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A UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13l OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended January 31, 2023

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from _______ to ________.

 

Commission File Number: 000-51791

 

INNOVATIVE DESIGNS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware 03-0465528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

 

124 Cherry Street

Pittsburgh, Pennsylvania 15223

(Address of Principal Executive Offices, Zip Code)

 

(412) 799-0350

(Issuer’s Phone Number Including Area Code)

 

N/A 

(Former Name or Former Address, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES ☐ 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). YES [X] 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 ☐
   
Non-accelerated Filer ☐ Smaller reporting company ☒

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

 

As of March 13, 2023, there were 35,262,560 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 January 31, 2023

 

  Part I -- Financial Information Page No.
     
Item 1. Condensed Financial Statements (Unaudited)  
     
  Condensed Balance Sheets as of January 31, 2023 (Unaudited) And October 31, 2022 1
     
  Condensed Statements of Operations for the Three Month Periods Ended January 31, 2023 and 2022 (Unaudited) 3
     
 

Condensed Statements of Changes in Stockholders’ Equity as of January 31, 2023 (Unaudited) and October 31, 2022

 4
     
 

Condensed Statements of Cash Flows for the Three Month Periods Ended January 31, 2023 and (Unaudited) 2022

 5
     
  Notes to the Condensed Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
     
  Part II -- Other Information  14
     
Items 1, 2, 3, 4 and 4T. 14
     
Item 6. Exhibits 15

 

 

 

  

INNOVATIVE DESIGNS, INC.
CONDENSED BALANCE SHEETS
JANUARY 31, 2023 (UNAUDITED) AND OCTOBER 31, 2022

 

           
   January 31, 2023  October 31, 2022
ASSETS          
CURRENT ASSETS          
Cash  $169,395   $263,293 
Accounts receivable - net of allowance for doubtful accounts of $-0- and $5,860, respectively   8,067    11,203 
Inventory - net of obsolete inventory reserve of $75,468   643,329    494,580 
           
Total current assets   820,791    769,076 
           
PROPERTY AND EQUIPMENT - NET   25,784    5,960 
           
OTHER ASSETS          
Inventory on consignment   —    1,625 
Deposits on inventory   —    80,000 
Advance to employees   13,200    13,200 
Deposits on equipment   607,370    607,370 
Total other assets   620,570    702,195 
           
TOTAL ASSETS  $1,467,145   $1,477,231 

 

The accompanying notes are an integral part of these condensed financial statements.

 

1

 

 

INNOVATIVE DESIGNS, INC.
CONDENSED BALANCE SHEETS
JANUARY 31, 2023 (UNAUDITED) AND OCTOBER 31, 2022

 

   January 31, 2023  October 31, 2022
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES          
Accounts payable  $176,152   $162,063 
Current portion of notes payable   20,305    20,128 
Accrued interest expense   50,992    46,345 
Due to stockholders   96,458    110,631 
Accrued expenses   3,778    3,778 
Total current liabilities   347,685    342,945 
           
LONG-TERM LIABILITIES          
Long-term portion of due to stockholders   —    66,667 
Long-term portion of notes payable   59,542    64,547 
Total long-term liabilities   59,542    131,214 
           
TOTAL LIABILITIES   407,227    474,159 
           
STOCKHOLDERS' EQUITY          
Preferred stock, $0.0001 par value, 25,000,000 shares authorized   —    — 
Common stock, $0.0001 par value, 100,800,000 shares authorized, and 35,177,560 and 34,650,560 issued and outstanding   3,520    3,467 
Additional paid-in capital   11,451,071    11,335,184 
Accumulated deficit   (10,394,673)   (10,335,579)
Total stockholders' equity   1,059,918    1,003,072 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $1,467,145   $1,477,231 

 

The accompanying notes are an integral part of these condensed financial statements.

 

2

 

 

INNOVATIVE DESIGNS, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS PERIODS ENDED JANURARY 31, 2023 AND 2022 (UNAUDITED)

 

           
   Three Months Ended January 31,
   2023  2022
       
REVENUES - NET  $71,647   $62,400 
           
OPERATING EXPENSES:          
Cost of sales   17,010    32,346 
Selling, general and administrative expenses   114,651    150,618 
Total Operating Expenses   131,661    182,964 
           
LOSS FROM OPERATIONS   (60,014)   (120,564)
           
OTHER INCOME (EXPENSE)          
Miscellaneous income (expense)   7,519    — 
Interest expense   (6,599)   (11,476)
Total other income (expense)   920    (11,476)
           
NET LOSS  $(59,094)  $(132,040)
           
PER SHARE INFORMATION - BASIC          
Net Loss Per Common Share  $(0.002)  $(0.004)
           
Weighted Average Number of Common Shares Outstanding   34,914,060    33,510,560 
           
PER SHARE INFORMATION - DILUTED          
Net Loss Per Common Share  $(0.002)  $(0.004)
           
Weighted Average Number of Common Shares Outstanding   35,908,060    34,884,560 

 

The accompanying notes are an integral part of these condensed financial statements.

