Innovative Designs Inc 10-Q for FY2023 Q3
Innovative Designs Inc (IVDN)
About this 10-Q
Innovative Designs Inc filed this 10-Q on September 25, 2023, covering the quarter ended July 31, 2023 (FY2023 Q3).
Headline figures
Quarter ended July 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $124.65K
- down 7.7% from $135.05K a year earlier
- Net loss
- $83.96K
- compared with net income of $212.36K a year earlier
- Diluted EPS
- -$0.00
- compared with $0.01 a year earlier
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.
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 ☐ No
As of September 22, 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 July 31, 2023
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, 2023 (UNAUDITED) AND OCTOBER 31, 2022 |
| July 31, 2023 | October 31, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | |||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| 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 | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Current portion of note payable | ||||||||
| Accrued interest of stockholder loans | ||||||||
| Current portion of stockholder loans | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES: | ||||||||
| Long-term portion of note payable | ||||||||
| Long-term portion of stockholder loans | ||||||||
| Total long-term 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 | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
-3-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED STATEMENTS OF OPERATIONS | |
| THREE AND NINE MONTHS ENDED JULY 31, 2023 AND 2022 (UNAUDITED) |
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUES, net | $ | $ | $ | $ | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Miscellaneous income (expense) | ||||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Depreciation | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| 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 - 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.
-4-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | |
THREE AND NINE MONTHS ENDED JULY 31, 2023 AND 2022 (UNAUDITED) |
| Common Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||
| Shares | Amount | To Be Issued | Capital | Deficit | Total | |||||||||||||||||||
| Balance at October 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at January 31, 2023 | ( | ) | ||||||||||||||||||||||
| Sale of stock | — | |||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at April 30, 2023 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at July 31, 2023 | ( | ) | ||||||||||||||||||||||
| Balance at October 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net income (loss) | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at January 31, 2022 | ( | ) | ||||||||||||||||||||||
| Sale of stock | ||||||||||||||||||||||||
| Shares issued for services | ||||||||||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance at April 30, 2022 | ( | ) | ||||||||||||||||||||||
| Sale of stock | — | |||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||
| Net income (loss) | — | |||||||||||||||||||||||
| Balance at July 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
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 (UNAUDITED) |
| Nine Months Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Bad debt expense | ||||||||
| 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 | ( |
) | ||||||
| Receivable due | ( |
) | ||||||
| Increase (decrease) from changes in: | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued interest expense | ( |
) | ||||||
| Net cash provided by (used in) operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equpment | ( |
) | ||||||
| Deposits on equipment | ( |
) | ( |
) | ||||
| Proceeds from sale of equipment | ||||||||
| Net cash provided by (used in) investing activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of stock | ||||||||
| Payments on shareholder advances | ( |
) | ( |
) | ||||
| Payments on lease liability | ( |
) | ||||||
| Proceeds on notes payable | ||||||||
| Payments on notes payable | ( |
) | ( |
) | ||||
| Net cash provided by (used in) financing activities | ( |
) | ||||||
| NET INCREASE (DECREASE) IN CASH | ( |
) | ( |
) | ||||
| CASH, BEGINNING OF YEAR | ||||||||
| CASH, END OF THE PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash financing activities - common stock issued for services | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
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INNOVATIVE DESIGNS, INC.
NOTES TO FINANCIAL STATEMENTS
| 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 (the “Company”) financial position as of July 31, 2023, 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, 2023 and 2022.
The financial statements included in the Form 10-Q (the “Form”) 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 Company’s annual report on Form 10-K for the fiscal year ended October 31, 2022. The results of operations for the three and nine month periods ended July 31, 2023 and 2022 are not necessarily indicative of operating results for the full year.
| 2. | 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 ($
| 3. | ACCOUNTS RECEIVABLE |
Accounts 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. There
were
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| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| 4. | OPENING AND CLOSING BALANCE OF RECEIVABLES |
The opening balance of accounts
receivable was $
| 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 manufacturing of its Artic Armor, hunting and swimming line of
apparel. The Company has booked a reserve against apparel
inventory as of
July 31, 2023
and October 31,
2022 of $
| 6. | WARRANTIES |
The Company provides a ten-year limited warranty covering defects in workmanship. These warranties are included in the contract and do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications. The Company does not consider these assurance-type warranties to be separate performance obligations.
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 $
| 8. | STOCKHOLDER LOANS |
Stockholder
loans to the
Company, including
accrued interest totaled
$
-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 contracts should be combined and accounted for as a single contract and whether a combined 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 combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. Contracts are considered to contain a single performance obligation if the promise to transfer individual goods or services is not separately identifiable from other promises in the contracts.
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.
| 10. | EARNINGS PER SHARE |
The Company calculates net
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
| 11. | INCOME TAXES |
The Company accounts for income taxes in accordance with FASB 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.
