A UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13l OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended July 31, 20222023
OR
| ☐ | 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: 000-51791
INNOVATIVE DESIGNS, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 03-0465528 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
124 Cherry Street
Pittsburgh, Pennsylvania 15223
(Address of Principal Executive Offices, Zip Code)
(412)799-0350
(412) 799-0350
(Issuer’sIssuer’s Phone Number Including Area Code)
N/A
(Former Name or Former Address, 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 and 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.
YESYes ☒ NONo ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). YESYes ☒ NONo ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act.
(Check One)
| Large Accelerated Filer ☐ | Accelerated Filer ☐ |
| Non-accelerated Filer ☐ | Smaller reporting company ☒ |
☐
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YESYes ☐ No NO☒
As of September 14, 2022,22, 2023, there were shares of the Registrant’s common stock, par value $.0001 per share, outstanding.
Transitional Small Business Disclosure Format: YESYes ☐ NONo ☒
Innovative Designs, Inc.
Index
Form 10-Q for the Quarter Ended July 31, 20182023
i
ITEM 1. CONDENSED FINANCIAL STATEMENTS
INNOVATIVE DESIGNS, INC.
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED
JULY 31, 2023
-1-
| TABLE OF CONTENTS |
-2-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED BALANCE SHEETS | |
| JULY 31, | |
| July 31, 2023 | October 31, 2022 | |||||||||||||||
| July 31, 2022 | October 31, 2021 | |||||||||||||||
| ASSETS | ||||||||||||||||
| CURRENT ASSETS | ||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||
| Cash | $ | 159,510 | $ | 480,451 | $ | 178,817 | 263,293 | |||||||||
| Accounts receivable - net of allowance for doubtful accounts of $5,860 | 9,613 | 1,201 | ||||||||||||||
| Inventory - net of obsolete inventory reserve of $75,468 | 531,484 | 542,588 | ||||||||||||||
| Current portion of right of use asset | 10,452 | 40,962 | ||||||||||||||
| Receivable due | 260,000 | — | ||||||||||||||
| Accounts receivable, net | 82 | 11,203 | ||||||||||||||
| Inventory, net | 588,874 | 494,580 | ||||||||||||||
| Total current assets | 971,059 | 1,065,202 | 767,773 | 769,076 | ||||||||||||
| PROPERTY AND EQUIPMENT - NET | 6,332 | 7,450 | ||||||||||||||
| PROPERTY AND EQUIPMENT, net | 24,247 | 5,960 | ||||||||||||||
| OTHER ASSETS | ||||||||||||||||
| OTHER ASSETS: | ||||||||||||||||
| Inventory on consignment | 1,625 | 1,625 | — | 1,625 | ||||||||||||
| Deposits on inventory | 40,000 | — | — | 80,000 | ||||||||||||
| Advance to employees | 8,200 | 8,200 | 13,200 | 13,200 | ||||||||||||
| Deposits on equipment | 607,370 | 600,000 | 719,944 | 607,370 | ||||||||||||
| Total other assets | 657,195 | 609,825 | 733,144 | 702,195 | ||||||||||||
| TOTAL ASSETS | $ | 1,634,586 | $ | 1,682,477 | ||||||||||||
| TOTAL | $ | 1,525,164 | $ | 1,477,231 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||||
| Accounts payable | $ | 275,487 | $ | 162,063 | ||||||||||||
| Current portion of note payable | 20,265 | 20,128 | ||||||||||||||
| Accrued interest of stockholder loans | 54,073 | 46,345 | ||||||||||||||
| Current portion of stockholder loans | 71,668 | 110,631 | ||||||||||||||
| Accrued expenses | 3,778 | 3,778 | ||||||||||||||
| Total current liabilities | 425,271 | 342,945 | ||||||||||||||
| LONG-TERM LIABILITIES: | ||||||||||||||||
| Long-term portion of note payable | 49,530 | 64,547 | ||||||||||||||
| Long-term portion of stockholder loans | — | 66,667 | ||||||||||||||
| Total long-term liabilities | 49,530 | 131,214 | ||||||||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||||||||||
| Preferred stock, $ par value, | ||||||||||||||||
| shares authorized | — | — | ||||||||||||||
| Common stock, $ par value, shares authorized, and and issued and outstanding | 3,612 | 3,467 | ||||||||||||||
| Common stock to be issued | — | — | ||||||||||||||
| Additional paid-in capital | 11,637,980 | 11,335,184 | ||||||||||||||
| Accumulated deficit | (10,591,228 | ) | (10,335,579 | ) | ||||||||||||
| Total stockholders’ equity | 1,050,363 | 1,003,072 | ||||||||||||||
| TOTAL | $ | 1,525,164 | $ | 1,477,231 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
-3-
| INNOVATIVE DESIGNS, INC. | |
| July 31, 2022 | October 31, 2021 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 294,306 | $ | 228,667 | ||||
| Current portion of notes payable | 18,628 | 18,628 | ||||||
| Current portion of lease liability | 10,452 | 40,962 | ||||||
| Accrued interest expense | 40,496 | 43,136 | ||||||
| Due to stockholders | 119,630 | 188,632 | ||||||
| Accrued expenses | 5,223 | 25,037 | ||||||
| Total current liabilities | 488,735 | 545,062 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term portion of due to stockholders | 66,667 | 133,332 | ||||||
| Long-term portion of notes payable | 71,122 | 71,722 | ||||||
| Total long-term liabilities | 137,789 | 205,054 | ||||||
| TOTAL LIABILITIES | 626,524 | 750,116 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Preferred stock, $ par value, shares authorized | — | |||||||
| Common stock, $ par value, shares authorized, and and issued and outstanding | 3,454 | 3,333 | ||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | 11,310,197 | 11,039,118 | ||||||
| Accumulated deficit | (10,305,589 | ) | (10,110,090 | ) | ||||
| Total stockholders' equity | 1,008,062 | 932,361 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,634,586 | $ | 1,682,477 | ||||
| CONDENSED STATEMENTS OF OPERATIONS | |
| THREE AND NINE MONTHS ENDED JULY 31, 2023 AND 2022 | |
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUES - NET | $ | 135,048 | $ | 110,475 | $ | 235,164 | $ | 176,388 | ||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Cost of sales | 56,224 | 50,712 | 109,884 | 78,352 | ||||||||||||
| Selling, general and administrative expenses | 115,757 | 66,845 | 546,330 | 275,998 | ||||||||||||
| Total Operating Expenses | 171,981 | 117,557 | 656,214 | 354,350 | ||||||||||||
