INNOVATIVE DESIGNS INC - Quarter Report: 2010 July (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
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For the
quarterly period ended July 31, 2010
OR
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
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For the
transition period from _______ to ________.
Commission
File Number: 000-51791
INNOVATIVE
DESIGNS, INC.
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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03-0465528
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(State
or other jurisdiction of
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(I.R.S.
Employer
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|
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incorporation
or organization)
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Identification
No.)
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223 North
Main Street, Suite 1
Pittsburgh,
Pennsylvania 15215
(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)
Check
whether the issuer (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 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)
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Large
Accelerated Filer ¨
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Accelerated
Filer ¨
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Non-accelerated
Filer ¨
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Smaller reporting
company x
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(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 o
NO x
As of
September 13, 2010, there were 18,710,743 shares of the Registrant’s common
stock, par value $.0001 per share, outstanding.
Transitional
Small Business Disclosure
Format: YES ¨ NO x
Innovative
Designs, Inc.
Index
Form
10-Q/A for the Quarter Ended July 31, 2010
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Page No.
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Part
I — Financial Information
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Item
1.
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Condensed
Financial Statements
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1
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Condensed
Balance Sheets at July 31, 2010 (Unaudited) and October 31,
2009
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1
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Condensed
Statements of Operations for the Three Months Ended July 31, 2010 and
2009, Nine Months Ended July 31, 2010 and 2009
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2
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Condensed
Statement of Changes in Stockholders’ Equity at July 31, 2010 (Unaudited)
and October 31, 2009
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3
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|
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Condensed
Statements of Cash Flows for the Nine Months Ended July 31, 2010 and
2009
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4
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|
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Notes
to Condensed Financial Statements
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5 -
7
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| Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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8 -
11
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Item
4 T.
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Controls
and Procedures
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11
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Part
II — Other Information
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||
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Item
1.
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Legal
Proceedings
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12
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Item
2.
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Unregistered
Sale of Equity Securities and Use of Proceeds
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12
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Item
6.
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Exhibits
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13
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ITEM
1. CONDENSED FINANCIAL STATEMENTS
INNOVATIVE
DESIGNS, INC.
CONDENSED
BALANCE SHEETS
July 31, 2010 (Unaudited)
and October 31, 2009
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2010
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2009
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|||||||
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ASSETS
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||||||||
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CURRENT
ASSETS:
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||||||||
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Cash
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$ | 27,985 | $ | 26,872 | ||||
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Accounts
receivable
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28,049 | 119,123 | ||||||
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Inventory
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935,956 | 811,730 | ||||||
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Deposits
on inventory
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86,858 | 123,312 | ||||||
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Total
current assets
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1,078,848 | 1,081,037 | ||||||
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LONG-TERM
ASSETS
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||||||||
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Property
and equipment - net
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812 | 4,642 | ||||||
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Total
long-term assets
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812 | 4,642 | ||||||
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TOTAL
ASSETS
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$ | 1,079,660 | $ | 1,085,679 | ||||
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LIABILITIES AND STOCKHOLDERS'
EQUITY
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||||||||
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CURRENT
LIABILITIES:
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||||||||
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Accounts
payable
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$ | 35,462 | $ | 53,983 | ||||
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Current
portion of notes payable
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169,707 | 177,029 | ||||||
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Accrued
interest expense
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94,688 | 98,800 | ||||||
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Accounts
payable - related party
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28,220 | 28,220 | ||||||
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Related
party debt
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47,300 | 84,000 | ||||||
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Shareholders
advances
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206,364 | 214,764 | ||||||
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Accrued
expenses
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- | 896 | ||||||
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Total
current liabilities
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581,741 | 657,692 | ||||||
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LONG-TERM
LIABILITIES:
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||||||||
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Long-term
portion of notes payable
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377,009 | 388,928 | ||||||
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Total
long term liabilities
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377,009 | 388,928 | ||||||
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TOTAL
LIABILITIES
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958,750 | 1,046,620 | ||||||
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STOCKHOLDERS'
EQUITY:
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||||||||
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Preferred
stock, $.0001 par value, 100,000,000 shares authorized
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||||||||
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Common
stock, $.0001 par value, 500,000,000 shares authorized, 18,715,743 and
18,703,743 shares issued
and outstanding
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1,875 | 1,873 | ||||||
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Additional
paid in capital
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5,640,416 | 5,638,018 | ||||||
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Accumulated
deficit
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(5,521,381 | ) | (5,600,832 | ) | ||||
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Total
stockholders' equity
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120,910 | 39,059 | ||||||
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 1,079,660 | $ | 1,085,679 | ||||
The
accompanying notes are an integral part of these financial
statements.
