Edgar Filing: TARRANT APPAREL GROUP

As filed with the Securities and Exchange
Commission on May 31, 2005. Registration No. 333-122043

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

TARRANT APPAREL GROUP
(Exact Name of Registrant as Specified in Its Charter)

CALIFORNIA 95-4181026
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)

3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(323) 780-8250
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

GERARD GUEZ, CHAIRMAN OF THE BOARD
3151 EAST WASHINGTON BOULEVARD
LOS ANGELES, CALIFORNIA 90023
(323) 780-8250
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)

COPIES TO:
John J. McIlvery, Esq.
Stubbs Alderton & Markiles, LLP
15821 Ventura Boulevard, Suite 525
Encino, California 91436
(818) 444-4500

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities on this form are being offered pursuant to
dividend or interest reinvestment 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 the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [_]

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.

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SUBJECT TO COMPLETION - MAY 31, 2005

PROSPECTUS

TARRANT APPAREL GROUP

9,216,346 SHARES OF COMMON STOCK
(no par value)

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This prospectus relates to the offer and sale from time to time of up
to 9,216,346 shares of our common stock that are held by the shareholders named
in the "Selling Shareholders" section of this prospectus. The shares of our
common stock offered pursuant to this prospectus were originally issued to the
selling shareholders pursuant to the conversion of secured convertible
debentures, the payment of accrued interest on secured convertible debentures or
the exercise of warrants to purchase common stock.

Our common stock is traded on the NASDAQ National Market System under
the symbol "TAGS." On May 27, 2005, the last reported sale price of the common
stock on the NASDAQ National Market System was $2.48 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT THE RISKS YOU
SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.

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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

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The date of this prospectus is ______________

TABLE OF CONTENTS

PAGE
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PROSPECTUS SUMMARY.............................................................3

RISK FACTORS...................................................................4

FORWARD-LOOKING STATEMENTS....................................................11

USE OF PROCEEDS...............................................................11

SELLING SHAREHOLDERS..........................................................11

PLAN OF DISTRIBUTION..........................................................16

WHERE YOU CAN FIND MORE INFORMATION...........................................18

LEGAL MATTERS.................................................................19

EXPERTS.......................................................................19

PROSPECTUS SUMMARY

ABOUT TARRANT APPAREL GROUP

Tarrant Apparel Group is a design and sourcing company for private
label and private brand casual apparel serving mass merchandisers, department
stores, branded wholesalers and specialty chains located primarily in the United
States. Our major customers include major retailers, such as Chico's, Macy's
Merchandising Group, the Avenue, Lane Bryant, Lerner New York, J.C. Penney,
K-Mart, Kohl's, Mervyn's and Wal-Mart. Our products are manufactured in a
variety of woven and knit fabrications and include jeans wear, casual pants,
t-shirts, shorts, blouses, shirts and other tops, dresses and jackets. Our
private brands include American Rag Cie, JS by Jessica Simpson, Princy by
Jessica Simpson, House of Dereon by Beyonce Knowles, No! Jeans, Alain Weiz, and
Gear 7.

ABOUT THE OFFERING

This prospectus may be used only in connection with the resale by the
selling shareholders of up to 9,216,346 shares of our common stock.

We will not receive any proceeds from the sale of the shares of common
stock offered by the selling shareholders using this prospectus. On May 13, 2005
we had 29,010,076 shares of common stock outstanding.

CORPORATE INFORMATION

We were incorporated in California in September 1988. Our executive
offices are located at 3151 East Washington Boulevard, Los Angeles, California
90023, and our telephone number is (323) 780-8250. Information on our website,
www.tags.com, does not constitute part of this prospectus.

RECENT EVENTS

In April 2005, we entered into a letter of intent with Qorus.com, Inc.
("Qorus"), to exchange all the outstanding shares of our wholly-owned
subsidiary, Private Brands, Inc., for shares of Qorus. Qorus is a publicly
traded company quoted on the Over-the-Counter Bulletin Board under the symbol
QRUS. Under the terms of the proposed transaction, in exchange for all of the
outstanding capital stock of Private Brands, Qorus would issue shares of its
convertible preferred stock to us in such amount so that, upon completion of the
transaction, we would own in the aggregate 97% of the issued and outstanding
shares of common stock of Qorus on a fully diluted and as-converted basis. The
current stockholders of Qorus are expected to own 3% of the issued and
outstanding common stock on a fully diluted and as-converted basis after
completion of the exchange transaction. The closing of the exchange transaction
would be subject to Private Brands' ability to obtain additional financing, and
the effect of any such financing would reduce the percentage ownership in Qorus
of both us and the current stockholders of Qorus. Following the transaction, the
combined company would be a majority-owned controlled subsidiary of ours. The
exchange transaction is subject to a number of additional conditions, including,
but not limited to, the negotiation and execution of a definitive acquisition
agreement, the delivery of audited financial statements of Private Brands, the
approval of the transaction by the boards of directors of Qorus, Private Brands
and our company, and the receipt of required third party consents and approvals.
Accordingly, there can be no assurance that the exchange transaction will be
completed.

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THE
MATERIAL ONES FACING OUR COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR,
OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER.
IF THIS OCCURS, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY
LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR SECURITIES.

RISKS ASSOCIATED WITH THIS OFFERING

THE ULTIMATE RESOLUTION OF THE INTERNAL REVENUE SERVICE'S EXAMINATION OF OUR TAX
RETURNS MAY REQUIRE US TO INCUR AN EXPENSE BEYOND WHAT HAS BEEN RESERVED FOR ON
OUR BALANCE SHEET OR MAKE CASH PAYMENTS BEYOND WHAT WE ARE THEN ABLE TO PAY.

