As filed with the Securities and Exchange Commission on December 11, 2003.
Registration No. 333-52318
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
POST-EFFECTIVE AMENDMENT NO. 4
TO FORM S-1 ON FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------------------------
INNOVO GROUP INC.
(Exact name of registrant as specified in its charter)
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Delaware 11-2928178
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5804 East Slauson Avenue
Commerce, California 90040
(323) 725-5516
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------------------------------
Samuel J. Furrow, Jr.
Chief Executive Officer
Innovo Group Inc.
5804 East Slauson Avenue
Commerce, California 90040
(323) 725-5516
(Name, Address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
Paul A. Belvin, Esq.
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue, NW
Washington, DC 20036
(202) 887-4000
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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 being registered 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
SUBJECT TO COMPLETION, DATED DECEMBER 11, 2003
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
INNOVO GROUP INC.
Common Stock
7,654,823 Shares Offered by Selling Stockholders
o The shares of common stock offered by this prospectus are being sold
by the stockholders listed on pages 16-18 of this prospectus. We will
not receive any proceeds from the sale of these shares of common
stock.
o Our common stock is traded on the Nasdaq SmallCap Market under the
symbol INNO.
o The selling stockholders may sell the shares of common stock described
in this prospectus in a number of different ways and at varying
prices. See "Plan of Distribution" beginning on page 20 for more
information about how a selling stockholder may sell its shares of
common stock. We will not be paying any underwriting discounts or
commissions in this offering.
o On December 8, 2003, the last reported sale price of our common stock
on the Nasdaq SmallCap Market was $3.20. You should obtain a current
market price quotation before you buy any of the offered shares.
Our principal executive offices are located at 5804 East Slauson
Avenue, Commerce, California 90040. Our telephone number is (323) 725-5516.
--------------------------------------------------
The securities offered by this prospectus involve a high degree of risk. You
should carefully consider the factors described under the heading "Risk Factors"
beginning on page 3 of this prospectus.
--------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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December 11, 2003
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS.....................................................1
OUR COMPANY....................................................................2
RISK FACTORS...................................................................4
USE OF PROCEEDS...............................................................15
DIVIDEND POLICY...............................................................16
SELLING STOCKHOLDERS..........................................................16
PLAN OF DISTRIBUTION..........................................................21
DESCRIPTION OF SECURITIES.....................................................22
ENGAGEMENT OF RESEARCH FIRM...................................................24
WHERE YOU CAN FIND MORE INFORMATION...........................................24
LEGAL MATTERS.................................................................25
EXPERTS.......................................................................26
CAUTIONARY STATEMENTS.........................................................26
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In connection with this offering, no person is authorized to give any
information or to make any representations not contained or incorporated by
reference in this prospectus. If information is given or representations are
made, you may not rely on that information or representations as having been
authorized by us. This prospectus is neither an offer to sell nor a solicitation
of an offer to buy any securities other than those registered by this
prospectus, nor is it an offer to sell or a solicitation of an offer to buy
securities where an offer or solicitation would be unlawful. You may not imply
from the delivery of this prospectus, nor from any sale made under this
prospectus, that our affairs are unchanged since the date of this prospectus or
that the information contained in this prospectus is correct as of any time
after the date of this prospectus. The information in this prospectus speaks
only as of the date of this prospectus unless the information specifically
indicates that another date applies.
We are not making any representation to any purchaser of the common
stock regarding the legality of an investment in the common stock by such
purchaser under any legal investment or similar laws or regulations. You should
not consider any information in this prospectus to be legal, business or tax
advice. You should consult your own attorney, business advisor and tax advisor
for legal, business and tax advice regarding an investment in the common stock.
---------------
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain both historical and forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements. These
forward-looking statements include, but are not limited to, statements regarding
the following: growth opportunities and increasing market share, earnings
estimates, future financial performance and other matters. Although we believe
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that the expectations contained in these forward-looking statements are
reasonable, you cannot be assured that these expectations will prove correct.
The words "anticipate," "believe," "estimate," "expect," "intend,"
"will" and similar expressions, as they relate to us, are intended to identify
forward-looking statements. Similarly, statements that describe our objectives,
plans and goals are or may be forward-looking statements. These forward-looking
statements are not based on historical facts, but rather reflect our current
views with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should our underlying assumptions prove incorrect,
actual results may vary materially from those described in this prospectus as
anticipated, believed, estimated, expected or intended. Whether actual results
will conform to expectations and predictions is subject to a number of risks and
uncertainties, including, but not limited to, those described in "Risk Factors."
You should carefully review all information, including the information
included in the section entitled "Risk Factors" and the financial statements and
the notes to the financial statements and related disclosures incorporated by
reference in this prospectus. We do not assume any responsibility for updating
forward-looking information contained in this prospectus.
OUR COMPANY
Our principal business activity involves the design, development and
worldwide marketing of high quality consumer products for the apparel and
accessory markets. As discussed below, we do not manufacture any apparel or
accessory products but outsource the manufacturing to third parties. We sell our
products to over 1,000 different retail, distributors and private label
customers around the world. Retail customers and distributors purchase finished
goods directly from us. Retail customers then sell the product through their
retail stores and distributors sell our products to retailers in the
international market place. Private label customers outsource the production and
sourcing of their private label products to us and then sell through their own
distribution channels. Private label customers are generally retail chains who
desire to sell apparel and accessory products under their own brand name. We
work with our private label customers to create their own brand image by custom
designing products. In creating a unique brand, our private label customers may
provide samples to us or may select styles already available in our showrooms.
We believe we have established a reputation among these private label buyers for
the ability to arrange for the manufacture of apparel and accessory products on
a reliable, expeditious and cost-effective basis.
We operate our consumer products business through three wholly-owned,
operating subsidiaries, Innovo, Inc. ("Innovo"), Joe's Jeans, Inc. ("Joe's"),
and Innovo Azteca Apparel, Inc. ("IAA"). We no longer manufacture any apparel or
accessory products. All of our products are currently manufactured by
independent contractors located in Los Angeles, Mexico and the Far East,
including, Hong Kong, China, Korea, Vietnam and India. The products are then
distributed out of warehouse facilities located in Los Angeles or directly from
the factory to the customer. During fiscal 2002, approximately 23% of our
apparel and accessory products were manufactured outside of North America. The
rest of our accessory and apparel products during fiscal 2002 were manufactured
in the United States (approximately 24%) and Mexico (approximately 53%). In the
nine months ended August 30, 2003, approximately 19% of our apparel and
accessory products were manufactured outside of North America. The rest of our
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accessory and apparel products in the nine months ended August 30, 2003 were
manufactured in the United States (approximately 14%) and Mexico (approximately
66%). All of our products manufactured in Mexico, are manufactured by Azteca
Productions International, Inc. ("Azteca") or its affiliates, as discussed
below. Azteca is controlled by significant shareholders of Innovo, Hubert Guez
and Paul Guez.
Our operations are comprised of two reportable segments: apparel and
accessory, with the operations of our Joe's and IAA subsidiaries representing
the apparel segment and Innovo conducting business in the accessory segment.
Segment revenues are generated from the sale of consumer products by Joe's, IAA
and Innovo. Our corporate activities are represented by the operations of Innovo
Group Inc., the parent company, and our real estate operations are conducted
through our Leaseall Management, Inc. and Innovo Realty, Inc. subsidiaries. Our
real estate operations do not currently require a substantial allocation of our
resources and is not a significant part of management's daily operational
functions, and thus, our real estate operations are not currently defined as a
distinct operating segment but are classified as "other" along with our other
corporate activities.
All of our products manufactured in Mexico are currently being
manufactured by Azteca and/or its affiliates. In the summer of 2000, we entered
into a group of transactions with Azteca and its affiliates and principals.
Pursuant to the terms of these transactions, Azteca's principals, through an
affiliated company named Commerce Investment Group, LLC ("CIG"), purchased from
Innovo common stock and warrants which resulted in CIG and its affiliates owning
approximately 25% of our outstanding common stock with the potential to acquire
additional common stock through the exercise of the issued warrants.
Additionally, as part of these transactions, we entered into a supply
agreement with Azteca and a distribution agreement with Apparel Distribution
Services ("ADS"), an Azteca affiliate. As contemplated under the agreements, we
agreed to purchase its accessory craft products, which primarily consist of
denim totebags and aprons, from Azteca and to have ADS distribute all of our
accessory products out of ADS's Los Angeles, CA distribution facility.
