FORM 8-K
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) October 31, 2000
Innovo Group Inc
(Exact name of registrant as specified in its charter)
Tennessee 0-18926 11-2928178
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2633 Kingston Pike, Suite 100, Knoxville, TN 37919
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (865) 546-1110
_________________________________________________
(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant
The purchase of shares and warrants by Commerce Group, LLC and its designees
as described in Item 5 below, which description is incorporated herein by this
reference, may be deemed to result in a change in control of the Company. As a
result of those purchases, which have been approved by the Company's
stockholders, the Company believes that Hubert Guez and the other members of the
Commerce Group hold an aggregate of 2,863,637 of 12,686,009 outstanding shares
of Company common stock, or 22.5% of currently outstanding shares. The members
of the Commerce Group also have the right under the terms of their investment to
designate three members of the Company's Board of Directors. See the exhibits
to the Company's amended Current Report on Form 8-K filed September 15, 2000,
which are incorporated herein by this reference. However, members of the
Company's current management hold approximately 3,863,000 shares, or
approximately 30.4% of outstanding shares. As of the date of this report, the
Commerce Group had not designated anyone to serve on the Company's Board
of Directors.
The Commerce Group members also have the right to acquire an additional
3,000,000 shares pursuant to purchased warrants that are currently exercisable,
which would result in ownership of 5,863,637 of 15,686,009 issued and
outstanding shares, or 37.3% of shares then outstanding assuming that no other
shares have been issued.
Item 2. Acquisition or Disposition of Assets
Not Applicable
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable
Item 5. Other Events
In July 1997, the SEC and Nasdaq announced revised standards for listing on
the Nasdaq SmallCap Market that required that a company's listed securities
trade for not less than $1.00 per share and that the company have net tangible
assets (total assets, excluding goodwill, minus total liabilities) of at least
$2,000,000. The change became effective in February 1998.
Due to continued losses, the Company did not meet the required net tangible
asset level as of November 30, 1999 and was notified on March 15, 2000 that the
common stock would be delisted unless the Company could establish a compliance
plan that would result in the Company obtaining the Nasdaq continued listing
requirements. On July 19, 2000, the Company was granted a temporary exception
from the net tangible asset level standard subject to Innovo meeting certain
conditions. The conditions required the Company to obtain a minimum net
tangible asset level of $4 million on or before August 11, 2000 ("Phase I") and
a minimum net tangible asset level of $5 million on or before October 31, 2000
("Phase II"). The Company was deemed by Nasdaq to have met the Phase I
requirements through transactions completed with the Furrow Group and Commerce
Investment Group, LLC ("Commerce") as reported in the Company's Current Report
on Form 8-K dated August 11, 2000.
In order to meet the Phase II requirements, the Company has issued (i) on
October 30, 2000, 1.5 million shares of Company common stock and 3.3 million
warrants with the warrants having a three-year term and an exercise price of
$2.10 per share for $1.5 million in cash to persons and entities designated by
Commerce; and (ii) on October 31, 2000, 1,062,500 shares of common stock and
850,000 warrants having a three-year term and an exercise price of $2.00 for net
proceeds after legal and placement fees of $823,000 to other investors (the
"Mizrachi Group"). (The legal and placement fees totaling $27,000.) The
Company believes that the completion of these transactions will allow the
Company to meet the Nasdaq requirements for continued listing on the Nasdaq
SmallCap Market.
The proceeds from the Commerce transaction will be used to immediately
purchase goods and services from Commerce pursuant to a supply agreement entered
into between Commerce and the Company. The Company anticipates taking
some one-time non-nonrecurring charges in the fourth quarter as a result of
the transactions.
During the latter part of November, the Company plans to issue an additional
1,062,500 shares and 850,000 warrants having a three-year term and an exercise
price of $2.00 for proceeds after placement fees of $833,000 to the Mizrachi
Group. (Placement fees totaling $17,000.)
The listing exception will expire on October 31, 2000. In the event the
Company is deemed to have met the terms of the exception, it shall continue to
be listed on The Nasdaq SmallCap Market. The Company believes that it can meet
these conditions; however, there can be no assurance that it will do so nor,
upon completion of the transactions, can their be any assurances that Nasdaq
will deem the Company to have met the requirements for continued listing on the
Nasdaq SmallCap Market. If at some future date the Company's securities should
cease to be listed on The Nasdaq SmallCap Market, they may continue to be listed
on the OTC-Bulletin Board. For the duration of the exception, the Company's
Nasdaq symbol will be INNOC.
Please see the unaudited pro forma consolidated balance sheet for the pro
forma effect of the Phase II transactions if they had occurred as of
September 30, 2000 and assuming that the proceeds of the Commerce Group
investment had been used to purchase finished goods taken into inventory.
INNOVO GROUP INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(000's except per share data)
Pro Forma
Balance Pro forma Balance
9/30/00 Adjustments 9/30/00
------- ----------- -------
CURRENT ASSETS
Cash and cash equivalents $ 28 $ 823 $ 851
Accounts receivable, net 2,573 2,573
Inventories 2,552 1,500 4,052
Prepaid expenses 26 26
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Total Current Assets 5,179 2,323 7,502
PROPERTY, PLANT AND EQUIPMENT, net 2,907 2,907
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TOTAL ASSETS 8,086 2,323 10,409
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CURRENT LIABILITIES
Current maturities of long-term debt 1,729 1,729
Accounts payable 517 517
Accrued expenses 1,202 1,202
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Total Current Liabilities 3,448 3,448
LONG-TERM DEBT, less current maturities 1,270 1,270
------ ------
TOTAL LIABILITIES 4,718 4,718
------ ------
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STOCKHOLDERS' EQUITY
Common stock 1,009 256 1,265
Additional paid-in-capital 35,139 2,067 37,206
Promissory note - officer (703) (703)
Deficit (29,651) (29,651)
Treasury stock (2,426) (2,426)
TOTAL STOCKHOLDERS' EQUITY 3,368 5,691
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,086 $ 2,323 $10,409
------ ------ ------
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Copies of definitive agreements entered into pursuant to the transactions
described above will be filed by amendment as exhibits to this Current Report
on Form 8-K. The forgoing descriptions are qualified in their entirety by
reference to such definitive agreements.
Item 6. Resignations or Registrant's Directors
Not Applicable
Item 7. Financial Statements and Exhibits
Not Applicable
Item 8. Change in Fiscal Year
None
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 hereunto duly authorized.
INNOVO GROUP INC.
-----------------
(Registrant)
Date: October 31, 2000
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By: /s/ Samuel J. Furrow
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Samuel J. Furrow