In January 2004, the Internal Revenue Service proposed adjustments to
increase our federal income tax payable for the years ended December 31, 1996
through 2001. This adjustment would also result in additional state taxes,
penalties and interest. In addition, in July 2004, the IRS initiated an
examination of our Federal income tax return for the year ended December 31,
2002. In March 2005, the IRS proposed an adjustment to our taxable income of
approximately $6 million related to similar issues identified in their audit of
the 1996 through 2001 federal income tax returns. We believe that we have
meritorious defenses to and intend to vigorously contest the proposed
adjustments made to our federal income tax returns for the years ended 1996
through 2002. If the proposed adjustments are upheld through the administrative
and legal process, they could have a material impact on our earnings and cash
flow. We believe we have provided adequate reserves for any reasonably
foreseeable outcome related to these matters on the balance sheet included in
our consolidated financial statements. The maximum amount of loss in excess of
the amount accrued in the financial statements is $12.6 million. If the amount
of any actual liability, however, exceeds our reserves, we would experience an
immediate adverse earnings impact in the amount of such additional liability,
which could be material. Additionally, we anticipate that the ultimate
resolution of these matters will require that we make significant cash payments
to the taxing authorities. Presently we do not have sufficient cash or borrowing
ability to make any future payments that may be required. No assurance can be
given that we will have sufficient surplus cash from operations to make the
required payments. Additionally, any cash used for these purposes will not be
available for other corporate purposes, which could have a material adverse
effect on our financial condition and results of operations.

INSIDERS OWN A SIGNIFICANT PORTION OF OUR COMMON STOCK, WHICH COULD LIMIT OUR
SHAREHOLDERS' ABILITY TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS.

As of March 31, 2005, our executive officers and directors and their
affiliates owned approximately 45% of the outstanding shares of our common
stock. Gerard Guez, our Chairman, and Todd Kay, our Vice Chairman, alone own
approximately 35.1% and 8.9%, respectively, of the outstanding shares of our
common stock at March 31, 2005. Accordingly, our executive officers and
directors have the ability to affect the outcome of, or exert considerable
influence over, all matters requiring shareholder approval, including the
election and removal of directors and any change in control. This concentration
of ownership of our common stock could have the effect of delaying or preventing
a change of control of us or otherwise discouraging or preventing a potential
acquirer from attempting to obtain control of us. This, in turn, could have a
negative effect on the market price of our common stock. It could also prevent
our shareholders from realizing a premium over the market prices for their
shares of common stock.

WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE PRICE OF
OUR COMMON STOCK.

Our shareholders rights plan, our ability to issue additional shares of
preferred stock and some provisions of our articles of incorporation and bylaws
could make it more difficult for a third party to make an unsolicited takeover
attempt of us. These anti-takeover measures may depress the price of our common
stock by making it more difficult for third parties to acquire us by offering to
purchase shares of our stock at a premium to its market price without approval
of our board of directors.

OUR STOCK PRICE HAS BEEN VOLATILE.

Our common stock is quoted on the NASDAQ National Market System, and
there can be substantial volatility in the market price of our common stock. The
market price of our common stock has been, and is likely to continue to be,
subject to significant fluctuations due to a variety of factors, including
quarterly variations in operating results, operating results which vary from the
expectations of securities analysts and investors, changes in financial
estimates, changes in market valuations of competitors, announcements by us or
our competitors of a material nature, loss of one or more customers, additions
or departures of key personnel, future sales of common stock and stock market
price and volume fluctuations. In addition, general political and economic
conditions such as a recession, or interest rate or currency rate fluctuations
may adversely affect the market price of our common stock.

In addition, the stock market in general has experienced extreme price
and volume fluctuations that have affected the market price of our common stock.
Often, price fluctuations are unrelated to operating performance of the specific
companies whose stock is affected. In the past, following periods of volatility
in the market price of a company's stock, securities class action litigation has
occurred against the issuing company. If we were subject to this type of
litigation in the future, we could incur substantial costs and a diversion of
our management's attention and resources, each of which could have a material
adverse effect on our revenue and earnings. Any adverse determination in this
type of litigation could also subject us to significant liabilities.

ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO YOU.

Some investors favor companies that pay dividends, particularly in
general downturns in the stock market. We have not declared or paid any cash
dividends on our common stock. We currently intend to retain any future earnings
for funding growth, and we do not currently anticipate paying cash dividends on
our common stock in the foreseeable future. Additionally, we cannot pay
dividends on our common stock unless the terms of our bank credit facilities and
outstanding preferred stock, if any, permit the payment of dividends on our
common stock. Because we may not pay dividends, your return on this investment
likely depends on your selling our stock at a profit.

RISKS RELATED TO OUR BUSINESS

WE DEPEND ON A GROUP OF KEY CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR SALES. A
SIGNIFICANT ADVERSE CHANGE IN A CUSTOMER RELATIONSHIP OR IN A CUSTOMER'S
FINANCIAL POSITION COULD HARM OUR BUSINESS AND FINANCIAL CONDITION.

Kohl's accounted for 19.6% and 16.3% of our net sales for the first
three months of 2005 and 2004, respectively. Mervyn's accounted for 9.8% and
16.2% of our net sales for the first three months of 2005 and 2004,
respectively. Lerner New York accounted for 8.5% and 8.0% of our net sales for
the first three months of 2005 and 2004, respectively. Affiliated department
stores owned by Federated Department Stores accounted for approximately 13.8%
and 10.7% of our net sales for the first three months of 2005 and 2004,
respectively. Wet Seal accounted for approximately 3.3% and 4.5% of our net
sales for the first three months of 2005 and 2004, respectively. We believe that
consolidation in the retail

industry has centralized purchasing decisions and given customers greater
leverage over suppliers like us, and we expect this trend to continue. If this
consolidation continues, our net sales and results of operations may be
increasingly sensitive to deterioration in the financial condition of, or other
adverse developments with, one or more of our customers.

While we have long-standing customer relationships, we generally do not
have long-term contracts with any of them. Purchases generally occur on an
order-by-order basis, and relationships exist as long as there is a perceived
benefit to both parties. A decision by a major customer, whether motivated by
competitive considerations, financial difficulties, and economic conditions or
otherwise, to decrease its purchases from us or to change its manner of doing
business with us, could adversely affect our business and financial condition.
In addition, during recent years, various retailers, including some of our
customers, have experienced significant changes and difficulties, including
consolidation of ownership, increased centralization of purchasing decisions,
restructurings, bankruptcies and liquidations.

These and other financial problems of some of our retailers, as well as
general weakness in the retail environment, increase the risk of extending
credit to these retailers. A significant adverse change in a customer
relationship or in a customer's financial position could cause us to limit or
discontinue business with that customer, require us to assume more credit risk
relating to that customer's receivables, limit our ability to collect amounts
related to previous purchases by that customer, or result in required prepayment
of our receivables securitization arrangements, all of which could harm our
business and financial condition.

