innovo_s3-082707.htm
As
filed
with the Securities and Exchange Commission on August 27, 2007
Registration
No.
333-
United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
____________________________________
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________________________
INNOVO
GROUP INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
2390
|
11-2928178
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Primary
standard industrial
classification
code number)
|
(I.R.S.
Employer
Identification
Number)
|
5901
South Eastern Avenue
Commerce,
California 90040
(323)
837-3700
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s
Principal Executive Offices)
Marc
B. Crossman
Chief
Executive Officer, President and Chief Financial Officer
Innovo
Group Inc.
5901
South Eastern Avenue
Commerce,
California 90040
(323)
837-3700
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent
for Service)
____________________________________
Approximate
date of commencement of proposed sale to the public:
From
time to time as determined by the selling stockholders after the effective
date
of this registration statement
If
the
only securities being registered on this Form are being offered pursuant to
a
dividend or interest reinvestment plan, 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
this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. ¨
________________
If
this
Form is a post-effective amendment to a registration statement filed pursuant
to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. ¨
________________
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities to be Registered
|
Amount
to be Registered(1)
|
Proposed
Maximum Offering Price Per Unit(2)
|
Proposed
Maximum Aggregate Offering Price(2)
|
Amount
of
Registration
Fee
|
Common
Stock, $0.10 par value
|
2,080,000
|
$1.68
|
$3,494,400.00
|
$107.28
|
(1)
|
Consists
of 1,600,000 shares of common stock being registered for resale by
the
selling stockholders named in the prospectus and 480,000 shares of
common
stock underlying warrants to purchase shares of common
stock.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant
to
Rule 457(c) of the Securities Act of 1933, as amended, based on the
average of the high and low price for the common stock of Innovo
Group
Inc. on the Nasdaq Capital Market on August 20,
2007.
|
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, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT
TO COMPLETION, DATED August 27, 2007
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING
STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO
BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
INNOVO
GROUP INC.
5901
SOUTH EASTERN AVENUE
COMMERCE,
CALIFORNIA 90040
COMMON
STOCK
2,080,000
SHARES OF COMMON STOCK OFFERED BY SELLING STOCKHOLDERS
You
should read this prospectus carefully before you invest in our common stock
offered hereby.
This
prospectus registers for resale up to 2,080,000 shares of our common stock
which
may be offered from time to time by the stockholders listed beginning on page
16
of this prospectus. Of these shares, 1,600,000 are issued and outstanding and
480,000 shares are issuable upon exercise of outstanding warrants. We originally
issued the shares and warrants in connection with private transactions. We
will
not receive any of the proceeds from the sale of our common stock by the selling
stockholders.
Our
common stock is traded on the Nasdaq Capital Market under the symbol “INNO.”
The
selling stockholders may sell the shares of common stock described in this
prospectus in a number of different ways and at varying prices. See “Plan of
Distribution” beginning on page 17 for more information about how a selling
stockholder may sell its shares of common stock. We will not be paying any
underwriting discounts or commissions in this offering.
On
August
24, 2007, the last reported sale price of the common stock on the Nasdaq Capital
Market was $1.97 per share. See "Price Range of Common Stock." You should obtain
a current market price quotation before you buy any of the offered
shares.
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 5 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is August 27, 2007.
TABLE
OF CONTENTS
|
Page
|
|
|
Prospectus
summary
|
1
|
Risk
factors
|
5
|
Use
of proceeds
|
14
|
Dividend
policy
|
14
|
Selling
stockholders
|
15
|
Plan
of Distribution
|
17
|
Description
of capital stock
|
18
|
Legal
matters
|
19
|
Experts
|
19
|
Where
you can find more information
|
19
|
Forward-looking
statements
|
21
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
22
|
Cautionary
Statements
|
22
|
In
connection with this offering, no person is authorized to give any information
or to make any representations not contained or incorporated by reference in
this prospectus. If information is given or representations are made, you may
not rely on that information or representations as having been authorized by
us.
This prospectus is neither an offer to sell nor a solicitation of an offer
to
buy any securities other than those registered by this prospectus, nor is it
an
offer to sell or a solicitation of an offer to buy securities where an offer
or
solicitation would be unlawful. You may not imply from the delivery of this
prospectus, nor from any sale made under this prospectus, that our affairs
are
unchanged since the date of this prospectus or that the information contained
in
this prospectus is correct as of any time after the date of this prospectus.
The
information in this prospectus speaks only as of the date of this prospectus
unless the information specifically indicates that another date
applies.
We
are not making any representation to any purchaser of the common stock regarding
the legality of an investment in the common stock by such purchaser under any
legal investment or similar laws or regulations. You should not consider any
information in this prospectus to be legal, business or tax advice. You should
consult your own attorney, business advisor and tax advisor for legal, business
and tax advice regarding an investment in the common
stock.
_________________________
In
this
prospectus, when we to refer to Innovo Group Inc. and its subsidiaries, we
use
the terms “Innovo Group,” “we,” “our” and “us” when we do not need to
distinguish among these entities or their predecessors or when any distinction
is clear from the context.
PROSPECTUS
SUMMARY
You
should read this summary together with the entire prospectus, including the
more
detailed information in our consolidated financial statements and related notes
incorporated herein by reference to this prospectus.
Our
Business
Overview
We
began
our operations in April 1987 as Innovo, Inc., or Innovo, a Texas corporation,
to
manufacture and domestically distribute cut and sewn canvas and nylon consumer
products for the utility, craft, sports licensed and advertising specialty
markets. In 1990, Innovo merged into Elorac Corporation, a Delaware corporation,
and renamed itself our present name, Innovo Group Inc. Initially, we produced
craft and accessory products for the consumer marketplace through various
operating subsidiaries. Since that time, we gradually evolved from producing
craft and accessory products to designing and selling apparel products. During
this transition, we moved our operations from Tennessee to Los Angeles,
California.
Our
principal business activity has evolved into the design, development and
worldwide marketing of apparel products, primarily, denim jeans and related
casualwear. Our primary apparel products bear the brand name Joe’s® and operated
under our Joe’s Jeans Inc., or Joe’s Jeans, subsidiary. Since Joe’s Jeans was
established in 2001, the brand is recognized in the premium denim industry
for
its quality, fit and fashion-forward designs. Because we focus on design,
development and marketing, we rely on third party manufacturers to manufacture
our apparel products for distribution and Pixior LLC, or Pixior, a Los
Angeles-based distribution company, for product fulfillment services. We sell
our products to numerous retailers, which include major department stores,
specialty stores and distributors around the world.
Fiscal
2006 was a transition year for us. After deciding to focus our operations on
our
Joe’s® brand, we decided to cease operations of our other branded and private
label business. In May 2006, we sold certain of the assets related to our
private label division where we made denim apparel products for mass market
retailers such as American Eagle Outfitters Inc., or AEO, and Target
Corporation, or Target. In addition throughout the course of the fiscal year,
we
ceased production and sold the remaining other branded apparel inventory, which
included the brands indie™ and Betsey Johnson®, to focus on our Joe’s® business.
Further, in the third quarter of fiscal 2006, we began operating under an
agreement with Pixior to outsource our product fulfillment services, including
our warehousing, distribution and customer services needs for our products
and
moved our principal offices to space under a verbal facilities arrangement
with
Pixior.