- 1
-
ITEM
1. CONDENSED FINANCIAL STATEMENTS
INNOVATIVE
DESIGNS, INC.
STATEMENTS
OF OPERATIONS
Three Months Ended July 31,
2010 and 2009, Nine Months Ended July 31, 2010 and 2009
(Unaudited)
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Three
Months Ended July 31,
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Nine
Months Ended July 31,
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|||||||||||||||
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2010
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2009
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2010
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2009
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|||||||||||||
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REVENUE
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$ | 28,347 | $ | 26,616 | $ | 783,437 | $ | 675,446 | ||||||||
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OPERATING
EXPENSES:
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||||||||||||||||
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Cost
of sales
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12,703 | 11,810 | 336,866 | 298,023 | ||||||||||||
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Selling,
general and administrative expenses
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83,058 | 66,766 | 340,460 | 340,373 | ||||||||||||
| 95,761 | 78,576 | 677,326 | 638,396 | |||||||||||||
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(Loss)/income
from operations
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(67,414 | ) | (51,960 | ) | 106,111 | 37,050 | ||||||||||
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OTHER
(EXPENSE)/INCOME:
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||||||||||||||||
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Interest
income
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255 | - | 255 | - | ||||||||||||
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Interest
expense
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(10,721 | ) | (4,456 | ) | (26,915 | ) | (12,828 | ) | ||||||||
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Total
other (expense)/income
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(10,466 | ) | (4,456 | ) | (26,660 | ) | (12,828 | ) | ||||||||
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Net
(loss)/income before income taxes
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(77,880 | ) | (56,416 | ) | 79,451 | 24,222 | ||||||||||
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Income
taxes
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- | - | - | - | ||||||||||||
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NET
(LOSS)/INCOME
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$ | (77,880 | ) | $ | (56,416 | ) | $ | 79,451 | $ | 24,222 | ||||||
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Weighted
Average Shares Outstanding
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18,727,743 | 18,646,743 | 18,503,801 | 19,321,799 | ||||||||||||
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Net
income/(loss) per share
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$ | (.004 | ) | $ | (.003 | ) | $ | .004 | $ | .001 | ||||||
The
accompanying notes are an integral part of these financial
statements.
- 2
-
ITEM
1. CONDENSED FINANCIAL STATEMENTS
INNOVATIVE
DESIGNS, INC.
STATEMENTS
OF STOCKHOLDERS’ EQUITY
July 31, 2010 (Unaudited)
and October 31, 2009
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Common
Stock
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Additional
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|||||||||||||||||||
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Shares
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Amount
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Paid in Capital
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Retained Deficit
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Total
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||||||||||||||||
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Balance
at October 31, 2008
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18,455,243 | $ | 1,846 | $ | 5,565,045 | $ | (5,622,832 | ) | $ | (55,941 | ) | |||||||||
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Shares
issued for services
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185,500 | 21 | 54,779 | - | 54,800 | |||||||||||||||
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Shares
issued for cash
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90,000 | 9 | 28,991 | - | 29,000 | |||||||||||||||
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Return
of shares for non-performance of services
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(27,000 | ) | (3 | ) | (10,797 | ) | - | (10,800 | ) | |||||||||||
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Net
income
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- | - | - | 22,000 | 22,000 | |||||||||||||||
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Balance
at October 31, 2009
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18,703,743 | 1,873 | 5,638,018 | (5,600,832 | ) | 39,059 | ||||||||||||||
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Shares
issued for services
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12,000 | 2 | 2,398 | - | 2,400 | |||||||||||||||
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Net
income
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- | - | - | 79,451 | 79,451 | |||||||||||||||
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Balance
at July 31, 2010
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18,715,743 | $ | 1,875 | $ | 5,640,416 | $ | (5,521,381 | ) | $ | 120,910 | ||||||||||
The
accompanying notes are an integral part of these financial
statements.
