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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 9/27/23 Innovative Designs Inc. 10-Q/A 7/31/23 53:2.6M Electro Filings LLC/FA |
Document/Exhibit Description Pages Size
1: 10-Q/A Amendment to Quarterly Report HTML 748K
2: EX-31.1 Certification -- §302 - SOA'02 HTML 19K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 19K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 16K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 16K
11: R1 Cover HTML 64K
12: R2 Condensed Balance Sheets (Unaudited) HTML 111K
13: R3 Condensed Balance Sheets (Unaudited) HTML 30K
(Parenthetical)
14: R4 Condensed Statements of Operations (Unaudited) HTML 84K
15: R5 Condensed Statements of Changes in Stockholders' HTML 70K
Equity (Unaudited)
16: R6 Condensed Statements of Cash Flows (Unaudited) HTML 92K
17: R7 Basis of Presentation HTML 20K
18: R8 Going Concern HTML 22K
19: R9 Accounts Receivable HTML 20K
20: R10 Opening and Closing Balance of Receivables HTML 19K
21: R11 Inventory HTML 20K
22: R12 Warranties HTML 19K
23: R13 Note Payable HTML 22K
24: R14 Stockholder Loans HTML 19K
25: R15 Revenues HTML 24K
26: R16 Earnings Per Share HTML 21K
27: R17 Income Taxes HTML 23K
28: R18 Shipping and Handling Costs HTML 19K
29: R19 Common Stock HTML 29K
30: R20 Deposits on Equipment HTML 26K
31: R21 Lease HTML 22K
32: R22 Segment Information HTML 46K
33: R23 Legal Proceedings HTML 23K
34: R24 Subsequent Events HTML 19K
35: R25 Segment Information (Tables) HTML 40K
36: R26 Going Concern (Details Narrative) HTML 35K
37: R27 Accounts Receivable (Details Narrative) HTML 17K
38: R28 Opening and Closing Balance of Receivables HTML 20K
(Details Narrative)
39: R29 Inventory (Details Narrative) HTML 17K
40: R30 Note Payable (Details Narrative) HTML 20K
41: R31 Stockholder Loans (Details Narrative) HTML 19K
42: R32 Earnings Per Share (Details Narrative) HTML 17K
43: R33 Shipping and Handling Costs (Details Narrative) HTML 16K
44: R34 Common Stock (Details Narrative) HTML 52K
45: R35 Deposits on Equipment (Details Narrative) HTML 41K
46: R36 Lease (Details Narrative) HTML 19K
47: R37 Segment Information (Details) HTML 29K
48: R38 Legal Proceedings (Details Narrative) HTML 17K
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49: XML XBRL Instance -- e5065_10qa_htm XML 456K
50: EXCEL IDEA Workbook of Financial Report Info XLSX 58K
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52: JSON XBRL Instance as JSON Data -- MetaLinks 240± 326K
53: ZIP XBRL Zipped Folder -- 0001731122-23-001734-xbrl Zip 120K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
| i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13l OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended i July 31, 2023
OR
| i ☐ | 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: i 000-51791
(Exact Name of Registrant as Specified in its Charter)
| i Delaware | i 03-0465528 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
i Pittsburgh, i Pennsylvania i 15223
(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). i Yes ☒ 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 ☐ |
| i Non-accelerated Filer ☐ | Smaller reporting company i ☒ |
(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 ☐ i 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 ☒
Explanatory Note
i Please note the Company is filing this form 10-Q/A to correct an inadvertent tag of shell status as being true instead of false in its Ixbrl tagging.
No other changes were made.