In July 2003, we entered into another supply agreement with an Azteca
affiliate, AZT International SA de CV, a Mexico corporation ("AZT"). Pursuant to
this agreement, we purchase certain products, particularly the products to be
sold by our Blue Concepts division acquired on July 17, 2003 from AZT. In
addition, we have verbal agreements with Azteca and/or its affiliates regarding
the supply and distribution of other apparel products, including certain denim
products for our Fetish(R) and Shago(R) branded accessory and apparel lines. We
rent warehouse space in Los Angeles from Azteca.
The strategic partnership entered into with CIG allowed us to close our
domestic manufacturing and distribution facilities and to move forward with our
goal of diversifying our product mix and offerings to include apparel products
as opposed to only accessory products. We obtained this goal with the creation
of the Joe's and Joe's Jeans brand in February 2001, which was created to design
and market high-end denim apparel products.
The strategic partnership created with CIG allowed us to quickly enter
the denim apparel market and to grow its accessory craft business. During fiscal
2001 and 2002, a vast majority of our apparel products sold were denim products
which we purchased from and other services provided by CIG or its affiliates.
The combined accessory, craft and denim apparel products purchased from and
other services provided by CIG or its affiliates during fiscal 2001 and 2002
were approximately $5.7 million and 16.0 million respectively or 90% and 80%,
respectively of our manufacturing and distribution costs for such periods. In
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the nine months ended August 30, 2003, we purchased approximately $23.2 million
of accessory, craft and denim apparel products from and other services provided
by CIG or its affiliates, or 66% of our manufacturing and distribution costs for
such period.
During the nine months ended August 30, 2003, we significantly
diversified our apparel products to include a broader array of apparel products
including, but not limited to, non-denim products. These non-denim products,
along with certain denim products, are purchased from third party independent
suppliers, including CIG and/or its affiliates. While we now use additional
suppliers to meet our needs, we intend to continue to take advantage of CIG's
expertise with denim products so long as we believe it is in our best interest.
Our headquarters and principal executive offices are located at 5804
East Slauson Avenue, Commerce, CA 90040 and our telephone number at this
location is (323) 725-5516. We also have operational offices and/or showrooms in
Los Angeles, New York, Knoxville, Tokyo and Hong Kong and third party showrooms
in New York, Los Angeles and Paris. Although we maintain a website at
www.innovogroup.com, we do not intend that the information available through our
website be incorporated into this prospectus. For additional information about
Innovo and our businesses, see "Where You Can Find More Information."
RISK FACTORS
Before you invest in our common stock by purchasing shares from a
selling stockholder named in this Prospectus, you should be aware that there are
various risks involved in investing in our common stock. We have described below
all of the risks which we deem material to your investment decision. You should
consider carefully these risk factors, together with all of the other
information included in this prospectus and in the periodic reports we have
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, before you decide to purchase any shares of our common stock.
Additional risks that we do not yet know of or that we currently think are
immaterial may also impair our business operations.
THE FOLLOWING RISK FACTORS RELATE TO OUR COMMON STOCK:
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THE 7,654,823 SHARES OF OUR COMMON STOCK REGISTERED FOR RESALE BY THIS
PROSPECTUS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
As of December 8, 2003, 25,336,278 shares of our common stock were
issued and outstanding. This prospectus registers for resale 7,654,823 shares,
or 30% of our outstanding common stock (this amount includes 300,000 shares of
common stock which may be issued upon exercise of warrants held by the selling
stockholders).
We are unable to predict the effect that sales into the market of
7,654,823 shares may have on the then prevailing market price of our common
stock. On December 8, 2003, the last reported sale price of our common stock on
the Nasdaq SmallCap Market was $3.20. During the four weeks prior to December 8,
2003, the average daily volume of trading of our common stock was 76,096 shares.
It is likely that market sales of the 7,654,823 shares offered for resale
pursuant to this prospectus (or the potential for those sales even if they do
not actually occur) may have the effect of depressing the market price of our
4
common stock. As a result, the potential resale and possible fluctuations in
trading volume of such a substantial amount of our stock may affect the share
price negatively beyond our control.
WE DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE
FUTURE.
We have not paid any dividends nor do we anticipate paying any
dividends on the common stock in the foreseeable future. We intend to retain
earnings, if any, to fund our operations and develop and expand our business.
WE HAVE A SUBSTANTIAL NUMBER OF AUTHORIZED PREFERRED AND COMMON SHARES AVAILABLE
FOR FUTURE ISSUANCE THAT COULD CAUSE DILUTION OF STOCKHOLDER INTERESTS AND
ADVERSELY IMPACT THE RIGHTS OF HOLDERS OF OUR COMMON STOCK.
We have a total of 40,000,000 authorized shares of common stock and
5,000,000 authorized shares of "blank check" preferred stock. As of December 8,
2003, we had 14,064,389 shares of common stock and 4,806,000 shares of preferred
stock available for issuance. In 2003, we raised $18,904,080 through the sale of
6,235,648 shares of our common stock and 916,833 shares of common stock purchase
warrants in private placement transactions. We expect to continue to seek
financing which could result in the issuance of additional shares of our capital
stock and/or rights to acquire additional shares of our capital stock. Those
additional issuances of capital stock would result in a reduction of your
percentage interest in Innovo. Furthermore, the book value per share of common
stock may be reduced. This reduction would occur if the exercise price of the
options or warrants or the conversion ratio of the preferred stock were lower
than the book value per share of common stock at the time of such exercise or
conversion.
The addition of a substantial number of shares of common stock, into
the market or by the registration of any other of our securities under the
Securities Act may significantly and negatively affect the prevailing market
price for the common stock. The future sales of shares of common stock issuable
upon the exercise of outstanding warrants and options may have a depressive
effect on the market price of the common stock, as such warrants and options
would be more likely to be exercised at a time when the price of the common
stock is in excess of the applicable exercise price.
Our board of directors has the power to establish the dividend rates,
preferential payments on any liquidation, voting rights, redemption and
conversion terms and privileges for any series of preferred stock. The sale or
issuance of any shares of preferred stock having rights superior to those of the
common stock may result in a decrease in the value or market price of the common
stock. The issuance of preferred stock could have the effect of delaying,
deferring or preventing a change of ownership without further vote or action by
the stockholders and may adversely affect the voting and other rights of the
holders of common stock.
WE ARE CONTROLLED BY OUR MANAGEMENT AND OTHER RELATED PARTIES.
As of December 8, 2003, our executive officers and directors
beneficially owned approximately 25% of our outstanding securities. Furthermore,
in connection with investments made by (1) Commerce Investment Group, LLC and
other investors affiliated with Hubert Guez and Paul Guez (collectively, the
"Commerce Group") and (2) Mr. Joseph Mizrachi in 2000 each of the Commerce Group
and Mr. Mizrachi have the right to designate three individuals and one
individual respectively, for election to the board of directors. If any of the
Commerce Group or Mizrachi designated directors are elected, then the Board
5
shall appoint at least one Commerce and/or Mizrachi designated director to each
of our Board Committees. Based on the Schedule 13D/A filed by Messrs. Simon
Mizrachi and Joseph Mizrachi on October 30, 2003, and the Schedule 13D/A filed
by Hubert Guez and Paul Guez on October 29, 2003, the Mizrachi's and Guez's
beneficially owned less than 1% and approximately 12% of our shares,
respectively. Effective February 21, 2003, the Mizrachi's ceased to be the
beneficial owners of more than 5% of our securities.
Because of their stock ownership and/or positions with us, these
persons have been and will continue to be in a position to greatly influence the
election of directors and thus control our affairs. Additionally, our by-laws
limit the ability of stockholders to call a meeting of the stockholders. These
by-law provisions could have the effect of discouraging a takeover of us, and
therefore may adversely affect the market price and liquidity of our securities.
We are also subject to a Delaware statute regulating business combinations that
may hinder or delay a change in control. The anti-takeover provisions of the
Delaware statute may adversely affect the market price and liquidity of our
securities.
OUR COMMON STOCK PRICE IS EXTREMELY VOLATILE AND MAY DECREASE RAPIDLY.
The trading price and volume of our common stock has historically been
subject to wide fluctuation in response to variations in actual or anticipated
operating results, announcements of new product lines or by us or our
competitors, and general conditions in the apparel and accessories industries.
In the 52 week period prior to December 8, 2003, the closing price of our common
stock has ranged from $2.33 - $7.80. In addition, stock markets generally have
experienced extreme price and volume trading volatility in recent years. This
volatility has had a substantial effect on the market prices of securities of
many companies for reasons frequently unrelated to the operating performance of
the specific companies. These broad market fluctuations may significantly and
negatively affect the market price of our common stock.