FAILURE OF THE TRANSPORTATION INFRASTRUCTURE TO MOVE SEA FREIGHT IN ACCEPTABLE
TIME FRAMES COULD ADVERSELY AFFECT OUR BUSINESS.

Because the bulk of our freight is designed to move through the West
Coast ports in predictable time frames, we are at risk of cancellations and
penalties when those ports operate inefficiently creating delays in delivery. We
experienced such delays from June 2004 through November 2004, and we may
continue to experience similar delays in the future especially during peak
seasons. There can be no assurances of, and we have no control over a return to
timely deliveries. Unpredictable timing for shipping may cause us to utilize air
freight or may result in customer penalties for late delivery, any of which
could reduce our operating margins and adversely effect our results of
operations.

FAILURE TO MANAGE OUR GROWTH AND EXPANSION COULD IMPAIR OUR BUSINESS.

Since our inception, we have experienced periods of rapid growth. No
assurance can be given that we will be successful in maintaining or increasing
our sales in the future. Any future growth in sales will require additional
working capital and may place a significant strain on our management, management
information systems, inventory management, sourcing capability, distribution
facilities and receivables management. Any disruption in our order processing,
sourcing or distribution systems could cause orders to be shipped late, and
under industry practices, retailers generally can cancel orders or refuse to
accept goods due to late shipment. Such cancellations and returns would result
in a reduction in revenue, increased administrative and shipping costs and a
further burden on our distribution facilities.

FAILURE TO MANAGE OUR RESTRUCTURING IN MEXICO COULD IMPAIR OUR BUSINESS.

We determined to cease directly operating a substantial majority of our
equipment and fixed assets in Mexico, and to lease a large portion of our
facilities and operations in Mexico to a related third party, which we
consummated effective September 1, 2003. Subsequently, in August 2004, we
entered into a purchase and sale agreement to sell substantially all of our
assets and real property in Mexico, including the equipment and facilities
previously leased to Mr. Nacif's affiliates, which transaction was consummated
in the fourth quarter of 2004. As a consequence, we have become primarily a
trading

company, relying on third party manufacturers to produce the merchandise we sell
to our customers and as a result assume the risks associated with contracting
these services.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

We have experienced, and expect to continue to experience, substantial
variations in our net sales and operating results from quarter to quarter. We
believe that the factors which influence this variability of quarterly results
include the timing of our introduction of new product lines, the level of
consumer acceptance of each new product line, general economic and industry
conditions that affect consumer spending and retailer purchasing, the
availability of manufacturing capacity, the seasonality of the markets in which
we participate, the timing of trade shows, the product mix of customer orders,
the timing of the placement or cancellation of customer orders, the weather,
transportation delays, quotas, the occurrence of charge backs in excess of
reserves and the timing of expenditures in anticipation of increased sales and
actions of competitors. Due to fluctuations in our revenue and operating
expenses, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance. It is possible
that in some future quarter or quarters, our operating results will be below the
expectations of securities analysts or investors. In that case, our stock price
could fluctuate significantly or decline.

THE FINANCIAL CONDITION OF OUR CUSTOMERS COULD AFFECT OUR RESULTS OF OPERATIONS.

Certain retailers, including some of our customers, have experienced in
the past, and may experience in the future, financial difficulties, which
increase the risk of extending credit to such retailers and the risk that
financial failure will eliminate a customer entirely. These retailers have
attempted to improve their own operating efficiencies by concentrating their
purchasing power among a narrowing group of vendors. There can be no assurance
that we will remain a preferred vendor for our existing customers. A decrease in
business from or loss of a major customer could have a material adverse effect
on our results of operations. There can be no assurance that our factor will
approve the extension of credit to certain retail customers in the future. If a
customer's credit is not approved by the factor, we could assume the collection
risk on sales to the customer itself, require that the customer provide a letter
of credit, or choose not to make sales to the customer.

WE DEPEND ON OUR COMPUTER AND COMMUNICATIONS SYSTEMS.

As a multi-national corporation, we rely on our computer and
communication network to operate efficiently. Any interruption of this service
from power loss, telecommunications failure, weather, natural disasters or any
similar event could have a material adverse affect on our business and
operations. Additionally, hackers and computer viruses have disrupted operations
at many major companies. We may be vulnerable to similar acts of sabotage, which
could have a material adverse effect on our business and operations.

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE.

We may not be able to fund our future growth or react to competitive
pressures if we lack sufficient funds. Currently, we believe we have sufficient
cash on hand and cash available through our bank credit facilities, issuance of
long-term debt, proceeds from loans from affiliates, and proceeds from the
exercise of stock options to fund existing operations for the foreseeable
future. However, in the future we may need to raise additional funds through
equity or debt financings or collaborative relationships. This additional
funding may not be available or, if available, it may not be available on
economically reasonable terms. In addition, any additional funding may result in
significant dilution to existing

shareholders. If adequate funds are not available, we may be required to curtail
our operations or obtain funds through collaborative partners that may require
us to release material rights to our products.

OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH IMPORTING PRODUCTS.

Substantially all of our import operations are subject to tariffs
imposed on imported products. In addition, the countries in which our products
are manufactured or imported may from time to time impose additional new duties,
tariffs or other restrictions on our imports or adversely modify existing
restrictions. Adverse changes in these import costs and restrictions, or our
suppliers' failure to comply with customs or similar laws, could harm our
business. We cannot assure that future trade agreements will not provide our
competitors with an advantage over us, or increase our costs, either of which
could have an adverse effect on our business and financial condition.

Our operations are also subject to the effects of international trade
agreements and regulations such as the North American Free Trade Agreement, and
the activities and regulations of the World Trade Organization. Generally, these
trade agreements benefit our business by reducing or eliminating the duties
assessed on products manufactured in a particular country. However, trade
agreements can also impose requirements that adversely affect our business, such
as limiting the countries from which we can purchase raw materials and setting
duties or restrictions on products that may be imported into the United States
from a particular country. In addition, the World Trade Organization may
commence a new round of trade negotiations that liberalize textile trade by
further eliminating quotas or reducing tariffs. The elimination of quotas on
World Trade Organization member countries by 2005 and other effects of these
trade agreements could result in increased competition from developing
countries, which historically have lower labor costs, including China and
Taiwan, both of which recently became members of the World Trade Organization.
This potential increase in competition from developing countries is one of the
several reasons why we determined to cease our manufacturing operations in
Mexico.

