MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this section together with our consolidated financial statements and related notes thereto included elsewhere in this report. In addition to the historical information contained herein, this report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are not based on historical information but relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. Certain statements contained in this Annual Report on Form 10-K, including, without limitation, statements containing the words "believe", "anticipate, "estimate", "expect", "are of the opinion that" and words of similar import, constitute "forward-looking statements." You should not place any undue reliance on these forward-looking statements.

INTRODUCTION. As noted elsewhere in this report, the Company's principal customers are large national and regional retailers. In order to maintain its relationship with these customers, enhance revenues from them, and enable them to improve their revenues and margins, the Company must work closely with these customers to ensure they receive the Company's products expeditiously and economically. The Company works diligently to maintain supply chain excellence as a way for the Company to provide value added services to its customers by creating retail programs that exceed customer expectations.

In servicing its customers, the Company faces competition from numerous other providers of licensed promotional clothing. Many of these competitors are larger and better capitalized than the Company. Additionally, if the Company is to continue to grow its business by adding additional products, product offerings and by making strategic acquisitions, it will require additional capital. Therefore, Management is continuously considering various suitable sources of capital in efforts to furnish the needed capital.

In assessing the Company's performance, Management focuses on (a) increasing revenues primarily through enhancing its licensing programs and (b) protecting such revenues by profitably diversifying its customer bases regionally and demographically. In order to enhance profitability, Management monitors and seeks to improve gross margins primarily through internal cost controls and purchases of raw materials at lower costs. Management also strives to reduce fixed costs, improve inventory turnover and reduce receivables measured by day's sales outstanding, all in an effort to improve profitability and cash flow.

RESULTS OF OPERATIONS. 2008 net sales reflected the continued difficulties the retail apparel industry has experienced over the past 24 months. However, the following discussion of results of operations shows the improvement in the Company's gross profit margin, despite a significant drop in net sales as well as an improvement in fixed expenses. To illustrate this compare the results of 2005 with 2008 as presented above in "Item 6. Selected Financial Data".

The following table discloses certain financial information for the years ended November 28, 2008, November 30, 2007, and December 1, 2006, respectively. You should also refer to the consolidated statement of operations presented above in "Item 6. Selected Financial Data" when reviewing the financial analysis and discussion presented below:

                                                Fiscal year ended
                                           2008        2007        2006
       Net sales                       $18,008,736  $20,217,810 $28,767,253
       Gross profit                        29.0%       30.8%       28.2%
       Royalties, commissions, and
       other selling expense              16.8%        14.4%       12.0%
       Operations expense               $1,745,376  $2,277,819  $2,754,244
         Corporate expense              $1,031,652  $1,109,474  $1,017,632
       Impairment of goodwill           $4,369,825     $  -        $  -
       Impairment of other intangible
       assets                            $40,042       $  -        $  -
       Interest expense                  $618,822    $683,304    $815,960
       Income (loss) before income
       taxes                           $(5,538.982) $(768,854)    $70,769
       Net income (loss)               $(6,413,378) $(471,036)    $46,537

For the fiscal year ended November 28, 2008

NET SALES. Net sales decreased 10.9% to $18,008,736 for 2008 from $20,217,810 for 2007. The retail industry, in general, again this year experienced little to no growth across the country and worldwide. Because the Company's product offerings are basic in orientation directed at mass and mid-tier distribution channels as opposed to higher-fashion oriented offerings commonly associated with the apparel industry and the upper-tier distribution channels, the Company had an opportunity to capitalize on its offerings. Through the first nine months of the Company's fiscal year, it appeared as though the Company's strategy would be realized since net sales were even with last year. However, an overall stagnant economy turned negative, complicated by shrinking credit markets and public confidence that disappeared in the fourth quarter, contributed to shifts in consumer spending that the Company's sales and marketing strategy could simply not overcome. Still, six of the Company's top twenty customers bought 2.6 times the amount they bought in 2007, or $5,476,000 more. Those gains were negated by the other fourteen of the Company's top twenty customers, who bought $7,677,000 less than they bought in 2007.

