In fiscal 1997 the Company has attempted to improve its operating
results by continuing the growth in sales while also improving its gross
profit margins and controlling any increase in fixed selling, general and
administrative expenses.

- Growth in sales. Sales increases are being achieved from the
continued recapture of domestic craft market share by Innovo,
increased sports licensed market sales, by both Innovo and NP
International, as the result of recovering demand, and an
increase in the sell-through and reorders for Innovo's back-to-
school targeted products.

- Improvement in gross margins. To improve gross profit margins
the Company has both increased prices on selected products and
reduced manufacturing costs.

Through the first three quarters of fiscal 1997, in part as the
result of these steps, the Company's sales have increased 26.7% as
compared to the first nine months of fiscal 1996. The changes to the
design of certain products and to the Company's production operations
began to produce positive results in the third quarter of fiscal 1997,
for which the gross profit margin was 41.8%, compared to a gross profit
margin of 32.8% for the third quarter of fiscal 1996. Additionally, the
gross profit margin for the nine month year-to-date periods (37.3% for
fiscal 1997 as compared to 37.7% for fiscal 1996) were essentially the
same despite a higher percentage of lower margin craft and Thimble Square
products in 1997 sales.

In fiscal 1998 the Company will attempt to further increase sales and
improve gross margin percentages while reducing overhead expenses.

- Sales increases are anticipated to come from the products being
marketed in Europe under the Walt Disney and Warner Bros.
licenses. Additional sales increases may also be produced by
the sources that produced the 1997 sales increases.

- The Company currently believes that it will be able to increase
certain product prices in fiscal 1998, and that the changes in
the manufacturing and administrative structure of the Company
being made under the direction of its new chief executive and
operating officers will further reduce product costs and
operating expenses.

The Company estimates that its products are carried in over 5,000
retail outlets in the United States, as well as in numerous retail
outlets in Europe. The Company's marketing efforts are conducted by its
own sales and marketing staff together with its network of domestic
marketing organizations and sales representatives and foreign
distributors. The Company sells to retail accounts such as mass
merchandisers, department, sporting goods, grocery, craft and drug store
chains, and mail order retailers, including K Mart Apparel Corp., Wal-
Mart Stores, Inc., J.C. Penney Company, Inc., Sports Authority, Inc., and
Michael's Stores, Inc., and advertising specialty accounts.

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 of sports-licensed sports bags, backpacks, and other sporting
goods, located in Springfield, Tennessee. 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").

Spirco had incurred significant trade debt from the fiscal 1992
losses it incurred in marketing fundraising programs and from 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 shares of Innovo Group common stock. Additionally, shares of
Innovo Group common stock were issued to a trust ("the Class 3 Trust")
which, in fiscal 1996, completed the process of selling those shares and
distributing the proceeds to the Class 3 claimants, which were federal,
state and local taxing authorities that had claims for income, sales,
property and unemployment taxes. Unsecured claims did not receive any
distribution, and were extinguished, under the plan of reorganization.

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 9,500,000 shares currently
outstanding

Securities Outstanding
Common Stock (1) 44,476,442 shares

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) 810,758 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, (iii) 2,925,000 shares of common stock issuable upon the
exercise, if any, of certain non-qualified stock options, and (iv) 200,000
shares of common stock pledged by the Company to secure its appeal bond in the
Tedescolitigation. See "Recent Developments," "Legal Proceedings",
"Management," "Description of Securities" and Notes 4, 8 and 9 of Notes to
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>
<TABLE>
<CAPTION>
Year ended Nine Months Ended
November 30, Year Ended October 31, August 31, August 31,
1996 (1)(2) 1995 1994 1993 1992 1997 (2) 1996 (2)
__________ ____ ____ ____ ____ _______ ________
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 7,391 $ 5,276 $ 8,028 $12,468 $12,768 $ 7,230 $ 5,704
Gross Profit 2,538 1,468 2,984 5,470 3,869 2,700 2,153
Operating income (loss) (1,940) (1,666) (2,405)(3) 447 (854) (907) (1,045)
Income (loss) from continuing
operations (3,088) (67)(4) (7,905)(5) (661)(5) (843) (1,349) (1,487)
Income (loss) from discontinued
operations (6) - (626) (685) (7,268) (2,117) - -
Extraordinary gain (loss) (7) - (258) 699 - - - -
Net income (loss) (3,088) (951) (7,891) (7,929) (2,896) (1,349) (1,487)
Income (loss) per share from
continuing operations $ (.23) $ (.03) $(3.99) $ (.63) $ (.79) $ (.04) $ (.13)
Income (loss) per share from
discontinued operations - (.24) (.34) (6.92) (1.95) - -
Extraordinary gain (loss) per share - (.09) .35 - - - -
Net income (loss) per share (.23) (.36) (3.98) (7.55) (2.74) (.04) (.13)
Weighted average common shares
and common share equivalents
outstanding 13,613 2,616 1,982 1,050 1,055 31,046 11,119

</TABLE>

<TABLE>
<CAPTION>
As of
August 31,
1997
_______
Actual pro forma (8)
______ _________
</CAPTION>
<S> <C> <C>
Total Assets $10,871 $11,546
Long-term debt 2,369 2,369
Stockholders' Equity 2,989 3,664
</TABLE>
_________________________

(1) 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 consolidated financial statements.
(2) Includes the effects of the acquisition of Thimble Square, accounted
for under the purchase method of accounting, beginning April, 1996. See
Note 2 of Notes to Consolidated Financial Statements.
(3) 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(l)
of Notes to Consolidated Financial Statements.
(4) 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."
(5) 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.
(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 NASCO Sportswear, Inc. ("Sportswear"). See Note 3
of Notes to Consolidated Financial Statements.
(7) Represents gain and losses resulting from the Chapter 11
reorganization of Spirco. See Note 4 of Notes to Consolidated Financial
Statements.
(8) Pro forma for the effects of the November, 1997 private placement
of 1.5 million shares of common stock for proceeds of $675,000 and the
concurrent return to the Company of 1.5 million shares of common stock
previously issued as the result of the exercise of the 1997 Stock
Purchase Right Award. See "Recent Developments."
<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. Company had losses
from continuing operations of $3,088,000, $67,000 and $7,905,000 for the
years ended November 30, 1996 and October 31, 1995 and 1994 and a loss
from continuing operations of $1,349,000 for the nine months ended August
31, 1997. Operating cash flows were a negative $2,743,000 and $406,000
for fiscal 1996 and 1994. At August 31, 1997, the Company had an
accumulated deficit of $22 million. There can be no assurance that the
Company will operate profitably in the future.

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 to increase
sales and lessen its dependence on sports licensed products. In 1997 the
Company is continuing its efforts to lessen its dependence on sports
licensed products through its development of products to be distributed
under its Warner Bros. and Walt Disney licenses. 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 and colleges and universities
represented 39.9% of the Company's net sales from continuing operations
in fiscal 1996. 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 90% of the balance
of assigned accounts receivable of Innovo and 80% of the balance of
assigned accounts receivable of Thimble Square, up to a maximum of
$1,500,000. The Company also has certain short-term financing
collateralized by the common stock of its NP International subsidiary.
However, the Company has been, to date, unable to obtain more traditional
asset based financing, including financing for and collateralized by its
inventory.

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, early fall and holiday seasons. The Company
will typically ship the majority of its orders during the second half of
its fiscal year. 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."

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 1996 the Company purchased the majority of each type of raw
material it uses from one or two suppliers. 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.

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

The Company has generally utilized overseas contractors that utilize
production facilities located in China. As a result, the products
manufactured for the Company are subject to export quotas and other
restrictions imposed by the Chinese government. To date the Company has
not been adversely affected by such restrictions; however, there can be
no assurance that future changes in such restrictions by the Chinese
government would not adversely affect the Company, even if only
temporarily while the Company shifted production to other countries or
regions such as Korea, Taiwan, or Latin America. See "Business -
Manufacturing."

