IVDN 10-Q
Innovative Designs Inc (IVDN)
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.
| ☒ | NO | ☐ |
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). ☒ NO ☐
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 September 23, 2021, 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 July 31, 2021
| Part I -- Financial Information | Page No. | |
| Item 1. | Condensed Financial Statements (Unaudited) | |
| Condensed Balance Sheets as of July 31, 2021 (Unaudited) And October 31, 2020 | 1 | |
| Condensed Statements of Operations for the Nine Month Periods Ended July 31, 2021 and 2020 (Unaudited) | 3 | |
| Condensed Statements of Changes in Stockholders’ Equity as of July 31, 2021 (Unaudited) and October 31, 2020 | 4 | |
| Condensed Statements of Cash Flows for the Nine Month Periods Ended July 31, 2021 and 2020 (Unaudited) | 5 | |
| Notes to the Condensed Financial Statements | 6 - 11 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 - 13 |
| Part II -- Other Information | ||
| Items 1, 2, 3, 4, 4T and 5. | 15 - 16 | |
| Item 6. | Exhibits | 17 |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED BALANCE SHEETS |
| JULY 31, 2021 (UNAUDITED) AND OCTOBER 31, 2020 |
| July 31, 2021 | October 31, 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable - net of allowance for doubtful accounts of $ | ||||||||
| Inventory - net of obsolete inventory reserve of $ | ||||||||
| Current portion of right of use asset | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT - NET | ||||||||
| OTHER ASSETS | ||||||||
| Inventory on consignment | ||||||||
| Deposits on inventory | ||||||||
| Advance to employees | ||||||||
| Right of use asset, net of current portion | ||||||||
| Deposits on equipment | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| - 1 - |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED BALANCE SHEETS |
| JULY 31, 2021 (UNAUDITED) AND OCTOBER 31, 2020 |
| July 31, 2021 | October 31, 2020 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Current portion of notes payable | ||||||||
| Unearned revenue | ||||||||
| Current portion of lease liability | ||||||||
| Accrued interest expense | ||||||||
| Due to shareholders | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term portion of notes payable | ||||||||
| Lease liability, net of current portion | ||||||||
| 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. |
| - 2 - |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED STATEMENTS OF OPERATIONS |
| THREE AND NINE MONTHS ENDED JULY 31, 2021 AND 2020 (UNAUDITED) |
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| 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 INCOME (LOSS) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| PER SHARE INFORMATION-UNDILUTED | ||||||||||||||||
| Net Income (Loss) Per Common Share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted Average Number of Common Shares Outstanding | ||||||||||||||||
| PER SHARE INFORMATION-FULLY DILUTED | ||||||||||||||||
| Net Income (Loss) Per Common Share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted Average Number of Common Shares Outstanding | ||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| - 3 - |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |
| THREE AND NINE MONTHS ENDED JULY 31, 2021 AND 2020 (UNAUDITED) |
| Common Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||
| Shares | Amount | To be Issued | Capital | Deficit | Total | |||||||||||||||||||
| Balance at October 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at January 31, 2021 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at April 30, 2021 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Balance at July 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance at October 31, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at January 31, 2020 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at April 30, 2020 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ( | ) | ||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at July 31, 2020 | ( | ) | ||||||||||||||||||||||
| The accompanying notes are an integral part of these condensed financial statements. |
| - 4 - |
| INNOVATIVE DESIGNS, INC. |
| CONDENSED STATEMENTS OF CASH FLOWS |
| THREE AND NINE MONTHS ENDED JULY 31, 2021 AND 2020 (UNAUDITED) |
| Nine Months Ended July 31, | ||||||||
| 2021 | 2020 | |||||||
| 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 | ||||||||
| (Increase) decrease from changes in: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Increase (decrease) from changes in: | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Unearned revenue | ||||||||
| Accrued interest expense | ( | ) | ( | ) | ||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net cash used in investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of stock | ||||||||
| Proceeds (forgivness) from loans | ( | ) | ||||||
| Proceeds from shareholder advances | ||||||||
| Payments on lease liability | ( | ) | ( | ) | ||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase 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. |
| - 5 - |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2021 and 2020 (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 July 31, 2021, the changes therein for the three and nine month periods then ended and the results of operations for the three and nine month periods ended July 31, 2021 and 2020.