COST OF SALES. Cost of sales was $12,792,592 or 71.0% of the Company's net sales for 2008 compared to $13,990,331 or 69.2% for 2007. Cost of sales is driven by four main factors; the customer, the source of the goods, spending and volume.
The Company continually reviews and monitors its process inputs on a weekly basis and strives to keep those inputs "right-sized" for the expected output.
It also attempts to optimally balance its sources of procurement and supply of goods against its need for flexibility and the ability to chase new orders and replenish old ones. Additionally, the Company has found that it needed to focus efforts toward refining its distribution channels and pricing policies. For 2008, the Company had lower domestic manufacturing volume that absorbs fixed costs into inventory because a greater percentage of product sold during the year came from inventory. This was compounded by smaller run lots, which created more setup expenses which are fixed in nature. This factor was made worse by prices of garments that increased during the year. To only fall by less than two percent, and not below 2006 levels when volume was much higher demonstrates how much the cost structure has improved over the past three years.

GROSS PROFIT. Gross profit was $5,216,144 or 29.0% of the Company's net sales for 2008 compared to $6,227,479 or 30.8% for 2007. The above discussion of cost of sales explains the decrease.

OPERATING AND OTHER EXPENSES. Operating and other expenses consist of royalties and commissions, salaries, office cost, travel, freight-out, insurance, utilities, depreciation, amortization, and other general services cost.

Operations expenses were $6,155,243 (34.2% of net sales) for 2008 compared to $2,277,819 (11.3% of net sales) for 2007. The increase includes a $4,369,825 write off of goodwill discussed more fully in the footnotes to the financial statements and a $40,042 write off of an intangible asset because the Company has chosen to stop servicing an unprofitable product line after 2009. Excluding these two noncash, nonrecurring items, operating expenses were $1,745,376 which would represent a reduction of 23.4% as compared to 2007. The reduction in dollars is primarily attributable to lower legal ($218,000), salary, insurance, travel and entertainment expenses that result from fewer salaried personnel ($106,000), savings from changing insurance companies ($60,000), and continued aggressive cost control ($80,000) as well as lower depreciation and amortization ($68,000).

Royalty fees associated with licensing agreements were $1,654,721 or 9.2% of sales in 2008 and $1,984,468 or 9.8% of sales in 2007. Lower overall sales contributed to lower royalty fees and the lower percentage is a result of product mix that shifted along with sales among the Company's major customers reflecting more sales of the Company's own designs. Commission expenses were $866,489 or 4.8% of sales in 2008, and $392,907 or 1.9% in 2007. This increase in both actual dollars and percentage also reflects the shift in mix of sales among the Company's top customers and the fact that an independent representative network is being utilized to service a major segment of the Company's business, whereas in prior years the internal sales force was servicing substantially all of the Company's sales. Other sales expenses were down by 1.1% in 2008 as compared to 2007 as a result of control over discretionary spending and a reorganization in October, 2008 that included terminations of personnel.

Corporate expense consists of full-time personnel, corporate and customary legal services, accounting fees, and investment professionals. These costs decreased in 2008 to $1,031,652 from $1,109,474 in 2007, due to professional fees paid for investor relations and management advisory services in addition to lower taxes resulting from a claim for refund on sales taxes paid.

Interest expense relates to the Company's short and long-term debt. Interest expense was $618,822 in 2008, compared to $683,304 for 2007. The decline in expense can be explained by lower interest rates and average balances on the line of credit offset by interest charged by vendors.

Other income and expenses are made up of sundry miscellaneous items and in 2008 were $71,542 of income, up from $6,355 of expenses in 2007.

PROVISION FOR INCOME TAXES. The Company recognized a tax benefit of $417,688 before valuation allowance, which is attributable to the recognition of deferred tax assets arising from the Company's year-to-date net operating loss adjusted by book and income tax recognition of temporary differences. Realization of deferred tax assets is uncertain due to the Company's inability to refinance its current asset based line of credit and recurring operating losses. As a result, a valuation allowance has been recorded in an amount sufficient to reduce the deferred tax asset value to zero. Therefore, a net provision for income taxes of $874,396 has been recorded in the financial statements and is more fully discussed in the footnotes to the financial statements.