To
enhance our ability to capitalize on the Joe’s® brand, on February 6, 2007, we
entered into a merger agreement to merge with JD Holdings Inc., or JD Holdings,
the successor in interest to JD Design LLC, or JD Design, the entity from whom
we license the Joe’s® brand and amended on June 25, 2007. In exchange for all of
the rights to the Joe’s® brand and subject to approval by our stockholders, we
will issue to JD Holdings 14,000,000 shares of our common stock, $300,000 in
cash and enter into an employment agreement with Joe Dahan, the principal
designer of the Joe’s brand and sole stockholder of JD Holdings. Mr. Dahan will
also be entitled to, for a period of 120 months following the effective date,
a
certain percentage of the gross profit above $11,250,000 earned by us in any
applicable fiscal year. In the event that the merger is approved, the license
agreement will terminate and we will own all right, title and interest in the
Joe’s® brand and marks. By owning all rights to the Joe’s® brand and marks
outright, we will eliminate any risks associated with the potential termination
of the license agreement and have the right to control the direction of the
brand and our company, including licensing opportunities. To capitalize on
licensing opportunities for the brand, we also announced that we entered into
a
license agreement with the Betesh Group to be effective upon completion of
the
merger agreement for the worldwide license to produce and sell handbags, belts
and small leather goods, such as wallets for men and women bearing the Joe’s®
brand.
_________________________
We
are
incorporated under the laws of the State of Delaware. Our corporate headquarters
are located at 5901 South Eastern Avenue, Commerce, California, 90040. Our
telephone number is (323) 837-3700. We also have operational offices and/or
showrooms in Los Angeles and New York, and third party showrooms in New York,
Los Angeles, Tokyo, Paris and Germany for the sale of our Joe’s Jeans® products.
Although we maintain a website at www.innovogroup.com,
we do
not intend that the information available through our website be incorporated
into this prospectus. For additional information about us and our businesses,
see “Where You Can Find More Information.”
The
Offering
Issuer
|
Innovo
Group Inc.
|
|
|
Common
stock offered by the selling stockholders
|
2,080,000
(consists of shares of common stock offered by BSS-Joe’s Investors, LLC,
Windsong DB, LLC (referred to as the Investor Shares) which Investor
Shares include 480,000 shares of common stock underlying warrants
to
purchase shares of common stock)
|
|
|
Common
stock outstanding before and after the offering
|
45,119,355
(excludes 111,811 shares held as treasury shares, which are issued
but not
outstanding)
|
|
|
Use
of Proceeds
|
We
will not receive any proceeds from this offering.
|
|
|
Registration
Rights of Investor Shares
|
We
have agreed to use commercially reasonable efforts to keep the
registration statement, of which this prospectus forms a part, current,
continuously effective and free from any material misstatement or
omission
until the earlier of:
· June
27, 2009;
· the
date on which the investor may sell all registrable securities then
held
by the investor without restriction by the volume limitations of
Rule
144(e) of the Securities Act; or
· such
time as all registrable securities held by such investor have been
sold
pursuant to a registration statement.
|
|
|
Trading
|
Our
common stock is traded on the Nasdaq Capital Market under the symbol
“INNO.”
|
|
|
Risk
Factors
|
See
“Risk Factors” and the other information in this prospectus for a
discussion of the factors you should carefully consider before deciding
to
invest in our common stock.
|
____________________________________________________________________________________
The
outstanding share information is based on our shares outstanding as of August
24, 2007. This information excludes (i) 3,519,796 shares of common stock
issuable upon the exercise of outstanding stock options at a weighted average
exercise price of $1.81 per share; (ii) an aggregate of 676,839 shares of common
stock available for future issuance under our 2004 Stock Incentive Plan for
employees, directors and consultants as of August
24, 2007; (iii) 1,383,333 shares of common stock issuable upon the exercise
of
outstanding warrants at a weighted average exercise price of $2.55 per share;
and (iv) 6,834,347 shares of common stock reserved for issuance pursuant to
a
collateral protection agreement.
RISK
FACTORS
Before
you invest in our common stock by purchasing shares from a selling stockholder
named in this prospectus, you should be aware that there are various risks
involved in investing in our common stock. We have described below all of the
risks which we deem material to your investment decision. You should consider
carefully these risk factors, together with all of the other information
included in this prospectus and in the periodic reports we have filed with
the
SEC under the Securities Exchange Act of 1934, or Exchange Act, before you
decide to purchase any shares of our common stock. Additional risks that we
do
not yet know of or that we currently think are immaterial may also impair our
business operations.
We
may not be successful in implementing our strategic plan to focus our resources
on our Joe’s® brand.
Our
ongoing business operations focus our resources on our Joe’s® brand. While to
date, this has been our best performing asset, we cannot assure you that our
reliance on sales from only one brand in the marketplace will result in
profitability for us. We cannot assure you that our Joe’s® brand will continue
to meet our expectations in terms of sales, profits and acceptance in the
marketplace by consumers and retailers. Therefore, our business operations
could
be negatively impacted by a change in any one or all of these expectations
and
may have a material adverse impact on our financial condition and results of
operations.
Our
operations could be dependent on our ability to execute on our exploration
of
strategic initiatives for our business, including our proposed merger agreement
with JD Holdings.
In
January 2006, we announced that our Board of Directors decided to explore
strategic initiatives related to our business, including the possible sale
of
some or all of our assets. In furtherance of these initiatives, in February
2007, we announced that we entered into a merger agreement with JD Holdings
to
purchase all right, title and interest in the Joe’s® brand and marks, which we
amended in June 2007. We believe that the purchase of the Joe’s® brand and marks
will give us the right to control the direction of the brand. However, this
merger is subject to the approval of our stockholders and we cannot assure
you
that the transaction will be approved or that this change will result in
profitability for us. While we believe that this transaction may ultimately
enhance stockholder value, we cannot assure you that this or any transaction
will result in enhanced economic value or profitability. In addition, in the
event that the merger is approved, we expect to seek opportunities to license
the Joe’s® brand and marks under license agreements for categories of products
that we do not produce. We cannot assure you that this strategy will work or
result in increased revenue for us.
We
have
not yet held our annual meeting to permit stockholders to approve the proposed
merger agreement and the issuance of the shares. We have filed a preliminary
revised merger proxy on Schedule 14A with the Securities and Exchange Commission
and expect to file a definitive merger proxy soon with the time, place and
date
of our annual meeting.
In
the event that we consummate the merger with JD Holdings, our existing
stockholders may be diluted. In addition, Mr. Dahan may be able to exert
significant influence and control over us as a result of his percentage of
stock
ownership and membership on our Board of Directors.
If
we
receive approval by our stockholders for the merger and the issuance of the
14
million shares of our common stock, this issuance would dilute the equity
interests of our existing stockholders. The perceived risk of dilution may
cause
our existing stockholders to sell their shares which could contribute to a
decline in the price of our common stock.
In
the
event that the merger and share issuance is approved by our stockholders, Mr.
Dahan will beneficially own approximately 24% of our total shares outstanding
on
a pro forma basis and will be our largest stockholder. In addition, Mr. Dahan
will be entitled to become a member of our Board of Directors and as a result,
he will be in a position to exert significant influence and control over us
as a
result of his voting power and membership on our Board of Directors. We are
not
aware of any intent by Mr. Dahan to influence or control our affairs as a result
of his percentage of ownership of our common stock and his position as a member
of our Board of Directors.
Due
to negative cash flows, we could be required to cut back or stop operations
if
we are unable to raise or obtain needed funding.
