As filed with the Securities and Exchange Commission on June 16, 1999.
Registration No. 333-79505
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INNOVO GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 5199
(State of other jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
11-2928178
(IRS Employer Identification Number)
1808 North Cherry Street
Knoxville, Tennessee 37917
(423) 546-1110
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Samuel J. Furrow, Jr. With a copy to: Gilbert H. Davis
INNOVO GROUP INC. Sims Moss Kline & Davis LLP
1808 North Cherry Street Suite 310, 1000 Abernathy Road
Knoxville, Tennessee 37917 Atlanta, Georgia 30328
(423) 546-1110 (770) 481-7200
(Address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As
soon as practicable after effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest investment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
Calculation of Registration Fee
Title of each class Amount to Proposed Maximum Proposed Maximum Amount
of securities to be be Offering Price Aggregate Offering of Registration
registered Registered Per Share Price Fee
Common Stock 1,316,419 $1.57812 $2,077,259(1) $578
(1) Pursuant to Rule 457(c), calculated on the basis of $1.578125 per
share as regards 1,287,188 shares, representing the average of the closing bid
and ask prices of the common stock on May 20, 1999 and which has previously been
paid, and as regards 29,231 additional shares as to which separate payment has
been made.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
PROSPECTUS
INNOVO GROUP INC.
Common Stock
1,316,419 Shares Offered by Selling Stockholders
* The shares of common stock offered by this prospectus are being
sold by the stockholders listed on pages 7 and 8 of this prospectus.
The company will not receive any proceeds from the sale of these
shares.
* Our common stock is traded on the Nasdaq SmallCap Market under
the symbol INNO.
* The shares will be sold by the respective selling stockholders in
one or more sales through the Nasdaq Small Cap Market, any other
market on which our common stock is traded at the time of the sale, or in
individually negotiated transactions.
* On June 14, 1999, the closing bid price of our common stock on
the Nasdaq SmallCap Market was $1.2813. You should obtain a
current market price quotation before you buy any of the offered
shares.
Our principal executive offices are located at 1808 North Cherry
Street, Knoxville, Tennessee 37917. Our telephone number is (423)
546-1110.
- --------------------------------------------------
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 2 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.
- --------------------------------------------------
May 24, 1999
TABLE OF CONTENTS Page
Risk Factors 2
Forward-Looking Statements 6
Use of Proceeds 7
Dividend Policy 7
Selling Stockholders 7
Plan of Distribution 8
Description of Securities 9
Where You Can Find More Information 12
Experts 13
Cautionary Statements 13
RISK FACTORS
This offering involves a high degree of risk, including those
risks described below. You should carefully consider these risk
factors, together with all of the other information in this
prospectus, before deciding to invest in shares of our common stock.
Risks Associated with Our Past Financial Results
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. We do not know if
we will be able 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.
Our cash requirements to run our business have been and will
continue to be significant. Since 1996, our negative cash flow and
losses from continuing operations have been as follows:
Negative Cash Flow Losses from
from Operating Continuing
Fiscal year ended: Activities Operations
November 30, 1998 $1,238,000 $2,267,000
November 30, 1997 $1,339,000 $1,729,000
November 30, 1996 $2,716,000 $2,983,000
As of February 28, 1999 we accumulated losses of almost $26 million.
The company has continued to generate losses through the first
quarter of 1999. Although we have undertaken numerous measures to
increase sales and operate more efficiently, the company may
experience further losses and negative cash flows. We can give you
no assurance that the company will in fact operate profitably in the
future.
Risks Associated with Our Business
We Must Expand Sales of Our Existing Products and Successfully
Introduce New Products 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. We began development of our Action Performance Fan
Fueler licenses in the fourth quarter of fiscal 1998. Shipments
under these new licenses began in January 1999. We have little
control over the demand for our existing products, and we cannot
assure you that the new products we introduce will achieve
acceptance. Failure to expand our sales of existing products and new
products would significantly and negatively affect our ability to
achieve profitability.
