UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended August 26, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number:  0-18926

INNOVO GROUP INC.
(Exact name of registrant as specified in its charter)

 

 

(323) 837-3700
(Registrant’s telephone number, including area code)

5804 East Slauson Avenue, Commerce, California 90040
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes                    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

(Check One):

Large accelerated filer o                                    Accelerated filer x                                             Non-accelerated filer  o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes o No x

The number of shares of the registrant’s common stock outstanding as of October 4, 2006 was 34,343,454.

INNOVO GROUP INC.

QUARTERLY REPORT ON FORM 10-Q

PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures about Market Risk
Item 4.		Controls and Procedures
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 2.		Changes in Securities and Use of Proceeds
Item 3.		Defaults Upon Senior Securities
Item 4.		Submission of Matters to a Vote of Security Holders
Item 5.		Other Information
Item 6.		Exhibits
		Signatures

 

PART I – FINANCIAL INFORMATION

Item 1.                    Financial Statements.

INNOVO GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

		08/26/06			11/26/05
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	226		$	560
Accounts receivable, net of allowance for customer credits and returns of $1,515 (2006) and $412 (2005)		793			60
Inventories, net		8,152			12,083
Due from related parties, net		—			2,781
Prepaid expenses and other current assets		382			96
Assets of discontinued operations		112			11,233
Total current assets		9,665			26,813
Property and equipment, net		855			428
Goodwill		20			20
Intangible assets, net		212			248
Other assets		134			87
Total assets		$	10,886		$	27,596
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses		$	5,607		$	3,859
Due to factor		—			2,855
Due to related parties, net		1,777			54
Liabilities of discontinued operations		98			9,271
Total current liabilities		7,482			16,039
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.10 par value: 5,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.10 par value: 80,000 shares authorized 34,455 shares issued and 34,343 outstanding (2006) and 33,414 shares issued and 33,302 outstanding (2005)		3,447			3,343
Additional paid-in capital		79,760			78,823
Accumulated deficit		(77,027		)	(67,833		)
Treasury stock, 112 shares		(2,776		)	(2,776		)
Total stockholders’ equity		3,404			11,557
Total liabilities and stockholders’ equity		$	10,886		$	27,596

 

The accompanying notes are an integral part of these financial statements

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INNOVO GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except  per share data)

 

		Three months ended						Nine months ended
		08/26/06			08/27/05			08/26/06			08/27/05
		(unaudited)						(unaudited)
Net sales		$	12,448		$	12,600		$	32,662		$	28,424
Cost of goods sold		7,485			7,830			22,648			16,901
Gross profit		4,963			4,770			10,014			11,523
Operating expenses
Selling, general and administrative		5,168			5,166			16,396			13,657
Depreciation and amortization		78			53			200			125
		5,246			5,219			16,596			13,782
Loss from continuing operations		(283		)	(449		)	(6,582		)	(2,259		)
Interest expense		(133		)	(140		)	(378		)	(634		)
Other income (expense)		—			—			(68		)	7
Loss from continuing operations, before taxes		(416		)	(589		)	(7,028		)	(2,886		)
Income taxes		13			3			28			21
Loss from continuing operations		(429		)	(592		)	(7,056		)	(2,907		)
Income (loss) from discontinued operations, net of tax		(95		)	2,007			(2,138		)	4,209
Net income (loss)		$	(524	)	$	1,415		$	(9,194	)	$	1,302
Earnings (loss) per common share - Basic
Earnings (loss) from continuing operations		$	(0.01	)	$	(0.02	)	$	(0.21	)	$	(0.09	)
Earnings (loss) from discontinued operations		0.00			0.06			(0.06		)	0.13
Earnings (loss) per common share - Basic		$	(0.01	)	$	0.04		$	(0.27	)	$	0.04
Earnings (loss) per common share - Diluted
Earnings (loss) from continuing operations		$	(0.01	)	$	(0.02	)	$	(0.21	)	$	(0.09	)
Earnings (loss) from discontinued operations		0.00			0.06			(0.06		)	0.13
Earnings (loss) per common share - Diluted		$	(0.01	)	$	0.04		$	(0.27	)	$	0.04
Weighted average shares outstanding
Basic		34,343			33,286			33,691			31,489
Diluted		34,343			33,286			33,691			31,489

