UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): May 17,
2006 (May 12, 2006)
Innovo Group Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-18926 11-2928178
(Commission File Number) (IRS Employer Identification No.)
5804 East Slauson Avenue, Commerce, California 90040
(Address of Principal Executive Offices) (Zip Code)
(323) 725-5516
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (see General
Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 Entry into a Material Definitive Agreement
Compensation Arrangements
On May 12, 2006, Innovo Group Inc., or the Company,
conducted an annual meeting of its Board of Directors, or the
Board. At such annual meeting, the Board approved certain
resolutions relating to compensation for itself and its named
executive officers. First, the Compensation Committee of the
Board approved an stock option grant pursuant to the Company's
2004 Stock Incentive Plan for services as a member of the Board
to each of its non-employee directors in the amount of a
nonqualified option to purchase up to 75,000 shares of the
Company's common stock at $1.02, which was the closing price of
the Company's common stock on May 12, 2006. Each option will
have a term of ten (10) years from the date of grant and will be
exercisable in full immediately. The Board does not receive any
cash compensation other than reimbursement for ordinary and
customary business expenses incurred in connection with travel
and attendance at meetings.
In addition, the Compensation Committee of the Board
authorized a direct amendment in accordance with the 2004 Stock
Incentive Plan to certain of the options previously granted to
Marc Crossman and Richard Quiroga, the Company's Named Executive
Officers, to reduce the exercise price to $1.02, which was the
closing price of the Company's common stock on May 12, 2006. Mr.
Crossman also forfeited a previous option grant to purchase
1,000,000 shares of the Company's common stock pursuant to the
Company's 2000 Employee Stock Incentive Plan in exchange for a
new option to purchase 1,000,000 shares of the Company's common
stock at $1.02 pursuant to the 2004 Stock Incentive Plan. This
option will have a term of ten (10) years from the date of grant
and be exercisable in full immediately.
The Compensation Committee also evaluated Mr. Crossman's
annual salary and made no changes to it.
ITEM 2.01 Completion of Acquisition or Disposition of Assets
As previously disclosed in our Quarterly Report on Form 10-Q
for the period ended February 25, 2006 filed with the Securities
and Exchange Commission on April 6, 2006, the Company announced
that on March 31, 2006, the Company entered into an Asset
Purchase Agreement, or APA, with Cygne Designs, Inc., or Cygne.
Cygne is a designer, merchandiser and manufacturer of branded and
private label women's denim, casual and career apparel with its
principal executive offices in New York, NY.
Pursuant to the APA, the Company agreed to sell to Cygne
certain assets related to its private label apparel division.
These assets included the private label division's customer list,
the assumption of current workforce related to the private label
division, the assumption of all existing purchase orders and
inventory related to the private label division, and the
assumption of the benefit of a non-compete clause in favor of
Azteca. In exchange for the purchased assets, Cygne assumed
certain liabilities associated with the Company's private label
division, including, the remaining obligation under the original
promissory note executed in favor of Azteca Production
International, Inc. under the original asset purchase agreement
pursuant to which it purchased the private label division assets,
or the Blue Concept APA, all other liabilities, excluding the
original promissory note, owed in connection with our operation
of the private label division to Azteca in excess of $1,500,000,
all liabilities associated with our outstanding purchase orders
and inventory schedules listed in the APA, and the obligation to
continue to pay the earn out under the Blue Concept APA. The
aggregate value of the assumed liabilities, which will represent
the purchase price for the transaction, is approximately
$10,437,000, and may be subject to certain post closing permitted
adjustments related to the payment of certain audit related fees.
On May 12, 2006, the Company completed the disposition of
these assets after obtaining stockholder approval to approve the
sale of certain of the assets of the private label division
pursuant to the APA. The aggregate value of the assumed
liabilities remained at $10,437,000 as of the closing date.