Availability of Labor. During fiscal 1996 Innovo experienced an
inability to obtain sufficient production labor to, at times, meet the
demand and customer delivery requirements for its domestically produced
products and, as a result, the Company was unable to accept certain
orders and experienced production inefficiencies and excess overtime
costs. In October, 1996, the Company obtained a three-year lease on a
sewing facility in Red Boiling Springs, Tennessee which, in November,
1996, began to produce Innovo products. The geographical location of Red
Boiling Springs, relative to Innovo's other production facility in
Springfield, Tennessee, is such that the Red Boiling Springs facility
draws its product labor from a different labor pool. The Red Boiling
Springs facility was used to allow the Company to avoid the effects of
labor shortages through the second quarter of fiscal 1997. In August,
1997, as the result of increases in the production efficiencies of the
Company's main plant in Springfield, Tennessee, the Company idled the Red
Boiling Springs plant. However, that plant remains available to offset
labor shortages should they occur again. Accordingly, the Company
believes that the addition of the Red Boiling Springs facility will
reduce the Company's exposure to labor shortages, which will favorably
impact sales and production costs. However, there can be no assurance
that the Company will not again be adversely affected by labor shortages
in the future. See "Business - Manufacturing."

Litigation. In Michael J. Tedesco v. Innovo, Inc., Innovo Group Inc.,
Rick Binet, and Patricia Anderson-Lasko, f/k/a/ Patricia M. DeAlejandro,
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. In August, 1994, the trial court granted the Company's motion for
partial summary judgement and directed verdicts with respect to certain
of Tedesco's claims, including those concerning his ownership of an
interest in the "E.A.R.T.H." trademark, or the existence of a partnership
with the Company to jointly own the trademark, and the state court jury
returned findings in favor of the Company on the remainder of the
plaintiff's claims concerning the trademark as well as his claims for
wrongful termination, fraud and conspiracy. However, the jury awarded
Tedesco approximately $700,000, of which $50,000 was assessed against
Innovo Group and $650,000 was assessed against Innovo, including pre-
judgement interest and attorney's fees, on the theory that he was
entitled to have received certain employment benefits, including employee
stock awards, during, and after, the term of his employment. The Company
appealed the jury's award, and in August, 1996 (as revised in an amended
October, 1996 opinion), the appeals court reversed approximately $350,000
of the initial judgement as 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. In
addition, the appeals court ruled that the trial court erred in not
submitting to the jury the questions 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 of the
Company's claims of breach of fiduciary duty by Tedesco, which trial is
scheduled for December, 1997. In connection with its appeal the Company
has pledged as an appeal bond 200,000 shares of its unissued common
stock.

The Company believes that its fiduciary duty claims against Tedesco are
meritorious. However, there can be no assurance that the Company's
claims against Tedesco will be successful, or that alternatively the
litigation can be settled on terms manageable to the Company. The need
to immediately satisfy the plaintiff's award in the event the Company's
claims are unsuccessful would have a material adverse impact on the
Company.

In May, 1996, a foreign manufacturer that had previously supplied
imported products to NASCO Products filed suit against NASCO Products
asserting that it is owed approximately $300,000 in excess of the amount
presently recorded by NASCO Products (Pannoy Enterprises Corporation v.
NASCO Products, Inc., Case No. 12948, in the Chancery Court for Robertson
County, Tennessee). NASCO Products and the supplier had previously
reached an agreement on the balance owed (which is the balance recorded),
as well as an arrangement under which the schedule for NASCO Products'
payments reducing the balance would be based on future purchases from
that supplier of products distributed internationally by NP
International. The Company has denied the supplier's claims, and has
asserted affirmative defenses, including the supplier's late shipment of
the original products, and the supplier's refusal to accept and fill NP
International orders on terms contained in the agreement. NASCO Products
sold its operations in July, 1995, and that company currently has no
operations or unencumbered assets. Nonetheless, there can be no
assurance that an adverse outcome of the litigation would not have a
material adverse effect on the Company. See "Legal Proceedings."

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 26.9% 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 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 a change in control that is not approved by the
Company's board of directors. Further, the Certificate of Incorporation
authorizes the board of directors to issue additional shares of common
stock, up to the authorized capitalization of 70 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. 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 44,476,442 shares of common
stock of the Company outstanding as of the date of this Prospectus,
1,942,839 shares are restricted securities, as that term is defined in
Rule 144 promulgated under the Securities Act. Additionally, 822,000
shares of common stock, while not restricted securities, are owned by
affiliates and are not the subject of an effective registration
statement. Absent registration under the Securities Act, the sale of
such 2,764,839 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 one year 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 two years is entitled to sell such shares under Rule 144 without
regard to any of the volume limitations described above. Also,
affiliates are entitled to sell shares of the non-restricted but
unregistered securities under the volume limitations of Rule 144 without
having to first satisfy a holding period. Additionally, 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, and the holders of 1.5 million restricted
shares are entitled to certain registration rights. 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 "Legal Proceedings,"
"Description of Securities," 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. 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 Exchange Act in order to continue trading on the NASDAQ
SmallCap Market.

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 temporary exemptions granted while the
Company took steps to comply with the stockholders' equity requirement,
which was met when the Company's stockholders' equity increased to above
$1 million during the first quarter of fiscal 1996. Additionally,
although the Company's common stock generally traded at prices below
$1.00 between November, 1995 and May, 1996, and has generally traded at
prices below $1.00 since July, 1996, the Company has been able to
maintain its NASDAQ SmallCap listing by complying with the alternative $2
million stockholders' equity requirement. If the Company's stockholders'
equity were to fall below $2 million due to operating losses or for other
reasons, and the Company's common stock was not trading at prices above
$1.00, the Company could face delisting unless it took action to increase
the minimum bid price of its common stock to $1.00, or to increase its
stockholders' equity to above $2 million.

On August 22, 1997 the Securities and Exchange Commission ("the
Commission") approved revisions to the listing requirements for the
NASDAQ SmallCap Market. Among the changes approved are continuing
listing standards that require that (i) listed companies to have either
net tangible assets of $2 million, a market capitalization of $35
million, or have reported $500,000 of net income in two of the last three
years, and (ii) listed common stocks maintain a minimum bid price of
$1.00. The existing NASDAQ requirements for stockholders' equity of $1
million, and the alternative of stockholders' equity of $2 million in
lieu of a $1.00 bid price, were eliminated. The revised continuing
listing requirements are effective February 22, 1998. With respect to
the requirement for net tangible assets, market capitalization or net
income, the Company will initially seek to comply with the net tangible
asset test. At August 31, 1997 the Company had net tangible assets
(stockholders' equity less goodwill) of $2,266,000. The Company believes
that it can maintain compliance with the $2 million requirement; however,
there can be no assurance. With respect to the $1.00 minimum bid
requirement, if, by February 22, 1998, the Company's common stock has not
been trading at or above $1.00 for the required period (generally 10
consecutive days out of the last 90 days) then the Company will be
required to effect a reverse stock split or take other actions to
increase the price of its common stock to above $1.00 or elect to delist
from the NASDAQ SmallCap Market.

Although the Company will continually use its best efforts to maintain
its NASDAQ SmallCap listing, there can be no assurance that it will be
able to do so. If, in the future, the Company is unable to satisfy the
NASDAQ criteria for maintaining listing, its securities would be subject
to 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 over-the-counter "OTC 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.

Penny Stock Regulation. 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 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.

<PAGE>
THE COMPANY

Innovo Group, operating through its wholly-owned subsidiaries designs,
manufactures and domestically markets various cut and sewn canvas and
nylon consumer products, such as tote bags and aprons, for sale to
various retailers and in the premium and advertising specialty market,
and manufactures and domestically markets ladies ready-to-wear at-home,
sleep and lounge wear for sale to retailers and through mail order
distribution. The Company also internationally markets and distributes
the Company's canvas and nylon products, as well as sport bags and
backpacks. The Company's operations are classified into two industry
segments. See Note 10 of Notes to Consolidated Financial Statements for
financial information on industry segments.

Innovo, a wholly owned subsidiary, manufactures and domestically
distributes cut and sewn canvas and nylon consumer products for the
utility, craft, sports licensed and advertising specialty markets.
Innovo's products are domestically manufactured at facilities owned or
leased by the Company. See "Business-Products" and "Business-
Manufacturing."

NP International markets and distributes overseas, principally in
Europe and the Middle East, certain products similar to those marketed
domestically by Innovo, as well as licensed sports bags and backpacks,
which the Company generally obtains from foreign suppliers. See
"Business-Products" and "Business-Manufacturing."