Our ability to import products in a timely and cost-effective manner
may also be affected by problems at ports or issues that otherwise affect
transportation and warehousing providers, such as labor disputes. These problems
could require us to locate alternative ports or warehousing providers to avoid
disruption to our customers. These alternatives may not be available on short
notice or could result in higher transit costs, which could have an adverse
impact on our business and financial condition.

OUR DEPENDENCE ON INDEPENDENT MANUFACTURERS REDUCES OUR ABILITY TO CONTROL THE
MANUFACTURING PROCESS, WHICH COULD HARM OUR SALES, REPUTATION AND OVERALL
PROFITABILITY.

We depend on independent contract manufacturers to secure a sufficient
supply of raw materials and maintain sufficient manufacturing and shipping
capacity in an environment characterized by declining prices, labor shortage,
continuing cost pressure and increased demands for product innovation and
speed-to-market. This dependence could subject us to difficulty in obtaining
timely delivery of products of acceptable quality. In addition, a contractor's
failure to ship products to us in a timely manner or to meet the required
quality standards could cause us to miss the delivery date requirements of our
customers. The failure to make timely deliveries may cause our customers to
cancel orders, refuse to accept deliveries, impose non-compliance charges
through invoice deductions or other charge-backs, demand reduced prices or
reduce future orders, any of which could harm our sales, reputation and overall
profitability. We do not have material long-term contracts with any of our
independent contractors and any of these contractors may unilaterally terminate
their relationship with us at any time. To the extent we are not able to secure
or maintain relationships with independent contractors that are able to fulfill
our requirements, our business would be harmed.

We have initiated a factory compliance agreement with our suppliers,
and monitor our independent contractors' compliance with applicable labor laws,
but we do not control our contractors or their labor practices. The violation of
federal, state or foreign labor laws by one of the our contractors could result
in our being subject to fines and our goods that are manufactured in violation
of such laws being seized or their sale in interstate commerce being prohibited.
From time to time, we have been notified by federal, state or foreign
authorities that certain of our contractors are the subject of investigations or
have been found to have violated applicable labor laws. To date, we have not
been subject to any sanctions that, individually or in the aggregate, have had a
material adverse effect on our business, and we are not aware of any facts on
which any such sanctions could be based. There can be no assurance, however,
that in the future we will not be subject to sanctions as a result of violations
of applicable labor laws by our contractors, or that such sanctions will not
have a material adverse effect on our business and results of operations. In
addition, certain of our customers, require strict compliance by their apparel
manufacturers, including us, with applicable labor laws and visit our facilities
often. There can be no assurance that the violation of applicable labor laws by
one of our contractors will not have a material adverse effect on our
relationship with our customers.

OUR BUSINESS IS SUBJECT TO RISKS OF OPERATING IN A FOREIGN COUNTRY AND TRADE
RESTRICTIONS.

Approximately 91% of our products were imported from outside the U.S.
during fiscal year 2004. We are subject to the risks associated with doing
business and owning or leasing fixed assets in foreign countries, including, but
not limited to, transportation delays and interruptions, political instability,
expropriation, currency fluctuations and the imposition of tariffs, import and
export controls, other non-tariff barriers (including changes in the allocation
of quotas) and cultural issues. Any changes in those countries' labor laws and
government regulations may have a negative effect on our profitability.

RISKS ASSOCIATED WITH OUR INDUSTRY

OUR SALES ARE HEAVILY INFLUENCED BY GENERAL ECONOMIC CYCLES.

Apparel is a cyclical industry that is heavily dependent upon the
overall level of consumer spending. Purchases of apparel and related goods tend
to be highly correlated with cycles in the disposable income of our consumers.
Our customers anticipate and respond to adverse changes in economic conditions
and uncertainty by reducing inventories and canceling orders. As a result, any
substantial deterioration in general economic conditions, increases in interest
rates, acts of war, terrorist or political events that diminish consumer
spending and confidence in any of the regions in which we compete, could reduce
our sales and adversely affect our business and financial condition.

OUR BUSINESS IS HIGHLY COMPETITIVE AND DEPENDS ON CONSUMER SPENDING PATTERNS.

The apparel industry is highly competitive. We face a variety of
competitive challenges including:

o anticipating and quickly responding to changing consumer
demands;

o developing innovative, high-quality products in sizes, colors
and styles that appeal to consumers of varying age groups and
tastes;

o competitively pricing our products and achieving customer
perception of value; and

o providing strong and effective marketing support.

WE MUST SUCCESSFULLY GAUGE FASHION TRENDS AND CHANGING CONSUMER PREFERENCES TO
SUCCEED.

Our success is largely dependent upon our ability to gauge the fashion
tastes of our customers and to provide merchandise that satisfies retail and
customer demand in a timely manner. The apparel business fluctuates according to
changes in consumer preferences dictated in part by fashion and season. To the
extent we misjudge the market for our merchandise, our sales may be adversely
affected. Our ability to anticipate and effectively respond to changing fashion
trends depends in part on our ability to attract and retain key personnel in our
design, merchandising and marketing staff. Competition for these personnel is
intense, and we cannot be sure that we will be able to attract and retain a
sufficient number of qualified personnel in future periods.

OUR BUSINESS IS SUBJECT TO SEASONAL TRENDS.

Historically, our operating results have been subject to seasonal
trends when measured on a quarterly basis. This trend is dependent on numerous
factors, including the markets in which we operate, holiday seasons, consumer
demand, climate, economic conditions and numerous other factors beyond our
control. There can be no assurance that our historic operating patterns will
continue in future periods as we cannot influence or forecast many of these
factors.

