Innovative Designs Inc 10-Q for FY2023 Q2
Innovative Designs Inc (IVDN)
About this 10-Q
Innovative Designs Inc filed this 10-Q on July 7, 2023, covering the quarter ended April 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended April 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $27.25K
- down 27.8% from $37.72K a year earlier
- Net loss
- $112.59K
- compared with a net loss of $275.82K a year earlier
- Diluted EPS
- -$0.00
- compared with -$0.01 a year earlier
A UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13l OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
(Address of Principal Executive Offices, Zip Code)
(
(Issuer’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.
| Yes | ☐ | |
☒ |
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).
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 ☐ |
| 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). YES ☐
As of July 5, 2023, there were shares of the Registrant’s common stock, par value $.0001 per share, outstanding.
Transitional Small Business Disclosure Format: YES ☐ NO ☒
Innovative Designs, Inc.
Index
Form 10-Q for the Quarter Ended April 30, 2023
| Part I -- Financial Information | Page No. | |
| Item 1. | Condensed Financial Statements (Unaudited) | |
| Condensed Balance Sheets as of April 30, 2023 (Unaudited) And October 31, 2022 | 2 | |
| Condensed Statements of Operations for the Six-Month Periods Ended April 30, 2023 and 2022 (Unaudited) | 4 | |
| Condensed Statements of Changes in Stockholders’ Equity as of April 30, 2023 (Unaudited) and October 31, 2022 | 5 | |
| Condensed Statements of Cash Flows for the Six-Month Periods Ended April 30, 2023 and 2022 (Unaudited) | 6 | |
| Notes to the Condensed Financial Statements | 7- 11 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 - 14 |
| Part II -- Other Information | ||
| Items 1, 2, 3, 4, 4T and 5. | 15 - 16 | |
| Item 6. | Exhibits | 17 |
| 1 |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED BALANCE SHEETS |
| APRIL 30, 2023 (UNAUDITED) AND OCTOBER 31, 2022 |
| April 30, 2023 | October 31, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory - net of obsolete inventory reserve of $ | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT - NET | ||||||||
| OTHER ASSETS | ||||||||
| Inventory on consignment | ||||||||
| Deposits on inventory | ||||||||
| Advance to employees | ||||||||
| Deposits on equipment | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| 2 |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED BALANCE SHEETS |
| APRIL 30, 2023 (UNAUDITED) AND OCTOBER 31, 2022 |
| April 30, 2023 | October 31, 2022 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Current portion of notes payable | ||||||||
| Accrued interest expense | ||||||||
| Due to stockholders | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term portion of due to stockholders | ||||||||
| Long-term portion of notes payable | ||||||||
| Total long-term liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value, shares authorized | ||||||||
| Common stock, $ par value, shares authorized, and and issued and outstanding | ||||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| 3 |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED STATEMENTS OF OPERATIONS |
| THREE AND SIX MONTHS ENDED APRIL 30, 2023 AND 2022 (UNAUDITED) |
| Three Months Ended April 30, | Six Months Ended April 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUES - NET | $ | $ | $ | $ | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Miscellaneous income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| PER SHARE INFORMATION - UNDILUTED | ||||||||||||||||
| Net Loss Per Common Share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding | ||||||||||||||||
| PER SHARE INFORMATION - DILUTED | ||||||||||||||||
| Net Loss Per Common Share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding | ||||||||||||||||
| 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 SIX MONTHS ENDED APRIL 30, 2023 AND 2022 (UNAUDITED) |
| Common Stock | Common Stock To be | Additional Paid-in | Accumulated | |||||||||||||||||||||
| Shares | Amount | Issued | Capital | Deficit | Total | |||||||||||||||||||