Our
ability to fund our operations will depend on (i) utilizing our receivable
and
inventory based agreements with CIT Commercial Services, a unit of CIT Group,
Inc., or CIT; (ii) utilizing the proceeds from our equity financing in December
2006 and June 2007; (iii) maximizing our trade payables with our domestic and
international suppliers; (iv) managing our inventory levels and operating
expenses; and (v) increasing collection efforts on existing account
receivables.
Our
primary method to obtain the cash necessary for operating needs is through
the
sale of our account receivables under our factoring agreements and ability
to
obtain advances under our inventory security agreements, or the Factoring
Facilities, with CIT. These Factoring Facilities give us, through our operating
subsidiaries, the ability to obtain cash by selling to CIT certain of our
account receivables for up to 85% of the face amount of the receivables on
either a recourse or non-recourse basis depending on the creditworthiness of
the
customer. The Factoring Facilities also allow us to obtain advances for up
to
50% of the value of certain eligible inventory. We currently obtain funds under
the Factoring Facilities at 85% of factored invoices and under the inventory
security agreement up to approximately $3,750,000 of maximum availability.
CIT
has the ability, in its discretion at any time or from time to time, to adjust
or revise any limits on the amount of loans or advances made to us pursuant
to
the Factoring Facilities. As further assurance to enter into the Factoring
Facilities, cross guarantees were executed by and among us, Innovo, Joe’s and
IAA, to guarantee each subsidiaries’ obligations. Historically, we have also
asked a member of our Board of Directors to execute a personal guarantee to
provide us with additional availability under the Factoring Facilities. In
addition, in October 2006, JD Design granted to CIT a security interest in
the
Joe’s® trademarks and executed a non-recourse guaranty in favor of CIT to allow
us to obtain additional advances under our inventory security agreement. In
connection with the security interest and guaranty, we entered into an agreement
with JD Design to provide protection to JD Design through the potential issuance
of shares of our common stock as collateral for the non-recourse guaranty and
security interest granted to CIT.
As
of May
26, 2007, our availability with CIT was approximately $290,000 under the
Factoring Facilities. This amount fluctuates on a daily basis based upon
invoicing and collection related activity by CIT on our behalf. In connection
with the agreements with CIT, certain assets are pledged to CIT, including
all
of our inventory, merchandise, and/or goods, including raw materials through
finished goods and receivables.
These
Factoring Facilities may be terminated by CIT upon 60 days prior written notice
or immediately upon the occurrence of an event of default, as defined in the
agreement. The agreements may be terminated by us upon 60 days advanced written
notice prior to June 30, 2008 or earlier provided that the minimum factoring
fees have been paid for the respective period.
Because
our negative cash flows could cause CIT to terminate the Factoring Facilities
after notice, we may be forced to pay our liability with CIT, which could
include CIT exercising its right to take possession of the pledged collateral,
which includes raw materials through finished goods and receivables. Although
we
have undertaken numerous measures to increase sales, control inventory costs
and
operate more efficiently so that we may be able to continue to fund our
operations for the remainder of fiscal 2007, we may continue to experience
losses and negative cash flows. We can give you no assurance that we will in
fact operate profitably in the future.
We
rely on our Joe’s ® license agreement to generate our
revenues.
Our
sales
are dependent upon our Joe’s® license. Although we believe we will continue to
meet all of our material obligations under this license agreement, there can
be
no assurance that such license rights will continue or will be available for
renewal beyond the rights that we have under the agreements. We are dependent
on
our revenue from this license agreement to fund our continuing operations.
Because of this reliance, we have entered into the merger agreement with JD
Holdings so that we can, if we obtain stockholder approval, own all right,
title
and interest to the Joe’s® brand and marks. By owning the brand and the marks,
we eliminate the possibility of losing the license that we rely on to generate
revenue. However, should our stockholders not approve the proposed merger and
stock issuance or in the event that the transaction does not close, we would
continue to operate under the existing license agreement.
We
outsource certain of our business operations and are dependent, to a degree,
on
third parties to perform these services for us.
In
connection with our operations, we outsource certain services and are dependent
on third parties for the manufacture and product fulfillment of our apparel
products. The inability of one or more of these service providers to
manufacture, ship or fulfill our customer purchase orders in a timely manner
or
to meet our quality standards could cause us to miss the delivery dates for
our
customers for those items. As a result, our customers may decide to cancel
orders, refuse to accept delivery of the products or cause us to provide
discounts or allowances. Any of these events could have a material adverse
effect on our financial condition and results of operation.
We
are dependent on our relationships with our vendors.
We
purchase our raw materials, including fabric, yarns, threads and trims, such
as
zippers, buttons, tags from a variety of vendors. While we are not reliant
exclusively on one or more particular vendor for the supply of the raw materials
or component parts required to meet our manufacturing needs, we depend on our
relationships and these vendors to ensure our supply of these raw materials
or
component parts. Any problems or disputes with these vendors could result in
us
having to source these raw materials or component parts from another vendor,
which could delay production, and in turn have a material adverse effect on
our
financial condition and results of operation.
Our
common 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 factors such as the following, some of which
are
beyond our control:
·
annual
and quarterly variations in actual or anticipated operating
results,
·
operating
results that vary from the expectations of securities analyst and
investors,
·
changes
in expectations as to our future financial performance, including financial
estimates by securities analysts and investors,
·
changes
in market valuations of other denim apparel companies,
·
announcements
of new product lines by us or our competitors, announcements by us or our
competitors of significant contracts, acquisitions or dispositions of assets,
strategic partnerships, joint ventures or capital commitments,
·
additions
or departures of key personnel or members of our board of directors,
and
·
general
conditions in the apparel industry.
In
the 52
week period prior to August 24, 2007, the high and low stock trading price
of
our common stock has ranged from $0.37 to $2.45. 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.
If
we cannot meet the Nasdaq Capital Market maintenance requirements and Nasdaq
rules, Nasdaq may delist our 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 Capital Market, formerly known as the Small Cap Market, and Nasdaq rules,
which require, among other things, minimum stockholders’ equity of $2.5 million,
a minimum bid price for our common stock of $1.00 and a requirement that a
majority of our Board of Directors be independent, as defined in the Nasdaq
rules.
On
June
30, 2006, we announced that we received a Nasdaq staff deficiency notice
indicating that we were no longer in compliance with Nasdaq Rule 4310(c)(4)
because the closing bid price per share of our common stock was below $1.00
per
share for 30 consecutive trading days. We were provided with 180 calendar days,
or until December 27, 2006, to regain compliance with this rule. On December
29,
2006, we announced that we had received a second letter from Nasdaq on December
28, 2006. The second letter notified us that since we did not regain compliance
by December 27, 2006, but otherwise met the initial listing criteria set forth
in Nasdaq Rule 4310(c) except for the bid price requirement, we were eligible
for an additional 180 calendar days, or until June 25, 2007, to regain
compliance. On January 29, 2007, we announced that we had regained compliance
with the minimum bid price rule. However, there can be no assurance that we
will
be able to maintain the bid price of our common stock at $1.00 and not violate
this rule or other Nasdaq requirements in the future.
If
we are
unable to satisfy Nasdaq criteria for maintaining listing, our common stock
would be subject to delisting. Trading, if any, of our 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., or NASD,
“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 our common stock.
Our
directors and management beneficially own a large percentage of our common
stock.