We Are Dependent on Certain Contractual Relationships to Generate Our
Revenues
Our sales are dependent to some degree upon the contractual
relationships we establish with licensors to exploit, on a generally
non-exclusive basis, proprietary rights in well known logos, marks
and characters such as Warner Bros. and Disney, as well as league and
team logos and marks licensed by Major League Baseball, The National
Football League, the NBA, the National Hockey League, and major
colleges and universities. 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.
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 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.
We Have a Large Number of Competitors, Including Some Competitors
Such as Reebok, Nike and Adidas With Substantially Greater Financial,
Technical and Other Resources than We Do
The industry in which the company operates is fragmented and
highly competitive. The company competes against a large number of
manufacturers, importers, and other companies that distribute
products similar to the products of two of the company's wholly owned
subsidiaries, Innovo, Inc. ("Innovo") and NP International, Inc.
("NP International"). Although the manufacture and sale of products
bearing sports logos requires a license, our licenses are non-
exclusive and we do not have any control over the granting of
additional licenses by the licensing entities. Some of our
competitors possess substantially greater financial, technical and
other resources than we do, including the ability to implement more
extensive marketing campaigns. For example, NP International's
sports-licensed products compete with those of sporting goods
manufacturers, such as Reebok, Nike and Adidas, that produce or
license the manufacture of sports bags bearing their names and logos.
We do not hold a dominant competitive position in any market, and
our ability to sell our products is dependent upon the anticipated
popularity of our designs, the logos or characters our products bear,
the price and quality of our products and our ability to meet our
customers' delivery schedules.
Risks Associated with Our Securities
We Do Not Anticipate Paying Any Dividends on the Common Stock
The company had not paid any dividends nor do we anticipate
paying any dividends on the common stock in the foreseeable future.
Our operating subsidiaries are currently restricted as to the payment
of dividends to us. It is also our present policy to retain
earnings, if any, for the use in the development and expansion of the
company's business.
We Have a Substantial Number of Authorized Preferred and Common
Shares Available for Future Issuances that Could Cause Dilution of
Stockholder Interests
The company has a total of 15,000,000 authorized shares of
common stock and 5,000,000 authorized shares of "blank check"
preferred stock. We expect 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 our company. 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, including the shares offered by this prospectus, 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. In addition, 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 our 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
Our executive officers, directors and affiliates beneficially
own or have voting control over approximately 39.6% of the issued and
outstanding common stock. Because of their stock ownership and/or
positions with the company, these persons have been and will continue
to be in a position to greatly influence the election of directors
and thus control the affairs of the company. Additionally, the
company's 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 the company, and therefore may
adversely affect the market price and liquidity of the company's
securities. The company is also subject to a Delaware statute
regulating business combinations that may hinder or delay a change in
control of the company. The anti-takeover provisions of the Delaware
statute may adversely affect the market price and liquidity of the
company's securities.
Our 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 products or technological innovations by us or our
competitors, and general conditions in our industries. 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.
Including the 1,316,419 shares subject to this prospectus,
there are a total of 2,081,204 shares that may be sold in the Nasdaq
SmallCap Market by selling stockholders pursuant to registration
statements filed by the company. An additional 469,571 shares that
are currently issued and outstanding are "restricted" pursuant to
Rule 144 under the Securities Act. Of those shares, 500 are
currently eligible for resale through the Nasdaq SmallCap Market
pursuant to Rule 144, with an additional 19, 571 to be eligible in
September 1999 and 449,500 eligible in October 1999 for sale pursuant
to Rule 144. However, Rule 144 will limit sales from the 449,500
block in any 90-day period to the greater 1.0% of outstanding shares
and the highest average of the average weekly reported volume of
trading of the common stock during the prior four calendar weeks.
Sales of those shares could also adversely affect our stock price.
If We Cannot Meet the Nasdaq SmallCap Market Maintenance Requirements
and Nasdaq Rules, Nasdaq May Delist the 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
shareholder 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, the common stock would be subject
to delisting. Trading, if any, of the 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.
"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 the common stock.
On February 27, 1998, Nasdaq notified the company that it was
not in compliance with the $1.00 minimum bid price requirement.