 

3

 

 

INNOVATIVE DESIGNS, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS PERIODS ENDED JANUARY 31, 2023 AND 2022 (UNAUDITED)

 

                               
   Common Stock  Common Stock To be  Additional Paid-in  Accumulated   
   Shares  Amount  Issued  Capital  Deficit  Total
                   
Balance at October 31, 2022   34,650,560   $3,467   $—   $11,335,184   $(10,335,579)  $1,003,072 
                               
Sale of stock   500,000    50    —    109,950    —    110,000 
                               
Shares issued for services   27,000    3         5,937         5,940 
                               
Net loss   —    —    —    —    (59,094)   (59,094)
                               
Balance at January 31, 2023   35,177,560    3,520    —    11,451,071    (10,394,673)   1,059,918 
                               
Balance at October 31, 2021   33,315,560    3,333    —    11,039,118    (10,110,090)   932,361 
                               
Sale of stock   340,000    34    —    60,966    —    61,000 
                               
Shares issued for services   50,000    5         9,995         10,000 
                               
Net loss   —    —    —    —    (132,040)   (132,040)
                               
 Balance at January 31, 2022   33,705,560    3,372    —    11,110,079    (10,242,130)   871,321 

 

The accompanying notes are an integral part of these condensed financial statements.

 

4

 

 

INNOVATIVE DESIGNS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 2023 AND 2022 (UNAUDITED)

 

           
   For the Three Month Periods
    Ended
   January 31, 2023  January 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(59,094)   (132,040)
Adjustments to reconcile net loss to net cash used in operating activities:          
Common stock issued for services   5,940    10,000 
Depreciation   769    373 
Amortization of right of use asset   —    10,031 
Bad debt        — 
Gain on sale of asset   (7,519)     
(Increase) decrease from changes in:          
Accounts receivable   3,136    (8,282)
Inventory   (147,124)   (5,686)
Deposits on inventory   80,000    (30,000)
Increase (decrease) from changes in:          
Accounts payable   14,089    9,672 
Lease liability   —    (10,031)
Accrued interest expense   4,647    (3,389)
Accrued expenses   —    (15,508)
Net cash used in operating activities   (105,156)   (174,860)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of equipment   (20,593)   — 
Gain on disposal of equipment   7,519    — 
Net cash used in investing activities   (13,074)   — 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from sale of stock   110,000    61,000 
Payments on stockholder advances   (80,840)   (76,666)
Payments on notes payable   (4,828)   — 
Net cash provided by financing activities   24,332    (15,666)
           
Net change in cash   (93,898)   (190,526)
           
CASH, BEGINNING OF PERIOD   263,293    480,451 
           
CASH, END OF THE PERIOD  $169,395   $289,925 
           
Supplemental disclosure of cash flow information:          
Cash paid during period for interest  $1,953   $14,865 
           
Non-cash investment activities - common stock issue for services  $5,940   $10,000 
           
Cash paid during period 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 Month Periods Ended January 31, 2023 and 2022 (Unaudited)

 

  NOTE 1. BASIS OF PRESENTATION

 

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments necessary to present fairly Innovative Designs, Inc.’s financial position as of January 31, 2023, the changes therein for the three periods then ended and the results of operations for the three periods ended January, 2023 and 2022.

 

The condensed financial statements included in the Form 10-Q are presented in accordance with the requirements of the Form and do not include all of the disclosures required by accounting principles generally accepted in the United States of America. For additional information, reference is made to the Innovative Designs, Inc.’s annual report on Form 10-K for the fiscal year ended October 31, 2022. The results of operations for the three periods ended January, 2023 and 2022 are not necessarily indicative of operating results for the full year.

 

  NOTE 2. RIGHT OF USE ASSETS AND LEASE LIABILITIES

 

During the quarter ended April 30, 2019, the Company implemented Accounting Standards Update 2016-02, leases. Under the new guidance, a lessee must record 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 as 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.