FORWARD-LOOKING STATEMENTS

This prospectus contains statements that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act of 1934, both as amended. These forward-looking
statements are subject to various risks and uncertainties. The words "expect,"
"estimate," "anticipate," "predict," "believe" and similar expressions and
variations thereof are intended to identify forward-looking statements. Such
statements appear in a number of places in this prospectus and include
statements regarding our intent, belief or current expectations regarding our
strategies, future sales, other plans and objectives, our ability to design,
develop, source and market products, and the ability of our products to achieve
or maintain commercial acceptance. Any forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those projected in this prospectus, for the
reasons, among others, described in the Risk Factors section beginning on page
4. You should read the Risk Factors section carefully, and should not place
undue reliance on any forward-looking statements, which speak only as of the
date of this prospectus. We undertake no obligation to release publicly any
updated information about forward-looking statements to reflect events or
circumstances occurring after the date of this prospectus or to reflect the
occurrence of unanticipated events.

USE OF PROCEEDS

The proceeds from the sale of each selling shareholder's common stock
will belong to that selling shareholder. We will not receive any proceeds from
such sales.

In a December 2004 private placement, we issued secured convertible
debentures and warrants for gross proceeds to us of $10,000,000. Net proceeds to
us amounted to approximately $9.36 million after payment of placement agent fees
and expenses. We used the proceeds for general working capital purposes.

In addition, we may receive additional proceeds upon exercise of the
warrants issued in the December 2004 private placement. To the extent we receive
any proceeds upon exercise of the warrants, we intend to use such proceeds for
general working capital purposes.

SELLING SHAREHOLDERS

SECURED CONVERTIBLE DEBENTURES AND WARRANTS

On December 14, 2004, we completed a $10 million financing through the
issuance of 6% secured convertible debentures and warrants to purchase up to
1,250,000 shares of our common stock. Prior to maturity, the secured convertible
debentures may be converted into our common stock at a price of $2.00 per share.
The secured convertible debentures pay interest at a rate of 6% per annum and
have a term of three years. We may elect to pay interest on the secured
convertible debentures in shares of our common stock if certain conditions are
met, including achieving a minimum market price and trading volume for our
common stock. The warrants have a term of five years and an exercise price of
$2.50 per share. The debentures are secured by a subordinated lien on certain of
our accounts receivable and related assets.

We sold these securities to the following investors: The Runnels Family
Trust DTD 1-11-2000, High Tide, LLC, Bear Stearns Securities Corp., Inc.,
Custodian FBO J. Steven Emerson Roth IRA, Bear Stearns Securities Corp., Inc.,
Custodian FBO J. Steven Emerson IRA II, Bristol Investment Fund, Ltd., MM & B
Holdings, Freedman Leff Investment Partnership, Bank Insinger de Beaufort Safe
Custody NV,

JMG Triton Offshore Fund, Ltd., JMB Capital Partners L.P. and JMG Capital
Partners, L.P. Other than the transactions described in the table below, we had
no material relationship with any selling shareholder during the three years
preceding the date of this prospectus.

T.R. Winston & Company, LLC, a selling shareholder, acted as placement
agent in the financing. For its services, we paid the placement agent an
aggregate of $620,000 in cash and issued to them five year warrants to purchase
up to 200,000 shares of our common stock at an exercise price of $2.50 per
share, which warrants vest and become exercisable in full on June 14, 2005.

In connection with the December 2004 private placement financing, we
entered into a registration rights agreement with the investors and T.R. Winston
& Company, LLC. Pursuant to the registrant rights agreement, we agreed to file a
registration statement on Form S-3 registering the resale by the investors and
T.R. Winston & Company, LLC of 125% of the shares of common stock to be issued
upon conversion of their secured convertible debentures, in payment of accrued
interest on their secured convertible debentures and upon exercise of the
warrants described in this prospectus, and to keep the registration statement
effective until the date that all the common shares covered by the registration
statement on Form S-3 have been sold or may be sold by the investors without
volume restrictions pursuant to Rule 144 promulgated under the Securities Act of
1933. This registration rights agreement also provides that if we do not comply
with certain covenants regarding the registration for resale of the common
shares by April 14, 2005, then we must pay each of the investors a fee of 1% of
the purchase price paid by such investor for the secured convertible debentures
for each month after such date that we fail to comply with such registration
covenants until such non-compliance is remedied. Pursuant to this agreement, we
filed the registration statement of which this prospectus is a part with the
Securities and Exchange Commission.

The convertible debentures and warrants issued in the December 2004
private placement financing contain "weighted average" antidilution adjustment
provisions which provide for adjustments to the conversion price of the
debentures and exercise price of the warrants under certain circumstances if we
were to issue additional securities at a price below the then applicable
conversion or exercise price. As a result, if these adjustment provisions are
triggered, we may be obligated to issue additional shares of common stock upon
conversion of the debentures than are currently issuable. To address this
possible issuance of additional shares, we are registering the additional 25% of
shares currently issuable upon conversion of the convertible debentures,
exercise of the warrants and as interest payments on the convertible debentures.
In addition, as described above the registration rights agreement we entered
into with the holders of the debentures and warrants obligates us to register
these additional shares.

SELLING SHAREHOLDERS TABLE

The following table sets forth: (1) the name of each of the
shareholders for whom we are registering shares under this registration
statement; (2) the number of shares of our common stock beneficially owned by
each such shareholder prior to this offering; (3) the number of shares of our
common stock offered by such shareholder pursuant to this prospectus; and (4)
the number of shares, and (if one percent or more) the percentage of the total
of the outstanding shares, of our common stock to be beneficially owned by each
such shareholder after this offering, assuming that all of the shares of our
common stock beneficially owned by each such shareholder and offered pursuant to
this prospectus are sold and that each such shareholder acquires no additional
shares of our common stock prior to the completion of this offering. Such data
is based upon information provided by each selling shareholder.

Pursuant to the terms of convertible debentures and warrants held by
the selling shareholders, the maximum number of shares that may be acquired by a
selling shareholder upon any exercise of its warrant or conversion of its
promissory note is limited to the extent necessary to ensure that, following

such exercise, the total number of shares of common stock then beneficially
owned by such selling shareholder and its affiliates and any other persons whose
beneficial ownership of common stock would be aggregated with the selling
shareholder for purposes of Section 13(d) of the Exchange Act, does not exceed
4.99%, of the total number of issued and outstanding shares of common stock then
outstanding. The shares of common stock and percentage ownership listed in this
table do not reflect these contractual limitations on a selling shareholder's
ability to acquire common shares upon exercise of its warrant or conversion of
its promissory note.