| LOSS FROM OPERATIONS | (36,933 | ) | (7,082 | ) | (421,050 | ) | (177,962 | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Miscellaneous income (expense) | 260,000 | 33,652 | 260,000 | 62,475 | ||||||||||||
| Interest expense | (10,710 | ) | (13,417 | ) | (34,450 | ) | (30,810 | ) | ||||||||
| Total other income (expense) | 249,290 | 20,235 | 225,550 | 31,665 | ||||||||||||
| NET (LOSS) INCOME | $ | 212,357 | $ | 13,153 | $ | (195,500 | ) | $ | (146,297 | ) | ||||||
| PER SHARE INFORMATION - UNDILUTED | ||||||||||||||||
| Net Loss Per Common Share | $ | 0.006 | $ | 0.000 | $ | (0.006 | ) | $ | (0.005 | ) | ||||||
| Weighted Average Number of Common Shares Outstanding | 33,845,560 | 32,216,560 | 33,845,560 | 31,776,560 | ||||||||||||
| PER SHARE INFORMATION - DILUTED | ||||||||||||||||
| Net Loss Per Common Share | $ | 0.006 | $ | 0.000 | $ | (0.006 | ) | $ | (0.005 | ) | ||||||
| Weighted Average Number of Common Shares Outstanding | 34,902,893 | 32,229,060 | 34,902,893 | 31,789,060 | ||||||||||||
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUES, net | $ | 124,650 | $ | 135,048 | $ | 223,546 | $ | 235,164 | ||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Cost of sales | 76,480 | 56,224 | 106,839 | 109,884 | ||||||||||||
| Selling, general and administrative expenses | 124,944 | 115,384 | 359,917 | 545,212 | ||||||||||||
| Total operating expenses | 201,424 | 171,608 | 466,756 | 655,096 | ||||||||||||
| Income (loss) from operations | (76,774 | ) | (36,560 | ) | (243,210 | ) | (419,932 | ) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Miscellaneous income (expense) | — | 260,000 | 7,519 | 260,000 | ||||||||||||
| Interest expense | (6,421 | ) | (10,710 | ) | (17,652 | ) | (34,450 | ) | ||||||||
| Depreciation | (769 | ) | (373 | ) | (2,306 | ) | (1,118 | ) | ||||||||
| Total other income (expense) | (7,190 | ) | 248,917 | (12,439 | ) | 224,432 | ||||||||||
| Net income (loss) | $ | (83,964 | ) | $ | 212,357 | $ | (255,649 | ) | $ | (195,500 | ) | |||||
| PER SHARE INFORMATION - UNDILUTED: | ||||||||||||||||
| Net income (loss) per common share | (0.002 | ) | 0.006 | $ | (0.007 | ) | $ | (0.006 | ) | |||||||
| Weighted average number of common shares outstanding | 35,656,821 | 33,845,560 | 35,339,663 | 33,845,560 | ||||||||||||
| PER SHARE INFORMATION - DILUTED: | ||||||||||||||||
| Net income (loss) per common share | (0.002 | ) | 0.006 | $ | (0.007 | ) | $ | (0.006 | ) | |||||||
| Weighted average number of common shares outstanding | 36,633,430 | 34,902,893 | 36,153,406 | 34,902,893 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
-4-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | |
THREE AND NINE MONTHS ENDED JULY 31, 2023 AND 2022 | |
| Common Stock | Common Stock To be | Additional Paid-in | Accumulated | |||||||||||||||||||||
| Shares | Amount | Issued | Capital | Deficit | Total | |||||||||||||||||||
| Balance at October 31, 2021 | 33,315,560 | $ | 3,333 | $ | — | $ | 11,039,118 | $ | (10,110,090 | ) | $ | 932,361 | ||||||||||||
| Sale of stock | 340,000 | 34 | — | 60,966 | — | 61,000 | ||||||||||||||||||
| Shares issued for services | 50,000 | 5 | 9,995 | 10,000 | ||||||||||||||||||||
| Net loss | — | — | — | — | (132,040 | ) | (132,040 | ) | ||||||||||||||||
| Balance at January 31, 2022 | 33,705,560 | 3,372 | — | 11,110,079 | (10,242,130 | ) | 871,321 | |||||||||||||||||
| Sale of stock | 120,000 | 12 | 25,188 | 25,200 | ||||||||||||||||||||
| Shares issued for services | 700,000 | 70 | 174,930 | 175,000 | ||||||||||||||||||||
| Net loss | — | (275,816 | ) | (275,816 | ) | |||||||||||||||||||
| Balance at April 30, 2022 | 34,525,560 | 3,454 | — | 11,310,197 | (10,517,946 | ) | 795,705 | |||||||||||||||||
| Sale of stock | — | — | — | — | — | |||||||||||||||||||
| Shares issued for services | — | — | — | — | — | |||||||||||||||||||
| Net income | — | 212,357 | 212,357 | |||||||||||||||||||||
| Balance at July 31, 2022 | 34,525,560 | $ | 3,454 | $ | — | $ | 11,310,197 | $ | (10,305,589 | ) | $ | 1,008,062 | ||||||||||||
| Balance at October 31, 2020 | 31,211,560 | $ | 3,123 | $ | — | $ | 10,574,828 | $ | (9,730,028 | ) | $ | 847,923 | ||||||||||||
| Sale of stock | — | — | — | — | — | — | ||||||||||||||||||
| Shares issued for services | 100,000 | 10 | — | 24,990 | — | 25,000 | ||||||||||||||||||
| Net loss | — | — | — | — | (35,965 | ) | (35,965 | ) | ||||||||||||||||
| Balance at January 31, 2021 | 31,311,560 | 3,133 | — | 10,599,818 | (9,765,993 | ) | 836,958 | |||||||||||||||||
| Sale of stock | 280,000 | 28 | 69,972 | — | 70,000 | |||||||||||||||||||
| Shares issued for services | 500,000 | 50 | 63,950 | 64,000 | ||||||||||||||||||||
| Net loss | — | — | — | — | (123,485 | ) | (123,485 | ) | ||||||||||||||||
| Balance at April 30, 2021 | 32,091,560 | 3,211 | — | 10,733,740 | (9,889,478 | ) | 847,473 | |||||||||||||||||
| Sale of stock | 240,000 | 24 | 59,976 | 60,000 | ||||||||||||||||||||
| Shares issued for services | 10,000 | 1 | 1,999 | 2,000 | ||||||||||||||||||||
| Net Income | — | 13,153 | 13,153 | |||||||||||||||||||||
| Balance at July 31, 2021 | 32,341,560 | $ | 3,236 | $ | — | $ | 10,795,715 | $ | (9,876,325 | ) | $ | 922,626 | ||||||||||||
| Common Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||
| Shares | Amount | To Be Issued | Capital | Deficit | Total | |||||||||||||||||||
| Balance at October 31, 2022 | 34,650,560 | $ | 3,467 | $ | — | $ | 11,335,184 | $ | (10,335,579 | ) | $ | 1,003,072 | ||||||||||||
| Sale of stock | 500,000 | 50 | — | 109,950 | — | 110,000 | ||||||||||||||||||
| Shares issued for services | 27,000 | 3 | — | 5,937 | — | 5,940 | ||||||||||||||||||
| Net income (loss) | — | — | — | — | (59,094 | ) | (59,094 | ) | ||||||||||||||||
| Balance at January 31, 2023 | 35,177,560 | 3,520 | — | 11,451,071 | (10,394,673 | ) | 1,059,918 | |||||||||||||||||
| Sale of stock | — | — | — | — | — | — | ||||||||||||||||||
| Shares issued for services | — | — | — | — | — | — | ||||||||||||||||||
| Net income (loss) | — | — | — | — | (112,591 | ) | (112,591 | ) | ||||||||||||||||
| Balance at April 30, 2023 | 35,177,560 | 3,520 | — | 11,451,071 | (10,507,264 | ) | 947,327 | |||||||||||||||||