IF WE CANNOT MEET THE NASDAQ SMALLCAP MARKET MAINTENANCE REQUIREMENTS AND NASDAQ
RULES, NASDAQ MAY DELIST OUR COMMON STOCK WHICH COULD NEGATIVELY AFFECT THE
PRICE OF THE COMMON STOCK AND YOUR ABILITY TO SELL THE COMMON STOCK.
In the future, we may not be able to meet the listing maintenance
requirements of the Nasdaq SmallCap Market and Nasdaq rules, which require,
among other things, minimum net tangible assets of $2 million, a minimum bid
price for our common stock of $1.00, and stockholder approval prior to the
issuance of securities in connection with a transaction involving the sale or
issuance of common stock equal to 20 percent or more of a company's outstanding
common stock before the issuance for less than the greater of book or market
value of the stock. If we are unable to satisfy the Nasdaq criteria for
maintaining listing, our common stock would be subject to delisting. Trading, if
any, of our common stock would thereafter be conducted in the over-the-counter
market, in the so- called "pink sheets" or on the National Association of
Securities Dealers, Inc. ("NASD") "electronic bulletin board." As a consequence
of any such delisting, a stockholder would likely find it more difficult to
dispose of, or to obtain accurate quotations as to the prices, of our common
stock.
IF NASDAQ DELISTS OUR COMMON STOCK YOU WOULD NEED TO COMPLY WITH THE PENNY STOCK
REGULATIONS WHICH COULD MAKE IT MORE DIFFICULT TO SELL YOUR COMMON STOCK.
In the event that our securities are not listed on the Nasdaq SmallCap
Market, trading of the common stock would be conducted in the "pink sheets" or
through the NASD's Electronic Bulletin Board and covered by Rule 15g-9 under the
Securities Exchange Act of 1934. Under such rule, broker/dealers who recommend
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these securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
subscriber and receive the subscriber's written agreement to a transaction prior
to sale. Securities are exempt from this rule if the market price is at least
$5.00 per share.
The Securities and Exchange Commission adopted regulations that
generally define a penny stock as any equity security that has a market price of
less than $5.00 per share, with certain exceptions. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated with it. If our common stock were considered a
penny stock, the ability of broker/dealers to sell the common stock and the
ability of our stockholders to sell their securities in the secondary market
would be limited. As a result, the market liquidity for the common stock would
be severely and adversely affected. We cannot assure you that trading in our
securities will not be subject to these or other regulations in the future which
would negatively affect the market for such securities.
THE FOLLOWING RISK FACTORS RELATE TO OUR OPERATIONS:
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DUE TO OUR NEGATIVE CASH FLOWS WE COULD BE REQUIRED TO CUT BACK OR STOP
OPERATIONS IF WE ARE UNABLE TO RAISE OR OBTAIN NEEDED FUNDING.
Our ability to continue operations will depend on our positive cash
flow, if any, from future operations and on our ability to raise additional
funds through equity or debt financing. Through the nine months ended August 30,
2003, we have raised $9,914,079 through the sale of 3,238,981 shares of our
common stock and 317,500 shares of common stock purchase warrants in private
placement transactions and had an outstanding loan balance of $5,757,000 with
CIT Group, Inc., with whom we have entered into financing agreements. These
sources of financing are used to fund our continuing operations and for working
capital. As of August 30, 2003, we had $6,649,000 of factored receivables with
CIT. While we had no liability with CIT as of August 30, 2003 due to the amount
of factored receivables, our financial position may change such that there may
be the need for us to continue to raise needed funds through a mix of equity and
debt financing to fund our operations and working capital. Equity financing will
usually result in existing stockholders becoming "diluted." A high degree of
dilutions can make it difficult for the price of our common stock to rise
rapidly, among other things. Dilution also lessens a stockholder's voting power.
We do not know if we will be able to continue to raise additional
funding or if such funding will be available on favorable terms. We could be
required to cut back or stop operations if we are unable to raise or obtain
needed funding.
7
OUR CASH REQUIREMENTS TO RUN OUR BUSINESS HAVE BEEN AND WILL CONTINUE TO BE
SIGNIFICANT.
Since 1997, our negative operating cash flow and losses from continuing
operations have been as follows:
Negative (positive) Cash Flow
from Operating Losses (Income)
Activities of from Continuing
Nine months ended: Continuing Operations Operations
------------------ --------------------- ----------
August 30, 2003 $7,615,000 $2,524,000
Fiscal year ended:
------------------
December 1, 2002 ($1,504,000) ($ 572,000)
December 1, 2001 $ 632,000 $ 618,000
November 30, 2000 $4,598,000 $5,056,000
November 30, 1999 $2,124,000 $1,340,000
November 30, 1998 $1,238,000 $2,267,000
November 30, 1997 $1,339,000 $1,729,000
Since fiscal 1996, we have experienced positive cash flow from our
operating activities only in fiscal 2002. As of August 30, 2003, we had an
accumulated deficit of approximately $36,032,000.
Although we have undertaken numerous measures to increase sales and
operate more efficiently, we may experience further losses and negative cash
flows. We can give you no assurance that we will in fact operate profitably in
the future.
WE MUST EXPNAD SALES OF OUR EXISTING PRODUCTS AND SUCCESSFULLY INTRODUCE NEW
PRODUCTS THAT RESPOND TO CONSTANTLY CHANGING FASHION TRENDS AND CONSUMER DEMANDS
TO INCREASE REVENUES AND ATTAIN PROFITABILITY.
Our success will depend on our ability to expand sales of our current
products to new and existing customers, as well as the development or
acquisition of new product designs and the acquisition of new licenses that
appeal to a broad range of consumers. We have little control over the demand for
our existing products, and we cannot assure you that the new products we
introduce will be successfully received by consumers. For example, in the past
year, we have acquired licenses to design and market apparel and accessory
products for the recording artists and actors known as "Lil' Bow Wow" and "Eve".
We have spent considerable resources to develop each of these brands. We
believe, but there can be no assurance, that there will be demand for products
associated with "Lil' Bow Wow" and "Eve".
Any failure on our part to anticipate, identify and respond effectively
to changing consumer demands and fashion trends could adversely affect the
acceptance of our products and leave us with a substantial amount of unsold
inventory or missed opportunities. If that occurs, we may be forced to rely on
markdowns or promotional sales to dispose of excess, slow-moving inventory,
which may negatively affect our ability to achieve profitability. At the same
time, our focus on tight management of inventory may result, from time to time,
8
in our not having an adequate supply of products to meet consumer demand and
cause us to lose sales.
A SUBSTANTIAL PORTION OF OUR NET SALES AND GROSS PROFIT IS DERIVED FROM A SMALL
NUMBER OF LARGE CUSTOMERS.
Our ten largest customers accounted for approximately 52% and 68% of
our gross sales during fiscal 2002 and for the nine months ended August 2003,
respectively. We do not enter into long-term agreements with any of our
customers. Instead, we enter into a number of individual purchase order
commitments with our customers. A decision by the controlling owner of a group
of stores or any other significant customer, whether motivated by competitive
conditions, financial difficulties or otherwise, to decrease the amount of
merchandise purchased from us, or to change their manner of doing business with
us, could have a material adverse effect on our financial condition and results
of operations.
WE ARE DEPENDENT ON CERTAIN CONTRACTUAL RELATIONSHIPS TO GENERATE REVENUES.
Our sales are dependent to a significant degree upon the contractual
relationships we can establish with licensors to exploit, on a generally
non-exclusive basis, proprietary rights in well known logos, marks and
characters. Although we believe we will continue to meet all of our material
obligations under such license agreements, there can be no assurance that such
licensing rights will continue or will be available for renewal on favorable
terms. Failure to obtain new licenses or extensions on current licenses or to
sell such products, for any reason, could have a significant negative impact on
our business. In fiscal 2002 and for the nine months ended August 30, 2003,
$13,244,000 (or 43%) and $13,040,000 (or 27%) of our gross revenues were
generated from licensed apparel and accessory products.
We are primarily dependent upon revenues from a certain number of
licenses, namely licenses to produce the Joe's Jeans(R) , Bongo(R), Fetish(R)
and Shago(R) accessory and apparel products. For the nine months ending August
30, 2003, we recorded $1,429,000 in sales of products under our Shago(R)
license. Our first product line to ship under the Shago(R) license was delivered
to retailers during August 2003, making the fall product line our first line
under the Shago(R) license. During that same period, we recorded $1,946,000 and
$9,665,000 in sales of product under our Bongo(R) license and Joe's Jeans(R)
license, respectively. During the same period ending August 30, 2003, we have
not shipped any product under our license with Fetish(R), as the first shipments
were expected to ship beginning after the nine month period ending August 30,
2003 ended.