The products comprising Innovo's sports licensed line, and those
distributed by NP International, display logos, insignia, names, slogans
or characters licensed from various licensors. Innovo and NP
International hold licenses for the use of the logos and names of the
teams of the National Football League, the National Basketball
Association, Major League Baseball, the National Hockey League, and over
130 colleges, as well as the slogans and taglines of Anheuser-Busch Cos.
and the drawings of sports artist Gary Patterson. In the second half of
fiscal 1996 NP International obtained licenses for the use of the Walt
Disney cartoon characters, and the Warner Bros. Looney Tunes cartoon
characters, on sports bags, backpacks, fanny packs and other products it
markets in Europe and the Middle East. NP International will begin
selling the Walt Disney and Warner Bros. products in fiscal 1997. For
the year ended November 30, 1996, 39.9% of the Company's net sales
represented the sale of products produced pursuant to such licenses. See
"Business-Licenses."

Thimble Square, which Innovo Group acquired in April, 1996,
manufactures and markets ladies' ready-to-wear at-home, sleep and lounge
wear. Thimble Square also provides "sew-only" manufacturing for other
distributors of private-label sleep and lounge wear. See "Business-
Products" and "Business-Manufacturing."

The Company also operates a retail mall facility in Florida (see -
"Properties," and "Recent Developments.")

During fiscal 1994 the Company began restructuring its operations to
concentrate on domestic manufacturing and the international distribution
of licensed products, which the Company views as its strategic strengths.
In October, 1994 the Company relocated to its owned facility in
Springfield, Tennessee the manufacturing operations it had previously
conducted in leased facilities in Sugarland, Texas to eliminate the
expense of the leased space in Texas and also eliminate certain shipping
and duplicative supervision costs. On July 31, 1995, NASCO Products, a
wholly-owned subsidiary, sold to ANG its operations of importing to and
distributing in the United States sports bags, backpacks and equipment
bags bearing the logos of the teams of the four major professional sports
leagues. The sale did not include the products distributed by Innovo or
NP International. For the licenses ANG is paying NASCO Products $750,000
through July 31, 1998. In addition, ANG will make an ongoing annual
payment, for up to forty years, of certain percentages of sales under
each of the National Football League, Major League Baseball, National
Hockey League licenses, and National Basketball Association licenses.
See Note 3 of Notes to Consolidated Financial Statements.

- Growth in sales. Sales increases are being achieved from the
continued recapture of domestic craft market share by Innovo,
increased sports licensed market sales, by both Innovo and NP
International, as the result of recovering demand, and an increase
in the sell-through and reorders for Innovo's back-to-school
targeted products.

- Improvement in gross margins. To improve gross profit margins the
Company has both increased prices on selected products and reduced
manufacturing costs.

Through the first three quarters of fiscal 1997, in part as the result
of these steps, the Company's sales have increased 26.7% as compared to
the first nine months of fiscal 1996. The changes to the design of
certain products and to the Company's production operations began to
produce positive results in the third quarter of fiscal 1997, for which
the gross profit margin was 41.8%, compared to a gross profit margin of
32.8% for the third quarter of fiscal 1996. Additionally, the gross
profit margin for the nine month year-to-date periods (37.3% for fiscal
1997 as compared to 37.7% for fiscal 1996) were essentially the same
despite a higher percentage of lower margin craft and Thimble Square
products in 1997 sales.

In fiscal 1998 the Company will attempt to further increase sales and
improve gross margin percentages while reducing overhead expenses.

- Sales increases are anticipated to come from the products being
marketed in Europe under the Walt Disney and Warner Bros. licenses.
Additional sales increases may also be produced by the sources that
produced the 1997 sales increases.

- The Company currently believes that it will be able to increase
certain product prices in fiscal 1998, and that the changes in the
manufacturing and administrative structure of the Company being made
under the direction of its new chief executive and operating
officers will further reduce product costs and operating expenses.

The Company believes that sales increases and cost reductions in fiscal
1998 may be sufficient to return the Company to profitability for the
year; however, there can be no assurance that any of the steps can be
successfully implemented or that the Company will in fact be profitable
in fiscal 1998. See "Business - Growth Strategy and Product
Development," "Business - Manufacturing," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

The Company estimates that its products are carried in over 5,000
retail outlets in the United States, as well as in numerous retail
outlets in Europe. The Company's marketing efforts are conducted by its
own sales and marketing staff together with its network of domestic
marketing organizations and sales representatives and foreign
distributors. The Company sells to retail accounts such as mass
merchandisers, department, sporting goods, grocery, craft and drug store
chains, and mail order retailers, including Wal-Mart Stores, Inc. (which
accounted for 12.5% of the Company's net sales in fiscal 1996), K Mart
Apparel Corp., J.C. Penney Company, Inc., Sports Authority, Inc., and
Michael's Stores, Inc., and advertising specialty accounts. See
"Business-Marketing and Customers."

Spirco had incurred significant trade debt from the fiscal 1992 losses
it incurred in marketing fundraising programs and from 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 shares of Innovo Group common stock.
Additionally, shares of Innovo Group common stock were issued to the
Class 3 Trust which, in fiscal 1996, completed the process of selling
those shares and distributing the proceeds to the Class 3 claimants,
which were federal, state and local taxing authorities that had claims
for income, sales, property and unemployment taxes. Unsecured claims did
not receive any distribution, and were extinguished, under the plan of
reorganization.

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.

RECENT DEVELOPMENTS

Issuance of Common Stock and Changes in Management

On August 13, 1997 the Company issued 6,750,000 shares of its common
stock to the Smith Group, which is comprised of L.E. Smith, Daniel A.
Page, J. Eric Hendrickson and Herb J. Newton. The Smith Group paid
$1,350,000 for such shares of common stock. The purchase by the Smith
Group was made pursuant to a Stock Purchase Agreement dated August 13,
1997 ("the Stock Purchase Agreement") by and between the members of the
Smith Group, the Company, and Patricia Anderson-Lasko.

The net proceeds to the Company, after the payment of the costs of the
transaction, were approximately $1,300,000. The Company utilized
$150,000 of the net proceeds to repurchase and cancel its outstanding
Class I common stock purchase warrants. The Class I common stock
purchase warrants had been issued in fiscal 1996 to the placement agent
for certain debt and equity private placements, and was exercisable
through August, 2001 for the purchase of 1,220,588 shares of common stock
at a price of $.17 per share. The remaining net proceeds of
approximately $1,150,000 were used to reduce operating liabilities and
add to the Company's working capital. In November, 1997, the Company
raised an additional $675,000 of equity capital through the private
placement of 1.5 million shares of common stock. As described below the
Company concurrently obtained the return of 1.5 million shares previously
issued as the result of the exercise by the Company's president of the
1997 Stock Purchase Right Award; as a result, the private placement did
not result in a new increase in outstanding shares.

Under the terms of the Stock Purchase Agreement each of the members
of the Smith Group were elected to the Company's board of directors.
Concurrently, Scott Parliament, a member of the board of directors,
resigned. As a result, the board of directors was comprised of the
following eight individuals: L. E. Smith, Daniel A. Page, J. Eric
Hendrickson, Herb Newton, Patricia Anderson-Lasko, Alexander Miller,
Eleanor Schwartz and Marvin Williamson. The Stock Purchase agreement also
provides that the Company will nominate these eight individuals as the
Company's nominees for directors for its next annual stockholders'
meeting; however, in December, 1997 Alexander Miller resigned from the
Company's board of directors, leaving the board with seven members. See
"Management."

Concurrently and as a condition to the execution of the Stock Purchase
Agreement, the Company executed employment contracts with each of L.E.
Smith, Daniel A. Page and J. Eric Hendrickson, and also executed new
employment contracts with Patricia Anderson-Lasko and Alexander Miller.
Mr. Smith became the chief executive officer of the Company under a two
year employment contract that provides for an annual salary of $30,000
and the grant to Mr. Smith of 1,600,000 non-qualified stock options. Mr.
Page became the chief operating officer of the Company under a two year
employment contract that provides for an annual salary of $30,000 and the
grant to Mr. Page of 1,200,000 non-qualified stock options. Mr.
Hendrickson became the vice-president and treasurer of the Company under
a two year employment contract that provides for an annual salary of
$70,000. The new employment contract for Ms. Anderson-Lasko employs her
for a two year term as the Company's president, and as the president of
the Company's Innovo, Inc. and NP International, Inc. subsidiaries, at an
annual salary of $157,500. The new employment contract for Mr. Miller
employs him for a two year term as the Company's manager of investor
relations at an annual salary, as amended, of $37,000 for the first year
of the contract and $33,000 for the second year of the contract, and
grants Mr. Miller 125,000 non-qualified stock options. See "Management-
Employment Contracts" and "Management-Stock Options."