| Sale of stock | 695,000 | 70 | — | 140,931 | — | 141,000 | ||||||||||||||||||
| Exercise of warrants | 40,000 | 4 | — | 9,996 | — | 10,000 | ||||||||||||||||||
| Shares issued for services | 180,000 | 18 | — | 35,982 | — | 36,000 | ||||||||||||||||||
| Net income (loss) | — | — | — | — | (83,964 | ) | (83,964 | ) | ||||||||||||||||
| Balance at July 31, 2023 | 36,092,560 | 3,612 | — | 11,637,980 | (10,591,228 | ) | 1,050,363 | |||||||||||||||||
| Balance at October 31, 2021 | 33,315,560 | $ | 3,333 | $ | — | $ | 11,039,118 | $ | (10,110,090 | ) | $ | 932,361 | ||||||||||||
| Sale of stock | 340,000 | 34 | — | 60,966 | — | 61,000 | ||||||||||||||||||
| Shares issued for services | 50,000 | 5 | — | 9,995 | — | 10,000 | ||||||||||||||||||
| Net income (loss) | — | — | — | — | (132,040 | ) | (132,040 | ) | ||||||||||||||||
| Balance at January 31, 2022 | 33,705,560 | 3,372 | — | 11,110,079 | (10,242,130 | ) | 871,321 | |||||||||||||||||
| Sale of stock | 120,000 | 12 | — | 25,188 | — | 25,200 | ||||||||||||||||||
| Shares issued for services | 700,000 | 70 | — | 174,930 | — | 175,000 | ||||||||||||||||||
| Net income (loss) | — | — | (275,816 | ) | (275,816 | ) | ||||||||||||||||||
| Balance at April 30, 2022 | 34,525,560 | 3,454 | — | 11,310,197 | (10,517,946 | ) | 795,705 | |||||||||||||||||
| Sale of stock | — | — | — | — | — | — | ||||||||||||||||||
| Shares issued for services | — | — | — | — | — | — | ||||||||||||||||||
| Net income (loss) | — | — | — | — | 212,357 | 212,357 | ||||||||||||||||||
| Balance at July 31, 2022 | 34,525,560 | $ | 3,454 | $ | — | $ | 11,310,197 | $ | (10,305,589 | ) | $ | 1,008,062 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
-5-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED STATEMENTS OF CASH FLOWS | |
NINE MONTHS ENDED JULY 31, 2023 AND 2022 | |
| Nine Months Ended July 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (195,500 | ) | $ | (146,297 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Allowance for doubtful accounts | — | — | ||||||
| Common stock issued for services | 185,000 | 66,000 | ||||||
| Depreciation | 1,118 | 24,981 | ||||||
| Amortization of right of use asset | 30,510 | 28,881 | ||||||
| (Increase) decrease from changes in: | ||||||||
| Accounts receivable | (8,412 | ) | 16,844 | |||||
| Inventory | 11,104 | 25,821 | ||||||
| Deposits on inventory | (40,000 | ) | — | |||||
| Receivable due | (260,000 | ) | ||||||
| Increase (decrease) from changes in: | ||||||||
| Accounts payable and accrued expenses | 45,826 | (66,534 | ) | |||||
| Accrued interest expense | (2,640 | ) | (11,420 | ) | ||||
| Net cash used in operating activities | (232,994 | ) | (61,724 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Increase in deposit on Equipment | (7,370 | ) | — | |||||
| Net cash used in investing activities | (7,370 | ) | — | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of stock | 86,200 | 155,000 | ||||||
| Forgivness from loans | — | (33,652 | ) | |||||
| Proceeds from shareholder advances | — | 250,000 | ||||||
| Payments on shareholder advances | (135,667 | ) | — | |||||
| Payments on lease liability | (30,510 | ) | (28,881 | ) | ||||
| Proceeds on notes payable | 1,818 | — | ||||||
| Payments on notes payable | (2,418 | ) | (1,820 | ) | ||||
| Net cash provided by financing activities | (80,577 | ) | 340,647 | |||||
| Net change in cash | (320,941 | ) | 278,923 | |||||
| CASH, BEGINNING OF YEAR | 480,451 | 48,009 | ||||||
| CASH, END OF THE PERIOD | $ | 159,510 | $ | 326,932 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 37,090 | $ | 39,100 | ||||
| Cash paid for taxes | $ | — | $ | — | ||||
| Nine Months Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | (255,649 | ) | $ | (195,500 | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Bad debt expense | — | — | ||||||
| Common stock issued for services | 41,940 | 185,000 | ||||||
| Depreciation | 2,306 | 1,118 | ||||||
| Amortization of right of use asset | — | 30,510 | ||||||
| Gain on sale of asset | (7,519 | ) | — | |||||
| (Increase) decrease from changes in: | ||||||||
| Accounts receivable | 11,121 | (8,412 | ) | |||||
| Inventory | (92,669 | ) | 11,104 | |||||
| Deposits on inventory | 80,000 | (40,000 | ) | |||||
| Receivable due | — | (260,000 | ) | |||||
| Increase (decrease) from changes in: | ||||||||
| Accounts payable and accrued expenses | 113,424 | 45,826 | ||||||
| Accrued interest expense | 7,728 | (2,640 | ) | |||||
| Net cash provided by (used in) operating activities | (99,318 | ) | (232,994 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equpment | (20,593 | ) | — | |||||
| Deposits on equipment | (112,574 | ) | (7,370 | ) | ||||
| Proceeds from sale of equipment | 7,519 | — | ||||||
| Net cash provided by (used in) investing activities | (125,648 | ) | (7,370 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of stock | 261,000 | 86,200 | ||||||
| Payments on shareholder advances | (105,630 | ) | (135,667 | ) | ||||
| Payments on lease liability | — | (30,510 | ) | |||||
| Proceeds on notes payable | — | 1,818 | ||||||
| Payments on notes payable | (14,880 | ) | (2,418 | ) | ||||
| Net cash provided by (used in) financing activities | 140,490 | (80,577 | ) | |||||
| NET INCREASE (DECREASE) IN CASH | (84,476 | ) | (320,941 | ) | ||||
| CASH, BEGINNING OF YEAR | 263,293 | 480,451 | ||||||
| CASH, END OF THE PERIOD | $ | 178,817 | $ | 159,510 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | 9,924 | $ | 37,090 | ||||
| Non-cash financing activities - common stock issued for services | $ | 41,940 | $ | 185,000 | ||||
The accompanying notes are an integral part of these condensed financial statements. |
INNOVATIVE DESIGNS, INC.
-6-
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2022 and 2021 (Unaudited)
| BASIS OF PRESENTATION |
In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly Innovative Designs, Inc.’s (the “Company”) financial position as of July 31, 2022,2023, the changes therein for the three and nine month periods then endedandtheresultsofoperationsforthethreeandninemonthperiodsended July31, 20222023 and 2021.2022.