Our license agreement under the Fetish(R) mark commenced on February
13, 2003 and continues through July 31, 2006. We may elect to renew the Fetish
License Agreement for an additional three-year term, subject to certain
obligations that we must meet regarding minimum sales and other monetary
obligations. We entered into the license agreement for the Shago(R) product line
on October 15 2002, which runs for a period of forty-two months, with Innovo
having a right of first refusal with respect to renewal of the Shago(R) license.
Our license for the Bongo(R) product began March 26, 2001 and was effective
through March 31, 2003. We entered into an amendment on April 1, 2003 to extend
the license through March 31, 2007. We also have the right to exercise an
additional renewal period should we elect to do so in the future. Our license
for Joe's Jeans(R) began in February 2001, and runs for a ten-year period, with
an option for two addition ten-year renewal periods.
9
WE ARE CURRENTLY DEPENDENT ON SUPPLY AND DISTRIBUTION ARRANGEMENTS WITH COMMERCE
INVESTMENT GROUP AND OUR RELATED ENTITIES TO GENERATE A SUBSTANTIAL PORTION OF
OUR REVENUES.
During 2000, we entered into supply and distribution arrangements with
Commerce Investment Group, LLC ("CIG") and affiliated entities (collectively,
the "Commerce Group"). Under the terms of the arrangements, the Commerce Group
purchased equity securities of Innovo. and we became obligated to manufacture
and distribute all of our craft products with the Commerce Group for a two-year
period, with an automatic renewal for an additional two-year term. In 2002, we
renewed these arrangements for another two years. In July 2003, we entered into
another supply agreement with an Azteca affiliate, AZT International SA de CV, a
Mexico corporation ("AZT"). Pursuant to this agreement, we purchase certain
products, particularly the products to be sold by us under our Blue Concepts
division acquired on July 17, 2003 from AZT. In addition, Innovo has verbal
agreements with Azteca and/or its affiliates regarding the supply and
distribution of other apparel products, including certain denim products for our
Fetish(R) and Shago(R) branded accessory and apparel lines. We rent warehouse
space in Los Angeles from Azteca. The loss of our supply and distribution
arrangements with the Commerce Group could adversely affect the our current
supply and distribution responsibilities, primarily because if we, due to
unforeseen circumstances that may occur in the future, are unable to utilize the
services for manufacturing, warehouse and distribution provided by the Commerce
Group, such inability may adversely affect our operations until we are able to
secure manufacturing, warehousing and distribution arrangements with other
suppliers that could provide the magnitude of services to us that the Commerce
Group currently provide.
CIG is an entity controlled by Hubert Guez and Paul Guez (the "Guez
Brothers"). The Guez Brothers are affiliates of Innovo, and based on a Schedule
13D/A filed by the Guez Brothers on October 29, 2003 with the SEC, the Guez
Brothers beneficially owned approximately 8% of our outstanding common stock.
We outsource a substantial amount of our products to be manufactured to
CIG. In fiscal 2002, we purchased approximately $16 million in goods and
services from CIG or approximately 80% of our manufacturing and distribution
costs. In the nine months ended August 30, 2003, we purchased approximately
$23.2 million in goods and services from CIG or its affiliates, or 66% of our
manufacturing and distribution costs.
Should we, due to unforeseen circumstances that may occur in the
future, be unable to utilize the services for manufacturing, warehouse and
distribution provided by CIG and/or its affiliates, such inability may adversely
affect our operations until we are able to secure manufacturing, warehousing and
distribution agreements with other suppliers that could provide the magnitude of
services to us that CIG and its affiliates currently provide.
THE SEASONAL NATURE OF OUR BUSINESS MAKES MANAGEMENT MORE DIFFICULT, SEVERELY
REDUCES CASH FLOW AND LIQUIDITY DURING PARTS OF THE YEAR AND COULD FORCE US TO
CURTAIL OPERATIONS.
Our business is seasonal. The majority of our marketing and sales
activities take place from late fall to early spring. Our greatest volume of
shipments and sales occur from late spring through the summer, which coincides
with our second and third fiscal quarters. Our cash flow is strongest in the
third and fourth fiscal quarters. Unfavorable economic conditions affecting
retailers during the fall and holiday seasons in any year could have a material
adverse effect on our results of operations for the year. We are likely to
experience periods of negative cash flow throughout each year and a drop-off in
10
business commencing each December, which could force us to curtail operations if
adequate liquidity is not available. We cannot assure you that the effects of
such seasonality will diminish in the future.
THE LOSS OF THE SERVICES OF KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
Our executive officers have substantial experience and expertise in our
business and have made significant contributions to our growth and success. The
unexpected loss of services of one or more of these individuals could also
adversely affect us. We are currently not protected by a key-man or similar life
insurance covering any of our executive officers, nor do we have written
employment agreements with our Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer or President. If, for example, any one of these
executive officers should leave us, his or her services would likely have a
substantial impact on our ability to operate, on a daily basis because we would
be forced to find and hire similarly experienced personnel to fill one or more
of those positions, and daily operations may suffer temporarily as a result.
Furthermore, with respect to Joe's, while we maintains an employment
agreement with Joe Dahan, Joe's president, should Mr. Dahan, leave Joe's, his
experience, design capabilities, and name recognition in the apparel and
accessory industry could materially adversely affect the operations of Joe's,
since Joe's relies heavily on his capabilities to design, direct and produce
product for the Joe's brand.
OUR BUSINESS COULD BE NEGATIVELY IMPACTED BY THE FINANCIAL INSTABILITY OR
CONSOLIDATION OF OUR CUSTOMERS.
We sell our product primarily to retail, private label and distribution
companies around the world based on pre-qualified payment terms. Financial
difficulties of a customer could cause us to curtail business with that
customer. We may also assume more credit risk relating to that customer's
receivables. Our inability to collect on our trade accounts receivable from any
one of these customers could have a material adverse effect on our business or
financial condition. More specifically, we are dependent primarily on lines of
credit that we establish from time to time with customers, and should a
substantial number of customers become unable to pay their respective debts as
they become due, we may be unable to collect some or all of the monies owed by
those customers.
Our current practice is to extend terms to a majority of our customers,
which is based on such factors as past credit history with us, reputation of
creditworthiness within our industry, and timelines of payments made to us. A
small percentage of our customers are required to pay by either credit card or
C.O.D., which is also based on such factors as lack of credit history,
reputation (or lack thereof) within our industry and/or prior negative payment
history. For these customers to whom we extend credit, typical terms are net 30
to 60 days. Our management exercises professional judgment in determining which
customers shall be extended credit, which is based on industry practices
applicable to our business, financial awareness of the customers with whom we
conduct business, and business experience of our industry. As of August 30,
2003, we had $2,818,000 in accounts receivable from our customers.
Furthermore, in recent years, the retail industry has experienced
consolidation and other ownership changes. Some of our customers, such as The
Warnaco Group, Inc. have operated under the protection of the federal bankruptcy
laws. While to date these changes in the retail industry have not had a material
adverse effect on our business or financial condition, our business could be
materially affected by these changes in the future.
11
OUR BUSINESS COULD SUFFER AS A RESULT OF MANUFACTURER'S INABILITY TO PRODUCE OUR
GOODS ON TIME AND TO OUR SPECIFICATIONS.
We do not own or operate any manufacturing facilities and therefore
depend upon independent third parties for the manufacture of all of our
products. Our products are manufactured to our specifications by both domestic
and international manufacturers. During fiscal 2002, approximately 24%, of our
products were manufactured in the United States and approximately 76% of our
products were manufactured in foreign countries. During the nine months ended
August 2003, approximately 14%, of our products were manufactured in the United
States and approximately 86% of our products were manufactured in foreign
countries. The inability of a manufacturer to ship orders of our products in a
timely manner or to meet our quality standards could cause us to miss the
delivery date requirements of our customers for those items, which could result
in cancellation of orders, refusal to accept deliveries or a reduction in
purchase prices, any of which could have a material adverse effect on our
financial condition and results of operations. Because of the seasonality of our
business, and the apparel and fashion business in particular, the dates on which
customers need and require shipments of products from us are critical, as styles
and consumer tastes change so rapidly in the apparel and fashion business,
particularly from one season to the next. Further, because quality is a leading
factor when customers and retailers accept or reject goods, any decline in
quality by our third-party manufacturers could be detrimental not only to a
particular order, but also to our future relationship with that particular
customer.
OUR BUSINESS COULD SUFFER IF WE NEED TO REPLACE MANUFACTURERS.