For the fiscal year ended November 30, 2007

NET SALES. Net sales decreased 29.7% to $20,217,810 for 2007 from $28,767,253 for 2006. The decrease was pervasive, affecting the Company's entire customer base. The retail industry, in general, experienced little to no growth across the country and worldwide. When viewed in detail, the apparel segment of the retail industry is the most commodity-oriented and because the Company's product offerings are basic in orientation as opposed to higher-fashion oriented offerings, and because the mass and mid-tier distribution channels are such a large part of the Company's business model, these results are not surprising.
Multiple factors of an overall stagnant economy have contributed to shifts in consumer spending that have negatively impacted the Company's sales volume.
Furthermore, mass and mid-tier retailers rely on imported garments from larger suppliers to a significant degree. Since these imports require longer lead times, it is easier for them to control purchases from domestic producers. This is the space in which the Company operates. Moving forward, and based upon present economic forecasts, this may benefit the Company, since 2008 will likely see reduced buying plans by these retailers for imported goods.

COST OF SALES. Cost of sales was $13,990,331 or 69.2% of the Company's net sales for 2007 compared to $20,641,860 or 71.8% for 2006. Cost of sales is driven in relation to volume, therefore the lower sales produced a lower cost of sales, but also reflects progress that was made and is evident in lowering these costs as a percentage of sales to increase gross profit. The Company continually reviews and monitors its process inputs on a weekly basis and strives to keep those inputs "right-sized" for the expected output. It also attempts to optimally balance its sources of procurement and supply of goods against its need for flexibility and the ability to chase new orders and replenish old ones. Additionally, the Company has found that it needed to focus efforts toward refining its distribution channels and pricing policies. As a result, the Company found that it was necessary to turn away high volume, lower margin programs, which had the potential to turn into losses in an effort to have better distribution channels and retail programs while improving margins.

GROSS PROFIT. Gross profit was $6,227,479 or 30.8% of the Company's net sales for 2007 compared to $8,125,393 or 28.2% for 2006. The improvement in gross profit margin is a result of the discussion above on Cost of Sales.

OPERATING AND OTHER EXPENSES. Operating and other expenses consist of royalties and commissions, salaries, office cost, travel, freight-out, insurance, utilities, depreciation, amortization, and other general services cost.

Operations expenses were $2,277,819 (11.3% of net sales) for 2007 compared to $2,754,244 (9.6% of net sales) for 2006. The quantitative decrease can be attributed to lower wages, freight-out, and outside services expense, as well as overall cost control measures. The relative increase as a percentage to sales is a result of certain fixed costs that were spread against a lower sales volume. These expenditures also necessarily included legal expenses of a non-recurring nature that totaled $259,514 during the year to defend a frivolous lawsuit brought on by a vendor for breach of contract which management believed to have no merit. The courts found the largest part of the claim to be unfounded and the remaining issues were settled out of court in June 2007. The settlement was to purchase goods of not less than $225,000 from the vendor at competitive cost and quality over the next twelve months. Legal expenses pertaining directly to operational issues are charged to operations, rather than corporate expense.

Royalty fees associated with licensing agreements were $1,984,468 or 9.8% of sales in 2007 and $2,488,951 or 8.7% of sales in 2006. While lower sales contributed to lower royalty fees, the higher percentage is a result of product mix (national-appeal schools which tend to have higher rates) and a trend toward increasing royalty rates. Commission expenses were $392,907 or 1.9% of sales in 2007, and $649,906 or 2.2% in 2006, which decreased both due to lower sales and greater utilization of the Company's internal sales force. Other sales expenses in 2007 were $542,006, up from $314,972, which is caused by a full year of salaries and related expense for the Company's new internal sales office which was set up in May of 2006.

Corporate expense consists of full-time personnel, corporate and customary legal services, accounting fees, and investment professionals. These costs increased in 2007 to $1,109,474 from $1,017,632 in the prior year, mostly due to wages and professional fees paid for investor relations and management advisory services.

Interest expense relates to the Company's short and long-term debt. Interest expense was $683,304 in 2007, compared to $815,960 for 2006. The decline in expense can be explained by lower interest rates and average balances on the line of credit, as well as the extinguishment of the subordinated debt which carried a higher interest rate.

Other expenses are made up of sundry miscellaneous items and in 2007 were $6,355, down from $12,959 in 2006.