ThefinancialstatementsincludedintheForm10-Q(the“Form”)arepresentedinaccordance with the requirements of the Form and do not include all of the disclosures required by accounting principles generally accepted in the United States of America. For additional information, reference is made to the Innovative Designs, Inc.’sCompany’s annual report on Form 10-K for the fiscal year ended October 31, 2021.2022. The results of operations for the three and nine month periods ended July 31, 20222023 and 20212022 are not necessarily indicative of operating results for the full year.
During the quarter ended April 30, 2019, the Company implemented Accounting Standards Update 2016-02, Leases. Under the new guidance, a lessee must be recorded a liability for lease payments (referred to as the lease liability) and an asset for the right to use the leased asset during the lease term (referred to at the right of use asset) for all leases, regardless of whether they are designated as finance or operating leases. This election requires the lessee to recognize lease expense on a straight-line basis over the lease term. The right of use assets and corresponding right of use liabilities have been recorded using the present value of the leases. See Notes 11 and 12 within the financial statement for additional disclosure on leases
| GOING CONCERN |
These financial statements have been prepared on a going concern basis, which implies that theCompanywillcontinuetorealizeitsassetsanddischargeitsliabilitiesinthenormalcourse ofbusiness.TheCompanyhadanetlossof ($195,500($255,649)andanegativecashflow from operations of ($232,994($84,476) fortheninemonthperiodendedJuly31, 2022. 2023.Inaddition,theCompanyhasanaccumulated deficit of ($10,305,58910,591,228). Management’s plans include cash receipts through sales, sales of Company stock, and borrowings from private parties. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a goingconcern.
| ACCOUNTS RECEIVABLE |
ManagementAccounts receivable are reported at their net realizable value. The Company evaluates its receivables on a quarterly basis to assess the validity of remaining receivables. Management has determined that there is significant doubt regarding the receivable balance over 90 days. Therewerenobalancesover90daysasJuly31,2023.AsofOctober31,2022,balancesover 90 days totaled $5,860 which have been recorded as anallowance.
-7-
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| 4. | OPENING AND CLOSING BALANCE OF RECEIVABLES |
The opening balance of accounts receivable was $11,203which was net of the allowance for doubtful accounts of $5,860. The ending balance of accounts receivable for the nine month period asendedJuly31,2023was$82.Therewasnotanallowancefordoubtfulaccountsatthe end of the July 31, 2022 and October 31, 2021. Management has applied an allowance on all balances in excess of 90 days.
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2022 and 2021 (Unaudited)period.
| INVENTORY |
Inventory consists principally of purchased apparel inventory and House Wraphouse wrap which is manufactured by the Company.Inventory is stated at the lower of cost or net realizable value on a first-in, first-out basis. The Company has decided to discontinue the manufacturing of its Artic Armor, hunting and swimming line of apparel. The Company has booked a reserve againstapparelinventory at asofJuly31,2023andOctober31,2022 and October 31, 2021 of$75,468.Management has determined that no allowance is currently necessary on their House Wrap Inventory. the house wrap inventory. Management will continue to evaluate its obsolete inventory reserve throughout the year and make adjustments asneeded.
| WARRANTIES |
The Company provides a ten-year limited warranty covering defects in workmanship. These warrantiesareincludedinthecontractanddonotprovidecustomerswithaserviceinaddition toassuranceofcompliancewithagreed-uponspecifications.TheCompanydoesnotconsider these assurance-type warranties to be separate performanceobligations.
Management has determined that no warranty reserve is currently necessary on the Company’s products. Management will continue to evaluate the need for a warranty reserve throughout the year and make adjustments as needed.
| 7. | NOTE PAYABLE |
During 2005, the Company entered into an agreement with the U.S. Small Business Association. The note is payable in monthly installments of $1,820 with the balance due and payable in November 2026, at an interest rate of 2.60%.
| 8. | STOCKHOLDER LOANS |
StockholderloanstotheCompany,includingaccruedinteresttotaled$125,741and$226,793 as of July 31, 2023 and 2022, respectively. The loans bear interest between 10% and12%.
-8-
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| 9. | REVENUES |
Revenues are measured based on the amount of consideration specified in a contract with a customer. The Company recognizes revenue when and as performance obligations (i.e., obligations to transfer goods and/or services) are satisfied, which generally occurs with the transfer of control of the goods or services to the customer.
To determine proper revenue recognition, the Company evaluates whether two or more contractsshouldbecombinedandaccountedforasasinglecontractandwhetheracombined or single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment, and the decision to combine contracts or separate a combinedorsinglecontractintomultipleperformanceobligationscouldchangetheamountof revenue and profit recorded in a given period. Contracts are considered to contain a single performanceobligationifthepromisetotransferindividualgoodsorservicesisnotseparately identifiable from other promises in thecontracts.
For contracts with multiple performance obligations, the Company allocates the transaction pricetoeachperformanceobligationusingthebestestimateofthestandalonesellingpriceof each distinct good or service in thecontract.
| 10. | EARNINGS PER SHARE |
The Company calculates net income (loss)loss per share in accordance with Financial Accounting StandardsBoard(“FASB”)AccountingStandardCodification(“ASC”)Topic260,“Earningsper Share”.Basicearnings(loss)pershareiscalculatedbydividingincome(loss)bytheweighted average number of common shares outstanding for the period. During the periodspresented, theCompanyonlyhascommonstockoutstanding. In2021,theCompanyissuedaconvertible debt instrument and has subsequently retired this debt in May of 2022.instrument. In addition, the Company also has stock warrants of 994,000954,000 and 860,000994,000 as ofJuly31,2023 and2022, and 2021, respectively. The Companyhas calculateddilutedearningsper share utilizing the outstanding stock warrants and convertible debt.
| INCOME TAXES |
The Company accounts for income taxes in accordance with FASB ASC Topic 740 "“Income Taxes"Taxes”, which requires an asset and liability approach for financial reporting purposes.
Deferred income taxes are provided for differences between the tax bases of assets and liabilities and the financial reporting amounts at the end of the period, and for net operating lossandtaxcreditcarryforwardsavailabletooffsetfuturetaxableincome.Changesinenacted tax rates or laws result in adjustments to recorded deferred tax assets and liabilities in the periodsinwhichthetaxlawsareenactedortaxratesarechanged.TheCompanywillcontinue to evaluate its income tax obligation throughout the year and will record a tax provision when it isnecessary.
-9-
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| SHIPPING AND HANDLING COSTS |
TheCompanypaysshippingandhandlingcostsonbehalfofcustomersforpurchasedapparel merchandise. These costs are billed back to the customer through the billing invoice. The shipping and handling costs associated with merchandise ordered by the Company are included as part of inventory as these costs are allocated across the merchandise received. With House Wraphouse wrap orders, the customer pays the shipping cost. The shipping and handling costs associated with customer orders was approximately $21,19927,070 and $6,40021,199 for the nine month periods ended July 31, 20222023 and 2021, 2022,respectively.