- 3
-
ITEM
1. CONDENSED FINANCIAL STATEMENTS
INNOVATIVE
DESIGNS, INC.
STATEMENTS
OF CASHFLOW
For Nine Months Ended July
31, 2010 and 2009
(Unaudited)
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For
the Nine Months Ended
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||||||||
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July 31, 2010
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July 31, 2009
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|||||||
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CASH
FLOWS FROM OPERATING ACTIVITIES:
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||||||||
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Net
income
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$ | 79,451 | $ | 24,222 | ||||
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Adjustments
to reconcile net income to cash provided by operating
activities:
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||||||||
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Common
stock issued for services
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2,400 | 54,800 | ||||||
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Depreciation
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3,830 | 3,592 | ||||||
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Common
stock returned for noncompliance of services
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- | (10,800 | ) | |||||
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Changes
in operating assets and liabilities:
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||||||||
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Accounts
receivable
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91,074 | 144,536 | ||||||
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Inventory
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(124,226 | ) | (80,871 | ) | ||||
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Deposits
on inventory
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36,454 | 187,939 | ||||||
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Accounts
payable
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(18,521 | ) | (45,246 | ) | ||||
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Accrued
expenses
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(896 | ) | (16,757 | ) | ||||
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Customer
deposits
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- | (9,823 | ) | |||||
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Accrued
interest on notes payable
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(4,112 | ) | (26,000 | ) | ||||
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Net
cash provided by operating activities
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65,454 | 225,592 | ||||||
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CASH
FLOWS FROM FINANCING ACTIVITIES:
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||||||||
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Payments
on note payable
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(134,241 | ) | (164,943 | ) | ||||
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Payment
on note payable - related party
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(36,700 | ) | (63,000 | ) | ||||
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Proceeds
from notes payable
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115,000 | - | ||||||
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Payment
of shareholder advances
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(8,400 | ) | (33,336 | ) | ||||
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Common
stock issued for cash
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- | 29,000 | ||||||
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Net
cash used in financing activities
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(64,341 | ) | (232,279 | ) | ||||
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Net
increase/(decrease) in cash
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$ | 1,113 | $ | (6,687 | ) | |||
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Cash
- beginning of year
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$ | 26,872 | $ | 22,523 | ||||
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Cash
- end of period
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$ | 27,985 | $ | 15,836 | ||||
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Supplemental
cash flow information:
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||||||||
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Cash
paid for interest
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$ | 16,193 | $ | 12,832 | ||||
The
accompanying notes are an integral part of these financial
statements.
- 4
-
INNOVATIVE
DESIGNS, INC.
NOTES TO
THE CONDENSED FINANCIAL STATEMENTS
July 31,
2010
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1.
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BASIS OF PRESENTATION
- INTERIM FINANCIAL
STATEMENTS
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The
accompanying unaudited condensed financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) for interim financial information and the
general instructions to Form 10-Q. Accordingly, they do not
include all information and footnotes required by GAAP for complete
financial statements. These interim financial statements should
be read in conjunction with our audited financial statements and notes
thereto included in our Annual Report on Form 10-K for the fiscal year
ended October 31, 2009. The preparation of financial statements
in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those
estimates. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. The results of operations
for the periods presented are not necessarily indicative of the results
that may be expected for the year ending October 31, 2010 or any future
period.
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|
2.
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FASB ACCOUNTING
STANDARDS CODIFICATION TOPIC 718 SHARE-BASED PAYMENT (FASB ASC
718)
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FASB ASC
718 establishes standards for the accounting and transactions in which an entity
exchanges its equity instruments for goods or services. It also
addresses transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of the entity’s equity
instruments or that may be settled by the issuance of those equity
instruments. This Statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. This Accounting Standard Codification does not change
the accounting guidance for share-based payment transactions with parties other
than employees provided in FASB ASC 718 as originally issued and EITF Issue No.