Our
executive officer and directors beneficially own approximately 12% of our common
stock, including options exercisable within 60 days of August 24, 2007, in
the
aggregate. More specifically, the Chairman of our Board, Sam Furrow,
beneficially owns approximately 7.32% of our common stock and in the event
that
the proposed merger is approved, Mr. Dahan, will own approximately 24% of our
common stock, as discussed above. Because of this level of stock ownership,
in
the aggregate, certain persons may be in a position to directly or indirectly
control our affairs. Our bylaws also limit the ability of stockholders to call
a
special meeting of stockholders. These bylaw provisions could have the effect
of
discouraging a takeover of us, and therefore may adversely affect the market
price and liquidity of our securities. We are also subject to a Delaware statute
regulating business combinations that may hinder or delay a change in control.
The anti-takeover provisions of the Delaware statute may adversely affect the
market price and liquidity of our securities.
We
are dependent on manufacturing arrangements with third parties to produce a
substantial portion of our products. We historically relied on certain
stockholders and their related entities, including, Azteca Production
International, Inc., or Azteca, to provide those services to us, however, now
we
utilize a third party that contracts with Azteca to utilize manufacturing time
in its facility in Mexico to manufacture our
product..
Over
the
course of our development, we have historically relied on a relationship with
Azteca, and its stockholders’ Hubert Guez and Paul Guez, who are also our
stockholders, to enter into purchase agreements and manufacturing and
distribution arrangements, verbal and written.
In
fiscal
2006, we entered into a manufacturing arrangement with Azteca to manufacture
some of our Joe’s® denim bottoms in Mexico through its Mexican subsidiary, AZT.
In fiscal 2006, we purchased approximately $12,845,000 in goods and services,
or
55% of our total purchases from AZT and its affiliates. Beginning in the third
quarter of fiscal 2007, we entered into a non-exclusive supply agreement with
a
new company called CMT for the manufacture of our Joe’s denim bottoms. CMT
leases space at AZT’s Mexico facility directly from AZT and is not affiliated
with Azteca or the Guez’s. We believe that this relationship with CMT is better
to ensure our current supply responsibilities are not adversely affected from
the reliance on one manufacturer.
Due
to
this dependence on third parties to manufacture our products, if due to
unforeseen circumstances, we are unable to utilize the services of any third
party for manufacturing, our operations may be adversely affected until we
are
able to secure manufacturing arrangements with other suppliers that could
provide a similar magnitude of services to us. In addition, developing and
finding such alternative suppliers for such services may take focus, time and
effort from management’s attention to other operations.
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 our operations.
Our
business is seasonal. The majority of our marketing and sales activities take
place from late fall to early spring. Historically, our greatest volume of
shipments and sales have occurred from late spring through the summer, which
coincides with our second and third fiscal quarters. This requires us to
build-up inventories during our first and second fiscal quarters when our cash
flow is weakest. Historically speaking, 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, including, 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
face risks associated with constantly changing fashion trends, including
consumer’s response to our Joe’s® branded apparel.
Our
success will depend on our ability to anticipate, gauge and respond to changing
consumer demand and fashion trends in a timely manner, in particular, consumer
demand for our Joe’s® branded apparel. Any failure on our part to anticipate,
identify and respond effectively to changing consumer demands and fashion trends
could adversely affect the acceptance of our products and leave us with a
substantial amount of unsold inventory or missed opportunities in the
marketplace. If that occurs, we may be forced to rely on markdowns or
promotional sales to dispose of excess, slow-moving inventory, which may
negatively affect our ability to achieve profitability. At the same time, a
focus on tight management of inventory may result, from time to time, in our
not
having an adequate supply of products to meet consumer demand and may cause
us
to lose sales.
In
addition, we face risks associated with delivering an entire collection of
items, including, fashion t-shirts, tops, sweaters and bottoms in fabric other
than denim, of fashion-forward apparel items bearing the Joe’s® brand name. We
attempt to minimize our risk associated with these products through early order
commitments by retailers. We must generally place production orders with
manufacturers before we have received all of a season’s orders and orders may be
cancelled by retailers before shipment. Therefore, if we fail to anticipate
accurately and respond to consumer preferences, we could experience lower sales,
excess inventories or lower profit margins, any of which could have a material
adverse effect on our results of operations and financial
condition.
Our
business could be negatively impacted by a change in consumer demand for denim
in the marketplace.
Denim,
including premium denim, an industry term for denim jeans with a typical retail
price of $120 or more, has been increasingly popular and growing in sales over
the past few years as a consumer discretionary purchase both domestically and
internationally. However, because consumer demands and fashion trends are
subject to cyclical variations as well as the fact that the general economy
and
future economic prospects can often affect consumer spending habits, a change
in
any one of the following:
·
consumer
demand,
·
consumer
purchases of discretionary items,
·
the
economy in general, or
·
fashion
trends,
any
of
which may result in lower sales, excess inventories or lower profit margins
for
our Joe’s® products, any of which could have a material adverse effect on our
results operations and financial condition.
Our
Joe’s® business may not experience the growth we expect if we are unable to
execute on our plan to increase our international
sales.
Continued
growth of our Joe’s® brand may be dependent, in part, on our ability to increase
our international net sales. During fiscal 2006, our international net sales
decreased compared to fiscal 2005 partially as a result of delays in producing
samples for use at international trade shows. On February 1, 2007, we and our
international distributor mutually agreed to dissolve our agreement for
international distribution. Under the terms of the dissolution, we have been
assigned the rights associated with the sub-distributors in various countries
and are continuing to ship to our international distributors. Further, our
distribution agreement for the Japanese market automatically ended on December
31, 2006, and we entered into a new agreement effective as of January 1, 2007.
We are internally evaluating our options with respect to our international
business and are reviewing our relationships in the international marketplace
to
create a strategy to improve and grow our international sales. This
strategy includes opening a branch office in Europe and hiring a consultant
to
assist us with our relationships with our agents and distributors in Europe
to
identify areas for potential growth. While we believe that our strategy for
fiscal 2007 will improve our international sales, there can be no assurance
that
we will be able to achieve our expectation level of net sales in the
international marketplace. Further, there can be no assurance that our styles,
fits and washes will gain acceptance in the international marketplace, as we
primarily design with the domestic customer in mind. Lack of growth in the
international market could have a material adverse effect on our results
operations and financial condition.
A
portion of our net sales and gross profit is derived from a small number of
large customers.
Our
10
largest customers and customer groups accounted for approximately 60% of our
net
sales during fiscal 2006. We do not enter into any type of long-term agreements
or firm commitment orders with any of our customers. Instead, we enter into
a
number of individual purchase order commitments with our customers. A decision
by the controlling owner of a group of stores or store or any other significant
customer, including our limited number of private label customers, whether
motivated by competitive conditions, financial difficulties or otherwise, to
decrease the amount of merchandise purchased from us, or to change their manner
of doing business with us, could have a material adverse effect on our financial
condition and results of operations if we were unable to find an alternative
customer for our products in a timely manner.
Our
business could be negatively impacted by the financial health of our retail
customers.
We
sell
our product primarily to retail and distribution companies around the world
based on pre-qualified payment terms. Financial difficulties of a customer
could
cause us to curtail business with that customer, in addition to the customer’s
decision to decrease the level of its orders, to cancel orders previously placed
in advance of shipment dates or to cease carrying our products. We may also
assume more credit risk relating to that customer’s receivables. We are
dependent primarily on lines of credit that we establish from time to time
with
customers, and should a substantial number of customers become unable to pay
to
us their respective debts as they become due, we may be unable to collect some
or all of the monies owed by those customers.