 

The accompanying notes are an integral part of these financial statements

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INNOVO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Nine months ended
		08/26/06			08/27/05
		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by (used in) continuing activities		$	3,187		$	(2,976	)
Cash provided by (used in) discontinued operations		574			(5		)
Net cash provided by (used in) operating activities		3,761			(2,981		)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(612		)	(331		)
Cash used in continuing activities		(612		)	(331		)
Cash provided by (used in) discontinued operations		614			(26		)
Net cash provided by (used in) investing activities		2			(357		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments on) factor borrowing, net		(2,855		)	885
Payments on note payable officer		—			(439		)
Proceeds from promissory note - former officer		—			703
Exercise of stock options		—			567
Exercise of warrants		—			2,284
Payment of stock issuance expense		—			(6		)
Net cash (used in) provided by continuing activities		(2,855		)	3,994
Cash used in discontinued operations		(1,242		)	(201		)
Net cash (used in) provided by financing activities		(4,097		)	3,793
NET CHANGE IN CASH AND CASH EQUIVALENTS		(334		)	455
CASH AND CASH EQUIVALENTS, at beginning of period		560			312
CASH AND CASH EQUIVALENTS, at end of period		$	226		$	767

 

The accompanying notes are an integral part of these financial statements

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INNOVO GROUP INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

												Additional						Promissory						Total
		Preferred Stock					Common Stock					Paid-In			Accumulated			Note - former			Treasury			Stockholders’
		Shares		Par Value			Shares		Par Value			Capital			Deficit			Officer			Stock			Equity
Balance, November 27, 2004		194		$	—		29,266		$	2,927		$	72,043		$	(51,400	)	$	(703	)	$	(2,588	)	$	20,279
Net loss		—		—			—		—			—			1,302			—			—			1,302
Payment of promissory note - former officer		—		—			—		—			—			—			703			—			703
Redemption of preferred stock		(194	)	—			—		—			—			—			—			—			—
Conversion of Convertible notes to common stock		—		—			2,560		256			4,129			—			—			—			4,385
Common stock registration related expense		—		—			—		—			(6		)	—			—			—			(6		)
Exercise of stock options		—		—			623		63			470			—			—			(188		)	345
Exercise of warrants		—		—			965		97			2,187			—			—			—			2,284
Balance, August 27, 2005 (unaudited)		—		$	—		33,414		$	3,343		$	78,823		$	(50,098	)	$	—		$	(2,776	)	$	29,292
Balance, November 26, 2005		—		$	—		33,414		$	3,343		$	78,823		$	(67,833	)	$	—		$	(2,776	)	$	11,557
Net loss		—		—			—		—			—			(9,194		)	—			—			(9,194		)
Common stock issued to related party		—		—			1,041		104			(104		)	—			—			—			—
Stock-based compensation		—		—			—		—			1,041			—			—			—			1,041
Balance, August 26, 2006 (unaudited)		—		$	—		34,455		$	3,447		$	79,760		$	(77,027	)	$	—		$	(2,776	)	$	3,404

 

The accompanying notes are an integral part of these financial statements

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INNOVO GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements of Innovo Group, Inc., or Innovo Group, which include the accounts of its wholly-owned subsidiaries, for the three and nine months ended August 26, 2006 and August 27, 2005 and the related footnote information have been prepared on a basis consistent with Innovo Group’s audited consolidated financial statements as of November 26, 2005 contained in Innovo Group’s Annual Report on Form 10-K for the year ended November 26, 2005, or the Annual Report.  Innovo Group’s operating subsidiaries include the following entities: Joe’s Jeans Inc., or Joe’s, and Innovo Azteca Apparel, Inc., or IAA.  All significant inter-company transactions have been eliminated.  Currently, Innovo Group has only one segment of operations - apparel.  Historically, Innovo Group operated in two segments - apparel and accessories.