 

  NOTE 3. GOING CONCERN

 

These condensed 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 ($59,094) and a negative cash flow from operations of ($105,156) for the three month period ended January 31, 2023. In addition, the Company has an accumulated deficit of ($10,394,673). 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 condensed financial statements. These condensed 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.

 

  NOTE 4. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

 

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 $-0- and $5,860 January 31, 2023 and October 31, 2022, respectively. Management has applied an allowance on all balances in excess of 90 days.

 

6

 

 

INNOVATIVE DESIGNS, INC.

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Three Month Periods Ended January 31, 2023 and 2022 (Unaudited)

 

  NOTE 5. OPENING AND CLOSING BALANCES OF RECEIVABLES

 

The opening balance of accounts receivables was $11,203 which was net of the allowance for doubtful accounts of $5,860. The ending balance of accounts receivable for the three month period ending January 31, 2023 was $8,067. There was not an allowance for doubtful accounts at the end of the period.

 

  NOTE 6. INVENTORY

 

Inventory consists principally of purchased apparel inventory and House Wrap which is manufactured by the Company. Inventory is stated at the lower of cost or net realizable value on a first-in, first-out basis. The Company has discontinued the manufacturing of its hunting and swimming line of apparel. The Company has booked a reserve against apparel inventory at January 31, 2023 and October 31, 2022 of $75,468. Management has determined that no allowance is currently necessary on their House Wrap Inventory. Management will continue to evaluate its obsolete inventory reserve throughout the year and make adjustments as needed.

 

  NOTE 7. EARNINGS PER SHARE

 

The Company calculates net income (loss) per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 260 ”Earnings per Share”. Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted average number of common shares outstanding for the period. During the periods presented, the Company only has common stock outstanding. In 2021, the Company issued a convertible debt instrument. In addition, the Company also has stock warrants of 994,000 and 1,254,000 as of January 31, 2023 and 2022, respectively. The Company has calculated diluted earnings per share utilizing the outstanding stock warrants and convertible debt.

 

  NOTE 8. INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC Topic 740 ”Income Taxes”, which requires an asset and liability approach for financial reporting purposes.

 

Deferred income taxes are provided for differences between the tax bases of assets and liabilities and the financial reporting amounts at the end of the period, and for net operating loss and tax credit carryforwards available to offset future taxable income. Changes in enacted tax rates or laws result in adjustments to recorded deferred tax assets and liabilities in the periods in which the tax laws are enacted or tax rates are changed. The Company will continue to evaluate its income tax obligation throughout the year and will record a tax provision when it is necessary.

 

  NOTE 9. SHIPPING AND HANDLING COSTS

 

The Company pays shipping and handling costs on behalf of customers for purchased apparel merchandise. These costs are billed back to the customer through the billing invoice. The shipping and handling costs associated with merchandise ordered by the Company are included as part of inventory as these costs are allocated across the merchandise received. With House Wrap orders, the customer pays the shipping cost. The shipping and handling costs associated with customer orders was approximately $15,125 and $8,647 for the three month periods ended January 31, 2023 and 2022, respectively.

 

7

 

 

INNOVATIVE DESIGNS, INC.

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Three Month Periods Ended January 31, 2023 and 2022 (Unaudited) 

 

  NOTE 10. COMMON STOCK

 

During the three month period ended January 31, 2023, the Company sold 500,000 shares of common stock to one investor for total proceeds of $110,000 and issued 27,000 shares to one investor for services. The stock was issued at $0.22 per share.

 

During the three month period ended January 31, 2022, the Company sold 340,000 shares of common stock to five investors for total proceeds of $61,000 and issued 50,000 shares to one investor for services. The stock was issued between $0.17 and $0.25 per share.

 

  NOTE 11. DEPOSITS ON EQUIPMENT

 

On July 12, 2015, the Company reached an agreement with Ketut Jaya to purchase the machinery and equipment utilized to produce the INSULTEX material. The purchase price is $700,000 and to be made in four installments. 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 $500,000 in accordance with the agreement and made a $100,000 pre-payment as the machine is not yet producing INSULTEX. During 2019, the Company determined the shipping costs of $17,000 were impaired and these costs were written down.

 

During 2022, the company has made a separate deposit on a different piece of equipment of $7,370.

 

Total deposits on Equipment as of January 31, 2023 and January 31, 2022 were $607,370 and $600,000, respectively.

