Innovo Group Inc. Reports Results For the Nine Month and Three Month Periods Ending September 1, 2001

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Innovo Group Inc. Reports Results For the Nine Month and Three Month Periods Ending September 1, 2001

KNOXVILLE, Tenn., Oct. 18 /PRNewswire/ -- Innovo Group Inc. (Nasdaq:INNO), a sales and marketing organization designing and selling craft, accessory and apparel products to the retail, specialty and premium markets, reported results today for the nine months and three months ending September 1, 2001.

For the nine months ending September 1, 2001, the Company's net operating income increased to $16,000 from an operating loss of $1,707,000 for the comparative period in 2000. For the same nine month periods, the Company experienced a net loss of $78,000 in 2001 compared to a net loss of $1,853,000 for 2000.

Net Sales for the nine months ended September 1, 2001 increased to $5,747,000 from $5,492,000 in the comparative period of 2000. The 4.4% increase is largely attributable to the Company's increased sales in the first and second quarters of 2001 from the Company's Innovo, Inc. and Joe's Jeans subsidiaries.

Selling, General and Administrative costs, for the nine months ended September 1, 2001, decreased by $1,088,000 or 33.6% compared to the same period in 2000. The decrease is a result of the Company's ability to significantly reduce its fixed and variable costs throughout the period while still maintaining an effective operational structure.

Jay Furrow, President of Innovo Group Inc., stated that ``we are pleased to be able to announce that the Company was able to continue to generate positive results during difficult economic conditions. We believe, despite the current economic realities, that the Company is positioned to experience significant growth in the immediate future based on recent developments with the Company's historical customer base and as a result of the opportunities afforded the Company through its recent acquisitions. With the expected future growth and the Company's streamlined operational expense structure, we believe the Company has created a formula which will lead to long-term profitability and increased shareholder value.''

For the three months ended September 1, 2001, Company's loss from operations improved by 95% to an operating loss of $12,000 compared to an operating loss of $241,000 for the corresponding period of the prior year. For the period, the Company experienced a net loss of $16,000 in contrast to a net loss of $288,000 in the third period of 2000.

Net Sales for the period were $2,625,000 compared to $3,579,000 for the corresponding period in 2000, a 26.6% decrease. The decrease is largely attributable to the general economic uncertainty in the retail market place and the Company's decision to focus on branded and private label markets as opposed to more seasonal and unpredictable niche markets. The Company believes that the move toward branded and private label business will allow the Company to experience significant long-term growth in revenues both with its historical customer base as well as with the customer base of its recent acquisitions.

For the third quarter of fiscal 2001, the Company's gross margin percentage increased 4.5 to 36.2% as a result of the Company's ability to continue to effectively source its products at lower prices and the higher margins associated with the Company's Joe's Jeans product line.

Selling, General and Administrative costs during the third quarter of 2001 decreased 28.3% from $1,321,000 in 2000 to $947,000. This decrease can be attributed to the successful implementation of the Company's new operating model throughout 2001 and management's efforts to closely monitor expenses.

About Innovo Group Inc.

Innovo Group Inc. through its subsidiaries Innovo Inc., Innovo Apparel, Inc. and Joe's Jeans, is a sales and marketing organization designing and selling craft, accessory and apparel products to the retail and premium markets. The Company's craft products include canvas and denim totebags and aprons. The Company's accessory product line is comprised of such products as licensed and non-licensed backpacks, totebags, waist packs and handbags. The Company's apparel products consist of knit shirts and fleece products and women's high-end denim jeans and knit shirts featuring the Joe's Jeans brand. For more information, visit the company web site at www.innovogroup.com.

Statements in this news release which are not purely historical facts are forward-looking statements, including statements containing the words ``believe,'' ``estimate,'' ``project,'' ``expect'' or similar expressions. These statements are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are based upon information available to Innovo Group Inc. on the date of this release. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products in the marketplace, successful implementation of its strategic plan, the extension or refinancing of its existing bank facility and the restrictions any such extension or refinancing could place on the Company, the ability to obtain new financing from other financing sources, the ability to generate positive cash flow from operations and asset sales, competitive factors, dependence upon third-party vendors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release. Readers are cautioned not to place undue reliance on forward-looking statements.