In
recent
years, the retail industry has experienced consolidation or other ownership
changes that have resulted in one entity controlling several different stores.
This consolidation can result in fewer customers for our products or the closing
of some stores or the number of “doors” which carry our products. As a result,
the potential for consolidation or ownership changes, closing of retail outlets
and fewer customers could negatively impact sales of our products and have
a
material adverse effect on our financial condition and results of
operations.
The
loss of the services of key personnel could have a material adverse effect
on
our business.
Our
executive officer has substantial experience and expertise in our business
and
has made significant contributions to our growth and success. The unexpected
loss of services of this individual could adversely affect us. We are currently
not protected by a key-man or similar life insurance covering our executive
officer, nor do we have a written employment agreement with our executive
officer who serves as our Chief Executive Officer, President and Chief Financial
Officer. If, for example, our executive officer should leave us, his services
would likely have a substantial impact on our ability to operate, on a daily
basis, because we would be forced to find and hire similarly experienced
personnel to fill one or more of those positions, and daily operations may
suffer temporarily as a result of this immediate void.
Furthermore,
with respect to Joe’s, while we maintain an employment agreement with Joe Dahan
and expect to enter into a new agreement if the merger transaction is completed,
Mr. Dahan’s departure from Joe’s could materially adversely affect our
operations because his experience, design capabilities and name recognition
in
the apparel industry is important to our business and we rely heavily on Mr.
Dahan’s capabilities to design, direct and produce product for the Joe’s brand.
However, the loss of Mr. Dahan would not terminate our existing agreement
pursuant to which we license the use of Joe’s® and the JD logo, nor would it
have any effect on the brand should the merger be approved. While we believe
that we would be able to find a suitable replacement to design, direct and
produce product for the Joe’s brand, we do not know the effect a new or
different designer would have on the products and consumer’s response to those
new products. Therefore, loss of such service could have an impact on our
ability to operate on a daily basis and daily operations may suffer temporarily
as well.
Our
business could suffer as a result of manufacturer’s inability to produce our
goods on time and to our specifications or if we need to replace
manufacturers.
We
do not
own or operate any manufacturing facilities and therefore depend upon
independent third parties for the manufacture of all of our products. Our
products are manufactured to our specifications by both domestic and
international manufacturers. In part, we are partially dependent on AZT and
its
affiliates as a manufacturer to the extent that they manufactured approximately
55% of our products during fiscal 2006. During fiscal 2006, approximately 41%
of
our products were manufactured in the United States and approximately 59% of
our
products were manufactured in Mexico or foreign countries. The inability of
a
certain manufacturer to ship orders of our products in a timely manner or to
meet our quality standards could cause us to miss the delivery date requirements
of our customers for those items, which could result in cancellation of orders,
refusal to accept deliveries or a reduction in purchase prices, any of which
could have a material adverse effect on our financial condition and results
of
operations. Because of the seasonality of our business, and the apparel and
fashion business in particular, the dates on which customers need and require
shipments of products from us are critical, as styles and consumer tastes change
so rapidly in the apparel and fashion business, particularly from one season
to
the next. Further, because quality is a leading factor when customers and
retailers accept or reject goods, any decline in quality by our third-party
manufacturers could be detrimental not only to a particular order, but also
to
our future relationship with that particular customer.
We
compete with other companies for the production capacity of our manufacturers.
Some of these competitors have greater financial and other resources than we
have, and thus may have an advantage in the competition for production and
import quota capacity. If we experience a significant increase in demand, or
if
an existing manufacturer of ours must be replaced, we may have to expand our
third-party manufacturing capacity. We cannot assure you that this additional
capacity will be available when required on terms that are acceptable to us
or
similar to existing terms which we have with our manufacturers, either from
a
production standpoint or a financial standpoint. We enter into a number of
purchase order commitments each season specifying a time for delivery, method
of
payment, design and quality specifications and other standard industry
provisions, but do not have long-term contracts with any manufacturer. None
of
the manufacturers we use produces our products exclusively.
Should
we
be forced to replace one or more of our manufacturers, particularly a
manufacturer that we may rely upon for a substantial portion of our production
needs, such as AZT, then we may experience an adverse financial impact, or
an
adverse operational impact, such as being forced to pay increased costs for
such
replacement manufacturing or delays upon distribution and delivery of our
products to our customers, which could cause us to lose customers or lose
revenues because of late shipments.
If
an independent manufacturer of ours fails to use acceptable labor practices,
our
business could suffer.
While
we
require our independent manufacturers to operate in compliance with applicable
laws and regulations, we have no control over the ultimate actions of our
independent manufacturers. Despite our lack of control, we have internal and
vendor operating guidelines to promote ethical business practices and our staff
periodically visits and monitors the operations of our independent
manufacturers. We also utilize the services of a third party independent labor
consulting service to conduct on site audits as required by state labor laws
to
help minimize our risk and exposure to unacceptable labor practice violations.
The violation of labor or other laws by one of our independent manufacturers
or
the divergence of an independent manufacturer’s labor practices from those
generally accepted as ethical in the United States, could interrupt or otherwise
disrupt the shipment of finished products to us or damage our reputation. Any
of
these, in turn, could have a material adverse effect on our financial condition
and results of operations. In particular, the laws governing garment
manufacturers in the State of California impose joint liability upon us and
our
independent manufacturers for the labor practices of those independent
manufacturers. As a result, should one of our independent manufacturers be
found
in violation of state labor laws, we could suffer financial or other unforeseen
consequences.
Our
trademark and other intellectual property rights may not be adequately protected
outside the United States and some of our products are targets of
counterfeiting.
We
believe that our trademarks and other proprietary rights are important to our
success and our competitive position. We may, however, experience conflict
with
various third parties who acquire or claim ownership rights in certain
trademarks as we expand our product offerings and expand the number of countries
where we sell our products. We cannot ensure that the actions we have taken
to
establish and protect these trademarks and other proprietary rights will be
adequate to prevent imitation of our products by others or to prevent others
from seeking to block sales of our products as a violation of their trademarks
and proprietary rights. Also, we cannot assure you that others will not assert
rights in, or ownership of, trademarks and other proprietary rights of ours
or
that we will be able to successfully resolve these types of conflicts to our
satisfaction. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent as do the laws of the United
States.
Our
Joe’s® products are sometimes the target of counterfeiters. As a result, there
are often products that are imitations or “knock-offs” of our Joe’s® products
that can be found in the marketplace or consumers can find products that are
confusingly similar to ours. We intend to vigorously defend our trademarks
and
products bearing our trademarks, however, we cannot assure you that our efforts
will be adequate to prosecute and block all sales of infringing products from
the marketplace.
Our
ability to conduct business in international markets may be affected by legal,
regulatory, political and economic risks.
Our
ability to capitalize on growth in new international markets and to maintain
the
current level of operations in our existing international markets is subject
to
risks associated with international operations. Some of these risks
include:
·
the
burdens of complying with a variety of foreign laws and
regulations,
·
unexpected
changes in regulatory requirements, and
·
new
tariffs or other barriers to some international markets.
We
are
also subject to general political and economic risks associated with conducting
international business, including:
·
political
instability,
·
changes
in diplomatic and trade relationships, and
·
general
economic fluctuations in specific countries or markets.
We
cannot
predict whether quotas, duties, taxes, or other similar restrictions will be
imposed by the United States, Mexico, the European Union, Canada, China, Japan,
India, Korea or other countries upon the import or export of our products in
the
future, or what effect any of these actions would have on our business,
financial condition or results of operations. Changes in regulatory or
geopolitical policies and other factors may adversely affect our business in
the
future or may require us to modify our current business
practices.