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
-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 | $ | i 178,817 | i 263,293 | |||||
| Accounts receivable, net | i 82 | i 11,203 | ||||||
| Inventory, net | i 588,874 | i 494,580 | ||||||
| Total current assets | i 767,773 | i 769,076 | ||||||
| PROPERTY AND EQUIPMENT, net | i 24,247 | i 5,960 | ||||||
| OTHER ASSETS: | ||||||||
| Inventory on consignment | i — | i 1,625 | ||||||
| Deposits on inventory | i — | i 80,000 | ||||||
| Advance to employees | i 13,200 | i 13,200 | ||||||
| Deposits on equipment | i 719,944 | i 607,370 | ||||||
| Total other assets | i 733,144 | i 702,195 | ||||||
| TOTAL | $ | i 1,525,164 | $ | i 1,477,231 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | i 275,487 | $ | i 162,063 | ||||
| Current portion of note payable | i 20,265 | i 20,128 | ||||||
| Accrued interest of stockholder loans | i 54,073 | i 46,345 | ||||||
| Current portion of stockholder loans | i 71,668 | i 110,631 | ||||||
| Accrued expenses | i 3,778 | i 3,778 | ||||||
| Total current liabilities | i 425,271 | i 342,945 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Long-term portion of note payable | i 49,530 | i 64,547 | ||||||
| Long-term portion of stockholder loans | i — | i 66,667 | ||||||
| Total long-term liabilities | i 49,530 | i 131,214 | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ par value, | ||||||||
| shares authorized | i — | i — | ||||||
| Common stock, $ par value, shares authorized, and and issued and outstanding | i 3,612 | i 3,467 | ||||||
| Common stock to be issued | — | — | ||||||
| Additional paid-in capital | i 11,637,980 | i 11,335,184 | ||||||
| Accumulated deficit | ( i 10,591,228 | ) | ( i 10,335,579 | ) | ||||
| Total stockholders’ equity | i 1,050,363 | i 1,003,072 | ||||||
| TOTAL | $ | i 1,525,164 | $ | i 1,477,231 | ||||
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 | $ | i 124,650 | $ | i 135,048 | $ | i 223,546 | $ | i 235,164 | ||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Cost of sales | i 76,480 | i 56,224 | i 106,839 | i 109,884 | ||||||||||||
| Selling, general and administrative expenses | i 124,944 | i 115,384 | i 359,917 | i 545,212 | ||||||||||||
| Total operating expenses | i 201,424 | i 171,608 | i 466,756 | i 655,096 | ||||||||||||
| Income (loss) from operations | ( i 76,774 | ) | ( i 36,560 | ) | ( i 243,210 | ) | ( i 419,932 | ) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Miscellaneous income (expense) | i — | i 260,000 | i 7,519 | i 260,000 | ||||||||||||
| Interest expense | ( i 6,421 | ) | ( i 10,710 | ) | ( i 17,652 | ) | ( i 34,450 | ) | ||||||||
| Depreciation | ( i 769 | ) | ( i 373 | ) | ( i 2,306 | ) | ( i 1,118 | ) | ||||||||
| Total other income (expense) | ( i 7,190 | ) | i 248,917 | ( i 12,439 | ) | i 224,432 | ||||||||||
| Net income (loss) | $ | ( i 83,964 | ) | $ | i 212,357 | $ | ( i 255,649 | ) | $ | ( i 195,500 | ) | |||||
| PER SHARE INFORMATION - UNDILUTED: | ||||||||||||||||
| Net income (loss) per common share | ( i 0.002 | ) | i 0.006 | $ | ( i 0.007 | ) | $ | ( i 0.006 | ) | |||||||
| Weighted average number of common shares outstanding | i 35,656,821 | i 33,845,560 | i 35,339,663 | i 33,845,560 | ||||||||||||
| PER SHARE INFORMATION - DILUTED: | ||||||||||||||||
| Net income (loss) per common share | ( i 0.002 | ) | i 0.006 | $ | ( i 0.007 | ) | $ | ( i 0.006 | ) | |||||||
| Weighted average number of common shares outstanding | i 36,633,430 | i 34,902,893 | i 36,153,406 | i 34,902,893 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
-4-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | |
THREE AND NINE MONTHS ENDED JULY 31, 2023 AND 2022 (UNAUDITED) |
| Common Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||
| Shares | Amount | To Be Issued | Capital | Deficit | Total | |||||||||||||||||||
