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) August 11, 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.)
1808 North Cherry Street, Knoxville, TN 37917
(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
Not Applicable
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 May 31, 2000. On July 19, 2000, the Company was granted a
temporary exception from this standard subject to Innovo meeting certain
conditions. The conditions require 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 has met the Phase I net tangible asset level of $4 million
by issuing common stock to Commerce Investment Group, LLC for $1.5 million in
cash, with the proceeds to be used by the Company to purchase finished goods and
services from Commerce and it's affiliates. The Company will further increase
its net tangible assests by issuing common stock to a group led by the Company's
Chairman and CEO, the "Furrow Group". The Furrow Group has assumed
$1 million of outstanding Company debt owed to third parties and converted
$500,000 of Company debt that was owed to the Furrow Group for consideration of
1,363,637 shares of common stock which approximates fair value of the shares.
The stock to be issued under Phase I will be priced at $1.10 per share.
The Company plans to meet the $5 million Phase II requirements on or before
October 31, 2000 through the issuance to the Commerce Investment Group of an
additional 1.5 million shares of Company common stock and 3.3 million warrants
with the warrants having an exercise price of $2.10 per share for $1.5 million
in cash. Three million of the warrants will have a term of three years and the
remaining 300,000 will vest over two years and expire 3 years from the last
vesting. The proceeds will be used by the Company to purchase finished goods
and services from Commerce and its affiliates. During Phase II, the Furrow
Group will also be issued 1.5 million warrants with the warrants having a
three-year term and an exercise price of $2.10 per share in exchange for the
debt assumed and converted in Phase I. The Company currently expects to
further increase its tangible assests through the issuance of additional shares
and warrants to outside investors.
The issuance of the shares and warrants under Phase II will be subject to
shareholder approval. The Chairman and CEO and other Board members have agreed
to vote their currently owned shares (approximately 2.4 million shares) in favor
of the Phase II share sales and the issuance of all the warrants.
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. 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 financial statements below for the pro forma effect
of Phase I transactions if they had occurred as of June 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
6/30/00 Adjustments 6/30/00
--------- ----------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 11 $ 11
Accounts receivable, net 2,349 2,349
Inventories 2,307 1,500 3,807
Prepaid expenses 46 46
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Total Current Assets 4,713 6,213
PROPERTY, PLANT AND EQUIPMENT, net 2,958 2,958
OTHER ASSETS -- --
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TOTAL ASSETS 7,671 9,171
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CURRENT LIABILITIES
Current maturities of
long-term debt 2,967 2,967
Accounts payable 650 650
Accrued expenses 857 857
------ ------
Total Current Liabilities 4,474 4,474
LONG-TERM DEBT, less
current maturities 1,937 (1,500) 437
TOTAL LIABILITIES 6,411 4,911
STOCKHOLDERS' EQUITY
Common stock 731 273 1,004
Additional paid-in-capital 32,537 2,727 35,264
Promissory note - officer (703) (703)
Deficit (28,879) (28,879)
Treasury stock (2,426) (2,426)
TOTAL STOCKHOLDERS' EQUITY 1,260 4,260
------ ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $7,671 $9,171
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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 Appilicable
Item 7. Financial Staements 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 By /s/ Samuel J. Furrow
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Samuel J. Furrow
Chairman/CEO