                      INNOVO GROUP INC AND SUBSIDIARIES
                    CONSOLIDATED CONDENSED BALANCE SHEETS
                        (000's except for share data)
                                 (unaudited)

                                                     9/1/01        11/30/00

    ASSETS
    CURRENT ASSETS
     Cash and cash equivalents                     $     376      $   1,179
     Accounts receivable, net of allowance             1,817            712
     Inventories                                       1,893          3,343
     Prepaid expenses & other current assets             154             94

     TOTAL CURRENT ASSETS                              4,240          5,328

    PROPERTY, PLANT and EQUIPMENT, net                    41             56
    PROPERTY, PLANT and EQUIPMENT, held for sale         948          2,028

    LICENSING RIGHTS, net                                452             --
    INTANGIBLE ASSETS, net                             4,484             --
    OTHER ASSETS                                          --              4

    TOTAL ASSETS                                   $  10,165      $   7,416

    LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES
     Notes payable                                 $      --      $     449
     Current maturities of long-term debt                 44             94
     Accounts payable and accrued expenses               498          1,869
     Due to Related Parties                              957             --
     TOTAL CURRENT LIABILITIES                         1,499          2,412

    DUE TO RELATED PARTIES, less current maturities    2,984             --
    LONG-TERM DEBT, less current maturities              606          1,246
    TOTAL LIABILITIES                                  5,089          3,658

    COMMITMENTS AND CONTINGENCIES

    STOCKHOLDERS' EQUITY
     Common stock, $0.10 par - shares
      Authorized 40,000,000
      Outstanding 14,921,264 in 2001 and
      13,721,264 in 2000                               1,491          1,371
     Additional paid-in capital                       40,256         38,977
     Deficit                                         (33,539)       (33,461)
     Promissory note - officer                          (703)          (703)

     Treasury stock                                   (2,429)        (2,426)

    TOTAL STOCKHOLDERS' EQUITY                         5,076          3,758

    TOTAL LIABILITIES and STOCKHOLDERS' EQUITY     $  10,165      $   7,416


                      INNOVO GROUP INC. AND SUBSIDIARIES
               CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                   (000's except share and per share data)
                                 (unaudited)

                                                       Three Months Ended
                                                     9/1/01         8/31/00

    NET SALES                                      $   2,625      $   3,579
    COST OF GOODS SOLD                                 1,674          2,441

     Gross profit                                        951          1,138

    OPERATING EXPENSES
     Selling, general and administrative                 947          1,321
     Depreciation and amortization                        16             58
                                                         963          1,379

    LOSS FROM OPERATIONS                                 (12)          (241)

    INTEREST EXPENSE                                     (25)           (55)
    OTHER INCOME, net                                     21              8

    LOSS BEFORE INCOME TAXES                             (16)          (288)

    INCOME TAXES                                          --             --

    NET LOSS AND COMPREHENSIVE LOSS                $     (16)     $    (288)

    NET LOSS PER SHARE:
     Basic and Diluted                             $   (0.00)     $   (0.04)

    WEIGHTED AVERAGE SHARES OUTSTANDING               14,283          7,970


                      INNOVO GROUP INC. AND SUBSIDIARIES
               CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                   (000's except share and per share data)
                                 (unaudited)

                                                        Nine Months Ended
                                                     9/1/01         8/31/00

    NET SALES                                      $   5,747      $   5,492
    COST OF GOODS SOLD                                 3,551          3,765

     Gross profit                                      2,196          1,727

    OPERATING EXPENSES
     Selling, general and administrative               2,142          3,230
     Depreciation and amortization                        38            204
                                                       2,180          3,434

    INCOME (LOSS) FROM OPERATIONS                         16         (1,707)

    INTEREST EXPENSE                                    (161)          (173)
    OTHER INCOME, net                                     70             27

    LOSS BEFORE INCOME TAXES                             (78)        (1,853)

    INCOME TAXES                                          --             --

    NET LOSS AND COMPREHENSIVE LOSS                $     (78)    $   (1,853)

    NET LOSS PER SHARE:
     Basic and Diluted                             $   (0.00)    $    (0.24)

    WEIGHTED AVERAGE SHARES OUTSTANDING               14,126          7,566

SOURCE: Innovo Group Inc.