The common stock generally traded at prices below $1.00 beginning in
November 1995 and until the company completed a one-for-ten reverse
split effective on September 11, 1998. Since the reverse split, the
bid price on the company's stock has consistently exceeded $1.00.
However, there can be no assurance that this will continue.
During the first quarter of fiscal 1999, we incurred a net loss
of $632,000. That loss reduced our tangible net worth to $1,482,000,
$512,000 below the minimum of $2,000,000 required for continued
Nasdaq Small Cap Market listing. We have increased the company's
tangible net worth through private sales of common stock to maintain
our Nasdaq Small Cap listing, but we can give no assurance that it
will be able to do so in the future if we experience substantial
losses.
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
SmallCap, 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 these securities to persons other
than established customers and accredited investors must make a
special written suitability determination for the purchaser and
receive the purchaser'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 purchasers in this offering 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.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference
into this prospectus contain some forward-looking statements which
involve substantial risks and uncertainties. These forward-looking
statements can generally be identified by the use of forward-looking
words like "may," "will," "except," "anticipate," "intend,"
"estimate," "continue," "believe" or other similar words. Similarly,
statements that describe our future expectations, objectives and
goals or contain projections of our future results of operations or
financial condition are also forward-looking statements. Our future
results, performance or achievements could differ materially from
those expressed or implied in these forward-looking statements as a
result of certain factors, including those listed under the heading
"Risk Factors" and in other cautionary statements in this prospectus.
USE OF PROCEEDS
The company will not receive any of the proceeds from the sale
of the shares of common stock offered by the selling stockholders.
DIVIDEND POLICY
The company has never declared or paid a dividend on its common
stock. 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 following table sets forth (i) the amount and percentage of
shares of common stock beneficially owned by each selling stockholder
prior to this offering, (ii) the number of such shares being offered
by each selling stockholder to the public from time to time pursuant
hereto, and (iii) the amount and percentage of shares of common stock
owned beneficially by each of the selling stockholders upon
completion of this offering (assuming the sale by the selling
stockholders of all the shares of common stock offered by means of
this prospectus).
Shares Beneficially Shares Shares Beneficially Owned
Owned Prior to the Offering Offered After the Offering
Name Shares % Number %
Alan Arp 15,000 * 15,000 - -
Nancy Coleman &
Michael E. Cox 10,000 * 10,000 - -
Michael E. Cox,
Keogh Plan 5,000 * 5,000 - -
Michael E. Cox 5,000 * 5,000 - -
Charles Gibson 10,000 * 10,000 - -
Frank Harris 20,000 * 20,000 - -
J. Eric
Hendrickson(1) 78,519 1.2% 4,566 32,600 *
Madison Investments
Corporation (1) 41,353 * 41,353 - -
Mike & Cindy Holt 5,000 * 5,000 - -
Jack Holt
Family Trust 5,000 * 5,000 - -
David Hultquist 10,000 * 10,000 - -
Dave Lunceford 10,000 * 10,000 - -
Patrick L. Martin 20,000 * 20,000 - -
Ramzy Mikhail 5,000 * 5,000 - -
David P. Doane 3,000 * 3,000 - -
Pamela H. Taylor 2,000 * 2,000 - -
John E. Hitch 2,000 * 2,000 - -
C.E. Jordon 2,000 * 2,000 - -
Sharron Mills 1,000 * 1,000 - -
George J. Harris 10,000 * 10,000 - -
First American
National Bank
for the IRA of
Barry Bradley 143,500 2.6% 33,500 110,000 2.0%
James A.
Haslam, II 70,000 1.3% 70,000 - -
PSM Trust 1 20,000 * 20,000 - -
Langley
Corporation 40,000 * 40,000 - -
Delaware Charter
G&T Co. TTEE FBO
John G. Looney
Rollover IRA 93,500 1.7% 33,500 60,000 1.1%
Samuel J. (Jay)
Furrow, Jr.(2) 61,300 * 50,000 11,300 *
Deloy L. Brown
Petroleum LLC 50,000 * 50,000 - -
Thomas B. Looney 114,000 2.1% 84,000 30,000 *
Lynn Purcell 50,000 * 50,000 - -
Barry L. and
Todd W. Bradley 60,000 1.1% 60,000 - -
Nancy Coleman 40,000 * 40,000 - -
Samuel J. (Sam)
Furrow(3) 549,496 10.1% 75,000 474,496 8.7%
Daniel A.