As a condition to the Stock Purchase Agreement, Ms. Anderson-Lasko
entered into a voting agreement with the Smith Group with respect to the
shares of common stock over which Ms. Anderson-Lasko has sole voting
power, and Ms. Anderson-Lasko granted first to the Smith Group, and
second to the Company, a right of first refusal with respect to the
shares of common stock acquired by her as the result of her exercise of
the 1997 Stock Purchase Right Award and also agreed to certain
limitations on the reoffer and resale of such shares. Ms. Anderson-Lasko
had initially acquired, on August 3, 1997, 4 million shares, the maximum
available, under the 1997 Stock Purchase Right Award, which was awarded
to Ms. Anderson-Lasko in February, 1997. However, in November, 1997, Ms.
Anderson-Lasko, at the request of the board of directors and to allow the
Company to raise the equity capital obtained through the private
placement described above without additional dilution, returned 1.5
million of such shares to the Company and gave up her right to acquire
such 1.5 million shares under the 1997 Stock Purchase Right Award. Upon
the return of such 1.5 million shares the note payable from Ms. Anderson-
Lasko to the Company for the purchase of the shares under the 1997 Stock
Purchase Right Award was proportionately reduced. Ms. Anderson-Lasko
continues to own 2.5 million shares acquired as the result of the
exercise of the 1997 Stock Purchase Right Award. See "Principal
Stockholders," "Principal Stockholders-Voting Agreements," "Principal
Stockholders-Rights of First Refusal," "Shares Eligible for Future
Sale," and Note 5 of Notes to Condensed Consolidated Financial
Statements. The Smith Group also executed an agreement with William T.
Williams, an unaffiliated stockholder of the Company under which the
Smith Group purchased 500,000 shares of common stock beneficially owned
by Mr. Williams. Additionally, Mr. Williams agreed to certain
limitations on the reoffer and resale of 1,500,000 shares of common stock
beneficially owned by him and granted, first to the Smith Group and
second to the Company, a right of first refusal to purchase any of such
1,500,000 shares that he might propose to offer or sell. See "Principal
Stockholders-Rights of First Refusal," and "Shares Eligible for Future
Sale."

Florida Retail Property

The Company's Florida retail property, operated as Good Deal Mall, was
acquired in fiscal 1995, and through August, 1997 the Company was engaged
in readying it to operate as an indoor multivendor open space mall in
which retailers operate from permanent booths. The Good Deal Mall has
approximately 22,000 square feet of rentable space, which can accommodate
up to 135 vendor merchants. The property was initially opened in August
31, 1997 with approximately 32 spaces, representing approximately 26% of
the space available and monthly rentals of approximately $16,000, rented
to merchants, generally on a monthly basis. The property has continued
to operate at approximately that level of occupancy through November,
1997. However, in November, 1997, the Company decided to engage new
management for the Good Deal Mall, and in connection therewith refine the
long-term goals for the property. The Company has determined that the
existing merchant lessees are not consistent with its revised plans, and
has commenced steps to have that space vacated so that merchants
consistent with the revised plans can be attracted. The Company
currently anticipates that these steps will be completed in the first
quarter of fiscal 1998.

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 any 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 1995
___________
</CAPTION>
<S> <S> <C> <C>
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 (September
through November) 5/8 3/16

Fiscal 1997
___________
First Quarter (December to February) 15/32 5/32
Second Quarter (March to May) 5/16 3/16
Third Quarter (June through
August) 31/32 5/32
Fourth Quarter (September through
November) 27/32 15/32

Fiscal 1998
___________
First Quarter (through
December 4, 1997) 23/32] 17/32
</TABLE>
(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 October 31, 1997, there were approximately 900 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
Exchange Act in order to continue trading on the NASDAQ SmallCap Market.
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 with the stockholders' equity requirement,
which was met when the Company's stockholders' equity increased to above
$1 million during the first quarter of fiscal 1996. Additionally,
although the Company's common stock generally traded at prices below
$1.00 between November, 1995 and May, 1996, and has generally traded at
prices below $1.00 since July, 1996, the Company has been able to
maintain its NASDAQ SmallCap listing by complying with the alternative $2
million stockholders' equity requirement. If the Company's stockholders'
equity were to fall below $2 million due to operating losses or for other
reasons and the Company's common stock was not trading at prices above
$1.00, the Company could face delisting unless it took action to increase
the minimum bid price of its common stock to $1.00, or to increase its
stockholders' equity to above $2 million.

On August 22, 1997 the Commission approved revisions to the listing
requirements for the NASDAQ SmallCap Market. Among the changes approved
are continuing listing standards that require that (i) listed companies
have either net tangible assets of $2 million, a market capitalization of
$35 million, or have reported $500,000 of net income in two of the last
three years, and that (ii) listed common stocks maintain a minimum bid
price of $1.00. The existing NASDAQ requirements for stockholders' equity
of $1 million, and the alternative of stockholders' equity of $2 million
in lieu of a $1.00 bid price, were eliminated. The revised continuing
listing requirements are effective February 22, 1998. With respect to
the requirement for net tangible assets, market capitalization or net
income, the Company will initially seek to comply with the net tangible
asset test. At August 31, 1997 the Company had net tangible assets
(stockholders' equity less goodwill) of approximately $2,266,000. The
Company believes that it can maintain compliance with the $2 million
requirement; however, there can be no assurance in that regard. With
respect to the $1.00 minimum bid requirement, if, by February 22, 1998,
the Company's common stock has not been trading at or above $1.00 for the
required period (generally 10 consecutive days out of the last 90 days)
then the Company will be required to effect a reverse stock split or take
other actions to increase the price of its common stock to above $1.00 or
elect to delist from the NASDAQ SmallCap Market.

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
August 31, 1997.
<TABLE>
<CAPTION>
Actual pro forma (4)
________ _________
(in thousands)
</CAPTION>
<S> <C> <C>
Notes payable (1) $ 1,584 $ 1,584
Long-term debt, including
current maturities of $271 (1) 2,369 2,369
_______ _______
Total Debt (1) 3,953 3,953
_______ _______

Stockholders' Equity:
Common Stock, $.01 par value;
70,000,000 shares authorized,
44,256,133 (actual and pro forma)
shares issued (2) 442 442
Additional paid-in capital 28,087 28,340
Note receivable (3) (1,125) (703)
Deficit (21,989) (21,989)
Treasury stock (119,691 shares) (2,426) (2,426)
_______ ______
Total Stockholders' Equity 2,989 3,664
_______ ______

Total Capitalization $ 6,942 $ 7,617
_______ ______
</TABLE>
_________________________

(1) See Notes 5 and 6 of Notes to Consolidated Financial Statements for
information regarding the Company's debt.
(2) Excludes (i) 1,075,758 shares of common stock issuable upon the
exercise of outstanding Common Stock Purchase Warrants (of which
265,000 shares represent shares issuable upon the exercise of Class
E and Class G warrants which were exercised in September, 1997),
(ii) 100,000 shares of common stock reserved for issuance pursuant
to the exercise of options under the Company's Stock Option Plan,
and (iii) 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", "Management -
Stock Options," "Description of Securities", Note 8 of Notes to
Consolidated Financial Statements and Notes 4 and 5 of Notes to May
31, 1997 Condensed Consolidated Financial Statements.
(3) Note payable to the Company from the exercise of the 1997 Stock
Purchase Right Award.
(4) Pro forma for the effects of the November, 1997 private placement of
1.5 million shares of common stock for proceeds of $675,000 and the
concurrent return to the Company of 1.5 million shares of common
stock previously issued as the result of the exercise of the 1997
Stock Purchase Right Award. The note payable to the Company from
the exercise of the 1997 Stock Purchase Right Award was reduced by
$421,875 ($.28125 per share) upon the return of such 1.5 million
shares. See "Recent Developments."
<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 November 30, 1996 and October 31, 1995, 1994, 1993 and
1992 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 nine months ended August 31, 1997 and 1996 and 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>
Year Year Ended Nine Months Ended
Ended October 31, August 31,
November 30, ___________________________________________ ________________
Income Statement Data: 1996 (1)(2) 1995 1994 1993 1992 1997(2) 1996(2)
___________ ___________________________________________ ______ ______
(000's except per share amounts)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 7,391 $ 5,276 $ 8,028 $12,468 $12,768 $ 7,230 $ 5,704
Cost of Goods Sold 4,853 3,808 5,044 6,998 8,899 4,530 3,551
Gross Profit 2,538 1,468 2,984 5,470 3,869 2,700 2,153
Operating Expenses 4,478 3,134 5,389(3) 5,023 4,723 3,607 2,198
Income (loss) from operations (1,940) (1,666) (2,405) 447 (854) (807) (1,045)
Interest expense (963) (511) (821) (960) (836) (678) (515)
Income (loss) before income taxes
(benefit) (3,088) (67)(4) (4,124) (223) (1,622) (1,349) (1,487)
Income (loss) from
continuing operations (3,088) (67)(4) (7,905)(5) (661)(5) (843) (1,349) (1,487)
Income (loss) per share
from continuing operations (.23) (.03) (3.99) (.63) (.79) (.04) (.13)
Supplemental loss per share from
continuing operations (6) - - (3.77) (.14) - - -
Income(loss) from discontinued
operations (7) - (626) (685) (7,268) (2,117) - -
Income(loss) per share from
discontinued operations (7) - (.24) (.34) (6.92) (1.95) - -