 

  NOTE 12.

RIGHT OF USE ASSETS

 

The Company entered lease at the time the Company was formed that is classified as right of use asset and lease liability. The lease for the Company’s office space is estimated to be through June 2022. In accordance with ASU 2016-02, the Company calculated the present value of the leases using the average commercial real estate interest rate of 5.50% at the commencement of the office lease. Effective July 2022, the Company is leasing the property on a month to month basis.

 

8

 

 

INNOVATIVE DESIGNS, INC.

 

 NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Three Month Periods Ended January 31, 2022 and 2021 (Unaudited)

 

  NOTE 13. SEGMENT INFORMATION

 

We have organized our operations into two segments. We rely on an internal management reporting process that provides segment information for purposes of making financial decisions and allocating resources.

 

The following tables present our business segment information for the three month periods ended January 31, 2023 and 2022:

 

          
   2023  2022
       
Revenues:          
Apparel  $25,364   $45,272 
House Wrap   46,283    17,128 
Total Revenues  $71,647   $62,400 
           
Assets:          
Apparel  $75,972   $134,245 
House Wrap   1,391,173    1,391,270 
Total  $1,467,145   $1,525,515 
           
Depreciation:          
Apparel  $-0-   $-0- 
House Wrap   769    373 
Total  $769   $373 

 

9

 

 

INNOVATIVE DESIGNS, INC.

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Three Month Periods Ended January 31, 2023 and 2022 (Unaudited)

 

  NOTE 14.

LEGAL PROCEEDINGS 

 

On November 4, 2016, the FTC filed a complaint against the Company in the U.S. District Court Western District of Pennsylvania, Case number 16-1669. In the complaint, the FTC alleges that, among other matters, the Company did not have substantiation of claims made by the Company regarding the R value and energy efficiency of its INSULTEX House Wrap products. The complaint asks as to redress a rescission of revenue the Company received from the sale of House Wrap and a permanent injunction. On September 24, 2020, a judgment was entered in favor of the Company as to all claims set forth in the FTC complaint. It was further ordered that as there were no remaining claims in the action the case shall be marked as closed.

 

On November 23, 2020, the Company was informed that the FTC had filed a notice of appeal in regard to the case. The appeal is from the District Court’s September 24, 2020, Order granting the Company’s Motion for Judgment on Partial Findings Pursuant to Fed. R. Civ. P. 52(c) and subsequent Judgment in favor of the Company and from the District Court’s February 14, 2020, striking Dr. David Yarbrough’s expert testimony made on behalf of the FTC. The FTC filed its appeal and on March 24, 2021, the Company filed its answer.

 

On July 22, 2021, the Registrant was informed that the United States Court of Appeals for the Third District affirmed the District Court’s ruling in favor of the Registrant. The ruling was in connection with the Federal Trade Commission complaint filed against the Registrant in November 2016, alleging, among other matters, that the Registrant did not have substantiation for claims made by the Registrant regarding the R-value and energy efficiency of its INSULTIX House Wrap products.

 

In November 2021, in connection with the FTC litigation, the Company filed an application for attorney fees, expenses and cost in the U.S. District Court for the Western District of Pennsylvania, Case No.2:16-cv-01669-NBF. On June 29, 2022, a settlement order was signed by the Court. Pursuant to the Order, the FTC paid the Company $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.

 

  NOTE 15. RELATED PARTY SALES

 

During the three month period ending January 31, 2023, the company sold apparel and house wrap to a shareholder. The amount total amount of the related party sale was approximately $3,275.

 

  NOTE 15. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events in accordance with ASC Topic 855, “Subsequent Events”, through March 10, 2023, which is the date the condensed financial statements were available to be issued. 

 

10

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  

General

 

The following information should be read in conjunction with the financial statements and the notes thereto and in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding future results of operation, made in this Quarterly Report on Form 10-Q are forward-looking statements. We use words such as expects, believes, intends, and similar expressions to identify forward-looking statements. Forward looking-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.

 

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INNOVATIVE DESIGNS, INC.