As a result of the sale of assets related to certain areas of its operations, Innovo Group has reclassified and reported the following operating divisions of its various subsidiaries as “Discontinued Operations”:  (1) its craft and accessories division operated under its Innovo Inc. subsidiary, or Innovo, sold in May 2005; (2) its former headquarters in Springfield, Tennessee that was used as a commercial rental property operated under its Leaseall Management Inc. subsidiary, or Leaseall, sold in February 2006; and (3) its private label apparel division operated by its IAA subsidiary and sold in May 2006.  Continuing operations include the results of Innovo Group’s branded apparel business, including certain terminated branded apparel lines, which were not separate operating divisions and thus, not considered to be part of Innovo Group’s “Discontinued Operations.”

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto contained in Innovo Group’s Annual Report.  In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments), which management considers necessary to present fairly Innovo Group’s financial position, results of operations and cash flows for the interim periods presented.  The results for the three and nine months ended August 26, 2006 are not necessarily indicative of the results anticipated for the entire year ending November 25, 2006.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements.  Actual results may differ from those estimates.

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NOTE 2 – INVENTORIES

Inventories are stated at the lower of cost, as determined by the first-in, first-out method, or market.  Inventories consisted of the following (in thousands):

 

NOTE 3 – SALE OF CERTAIN ASSETS OF PRIVATE LABEL APPAREL DIVISION

On March 31, 2006, Innovo Group and its IAA subsidiary entered into an Asset Purchase Agreement, or Cygne APA, with Cygne Designs, Inc., or Cygne.  Pursuant to the Cygne APA, Innovo Group agreed to sell to Cygne certain assets related to its private label apparel division.  These assets include the private label division’s customer list, the assumption of certain existing purchase orders and inventory related to the private label division, and the assumption of the benefit of a non-compete clause in favor of Azteca Production International, Inc., or Azteca, entered into under the original asset purchase agreement between IAA and Azteca.  In exchange for the purchased assets, Cygne agreed to assume certain liabilities associated with the private label division, including, the remaining obligation under the original promissory note executed in favor of Azteca under the original asset purchase agreement (and as more fully described in “Note 4 – Related Party Transactions”), certain other liabilities owed in connection with the private label division to Azteca in excess of $1,500,000, certain liabilities associated with outstanding purchase orders and inventory schedules listed in the Cygne APA, the obligation to continue to pay the earn-out under the original asset purchase agreement and the assumption of the liabilities related to the workforce of the private label division.  The aggregate value of the assumed liabilities which represented the purchase price for the transaction at the time of execution of the Cygne APA was estimated to be $10,437,000, subject to certain permitted adjustments on the closing date.  On May 12, 2006, Innovo Group conducted its annual meeting of stockholders and its stockholders approved the sale of its private label apparel division pursuant to the Cygne APA.  Immediately thereafter, Innovo Group and Cygne closed the transaction.  No cash was transferred at closing and each party was responsible for its respective transaction costs.  Innovo Group recorded an approximate charge of $36,000 for certain property and equipment disposed of or abandoned as part of discontinuing these operations.

The following table sets forth a summary of the assumption of the liabilities less the net book value of the assets and Innovo Group’s resulting loss on the sale of these assets (in thousands):

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Note payable - related party		$	7,937
Other related party liabilities		2,500
Total purchase price (Liabilities assumed by buyer)		10,437
Net intangible asset - customer relationship		9,469
Raw material inventory		3,360
Loss on disposition of property and equipment		36
Net book value of assets sold		12,865
Loss, before transaction costs		2,428
Transaction costs		186
Loss on sale of Private Label Apparel Division		$	2,614

 

NOTE 4 –RELATED PARTY TRANSACTIONS

As of August 26, 2006 and November 26, 2005, Innovo Group’s related party balance consisted of amounts due (to) or due from certain related parties, as further described below, as follows:

		(in thousands)
		8/26/2006			11/26/05
Commerce Investment Group and affiliates		$	(1,594	)	$	2,781
JD Design		(183		)	(54		)
Due (to) from related parties, net		$	(1,777	)	$	2,727

 

Commerce Investment Group and affiliates

Innovo Group has a strategic relationship with certain of its stockholders, Hubert Guez, Paul Guez and their affiliated companies, including Azteca and Commerce Investment Group LLC, or Commerce.  By virtue of this relationship, Innovo Group has entered into the following agreements, at various times, with Hubert Guez, Paul Guez and their affiliated companies, Azteca and/or Commerce, entities in which Hubert Guez and Paul Guez have controlling interests.