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, 2020. The results of operations for the three and nine month periods ended July 31, 2021 and 2020 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 $
| - 6 - |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2021 and 2020 (Unaudited)
| NOTE 5. | 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 selling of its hunting and swimming
line of apparel. The Company has booked a reserve against apparel inventory at July 31, 2021 and October 31, 2020 of $
| NOTE 6. | 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. As described in Note 15, the Company has issued a convertible promissory note on May 6, 2021, therefore, fully diluted shares are presented in the Condensed Statements of income.
| NOTE 7. | 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 8. | 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 $
| - 7 - |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2021 and 2020 (Unaudited)
| NOTE 9. | COMMON STOCK |
During the nine month period ended
July 31, 2021, the Company issued shares of common stock to investors for total proceeds of $
During the nine month period ended
July 31, 2020, the Company issued shares of common stock to investors for total proceeds of $
| NOTE 10. | 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.
| NOTE 11. | RIGHT OF USE ASSETS |
The Company entered into a month
to month verbal 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
| - 8 - |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2021 and 2020 (Unaudited)
| NOTE 11. | RIGHT OF USE ASSETS (CONTINUED) |
As of July 31, 2021, the right of use assets associated with future operating lease is as follows:
| Total present value of right of use asset under lease agreement | $ | |||
| Amortization of right of use asset | ( | ) | ||
| Total right of use asset as of July 31, 2021 | $ | |||
| Less current portion due within one year | ||||
| Long-term right of use asset | $ |
Total amortization expense related
to the right of use assets under the verbal lease agreement was $
Future amortization of the right of use asset as of July 31, 2021 is as follows:
| 2021 | $ | ||||
| 2022 | |||||
| Right of use assets | $ |
| NOTE 12. | RIGHT OF USE LEASE LIABILITY |
As disclosed in Note 11, the Company entered into a verbal lease for office space prior to the quarter ended July 31, 2021 that is classified as a right of use asset and lease liability.
As of July 31, 2021, the lease liability associated with future payments due under the verbal lease is as follows:
| Total future minimum lease payments | $ | |||
| Less present value discount | ||||
| Total right of use lease liability as of April 30, 2021 | ||||
| Less current portion due within one year | ||||
| Long-term right of use liability | $ |
| - 9 - |
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Three and Nine Month Periods Ended July 31, 2021 and 2020 (Unaudited)
Total maturities of lease liability as of July 31, 2021 are as follows:
| Total future minimum lease payments | Present value discount | Right of use lease liability | |||||||||||
| 2021 | $ | $ | $ | ||||||||||
| 2022 | |||||||||||||
| $ | $ | $ | |||||||||||
| 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 nine month periods ended July 31, 2021 and 2020:
| 2021 | 2020 | |||||||
| 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 Nine Month Periods Ended July 31, 2021 and 2020 (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.
| NOTE 15. | CONVERTIBLE PROMMISORY NOTE |
On May 6, 2021, the Company issued a convertible promissory
note in the principal amount of $
| NOTE 16. | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events in accordance with ASC Topic 855, “Subsequent Events”, through, which is the date financial statements were available to be issued. The Company identified the below subsequent event.
| - 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, 2020.
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-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, 2020. 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, Inc. (hereinafter referred to as the “Company”, “we” or “our”) was formed on June 25, 2002. We market and sell clothing products such as outdoor apparel, and cold weather gear called “Arctic Armor” that are made from INSULTEX, a material with buoyancy, scent block and thermal resistant properties. We also market our House Wrap product line which is a building material with thermal qualities. House Wrap 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:
| ● | Completing the development, design and prototypes of our products, | |
| ● | Obtaining retail stores or sales agents to offer and sell our products, | |
| ● | Developing our website to sell more of our products. |
| - 12 - |
Results of Operations
Comparison of the Three Month Period Ended July 31, 2021 with the Three Month Period Ended July 31, 2020.
The following table shows a comparison of the results of operations between the three month periods ended July 31, 2021 and July 31, 2020:
| Three Month Period Ended July 31, 2021 | % of Sales | Three Month Period Ended July 31, 2020 | % of Sales | Increase (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 110,475 | 100 | % | $ | 90,814 | 100 | % | $ | 19,661 | 22 | % | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | 50,712 | 46 | % | 42,965 | 47 | % | 7,747 | 18 | % | |||||||||||||||
| Selling, general and administrative expenses | 58,518 | 53 | % | 91,354 | 101 | % | (32,836 | ) | -36 | % | ||||||||||||||
| 109,230 | 99 | % | 134,319 | 148 | % | (25,089 | ) | -19 | % | |||||||||||||||
| Loss from operations | 1,245 | 1 | % | (43,505 | ) | -48 | % | 44,750 | -103 | % | ||||||||||||||
| Other income (expense) | 33,652 | 30 | % | — | 0 | % | 33,652 | 0 | % | |||||||||||||||
| Other Expense | ||||||||||||||||||||||||
| Interest expense | (13,417 | ) | -12 | % | (2,173 | ) | -2 | % | (11,244 | ) | 517 | % | ||||||||||||
| Depreciation expense | (8,327 | ) | -8 | % | (8,327 | ) | -9 | % | — | 0 | % | |||||||||||||
| Net Income | $ | 13,153 | 12 | % | $ | (54,005 | ) | -59 | % | $ | 67,158 | -124 | % | |||||||||||
Revenues for the three month period ended July 31, 2021 were $110,475 compared to revenues of $90,814 for the three month period ended April 30, 2020. The increase in revenue is attributable to an increase in our HouseWrap product sale. Substantially all of our revenue for the period was HouseWrap sale. In warmer months we sell less of our clod weather apparel products. See Note 13 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment product sales. .