Extraordinary gain (loss) (8) - (258) 699 - - - -
Extraordinary gain (loss) per share - (.09) .35 - - - -

Net income (loss) (3,088) (951) (7,891) (7,929) (2,896) (1,349) (1,487)
Net income (loss) per share (.23) (.36) (3.98) (7.55) (2.74) (.04) (.13)

Cash dividends declared
per common share - - - - - - -
Weighted Average Shares of
Common Stock and Common Stock
Equivalents Outstanding 13,613 2,616 1,982 1,050 1,055 31,046 11,199

Balance Sheet Data:
Total Assets $ 9,433 $ 5,667 $11,143 $19,351 $29,957 $10,871 $11,187
Long-Term Debt 3,303 1,565 1,514 1,759 1,962 2,389 4,553
Common Stock Issuable (9) - - - 2,911 - - -
Redeemable Common Stock (10) - - 1,423 1,423 - - -
Stockholders' Equity 2,275 (230) (2,372) 951 7,520 2,989 2,778

</TABLE>
_______________

(2) Includes the effects of the acquisition of Thimble Square, accounted for
under the purchase method of accounting, beginning April, 1996. See Note 2 of
Notes to Consolidated Financial Statements.

(3) 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(l) of Notes to Consolidated Financial
Statements.

(4) Includes other income of $1.9 million from the settlement of litigation.
See Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations".

(5) 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.

(6) 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 8 of Notes to Consolidated Financial
Statements.

(7) 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.

(8) Represents gains and losses resulting from the Chapter 11 reorganization of
Spirco. See Note 4 of Notes to Consolidated Financial Statements.

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

(10) 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 8 of Notes to Consolidated Financial Statements.
<PAGE>
MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding the
directors and executive officers of the Company as of the date hereof.
<TABLE>
<CAPTION>
Name Age Position
____ _______ ________
<CAPTION>
<S> <C> <S>
L. E. Smith 49 Chairman of the Board; Chief
Executive Officer and Director

Patricia Anderson-Lasko(2) 38 President and Director

Daniel A. Page 49 Chief Operating Officer and
Director

J. Eric Hendrickson(2) 45 Vice President; Treasurer and
Director

Eleanor V. Schwartz 64 Director; Designer for Thimble
Square

Herb J. Newton(1)(2)(3) 47 Director

Marvin Williamson (1)(2)(3) 58 Director
</TABLE>
(1) Member of the Audit committee of the board of directors.
(2) Member of the executive compensation committee of the board of
directors.
(3) Member of the stock option committee of the board of directors.

L. E. Smith became the chairman and chief executive officer of the
Company in August, 1997. For more than five years prior thereto Mr.
Smith has served as the president of Smith & Smith, Inc., a privately
held company engaged in real estate investing in Tennessee. Mr. Smith is
also the managing partner of Forbus Capital, LLC, Capital Management, LLC
and Crawford Properties, LLC, each of which is a privately held real
estate investment company.

Patricia Anderson-Lasko has been President and a director of the
Company since August 1990, and President of Innovo since her founding of
that company in 1987. From August, 1990 until August, 1997 Ms. Anderson-
Lasko was also the Chairman and Chief Executive Officer of the Company.

Daniel A. Page became the chief operating officer and a director of
the Company in August, 1997. From June, 1993 until August, 1997, Mr.
Page was the principal operating and executive officer of Southeast Mat
Company, a privately held manufacturer of automobile mats. Prior thereto
Mr. Page was the president of Tennessee Properties Company, a privately
held real estate development company.

J. Eric Hendrickson became vice president, treasurer and a director of
the Company in August, 1997. From February, 1997 until August, 1997, Mr.
Hendrickson was engaged as a consultant for Smith & Smith, Inc. From
December 1995 until February, 1997 Mr. Hendrickson held an executive
officer and director position with a state chartered bank, and from
February, 1994 until May, 1995 held a similar position with a regional
banking subsidiary of a federally chartered bank holding company. From
November, 1984 until February, 1994 Mr. Hendrickson held various
executive positions with banking subsidiaries of NationsBank, N.A.

Eleanor V. Schwartz became a director of the Company in April, 1996
upon the completion of the Company's acquisition of Thimble Square. Mrs.
Schwartz, together with her husband Philip Schwartz, founded Thimble
Square in 1985 and since that time has been a director of Thimble Square
and its principal designer. Mrs. Schwartz has over 35 years of
experience in the buying, design and marketing of ladies apparel.

Herb J. Newton became a director of the Company in August, 1997. Mr.
Newton's principal occupation for in excess of the last five years has
been the ownership of retail automobile dealer franchises.

Marvin Williamson has been a director of the Company since August
1990. From April 1982 to June 1987, he was a Vice President and Mortgage
Sales Manager for First Boston Corp. in New York City. From June 1987
through August 1990 he was Vice President of Mortgage Sales for Greenwich
Capital, Greenwich, Connecticut. From August 1990 to April 1991 Mr.
Williamson was a Senior Vice President with Alliance Funding Co. in
Montvale, New Jersey. In April 1991 he left Alliance Funding Co. to
establish his own business, Marvin Williamson Associates, a mortgage
investment brokerage and consulting firm in New Canaan, Connecticut. Mr.
Williamson is currently a registered representative of First Sentinel
Securities Ltd., a member firm of the National Association of Securities
Dealers, Inc.

Each of the Company's directors is elected at the annual meeting of
stockholders and serves until the next annual meeting or until his
successor has been elected and qualified. Vacancies in the board of
directors are filled by a majority vote of the remaining members of the
board of directors. Pursuant to the Stock Purchase Agreement, the
Company has agreed that the current seven members of the board of
directors will be the Company's director nominees at the next annual
meeting of stockholders.

Executive officers of the Company are elected on an annual basis and
serve at the discretion of the board of directors.

Executive Compensation

The following table sets forth summary information concerning
compensation paid or accrued by or on behalf of the Company's chief
executive officer. No other executive officer of the Company received
compensation of or in excess of $100,000 in fiscal 1996.
<PAGE>
Summary Compensation Table

<TABLE>
<CAPTION>
Long Term Compensation
______________________
Annual Compensation Awards Payouts
___________________ ______ _______
Other
Annual Restricted LTIP All Other
Compen- Stock Compen-
Name and Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) (1) (#) ($) ($)
________ ____ _________ ________ ______ _______ ________ _______ ________
</CAPTION>
<S> <C> <C> <S> <C> <C> <C> <C> <C>
Patricia Anderson- 1996 $171,354 - 1,346(3) 0 0 0 -
Lasko 1995 175,000(2) - 1,346(3) 0 0 0 -
President, Chief 1994 175,000 - 2,791(3) 0 0 0 -
Executive Officer,
and Chairman of the
Board
</TABLE>

(1) No executive officer received or held restricted stock awards during
or at the end of fiscal 1996, 1995, or 1994, or received, exercised or held
stock options during or at the end of fiscal 1996, 1995 or 1994.

(2) At the request of the Company Ms. Anderson-Lasko deferred the payment
of $51,000 of her fiscal 1995 salary until fiscal 1996.