The following table represents charges from the affiliated companies pursuant to Innovo Group’s relationship with them, including its discontinued operations, as follows:

		Three months ended						Nine months ended
		(in thousands)						(in thousands)
		8/26/06			8/27/05			8/26/06			8/27/05
Continuing operations
Purchase order arrangements		$	6,661		$	795		$	8,611		$	1,919
Verbal facilities arrangement		28			109			255			242
Discontinued operations
Supply agreement / Purchase order arrangements		208			19,929			16,850			50,739
Earn-out due to Sweet Sportswear		4			436			248			1,120
Verbal facilities agreement		—			181			302			543
Principal and interest on note payable		—			273			1,087			518
Supply and Distribution agreement		—			—			—			639

 

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Continuing Operations - Purchase order arrangement

Due to a preexisting relationship with AZT International SA de CV, a Mexican corporation and wholly owned subsidiary of Azteca, or AZT, as a supplier of finished goods for its discontinued private label operations, Innovo Group utilizes AZT as a supplier on a purchase order basis for certain of its Joe’s Jeans® denim products.  Under this arrangement, Innovo Group advances the funds to purchase raw materials, which primarily includes fabric, anticipated for production of its products.  Innovo Group pays AZT for the production cost less credit for the advances on raw materials.  Innovo Group purchases these products in various stages of production from partial to completed finished goods.

Continuing Operations - Verbal facilities arrangement

Until mid-July 2006, Innovo Group utilized space for its headquarters and principal executive offices under a verbal month-to-month arrangement with Azteca.  Under this arrangement, Innovo Group paid to Azteca a monthly fee for allocated expenses associated with its use of office and warehouse space, including a fee charged on a per unit basis for inventory, and expenses in connection with maintaining such office and warehouse space.  These allocated expenses included, but were not limited to, rent, security, office supplies, machine leases and utilities.  In mid-July 2006, Innovo Group moved its headquarters and principal executive offices to nearby office and warehouse space at 5901 Eastern Avenue, Commerce, California and accordingly, no longer has any obligation to pay Azteca under the verbal facilities arrangement.

Discontinued Operations – Supply Agreement

In July 2003, under an asset purchase agreement, or Blue Concept APA, with Azteca, Hubert Guez and Paul Guez, Innovo Group’s IAA subsidiary acquired the Blue Concept Division of Azteca, a division which sells denim apparel primarily to American Eagle Outfitters, Inc., or AEO.  Simultaneous with the Blue Concept APA, IAA entered into a non-exclusive Supply Agreement with AZT for the purchase of denim products to be sold to AEO, which expired on July 17, 2005.  Under the terms of the Supply Agreement, AZT agreed that the purchase price on the products supplied would provide for a margin per unit of 15%.  After the expiration of the supply agreement, Innovo Group continued to utilize AZT as a supplier on a purchase order basis for its AEO products under similar terms.  Upon completion of the sale of IAA’s private label division to Cygne, as discussed in Note 3 above, Cygne assumed $2,500,000 of the amount owed to AZT under this purchase order supply arrangement.

Discontinued Operations - Earn-out due to Sweet Sportswear LLC

The Blue Concept APA also provided for the calculation and payment, on a quarterly basis, to Sweet Sportswear LLC, an entity owned by Hubert and Paul Guez, of an amount equal to 2.5% of the gross sales solely attributable to AEO.  Under the terms of the Cygne APA, Cygne assumed the future liability associated with this payment.