On May 16, 2006,the Company issued a press release in
connection with its annual meeting of stockholders held on May
12, 2006 announcing the approval of the four proposals on the
ballot: (1) the election of seven directors, (2) the approval of
the sale of certain assets of the private label division pursuant
to an asset purchase agreement by and among Cygne, IAA and the
Company dated March 31, 2006, (3) the approval of any proposal to
adjourn the meeting to a later date, if necessary, to solicit
additional proxies if there are not sufficient votes in favor of
the approval of the sale of certain assets of the private label
division, and (4) the ratification of the appointment of Ernst &
Young LLP as Innovo Group's independent registered public
accounting firm for the fiscal year ending November 25, 2006.
The Press Release is attached hereto and incorporated herein by
reference as Exhibit 99.1 to this Current Report on Form 8-K.
ITEM 5.02 Departure of Directors or Principal Officers; Election
of Directors; Appointment of Principal Officers
In connection with the annual meeting of the Board on May
12, 2006, the Board appointed Marc Crossman to the position of
Chief Executive Officer, President and Chief Financial Officer.
ITEM 8.01 Other Events
On April 21, 2006, the Company filed a Definitive Proxy
Statement on Schedule 14A with the Securities and Exchange
Commission relating to an annual meeting of our stockholders to
be held on May 12, 2006. The purpose of the annual meeting was
to vote on the following proposals: (1) to elect seven directors
to serve on the Board of Directors until the next annual meeting
of stockholders or until their respective successors are elected
and qualified; (2) to approve the sale of certain assets of the
private label division pursuant to an asset purchase agreement by
and among Cygne, IAA and the Company dated March 31, 2006; (3) to
approve any proposal to adjourn the meeting to a later date, if
necessary, to solicit additional proxies if there are not
sufficient votes in favor of the approval of the sale of certain
assets of the private label division; and (4) to ratify the
appointment of Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ended November 25,
2006. The Board fixed the close of business on April 12, 2006 as
the record date for identifying those stockholders entitled to
notice of, and to vote, at the annual meeting. On April 21,
2006, the notice of annual meeting, proxy statement and proxy
cards were first mailed to stockholders along with the Company's
Annual Report on Form 10-K for the fiscal year ended November 26,
2005. On May 12, 2006, the Company conducted its annual meeting
of stockholders and all four proposals were approved.
On May 12, 2006, a maximum amount of 31,463,889 shares were
represented in person or by proxy at the meeting, which reflected
approximately 94% of total shares outstanding, which was
33,408,598 as of April 12, 2006 according to the records of our
transfer agent, the record date of the annual meeting. This
share amount reflects the addition of certain shares that the
Company holds as treasury shares in a segregated brokerage
account. The vote totals on the four proposals were as follows:
1. Election of seven directors: For Against Abstain
Samuel J. Furrow 29,825,795 173 2,199,142
Samuel J. Furrow, Jr. 29,670,244 173 2,354,693
Marc B. Crossman 30,100,337 173 1,924,600
Kelly Hoffman 31,117,860 173 907,077
Tom O'Riordan 31,399,847 173 625,090
Suhail R. Rizvi 28,742,567 173 3,282,370
Kent Savage 30,598,209 173 1,426,728
For Against Abstain
2. The approval of the sale of 20,307,837 50,774 326,923
certain assets of the private
label division pursuant to an
asset purchase agreement by and
among Cygne, IAA and the Company
dated March 31, 2006
For Against Abstain
3. The approval of any proposal 29,374,751 2,215,979 434,378
to adjourn the meeting to a later
date, if necessary, to solicit
additional proxies if there are
not sufficient votes in favor of
the approval of the sale of
certain assets of the private
label division
For Against Abstain
4. Appointment of Ernst & Young 31,474,300 195,799 355,010
LLP as
independent registered public
accounting firm for the fiscal
year ending November 25, 2006
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit
Number Description
99.1 Press Release dated May 16, 2006
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
INNOVO GROUP INC.
(Registrant)
Date: May 17, 2006 By: /s/ Marc Crossman
Marc Crossman
Chief Executive Officer, Chief
Financial Officer and Director
(Principal Executive Officer
and Principal Financial
Officer)
Exhibit Index
Exhibit
Number Description
99.1 Press Release dated May 16, 2006