(3) During fiscal 1996, 1995 and 1994 Ms. Anderson-Lasko received life
insurance benefits in the aggregate amount of $1,346, $1,346 and $2,019,
respectively, and, in fiscal 1994, health insurance benefits in the
aggregate amount of $772.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

Ms. Anderson-Lasko served on the executive compensation committee of
the board of directors during fiscal 1996. Although Ms. Anderson-Lasko,
the Company's President, and during fiscal 1996 its chief executive officer
and Chairman of the Board, served on the Company's executive compensation
committee, she did not participate in any decisions regarding her own
compensation as an executive officer. The remaining members of the
executive compensation committee were not officers of the Company.

Employment Agreements

In August, 1997 the Company executed employment agreements with each
of L. E. Smith, Daniel A. Page and J. Eric Hendrickson, and also executed
new employment agreements with Patricia Anderson-Lasko and Alexander K.
Miller. Mr. Smith became the chief executive officer of the Company under
an employment agreement that provides for an annual salary of $30,000. Mr.
Page became the chief operating officer of the Company under an employment
agreement that provides for an annual salary of $30,000. Mr. Hendrickson
became the vice-president and treasurer of the Company under an employment
agreement that provides for an annual salary of $70,000. The new
employment agreement for Ms. Anderson-Lasko employs her as the Company's
president, and as the president of the Company's Innovo, Inc. and NASCO
Products International, Inc. subsidiaries, at an annual salary of $157,500.
The new employment contract for Mr. Miller employs him as the Company's
manager of investor relations at an annual salary of $37,000 for the first
year of the contract and $33,000 for the second year of the contract.

Each of the employment agreements of Ms. Anderson-Lasko and Messrs.
Smith, Page and Hendrickson are for initial terms of two years and provide
that the agreement shall automatically renew for successive one year terms
unless terminated by either party. The employment agreement for Mr.
Miller, as amended, is for a two year term but does not automatically
renew. Each of the agreements also provides for the payment of a
termination benefit equal to one year's salary, payable in twelve monthly
installments, upon the termination of employment, for any reason, during
the term of the contract (including extensions thereof).

Pursuant to the employment agreements with Messrs. Smith, Page and
Miller, the Company granted to those individuals non-qualified stock
options exercisable for the purchase of 1,600,000 shares, 1,200,000 shares
and 125,000 shares of common stock, respectively. See "-Stock Options."

Stock Options

The Company has adopted a stock option plan (the "1991 Plan") pursuant
to which an aggregate of 100,000 shares of common stock had been reserved
for issuance to officers, directors, consultants and employees of the
Company and its subsidiaries upon exercise of non-qualified options and
exercise of "incentive stock options" (within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended) issuable under the 1991
Plan. The primary purpose of the 1991 Plan is to attract and retain
capable executives, consultants and employees by offering them stock
ownership in the Company. The 1991 Plan was originally adopted by the
board of directors on December 11, 1991, and amended and ratified by the
board of directors on April 10, 1992. The 1991 Plan was approved by the
Company's shareholders at the annual meeting of shareholders on May 28,
1992.

The 1991 Plan is administered by the stock option committee appointed
by the Company's board of directors. The current members of the stock
option committee are Messrs. Newton and Williamson. No member of the stock
option committee will be eligible to participate in a grant of options
pursuant to the 1991 Plan.

The stock option committee will determine, among other things, the
persons to be granted options, the number of shares subject to each option
and the option price. The exercise price of any incentive stock option
granted under the 1991 Plan to an eligible employee must be equal to the
fair market value of the shares on the date of grant and, with respect to
persons owning more than 10% of the outstanding common stock, the exercise
price may not be less than 110% of the fair market value of the shares
underlying such option on the date of grant. The exercise price for non-
qualified options must be at least 50% of the fair market value of the
shares on the date of issue. The stock option committee will determine the
terms of each option and the manner in which it may be exercised. No
option may be exercisable more than ten years after the date of grant,
except for those held by optionee who own more than 10% of the Company's
common stock, which may not be exercisable more than five years after the
date of grant. Options are not transferable except upon the death of the
optionee.

The board of directors may amend the 1991 Plan from time to time;
however, without stockholder approval, the 1991 Plan may not be amended to:
(i) increase the aggregate number of shares subject to the 1991 Plan; (ii)
materially increase the benefits accruing to participants under the 1991
Plan; (iii) change the class of individuals eligible to receive options
under the 1991 Plan; or (iv) extend the term of the 1991 Plan.

As of the date hereof, the Company had outstanding no options to
acquire shares of the Company's common stock held by officers and other
employees of the Company under the 1991 Plan. No options granted under the
1991 Plan have been exercised.

The Company's board of directors may also grant non-qualified stock
options, or stock awards, other than pursuant to the 1991 Stock Option
Plan. In August, 1997, the Company granted to Messrs. Smith, Page and
Miller non-qualified stock options ("the 1997 Non-Qualified Options") for
the purchase of 1,600,000 shares, 1,200,000 shares and 125,000 shares of
common stock, respectively. The 1997 Non-Qualified Options granted to
Messrs. Smith, Page and Miller vest and become exercisable rateably over
the two year period from August 1, 1997 to July 31, 1999. Unvested 1997
Non-Qualified Options are forfeited at any termination of employment.
However, the vesting of any unvested and unforfeited 1997 Non-Qualified
Options will accelerate, and vest immediately, upon (i) the market price of
the Company's common stock reaching $1.00, or (ii) a change in the control
of the Company which is not approved by the Company's board of directors.
For the purposes of the 1997 Non-Qualified Options, a change in control is
defined as the acquisition by any person or group of shares of common stock
representing 25 percent of the Company's outstanding common stock. Vested
1997 Non-Qualified Options remain exercisable until August, 2002 at a price
of $.3315 per share, which represents the market price of the Company's
common stock at the time the terms of the employment agreements and options
were agreed to in a letter of intent which preceded the execution of the
Stock Purchase Agreement.
<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>
L.E. Smith (2) 3,322,002 (3) (4) 7.4%
27 North Main Street
Springfield, Tennessee 37172

Patricia Anderson-Lasko 2,861,439 (5) (6) (7) (8) 6.4%
27 North Main Street
Springfield, TN 37172

Daniel A. Page (2) 2,738,330 (9) 6.1%
27 North Main Street
Springfield, Tennessee 37172

J. Eric Hendrickson (2) 500,000 1.1%
27 North Main Street
Springfield, Tennessee 37172

Marvin M. Williamson 22,000 *
53 Fitch Lane
New Canaan, CT 06840

Eleanor and Philip Schwartz 419,973 *
23362 Water Circle
Boca Raton, FL 33486

Herb J. Newton (2) 2,308,335 5.2%
2865 Camp Branch Road
Buford, Georgia 30519

All Executive Officers 12,172,079 (2) (3) (4) (5) 26.9%
and Directors as a Group (8) (9)
(7 persons)
</TABLE>
_________________
* Less than 1%.

(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
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 bond, such shares are not eligible to
vote.

(2) Messrs. Smith, Page, Hendrickson and Newton are deemed to be a "group"
(the Smith Group) for purposes of Section 13(d) of the Exchange Act. In
certain circumstances the Smith Group may be entitled to direct the manner
in which shares owned by Patricia Anderson-Lasko are voted, and the Smith
Group holds rights of first refusal with respect to certain shares of
common stock. See "-Voting Agreements," and "-Rights of First Refusal."

(3) Includes 2,458,335 shares owned by Forbus Investments, L.P., a limited
partnership comprised of members of the family of Mr. Smith. The
management of Forbus Investments, L.P. resides in two general partner
limited liability companies controlled by Mr. Smith. Mr. Smith disclaims
beneficial ownership of the shares owned by Forbus Investments, L.P.

(4) Includes 466,666 shares subject to options exercisable, or which become
exercisable within 60 days of the date hereof, by Mr. Smith.

(5) Includes 79,432 shares owned by DWL International, a corporation in
which Ms. Anderson-Lasko's spouse, Donald W. Lasko, holds a controlling
interest.