Discontinued Operations - Principal and interest on note payable

Innovo Group had originally incurred long-term debt in connection with the purchase of the Blue Concept Division from Azteca.  In July 2003, IAA issued a seven-year unsecured, convertible promissory note in the principal amount of $21.8 million, or the Blue Concept Note.  The Blue Concept Note bore interest at a rate of 6% and required payment of interest only during the first 24 months and then was fully amortized over the remaining five-year period.  On March 5, 2004, after stockholder approval, a portion of the Blue Concept Note was converted into 3,125,000 shares of common stock at a value per share of $4.00.  Under the terms of the Cygne APA, Cygne assumed the remaining principal balance of the Blue

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Concept Note.  On May 12, 2006, pursuant to the closing of the transaction, Azteca released Innovo Group from any and all remaining obligations under the Blue Concept Note and the Blue Concept Note has been reclassified as a discontinued operation liability.  Under the terms of the original asset purchase agreement, in addition to the shares previously issued, Innovo Group issued on May 17, 2006 an additional 1,041,667 shares of its common stock as a result of its average stock price trading at less than $3.00 per share for the period between February 10, 2006 and March 12, 2006.  This share issuance has been recognized in the Statement of Stockholders’ Equity.

Discontinued Operations - Craft and accessories business segment

In August 2000, Innovo Group entered into a supply agreement and a distribution agreement for its craft products with Commerce.  In connection with the sale of the craft inventory and certain other assets of its Innovo subsidiary in May 2005, both the supply agreement and the distribution agreement were terminated.

Aggregate balances by entities

As of August 26, 2006 and November 26, 2005, respectively, the balances due (to) or due from these related parties and certain of their affiliates are as follows:

 

The AZT balances represent the balances due as a result of Innovo Group’s current production efforts in Mexico for our branded label apparel production.  Upon completion of the sale of IAA’s private label division to Cygne, as discussed in Note 3 above, Cygne assumed the aggregate liability in the amount of $2,500,000 owed to Commerce and its affiliates.  The balance due to Commerce represents the adjusted balance remaining that Innovo Group continues to be obligated for after the completion of the transaction with Cygne.  The balance of $26,000 due from Cygne represents the amount Innovo Group is owned by Cygne for various reimbursable expenses related to the transition of the private label division.

Joe’s Jeans License

On February 7, 2001, Innovo Group acquired a license for the rights to the Joe’s Jeans label from JD Design, LLC, or JD Design, along with the right to market the previously designed product line and existing sales orders, in exchange for 500,000 shares of Innovo Group’s common stock and a warrant contingent on certain sales and gross margins which were not met and therefore, not eligible for exercise.

Additionally, Joe Dahan, the designer of the Joe’s Jeans line and managing member of JD Design, joined Innovo Group as President of its wholly owned subsidiary, Joe’s Jeans, Inc.  Under his

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employment agreement, Mr. Dahan received an option, with a four-year term, to purchase 250,008 shares of Innovo Group’s common stock at $1.00 per share, vesting over 24 months.  This option was exercised in full as of January 26, 2005.  Under the terms of the license, Innovo Group is required to pay a royalty of 3% on net sales of its licensed products to JD Design.  In October 2005, Innovo Group granted JD Design the right to develop the children’s branded apparel line under an amendment to its master license agreement in exchange for a 5% royalty on net sales of those products.  In addition, Innovo Group had a verbal arrangement to pay JD Design a design fee of 3% of net sales for assistance related to designs for its indie™ products, the line of business that Innovo Group exited in early 2006.

For the three and nine months ended August 26, 2006 and August 27, 2005, the following table sets forth royalties, fees and income related to JD Design.

		Three months ended						Nine months ended
		(in thousands)						(in thousands)
		8/26/06			8/27/05			8/26/06			8/27/05
Expense (income):
Joe’s Jeans royalty expense		$	372		$	367		$	935		$	791
indie Design Fee		2			7			40			25
Children’s license, royalty income		(14		)	—			(40		)	—

 