| Balance at October 31, 2022 | i 34,650,560 | $ | i 3,467 | $ | — | $ | i 11,335,184 | $ | ( i 10,335,579 | ) | $ | i 1,003,072 | ||||||||||||
| Sale of stock | i 500,000 | i 50 | — | i 109,950 | — | i 110,000 | ||||||||||||||||||
| Shares issued for services | i 27,000 | i 3 | — | i 5,937 | — | i 5,940 | ||||||||||||||||||
| Net income (loss) | — | — | — | — | ( i 59,094 | ) | ( i 59,094 | ) | ||||||||||||||||
| Balance at January 31, 2023 | i 35,177,560 | i 3,520 | — | i 11,451,071 | ( i 10,394,673 | ) | i 1,059,918 | |||||||||||||||||
| Sale of stock | — | — | — | — | — | — | ||||||||||||||||||
| Shares issued for services | — | — | — | — | — | — | ||||||||||||||||||
| Net income (loss) | — | — | — | — | ( i 112,591 | ) | ( i 112,591 | ) | ||||||||||||||||
| Balance at April 30, 2023 | i 35,177,560 | i 3,520 | — | i 11,451,071 | ( i 10,507,264 | ) | i 947,327 | |||||||||||||||||
| Sale of stock | i 695,000 | i 70 | — | i 140,931 | — | i 141,000 | ||||||||||||||||||
| Exercise of warrants | i 40,000 | i 4 | — | i 9,996 | — | i 10,000 | ||||||||||||||||||
| Shares issued for services | i 180,000 | i 18 | — | i 35,982 | — | i 36,000 | ||||||||||||||||||
| Net income (loss) | — | — | — | — | ( i 83,964 | ) | ( i 83,964 | ) | ||||||||||||||||
| Balance at July 31, 2023 | i 36,092,560 | i 3,612 | — | i 11,637,980 | ( i 10,591,228 | ) | i 1,050,363 | |||||||||||||||||
| Balance at October 31, 2021 | i 33,315,560 | $ | i 3,333 | $ | — | $ | i 11,039,118 | $ | ( i 10,110,090 | ) | $ | i 932,361 | ||||||||||||
| Sale of stock | i 340,000 | i 34 | — | i 60,966 | — | i 61,000 | ||||||||||||||||||
| Shares issued for services | i 50,000 | i 5 | — | i 9,995 | — | i 10,000 | ||||||||||||||||||
| Net income (loss) | — | — | — | — | ( i 132,040 | ) | ( i 132,040 | ) | ||||||||||||||||
| Balance at January 31, 2022 | i 33,705,560 | i 3,372 | — | i 11,110,079 | ( i 10,242,130 | ) | i 871,321 | |||||||||||||||||
| Sale of stock | i 120,000 | i 12 | — | i 25,188 | — | i 25,200 | ||||||||||||||||||
| Shares issued for services | i 700,000 | i 70 | — | i 174,930 | — | i 175,000 | ||||||||||||||||||
| Net income (loss) | — | — | ( i 275,816 | ) | ( i 275,816 | ) | ||||||||||||||||||
| Balance at April 30, 2022 | i 34,525,560 | i 3,454 | — | i 11,310,197 | ( i 10,517,946 | ) | i 795,705 | |||||||||||||||||
| Sale of stock | — | — | — | — | — | — | ||||||||||||||||||
| Shares issued for services | — | — | — | — | — | — | ||||||||||||||||||
| Net income (loss) | — | — | — | — | i 212,357 | i 212,357 | ||||||||||||||||||
| Balance at July 31, 2022 | i 34,525,560 | $ | i 3,454 | $ | — | $ | i 11,310,197 | $ | ( i 10,305,589 | ) | $ | i 1,008,062 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
-5-
| INNOVATIVE DESIGNS, INC. | |
| CONDENSED STATEMENTS OF CASH FLOWS | |
NINE MONTHS ENDED JULY 31, 2023 AND 2022 (UNAUDITED) |
| Nine Months Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( i 255,649 | ) | $ | ( i 195,500 | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Bad debt expense | — | — | ||||||
| Common stock issued for services | i 41,940 | i 185,000 | ||||||
| Depreciation | i 2,306 | i 1,118 | ||||||
| Amortization of right of use asset | — | i 30,510 | ||||||
| Gain on sale of asset | ( i 7,519 | ) | — | |||||
| (Increase) decrease from changes in: | ||||||||
| Accounts receivable | i 11,121 | ( i 8,412 | ) | |||||
| Inventory | ( i 92,669 | ) | i 11,104 | |||||
| Deposits on inventory | i 80,000 | ( i 40,000 | ) | |||||
| Receivable due | — | ( i 260,000 | ) | |||||
| Increase (decrease) from changes in: | ||||||||
| Accounts payable and accrued expenses | i 113,424 | i 45,826 | ||||||
| Accrued interest expense | i 7,728 | ( i 2,640 | ) | |||||
| Net cash provided by (used in) operating activities | ( i 99,318 | ) | ( i 232,994 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equpment | ( i 20,593 | ) | i — | |||||
| Deposits on equipment | ( i 112,574 | ) | ( i 7,370 | ) | ||||