We compete with other companies for the production capacity of our
manufacturers and import quota capacity. Some of these competitors have greater
financial and other resources than we have, and thus may have an advantage in
the competition for production and import quota capacity. If we experience a
significant increase in demand, or if an existing manufacturer of ours must be
replaced, we may have to expand our third-party manufacturing capacity. We
cannot assure you that this additional capacity will be available when required
on terms that are acceptable to us or similar to existing terms which we have
with our manufacturers, either from a production standpoint or a financial
standpoint. We enter into a number of purchase order commitments each season
specifying a time for delivery, method of payment, design and quality
specifications and other standard industry provisions, but do not have long-term
contracts with any manufacturer. None of the manufacturers we use produces our
products exclusively.
Should we be forced to replace one or more of our manufacturers,
particularly a manufacturer that we may rely upon for a substantial portion of
our production needs, such as CIG and its affiliates, then we may experience an
adverse financial impact, or an adverse operational impact, such as being forced
to pay increased costs for such replacement manufacturing or delays upon
distribution and delivery of our products to our customers, which could cause us
to loose customers or loose revenues because of late shipments.
IF A MANUFACTURER OF OURS FAILS TO USE ACCEPTABLE LABOR PRACTICES, OUR BUSINESS
COULD SUFFER.
While we require our independent manufacturers to operate in compliance
with applicable laws and regulations, we have no control over the ultimate
actions of our independent manufacturers. While our internal and vendor
operating guidelines promote ethical business practices and our staff
periodically visits and monitors the operations of our independent
manufacturers, we do not control these manufacturers or their labor practices.
The violation of labor or other laws by an independent manufacturer of ours, or
12
by one of our licensing partners, or the divergence of an independent
manufacturer's or licensing partner's labor practices from those generally
accepted as ethical in the United States, could interrupt, or otherwise disrupt
the shipment of finished products to us or damage our reputation. Any of these,
in turn, could have a material adverse effect on our financial condition and
results of operations. In particular, the laws governing garment manufacturers
in the State of California impose joint liability upon us and our independent
manufacturers for the labor practices of those independent manufacturers. As a
result, should one of our independent manufacturers be found in violation of
state labor laws, we could suffer financial or other unforeseen consequences.
OUR TRADEMARK AND OTHER INTELLECTUAL PROPERTY RIGHTS MAY NOT BE ADEQUATELY
PROTECTED OUTSIDE THE UNITED STATES.
We believe that our trademarks, whether licensed or owned by us, and
other proprietary rights are important to our success and our competitive
position. In the course of our international expansion, we may, however,
experience conflict with various third parties who acquire or claim ownership
rights in certain trademarks. We cannot assure that the actions we have taken to
establish and protect these trademarks and other proprietary rights will be
adequate to prevent imitation of our products by others or to prevent others
from seeking to block sales of our products as a violation of the trademarks and
proprietary rights of others. Also, we cannot assure you that others will not
assert rights in, or ownership of, trademarks and other proprietary rights of
ours or that we will be able to successfully resolve these types of conflicts to
our satisfaction. In addition, the laws of certain foreign countries may not
protect proprietary rights to the same extent as do the laws of the United
States.
WE CANNOT ASSURE THE SUCCESSFUL IMPLEMENTATION OF OUR GROWTH STRATEGY.
As part of our growth strategy, we seek to expand our geographic
coverage, strategically acquiring select licensees and enhancing our operations.
We may have difficulty hiring and retaining qualified key employees or otherwise
successfully managing the required expansion of our infrastructure in our
current United States market and other international markets we may enter.
Furthermore, we cannot assure you that we will be able to successfully integrate
the business of any licensee that we acquire into our own business or achieve
any expected cost savings or synergies from such integration.
OUR BUSINESS IS EXPOSED TO DOMESTIC AND FOREIGN CURRENCY FLUCTUATIONS.
We generally purchase our products in U.S. dollars. However, we source
most of our products overseas and, as such, the cost of these products may be
affected by changes in the value of the relevant currencies. Changes in currency
exchange rates may also affect the relative prices at which we and our foreign
competitors sell products in the same market. We currently do not hedge our
exposure to changes in foreign currency exchange rates. We cannot assure you
that foreign currency fluctuations will not have a material adverse impact on
our financial condition and results of operations. For example, we are subject
to currency fluctuations in Japan and Hong Kong. In fiscal 2002, our earnings
were negatively impacted by $41,000 due to currency fluctuations in Japan and
Hong Kong. For the nine months ended August 2003, our earnings were positively
impacted by $74,000 due to currency fluctuations in Japan and Hong Kong.
13
OUR ABILITY TO CONDUCT BUSINESS IN INTERNATIONAL MARKETS MAY BE AFFECTED BY
LEGAL, REGULATORY, POLITICAL AND ECONOMIC RISKS.
Our ability to capitalize on growth in new international markets and to
maintain the current level of operations in our existing international markets
is subject to risks associated with international operations. These include:
- the burdens of complying with a variety of foreign laws and
regulations,
- unexpected changes in regulatory requirements, and
- new tariffs or other barriers to some international markets.
We are also subject to general political and economic risks associated
with conducting international business, including:
- political instability,
- changes in diplomatic and trade relationships, and
- general economic fluctuations in specific countries or markets.
We cannot predict whether quotas, duties, taxes, or other similar
restrictions will be imposed by the United States, the European Union, China,
Japan, or other countries upon the import or export of our products in the
future, or what effect any of these actions would have on our business,
financial condition or results of operations. Changes in regulatory,
geopolitical policies and other factors may adversely affect our business in the
future or may require us to modify our current business practices.
WE FACE INTENSE COMPETITION IN THE WORLDWIDE APPAREL AND ACCESSORY INDUSTRY.
We face a variety of competitive challenges from other domestic and
foreign fashion-oriented apparel and accessory producers, some of which may be
significantly larger and more diversified and have greater financial and
marketing resources than we have. We do not currently hold a dominant
competitive position in any market. We compete with our competitors, including
Kellwood, Jones Apparel Group, and VF Corp. primarily on the basis of:
- anticipating and responding to changing consumer demands in a timely
manner,
- maintaining favorable brand recognition,
- developing innovative, high-quality products in sizes, colors and
styles that appeal to consumers,
- appropriately pricing products,
- providing strong and effective marketing support,
- creating an acceptable value proposition for retail customers,
- ensuring product availability and optimizing supply chain
14
efficiencies with manufacturers and retailers, and
- obtaining sufficient retail floor space and effective presentation
of our products at retail.
A DOWNTURN IN THE ECONOMY MAY AFFECT CONSUMER PURCHASES OF DISCRETIONARY ITEMS,
WHICH COULD ADVERSELY AFFECT OUR SALES.
The fashion apparel and accessory industry in which we operate are
cyclical. Many factors affect the level of consumer spending in the apparel,
accessories and craft industries, including, among others:
- general business conditions,
- interest rates,
- the availability of consumer credit,
- taxation, and
- consumer confidence in future economic conditions.
Consumer purchases of discretionary items, including accessory and
apparel products, including our products, may decline during recessionary
periods and also may decline at other times when disposable income is lower. A
downturn in the economies in which we sell our products, whether in the United
States or abroad, may adversely affect our sales.
IMPACT OF POTENTIAL FUTURE ACQUISITIONS.
From time to time, we have pursued, and may continue to pursue,
acquisitions. Most recently, we acquired the Blue Concepts division from Azteca
Production International, Inc., which is owned by our affiliates Mr. Hubert Guez
and Paul Guez. We issued a $21.8 million Convertible Note for the acquisition,
which has increased our long-term debt by over 600%. Additional acquisitions may
result in us becoming substantially more leveraged on a consolidated basis, and
may adversely affect our ability to respond to adverse changes in economic,
business or market conditions.
USE OF PROCEEDS
Each selling stockholder will receive all of the proceeds from the sale
of its common stock offered by this prospectus. We will not receive any of the
proceeds from the sale of the shares of common stock offered by the selling
stockholders. We will, however, receive the exercise price with respect to
warrants to purchase 398,002 shares of our common stock, when exercised by the
selling stockholders who hold them unless a holder elects to effect a "cashless"
exercise. If all the warrants are exercised, we estimate our net proceeds would
be $630,000 (reduced to the extent any warrants are exercised on a "cashless"
basis). Each of the warrants includes a cashless exercise option, pursuant to
which the holder thereof can exercise the warrant without paying the exercise
price in cash. If the holder elects to use this cashless exercise option, it
will receive a fewer number of our shares than it would have received if the
exercise price were paid in cash. The number of our shares a holder of the
warrant would receive in connection with a cashless exercise is determined in
accordance with a formula set forth in the applicable warrant. There can be no
15
assurance that we will receive any payments even if all of the warrants are
exercised. Any proceeds received will be used for working capital, inventory
purchases and other general corporate purposes.