| Balance at October 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at January 31, 2023 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance at October 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at January 31, 2022 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at April 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| 5 |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED STATEMENTS OF CASH FLOWS |
| SIX MONTHS ENDED APRIL 30, 2023 AND 2022 (UNAUDITED) |
| Six Months Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Allowance for doubtful accounts | ||||||||
| Common stock issued for services | ||||||||
| Depreciation | ||||||||
| Amortization of right of use asset | ||||||||
| Gain on sale of asset | ( |
) | ||||||
| (Increase) decrease from changes in: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Inventory | ( |
) | ( |
) | ||||
| Deposits on inventory | ( |
) | ||||||
| Increase (decrease) from changes in: | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued interest expense | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of equipment | ( |
) | ||||||
| Deposits on equipment | ( |
) | ||||||
| Gain on sale of equipment | ||||||||
| Net cash used in investing activities | ( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of stock | ||||||||
| Proceeds from shareholder advances | ||||||||
| Payments on shareholder advances | ( |
) | ( |
) | ||||
| Payment on lease liability | |
( |
) | |||||
| Proceeds on notes payable | ||||||||
| Payments on notes payable | ( |
) | ||||||
| Net cash provided by financing activities | ( |
) | ||||||
| Net change in cash | ( |
) | ( |
) | ||||
| CASH, BEGINNING OF YEAR | ||||||||
| CASH, END OF THE PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| 6 |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Six Month Periods Ended April 30, 2023 and 2022 (Unaudited)
| NOTE 1. | BASIS OF PRESENTATION |
In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly Innovative Designs, Inc.’s financial position as of April 30, 2023, the changes therein for the three and six month periods then ended and the results of operations for the three and six month periods ended April 30, 2023 and 2022.
The financial statements included in the Form 10-Q are presented in accordance 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.’s annual report on Form 10-K for the fiscal year ended October 31, 2022. The results of operations for the three and six month periods ended April 30, 2023 and 2022 are not necessarily indicative of operating results for the full year.
| NOTE 2. | RIGHT OF USE ASSETS AND LEASE LIABILITIES |
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
| NOTE 3. | GOING CONCERN |
These financial statements have been prepared
on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal
course of business. The Company had a net loss of $(
| NOTE 4. | ACCOUNTS RECEIVABLE |
Management 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 of $-
| 7 |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Six Month Periods Ended April 30, 2023 and 2022 (Unaudited)
| NOTE 5. | OPENING AND CLOSING BALANCE OF RECEIVABLES |
The opening balance of accounts receivables
was $
| NOTE 6. | INVENTORY |
Inventory consists principally of purchased
apparel inventory and House 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 against apparel inventory at April 30, 2023 and October 31, 2022 of $
| NOTE 7. | EARNINGS PER SHARE |
The Company calculates net income (loss)
per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”)
Topic 260 ”Earnings per Share”. Basic earnings (loss) per share is calculated by dividing income (loss) by the
weighted average number of common shares outstanding for the period. During the periods presented, the Company only has common stock outstanding.
In 2021 the Company issued a convertible debt instrument. In addition, the Company also has stock warrants of
| NOTE 8. | INCOME TAXES |
The Company accounts for income taxes in accordance with ASC Topic 740 ”Income 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 loss and tax credit carryforwards available to offset future taxable income. Changes in enacted tax rates or laws result in adjustments to recorded deferred tax assets and liabilities in the periods in which the tax laws are enacted or tax rates are changed. The Company will continue to evaluate its income tax obligation throughout the year and will record a tax provision when it is necessary.