| Proceeds from sale of equipment | i 7,519 | i — | ||||||
| Net cash provided by (used in) investing activities | ( i 125,648 | ) | ( i 7,370 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of stock | i 261,000 | i 86,200 | ||||||
| Payments on shareholder advances | ( i 105,630 | ) | ( i 135,667 | ) | ||||
| Payments on lease liability | i — | ( i 30,510 | ) | |||||
| Proceeds on notes payable | — | i 1,818 | ||||||
| Payments on notes payable | ( i 14,880 | ) | ( i 2,418 | ) | ||||
| Net cash provided by (used in) financing activities | i 140,490 | ( i 80,577 | ) | |||||
| NET INCREASE (DECREASE) IN CASH | ( i 84,476 | ) | ( i 320,941 | ) | ||||
| CASH, BEGINNING OF YEAR | i 263,293 | i 480,451 | ||||||
| CASH, END OF THE PERIOD | $ | i 178,817 | $ | i 159,510 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | i 9,924 | $ | i 37,090 | ||||
| Non-cash financing activities - common stock issued for services | $ | i 41,940 | $ | i 185,000 | ||||
The accompanying notes are an integral part of these condensed financial statements.
-6-
INNOVATIVE DESIGNS, INC.
i
| 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.
i
| 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 ($ i 255,649) and a negative cash flow of ($ i 84,476) for the nine month period ended July
31, 2023. In addition, the Company has an accumulated deficit of ($ i 10,591,228). Management’s plans include cash receipts through sales, sales of Company stock, and borrowings from private parties. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern./ i
| 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 i no balances over 90 days as July 31,
2023. As of October 31, 2022, balances over 90 days totaled $ i 5,860 which have been recorded as an allowance.
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
| 4. | OPENING AND CLOSING BALANCE OF RECEIVABLES |
The opening balance of accounts receivable was $ i 11,203 which was net of the allowance for doubtful accounts of $ i 5,860. The ending balance of accounts receivable for the nine month period ended July 31, 2023 was $ i 82. There was not an allowance for doubtful accounts at the end of the period.
/ i
| 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 $ i i 75,468 / . Management has determined that no allowance is currently necessary on the house wrap inventory. Management will continue to evaluate its obsolete inventory reserve throughout the year and make adjustments as needed./ i
| 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.
i
| 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 $ i 1,820 with the balance due and payable in November 2026, at an interest rate of i 2.60%.
/ i
| 8. | STOCKHOLDER LOANS |
Stockholder loans to the Company, including accrued interest totaled $ i 125,741 and $ i 226,793 as of July 31, 2023 and 2022, respectively. The loans bear interest between i 10% and i 12%.
| 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.
i
| 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 i 954,000 and i 994,000 as of July 31,
2023 and 2022, respectively. The Company has calculated diluted earnings per share utilizing the outstanding stock warrants and convertible debt./ i
| 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.
| 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 $ i 27,070 and $ i 21,199 for the nine month periods ended July 31, 2023 and 2022, respectively.
/ i
| 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 $ i 131,000, one investor exercised i 40,000 warrants for stock for total proceeds of $ i 10,000, and i 230,000 shares were issued to two investors for services. The stock was issued between $ and $ per share.
During the nine month period ended July 31, 2022, the Company sold shares of common stock to seven investors for total proceeds of $ i 86,200 and issued shares to eight individuals for services. The stock was issued between $ and $ per share.