PROVISION FOR INCOME TAXES. The Company recognized a tax benefit of $297,768, which is attributable to the recognition of deferred tax assets arising from the Company's year-to-date net operating loss adjusted by book and income tax recognition of temporary differences.

FINANCIAL POSITION, CAPITAL RESOURCES, AND LIQUIDITY. At November 30, 2008, working capital was $(880,793) of which $(2,561,168) resulted from the reclassification of long-term debt owed to Crossroads Bank to current liabilities as a consequence of Going Concern doubt. This reclassification was made due to a conclusion reached that if the Company is unable to continue as a going concern, this debt would be accelerated within the next twelve months and, also because of the Company's failure to meet certain financial covenants.
Without this reclassification, working capital was $1,680,375, which is $396,573 lower than the working capital of $2,076,948 at the end of 2007. Accounts receivable were $2,663,394 lower at the end of 2008 compared to 2007 caused by lower November over November sales. While an increase in inventory of $272,705 resulted for 2008, the increase was in raw materials rather than finished goods and was in response to timing of orders received from customers.
Accrued expenses and other current liabilities were $1,326,476 lower in 2008 than 2007 and accounts payable was also $214,713 lower due principally to the lower November over November sales also. A decrease in the Company's working capital line of credit of $499,579 accounts for the final item of the working capital decrease.

Liquidity and Capital Resources. We have experienced recurring losses from operations and poor cash flows for the past two years. For the fiscal year ended November 28, 2008, we incurred a net loss of $6,413,378 that results from a noncash write off of long-lived assets (predominantly goodwill) of $4,409,867, a noncash write down of deferred taxes of $874,396, interest expense as reduced by other income of $547,280, and an actual operating loss of $581,835. The report from our independent registered public accounting firm on our audited financial statements at November 28, 2008 contains an explanatory paragraph regarding substantial doubt as to our ability to continue as a going concern as a result of our inability to replace our existing line of credit lender and recurring losses from operations. There is no assurance that we will be able to replace our line of credit, maintain or increase our revenues in fiscal 2009 or that we will be successful in reaching profitability or generate positive cash flows from our operations. We are considering all strategic options to improve our liquidity and provide us with working capital to fund our continuing business operations including equity offerings, asset sales and debt financing as alternatives to improve our cash needs however, there can be no assurance that we will be successful in negotiating financing terms. If adequate funds are not available or are not available on acceptable terms, we will likely not be able to take advantage of unanticipated opportunities, develop or enhance services or products, respond to competitive pressures, or continue as a going concern.

Our consolidated financial statements for the fiscal year ended November 28, 2008 do not give effect to any adjustments to recorded amounts and their classifications, other than deferred taxes, which would be necessary should we be unable to continue as a going concern and therefore, be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in the consolidated financial statements.

The Company has historically financed its operations through a combination of earnings and debt. The Company's principal sources of debt financing are its asset based revolving line of credit with National City Bank of Indiana and promissory notes issued by Crossroads Bank (name changed from First Federal Savings Bank of Wabash). At November 28, 2008, $5,144,524 of the credit facility had been drawn upon. On November 30, 2008, the Company and National City Bank entered into a Promissory Note Modification Agreement under which the maturity date of the line of credit was extended to December 15, 2008. On December 15, 2008, a second Promissory Note Modification Agreement was entered into with National City Bank to extend the maturity date of the line of credit to January 31, 2009. These extensions were given to permit the Company to complete the due diligence and underwriting process with a bank that gave the Company a proposal and also gave management every indication that they could close the deal.
Management was also assured by an independent investment banker/broker that the deal would close. On January 14, 2009, the bank notified the Company verbally that it would not be able to close the deal because of the tightened credit markets requirements that cash flow now be looked at in addition to the review of asset bases, which in the Company's case are good. On January 30, 2009, the Company had to enter into a Forbearance Agreement with National City Bank to obtain enough time to try and find a replacement bank. The uncertainty surrounding the Company's ability to secure a replacement line of credit creates substantial doubt about the Company's ability to survive as a Going Concern.
This item is discussed in greater detail in Items 1 and 1A as well as in the footnotes to the financial statements.