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2022 and 2021 (Unaudited)
| COMMON STOCK |
During the nine month period ended July 31, 2023, the Company sold shares of commonstocktofourinvestorsfortotalproceedsof$131,000,oneinvestorexercised40,000 warrants for stock for total proceeds of $10,000, and 230,000 shares were issued to two investors for services. The stock was issued between $ and $ pershare.
During the nine month period ended July 31, 2022, the Company sold shares of commonstocktoseveninvestorsfortotalproceedsof$86,200andissuedsharesto eight investorsindividuals for services. The stock was issued between $ and $ pershare.
During the nine month period ended July 31, 2021, the Company sold shares of common stock to twelve investors for total proceeds of $130,000 and issued shares to nine investors for services. The stock was issued between $ and $ per share.
| DEPOSITS ON EQUIPMENT |
On July 12, 2015, the Company reached an agreement with Ketut Jaya to purchase the machinery and equipment utilized to produce the INSULTEX material. The purchase price is $700,000 which was$700,000 and to be paidmade in four installments. The first installment of $300,000 wasis to be paidmade at the execution of the agreement. The second installment of $200,000 wasis to be paidmade when the machinery and equipment is ready to be shipped to the United States. The third installment of $100,000 is to be paidmade once the machinery and equipment is producing INSULTEX, and the fourth and final installment of $100,000 is to be made after the first commercial production run of INSULTEX is completed.completed. As of April 30, 2020,October 31, 2018, the Company has made payments of $500,000 in accordance with the agreement and made a $100,000 pre-payment as the machine is not yet producing INSULTEX. Additionally, the Company has incurred $17,000of additional expenses related to shipping, site improvements and installation of the equipment. Due to various environmental regulations that must be met and other costs to assemble the machineDuring 2019, the Company expects to incurdetermined the shipping costs in excess of the current deposit agreement. Management of the Company currently cannot reasonably estimate the costs. During the six month period ended April 30, 2019 Management decided to sell the machine. The shipping$17,000 were impaired and other purchasethese costs associated with the purchase of the machine that were originally capitalized as part of the machine cost that were written off. The total loss on impairment for off the six month period ended April 30, 2019 was $17,000.balance due. In July 2021, management has decided that it is no longer selling this equipment and is moving forward with plans of putting it in service in the future.
In May of 2022,February 2023, the Company made an additional depositprepayment of $7,32010,000 on the equipment and owes an additional $73,000 for the installation of the equipment.
During the fiscal year ending October 31, 2022, the Company made deposits on a new testing machine.separate piece of equipment of $7,370. During the three quarters ended July 31, 2023, the Company made additional deposits of $29,574 on this piece of equipment. Total deposits for this piece equipment as of July 31, 2023 total $36,944.
Total deposits made for the three quarters ended July 31, 2023 total $112,574.
-10-
| INNOVATIVE DESIGNS, INC. | |
The Company entered into
Total overall depositsonequipmentasofJuly31,2023and2022were$719,944and $607,370, respectively.
| 15. | LEASE |
FASBASCTopic842,“Leases”,establishesarightofuse(“ROU”)modelthatrequiresalessee to recognize a month to month verbal lease at the time the Company was formed that is classified as right of useROU asset and lease liability.liability on the condensed balance sheets. ROU assets andleaseliabilitiesarerecognizedatthecommencementdatebasedonthepresentvalueof lease payments over the lease term. ROU assets are reduced each period by an amount equaltothedifferencebetweentheleaseexpenseandtheamountofinterestexpenseonthe leaseliability,usingtheeffectiveinterestmethod. The lease for Companyusedthe Company’s office space is estimated to be through October 2022. In accordance with ASU 2016-02, the Company calculated the present value of the leases using the averagecommercial real estate interest rate of 5.50% at the commencement of the office lease. Applying the commercial rate, the Company calculatedto calculate the present value of $150,496 for the officelease. The Company recognizes lease asexpense on a straight-line basis over the leased term on the condensed statements of April 30, 2020.
INNOVATIVE DESIGNS, INC.operations.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2022 and 2021 (Unaudited)
As of July 31, 2022, the right of use assets associated with future operating lease is as follows:
| Right of use assets associated with future operating leases | ||||
| Total present value of right of use asset under lease agreement | $ | 150,496 | ||
| Amortization of right of use asset – operating lease | (140,044 | ) | ||
| Total right of use asset – operating lease as of July 31, 2022 | $ | 10,452 | ||
| Less current portion due within one year | 10,452 | |||
| Long-term right of use asset – operating lease | $ | -0- |
Total amortization expense related to the right of use assets under the verbal lease agreement was $30,510 and $28,881 for the nine month periods ended July 31, 2022 and 2021, respectively.
Future amortization of the right of use asset as of July 31, 2022 is as follows:
| Future amortization of right of use assets | |||||
| 2022 | $ | 10,452 |
As disclosed in Note 11, theThe Company entered into a verbal lease for office space priorat the time the Company was formed through June 2022. Effective July 2022, the Company is leasing the office space on a month to month basis. Asaresult,theCompanyhaselectedtoapplytheshort-termleaseexemption to its lease of the quarter ended July 31, 2022 that is classified asfacilities and therefore has not recorded a right of useROU asset and related lease liability.
As of July 31, 2022, the lease liability associated with future payments due under the verbal lease is as follows:
| Schedule of future minimum lease payments | ||||
| Total future minimum lease payments | $ | 150,496 | ||
| Principal payments made as of the period ended July 31, 2022 | (140,044 | ) | ||
| Total operating lease liability as of July 31, 2022 | 10,452 | |||
| Less current portion due within one year | 10,452 | |||
| Long-term operating lease liability | $ | -0- |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2022 and 2021 (Unaudited)
Total maturities of lease liability as of July 31, 2022 are as follows:
| Schedule of maturities of lease liabilities | |||||||||||||
| Total future minimum lease payments | Present value discount | Operating lease liability | |||||||||||
| 2022 | $ | 10,500 | $ | 48 | $ | 10,452 | |||||||
| SEGMENT INFORMATION |
We have TheCompanyhasorganized our operationsintotwo segments. We rely segmentsbasedonaninternalmanagement reporting process that provides segment information for purposes of making financial decisions and allocatingresources.