We
face intense competition in the denim industry.
We
face a
variety of competitive challenges from other domestic and foreign
fashion-oriented apparel producers, some of whom may be significantly larger
and
more diversified and have greater financial and marketing resources than we
have. We do not currently hold a dominant competitive position in any market.
We
compete with other denim manufacturers such as Seven for All Mankind, Citizens
of Humanity and Rock & Republic, and other larger competitors primarily on
the basis of:
·
anticipating
and responding to changing consumer demands in a timely manner,
·
maintaining
favorable brand recognition,
·
developing
innovative, high-quality products in sizes, colors and styles that appeal to
consumers,
·
appropriately
pricing products,
·
providing
strong and effective marketing support,
·
creating
an acceptable value proposition for retail customers,
|
·
|
ensuring
product availability and optimizing supply chain efficiencies with
manufacturers and retailers, and
|
·
obtaining
sufficient retail floor space and effective presentation of our products at
retail.
Furthermore,
some of our competitors are privately held corporations and may have resources
available to them that we, as a public company do not have. Therefore, it may
be
difficult for us to effectively gauge consumer response to our products and
how
our products are competing with these and other competitors in the
marketplace.
USE
OF PROCEEDS
Each
selling stockholder will receive all of the proceeds from the sale of its common
stock offered by this prospectus. We will not receive any of the proceeds from
the sale of the shares of common stock offered by the selling stockholders.
DIVIDEND
POLICY
We
have
never declared or paid a dividend on our 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.
SELLING
STOCKHOLDERS
The
table
below sets forth information regarding ownership of our common stock by the
selling stockholders on August 24, 2007 and the shares of common stock to be
sold by them under this prospectus. Beneficial ownership is determined in
accordance with SEC rules and includes voting or investment power with respect
to the securities. Except as indicated by footnote, and subject to applicable
community property laws, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. SEC rules require that the number of shares of
common stock outstanding used in calculating the percentage for each listed
person includes the shares of common stock underlying the warrants or options
held by such person that are currently exercisable or exercisable within 60
days
of August
24, 2007 are
deemed to be outstanding and to be beneficially owned by the person holding
the
options for the purpose of computing the percentage ownership of that person
but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. As of August 24, 2007, 45,119,355 shares of
our
common stock were outstanding.
|
Shares
Beneficially Owned
Prior
to the Offering
|
|
Shares
Beneficially Owned
After
Offering
|
Name
of Selling Stockholder
|
Number
of
Shares
|
Percent
of Class
|
Number
of Shares to be Sold in the Offering
|
Number
of Shares
|
Percent
of Class
|
|
|
|
|
|
|
BSS
- Joe’s Investors, LLC (1)
|
5,482,325(3)
|
12.09%
|
1,040,000
|
4,442,325
|
9.79%
|
Windsong
DB, LLC (2)
|
5,540,925(3)
|
12.22%
|
1,040,000
|
4,500,925
|
9.92%
|
TOTAL
for Selling Stockholders:
|
11,023,250
|
|
2,080,000
|
|
|
__________________
*
Represents less than 1%
|
(1)
|
The
shares registered hereunder includes (i) 800,000 shares held for
the
account of BSS-Joe’s Investors, LLC, an entity which Barry S. Sterlicht
holds the majority of the membership interests; and (ii) 240,000
shares
issuable upon exercise of a warrant first exercisable beginning on
December 25, 2007. The remaining shares beneficially owned after
the
offering include 4,442,326 shares previously registered for resale
on a
Pre-Effective Amendment No. 1 to a Registration Statement on Form
S-3
(Registration No. 333-140867) filed with the SEC on May 4, 2007 and
declared effective on May 16, 2007. Barry S. Sternlicht, as holder
of the
majority of the membership interest of BSS-Joe’s Investors, LLC, has sole
voting or investment control over these shares. This information
is based
upon a Schedule 13D/A filed with the SEC on July 10,
2007.
|
|
(2)
|
The
shares registered hereunder includes (i) 800,000 shares held for
the
account of Windsong DB, LLC, an entity which William Sweedler holds
the
majority of the membership interests; and (ii) 240,000 shares issuable
upon exercise of a warrant first exercisable beginning on December
25,
2007. The remaining shares beneficially owned after the offering
include
(i) 4,442,325 shares previously registered for resale on a Pre-effective
Amendment No. 1 to a Registration Statement on Form S-3 (Registration
No.
333-140867) filed with the SEC on May 4, 2007 and declared effective
on
May 16, 2007 and (ii) 58,600 shares held directly by Mr. Sweedler.
William
Sweedler, as holder of the majority of the membership interest of
Windsong
DB, LLC, has sole voting or investment control over these shares.
This
information is based upon a Schedule 13D/A filed with the SEC on
July 10,
2007 and July 11, 2007.
|
|
(3)
|
Includes
240,000 shares issuable upon exercise of a warrant first exercisable
beginning on December 25, 2007 and registered for resale upon exercise
hereunder (the "Warrant Shares"). However, because such Warrant
Shares are
not exercisable within 60 days of the date of this filing, such
Warrant
Shares are not beneficially owned as defined in Rule 13d-3(a) by
the
holder and are not included in its Schedule 13D/A filed with the
SEC. The
Warrant Shares are included herein since they are being registered
by this
prospectus.
|
In
June
2007, we consummated a private placement of our common stock and/or warrants
to
purchase common stock to two “accredited investors” pursuant to Rule 506 of
Regulation D under the Securities Act. The proceeds from the transaction were
earmarked for general working capital purposes. In connection with the
transaction, we issued 1,600,000 shares at a purchase price of $1.25 per share
and warrants to purchase an additional 480,000 shares of common stock to these
investors at an exercise price of $1.36 per share. Each of the warrants issued
include a cashless exercise option, pursuant to which the holder can exercise
the warrant without paying the exercise price in cash. If the holder elects
to
use this cashless exercise option, it will receive a fewer number of our shares
than it would have received if the exercise price were paid in cash. The number
of shares of common stock a holder of the warrant would receive in connection
with a cashless exercise is determined in accordance with a formula set forth
in
the warrant. The warrants issued in connection with the private placement have
a
term of five years and are first exercisable on December 25, 2007. We are
registering the maximum number of shares issuable pursuant to the warrants
as
part of this registration statement of which this prospectus forms a part.
We
received representations and warranties from the investors that each was
acquiring the securities for investment purposes and not with a view towards
distribution of the securities.
We
are
registering all 2,080,000 shares of common stock as described above in order
to
permit the selling stockholders to offer the common stock for resale from time
to time. We are obligated to maintain the effectiveness of the registration
statement of which this prospectus forms a part until at least June 27, 2009.
Under a previous registration rights agreement, we registered for resale other
shares held by the selling stockholders.
Except
as
otherwise disclosed above or in documents incorporated herein by reference,
the
selling stockholders, have not within the past three years had any position,
office or other material relationship with us or any of our predecessors or
affiliates. Because the selling stockholders may sell all or some portion of
the
shares of common stock beneficially owned by them from time to time or at any
time, only an estimate (assuming the selling stockholders sell all of the shares
offered hereby) can be given as to the number of shares of common stock that
will be beneficially owned by the selling stockholders after this offering.
In
addition, the selling stockholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time or
from
time to time since the dates on which they provided the information regarding
the shares beneficially owned by them, all or a portion of the shares
beneficially owned by them in transactions registered under other effective
registration.