Page(4) 433,833 7.9% 75,000 358,833 6.6%
Robert S.
Talbott(5) 465,000 8.6% 449,500 15,500 *
* Less than 1% of outstanding shares.
(1) Mr. Hendrickson was our Vice President, Secretary and Treasurer
from August 1997 until March 1999 and was a director of the company
from August 1997 to April 1999. Mr. Hendrickson is the President and
sole shareholder of Madison Investments Corporation. His individual
share ownership before this offering includes the shares offered by
Madison Investments Corporation.
(5) Jay Furrow has been our Vice President Corporate Development
since July 1998 and a director since January 1999.
(6) Sam Furrow has been a director since April 1998 and our
Chairman and Chief Executive Officer since October 1998.
(7) Mr. Page has been a director and our Chief Operating Officer
since August 1997. Mr. Page's shareholdings before and after
this offering include 90,000 shares subject to exercisable
options.
(8) Mr. Talbott has been a director since August 1998.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common
stock at various times in one or more of the following transactions:
* on any U.S. securities exchange on which our common stock
may be listed at the time of such sale;
* in the over-the-counter market;
* in transactions other than on such exchanges or in the
over-the-counter market;
* in connection with short sales; or
* 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 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. If we become aware of any
agreement, arrangement or understanding, to the extent required under
the Securities Act, we will file a supplemental prospectus to
disclose:
* the name of any of the broker-dealers;
* the number of shares involved;
* the price at which the shares are to be sold;
* the commissions paid or discounts or concessions allowed
to the broker-dealers, where applicable;
* that the broker-dealers did not conduct any investigation
to verify the information set out in this prospectus, as
supplemented; and
* 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 the company's Amended and Restated Certificate of
Incorporation, the company is authorized to issue 15 million shares
of common stock, $.10 par value per share. As of the date hereof,
the company had outstanding 5,432,122 validly issued, fully paid and
nonassessable shares of common stock.
Holders of the common stock are entitled to one vote for each
share held of record in each matter properly submitted to such
holders for a vote. Subject to the rights of the holders of any
other outstanding series of stock the board of directors of the
company may designate from time to time, holders of common stock are
entitled to receive their pro rata share of (i) any dividends that
may be declared by the board of directors out of assets legally
available therefore, and (ii) any excess assets available upon the
liquidation, dissolution, or winding up of the company.
The board of directors may issue the additional shares of
common stock, up to the authorization of 15 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 the completion of the
takeover transaction, by diluting the voting or other rights of the
proposed acquiror or insurgent stockholder group, by creating a
substantial voting block in hands that might support the position of
the board of directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise.
Preferred Stock
The company's 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 the
company.
Common Stock Purchase Warrants
In August, 1996, as part of a private placement of units
comprised of shares of its common stock and common stock purchase
warrants, the company issued 77,575 Class H common stock purchase
warrants exercisable for five years at a price of $5.20 per shares.
The Class H common stock purchase warrants expire August 2001.
The exercise price of the common stock purchase warrants is
subject to adjustment based on anti-dilution provisions that are
triggered upon a stock dividend, stock split, reverse stock split,
reorganization, reclassification, consolidation, merger or sale of
all or substantially all of the company's assets.
Registration Rights
The holders of the 150,000 shares issued by the company in the
November 1997 private placement are entitled to certain demand and
piggyback registration rights with respect to such shares of common
stock. These rights provide, generally, that upon the request of the
holders of a majority of such 150,000 shares of common stock the
company shall, as soon as practicable, give written notice of such
request to all holders of such common stock and then, as soon as
practicable thereafter, shall file a registration statement covering
the number of shares as to which the holders of such common stock
have requested registration. Additionally, the holders of such
150,000 shares of common stock are entitled to the "piggyback"
registration of such shares of common stock if the company proposed
to register any of its securities under the Securities Act, except
that, among other conditions, the underwriters of any offering have
the right to limit the number of shares included in such
registration. Martha H. Morris, Thomas E. Looney and the John G.