Thefollowingtablespresent our theCompany’sbusinesssegmentinformationfortheninemonth periodsperiod ended July 31, 20222023 and 2021:
| Schedule of business segment information | ||||||||
| 2022 | 2021 | |||||||
| Revenues: | ||||||||
| Apparel | $ | 59,126 | $ | 49,675 | ||||
| House Wrap | 176,038 | 126,713 | ||||||
| Total Revenues | $ | 235,164 | $ | 176,388 | ||||
| Assets: | ||||||||
| Apparel | $ | 81,045 | $ | 135,542 | ||||
| House Wrap | 1,546,171 | 1,503,627 | ||||||
| Total | $ | 1,627,216 | $ | 1,639,169 | ||||
| Depreciation: | ||||||||
| Apparel | $ | -0- | $ | 7,116 | ||||
| House Wrap | 1,118 | 17,865 | ||||||
| Total | $ | 1,118 | $ | 24,981 | ||||
INNOVATIVE DESIGNS, INC.2023:
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2022 and 2021 (Unaudited)
| Schedule of business segment information | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Apparel | $ | 31,105 | $ | 59,126 | ||||
| House wrap | 192,441 | 176,038 | ||||||
| Total revenues | $ | 223,546 | $ | 235,164 | ||||
| Assets: | ||||||||
| Apparel | $ | 167,822 | $ | 81,045 | ||||
| House wrap | 1,318,342 | 1,546,171 | ||||||
| Total assets | $ | 1,486,164 | 1,627,216 | |||||
| Depreciation: | ||||||||
| Apparel | $ | — | $ | — | ||||
| House wrap | 2,306 | 1,118 | ||||||
| Total depreciation | $ | 2,306 | $ | 1,118 | ||||
-11-
| INNOVATIVE DESIGNS, INC. | |
| 17. | LEGAL PROCEEDINGS |
On November 4, 2016, the FTCFederal Trade Commission (“FTC”) filed a complaint against the Company in the U.S. District Court Western District of Pennsylvania, Case number 16-1669. In the complaint, the FTC alleges that, among other matters, the Company did not have substantiationofclaimsmadebytheCompanyregardingtheRvalueandenergyefficiencyof its INSULTEX House Wraphouse wrap products. The complaint asks as to redress a rescission of revenue the Company received from the sale of House Wrapthe house wrap and a permanent injunction. On September 24, 2020, a judgment was entered in favor of the Company as to all claims set forth in the FTC complaint. It was further ordered that as there were no remaining claims in the action the case shall be marked asclosed.
OnNovember23,2020,theCompanywasinformedthattheFTChadfiledanoticeofappeal in regard to the case. The appeal is from the District Court’s September 24, 2020, Order granting the Company’s Motion for Judgment on Partial Findings Pursuant to Fed. R. Civ. P. 52(c) and subsequent Judgment in favor of the Company and from the District Court’s February14,2020,strikingDr.DavidYarbrough’sexperttestimonymadeonbehalfoftheFTC. The FTC filed its appeal and on March 24, 2021, the Company filed itsanswer.
On July 22, 2021, the Registrant was informed that the United StatesU.S. Court of Appeals for the Third District affirmed the District Court’s ruling in favor of the Registrant. The ruling was in connection with the Federal Trade CommissionFTC complaint filed against the Registrant in November 2016, alleging, among other matters, that the Registrant did not have substantiation for claims made by the RegistrantregardingtheR-valueandenergyefficiencyofits INSULTIX House Wrap INSULTEXhousewrapproducts.
In November 2021, in connection with the FTC litigation, the Company filed an application for attorney fees, expenses and cost in the U.S. District Court for the Western District of Pennsylvania, Case No.2:16-cv-01669-NBF. On June 29, 2022, a settlement order was signed by the Court. Pursuant to the Order, the FTC shall paypaid the Company $260,000 to resolve all such claims. The parties agreed to waive all rights to appeal or otherwise challenge or contest the validity of the Order.
| SUBSEQUENT EVENTS |
The Company has evaluated subsequent events in accordance with ASC Topic 855, “SubsequentEvents”,throughSeptember 14, 2022, 20,2023whichisthedatefinancialstatementswere available to be issued. The Company identified no material subsequent events that require recognition or additional disclosure in these financialstatements.
On August 30, 2022, the Company received a partial payment of $200,000 from the settlement with the FTC.
-12-
INNOVATIVE DESIGNS, INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following information should be read in conjunction with the financial statements and the notes thereto and in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.2022.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Reform Act of 1995. All statements other than statements of historical fact, including statements regarding future results of operation, made in this Quarterly Report on Form 10-Q are forward-looking statements. We use words such as expects, believes, intends, and similar expressions to identify forward-looking statements. Forward looking-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others, an adverse outcome in our legal matter with the Federal Trade Commission, competition in our cold weather markets, our inability to secure sufficient funding to maintain and/or expand our current level of operations and the seasonality of our cold weather product line. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management’s expectations, are described in greater detail in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.2017. The Company undertakes no obligation to publicity update or revise any forward-looking statement, whether as a result of new information, future events or otherwise except as required by law.
Background
Innovative Designs,Desings, Inc. (hereinafter(herein after referred to as the “Company”, “we” or “our”) was formed on June 25, 2002. We produce, market and sell clothing products such asmade from Insultex, which is a low-density polyethylene semi-crystalline, closed cell foam in which the cells are totally evacuated with buoyancy and thermal resistant properties. Other than Korea and Japan, we are the sole worldwide supplier/ distributor of the Insultex material. Our main product line is a house wrap, Insultex House Wrap, for the building construction industry. Insultex House Wrap is a multi-ply weatherization membrane that provides a protective layer under a building’s outer covering that resists water and air infiltration, preventing mold and mildew buildup that can cause structural rotting. What differentiates Insultex House Wrap from its competition is the fact that it offers an R-Value of R-6. R-value is a term used to measure thermal resistance and is most commonly used when referring to the insulating qualities of a building structure, thus increasing energy efficiency. We also sell a cold weather line of outdoor apparel and cold weather gear called “Arctic Armor”call Artic Armor made using Insultex. We no longer produce this line and are only selling from our remaining inventory. The fact that are made from INSULTEX, a material with buoyancy, scent block and thermal resistant properties. We also market our House Wrap product line whichInsultex is a building material with thermal qualities. House Wrapinsulation means it has many other applications such as other clothing apparel, tents and sleeping bags. It can also be used in refrigerated environments where keeping the temperature low is also made from INSULTEX. We obtain INSULTEX through a license agreement with the owner and manufacturer of the material. Since our formation we have devoted our efforts to:requirement.
12-13-
INNOVATIVE DESIGNS, INC.
Results of Operations
Comparison of the Three Month Period Ended July 31, 2022,2023 with the Three Month Period Ended July 31, 2021.2022.