The
preceding table has been prepared based upon the information furnished to us
by
the selling stockholders. The selling stockholders identified above may have
sold, transferred or otherwise disposed of some or all of their common stock
in
transactions exempt from the registration requirements of the Securities Act
since the dates on which they provided the information regarding the common
stock beneficially owned by them. Information concerning the selling stockholder
may change from time to time and, if necessary, we will supplement this
prospectus accordingly.
PLAN
OF DISTRIBUTION
We
are
registering the shares of common stock on behalf of the selling stockholders.
A
selling stockholder is a person named on page 16 and also includes any donnee,
pledgee, transferee or other successor-in-interest selling shares received
after
the date of this prospectus from a selling stockholder as a gift, pledge,
partnership or limited liability company or corporate distribution, assignment
or other non-sale related transfer.
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 transfer shares to discharge
indebtedness, as payment for goods or services, or for other non-cash
consideration.
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.
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 CAPITAL
STOCK
Common
Stock
Pursuant
to our Amended and Restated Certificate of Incorporation, we are authorized
to
issue 80,000,000 shares of common stock, $0.10 par value per share. As of August
24, 2007, we had outstanding 45,119,355 validly issued, fully paid and
non-assessable 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 our board of directors
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 our
company.
Our
Board
of Directors may issue the additional shares of common stock, up to the
authorization of 80,000,000 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 acquirer 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
Our
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 Innovo. As of August 17, 2007, we did not have any shares
of preferred stock outstanding.
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. We have made no such election and are therefore governed by
Section 203. Such anti-takeover provision may have an adverse effect on the
market for our securities.
Indemnification
and Limitation of Liability
Our
Amended and Restated Certificate of Incorporation provides that we shall
indemnify our 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, our 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 any of our
directors or officers as to which indemnification is being sought, nor are
we
aware of any threatened litigation that may result in claims for indemnification
by any officer or director.
Transfer
Agent and Registrar
for our Common Stock
The
transfer agent and registrar for our common stock is Continental Stock Transfer
and Trust Company located at 17 Battery Place, New York, New York 10004, and
its
telephone number is (212) 509-4000.
LEGAL
MATTERS
The
validity of the shares of common stock offered by this prospectus will be passed
upon for our company by our general counsel, Dustin A. Huffine, Esq. Mr. Huffine
beneficially owns 8,050 shares of common stock held for his personal account
and
options to purchase 100,000 shares (including shares exercisable within 60
days
of the date of this prospectus) of our common stock pursuant to our 2004 Stock
Incentive Plan.
EXPERTS
The
consolidated financial statements of Innovo Group, Inc. appearing in Innovo
Group Inc.'s Annual Report (Form 10-K and Amendment No. 1 on Form 10-K/A)
for the year ended November 25, 2006 (including the schedule appearing therein),
have been audited by Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon, included therein, 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.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any document we file at the SEC’s public
reference rooms at 100
F
Street, N.E., Washington, D.C. 20549.
Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public from the SEC’s website
at http://www.sec.gov.
We also
make such documents that we file with the SEC available on our website at
http://www.innovogroup.com
as soon
as reasonably practicable after such reports are electronically filed with
or
furnished to the SEC. However, we do not intend that the information available
through our website be incorporated into this prospectus.
We
have
filed a registration statement on Form S-3 with the SEC 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
SEC’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 herein. You can review and copy these documents
at the public reference facilities maintained by the SEC or on the SEC’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.
The
SEC
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
SEC
at a later date will automatically update or supersede this information. We
incorporate by reference the documents listed below:
|
1.
|
Our
Amendment No. 2 to our Annual Report on Form 10-K/A for the fiscal
year
ended November 25, 2006, filed with the SEC on March 23,
2007;
|
|
2.
|
Our
Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal
year
ended November 25, 2006, filed with the SEC on February 9,
2007;
|
|
3.
|
Our
Annual Report on Form 10-K for the fiscal year ended November 25,
2006,
filed with the SEC on February 8,
2007;
|
|
4.
|
Our
Quarterly Report on Form 10-Q for the three months ended February
24, 2007
filed with the SEC on April 10,
2007;
|
|
5.
|
Our
Quarterly Report on Form 10-Q for the three months ended May 26,
2007
filed with the SEC on July 10,
2007;
|
|
6.
|
Our
Definitive Proxy Statement on Schedule 14A filed with the SEC on
April 21,
2006;
|
|
7.
|
Our
Current Report on Form 8-K filed with the SEC on August 27,
2007;
|
|
8.
|
Our
Current Report on Form 8-K filed with the SEC on July 24,
2007;
|
|
9.
|
Our
Current Report on Form 8-K filed with the SEC on July 9,
2007;
|
|
10.
|
Our
Current Report on Form 8-K filed with the SEC on July 3,
2007;
|
|
11.
|
Our
Current Report on Form 8-K filed with the SEC on June 26,
2007;
|
|
12.
|
Our
Current Report on Form 8-K filed with the SEC on May 25,
2007;
|
|
13.
|
Our
Current Report on Form 8-K filed with the SEC on May 3,
2007;
|
|
14.
|
Our
Current Report on Form 8-K filed with the SEC on April 19,
2007;
|
|
15.
|
Our
Current Report on Form 8-K/A filed with the SEC on March 14,
2007;
|
|
16.
|
Our
Current Report on Form 8-K filed with the SEC on February 12,
2007;
|
|
17.
|
Our
Current Report on Form 8-K filed with the SEC on February 7,
2007;
|
|
18.
|
Our
Current Report on Form 8-K filed with the SEC on February 1,
2007;
|
|
19.
|
Our
Current Report on Form 8-K/A filed with the SEC on January 16,
2007;
|
|
20.
|
Our
Current Report on Form 8-K filed with the SEC on January 3,
2007;
|
|
21.
|
Our
Current Report on Form 8-K filed with the SEC on December 26,
2006;
|
|
22.
|
Our
Current Report on Form 8-K filed with the SEC on December 8,
2006;
and
|
|
23.
|
Our
description of common stock that is referenced in our registration
statement on Form 8-A, File No. 000-18926, filed with the SEC on
December
6, 1990 (which incorporates by reference the description of Common
Stock
that is contained in our Post Effective Amendment No. 6 to Form S-18,
File
No. 33-25912, filed with the SEC on November 29, 1990), including
all
amendments or reports filed for the purpose of updating such
description.
|
All
documents filed (File No. 0-18926) under Sections 13(a), 13(c), 14 or 15(d)
of
the Securities Exchange Act of 1934, as amended, after the date of this
prospectus and prior to the termination of this offering shall be deemed to
be
incorporated by reference in this prospectus and to be part of this prospectus
from the date they are filed. In addition, all documents filed pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the
initial registration statement and prior to the effectiveness of the
registration statement of which this prospectus forms a part shall be deemed
to
be incorporated by reference in this prospectus and to be part of this
prospectus from the date they are filed. However, we are not incorporating
any
information furnished under either former Item 9 or former Item 12 or Item
2.02,
Item 7.01, or Item 9.01 of any Current Report on Form 8-K.
You,
including any beneficial owner of any security to whom a prospectus is
delivered, may request a copy of these filings or any exhibits thereto, at
no
cost, by writing to or calling Dustin Huffine, Secretary, Innovo Group Inc.,
5901 South Eastern Avenue, Commerce, California 90040, telephone (323)
837-3700.