96-18, “Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services.” This Accounting Standard Codification does not address the
accounting for employee share ownership plans, which are subject to AICPA
Statement of Position 93-6, Employers’ Accounting for Employee
Stock Ownership Plans. The adoption of FASB ASC 718 by the
Company did not have a material impact on the Company’s financial position,
results of operations or cash flows. There was no change in the
status of outstanding shares or in the Equity Compensation Plan since October
31, 2006, and no shares were granted to employees of the Company for services
rendered or to be rendered.
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3.
|
EARNINGS PER
SHARE
|
Innovative
Designs, Inc. (the “Company”) calculates net income (loss) per share as required
by FASB 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. Diluted earnings (loss) per
share is calculated by dividing net income (loss) by the weighted average number
of common shares and dilutive common stock equivalents
outstanding. During the periods presented common stock equivalents
were not considered as their effect would be anti-dilutive.
- 5
-
INNOVATIVE
DESIGNS, INC.
NOTES TO
THE CONDENSED FINANCIAL STATEMENTS
July 31,
2010
|
4.
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GOING CONCERN AND
LEGAL PROCEEDINGS
|
The
Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The
Company's ability to continue as a going concern is contingent upon its ability
to expand its operations and secure additional financing. The Company
is currently pursuing financing for its operations and seeking to expand its
operations. Failure to secure such financing or expand its operations
may result in the Company not being able to continue as a going concern. During
the quarter ended July 31, 2010, the Company entered into new short-term
borrowings of $115,000 with various individuals in addition to loans made to us
by our Chief Executive Officer.
The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
On July
30, 2008, Elio D. Cattan and Eliotex srl filed a Motion to Strike Satisfaction
of Judgment in the action filed at 04-00593 in the United States District Court
for the Western District of Pennsylvania. The basis for the relief
requested was Cattan’s averment that Innovative Designs defrayed certain of the
expenses in Greystone, Inc.’s litigation in the United States, and that
assistance violated Pennsylvania public policy regarding champerty and
maintenance.
On
February 5, 2009, The Honorable Arthur J. Schwab entered an Order on the Motion
of Elio Cattan and Eliotex, SRL (collectively, “Cattan”) to strike the
assignment and satisfaction of judgment filed at Docket No. 04-00593 by Elite
Properties, LLC. Counsel for Innovative Designs, Inc. sought to
preclude the District Court from rendering any determination on the merits as to
the ownership of the Judgment or the propriety of the State Court execution
proceedings by which ownership of the Judgment was transferred.
The
District Court did not adopt or substantiate the legal argument brought forward
by Counsel for Cattan, and did not render any findings on the merits that would
disturb Elite Properties, LLC’s ownership of the IDI Judgment at the time it was
satisfied.
On March
31, 2009, Eliotex, srl (“Eliotex”) and Elio Cattan (“Cattan”) filed a Motion to
Strike Assignment and Satisfaction of Judgment in the Court of Common Pleas of
Allegheny County, Pennsylvania at Case No. GD-06-011327. The Motion
requests that the Court invalidate State Court execution proceedings on the
default judgment entered against Eliotex and Cattan by Greystone, Inc.
(“Greystone”) by which Greystone purchased at Sheriff Sale the default judgment
against IDI entered in favor of Eliotex and Cattan in Italian arbitration
proceedings and confirmed by the District Court. The Motion further
requests that the Court strike the purchase of an assignment of that judgment
from Greystone, and its subsequent satisfaction, by Elite Properties,
LLC. IDI consented to the issuance of a Rule to Show Cause why the
relief should not be granted.
- 6
-
INNOVATIVE
DESIGNS, INC.
NOTES TO
THE CONDENSED FINANCIAL STATEMENTS
July 31,
2010
On June
10, 2009, Eliotex and Cattan filed a Verification to their
Motion. IDI filed its Answer to Rule to Show Cause on June 23,
2009. Eliotex and Cattan conducted no discovery within the 60 day
time period provided for by the Order issuing the Rule, and no oral argument on
the Rule has been requested. The Motion is dormant and likely to
remain so for the foreseeable future.