Looney IRA Trust, which are the holders of 60,000, 30,000 and 60,000,
respectively, of such 150,000 sharers, have each agreed to limit
sales of such shares to 2,500, 1,250 and 2,500 shares, respectively,
per month on a cumulative basis, through November 1999. The
piggyback registration rights with respect to such 150,000 shares
have been exercised in connection with the registration statement of
which this prospectus forms a part. See "Selling Stockholders."
Certain Provisions Relating to Share Acquisitions
Section 203 of the Delaware General Corporation Law generally
prevents a corporation from entering into certain business
combinations with an interested stockholder (defined as any person or
entity that is the beneficial owner of at least 15% of a
corporation's voting stock) or its affiliates for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless (i) the transaction is approved by the
board of directors of the corporation prior to such business
combination, (ii) the interested stockholder acquires 85% of the
corporation's voting stock in the same transaction in which it
exceeds 15%, or (iii) the business combination is approved by the
board of directors and by a vote of two-thirds of the outstanding
voting stock not owned by the interested stockholder. The Delaware
General Corporation Law provides that a corporation may elect not to
be governed by Section 203. The company has made no such election
and is therefore governed by Section 203. Such anti-takeover
provision may have an adverse effect on the market for the company's
securities.
Indemnification and Limitation of Liability
The company's Amended and Restated Certificate of
Incorporation provides that the company shall indemnify its officers
and directors to the fullest extent permitted by Delaware law,
including some instances in which indemnification is otherwise
discretionary under Delaware law. The Amended and Restated
Certificate of Incorporation also provides that, pursuant to Delaware
law, the company's directors shall not be liable for monetary damages
for breach of the director's fiduciary duty of care to the company
and its stockholders. This provision does not eliminate the duty of
care, and, in appropriate circumstances, equitable remedies such as
an injunction or other forms of non-monetary relief would remain
available under Delaware law. In addition, each director will
continue to be subject to liability for breach of the director's duty
of loyalty to the company, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director and for
payment of dividends or approval of stock repurchases or redemptions
that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities for environmental laws.
At present, there is no pending litigation or proceeding
involving a director or officer of the company as to which
indemnification is being sought, nor is the company aware of any
threatened litigation that may result in claims for indemnification
by any officer or director.
Transfer and Warrant Agent
The transfer agent for the company's common stock is American
Securities Transfer, Lakewood, Colorado.
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 in Washington, DC, New
York, New York, and Chicago, Illinois. 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-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 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 30,1998;
2. Our definitive proxy statement for our 1999 annual
meeting of shareholders; and
3. Our quarterly reports on Form 10-Q for the three months
ended February 28, 1999.
You may request a copy of these filings, at no cost, by writing
to or calling Bradley White, Innovo Group Inc., 1808 North Cherry
Street, Knoxville, Tennessee, 37917, telephone 423-546-1110.
EXPERTS
Our consolidated financial statements and schedule incorporated
by reference in this prospectus have been audited by BDO Seidman,
LLP, independent certified public accountants, to the extent and for
the periods set forth in their reports incorporated in this
prospectus by reference. Those reports are incorporated into this
prospectus by reference in reliance upon such reports given upon the
authority of BDO Seidman, LLP as experts in auditing and accounting.
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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 565
Nasdaq fee 7,500
Accounting fees and expenses 3,000
Legal fees and expenses 5,000
Printing and engraving expenses 500
Blue Sky fees and expenses -
Transfer Agent and Register fee -
Miscellaneous expenses 500
$17,065
Item 15. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, a
corporation may indemnify any of its directors and officers against
expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding (i) if any such
person acted in good faith and in a manner reasonably believed to be
in or not opposed to be the best interests of the corporation, and
(ii) in connection with any criminal action or proceeding if such
person had no reasonable cause to believe such conduct was unlawful.