FORWARD-LOOKING
STATEMENTS
This
prospectus and the documents incorporated by reference in this prospectus
contain both historical and forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are not statements
of historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words
such
as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this
prospectus. Factors that can cause or contribute to these differences include
those described under the headings “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” These forward
looking statements include, but are not limited to, statements regarding the
following: growth opportunities and increasing market share, earnings estimates,
future financial performance and other matters. Although we believe that the
expectations contained in these forward-looking statements are reasonable,
you
cannot be assured that these expectations will prove correct.
If
one or
more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from
what
we projected. Any forward-looking statements you read in this prospectus and
the
documents incorporated by reference in this prospectus reflect our current
views
with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to our operations, results of operations,
growth strategy and liquidity. All subsequent written and oral forward-looking
statements attributable to us or individuals acting on our behalf are expressly
qualified in their entirety by this paragraph. You should carefully review
and
consider all information, including the information included in the section
entitled “Risk Factors” and the financial statements and the notes to the
financial statements and related disclosures incorporated by reference in this
prospectus before making an investment decision. We are under no duty to update
any of the forward-looking statements after the date of this prospectus or
to
conform these statements to actual results.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITY
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers or controlling persons pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities
Act
and is therefore unenforceable.
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.
You
should rely only on the information contained in this document or to which
we
have referred you. We have not authorized anyone to provide you with information
that is different. This document may only be used where it is legal to sell
these securities. The information contained in this document is current only
as
of its date.
2,080,000
SHARES
INNOVO
GROUP INC.
COMMON
STOCK
____________
PROSPECTUS
____________
August
27, 2007
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other
Expenses of Issuance and Distribution.
The
following table sets forth the costs and expenses to be paid by us in connection
with the sale of the shares of common stock being registered hereby. All amounts
are estimates, except for the SEC registration fee.
SEC
registration fee
|
|
$
|
107.28
|
|
Accounting
fees and expenses
|
|
$
|
10,000.00
|
|
Legal
fees and expenses
|
|
$
|
20,000.00
|
|
Transfer
agent and registrar fees and expenses
|
|
$
|
2,000.00
|
|
Miscellaneous
expenses
|
|
$
|
50,000.00
|
|
Total
|
|
$
|
82,107.28
|
|
Item
15. Indemnification
of Directors and Officers.
Section
145 of the Delaware General Corporation Law provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in
the right of the corporation) by reason of the fact that the person is or was
a
director, officer, employee or agent of the corporation or is or was serving
at
the corporation’s request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys’ fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
the
action, suit or proceeding if the person acted in good faith and in a manner
the
person reasonably believed to be in or not opposed to the best interests of
the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person’s conduct was unlawful. In actions
brought by or in the right of a 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 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 our Amended and Restated Certificate of
Incorporation requires that we indemnify our directors and officers for certain
liabilities incurred in the performance of their duties on our behalf to the
fullest extent allowed by Delaware law.
Our
Amended and Restated Certificate of Incorporation relieves our directors from
personal liability to us or our stockholders for breach of any of 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 for
any
breach of their fiduciary duties 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 such director derived an improper personal
benefit.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers or controlling persons pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities
Act
and is therefore unenforceable.
Item
16. Exhibits.
The
following exhibits are filed herewith and as a part of this registration
statement:
Exhibit
Number
|
|
Description
|
|
Document
if
Incorporated
by Reference
|
|
|
|
|
|
4.2
|
|
Form
of Securities Purchase Agreement dated June 27, 2007
|
|
Exhibit
4.1 to Current Report on Form 8-K filed on July 3, 2007
|
|
|
|
|
|
4.3
|
|
Form
of Common Stock Purchase Warrant dated June 27, 2007
|
|
Exhibit
4.1 to Current Report on Form 8-K filed on July 3, 2007
|
|
|
|
|
|
5
|
|
Opinion
of Dustin Huffine, Esq.
|
|
Filed
herewith
|
|
|
|
|
|
23.1
|
|
Consent
of Dustin Huffine, Esq. (included in Exhibit 5)
|
|
Filed
herewith
|
|
|
|
|
|
23.2
|
|
Consent
of Independent Registered Public Accounting Firm
|
|
Filed
herewith
|
|
|
|
|
|
24
|
|
Power
of Attorney (included on page II-5and II-6)
|
|
Filed
herewith
|
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;
(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 this registration statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material change
to
such information in this registration statement.
provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the undersigned registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this registration statement;
(2) That,
for
the purpose of determining any liability under the Securities Act, 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) The
undersigned registrant hereby undertakes that each prospectus filed pursuant
to
Rule 424(b) as part of a registration statement relating to an offering, other
than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included
in
the registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made
in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into
the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first
use,
supersede or modify any statement that was made in the registration statement
or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(c) 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 15 above, or otherwise, the
registrant has been advised that in the opinion of the SEC 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 asserted 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 matter 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.
(d) 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.
(e) 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 the City of
Commerce, State of California, on the 27th
day of
August, 2007.
INNOVO
GROUP INC.
By:
/s/
Marc
Crossman
Marc
Crossman
Chief
Executive Officer (Principal Executive Officer),
and
President
By:
/s/ Hamish
Sandhu
Hamish
Sandhu
Chief Financial
Officer (Principal Financial Officer
and
Principal Accounting Officer)
POWER
OF ATTORNEY
KNOW
ALL
PERSON BY THESE PRESENTS that each individual whose signature appears below
constitute and appoints Marc Crossman and his true and lawful attorneys-in-fact
and agents with full power of substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
sign any registration statement for he same offering covered by the registration
statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents
in
connection therewith, with the Securities and Exchange Commission, granting
unto
said attorneys-in-fact and agents, and each of them, 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 to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute
or
substitutes, may lawfully do or cause to be done or 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 date
indicated.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO
FOLLOW.]
Signature
|
|
Capacity
|
|
Date
|
/s/
Marc B. Crossman
|
|
Chief
Executive Officer (Principal Executive Officer),
President and Director
|
|
August
27, 2007
|
Marc
B. Crossman |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Hamish Sandhu
|
|
Chief
Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
|
|
August
27, 2007
|
Hamish
Sandhu |
|
|
|
|
/s/
Samuel J. Furrow
|
|
Chairman
of the Board of Directors
|
|
August
27, 2007
|
Samuel
J. Furrow
/s/
Kelly Hoffman
|
|
Director
|
|
August
27, 2007
|
Kelly
Hoffman
/s/
Thomas O’Riordan
|
|
Director
|
|
August
27, 2007
|
Thomas
O’Riordan
/s/
Suhail R. Rizvi
|
|
Director
|
|
August
27, 2007
|
Suhail
R. Rizvi
/s/
Kent A. Savage
|
|
Director
|
|
August
27, 2007
|
Kent
A. Savage
|
|
|
|
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
4.1
|
|
Form
of Securities Purchase Agreement dated June 27, 2007**
|
|
|
|
4.2
|
|
Form
of Common Stock Purchase Warrant dated June 27, 2007**
|
|
|
|
5
|
|
Opinion
of Dustin Huffine, Esq.*
|
|
|
|
23.1
|
|
Consent
of Dustin Huffine, Esq. (included in Exhibit 5)*
|
|
|
|
23.2
|
|
Consent
of Independent Registered Public Accounting Firm*
|
|
|
|
24
|
|
Power
of Attorney (included
in
the signature page of this Registration
Statement)*
|
__________________
*
Filed
herewith.
**
Previously Filed