| Three Month Period Ended July 31, 2022 | % of Sales | Three Month Period Ended July 31, 2021 | % of Sales | Increase (Decrease) | % Change | Three Month Period Ended 31-Jul 2023 | % of Sales | Three Month Period Ended 31-Jul 2022 | % of Sales | Increase (Decrease) | % Change | |||||||||||||||||||||||||||||||||||||
| REVENUE - NET | $ | 135,048 | 100 | % | $ | 110,475 | 100 | % | $ | 24,573 | 22 | % | $ | 124,650.00 | $ | 135,048.00 | $ | -10,398.00 | -8.3 | % | ||||||||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 56,224 | 42 | % | 50,712 | 46 | % | 5,512 | 11 | % | $ | 76,480.00 | 61.4 | % | $ | 56,224.00 | 41.6 | % | $ | 20,256.00 | 26.5 | % | |||||||||||||||||||||||||||
| Selling, general and administrative expenses | 115,385 | 85 | % | 58,518 | 53 | % | 56,867 | 97 | % | |||||||||||||||||||||||||||||||||||||||
| 171,609 | 127 | % | 109,230 | 99 | % | 62,379 | 57 | % | ||||||||||||||||||||||||||||||||||||||||
| (Loss) Income from operations | (36,561 | ) | -27 | % | 1,245 | 1 | % | (37,806 | ) | -3037 | % | |||||||||||||||||||||||||||||||||||||
| Selling, general and | ||||||||||||||||||||||||||||||||||||||||||||||||
| administrative expenses | $ | 124,944.00 | 100.2 | % | $ | 115,384.00 | 85.4 | % | $ | 9,560.00 | 7.7 | % | ||||||||||||||||||||||||||||||||||||
| Total Operating Expenses | $ | 201,424.00 | $ | 171,608.00 | ||||||||||||||||||||||||||||||||||||||||||||
| Loss from operations | $ | -76,774.00 | -61.6 | % | $ | -36,560.00 | -27.1 | % | $ | -40,214.00 | 52.4 | % | ||||||||||||||||||||||||||||||||||||
| Other income (expense) | 260,000 | 193 | % | 33,652 | 30 | % | 226,348 | 0 | % | |||||||||||||||||||||||||||||||||||||||
| Other Expense | ||||||||||||||||||||||||||||||||||||||||||||||||
| Miscellaneous Income (expense) | $ | 0.00 | $ | 260,000.00 | 100.0 | % | $ | -260,000.00 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||
| Interest expense | (10,710 | ) | -8 | % | (13,417 | ) | -12 | % | 2,707 | -20 | % | $ | -6,421.00 | -5.2 | % | $ | -10,710.00 | -7.9 | % | $ | 4,289.00 | -66.8 | % | |||||||||||||||||||||||||
| Depreciation expense | (372 | ) | 0 | % | (8,327 | ) | -8 | % | 7,955 | -96 | % | |||||||||||||||||||||||||||||||||||||
| Net (Loss) Income | $ | 212,357 | 157 | % | $ | 13,153 | 12 | % | $ | 199,204 | 1515 | % | ||||||||||||||||||||||||||||||||||||
| Depreciation | $ | -769.00 | $ | -373.00 | -0.3 | % | $ | -396.00 | 51.5 | % | ||||||||||||||||||||||||||||||||||||||
| Total other income (expense) | $ | -7,190.00 | $ | 248,917.00 | 184.3 | % | $ | -256,107.00 | 3562.0 | % | ||||||||||||||||||||||||||||||||||||||
| Net Loss | $ | -83,964.00 | -7.4 | % | $ | 212,357.00 | 157.2 | % | $ | -296,321.00 | 352.9 | % | ||||||||||||||||||||||||||||||||||||
Revenues for the three month period ended July 31, 20222023 were $135,048$124,650 compared to revenues of $110,475$135,048 for the three month period ended July 31, 2021. The increase in revenue is attributable to more sales of our HouseWrap product line. See Note 1316 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment products sales. Our net loss for the three monththree-month period ended July 31, 20222023, was ($213,357)83,964).
Our cost of sales was $76,480 for the three months ended July 31, 2023, compared to $56,224 for the three months ended July 31, 2022. The increase is largely on account of the increase in the price we pay to our supplier of the House Wrap product line.
Our selling, general and administrative expenses were $115,385$124,944 for the three month period ended July 31, 2022,2023 compared to $58,518$115,384 for the three month period ended July 31, 2021. The increase is primarily the result of an increase in payroll as we brought back two employees who had been furloughed as a result of the pandemic.2022.
-14-
INNOVATIVE DESIGNS, INC.
Comparison of the Nine Month Period Ended July 31, 2022,2023, with the Nine Month Period Ended July 31, 2021.2022.
The following table shows a comparison of the results of operations between the nine month periods ended July 31, 20222023 and July 31, 2021:2022:
| Nine Month Period Ended July 31, 2022 | % of Sales | Nine Month Period Ended July 31, 2021 | % of Sales | Increase (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 235,164 | 100 | % | $ | 176,388 | 100 | % | $ | 58,776 | 33 | % | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | 109,884 | 47 | % | 78,352 | 44 | % | 31,532 | 40 | % | |||||||||||||||
| Selling, general and administrative expenses | 545,212 | 232 | % | 251,017 | 142 | % | 294,195 | 117 | % | |||||||||||||||
| 655,096 | 279 | % | 329,369 | 187 | % | 325,727 | 99 | % | ||||||||||||||||
| Loss from operations | (419,932 | ) | -179 | % | (152,981 | ) | -87 | % | (266,951 | ) | 174 | % | ||||||||||||
| Other income (expense) | 260,000 | 111 | % | 62,475 | 35 | % | 197,525 | 0 | % | |||||||||||||||
| Other Expense | ||||||||||||||||||||||||
| Interest expense | (34,450 | ) | -15 | % | (30,810 | ) | -17 | % | (3,640 | ) | 12 | % | ||||||||||||
| Depreciation expense | (1,118 | ) | 0 | % | (24,981 | ) | -14 | % | 23,863 | -96 | % | |||||||||||||
| Net Loss | $ | (195,500 | ) | -83 | % | $ | (146,297 | ) | -83 | % | $ | (49,203 | ) | 34 | % | |||||||||
| Nine Month Period Ended 31-Jul 2023 | % of Sales | Nine Month Period Ended 31-Jul 2022 | % of Sales | Increase (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 223,546.00 | $ | 235,164.00 | $ | -11,618.00 | -5.2 | % | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | $ | 106,839.00 | 47.8 | % | $ | 109,884.00 | 46.7 | % | $ | -3,045.00 | -2.9 | % | ||||||||||||
| Selling, general and | ||||||||||||||||||||||||
| administrative expenses | $ | 359,917.00 | 161.0 | % | $ | 545,212.00 | 231.8 | % | $ | -185,295.00 | -51.5 | % | ||||||||||||
| Total Operating Expenses | $ | 466,756.00 | $ | 655,096.00 | ||||||||||||||||||||
| Loss from operations | $ | -243,210.00 | -108.8 | % | $ | -419,932.00 | -178.6 | % | $ | 176,722.00 | -72.7 | % | ||||||||||||
| Other income (expense) | ||||||||||||||||||||||||
| Miscellaneous Income (expense) | $ | 7,519.00 | $ | 260,000.00 | 100.0 | % | $ | -252,481.00 | 100.0 | % | ||||||||||||||
| Interest expense | $ | -17,652.00 | -7.9 | % | $ | -34,450.00 | -14.6 | % | $ | 16,798.00 | -95.2 | % | ||||||||||||
| Depreciation | $ | -2,306.00 | $ | -1,118.00 | -0.5 | % | $ | -1,188.00 | 51.5 | % | ||||||||||||||
| Total other income (expense) | $ | -12,439.00 | $ | 224,432.00 | 95.4 | % | $ | -236,871.00 | 1904.3 | % | ||||||||||||||
| Net Loss | $ | -255,649.00 | -114.4 | % | $ | -195,500.00 | -83.1 | % | $ | -60,149.00 | 23.5 | % | ||||||||||||
Revenues for the nine month period ended July 31, 20222023 were $235,164$223,546 compared to revenues of $176,388$235,164 for the nine month period ended July 31, 2021. The increasedecrease is caused, by the result of moredecrease in our apparel sales ofand the sales in our HouseWrapHouse Wrap product line. The apparel sales were adversely affected by warm weather. During the nine month period ended July 31, 2023 House Wrap sales totaled $192,441 in comparison with $176,038 during the nine month period ended July 31, 2022. See Note 1316 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment product sales. During the nine month period ended July 31, 2022 House Wrap sales totaled $176,038 in comparison with $126,713 during the nine month period ended July 31, 2021. Our net loss for the nine month period ended July 31, 2022,2023 was ($195,500)255,649).