The Crossroads Bank (name changed from First Federal Savings Bank of Wabash) Promissory Notes consist primarily of one loan, originally in the amount of $3,225,809 payable in monthly installments of $29,263 of principal and interest with maturity on October 15, 2020. The balance on that loan as of November 28, 2008 was $2,692,629. Two other smaller loans, as detailed in the Notes to the Financial Statements contained elsewhere in this Form 10-K, total $145,364 at November 28, 2008, and have varying maturity dates and interest rates. A fourth promissory note that had a balance at November 30, 2007, was paid off in the third quarter of 2008. Because of the Going Concern and also because Crossroads has declined waiving covenant defaults which existed at November 28, 2008, and relaxing covenants going forward, the Promissory Notes have been classified as current debt despite their terms to the contrary.

The Company's principal use of cash is for operating expenses, interest and principal payments on its long-term debt, working capital and capital expenditures. The Company had a net loss of $6,413,378 after a noncash write off of goodwill and other intangible assets of $4,409,867 and a noncash write down of deferred tax assets of $874,396 in 2008 which resulted in an outflow of cash as compared to the net loss in 2007 of $471,086. Cash provided by operating activities in 2008 totaled $379,067, as compared to cash used in operating activities in 2007 of $1,127,730. The biggest factors in the difference of $1,506,797 are greater decreases in accounts receivable in 2008 and a lower increase in inventory in 2008. Lower increases in accounts payable and lower accrued expenses accounted for the change in cash from operations.
Additionally, the Company raised $550,000 of new equity during the year (discussed below) which was used to reduce the line of credit and long-term indebtedness. Finally, the executive management of the Company voluntarily deferred one-half of their compensation from mid-April until July to alleviate strain on cash flow, at which time such deferrals were repaid without interest.
The Company's business is seasonal in nature, with 60-80% of sales falling into the last six months of the year.

On April 28, 2008, the Company entered into Securities Purchase Agreements with each of C. W. "Bill" Reed, Dan F. Cooke, the William B. Hensley III Family Trust and Jeffrey R. Kellam, pursuant to which the Company issued an aggregate of 5,500,000 shares of common stock and warrants for the purchase of an aggregate of up to 2,750,000 shares of common stock for an aggregate offering price of $550,000 in cash. The warrants are exercisable, in whole or in part, at any time and from time to time for a period of seven years following the date of issuance and have an exercise price equal to $0.15 per share. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment as provided in the warrants. Under the terms of the purchase agreements, the purchasers have certain demand registration rights that may be exercised with respect to any shares of common stock acquired upon purchase or exercise of the warrants.

The following table represents the contractual commitments of the Company as of November 30, 2008:

                                                          Payments Due by Period
                                              Less than 1               4 - 5      After 5
Contractual Obligations              Total       year     1 - 3 years   years       years
Revolving Credit Facility          $5,144,524 $5,144,524    $    -      $    -     $    -
Long-Term Debt                      3,037,993    476,825    401,647    423,523    1,735,998
Operating Leases                       25,200     21,600      3,600       -           -

CRITICAL ACCOUNTING POLICIES AND ESTIMATES. Our significant accounting policies are described in NOTE 2 - Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the estimates that we have made. These estimates have been based upon historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts and Returns. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which is included in bad debt expense. Management determines the adequacy of this allowance by regularly reviewing our accounts receivable aging and evaluating individual customer receivables, considering customers' financial condition, credit history and current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Credits for returns are only issued after proper documentation and support is obtained by the Company.

Revenue Recognition. The Company recognizes revenue when all of the following conditions are met: persuasive evidence of an agreement exists, the product has been shipped and legal title and all risks of ownership have been transferred, the sales price is fixed or determinable, and collectability is reasonably assured. Revenues are reduced for estimated product returns, allowances and price discounts based on past experience.

Inventories. Inventories, which are predominantly blank garments or finished goods, are valued at the lower of cost or market, with cost determined using the first-in, first-out method. A detailed analysis of inventory is performed on a periodic basis throughout the year. If actual market conditions are less favorable than those projected by management, write-downs may be required.

Impairment of Long-Lived Assets. The Company reviews the carrying values of its long-lived assets whenever events or changes in circumstances indicate that such . . .