SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 23, 1996
INNOVO GROUP INC.
_______________________________________________________________________
(Exact name of registrant as specified in charter)
Delaware 0-18926 11-2928178
______________________________________________________________________
(State or other jurisdiction Commission (IRS Employer
of Incorporation File Number) Identification No.)
27 North Main Street, Springfield, Tennessee 37172
______________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 384-0100
Not Applicable
______________________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
Contents
Item 5: Other Events 3
Item 7: Financial Statements and Exhibits 3
Signatures 4
Index to Financial Statements F-1
<PAGE>
ITEM 5. Other Events
On April 12, 1996, Innovo Group Inc. ("the Company") acquired
Thimble Square, Inc. ("Thimble Square"). The Company reported the
acquisition on a Form 8-K filed April 29, 1996, and amended (by Form 8-
K/A) on July 3, 1996 to include historical financial statements of
Thimble Square for the years ended December 31, 1995 and 1994, and pro
forma financial statements for the Company's year ended October 31, 1995
and three months ended February 29, 1996.
This Current Report on Form 8-K is being filed to supplement the
financial statements included in the April 29, 1996 Form 8-K, as amended,
with (i) unaudited financial statements of Thimble Square as of and for
the three months ended March 31, 1996 and 1995, and (iii) pro forma
financial statements for the Company's six months ended May 31, 1996.
Item 7. Financial Statements and Exhibits
(a) Financial Statements for Business Acquired.
The index to financial statements appears at page F-1.
(b) Pro Forma Financial Information.
The index to financial statements appears at page F-1.
(c) Exhibits.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INNOVO GROUP INC.
(Registrant)
Date: September 23, 1996 By:/s/ Patricia Anderson-Lasko
____________________________
Patricia Anderson-Lasko
Chairman/President/CEO
<PAGE>
INDEX TO FINANCIAL STATEMENTS
INNOVO GROUP INC.
Form 8-K
Thimble Square, Inc. (Unaudited)
________________________________
Condensed Combined Balance Sheets as of March 31, 1996
and December 31, 1995 F-2
Condensed Combined Statements of Operations for the
three months ended March 31, 1996 and 1995 F-3
Condensed Combined Statement of Stockholders' Equity
for the three months ended March 31, 1996 F-4
Condensed Combined Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 F-5
Notes to Condensed Combined Financial Statements F-6
Innovo Group Inc. Pro Forma Condensed Consolidated
Financial Statements (Unaudited)
___________________________________________________
Introduction F-8
Pro Forma Condensed Consolidated Statement of Operations
for the six months ended May 31, 1996 F-9
Notes to Pro Forma Condensed Consolidated Statement of
Operations F-10
<PAGE>
Thimble Square, Inc.
Condensed Combined Balance Sheets
(unaudited)
(000's except for share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
ASSETS
CURRENT:
</CAPTION>
<S> <C> <C>
Cash and cash equivalents $ 3 $ 6
Accounts receivable 27 12
Inventories 178 253
Due from stockholders (Note 4) - 39
Other 12 12
_______ _______
Total current assets 220 322
PROPERTY AND EQUIPMENT, net 519 529
INVESTMENT IN INNOVO GROUP (Note 3) 360 -
OTHER ASSETS 40 -
_______ _______
$ 1,139 $ 851
_______ _______
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable 117 118
Current maturities of long-term
debt and capital lease obligations 64 62
Accounts payable 216 207
Accrued expenses 109 99
Deferred revenue (Note 3) 400 -
_______ _______
Total current liabilities 906 486
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION, less current maturities 546 562
DUE TO STOCKHOLDER 75 64
_______ _______
TOTAL LIABILITIES 1,527 1,112
_______ _______
STOCKHOLDERS' EQUITY (Note 4)
Common stock, $100 par - shares
authorized 10,000, issued and
outstanding 600 and 866 60 86
Additional paid-in capital 139 124
Deficit (587) (471)
_______ _______
TOTAL STOCKHOLDERS' EQUITY (388) (261)
_______ _______
$ 1,139 $ 851
_______ _______
</TABLE>
See accompanying notes to condensed combined financial statements.
Thimble Square, Inc.