| NOTE 9. | SHIPPING AND HANDLING COSTS |
The Company pays shipping and handling costs
on behalf of customers for purchased apparel 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 Wrap orders, the customer pays the shipping cost. The shipping and handling costs associated
with customer orders was approximately $
| 8 |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Six Month Periods Ended April 30, 2023 and 2022 (Unaudited)
| NOTE 10. | COMMON STOCK |
During the six month period ended April 30,
2023, the Company sold shares of common stock to one investor for total proceeds of $
During the six month period ended April 30,
2022, the Company sold shares of common stock to seven investors for total proceeds of $
| NOTE 11. | 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 $
During the fiscal year ending October 31,
2022 the Company made deposits on a separate piece of equipment of $
Total deposits made for the two quarters
ending April 30, 2023 total $
Total overall deposits on Equipment as of
April 30, 2023 and April 30, 2022 were $
| NOTE 12. | RIGHT OF USE ASSETS |
The Company entered lease at the time the
Company was formed that is classified as right of use asset and lease liability. The lease for the Company’s office space is estimated
to be through June 2022. In accordance with ASU 2016-02, the Company calculated the present value of the leases using the average commercial
real estate interest rate of
| 9 |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Six Month Periods Ended April 30, 2023 and 2022 (Unaudited)
| NOTE 13. | SEGMENT INFORMATION |
We have organized our operations into two segments. We rely on an internal management reporting process that provides segment information for purposes of making financial decisions and allocating resources.
The following tables present our business segment information for the six month periods ended April 30, 2023 and 2022:
| Schedule of business segment information | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Apparel | $ | $ | ||||||
| House Wrap | ||||||||
| Total Revenues | $ | $ | ||||||
| Assets: | ||||||||
| Apparel | $ | $ | ||||||
| House Wrap | ||||||||
| Total | $ | $ | ||||||
| Depreciation: | ||||||||
| Apparel | $ | - | $ | - | ||||
| House Wrap | ||||||||
| Total | $ | $ | ||||||
| 10 |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Six Month Periods Ended April 30, 2023 and 2022 (Unaudited)
| NOTE 14. | LEGAL PROCEEDINGS |
On November 4, 2016, the 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 substantiation of claims made by the Company regarding the R value and energy efficiency of its INSULTEX House Wrap products. The complaint asks as to redress a rescission of revenue the Company received from the sale of 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 as closed.
On November 23, 2020, the Company was informed that the FTC had filed a notice of appeal 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 February 14, 2020, striking Dr. David Yarbrough’s expert testimony made on behalf of the FTC. The FTC filed its appeal and on March 24, 2021, the Company filed its answer.
On July 22, 2021, the Registrant was informed that the United States 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 Commission complaint filed against the Registrant in November 2016, alleging, among other matters, that the Registrant did not have substantiation for claims made by the Registrant regarding the R-value and energy efficiency of its INSULTIX House Wrap products.
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
paid the Company $
| NOTE 15. | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events in accordance with ASC Topic 855, “Subsequent Events”, through June 28, 2023 which is the date financial statements were available to be issued. The Company identified no material subsequent events that require recognition or additional disclosure in these financial statements.
| 11 |
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, 2022.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation 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 statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others, competition in our cold weather markets, our ability to sell out HouseWrap product line, 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, 2022. The Company undertakes no obligation to publicly 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 Desings, Inc. (herein after referred to as the “Company”, “we” or “our”) was formed on June 25, 2002. We produce, market and sell products made 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 call Artic Armor made using Insultex. We no longer produce this line and are only selling from our remaining inventory. The fact that Insultex is a thermal insulation 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 a requirement.
| 12 |
Results of Operations
Comparison of the Three-Month Period Ended April 30, 2023, with the Three Month Period Ended April 30, 2022.
The following table shows a comparison of the results of operations between the three month periods ended April 30, 2023 and April 30, 2022:
| Three Month | Three Month | |||||||||||||||||||||||
| Period Ended | Period Ended | |||||||||||||||||||||||
| April 30, | % of | April 30, | % of | Increase | ||||||||||||||||||||
| 2023 | Sales | 2022 | Sales | (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 27,249 | 100 | % | $ | 37,717 | 100 | % | $ | (10,468 | ) | -28 | % | |||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | 13,349 | 49 | % | 21,314 | 57 | % | (7,965 | ) | -37 | % | ||||||||||||||
| Selling, general and administrative expenses | 121,091 | 444 | % | 279,582 | 741 | % | (158,491 | ) | -57 | % | ||||||||||||||
| 134,440 | 493 | % | 300,896 | 798 | % | (166,456 | ) | -55 | % | |||||||||||||||
| (Loss) Income from operations | (107,191 | ) | -393 | % | (263,179 | ) | -698 | % | 155,988 | -59 | % | |||||||||||||
| Other income (expense) | 0 | % | 0 | % | — | 0 | % | |||||||||||||||||
| Other Expense | ||||||||||||||||||||||||
| Interest expense | (4,632 | ) | -17 | % | (12,264 | ) | -33 | % | 7,632 | -62 | % | |||||||||||||
| Depreciation expense | (768 | ) | -3 | % | (373 | ) | -1 | % | (395 | ) | 106 | % | ||||||||||||
| Net (Loss) Income | $ | (112,591 | ) | -413 | % | $ | (275,816 | ) | -731 | % | $ | 163,225 | -59 | % | ||||||||||
Revenues for the three month period ended April 30, 2022, were $27,249 compared to revenues of $37,717 for the three month period ended April 30, 2022. The decrease in revenue is attributable to fewer sales of our apparel products.
