As filed with the Securities and Exchange Commission on November 13, 2002.
Registration No. 333-52318
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
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)
Delaware 11-2928178
(State of other jurisdiction (IRS Employer Identi-
of incorporation or organization) fication Number)
5900 S. Eastern Avenue, Suite 120
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.
INNOVO GROUP INC.
5900 S. Eastern Avenue, Suite 120
Commerce, California 90040
(323) 725-5516
(Address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
Gilbert H. Davis, Esq.
Sims Moss Kline & Davis LLP
Suite 1700,Three Ravinia Drive
Atlanta, Georgia 30346
(770) 481-7200
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. [ ]
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
10,125,000 Shares Offered by Selling Stockholders
The shares of common stock offered by this prospectus are being sold by
the stockholders listed on pages 8 and 9 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 SmallCap Market, any other market on
which our common stock is traded at the time of the sale, or in
individually negotiated transactions.
On November 8, 2002, the last sale price of our common stock on the
Nasdaq SmallCap Market was $3.38. You should obtain a current market
price quotation before you buy any of the offered shares.
Our principal executive offices are located at 5900 S. Eastern Avenue,
Suite 120, Commerce, California 90040. Our telephone number is
(323) 725-5516.
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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.
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November 13, 2002
TABLE OF CONTENTS Page
Risk Factors.........................................................2
Forward-Looking Statements...........................................7
Use of Proceeds......................................................7
Dividend Policy......................................................8
Selling Stockholders.................................................8
Plan of Distribution.................................................9
Description of Securities ..........................................10
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.
Our cash requirements to run our business have been and will continue to be
significant. From 1997 through fiscal 2001, our negative operating cash flow
and losses from continuing operations have been as follows:
Negative Cash Flow
from Operating Losses from
Activities of Continuing
Fiscal year ended: Continuing Operations Operations
December 1, 2001 $ 632,000 $ 618,000
November 30, 2000 $4,598,000 $6,151,000
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
As of August 31, 2002 we had an accumulated deficit of approximately
$33.5 million. The company continued to generate losses through the first
quarter of fiscal 2002 before a net profit of $207,000 for the second
quarter and $820,000 for the third quarter of fiscal 2002, respectively.
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
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
sustained profitability.
The Loss of One Major Customer Would Substantially Reduce Revenues and the
Potential for Profitable Operations
For fiscal 2001, three customers accounted for aggregate sales in excess
of 36.1% of gross sales: Wal-Mart, Michael's and Joannes accounted for
26.4%, 4.3% and 5.4%, respectively. Wal-Mart has continued to be a major
customer for the company and the loss of Wal-Mart as a customer would have
a material adverse effect on the company.
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. 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.
We Are Currently Dependent on Supply and Distribution Arrangements to
Generate a Substantial Portion of Our Revenues
During 2000, the company entered into arrangements with Commerce
Investment Group, LLC, and affiliated entities (collectively, the
"Commerce Group"). Under the terms of the arrangements, the Commerce Group
purchased equity securities of Innovo Group and Innovo Group became
obligated to manufacture and distribute all of its craft products with the
Commerce Group for a two-year period. Those arrangements, which renewed
automatically for an additional two-year term but without minimum purchase
obligations, could adversely affect the company's ability to obtain
distribution and manufacturing services at the lowest available cost in
the future.
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 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
company's. Some of our competitors possess substantially greater
financial, technical and other resources than we do, including the ability
to implement more extensive marketing campaigns. 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 has 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 40,000,000 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 their affiliates as of August 27,
2002 beneficially owned or had the right to acquire voting control over
approximately 40% of the common stock. In addition, two investor groups
who have the contractual rights to designate persons to be elected as
directors beneficially owned or had the right to acquire voting control
over approximately 37% (the Commerce Group) and 17% of the company's
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 shares subject to this prospectus, there are a total of
approximately 15 million shares that may be sold in the Nasdaq SmallCap
Market by selling stockholders pursuant to registration statements filed
by the company. Approximately 2.6 million additional shares and shares
subject to options and warrants are also expected to be registered for
resale in the next several months. 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 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, 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.