DIVIDEND POLICY
We have never declared or paid a dividend on our common stock. We
intend to retain earnings to finance the growth and development of our business
and do not expect to declare or pay any cash dividends on our common stock in
the foreseeable future. The declaration of dividends is within the discretion of
our board of directors, which will review this dividend policy from time to
time. See "Risk Factors - We Do Not Anticipate Paying Any Dividends on the
Common Stock."
SELLING STOCKHOLDERS
The table below sets forth information regarding ownership of our
common stock by the selling stockholders on November 3, 2003 and the shares of
common stock to be sold by them under this prospectus. Beneficial ownership is
determined in accordance with SEC rules and includes voting or investment power
with respect to the securities. Except as indicated by footnote, and subject to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them. SEC rules require that the number of shares of
common stock outstanding used in calculating the percentage for each listed
person includes the shares of common stock underlying the warrants or options
held by such person that are exercisable within 60 days of November 3, 2003. As
of December 8, 2003, 25,336,278 shares of our common stock were outstanding.
Securities Owned Prior to Offering Securities Owned After Offering
---------------------------------- -------------------------------
Percent
of Shares of Number of Percent of
Name of Selling Shares of Common Common Common Stock Shares of Common
Stockholder Stock Stock Offered Hereby Common Stock Stock
Samuel J. (Sam) Furrow, 3,131,600 (2) 12% 530,946 2,600,654 10%
Sr.(1)
Samuel J. (Jay) Furrow, 1,410,592 (4) 6% 530,946 879,646 3%
Jr.(3)
Commerce Investment Group, 2,069,689 (5) 8% 1,706,052 363,637 1%
LLC
Integrated Apparel, LLC 1,021,428 (6) 4% 1,021,428 0 *
16
Securities Owned Prior to Offering Securities Owned After Offering
---------------------------------- -------------------------------
Percent
of Shares of Number of Percent of
Name of Selling Shares of Common Common Common Stock Shares of Common
Stockholder Stock Stock Offered Hereby Common Stock Stock
S.H.D. Investments, LLC 285,714 (7) 1% 285,714 0 *
MidAtlantic Agency, Inc. 72,183 (8) * 72,183 0 *
Innavation, LLC 2,627,276(9) 10% 2,627,276 0 *
C. J. Rahm, L.P. 173,283 (10) * 173,283 0 *
FBV Family Limited 50,000 (11) * 50,000 0 *
Partnership LP
Griffin James Aron Guez 142,857 (12) * 142,857 250,000 1%
Irrevocable Trust dated
Sept. 13, 1996
Stephan Avner Felix Guez 392,857 (13) 2% 392,857 0 *
Irrevocable Trust dated
Sept. 13, 1996
Nir Levitan 18,750 * 18,750 0 *
Alec Land 45,205 * 45,205 0 *
Eyal Ben-Yosef 1,792 * 1,792 0 *
Lon Morton Family Limited 5,817 (14) * 5,817 0 *
Partnership
Gerald Pinsky 1,782 * 1,782 0 *
Milton Koffman 4,325 * 4,325 0 *
Mark Friedman 2,112 * 2,112 0 *
Max Candiotty 4,430 * 4,430 0 *
17
Securities Owned Prior to Offering Securities Owned After Offering
---------------------------------- -------------------------------
Percent
of Shares of Number of Percent of
Name of Selling Shares of Common Common Common Stock Shares of Common
Stockholder Stock Stock Offered Hereby Common Stock Stock
Martin Kaufman 9,018 * 9,018 0 *
Fredrick Benetti 1,803 * 1,803 0 *
Brentwood Holding Company, 7,214 (15) * 7,214 0 *
G.P.
Jewelcor Management, Inc. 11,018 (16) * 11, 018 0 *
New Valu, Inc. 4,408 (17) * 4,408 0 *
Ann Seccombe and Roger R. 3,607 * 3,607 0 *
Williams
TOTALS 11,498,760 45% 7,654,823 4,093,937 16%
* Less than 1% of outstanding shares.
(1) Sam Furrow became a director of the Innovo in April 1998 and Innovo's
Chairman in October 1998, and served as Chief Executive Officer from
October 1998 through December 2000.
(2) Includes 48,002 shares available upon exercise of presently exercisable
options or those exercisable within 60 days.
(3) Jay Furrow, Sam Furrow's son, became Innovo's Vice President for
Corporate Development and In-House Counsel in August 1998 and a
Director in January 1999. Mr. Furrow served as President from December
2000 until July 2002, when he became Chief Executive Officer. He has
also served as the Innovo's Chief Operating Officer from April 1999 to
May 2003 and its Acting Chief Financial Officer from August 2000 to
March 2003.
(4) Includes 350,000 shares available upon exercise of presently
exercisable options or those exercisable within 60 days.
(5) Based on a Schedule 13D filed on October 29, 2003, reporting beneficial
ownership of 2,069,689 shares for which it holds sole voting and
investment power. Includes 300,000 shares available upon exercise of
presently exercisable warrants. Mr. Hubert Guez and his brother Mr.
Paul Guez are joint owners of Commerce Investment Group, LLC
("Commerce"). As such they have shared voting power with respect to the
shares of our common stock reported in the table for Commerce.
Accordingly, they may be deemed the beneficial owners of these shares
as a result of possessing these powers.
18
(6) Based on a Schedule 13D filed on October 29, 2003, reporting beneficial
ownership of 1,021,428 shares for which it holds sole voting and
investment power. Mr. Hubert Guez and his brother Mr. Paul Guez are
joint owners of Integrated Apparel LLC ("Integrated"). As such they
have shared voting power with respect to the shares of our common stock
reported in the table for Integrated. Accordingly, they may be deemed
the beneficial owner of these shares as a result of possessing these
powers.
(7) Based on a Schedule 13D filed on October 29, 2003, reporting beneficial
ownership of 285,714 shares for which it holds sole voting and
investment powers. Mr. Paul Guez is the President of S.H.D.
Investments, LLC ("SHD"). As such, Mr. Paul Guez may be deemed to have
sole voting power with respect to the shares of our common stock
reported in the table for SHD. Accordingly, he may be deemed to be the
beneficial owner of these shares as a result of possessing these
powers.
(8) Based on a Schedule13D filed on October 30, 2003, by Mr. Joseph
Mizrachi and Mr. Simon Mizrachi, reporting beneficial ownership of
72,183 shares of Innovo common stock. Mr. Simon Mizrachi is the
President of Mid Atlantic Agency, Inc. As President, Mr. Simon Mizrachi
may be deemed to have sole voting and dispositive power, with respect
to these shares, and accordingly, may be deemed the beneficial owner of
these shares.
(9) Based on a Form 4 filed on October 30, 2003 by Seymour Braun, reporting
beneficial ownership of 2,627,276 shares of Innovo common stock.
Innavation, LLC ("Innavation") is owned 85% by Yardworth Mortgage Corp.
("Yardworth"). Praha Trust ("Praha") is the beneficial owner of
Yardworth. As sole trustee of Praha, Seymour Braun has the right to
vote all shares owned by Innavation. Mr. Seymour Braun, as the sole
trustee of Praha, which beneficially owns Yardworth, has the sole power
to vote or direct the vote and dispose or direct the disposition of
2,627,276 shares of Innovo common stock. Mr. Braun's seven children are
the sole beneficiaries of the Praha Trust. We had previously listed
this selling stockholder as Innovation, LLC but have been informed by
Mr. Seymour Braun that the name is Innavation, LLC.
(10) Based on Schedule 13D filed on October 29, 2003, by Mr. Joseph Mizrachi
and Mr. Simon Mizrachi, reporting beneficial ownership of 197,183
shares of Innovo common stock held for the account of C.J. Rahm, L.P.
("CJ Rahm"). Mr. Joseph Mizrachi is the advisor to CJ Rahm and Mr.
Simon Mizrachi is the President of SAT Holdings, Inc., the general
partner of CJ Rahm. Each of Mr. Joseph Mizrachi, as advisor to CJ Rahm,
and Mr. Simon Mizrachi as President of the general partner of CJ Rahm,
may be deemed to have sole voting and dispositive power with respect to
these shares, and thus, may be deemed the beneficial owner of these
shares.
(11) The partnership interest of FBV Family Limited Partnership, L.P.
("FBV") is owned jointly by Frederick Benetti and his wife, Vera
Benetti. As the managing partner of FBV, Frederick Benetti may be
deemed to have sole voting and dispositive power with respect to these
shares, and thus, may be deemed to be the beneficial owner of these
shares.