COMMON STOCK COMMON STOCK PERCENTAGE OF
COMMON STOCK BEING OFFERED OWNED UPON COMMON STOCK
OWNED PRIOR PURSUANT COMPLETION OWNED UPON
TO THE TO THIS OF THIS COMPLETION OF
NAME OFFERING (1) PROSPECTUS (2) OFFERING THIS OFFERING (3)
------------------------------------ ------------- -------------- ------------ -----------------

Bank Insinger de Beaufort
Safe Custody NV (4)............. 625,000 896,635 -- *

Bear Stearns Securities Corp., Inc.,
Custodian FBO J. Steven
Emerson IRA II (5) ............. 687,500 986,298 -- *

Bear Stearns Securities Corp., Inc.,
Custodian FBO J. Steven
Emerson Roth IRA (6) ........... 500,000 717,308 -- *

Bristol Investment Fund, Ltd. (7) 1,250,000 1,793,269 -- *

Freedman Leff Investment
Partnership (8)................. 62,500 89,663 -- *

High Tide, LLC (9) 125,000 179,327 -- *

JMB Capital Partners L.P. (10)..... 1,187,500 1,703,606 -- *

JMG Capital Partners, L.P. (11).... 625,000 896,635 -- *

JMG Triton Offshore
Fund, Ltd. (12)................. 625,000 896,635 -- *

MM & B Holdings (13)............... 468,750 672,476 -- *

The Runnels Family Trust
DTD 1-11-2000 (14).............. 93,750 134,495 -- *

T.R. Winston &
Company, LLC (15)............... 200,000 250,000 -- *

TOTAL........................... 6,450,000 9,216,346 -- *
----------
* Less than 1%

(1) Includes for each selling shareholder, the number shares of common stock
issuable upon conversion of the principal amount of debentures and
exercise of warrants held by such selling shareholder.

(2) Pursuant to the terms of the registration rights agreement, we agreed to
register for the selling shareholders, the number of shares of common
stock determined by multiplying 125% of the sum of (i) all shares issuable
upon conversion of the principal amount of the debentures, (ii) all shares
issuable in payment of interest on the debentures assuming all permissible
interest payments are made in shares of common stock at a price of $1.95
per share (the lowest price at which such shares may be issued without
first obtaining shareholder approval) and the debentures are held until
maturity, and (iii) all shares issuable upon exercise of the warrants.

(3) Percentage ownership is based upon 28,814,763 shares of Common Stock of
the Registrant issued and outstanding as of the date of this prospectus.

(4) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 500,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 92,308 shares issuable in payment of
interest on debentures and (iii) 125,000 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. David Mun-Gavin,
Director of Private Banking, exercises voting and investment authority
over the shares held by this selling shareholder.

(5) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 550,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 101,538 shares issuable in payment of
accrued interest on debentures and (iii) 137,500 shares issuable upon the
exercise of a 5 year warrant with an exercise price of $2.50 per share,
which vests and becomes exercisable in full on June 14, 2005. J. Steven
Emerson, the Sole Beneficiary of this Self-Directed IRA, exercises voting
and investment authority over the shares held by this selling shareholder.

(6) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 400,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 73,846 shares issuable in payment of
interest on debentures and (iii) 100,000 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. J. Steven Emerson, the
Sole Beneficiary of this Self-Directed IRA, exercises voting and
investment authority over the shares held by this selling shareholder.

(7) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 1,000,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 184,615 shares issuable in payment of
interest on debentures and (iii) 250,000 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. Bristol Capital
Advisors, LLC ("BCA") is the investment manager to Bristol Investment
Fund, Ltd. Paul Kessler is the manager of BCA. By virtue of his position,
Mr. Kessler exercises voting and investment authority over the shares held
by this selling shareholder.

(8) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 50,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 9,231 shares issuable in payment of
accrued interest on debentures and (iii) 12,500 shares issuable upon the
exercise of a 5 year warrant with an exercise price of $2.50 per share,
which vests and becomes exercisable in full on June 14, 2005. The general
partner of Freedman Leff Investment Partnership is the Freedman Family
Trust, of which Gary Freedman is the Trustee. By virtue of his position,
Mr. Freedman exercises voting and investment authority over the shares
held by this selling shareholder.

(9) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 100,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 18,462 shares issuable in payment of
interest on debentures and (iii) 25,000 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. G. Tyler Runnels,
Manager of High Tide, LLC, exercises voting and investment authority over
the shares held by this selling shareholder.

(10) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 950,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 175,385 shares issuable in payment of
interest on debentures and (iii) 237,500 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. Jon Brooks, general
partner of JMB Capital Partners L.P., exercises voting and investment
authority over the shares held by this selling shareholder.

(11) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 500,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 92,308 shares issuable in payment of
interest on debentures and (iii) 125,000 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. JMG Capital Management,
LLC ("JMG LLC") is the general partner of JMG Capital Partners, L.P. JMG
Capital Management, Inc. ("JMG INC") and Asset Alliance Holding Corp. own
the equity interests of JMG LLC.

Jonathan M. Glaser is the Executive Officer and Director of JMG INC and
exercises voting and investment authority over the shares held by this
selling shareholder.

(12) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 500,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 92,308 shares issuable in payment of
interest on debentures and (iii) 125,000 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. Pacific Assets
Management LLC ("Pacific Assets") is the investment manager of JMG Triton
Offshore Fund, Ltd. Pacific Capital Management, Inc. ("Pacific Inc.") and
Asset Alliance Holding Corp. own the equity interests of Pacific Assets.
Roger Richter and Jonathan M. Glaser own equity interests of Pacific Inc.
Messrs. Richter and Glaser exercise voting and investment authority over
the shares held by this selling shareholder.