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 Owned
Shares Beneficially Shares After the Offering
Owned Prior to the Offering Offered Number %
--------------------------- ------- ------ ---
Samuel J. (Sam) Furrow(1) 3,494,015(2) 750,000(2) 2,744,015 18.2%
Samuel J. Furrow, Jr.(3) 1,586,688(4) 750,000(4) 836,688 5.6%
Commerce Investment Group, LLC(5) 3,163,637(6) 2,800,000(6) 863,637 5.8%
Integrated Apparel, LLC(5) 1,000,000(7) 1,000,000(7) 0 0%
JAML, LLC(8) 100,000(9) 100,000(9) 0 0%
Innovation, LLC(8) 3,312,500(10) 3,312,500(10) 0 0%
C J Rahm, LP(11) 162,500(9) 162,500(9) 0 0%
FVB Family Limited Partnership LP(11) 50,000 50,000 0 0%
Alec Land(11) 62,500 62,500 0 0%
Milton Koffman(11) 31,250 31,250 0 0%
Cecilia I. Rossi and 25,000 25,000 0 0%
Anthony C. Rossi(11)
Joseph Mizrachi(11) 2,719,750 2,719,750 0 0%
Third Millennium Properties, Inc.(8) 62,500 62,500 0 0%
SHD Investments, LLC(13) 1,000,000(12) 500,000(12) 0 0%
Griffin James Aron Guez
Irrevocable Trust dated
Sept. 13, 1996(14) 250,000 250,000 0 0%
Stephan Avner Felix Guez
Irrevocable Trust dated
Sept. 13, 1996(14) 250,000 250,000 0 0%
Nir Levitan 12,500 12,500 0 0%
Joseph Yariv 6,250 6,250 0 0%
* Less than 1% of outstanding shares.
(1) Sam Furrow has been a director and Chairman since April 1998 and served as
Chief Executive Officer from October 1998 through December 2000.
(2) Includes 750,000 shares subject to exercisable warrants with a 3-year term
expiring October 2003 and an exercise price of $2.10 per share and, in shares
held prior to the offering only, 97,901 shares subject to currently exercisable
options and 25,164 shares subject to exercisable 20-year term options granted
under the Company's 2000 Director Stock Incentive Plan in lieu of cash
directors' fees with an exercise price of $0.39 per share.
(3) Mr. Jay Furrow, Sam Furrow's son, became the company'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
company's Chief Operating Officer since April 1999 and its Acting Chief
Financial Officer since August 2000.
(4) Includes 750,000 shares subject to currently exercisable warrants with an
exercise price of $2.10 per share and expiring n October 2003 and, in shares
held prior to the offering only, 125,000 shares subject to currently
exercisable options.
(5) Commerce Investment Group, LLC and Integrated Apparel, LLC are controlled
by Mr. Hubert Guez. Pursuant to agreements entered into with the company by
Commerce and affiliates when Commerce invested in the company, Mr. Guez may
become a member of the Board of Directors and designate two additional Board
members immediately.
(6) Includes 1,000,000 shares subject to immediately exercisable warrants
with a purchase price of $2.10 per share and 300,000 shares subject to
warrants with a purchase price of $2.10 per share that become exercisable over
two years.
(7) Includes 500,000 shares subject to immediately exercisable options with a
purchase price of $2.10 per share and expiring in October 2003.
(8) Third Millennium Properties, Inc., JAML, LLC and Innovation, LLC, each of
which are controlled by Mr. Joseph Mizrachi, are the purchasers of shares and
warrants pursuant to agreements entered into with the company pursuant to
which Mr. Mizrachi may become a member of the Board of Directors and designate
an additional Board member.
(9) Includes 100,000 shares subject to immediately exercisable options with a
purchase price of $2.00 per share expiring in October 2003.
(10) Includes 1,500,000 shares subject to immediately exercisable options with
a purchase price of $2.00 per share expiring in October 2003.
(11) The subject securities have been distributed to the respective selling
stockholder as an owner of Third Millennium Properties, Inc. or JAML, LLC.
(12) Includes 500,000 shares subject to immediately exercisable warrants with
a purchase price of $2.00 per share expiring in October 2003.