(12) Based on a Schedule 13D filed on October 29, 2003, the Griffin James
Aron Guez Irrevocable Trust ("Griffin Trust") has sole voting and
dispositive power over 142,857 shares, and accordingly, may be deemed
19
beneficial owner of these shares. Ms. Marguerite Guez, Mr. Hubert
Guez's mother, serves as trustee of the Griffin Trust.
(13) Based on a Schedule 13D filed on October 29, 2003, the Stephan Avner
Felix Guez Irrevocable Trust ("Stephan Trust") has sole voting and
dispositive power over 392,857 shares, and accordingly, may be deemed
beneficial owner of these shares. Ms. Marguerite Guez, Mr. Hubert
Guez's mother, serves as trustee of the Stephan Trust.
(14) The partnership interest of the Lon Morton Family Limited Partnership
("Lon Morton FLP") is controlled by Lon Morton. As general partner of
the Lon Morton FLP, Lon Morton may be deemed to have sole voting and
dispositive power with respect to these shares, and thus, may be deemed
to be the beneficial owner of these shares.
(15) The partnership interest of Brentwood Holding Company, G.P.
("Brentwood") is owned one-third by Frederick Benetti and his wife,
Vera Benetti; one-third by Frederick Benetti's brother, John Benetti,
and his wife, Elenor Benetti; and one-third by Anna Tuccori. As
managing partner of Brentwood, Mr. Frederick Benetti may be deemed to
have sole voting and dispositive power with respect to these shares,
and thus, may be deemed the beneficial owner of those shares.
(16) The ownership interest of Jewelcor Management, Inc. ("Jewelcor
Management") is owned 100 % by Jewelcor, Inc. ("Jewelcor"). 100% of the
outstanding stock of Jewelcor is owned by SH Holdings, Inc. ("SH"), of
which 91% of the outstanding stock is owned by Seymour Holtzman and his
wife, Evelyn Holtzman, as tenants by the entirety. As such and as the
President of SH, as President and Chairman of Jewelcor, and as
President and Chairman of Jewelcor Management, Mr. Holtzman may be
deemed to have sole voting and dispositive power with respect to these
shares, and thus, may be deemed to be the beneficial owner of these
shares.
(17) Messrs. Milton Koffman and Burton Koffman, Milton Koffman's nephew, are
joint owners of New Valu, Inc. ("New Valu"). As such, they have shared
voting power with respect to these shares. Accordingly, they may be
deemed the beneficial owners of these shares as a result of possessing
these powers
Except as otherwise disclosed above or in documents incorporated herein
by reference, the selling stockholders, have not within the past three years had
any position, office or other material relationship with us or any of our
predecessors or affiliates. Because the selling stockholders may sell all or
some portion of the shares of common stock beneficially owned by them, only an
estimate (assuming the selling stockholders sell all of the shares offered
hereby) can be given as to the number of shares of common stock that will be
beneficially owned by the selling stockholders after this offering. In addition,
the selling stockholders may have sold, transferred or otherwise disposed of, or
may sell, transfer or otherwise dispose of, at any time or from time to time
since the dates on which they provided the information regarding the shares
beneficially owned by them, all or a portion of the shares beneficially owned by
them in transactions registered under other effective registration
The preceding table has been prepared based upon the information
furnished to us by the selling stockholders. The selling stockholders identified
above may have sold, transferred or otherwise disposed of some or all of their
common stock in transactions exempt from the registration requirements of the
20
Securities Act since the dates on which they provided the information
regarding the common stock beneficially owned by them. Information concerning
the selling stockholder may change from time to time and, if necessary, we will
supplement this prospectus accordingly.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock at
various times in one or more of the following transactions:
o on any U.S. securities exchange on which our common stock may be
listed at the time of such sale;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in connection with short sales; or
o in a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at
prevailing market prices, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices. The selling stockholders may transfer
shares to discharge indebtedness, as payment for goods or services, or for other
non-cash consideration.
The selling stockholders may use broker-dealers to sell their shares of
common stock. If this occurs, broker-dealers will either receive discounts or
commission from the selling stockholder, or they will receive commissions from
the purchasers of shares of common stock for whom they acted as agents. These
brokers may act as dealers by purchasing any and all of the shares covered by
this prospectus either as agents for others or as principals for their own
accounts and reselling these securities under the prospectus.
The selling stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be considered underwriters under the Securities Act. As such, any commissions or
profits they receive on the resale of the shares may be considered underwriting
discounts and commissions under the Securities Act.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the selling
stockholders with respect to the offer or sale of the shares under this
prospectus. Each of MidAtlantic Agency, Inc., C. J. Rahm, L.P. and Jewelcor
Management, Inc. is an affiliate of broker-dealer, Mr. Joseph Mizrachi
(collectively, the "Broker-Dealer Affiliates"). Each Broker-Dealer Affiliate has
represented to us that it purchased the shares registered for resale under this
prospectus in the ordinary course of business and for its own account, and that
at the time of the purchase of these shares, each Broker-Dearl Affiliate had no
agreements or understandings, directly or indirectly, with any person to
distribute these shares. If we become aware of any agreement, arrangement or
21
understanding, to the extent required under the Securities Act, we will file a
supplemental prospectus to disclose:
o the name of any of the broker-dealers;
o the number of shares involved;
o the price at which the shares are to be sold;
o the commissions paid or discounts or concessions allowed to
broker-dealers, where applicable;
o that the broker-dealers did not conduct any investigation to verify
the information set out in this prospectus, as supplemented; and
o other facts material to the transaction.
Certain of the agreements with the selling stockholders contain
reciprocal indemnification provisions between us and the selling stockholder to
indemnify each other against certain liabilities, including liabilities under
the Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact.
DESCRIPTION OF SECURITIES
COMMON STOCK
Pursuant to Innovo's Amended and Restated Certificate of Incorporation,
we are authorized to issue 40 million shares of common stock, $.10 par value per
share. As of December 8, 2003, we had outstanding 25,336,278 validly issued,
fully paid and non-assessable shares of common stock.
Holders of the common stock are entitled to one vote for each share
held of record in each matter properly submitted to such holders for a vote.
Subject to the rights of the holders of any other outstanding series of stock
our board of directors may designate from time to time, holders of common stock
are entitled to receive their pro rata share of (i) any dividends that may be
declared by the board of directors out of assets legally available therefore,
and (ii) any excess assets available upon the liquidation, dissolution, or
winding up of Innovo.
The board of directors may issue the additional shares of common stock,
up to the authorization of 40 million shares, without soliciting additional
stockholder approval. The existence of authorized but unissued shares of the
common stock could tend to discourage or render more difficult the completion of
a hostile merger, tender offer or proxy contest. For example, if in the due
exercise of its fiduciary obligations, the board of directors were to determine
that a takeover proposal was not in the best interest of the company and its
stockholders, the ability to issue additional shares of stock without further
stockholder approval could have the effect of rendering more difficult or costly
22
the completion of the takeover transaction, by diluting the voting or other
rights of the proposed acquirer or insurgent stockholder group, by creating a
substantial voting block in hands that might support the position of the board
of directors, by effecting an acquisition that might complicate or preclude the
takeover, or otherwise.
PREFERRED STOCK
Our Amended and Restated Certificate of Incorporation authorizes the
issuance of up to 5 million shares of preferred stock with designations, rights
and preferences determined from time to time by the board of directors.
Accordingly, the board of directors is empowered, without stockholder approval,
to issue preferred stock with dividends, liquidation, conversion, voting and
other rights that could adversely affect the voting power or other rights of the
holders of common stock. In the event of issuance, the preferred stock could be
used, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of Innovo. As of December 8, 2003, we had
outstanding 4,806,000 validly issued, fully paid and non-assessable shares of
preferred stock.
CERTAIN PROVISIONS RELATING TO SHARE ACQUISITIONS
Section 203 of the Delaware General Corporation Law generally prevents
a corporation from entering into certain business combinations with an
interested stockholder (defined as any person or entity that is the beneficial
owner of at least 15% of a corporation's voting stock) or its affiliates for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) the transaction is approved by the
board of directors of the corporation prior to such business combination, (ii)
the interested stockholder acquires 85% of the corporation's voting stock in the
same transaction in which it exceeds 15%, or (iii) the business combination is
approved by the board of directors and by a vote of two-thirds of the
outstanding voting stock not owned by the interested stockholder. The Delaware
General Corporation Law provides that a corporation may elect not to be governed
by Section 203. We have made no such election and are therefore governed by
Section 203. Such anti-takeover provision may have an adverse effect on the
market for our securities.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Our Amended and Restated Certificate of Incorporation provides that we
shall indemnify our officers and directors to the fullest extent permitted by
Delaware law, including some instances in which indemnification is otherwise
discretionary under Delaware law. The Amended and Restated Certificate of
Incorporation also provides that, pursuant to Delaware law, our directors shall
not be liable for monetary damages for breach of the director's fiduciary duty
of care to the company and its stockholders. This provision does not eliminate
the duty of care, and, in appropriate circumstances, equitable remedies such as
an injunction or other forms of non-monetary relief would remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the company, for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities for environmental laws.