Condensed Combined Statements of Operations
(Unaudited)
(000's)
<TABLE>
<CAPTION>
Three months ended March 31,
___________________________
1996 1995
____ ____
</CAPTION>
<S> <C> <C> <C>
NET SALES $ 367 $ 1,091
COST OF GOODS SOLD 285 899
______ ______
Gross profit 82 192
OPERATING EXPENSES
Selling, general and administrative 160 142
Depreciation and amortization 14 14
______ ______
Income (loss) from operations (92) 36
INTEREST EXPENSE 24 43
______ ______
NET INCOME (LOSS) $ (116) $ (7)
______ ______
</TABLE>
See accompanying notes to condensed combined financial statements.
<PAGE>
Thimble Square, Inc.
Combined Statements of Stockholders' Equity
Three Months ended March 31, 1996
(000's except for share amounts)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings
______ ______ _________ ________
</CAPTION>
<S> <C> <C> <C>
Balance, January 1, 1996 866 $ 86 $ 124 $ (471)
Capital contribution
(Note 4) - - 31 -
Repurchase and retirement
of common stock (Note 4) (266) (26) (16) -
Net income (loss) - - - (116)
____ ____ _____ _____
Balance, March 31, 1996 600 $ 60 $ 139 $ (587)
____ ____ _____ _____
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
Thimble Square, Inc.
Condensed Combined Statements of Cash Flows
(unaudited)
(000's)
<TABLE>
<CAPTION>
Three months ended March 31,
___________________________
1996 1995
____ ____
</CAPTION>
<S> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 32 $ 1
____ ____
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (1)
____ ____
CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES - (1)
____ ____
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (21) (1)
Repayments of long-term debt (14) (14)
____ ____
CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (35) (15)
____ ____
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (3) (15)
CASH AND CASH EQUIVALENTS,
at beginning of period 6 18
____ ____
CASH AND CASH EQUIVALENTS,
at end of period $ 3 $ 3
____ ____
</TABLE>
See accompanying notes to condensed combined financial statements.
<PAGE>
Thimble Square, Inc.
Notes to Combined Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
On April 12, 1996, Innovo Group Inc. ("Innovo") acquired 100% of the
outstanding common stock of Thimble Square, Inc. ("the Company") and, in
a concurrent transaction, the Company acquired from its stockholders a
plant that it had previously leased from them. The accompanying combined
financial statements have been prepared as if the Company had owned the
plant for all periods presented. The plant (and depreciation expense
thereon) and related mortgage debt, recorded at the stockholder/owners'
historical cost, have been combined with the accounts of the Company.
The lease transaction between the Company and the stockholder/owners has
been eliminated in combination.
The condensed combined financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. These condensed combined financial
statements and the notes thereto should be read in conjunction with the
combined financial statements of the Company included in the Current
Report on Form 8-K of Innovo filed April 29, 1996, as amended.
In the opinion of the management of the Company, the accompanying
unaudited condensed combined financial statements contain all necessary
adjustments to present fairly the financial position, the results of
operations and cash flows for the periods reported. All adjustments are
of a normal recurring natures.
The results of operations for the above periods are not necessarily
indicative of the results to be expected for the full year.
NOTE 2: INVENTORIES
Inventories are stated at the lower of cost, as determined by the
first-in, first-out method, or market.
<PAGE>
Thimble Square, Inc.
Notes to Combined Financial Statements
(Unaudited)
NOTE 2: INVENTORIES (concluded)
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
________ ___________
(000's)
</CAPTION>
<S> <C> <C>
Finished goods $ 23 $ 60
Work-in-process 42 42
Raw materials 64 102
Supplies 49 49
_____ _____
$ 178 $ 253
_____ ______
</TABLE>
NOTE 3: INVESTMENT IN INNOVO
In January, 1996, the Company and Innovo executed an agreement
pursuant to which the Company agreed to provide Innovo with $400,000 of
sew-only services, between February, 1996 and July, 1997, in exchange for
1,200,000 shares of Innovo common stock. The Company transferred 120,000
of such shares to a third party as payment of a finder's fee on the
agreement.
As of April 12, 1996, the date on which Innovo acquired the Company,
no services had been performed. The 1,080,000 shares of Innovo common
stock owned by the Company at the time of its acquisition were
subsequently transferred to Innovo, which cancelled the shares.
NOTE 4: TRANSACTIONS WITH STOCKHOLDERS
The balance due from stockholders results from cash and expense
advances, and does not bear interest. In March, 1996, the balance was
settled when the Company repurchased from a stockholder 266 shares of
common stock at the stockholder's original cost.