 

Results of Operations

 

Comparison of the Three-Month Period Ended January 31, 2023, with the Three Month Period Ended January 31, 2022

 

   Three Month     Three Month         
   Period Ended     Period Ended         
   January 31,  % of  January 31,  % of  Increase   
   2023  Sales  2022  Sales  (Decrease)  % Change
                   
REVENUE - NET  $71,647    100%  $62,400    100%  $9,247    15%
                               
OPERATING EXPENSES                              
Cost of sales   17,010    24%   32,346    52%   (15,336)   -47%
Selling, general and                              
administrative expenses   113,882    159%   150,246    241%   (36,364)   -24%
    130,892    183%   182,592    293%   (51,700)   -28%
                               
(Loss) Income from operations   (59,245)   -83%   (120,192)   -193%   60,947    -51%
                               
Other income (expense)   7,519    10%   —    0%   7,519    100%
Other Expense                              
Interest expense   (6,599)   -9%   (11,476)   -18%   4,877    -42%
Depreciation expense   (769)   -1%   (372)   -1%   (397)   107%
                               
Net (Loss) Income  $(59,094)   -82%  $(132,040)   -212%  $72,946    -55%

 

Revenues for the three-month period ended January 31, 2023, was $71,647 compared to revenues of $62,400 for the three-month period ended January 31, 2022. The increase in revenue is primarily attributable to more sales of our House Wrap product. See Note 13 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment products sales. Our net loss for the three-month period ended January 31, 2022, was ($ 132,040) compared to a net loss of ($ 35,965) for the same period in 2021.

 

Our selling, general and administrative expenses were $114,651 for the three-month period ended January 31, 2023, compared to $150,618 for the three-month period ended January 31, 2022. Professional fees for the three-month period ended January 31, 2023, were $19,481 compared to $40,610 for the three-month period ended January 31, 2022. The decrease is primarily a result of lower accounting and legal costs. Salary was $35,773 for the three-months ended January 31, 2023 compared to $43,284 for the three months ended January 31, 2022.

 

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Liquidity and Capital Resources

 

During the three-month period ended January 31, 2023, we funded our operations from revenues from sales, and sale of our common stock.

 

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.

 

We also must purchase new quality control testing equipment for our House Wrap Product line which we estimate may cost approximately $100,000. However, we have not as yet received a quote from the vendor. We have placed a $7,000 deposit with the vendor. Once the equipment is built it will have to go through a certification process.

 

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.

 

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, 2022.

 

ITEM 1A Risk Factors

 

            As a smaller reporting company, we are not required to provide the information required by this Item.

 

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, 2022.

 

ITEM 3.Defaults upon Senior Securities

 

                None

 

Item 4 Mine Safety Disclosures

 

                 Not applicable

 

ITEM 4T.CONTROLS AND PROCEDURES

 

As of January 31, 2023, our Chief Executive Officer/Chief Financial Officer identified the following specific material weaknesses in the Company’s internal controls over its financial reporting processes:

 

  ● The Company is not maintaining supporting schedules, or the schedules being maintained are inaccurate to support amounts presented and disclosed in the financial statements. Specific schedules in relation to inventory deposits, inventory reserves, fixed assets, debt balance (and related accrued interest) were not available, or in the case of debt schedules were not accurate and in accordance with the loan documents
     
  ● The Company’s internal controls policies are ineffective, or not being complied with, to identify errors, in the financial statements. These deficiencies may be considered as “material weaknesses”.
     
  ● In addition, the Company does not utilize an internal accounting system that captures all Company activity on a timely basis. Certain transactions, such as sales and receivables are maintained in one system and disbursements and accounts payable are maintained manually. On a quarterly basis this information is sent to an external accountant to retroactively enter the information into a general ledger system and then prepare the financial statements. The lack of a single accounting system presents multiple opportunities for errors to occur, and further contributes to a lack of timely internal and external financial reporting.

 

This was due to our limited resources, including the absence of an internal financial staff member with accounting and financial expertise and deficiencies in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls.

 

However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

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ITEM 6.EXHIBITS

 

*3.1 Revised Certificate of Incorporation  
     
**3.2 By-Laws  
     
31.1 Rule 13a - 14a Certification of Chief Executive Officer  
     
31.2 Rule 13a-14a Certification of Chief Financial Officer and Principal Accounting Officer  
     
32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer  
     
32.2 Section 1350 Certification of Chief Financial Officer and Chief Accounting Officer  
     
* Incorporated by reference to the Company’s Form 10-K filed February 12, 2015  
     
**   Incorporated by reference to the Company’s registration statement on Form SB-2, filed March 11, 2003  
     
99*** Incorporated by reference to the Company’s Current Report on Form 8-k, filed November4, 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: March 15, 2023 by:  /s/ Joseph Riccelli 
    Joseph Riccelli, Chief Executive Officer and Chief Financial Officer

 

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