(13) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 375,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 69,231 shares issuable in payment of
interest on debentures and (iii) 93,750 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. The general partner of
MM & B Holdings is the Bryan Ezralow 1994 Trust, of which Bryan Ezralow is
the Trustee. By virtue of his position, Mr. Ezralow exercises voting and
investment authority over the shares held by this selling shareholder

(14) The shares of common stock offered pursuant to this prospectus consist of
125% of the sum of (i) 75,000 shares issuable upon conversion of the
principal amount of debentures, (ii) 13,846 shares issuable in payment of
interest on debentures and (iii) 18,750 shares issuable upon the exercise
of a 5 year warrant with an exercise price of $2.50 per share, which vests
and becomes exercisable in full on June 14, 2005. G. Tyler Runnels and
Jasmine Niklas Runnels, trustees of The Runnels Family Trust DTD
1-11-2000, exercise voting and investment authority over the shares held
by this selling shareholder.

(15) The shares of common stock offered pursuant to this prospectus consist of
125% of 200,000 shares issuable upon the exercise of a warrant with an
exercise price of $2.50 per share. The warrant has a term of 5 years, and
vests and becomes exercisable in full on June 14, 2005. John W. Galuchie
Jr. serves as President of T.R. Winston & Company, LLC and, in such
capacity may be deemed to exercise voting and investment authority over
the shares held by this selling shareholder. T.R. Winston & Company, LLC
is a registered broker/dealer and is a member of the NASD.

PLAN OF DISTRIBUTION

The shares of our common stock offered pursuant to this prospectus may
be offered and sold from time to time by the selling shareholders listed in the
preceding section, or their donees, transferees, pledgees or other successors in
interest that receive such shares as a gift or other non-sale related transfer.
These selling shareholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale.

The selling shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling shareholders may use any one or more of the
following methods when selling shares:

o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

o Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

o Purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o An exchange distribution in accordance with the rules of the
applicable exchange;

o Privately negotiated transactions;

o Settlement of short sales entered into after the date of this
prospectus;

o Broker-dealers may agree with the selling shareholders to sell
a specified number of such shares at a stipulated price per
share;

o A combination of any such methods of sale;

o Through the writing or settlement of options or other hedging
transactions, whether through an options exchange or
otherwise; and

o Any other method permitted pursuant to applicable law.

The selling shareholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

Broker-dealers engaged by the selling shareholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling shareholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling shareholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.

In connection with the sale of our common stock or interests therein,
the selling shareholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The

selling shareholders may also sell shares of our common stock short and deliver
these securities to close out their short positions, or loan or pledge the
common stock to broker-dealers that in turn may sell these securities. The
selling shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

The selling shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each selling shareholder has
informed us that it has purchased the securities to be resold pursuant to this
registration statement in the ordinary course of business and that it does not
have any agreement or understanding, directly or indirectly, with any person to
distribute our common stock.

We are required to pay certain fees and expenses incurred by us
incident to the registration of the shares. We have agreed to indemnify the
selling shareholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

Because selling shareholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each selling shareholder has advised us that they have not entered into any
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
selling shareholders.

We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the selling shareholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to our common stock for a period
of two business days prior to the commencement of the distribution. In addition,
the selling shareholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of shares of our common stock
by the selling shareholders or any other person. We will make copies of this
prospectus available to the selling shareholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-3 with the SEC with
respect to the common stock offered by this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits and
schedules that are part of the registration statement. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. We refer you to the registration statement and the
exhibits and schedules thereto for further information with respect to us and
our common stock. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference room. Our SEC filings are also available to the public
from the SEC's website at www.sec.gov.

We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934 and, in accordance with those
requirements, will continue to file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the SEC's website referred to above.

The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. We incorporate by reference the documents listed
below and any additional documents filed by us with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of
securities is terminated. The information we incorporate by reference is an
important part of this prospectus, and any information that we file later with
the SEC will automatically update and supersede this information.

The documents we incorporate by reference are:

1. Our Annual Report on Form 10-K for the year ended December 31,
2004, as amended (File No. 000-26006);

2. Our Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2005 (File No. 000-26006)

3. Our Current Report on Form 8-K as filed on January 5, 2005
(File No. 000-26006);

4. Our Current Report on Form 8-K as filed on February 11, 2005
(File No. 000-26006);

5. Our Current Report on Form 8-K as filed on February 18, 2005
(File No. 000-26006);

6. Our Current Report on Form 8-K as filed on March 9, 2005 (File
No. 000-26006);

7. Our Current Report on Form 8-K as filed on March 31, 2005
(File No. 000-26006);

8. Our Current Report on Form 8-K filed on April 12, 2005 (File
No. 000-26006);

9. Our Current Report on Form 8-K filed on April 26, 2005 (File
No. 000-26006);

10. Our Current Report on Form 8-K filed on May 11, 2005 (File No.
000-26006);

11. Our Current Report on Form 8-K filed on May 12, 2005 (File No.
000-26006);

12. The description of the Common Stock of the Registrant
contained in the Registrant's Registration Statements on Form
8-A as filed on May 14, 1995, July 14, 1995 and August 7, 1995
(File No. 000-26006); and

13. All other reports filed by us pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 since December
31, 2003, including all such reports filed after the date of
the initial registration statement and prior to effectiveness
of the registration statement.

You may request a copy of these filings, at no cost, by writing or
calling us at Tarrant Apparel Group, 3151 East Washington Boulevard, Los
Angeles, California 90023, telephone number (323) 780-8250, Attention: Corazon
Reyes.

You should rely only on the information contained in this prospectus or
any supplement and in the documents incorporated by reference above. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any supplement or in the
documents incorporated by reference is accurate on any date other than the date
on the front of those documents.

LEGAL MATTERS

Stubbs Alderton & Markiles, LLP, Encino, California, has rendered to
Tarrant Apparel Group a legal opinion as to the validity of the common stock
covered by this prospectus.

EXPERTS

The consolidated financial statements and schedule of Tarrant Apparel
Group, incorporated by reference into this Prospectus and Registration
Statement, at December 31, 2004, and for each of the two years in the period
then ended have been audited by Grant Thornton LLP, independent registered
public accounting firm, and at December 31, 2002, and for year ended December
31, 2002, by Ernst & Young LLP, independent registered public accounting firm,
as set forth in their respective reports thereon incorporated by reference, and
are included in reliance upon such reports given on the authority of such firms
as experts in accounting and auditing.