(13) SHD Investments, LLC is controlled by Mr. Guez's brother, Paul Guez.
(14) Griffin and Stephan Guez are the sons of Hubert Guez. Mr. Guez's mother
serves as trustee of the trusts.
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 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 40 million shares of
common stock, $.10 par value per share. As of November 1, 2002, the company
had outstanding 14,901,264 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 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 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.
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 ComputerShare
Investor Services, 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-1 as amended by a post-
ffective amendment number one 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
December 1, 2001;
2. Our quarterly report on Form 10-Q for the three months ended March 2,
2002;
3. Our quarterly report on Form 10-Q for the three and six months ended
June 1, 2002; and
4. Our Current Report on Form 8-K dated July 26, 2002.
5. Our quarterly report on Form 10-Q for the three and nine months
ended August 31, 2002.
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.
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 December 1, 2001 and the year ended November 30, 2000 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.
The consolidated financial statements and schedule of Innovo
Group Inc. for the year ended November 30, 1999 incorporated by
reference in this Prosectus have been audited by BDO Seidman,
LLP, independent certified public accountants, to the extent and for
the period set forth in their report incorporated herein by
reference and are incorporated herein in reliance upon such report
given upon the authority of said 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.
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 45,000
Legal fees and expenses 10,000
Printing and engraving expenses 500
Blue Sky fees and expenses --
Transfer Agent and Registrar fee --
Miscellaneous expenses 500
------
$58,047
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 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.
5.1 Opinion of Sims Moss Kline & Davis, LLP. *
23.1 Consent of Ernst & Young, LLP Filed Herewith
23.2 Consent of BDO Seidman, 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
(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 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.
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 Knoxville, Tennessee on
November 13, 2002.
INNOVO GROUP INC.
By: /s/ Samuel J. Furrow, Jr.
--------------------------
Samuel J. Furrow, Jr.
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Samuel J. Furrow, Jr. and Samuel
J. Furrow, Sr., and each of them, his true and lawful attorney-in-fact,
as agent with full power of substitute and resubstitution for him and
in his name, place and stead, in any and all capacity, to sign any or
all amendments to this Registration Statement and to file the same, with
all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorney-in-
fact and agent full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
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, November 13, 2002
-------------------- Director
Samuel J. Furrow
/S/Patricia Anderson-Lasko President and Director November 13, 2002
--------------------------
Patricia Anderson-Lasko
/s/ Samuel J. Furrow,Jr. CEO, Acting CFO, November 13, 2002
------------------------ Chief Operating Officer and
Samuel J. Furrow, Jr. Director; Principal Executive,
Financial and Accounting Officer
/s/ Dan Page Director November 13, 2002
------------
Dan Page
/s/ Marc B. Crossman Director November 13, 2002
--------------------
Marc B. Crossman
/s/ John G. Looney Director November 13, 2002
John G. Looney
By: /s/ Samuel J. Furrow, Jr. November 13, 2002
-----------------------------
Samuel J. Furrow, Jr.
Attorney-in-Fact
Exhibit 23.1
Consent of Independent Certified Public Accountants
Innovo Group Inc.
Commerce, California
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 the Innovo Group Inc. for the registration of 10,125,000
shares of its common stock and to the incorporation by reference
therein of our report dated February 8, 2002, with respect to the
consolidated financial statements and schedules of the Innovo Group
Inc. included in its Annual Report (Form 10-K) for the year ended
December 1, 2001, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Los Angeles, California
November 8, 2002
Exhibit 23.2
Consent of Independent Certified Public Accountants
Innovo Group Inc.
Commerce, California
We hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Registration Statement on Form
S-3 (Registration No. 333-52318) of our report dated January 13, 2000,
except for Notes 11 and 14, as to which the date is March 8, 2000,
relating to the consolidated financial statements and schedule of
Innovo Group Inc. appearing in the Company's Annual Report on Form
10-K for the year ended December 1, 2001.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
/s/ BDO Seidman, LLP
---------------------------
BDO Seidman, LLP
Atlanta, Georgia
November 8, 2002