Due to stockholder represents unrepaid cash advances to the Company,
which bear interest at the rate of 10% per annum.
During the first quarter of fiscal 1996 certain officer/stockholders
deferred their receipt of portions of their compensation. The deferred
amounts remained unpaid at April 12, 1996 when the Company was acquired
by Innovo. At that time the officer/stockholders forgave the unpaid
amounts. Compensation expense, and an offsetting capital contribution,
has been recorded for these amounts.
Innovo Group Inc. and Subsidiaries
Condensed Consolidated Pro Forma Financial Statements
(unaudited)
Introduction
The accompanying unaudited pro forma condensed consolidated financial
statement is presented to illustrate the effect on the Company's results
of operations of the consummation of the acquisition of Thimble Square.
The unaudited pro forma condensed consolidated statement of operations
for the six months ended May 31, 1996 is based upon the Company's results
of operations for the six months ended May 31, 1996 (which include the
operations of Thimble Square for the period April 1, 1995 to May 31,
1996) and the results of operations for Thimble Square for the period
December 1, 1995 to March 31, 1996. The following pro forma financial
information should be read in conjunction with the pro forma financial
information included in the Company's Current Report on Form 8-K, filed
April 29, 1996, as amended.
The accompanying unaudited pro forma condensed consolidated financial
statements have been prepared for illustrative purposes only and are not
necessarily indicative of the Company's future financial position or
results of operations. Among other things, the unaudited pro forma
condensed consolidated statement of operations reflects adjustments only
for (i) the effects of certain employment contracts with certain key
employees of Thimble Square and (ii) the increase in depreciation and
amortization resulting from recording Thimble Square's assets at
estimated fair value. Not reflected in the pro forma results of
continuing operations are additional cost savings that the Company
believes can be achieved through changes to Thimble Square's
manufacturing operations, and through the use of Thimble Square's
facilities to manufacture Innovo's products during periods of peak
production. Additionally, the Company plans to use Innovo's existing
marketing and sales functions to market Thimble Square's products through
the Company's existing network of marketing organizations and sales
representatives, and to the mass merchant customers with which the
Company has existing relationships. Thimble Square previously has not
made significant use of outside sales representatives, or had significant
sales to Innovo's customers, and has instead relied principally on the
marketing and sales efforts of its own personnel. While there can be no
assurance, the Company believes that these new marketing and sales
efforts could, over time, generate increases in Thimble Square's sales.
<PAGE>
Innovo Group Inc.
Pro Forma Condensed Consolidated
Statement of Continuing Operations
Six Months Ended May 31, 1996
(unaudited)
(000's except for per share information)
<TABLE>
<CAPTION>
Innovo Thimble Pro Forma Pro
Group Square Adjustments Forma
______ _______ ___________ _____
</CAPTION>
<S> <C> <C> <C> <C>
Net sales $ 3,400 $ 433 $ 3,833
Cost of sales 2,003 339 2,342
______ ______ ______
Gross profit 1,397 94 1,491
Operating expenses
Selling, general and
administrative 1,608 254 (50) [A] 1,812
Depreciation and amortization 268 19 49 [B] 336
______ ______ ______
Income (loss) from operations (479) (179) (657)
Interest expense (284) (34) (318)
Other income 166 - 166
______ ______ ______
Income (loss) from continuing
operations $ (597) $ (213) $ (809)
______ ______ ______
Income (loss) from continuing
operations per share $ (.06) $ (.08)
______ ______
Weighted average shares outstanding 9,318 9,824
______ ______
</TABLE>
See notes to pro forma condensed consolidated statement of operations
<PAGE>
Innovo Group Inc.
Notes to Pro Forma Condensed
Consolidated Financial Statements - concluded
(unaudited)
Note 1 - Basis of Presentation
Reference is made to the "Introduction" at page F-8
Note 2 - Pro Forma Adjustments
The pro forma adjustments to the condensed consolidated statement of
continuing operations are as follows:
[A] To adjust costs and expenses to reflect the termination of
certain personnel and certain fringe benefits, and the changes in
the salaries of other personnel, effected concurrently with the
acquisition.
[B] To adjust depreciation and amortization to reflect the adjusted
bases of Thimble Square's assets. Goodwill resulting from the
acquisition will be amortized over a period of 10 years.