-9-
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| 12. | 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 $
| 13. | COMMON STOCK |
During the nine month period
ended July 31, 2023, the Company sold shares of common stock
to four investors
for total proceeds
of $
During the nine month period
ended July 31, 2022, the Company sold shares of common stock
to seven investors
for total proceeds
of $
| 14. | 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 three
quarters ended July 31, 2023 total $
-10-
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
Total overall
deposits on equipment
as of July
31, 2023 and
2022 were $
| 15. | LEASE |
FASB
ASC Topic
842, “Leases”, establishes
a right of
use (“ROU”) model
that requires a
lessee to recognize a ROU asset and lease liability on the condensed balance sheets. ROU assets and
lease liabilities are
recognized at the
commencement date based
on the present
value of lease payments over the lease term. ROU assets are reduced each period
by an amount equal to the
difference between the
lease expense and
the amount of
interest expense on
the lease liability,
using the effective
interest method. The Company
used the average
commercial real estate interest rate of
| 16. | SEGMENT INFORMATION |
The Company has organized operations into two segments based on an internal management reporting process that provides segment information for purposes of making financial decisions and allocating resources.
The following tables present the Company’s business segment information for the nine month period ended July 31, 2023 and 2023:
| Schedule of business segment information | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Apparel | $ | $ | ||||||
| House wrap | ||||||||
| Total revenues | $ | $ | ||||||
| Assets: | ||||||||
| Apparel | $ | $ | ||||||
| House wrap | ||||||||
| Total assets | $ | |||||||
| Depreciation: | ||||||||
| Apparel | $ | $ | ||||||
| House wrap | ||||||||
| Total depreciation | $ | $ | ||||||
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| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| 17. | LEGAL PROCEEDINGS |
On November 4, 2016, the Federal 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 substantiation of claims made by the Company regarding the R value and energy efficiency of its INSULTEX house wrap products. The complaint asks to redress a rescission of revenue the Company received from the sale of the 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 U.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 FTC 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 INSULTEX 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 $
| 18. | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events in accordance with ASC Topic 855, “Subsequent Events”, through September 20, 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.
-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, 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, 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 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.
-13-
INNOVATIVE DESIGNS, INC.
Results of Operations
Comparison of the Three Month Period Ended July 31, 2023 with the Three Month Period Ended July 31, 2022.
| Three Month Period Ended 31-Jul 2023 | % of Sales | Three Month Period Ended 31-Jul 2022 | % of Sales | Increase (Decrease) | % Change | |||||||||||||||||||
| REVENUE - NET | $ | 124,650.00 | $ | 135,048.00 | $ | -10,398.00 | -8.3 | % | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Cost of sales | $ | 76,480.00 | 61.4 | % | $ | 56,224.00 | 41.6 | % | $ | 20,256.00 | 26.5 | % | ||||||||||||
| 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) | ||||||||||||||||||||||||
| Miscellaneous Income (expense) | $ | 0.00 | $ | 260,000.00 | 100.0 | % | $ | -260,000.00 | 100.0 | % | ||||||||||||||
| Interest expense | $ | -6,421.00 | -5.2 | % | $ | -10,710.00 | -7.9 | % | $ | 4,289.00 | -66.8 | % | ||||||||||||
| 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, 2023 were $124,650 compared to revenues of $135,048 for the three month period ended July 31, 2021. See Note 16 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-month period ended July 31, 2023, was ($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 $124,944 for the three month period ended July 31, 2023 compared to $115,384 for the three month period ended July 31, 2022.
-14-
INNOVATIVE DESIGNS, INC.
Comparison of the Nine Month Period Ended July 31, 2023, with the Nine Month Period Ended July 31, 2022.
The following table shows a comparison of the results of operations between the nine month periods ended July 31, 2023 and July 31, 2022:
| 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, 2023 were $223,546 compared to revenues of $235,164 for the nine month period ended July 31, 2021. The decrease is caused, by the decrease in our apparel sales and the sales in our House 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 16 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment product sales. Our net loss for the nine month period ended July 31, 2023 was ($255,649).
Our selling, general and administrative expenses were $106,839 for the nine months ended July 31, 2023, compared to $109,884 for the nine month period ended July 31, 2022. Professional fees for the period were approximately $63,000. Salaries were approximately $107,000, travel expenses were approximately $20,000 and rent expense was $21,000.
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INNOVATIVE DESIGNS, INC.
Liquidity and Capital Resources
During the period ended July 31, 2023, we funded our operations from revenues and from sales of our securities.
Subsequent to the period we raised $60,000 from the sale of our 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 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. 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 Insultex under its own brand name. See Note 14 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 and we expect delivery of the equipment within the next few weeks. After such testing is complete the certification process can begin. We have paid approximately $39,000 as of 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 Insultex would be delayed.
-16-
INNOVATIVE DESIGNS, INC.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
See Note 17 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.
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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, 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.
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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-
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 25, 2023 | By: /s/ Joseph Riccelli |
| Joseph Riccelli, Chief Executive Officer | |
| and Chief Financial Officer |
-20-
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: September 25, 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: September 25, 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 July 31, 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: September 25, 2023 | By:/s/ Joseph Riccelli |
| Joseph Riccelli | |
| Chief Executive Officer, Chief | |
| Financial Officer, Principal | |
| Accounting Officer and Director |
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 July 31, 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: | September 25, 2023 | By: | /s/ Joseph Riccelli |
| Joseph Riccelli | |||
| Chief Executive Officer, Chief | |||
| Financial Officer, Principal | |||
| Accounting Officer | |||