23
At present, there is no pending litigation or proceeding involving a
director or officer of Innovo as to which indemnification is being sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
TRANSFER AND WARRANT AGENT
The transfer agent for our common stock is North American Transfer Co.,
147 W. Merrick Road, Freeport, New York 11520.
ENGAGEMENT OF RESEARCH FIRM
In or about February 2002, we engaged Barrow Street Research, Inc.
("Barrow"), an independent New York City-based research firm to prepare and
issue a basic research report on Innovo to better inform the investing public of
our long term prospects. We paid Barrow $6,000.00 for writing and disseminating
its report, inclusion of the report on Barrow's website for the remainder of
2002, as well as continued coverage of Innovo by Barrow in 2002, which included
a mid-year update of our prospects. We also engaged Barrow to prepare a business
plan for Innovo. We paid Barrow $13,209.00 for (i) the preparation of the
business plan and (ii) reimbursement of expenses. We did not, at any time, issue
our securities to Barrow as compensation for its services and is not aware of
any holdings of our securities by Barrow or its affiliates. We currently do not
have any relationships, financial or otherwise, with any research firms that
publish reports about Innovo.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference rooms at 450 Fifth Street, N.W., Washington, DC 20549. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Securities and Exchange Commission filings are
also available to the public from the Securities and Exchange Commission's
website at "http://www.sec.gov."
We have filed a registration statement on Form S-1 as amended by this
post-effective amendment No. 3 on Form S-3 with the Securities and Exchange
Commission to register the offering of the shares of common stock offered
pursuant to this prospectus. This prospectus is part of that registration
statement and, as permitted by the Securities and Exchange Commission's rules,
does not contain all of the information included in the registration statement.
For further information about us, this offering and our common stock, you may
refer to the registration statement and its exhibits and schedules as well as
the documents described below. You can review and copy these documents at the
public reference facilities maintained by the Securities and Exchange Commission
or on the Securities and Exchange Commission's website as described above.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
24
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is considered to be an important part of
this prospectus, and information that we file with the Securities and Exchange
Commission at a later date will automatically update or supersede this
information. We incorporate by reference the following documents as well as any
future filing we will make with the Securities and Exchange Commission (File No.
0-18926) under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
1. Our annual report on Form 10-K for the fiscal year ended November
30, 2002, as amended by Form 10-K/A filings filed on March 27, 2003
and December 9, 2003;
2. Our Definitive Proxy Statement on Schedule 14A filed with the SEC on
April 24, 2003;
3. Our Quarterly Report on Form 10-Q for the three months ended March
1, 2003;
4. Our Current Report on Form 8-K filed with the SEC on March 17, 2003;
5. Our Current Report on Form 8-K filed with the SEC on April 15, 2003;
6. Our Quarterly Report on Form 10-Q for the six months ended May 31,
2003;
7. Our Current Report on Form 8-K filed with the SEC on August 1, 2003;
8. Our Current Report on Form 8-K/A filed with the SEC on September 30,
2003;
9. Our Current Report on Form 8-K/A filed with the SEC on October 17,
2003; and
10. Our Quarterly Report on Form 10-Q for the nine months ended August
30, 2003, as amended by a Form 10-Q/A filing filed on October 17,
2003.
11. Our Current Report on Form 8-K filed with the SEC on December 2,
2003.
You may request a copy of these filings, at no cost, by writing to or
calling Donna Drewrey, Innovo Group Inc., 2633 Kingston Pike, Suite 100,
Knoxville, Tennessee 37919, telephone 865-546-1110.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for Innovo by Sim Moss Kline & Davis, L.L.P.
25
EXPERTS
The consolidated financial statements of the Innovo Group Inc.
appearing in Innovo Group Inc.'s Annual Report (Form 10-K) for the year ended
November 30, 2002 and the year ended December 1, 2001 have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
CAUTIONARY STATEMENTS
No person has been authorized to give any information or to make any
representation not contained in this prospectus in connection with this offering
of common stock and, if given or made, no one may rely on such unauthorized
information or representations. This prospectus does not constitute an offer to
sell or the solicitation of an offer to buy any securities other than the common
stock to which it relates, or an offer to sell or the solicitation of an offer
to buy such securities in any jurisdiction in which such offer or solicitation
may not be legally made. Neither the delivery of this prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 2,047
Nasdaq fee --
Accounting fees and expenses 15,000
Legal fees and expenses 25,000
Printing and engraving expenses 500
Blue Sky fees and expenses --
Transfer Agent and Registrar fee --
Miscellaneous expenses 500
------
$ 43,047
Item 15. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, a
corporation may indemnify any of its directors and officers against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding (i) if any such person acted in good faith and in a manner
reasonably believed to be in or not opposed to be the best interests of the
corporation, and (ii) in connection with any criminal action or proceeding if
such person had no reasonable cause to believe such conduct was unlawful. In
actions brought by or in the right of the corporation, however, Section 145
provides that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of such person's duty to the
corporation unless, and only to the extent that, the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
review of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. Article Nine of the registrant's Amended
and Restated Certificate of Incorporation requires that the registrant indemnify
its directors and officers for certain liabilities incurred in the performance
of their duties on behalf of the registrant to the fullest extent allowed by
Delaware law.
The registrant's Amended and Restated Certificate of Incorporation
relieves the directors from personal liability to the registrant or to
stockholders for breach of any such director's fiduciary duty as a director to
the fullest extent permitted by the Delaware General Corporation Law. Under
Section 102(b)(7) of the Delaware General Corporation Law, a corporation may
relieve its directors from personal liability to such corporation or its
stockholders for monetary damages for any breach of their fiduciary duty as
directors except (i) for a breach of the duty of loyalty, (ii) for failure to
act in good faith, (iii) for intentional misconduct or knowing violation of law,
(iv) for willful or negligent violations of certain provisions of the Delaware
General Corporation Law imposing certain requirements with respect to stock
Part II-1
repurchases, redemptions and dividends, or (v) for any transaction from which
the director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
registrant pursuant to the foregoing provisions, the registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 16. Exhibits
The following exhibits are filed as part of the Registration Statement:
Exhibit Index
Exhibit
Number Description Reference No.
5.1 Opinion of Sims Moss Kline & Davis, LLP. *
23.1 Consent of Ernst & Young, LLP Filed Herewith
24 Power of Attorney **
--------------------------
* Filed as Exhibit 5.1 to original registration statement on Form S-1
(File No. 333-52318) on December 20, 2000.
** Filed as Exhibit 24 to original registration statement on Form S-1.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information in the registration statement; and
Part II-2
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under
Item 14 above, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer of
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel
the 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 Securities Act and
will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Part II-3
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 Commerce, California, on December 9, 2003.
INNOVO GROUP INC.
By: /s/ Samuel J. Furrow, Jr.
-------------------------
Samuel J. Furrow, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
/s/ Samuel J. Furrow, Jr. Chief Executive Officer, December 9, 2003
------------------------- Chief Operating Officer and
Samuel J. Furrow, Jr. Director; Principal Executive
Officer
/s/ Partricia Anderson-Lasko President and Director December 9, 2003
----------------------------
Patricia Anderson-Lasko
/s/ Marc B. Crossman Chief Financial Officer, December 9, 2003
-------------------- Principal Financial Officer,
Marc B. Crossman Principal Accounting Officer
and Director
* Chairman of the Board December 9, 2003
----------------------- and Director
Samuel J. Furrow
* Director December 9, 2003
-----------------------
Daniel Page
* Director ` December 9, 2003
-----------------------
Dr. John Looney
* Director ` December 9, 2003
-----------------------
Suhail Rizvi
* Director December 9, 2003
-----------------------
Kent A. Savage
* Director December 9, 2003
-----------------------
Vincent Sanfilippo
* By: /s/ Samuel J. Furrow, Jr.
-------------------------
Samuel J. Furrow, Jr.
Attorney-in-Fact
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3, No. 333-52318) and related Prospectus of
Innovo Group Inc. for the registration of 7,654,823 shares of its common stock
and to the incorporation by reference therein of our report dated February 4,
2003, with respect to the consolidated financial statements and schedule of
Innovo Group Inc. included in its Annual Report (Form 10-K) for the year ended
November 30, 2002, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Los Angeles, California
December 10, 2003