--------------------------------------------------------------------------------

You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement to this prospectus. We have not authorized
anyone else to provide you with different information. The selling shareholders
should not make an offer of these shares in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
supplement to this prospectus is accurate as of any date other than the date on
the cover page of this prospectus or any supplement.

--------------------------------------------------------------------------------

--------------------

TARRANT APPAREL GROUP

PROSPECTUS

--------------------

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table itemizes the expenses incurred by the Registrant in
connection with the offering. All the amounts shown are estimates except the
Securities and Exchange Commission registration fee.

Registration fee - Securities and Exchange Commission ............ $ 2,539
Legal Fees and Expenses .......................................... 35,000
Accounting Fees and Expenses ..................................... 35,000
Miscellaneous Expenses ........................................... 1,461
-------
Total ....................................................... $74,000

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Restated Articles of Incorporation and its Bylaws
provide for the indemnification by the Registrant of each director, officer and
employee of the Registrant to the fullest extent permitted by the California
General Corporation Law, as the same exists or may hereafter be amended. Section
317 of the California General Corporation Law provides in relevant part that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.

In addition, Section 317 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in the best interests of the corporation and
its shareholders. No indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation in the performance of that person's duty to the corporation and
its shareholders, unless and only to the extent that the court in which such
action or suit is or was pending shall determine upon application that, in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses and then only to the extent that the
court shall determine. California law further provides that nothing in the above
described provisions shall be deemed exclusive of any other rights to
indemnification or advancement of expenses to which any person may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise.

II-1

The Registrant has entered into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director of the Registrant and
certain officers of the Registrant (the "Indemnitees"). Pursuant to the terms
and conditions of the Indemnity Agreements, the Registrant indemnified each
Indemnitee against any amounts which he or she becomes legally obligated to pay
in connection with any claim against him or her based upon any action or
inaction which he or she may commit, omit or suffer while acting in his or her
capacity as a director and/or officer of the Registrant or its subsidiaries,
provided, however, that Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action, had no reasonable cause
to believe Indemnitee's Conduct was unlawful.

ITEM 16. EXHIBITS.

EXHIBIT
NUMBER DESCRIPTION
------- --------------------------------------------------------------

4.1 Specimen of Common Stock Certificate. Incorporated by
reference to an Exhibit to Amendment No. 1 to Registration
Statement on Form S-1 filed on July 15, 1995.

4.2 Rights Agreement, dated as of November 21, 2003, by and
between the Company and Computershare Trust Company, as Rights
Agent. Incorporated by reference to Exhibit 4.4 to the Current
Report on Form 8-K filed on November 21, 2003.

4.3 Certificate of Determination of Preferences, Rights and
Limitations of Series B Preferred Stock. Incorporated by
reference to Exhibit A to the Rights Agreement filed as
Exhibit 4.4 to the Current Report on Form 8-K filed on
November 21, 2003.

4.4 Form of Rights Certificate. Incorporated by reference to
Exhibit B to the Rights Agreement filed as Exhibit 4.4 to the
Current Report on Form 8-K filed on November 21, 2003.

5.1 Opinion and Consent of Stubbs Alderton & Markiles, LLP.*

10.1 Securities Purchase Agreement, dated December 6, 2004, between
the Company and the Purchasers identified therein.
Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed on December 10, 2004.

10.2 Registration Rights Agreement, dated December 14, 2004,
between the Company and the Purchasers identified therein.
Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed on December 20, 2004.

10.3 Security Agreement, dated December 14, 2004, between the
Company and the Purchasers identified therein. Incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K
filed on December 20, 2004.

10.4 Intercreditor Agreement, dated December 14, 2004, between the
Company, GMAC Commercial Finance LLC, UPS Capital Global Trade
Finance Corporation and T.R. Winston & Company, LLC.
Incorporated by reference to Exhibit 10.3 to the Current
Report on Form 8-K filed on December 20, 2004.

10.5 Common Stock Purchase Warrant, dated December 14, 2004, issued
by the Company in favor of T.R. Winston & Company, LLC.
Incorporated by reference to Exhibit 10.4 to the Current
Report on Form 8-K filed on December 20, 2004.

10.6 Form of 6% Secured Convertible Debenture. Incorporated by
reference to Exhibit 10.5 to the Current Report on Form 8-K
filed on December 20, 2004.

10.7 Form of Common Stock Purchase Warrant. Incorporated by
reference to Exhibit 10.6 to the Current Report on Form 8-K
filed on December 20, 2004.

23.1 Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm.

23.2 Consent of Grant Thornton LLP, Independent Registered Public
Accounting Firm.

23.3 Consent of Stubbs Alderton & Markiles, LLP (included in
Exhibit 5.1).*

II-2

EXHIBIT
NUMBER DESCRIPTION
------- --------------------------------------------------------------

24.1 Power of Attorney (included on signature page).*

------------
* Previously filed.

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 set
forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;

(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; provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) of this section do not apply if the information required
to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission
by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference 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) 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 (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.

II-3

(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions 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 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 or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of their counsel the
matter 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 Act and will be governed by the final
adjudication of such issue.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on May 31, 2005.

TARRANT APPAREL GROUP

By: /S/ CORAZON REYES
--------------------------------------
Corazon Reyes, Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.

SIGNATURE TITLE DATE
--------- ----- ----

* Chairman of the Board of May 31, 2005
--------------------------- Directors
Gerard Guez

* Vice Chairman of the Board May 31, 2005
--------------------------- of Directors
Todd Kay

* Chief Executive Officer and May 31, 2005
--------------------------- President and Director
Barry Aved (Principal Executive Officer)

/S/ CORAZON REYES Chief Financial Officer, May 31, 2005
--------------------------- Treasurer and Director
Corazon Reyes (Principal Financial and
Accounting Officer)

* Director May 31, 2005
---------------------------
Stephane Farouze

* Director May 31, 2005
---------------------------
Mitchell Simbal

Director
---------------------------
Joseph Mizrachi

* Director May 31, 2005
---------------------------
Milton Koffman

* Director
---------------------------
Simon Mani

* By: /S/ CORAZON REYES
----------------------------------
Corazon Reyes, As Attorney-In-Fact

S-1

EXHIBIT INDEX