Innovo Group Inc previously reported on a transaction involving JD Design LLC, the licensor of its Joe's Jeans brand that enabled the company to increase its availability under its financing arrangements with its primary lender, The CIT Group/Commercial Services Inc.
Concurrent with that arrangement, on October 13, 2006, the Company entered into a separate agreement with JD Design to provide for additional protection through the potential future issuance of shares of its common stock upon the occurrence of certain events of default.
Upon review of the Listing of Additional Shares form by the staff at The NASDAQ Stock Market Inc, ("Nasdaq"), the Company was verbally notified by Nasdaq that it was not compliant with the shareholder approval requirements set forth in Marketplace Rule 4350(i)(1)(A) (the "Rule").
Subsequently, on October 30, 2006, the Company provided Nasdaq with an amendment to the agreement whereby in the event of a default, the number of shares of common stock that could potentially be issued would be based, in part, on the closing bid price of the Company's common stock on October 13, 2006, the date it entered into the agreement.
As a result, on November 1, 2006, the Company received a letter from Nasdaq informing it that they had determined, based upon the above described action and subject to proper disclosure, that the Company had regained compliance with the Rule and that the matter was now closed.