Our selling, general and administrative expenses were $545,212$106,839 for the nine months ended July 31, 2022,2023, compared to $251,017$109,884 for the nine month period ended July 31, 2021. The increase2022. Professional fees for the period were approximately $63,000. Salaries were approximately $107,000, travel expenses were approximately $20,000 and rent expense was a result, in part, by an increase in payroll expenses of approximately $101,000 as we brought back two employees who had been furloughed during the pandemic. we also incurred $50,000 in marketing cost through the issuance of our common stock. Directors’ fees increased by $33,000 as we issued common stock to members of the Board of Directors. Shipping costs increased by $9,000 from the prior nine month period.$21,000.
-15-
INNOVATIVE DESIGNS, INC.
Liquidity and Capital Resources
During the nine period ended July 31, 2022,2023, we funded our operations from revenues and from sales andof our securities.
Subsequent to the period we raised $60,000 from the sale of our common stock.securities.
Short Term: We will continue to fund our operations from sales and the sale of our securities. We continue to pay our creditors when payments are due. We will require more funds to be able to order the material for our INSULTEXInsultex products and to purchase equipment needed for the manufacture of the INSULTEXInsultex product. The Company reached an agreement with the manufacturer of the INSULTEXInsultex material to purchase a machine capable of producing the INSULTEXInsultex material. Also included in the proposed agreement will be the propriety formula that creates INSULTEX.Insultex. The Company took delivery of the equipment in December 2015. The Company will have to have the machine installed and ensure that it can be operated in compliance with all environmental rules and regulations. TheIt is the Company has not made anintentions to have the equipment operational but cannot currently provide a time estimate. Among the factors affecting the time estimate ofare the cost required for bringing the operation of the machine into compliance with the environmental regulations, but it is considered to be a substantial amount. We are in the permitting stage relating to environmental issues necessary to begin the installation of the equipment. However, given our current limited financial resources we are not devotingavailable to the resources neededCompany, finding a suitable facility and bringing technical personnel from abroad to completeinstall the permitting process.equipment. The Company has currently made deposits of $600,000 on the equipment. The Company has incurred $17,000 of additional expenses related to shipping. Earlier this year, our CEO traveled to Indonesia to inspect the manufacturing facility of the Ketut Group where Insultex is currently produced. He also discussed with Ketut management the plans for the Company to install in the United States the machinery and equipment utilized to produce the Insultex material and for Ketut to arrange for the technical personal needed to assist in the installation. The Company is currently looking for a suitable site for the onshore manufacturing of Insultex. It is also seeking the financing needed to accomplish the installation which is estimated to cost between 1.5 to 2 million dollars.
The Company will produce INSULTEXInsultex under its own brand name. See Note 1014 of the Notes to the Condensed Financial Statements.
We also must purchase new quality control testing equipment for our HouseWrap product line. A depositproducts. The vendor is currently working on the project and we expect delivery of $7,320 has been made however, we do not have a full cost estimate from the builder.equipment within the next few weeks. After such testing is complete the certification process can begin. We have estimated a costpaid approximately $39,000 as of approximately $100,000.July 31, 2023, for the equipment.
Long Term: The Company will continue to fund its operations from revenues, borrowings from private parties and the possible sale of our securities. Should we not be able to rely on the private sources for borrowing and /or increased sales, our operations would be severely affected as we would not be able to fund our purchase orders to our suppliers for finished goods and our efforts to produce our own INSULTEXInsultex would be delayed.
Subsequent to the period on August 29, 2022, we received approximately $200,000 as partial payment on the amount owed under the settlement agreement with the FTC. See Note 14 of the Notes to the Condensed Financial Statement appearing elsewhere in this Report.
-16-
INNOVATIVE DESIGNS, INC.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
See Note 1417 of the Notes to Condensed Financial Statements appearing elsewhere in this Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On May 17, 2023, we issued 185,000 shares of our common stock to a consultant for services pursuant to an agreement dated April 17, 2023. Also on May 17, 2023, we sold 50,000 Units to one investor at a price of $.20 per Unit. Each Unit contained one share of common stock and a warrant with a two year term to purchase one share of common stock. The warrant has an exercise price of $.20 per warrant. We received $10,000 in proceeds.
On June 2, 2023, , we sold 40,000 Units each to one investors at a price of $.25 per Unit. The warrant had an exercise price of $.25. We received $10,000 in total proceeds.
On June 23, 2023, a warrant holder exercised warrants to purchase 40,000 shares of common stock at an exercise price of $.25. We received $10,000 in proceeds.
Between August 16, 2023, and August 24, 2023, we sold a total of 180,000 Unites to five investors at a price of $.25 per Unit. The warrant had an exercise price of $0.25 per warrant. Total proceeds were $45,000.
On September 6, 2023, we sold 20,000 Units each to three investors at a price of $.25 per Unit. The warrant had an exercise price of $.25 per warrant.
We relied on Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended.
-17-
INNOVATIVE DESIGNS, INC.
ITEM 3. QUANTITATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
ITEM 4T. CONTROLS AND PROCEDURES
Management has developed and implemented a policy and procedures for reviewing, on a quarterly basis, our disclosure controls and procedures. During the period ended July 31, 2022,2023, our principal executive/financial officer concluded that these controls and procedures were ineffective. At this time, we do not have the financial resources to employ a financial staff with accounting and financial expertise. Once we have the necessary financial resources, we plan to hire and designate an individual responsible for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional attention and resources in our internal accounting functions.
Changes in Internal Control Over Financial Reporting
During the most recent fiscal quarter, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13(a)-15 or 15d-15 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Until the Company has the financial resources to employ a financial staff with accounting and financial expertise, to be able to properly account for internal financial reporting, errors that may have a material effect on the financial statements have the potential to occur.
-18-
INNOVATIVE DESIGNS, INC.
ITEM 6. EXHIBITS
| * | Incorporated by reference to the Company’s Form 10-K filed February 12, 2015 | |
| ** | Incorporated by reference to the Company’s registration statement on Form SB-2, filed March 11, 2003 | |
| 99*** | Incorporated by reference to the Company’s Current Report on Form 8-k, filed November 4, 2016 |
-19-
INNOVATIVE DESIGNS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Innovative Designs, Inc. | ||
| Registrant | ||
| Date: September | By: /s/ Joseph Riccelli | |
| Joseph Riccelli, Chief Executive Officer | ||
| and Chief Financial Officer |
18
-20-