NOTE 5 – LOSS FROM DISCONTINUED OPERATIONS

During fiscal 2004, Innovo Group made the decision to market for sale its commercial rental property consisting of four separate buildings that served as its former headquarters located in Springfield, Tennessee and to offer for sale the assets of its craft and accessory segment of operations conducted through its Innovo subsidiary.  On May 17, 2005, Innovo Group completed the sale of the assets of its craft and accessory segment of operations.  In February 2006, Innovo Group completed the sale of each of the four separate buildings that served as its former headquarters for an aggregate sales price of $741,000 before net selling costs of approximately $126,000.  Innovo Group also paid off the remaining note payable balance of $287,000 collateralized by a first deed of trust on these buildings with the proceeds from the sale.  In connection with the sale of one of the buildings, Innovo Group received a promissory note issued by the purchaser in the original principal amount of $50,000, which represented a portion of the purchase price.  As of August 26, 2006, $2,000 of the promissory note has been included on Innovo Group’s balance sheet under “Other current assets” and $47,000 of the promissory note has been included under non-current “Other assets” of continuing operations.  The note bears interest at a rate of 8%, has a term of five years and is collateralized by a deed of trust on the building.

In accordance with the provisions of SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” the accompanying unaudited condensed consolidated financial statements reflect the results of operations and financial position of Innovo Group’s commercial rental property, its craft and accessory business segment and its private label apparel division separately as discontinued operations.

The assets and liabilities of the discontinued operations are presented in the unaudited condensed consolidated balance sheet under the captions “Assets of Discontinued Operations” and “Liabilities of Discontinued Operations.”  The underlying assets and liabilities of the discontinued operations are as follows:

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		(in thousands)
								Private
		Innovo,			Leaseall			Label
		Inc.			Management			Business			Total
August 26, 2006
Cash and cash equivalents		—			—			$	19		$	19
Accounts receivable and due from factor, net of allowance for customer credits and allowances of $0 (2006)		—			—			70			70
Inventories		—			—			23			23
Assets of discontinued operations		—			—			$	112		$	112
Accounts payable and accrued expenses		—			—			$	98		$	98
Liabilities of discontinued operations		—			—			$	98		$	98
November 26, 2005
Cash and cash equivalents		$	5		—			$	68		$	73
Accounts receivable and due from factor, net of allowance for customer credits and allowances of $23 (2005)		—			16			8			24
Inventories		—			—			366			366
Prepaid expenses and other current assets		—			18			20			38
Property, Plant and Equipment, net		—			599			59			658
Intangible assets, net		—			—			10,074			10,074
Assets of discontinued operations		$	5		$	633		$	10,595		$	11,233
Accounts payable and accrued expenses		—			$	5		$	87		$	92
Due to factor		—			—			$	130		130
Note payable		—			$	287		—			287
Note payable - related party		—			—			8,762			8,762
Liabilities of discontinued operations		—			$	292		$	8,979		$	9,271

 

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The following table sets forth the loss from the discontinued operations of each period.

		(in thousands)
								Private
					Leaseall			Label
		Innovo, Inc.			Management			Business			Total
Three months ended August 26, 2006
Net sales		$	—		$	—		$	482		$	482
Pre-tax loss from operations		—			—			(14		)	(14		)
Loss on sale of assets		—			—			(81		)	(81		)
Income tax		—			—			—			—
Discontinued operations, net of tax		$	—		$	—		$	(95	)	$	(95	)
Three months ended August 27, 2005
Net sales		$	—		$	—		$	23,752		$	23,752
Pre-tax income (loss) from operations		(45		)	(16		)	2,070			2,009
Gain on sale of assets		—			—			—			—
Income tax		1			1			—			2
Discontinued operations, net of tax		$	(46	)	$	(17	)	$	2,070		$	2,007
Nine months ended August 26, 2006
Net sales		$	—		$	—		$	20,483		$	20,483
Pre-tax income (loss) from operations		(4		)	(34		)	498			460
Gain (loss) on sale of assets		—			16			(2,614		)	(2,598		)
Income tax		—			—			—			—
Discontinued operations, net of tax		$	(4	)	$	(18	)	$	(2,116	)	$	(2,138	)
Nine months ended August 27, 2005
Net sales		$	2,490		$	—		$	60,424		$	62,914
Pre-tax income (loss) from operations		(263		)	(96		)	4,192			3,833
Gain on sale of assets		377			—			—			377
Income tax		1			—			—			1
Discontinued operations, net of tax		$	113		$	(96	)	$	4,192		$	4,209

 

Pre-tax income (loss) from discontinued operations does not include an allocation of corporate overhead costs.

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