/ i
| 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 $ i 700,000 and to be made in four installments. i The first installment of $300,000 is to be made at the execution of the agreement. The second installment of $200,000 is to be made when the machinery and equipment is ready to be shipped to the United States. The third installment of $100,000 is to be made once the machinery and equipment is producing INSULTEX, and the fourth and final installment of $100,000 is to be made after the first commercial production run of INSULTEX is completed. As of October 31, 2018, the Company has made payments of $ i 500,000 in accordance with the agreement and made a $ i 100,000 pre-payment as the machine is not yet producing INSULTEX. Additionally, the Company has incurred $ i 17,000 of additional expenses related to shipping, site improvements and installation of the equipment. During 2019, the Company determined the shipping costs of $ i 17,000 were impaired and these costs were written off the balance due. In February 2023, the Company made an additional prepayment of $ i 10,000 on the equipment and owes an additional $ i 73,000 for the installation of the equipment.
During the fiscal year ending October 31, 2022, the Company made deposits on a separate piece of equipment of $ i 7,370. During the three quarters ended July 31, 2023, the Company made additional deposits of $ i 29,574 on this piece of equipment. Total deposits for this piece equipment as of July 31, 2023 total $ i 36,944.
Total deposits made for the three quarters ended July 31, 2023 total $ i 112,574.
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
Total overall deposits on equipment as of July
31, 2023 and 2022 were $ i 719,944 and $ i 607,370, respectively./ i
| 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 i 5.50% to calculate the present value of the lease. The Company recognizes lease expense on a straight-line basis over the leased term on the condensed statements of operations.
i The Company entered into a lease for office space at the time the Company was formed through June 2022. Effective July 2022, the Company is leasing the office space on a month to month basis. As a result, the Company has elected to apply the short-term lease exemption to its lease of the facilities and therefore has not recorded a ROU asset and related lease liability.
/ i
| 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:
i /
| INNOVATIVE DESIGNS, INC. | |
| NOTES TO FINANCIAL STATEMENTS | |
/ i
| 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 $ i 260,000 to resolve all such claims. The parties agreed to waive all rights to appeal or otherwise challenge or contest the validity of the Order.
/ i
| 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.
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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.
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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.
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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.
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INNOVATIVE DESIGNS, INC.
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.
| * | 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 |
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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 27, 2023 | By: /s/ Joseph Riccelli |
| Joseph Riccelli, Chief Executive Officer | |
| and Chief Financial Officer |
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| This ‘10-Q/A’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| Filed on: | 9/27/23 | |||
| 9/22/23 | ||||
| 9/20/23 | ||||
| 9/6/23 | NT 10-Q | |||
| 8/24/23 | ||||
| 8/16/23 | ||||
| For Period end: | 7/31/23 | 10-Q, NT 10-Q | ||
| 6/23/23 | ||||
| 6/2/23 | ||||
| 5/17/23 | ||||
| 4/30/23 | 10-Q, NT 10-Q | |||
| 4/17/23 | ||||
| 1/31/23 | 10-Q, NT 10-Q | |||
| 10/31/22 | 10-K, NT 10-K | |||
| 7/31/22 | 10-Q | |||
| 6/29/22 | ||||
| 4/30/22 | 10-Q, NT 10-Q | |||
| 1/31/22 | 10-Q | |||
| 10/31/21 | 10-K, NT 10-K | |||
| 7/31/21 | 10-Q | |||
| 7/22/21 | 8-K | |||
| 3/24/21 | ||||
| 11/23/20 | 8-K | |||
| 9/24/20 | 8-K | |||
| 2/14/20 | ||||
| 10/31/18 | 10-K, 10-K/A, NT 10-K | |||
| 10/31/17 | 10-K | |||
| 11/4/16 | 8-K | |||
| 7/12/15 | ||||
| 2/12/15 | 10-K | |||
| 3/11/03 | SB-2 | |||
| 6/25/02 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/12/15 Innovative Designs Inc. 10-K 10/31/14 58:6.2M Toppan Merrill/FA 3/11/03 Innovative Designs Inc. SB-2 10:348K Edgar Miser Inc./FA |