Revenues for the first part of the third quarter of 2023 through June 26, 2023, are approximately 437% higher than revenues for the second quarter. We expect revenues to continue to increase primarily from sales of our House Wrap product line as we increase our distribution network, get repeat orders from existing distributors and customers and increase sales to contractors and builders.
Our selling, general and administrative expenses (“SG&A”) were $121,091 for the three months ended April 30, 2023, compared to $279,582 for the three month period ended April 30, 2022. Professional fees for the period ended April 30, 2023, were $21,982 compared to $36,595 for the three month period ended April 30, 2022. Travel expenses were $16,422 for the period.
| 13 |
INNOVATIVE DESIGNS, INC.
Results of Operations
Comparison of the Six-Month Period Ended April 30, 2023, with the Six -Month Period Ended April 30, 2022.
| Six Month | Six Month | |||||||||||||||||||||||
| Period Ended | Period Ended | |||||||||||||||||||||||
| April 30, | % of | April 30, | % of | Increase | ||||||||||||||||||||
| 2023 | Sales | 2022 | Sales | (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 98,896 | 100 | % | $ | 100,116 | 100 | % | $ | (1,220 | ) | -1 | % | |||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | 30,359 | 31 | % | 53,659 | 54 | % | (23,300 | ) | -43 | % | ||||||||||||||
| Selling, general and administrative expenses | 234,974 | 238 | % | 429,829 | 429 | % | (194,855 | ) | -45 | % | ||||||||||||||
| 265,333 | 268 | % | 483,488 | 483 | % | (218,155 | ) | -45 | % | |||||||||||||||
| Loss from operations | (166,437 | ) | -168 | % | (383,372 | ) | -383 | % | 216,935 | -57 | % | |||||||||||||
| Other income (expense) | 7,519 | 8 | % | — | 0 | % | 7,519 | 0 | % | |||||||||||||||
| Other Expense | ||||||||||||||||||||||||
| Interest expense | (11,231 | ) | -11 | % | (23,740 | ) | -24 | % | 12,509 | -53 | % | |||||||||||||
| Depreciation expense | (1,537 | ) | -2 | % | (745 | ) | -1 | % | (792 | ) | 106 | % | ||||||||||||
| Net Loss | $ | (171,686 | ) | -174 | % | $ | (407,857 | ) | -407 | % | $ | 236,171 | -58 | % | ||||||||||
Revenues for the six-month period ended April 30, 2023, were $98,896 compared to revenues of $100,116 for the six month period ended April 30, 2022. See Note 13 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment products sales.
SG&A expenses were $234,974 for the six month period ended April 30, 2023, compared to $429,829 for the six month period ended April 30, 2022. Professional fees for the six month period ended April 30, 2023, were $40,610 compared to $41,463 for the six month period ended April 30, 2022.
| 14 |
INNOVATIVE DESIGNS, INC.
Liquidity and Capital Resources
During the three month period ended April 30, 2023, we funded our operations from revenues.
Subsequent to the period, in May, we sold our common stock and raised $100,000 in proceeds. In June an investor exercised warrants to purchase 40,000 shares of our common stock for total proceeds of $18,000.