In actions brought by or in the right of the corporation, however,
Section 145 provides that no indemnification may be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance
of such persons's duty to the corporation unless, and only to the
extent that, the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in review
of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper. Article Nine of the
company's Amended and Restated Certificate of Incorporation requires
that the company indemnify its directors and officers for certain
liabilities incurred in the performance of their duties on behalf of
the company to the fullest extent allowed by Delaware law.
The company's Amended and Restated Certificate of Incorporation
relieves its directors from personal liability to the company or to
stockholders for breach of any such director's fiduciary duty as a
director to the fullest extent permitted by the Delaware General
Corporation Law. Under Section 102(b)(7) of the Delaware General
Corporation Law, a corporation may relieve its directors from
personal liability to such corporation or its stockholders for
monetary damages fore any breach of their fiduciary duty as directors
except (i) for a breach of the duty of loyalty, (ii) for failure to
act in good faith, (iii) for intentional misconduct or knowing
violation of law, (iv) for willful or negligent violations of certain
provisions of the Delaware General Corporation Law imposing certain
requirements with respect to stock repurchases, redemptions and
dividends, or (v) for any transaction from which the director derived
an improper personal benefit.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling
persons of the company pursuant to the foregoing provisions, the
company has been informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits
The following exhibits are filed as part of the Registration
Statement:
Exhibit Index
Exhibit
Number Description Reference
No.
3.1 Form of Amended and Restated Certificate
of Incorporation of Registrant. Filed Herewith
3.2 Amended and Restated Bylaws of Registrant.* 4.2 (1)
21 Subsidiaries of the Registrant* 21 (2)
23.1 Consent of BDO Seidman
24 Power of Attorney (see Signature Page) 24 (3)
__________________________
*Certain of the exhibits to this Report, indicated by an asterisk,
are incorporated by reference to other documents on file with the
Securities and Exchange Commission with which they were physically
filed, to be part hereof as of their respective dates. Documents to
which reference is made are as follows:
(1) Current Report on Form 8-K of Innovo Group Inc. (file no.
0-18926) dated May 10, 1993 filed November 12, 1993.
(2) Current Report on Form 8-K of Innovo Group Inc. (file
0-18926) dated April 12, 1996 filed April 29, 1996.
(3) Registration Statement on Form S-3 (file 333-12527) of
Innovo Group In. filed September 23, 1996.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information in the
registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the
provisions described under Item 14 above, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer of controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
assured by such director, officer or controlling person in
connection with the securities being registered hereunder, the
Registrant will, unless in the opinion of its counsel the
question has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(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
therein.
(d) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant hereby certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has
duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in Knoxville, Tennessee on June 15, 1999.
INNOVO GROUP INC.
By: /s/ Samuel J. Furrow
Samuel J. Furrow
Chairman of the Board
and 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.
Signature Title
Date
/s/ Samuel J. Furrow Chairman of the Board and June 15, 1999
Samuel J. Furrow Chief Executive Officer;
Principal Executive Officer
/s/ Dan Page Chief Operating Officer June 15, 1999
Dan Page and Director
/s/ Patricia Anderson-Lasko President and Director June 15, 1999
Patricia Anderson-Lasko
/s/ L.E. Smith Director June 15, 1999
L.E. Smith
Director
Robert S. Talbott
/s/ Samuel J. Furrow, Jr. Vice President, Secretary June 15, 1999
Samuel J. Furrow, Jr. and Director
Director
Marc B. Crossman
/s/ Bradley T. White Treasurer and Controller; June 15, 1999
Bradley T. White Principal Financial and
Accounting Officer
Exhibit 23.1
Consent of Independent Certified Public Accountants
Board of Directors
Innovo Group Inc.
We hereby consent to the incorporation by reference in the
prospectus constituting a part of this Registration Statement of our
reports dated February 10, 1999 (and March 10, 1999 as regards Note
13 thereto), relating to the consolidated financial statements and
schedule of Innovo Group Inc. and subsidiaries appearing in the
company's Annual Report on Form 10-K for the year ended November 30,
1998.
We also consent to the references to us under the caption
"Experts" in the prospectus.
/s/ BDO SEIDMAN, LLP
Atlanta, Georgia
June 15, 1999