(6) Includes 2.5 million shares purchased by Ms. Anderson-Lasko pursuant
to the 1997 Stock Purchase Right Award, awarded to her in February, 1997.
Under the terms of the 1997 Stock Purchase Right Award, Ms. Anderson-Lasko
was permitted to, and elected to, pay for the purchase of the 2.5 million
shares ("the 1997 Award Shares") by the execution of a non-recourse note
("the Note") to the Company for the exercise price of $.28125 per share
($703,125) in the aggregate). The Note is due, without interest, on April
30, 2002, and is collateralized by the 1997 Award Shares purchased
therewith. Ms. Anderson-Lasko may pay, or prepay (without penalty) all or
any part of the Note by (i) the payment of cash, or (ii) the delivery to
the Company of other shares of the Company's common stock (other than the
1997 Award Shares) that Ms. Anderson-Lasko has owned for a period of at
least six months, which shares would be credited against the Note on the
basis of the closing bid price for the Company's common stock on the date
of delivery. The 1997 Award Shares will be forfeited and returned (at the
rate of one shares per $.28125) to the Company to the extent the Note is
not paid on or before its maturity; accordingly, the number of shares owned
by Ms. Anderson-Lasko could decrease in the future.

(7) In certain circumstances the Smith Group may be entitled to direct the
manner in which shares owned by Ms. Anderson-Lasko are voted. See "-Voting
Agreements."

(8) Includes 2.5 million shares (the 1997 Award Shares) as to which the
Smith Group holds rights of first refusal. See "-Rights of First Refusal."

(9) Includes 350,000 shares subject to options exercisable, or which become
exercisable within 60 days of the date hereof, by Mr. Page.

Voting Agreements

The Smith Group and Patricia Anderson-Lasko have entered into a voting
agreement under which Ms. Anderson-Lasko has agreed for a period of two
years commencing August 13, 1997 to vote, in the manner directed by the
Smith Group, such number of shares of common stock as to which she has sole
voting power as equals one-half of the excess, if any, of the number of
shares of the Company's common stock as to which Ms. Anderson-Lasko has
sole voting power over the number of shares of the Company's common stock
as to which the Smith Group has sole or shared voting power. However, Ms.
Anderson-Lasko is not required to vote any shares as directed by the Smith
Group if the Company's net income, as determined under generally accepted
accounting principles and as reported in the reports filed by the Company
under the Exchange Act, is for the twelve month period ending as of the
latest fiscal quarter for which a quarterly report or annual report has
been filed by the Company with the Commission under the Exchange Act as of
the applicable voting date, not greater than (or net loss is not less than)
the net income or loss for the comparable twelve month period of the prior
year. Additionally, Ms. Anderson-Lasko is not required to vote as directed
by the Smith Group if such vote would be contrary to a recommendation of
the Company's board of directors. As of the date hereof, Ms. Anderson-Lasko
would, under the formula in the voting agreement, not be required to vote
any shares as directed by the Smith Group.

Eleanor Schwartz, a director of the Company, Philip Schwartz, who is
the husband of Eleanor Schwartz and Lee Schwartz, who is the brother of
Philip Schwartz, have entered into a voting agreement under which Philip
Schwartz and Lee Schwartz have agreed to vote any shares of common stock
owned by either of them in the manner directed by Eleanor Schwartz for so
long as Eleanor Schwartz is a member of the Company's board of directors.
As of the date hereof Lee Schwartz owns no shares of common stock of the
Company.

Rights of First Refusal

Under an agreement between Patricia Anderson-Lasko and the Smith Group,
Ms. Anderson-Lasko has granted first to the Smith Group and second to the
Company a right of first refusal to purchase any of the 1997 Award Shares
that she might propose to offer or sell, exercisable generally on terms
equal to those of the intended offer or sale. Ms. Anderson-Lasko has also
agreed to certain restrictions on her reoffer and resale of the 1997 Award
Shares. See "Shares Eligible for Future Sale."

Under an agreement between William T. Williams and the Smith Group Mr.
Williams has granted first to the Smith Group and second to the Company a
right of first refusal to purchase any of a certain 1,500,000 shares of
common stock beneficially owned by him that he might propose to offer or
sell, exercisable generally on terms equal to those of the intended offer
or sale. Mr. Williams has also agreed to certain restrictions on her
reoffer and resale of such 1,500,000 shares. See "Shares Eligible for
Future Sale."
<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>
Beneficially Shares
Shares Beneficially Shares Owned After
Owned Prior to the Offering(1) Being The Offering
____________________________________ Offered ___________
Name Shares % __________ Number %
____ ______ ___ ______ ___
</CAPTION>
<S> <C> <C> <C> <S>
Douglas Fleck 275,000 * 275,000 - -
Josephine Finnegan 400,000 * 400,000 - -
William T. and Virginia
C. Williams 1,557,000 3.5% 1,500,000(2) 57,000 *
Forbus Investments,
L.P. (3) (4) 2,458,335 5.5% 2,458,335 - -
Daniel A. Page (4) 2,388,330 5.4% 2,083,330 305,000 *
J. Eric Hendrickson (4) 500,000 1.1% 500,000 - -
Herb J. Newton (4) 2,308,335 5.2% 2,208,335 100,000 *
Quanta, Ltd. 75,000 * 75,000 - -
</TABLE>
* less than 1 percent

(1) Excludes shares which Mr. Page may obtain upon the exercise of stock
options. See "Principal Stockholders."

(2) Mr. Williams has granted to the Smith Group and to the Company certain
rights of first refusal with respect to the shares offered by means of this
Prospectus, and has agreed to certain limitations on the reoffer and resale
of such shares. See "Principal Stockholders-Rights of First Refusal," and
"Shares Eligible for Future Sale."

(3) Under the rules of the Commission, L. E. Smith may be deemed to be the
beneficial owner of the shares of common stock owned by Forbus Investments,
L.P. Mr. Smith disclaims beneficial ownership of the shares of common
stock owned by Forbus Investments, L.P. See "Principal Stockholders."

(4) Messrs. Smith, Page and Hendrickson are executive officers of the
Company, and Messrs. Smith, Page, Hendrickson and Newton are directors of
the Company. See "Management."
<PAGE>
DESCRIPTION OF SECURITIES

Common Stock

Pursuant to the Certificates of Incorporation, the Company is
authorized to issue 70 million shares of common stock, $.01 par value per
share. As of the date hereof, the Company had outstanding 44,476,442
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 70 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

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. 15,000 Class G common stock purchase warrants were
exercised in September, 1997, and as of the date hereof there remain
outstanding 35,000 Class G common stock purchase warrants. 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. The Class H common stock purchase
warrants expire August, 2001.

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.

Registration Rights

The holders of the 1.5 million shares issued by the Company in the
November, 1997 private placement are entitled to certain demand and piggy-
back registration rights with respect to such shares of common stock.
These rights provide, generally, that upon the request of the holders of a
majority of such 1.5 million shares of common stock the Company shall, as
soon as practicable, give written notice of such request to all holders of
such common stock and then, as soon as practicable thereafter, shall file
a registration statement covering the number of shares as to which the
holders of such common stock have requested registration. Additionally,
the holders of such 1.5 million shares of common stock are entitled to the
"piggy-back" registration of such 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 such 1.5 million shares of common stock have agreed to limit any
resales of such shares to 62,500 shares per month for the two year period
ending November 18, 1997. The registration rights with respect to such 1.5
million shares have not been exercised in connection with the registration
statement of which this Prospectus forms a part.

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.

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, 44,476,442 shares of common stock are issued
and outstanding, and an additional 810,758 shares of common stock are
issuable upon exercise of the common stock purchase warrants. Of the
shares of common stock outstanding, 1,942,839 shares are "restricted
securities" as defined under the Securities Act. Additionally, 822,000
shares of common stock, while not restricted shares, are owned by
affiliates and are not the subject of an effective registration
statement. Such 2,764,839 shares 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 one year (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
two years would be entitled to sell his shares under Rule 144 without
regard to these requirements. Also, affiliates are entitled to sell
shares of the non-restricted but unregistered securities under the volume
limitations of Rule 144 without having to first satisfy a holding period.

As of the date hereof, the one year holding period had been
satisfied with respect of 284,007 restricted shares which could therefore
be sold subject to the volume limitations of Rule 144, and the two year
holding period had also been satisfied with respect to an additional
158,832 shares held by non-affiliates and could therefore be sold without
compliance with the volume restrictions under Rule 144.