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 INSULTEX products and to purchase equipment needed for the manufacture of the INSULTEX product. The Company reached an agreement with the manufacturer of the INSULTEX material to purchase a machine capable of producing the INSULTEX material. Also included in the proposed agreement will be the propriety formula that creates 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. It is the Company intentions to have the equipment operational but cannot currently provide a time estimate. Among the factors affecting the time estimate are the financial resources available to the Company, finding a suitable facility and bringing technical personnel from abroad to install the 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. During the period 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 INSULTEX under its own brand name. See Note 11 of the Notes to the Condensed Financial Statements.
We must purchase new quality control testing equipment for our products. The vendor is currently working on the project. It is expected that the equipment will be ready for beta testing in approximately the next three to four weeks, although no assurance can be given. After such testing is complete the certification process can begin. We have paid approximately $39,000 as of June 26, 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 Insultex would be delayed.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
See Note 14 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report.
ITEM 1A Risk Factors
See Risk factors set forth in Part I Item 1A of the Company’s Annual report on Form 10-K for the fiscal year ended October 31, 2022.
| 15 |
INNOVATIVE DESIGNS, INC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On May 30, 2023, we sold 500,000 Units to one investor. Each Unit consists of one share of common stock and one common stock purchase warrant. The warrants have a term of three years and an exercise price of $.20 per warrant. We received $100,000 in proceeds from the sale. On June 23, 2023, an investor exercised warrants and was issued 40,000 shares of our common stock. We received $18,000 in total proceeds.
We relied on Section 4(2) of the Securities Act of 1933, as amended and Regulation D, Rule 506 (c)) promulgated thereunder.
ITEM 3. Defaults upon Senior Securities
None
Item 4 Mine Safety Disclosures
Not applicable
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 April 30, 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.
ITEM 5. Other Information
None
| 16 |
INNOVATIVE DESIGNS, INC.
ITEM 6. EXHIBITS
| *3.1 | Revised Certificate of Incorporation |
| **3.2 | By-Laws |
| 31.1 | Rule 13a - 14a Certification of Chief Executive Officer |
| 31.2 | Rule 13a-14a Certification of Chief Financial Officer and Principal Accounting Officer |
| 32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
| 32.2 | Section 1350 Certification of Chief Financial Officer and Chief Accounting Officer |
| * | 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 |
| 17 |
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: July 7, 2023 | by: | /s/ Joseph Riccelli |
| Joseph Riccelli, Chief Executive Officer | ||
| and Chief Financial Officer |
18
EXHIBIT 31.1
INNOVATIVE DESIGNS, INC.
CERTIFICATIONS
I, Joseph Riccelli, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Innovative Designs, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: July 7, 2023 | by: | /s/ Joseph Riccelli |
| Joseph Riccelli | ||
| Chief Executive Officer | ||
EXHIBIT 31.2
INNOVATIVE DESIGNS, INC.
CERTIFICATIONS
I, Joseph Riccelli, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Innovative Designs, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: July 7, 2023 | by: | /s/ Joseph Riccelli |
| Joseph Riccelli | ||
| Chief Financial Officer, Principal Accounting Officer |
EXHIBIT 32.1
SECTION 906 CERTIFICATION
CERTIFICATION REQUIRED BY
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Innovative Designs, Inc. (the “Company”) on Form 10-Q for the quarterly period ended April 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: July 7, 2023 | by: | /s/ Joseph Riccelli |
| Joseph Riccelli | ||
| Chief Executive Officer |
EXHIBIT 32.2
SECTION 906 CERTIFICATION
CERTIFICATION REQUIRED BY
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Innovative Designs, Inc. (the “Company”) on Form 10-Q for the quarterly period ended April 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: | July 7, 2023 | by: | /s/ Joseph Riccelli |
| Joseph Riccelli | |||
| Chief Executive Officer, Chief | |||
| Financial Officer, Principal | |||
| Accounting Officer | |||