Our selling, general and administrative expenses were $58,519 for the three months ended July 31, 2021 compared to $91,354 for the three month period ended July 31, 2020. Professional fees for the period ended July 31, 2021, were $12,930 compared to $14,390 for the three month period ended July 31, 2020. The majority of our professional fees related to the legal fees incurred in connection to the FTC matter. We expect our professional fees to decrease going forward.
| - 13 - |
INNOVATIVE DESIGNS, INC.
Results of Operations
Comparison of the Nine Month Period Ended July 31, 2021 with the Nine Month Period Ended July 31, 2020.
| Nine Month Period Ended July 31, 2021 | % of Sales | Nine Month Period Ended July 31, 2020 | % of Sales | Increase (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 176,388 | 100 | % | $ | 174,048 | 100 | % | $ | 2,340 | 1 | % | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | 78,352 | 44 | % | 78,664 | 45 | % | (312 | ) | 0 | % | ||||||||||||||
| Selling, general and administrative expenses | 251,017 | 142 | % | 246,857 | 142 | % | 4,160 | 2 | % | |||||||||||||||
| 329,369 | 187 | % | 325,521 | 187 | % | 3,848 | 1 | % | ||||||||||||||||
| Loss from operations | (152,981 | ) | -87 | % | (151,473 | ) | -87 | % | (1,508 | ) | 1 | % | ||||||||||||
| Other income (expense) | 62,475 | 35 | % | 833 | 0 | % | 61,642 | 7400 | % | |||||||||||||||
| Other Expense | ||||||||||||||||||||||||
| Interest expense | (30,810 | ) | -17 | % | (9,668 | ) | -6 | % | (21,142 | ) | 219 | % | ||||||||||||
| Depreciation expense | (24,981 | ) | -14 | % | (24,981 | ) | -14 | % | — | 0 | % | |||||||||||||
| Net Loss | $ | (146,297 | ) | -83 | % | $ | (185,289 | ) | -106 | % | $ | 38,992 | -21 | % | ||||||||||
Revenues for the nine month period ended July 31, 2021 were $176,388 compared to revenues of $174,048 for the nine month period ended July 31, 2020. The increase in revenue is attributable to HouseWrap sales. HousWrap sales for the nine month period ended July 31, 2021 was $126,713. Compared to sales of $121,652 for the comparable period ended July 31, 2020. We believe our HouseWrap sales continue to be adversely affected by the COVID pandemic as many contractors could not access other building materials on account of supply chain bottlenecks. See Note 13 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment products sales.
Our selling, general and administrative expenses were $251,017 for the nine month period ended July 31, 2021 compared to $246,857 7for the nine month period ended July 31, 2020. Professional fees for the nine month period ended July 31, 2021 were $37,485 compared to $21,050 for the nine month period ended July 31, 2020. The majority of our professional fees relate to the legal fees incurred in connection to the FTC matter. We expect our professional fees to decrease going forward.
| - 14 - |
INNOVATIVE DESIGNS, INC.
Liquidity and Capital Resources
During the three month period ended July 31, 2021, we funded our operations from revenues from sales, and the sale of our common stock totaling $60,000.
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 financial resources available to the Company, finding a suitable facility and bringing technical personal 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. The Company will produce INSULTEX under its own brand name. See Note 10 of the Notes to the Condensed Financial Statements.
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 Legal Proceedings set forth in Part I Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
ITEM 1A Risk Factors
See Risk factors set forth in in Part I Item 1A of the Company’s Annual report on Form 10-K for the fiscal year ended October 31, 2020.
| - 15 - |
INNOVATIVE DESIGNS, INC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
See Part II Item 5 of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
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 three month period ended July 31, 2021, our principle 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 |
| 31.2 | 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 |
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 24, 2021 | by: | /s/ Joseph Riccelli |
| Joseph Riccelli, Chief Executive Officer | ||
| and Chief Financial Officer |
- 17 -