Patricia Anderson-Lasko has agreed that until the later of (i) 90
days following the termination of her employment or other affiliation
with the Company (except for affiliation resulting only from the
ownership of common stock), or (ii) one year from the August 13, 1997
date of the agreement, she would not reoffer or resell any of 1997 Award
Shares, except for (a) offers and sales of 1997 Award Shares up to an
aggregate of 500,000 1997 Award Shares during each six month period
commencing with the six month period that begins on the first anniversary
of the agreement, (b) offers and sales affected through privately
negotiated transactions, provided that the purchaser in any such
privately negotiated transaction agrees to be bound by the terms of the
resale limits, including such portion of the semi-annual 500,000 share
sale limit as may be allocated to it in negotiation between the purchaser
and Ms. Anderson-Lasko, and (c) a sale of any of the 1997 Award Shares in
response to an offer made generally to all stockholders of the Company in
connection with a proposed or intended acquisition of a controlling
interest in the Company. Ms. Anderson-Lasko has also granted first to
the Smith Group and second to the Company a right of first refusal to
purchase any of the 1997 Award Shares that she might propose to offer or
sell. See "Principal Stockholders-Rights of First Refusal."

William T . Williams has agreed, as to 1,500,000 shares of common
stock beneficially owned by him, not to reoffer or resell any of such
1,500,000 shares for a period of one year from August, 1997, except for
sales in response to an offer made generally to all stockholders of the
Company in connection with a proposed or intended acquisition of a
controlling interest in the Company. Mr. Williams has also granted,
first to the Smith Group and second to the Company, a right of first
refusal to purchase any of such 1,500,000 shares that he might propose to
offer or sell. See "Principal Stockholders-Rights of First Refusal."

The holders of the 1.5 million shares of common stock issued by the
Company in the November, 1997 private placement hold certain registration
rights and have agreed to certain limitations on the resale of such 1.5
million shares. See "Description of Securities - Registration Rights."

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
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. . . . . . . . . . . . . . . . . . . . . .
The Company . . . . . . . . . . . . . . . . . . . . . .
Recent Developments . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . .
Dividend Policy . . . . . . . . . . . . . . . . . . . .
Market for the
Company's Securities
and Related
Shareholder Matters . . . . . . . . . . . . . . . . .
Capitalization. . . . . . . . . . . . . . . . . . . . .
Selected Consolidated
Financial Data. . . . . . . . . . . . . . . . . . . .
Management. . . . . . . . . . . . . . . . . . . . . . .
Principal Stockholders. . . . . . . . . . . . . . . . .
Selling Stockholders. . . . . . . . . . . . . . . . . .
Description of Securities . . . . . . . . . . . . . . .
Shares Eligible for
Future Sale . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . .

<PAGE>
9,500,000 Shares
by Selling Stockholders

INNOVO GROUP INC.

PROSPECTUS

, 1997

<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

SEC registration fee $ 1,691.32
NASD fee 21,500.00
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
_________

$43,191.32
_________
_________________________________

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
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
No.
</CAPTION>
<C> <S> <C>
3.1 Form of Amended and Restated Certificate
of Incorporation of Registrant.* 3.1 (1)

3.2 Amended and Restated Bylaws of Registrant.* 4.2 (2)

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

10.1 Stock Purchase Agreement by and between
L.E. Smith, Dan Page, J. Eric Hendrickson
and Herb Newton and Innovo Group Inc. and
Patricia Anderson-Lasko* 10.1 (4)

10.2 Employment Agreement of L.E. Smith* 10.2 (4)

10.3 Employment Agreement of Dan Page* 10.3 (4)

10.4 Employment Agreement of J. Eric Hendrickson* 10.4 (4)

10.5 Employment Agreement of Patricia Anderson-Lasko* 10.5 (4)

10.6 Employment Agreement of Alexander Miller* 10.6 (4)

10.7 Common Stock Voting Agreement by and between
L.E. Smith, Dan Page, J. Eric Hendrickson and
Herb Newton and Patricia Anderson-Lasko* 10.7 (4)

10.8 Common Stock Resale and Right of First Refusal
Agreement by and between L.E. Smith, Dan Page,
J. Eric Hendrickson and Herb Newton and Patricia
Anderson-Lasko* 10.8 (4)

10.9 Common Stock Purchase and Right of First Refusal
Agreement by and between L.E. Smith, Dan Page,
J. Eric Hendrickson and Herb Newton and William
T. Williams, Sr., Virginia C. Williams, William
T. Williams, Jr. and Allison Williams ITTN* 10.9 (4)

10.10 Amendment to Employment Agreement of Alexander
Miller

21 Subsidiaries of the Registrant* 21 (3)

23.1 Consent of BDO Seidman
</TABLE>
__________________________

* Certain of the exhibits to this Registration Statement, 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) Quarterly Report on Form 10-Q of Innovo Group Inc. (file no.
0-18926) for the period ended February 28, 1997.

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

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

(4) Current Report on Form 8-K of Innovo Group Inc. (file 0-18926)
dated August 13, 1997.

<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 December 5, 1997.

INNOVO GROUP INC.

By: /s/L. E. Smith
L. E. Smith
Chairman of the Board,
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
</CAPTION>
<S> <S> <S>
/s/L. E. Smith Chairman of the Board, December 5, 1997
L. E. Smith Chief Executive Officer,
Director (Principal Executive
Officer)

/s/Patricia Anderson President and Director December 5, 1997
Patricia Anderson (Principal Accounting Officer)

/s/Daniel A. Page Chief Operating Officer December 5, 1997
Daniel A. Page and Director

/s/J. Eric Hendrickson Vice President, Treasurer December 5, 1997
J. Eric Hendrickson and Director (Principal
Financial Officer)

/s/Eleanor V. Schwartz* Director December 5, 1997
Eleanor V. Schwartz

/s/Marvin Williamson* Director December 5, 1997
Marvin Williamson

/s/Herb J. Newton* Director December 5, 1997
Herb J. Newton

*By /s/Patricia Anderson
Patricia Anderson, Attorney-in-fact

</TABLE>

AMENDMENT TO EMPLOYMENT AGREEMENT

This Amendment to Employment Agreement (this "Amendment") has
been entered into this 5th day of December, 1997 by and between
Innovo Group Inc., a Delaware corporation ("the Employer") and
Alexander Miller ("the Employee").

Recitals

WHEREAS, the Employer and the Employee entered into an
Employment Agreement ("the Original Agreement") dated August 13,
1997 under which the Employer agreed to employ the Employee, and
the Employee agreed to such employment, as the Director of Investor
Relations; and

WHEREAS the Employer and the Employee now wish to modify
certain terms of the Original Agreement;

NOW THEREFORE, the Employer and the Employee hereby agree as
follows:

Agreement

1. Compensation of Employee. Effective as of the Amendment Date
and continuing from the Amendment Date to the Expiration Date (as
defined in Section 3 of the Original Agreement), the Base
Compensation payable by reason of Section 4(A) of the Original
Agreement shall be revised to be Two Thousand, Seven Hundred and
Thirty-One dollars and Seventy-One cents ($2,731.71) per month,
with such amount pro-rated for periods of less than one full month.

2. Non-Renewal. The Original Agreement shall not renew for one-
year periods as originally provided for in Section 3 of the
Original Agreement, and the Original Agreement, as amended by this
Amendment, shall terminate on the Termination Date unless earlier
terminated pursuant to its terms or renewed or extended by the
mutual agreement of the Employer and the Employee.

3. Resignation from Employer Board of Directors. The Employee
hereby resigns, as of the Amendment Date, from the board of
directors of the Employer and from any committees of such board of
directors of which he is a member.

4. Sections 8,9,10,11 and 12. Sections 8,9,10,11 and 12 of the
Original Agreement are referred to and incorporated by reference
herein so as to apply with equal force and effect to this
Amendment.
<PAGE>
5. Entire Agreement. The Original Agreement as modified by this
Amendment constitutes the entire agreement between the parties with
respect to the subject matter of the Original Agreement and this
Amendment and supersedes all prior written and oral agreements and
understandings between the Employer and the Employee with respect
to the subject matter of the Original Agreement and this Amendment.
The Original Agreement as modified by this Amendment may not be
further amended except by written amendment executed by the party
to be charged with the amendment.

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

/s/ Alexander Miller Innovo Group Inc.
_________________________
Alexander Miller
By: /s/ L.E. Smith
_________________________

Title: Chairman and Chief
Executive Officer

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 February 18, 1997,
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 November 30, 1996.

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
December 5, 1997