On
January 22, 2010 , counsel for IDI and Eliotex/Cattan participated in a oral
argument before the Honorable R. Stanton Wettick, Jr. of the Court of Common
Pleas of Allegheny County, Pennsylvania on the Rule to Show Cause regarding
Eliotex/Cattan’s Motion to Strike Assignment of Judgement. The Judge heard
arguments, and has asked the parties to brief two issues: (1) whether
Eliotex/Cattan have standing to challenge the assignment from Greystone to Elite
Properties; and (2) whether the dealings between IDI and Greystone constitute
champerty and maintenance.
On June
2, 2010, the Honorable R. Stanton Wettick, Jr. of the Court of Common Pleas of
Allegheny County, Pennsylvania entered an Order denying Elio D. Cattan and
Eliotex, SRL’s motion to strike assignment and satisfaction of
judgment. As Judge Arthur J. Schwab of the United States District
Court for the Western District of Pennsylvania specifically deferred the
question of the ownership of the judgment to the State Court, Judge Wettick’s
Order represents a final adjudication of this matter on the merits, and resolved
the case in IDI’s favor. IDI’s legal counsel will now request that
Judge Schwab reform the Federal Court docket to comport with the State Court’s
ruling.
On July
23, 2010, IDI filed a motion with the United States District Court for the
Western District of Pennsylvania in Case No. 04-00593 requesting that Judge
Schwab enter an Order to conform the District Court docket in light of the State
Court adjudication. On July 26, 2010, Judge Schwab entered an Order:
(1) striking the assignment to Elio Cattan and Eliotex, SRL filed by Greystone,
Inc. on March 25, 2009; (2) vacating the Order of February 5, 2009 striking the
Assignment and Satisfaction of Judgment filed by Elite Properties, LLC on May
27, 2008; and (3) deeming satisfied the Judgment entered in favor of Elio Cattan
and Eliotex, SRL and against RMF Global, Inc. and Innovative Designs, Inc. on
May 9, 2006. Counsel for Elio Cattan and Eliotex, SRL represented to
counsel for IDI that they would not oppose the Motion.
IDI has
prevailed in all of the outstanding litigation involving the foregoing, and
believes the matter to be concluded.
|
5.
|
COMMON
STOCK
|
On May
25, 2010, we issued 12,000 shares of our common stock for professional services
for $.20 per share or $2,400. The shares were issued without
registration pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended.
|
6.
|
SUBSEQUENT
EVENTS
|
The
Company has evaluated subsequent events in accordance with Accounting Standards
Codification Topic 855, Subsequent Events, through September 13, 2010, which is
the date financial statements were available to be issued. During the
evaluation no subsequent event items were identified by the
Company.
- 7
-
INNOVATIVE
DESIGNS, INC.
July 31,
2010
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 consolidated
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,
2009.
Disclosure
Regarding Forward-Looking Statements
Certain
statements made in this report, and other written or oral statements made by or
on behalf of the Company, may constitute “forward-looking statements” within the
meaning of the federal securities laws. When used in this report, the
words “believes,” “expects,” “estimates,” “intends” and similar expressions are
intended to identify forward-looking statements. Statements regarding
future events and developments and our future performance, as well as our
expectations, beliefs, plans, intentions, estimates or projections relating to
the future, are forward-looking statements within the meaning of these
laws. Examples of such statements in this report include descriptions
of our plans and strategies with respect to developing certain market
opportunities and our overall business plan. All forward-looking
statements are subject to certain risks and uncertainties that could cause
actual events to differ materially from those projected. We believe
that these forward-looking statements are reasonable; however, you should not
place undue reliance on such statements. These statements are based
on current expectations and speak only as of the date of such
statements. We undertake no obligations to publicly update or revise
any forward-looking statement, whether as a result of future events, new
information or otherwise.
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 hunting apparel, and cold weather gear called “Artic Armor” that
are made from INSULTEX, a material with buoyancy, scent block and thermal
resistant proprieties. 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,
and
|
|
|
·
|
Developing
our website to sell more of our
products.
|
- 8
-
INNOVATIVE
DESIGNS, INC.
July 31,
2010
Results
of Operations
Comparison
of the Three Months Ended July 31, 2010 with the Three Months Ended July 31,
2009.
Revenues
The
following table shows a comparison of the results of operations between the
three months ended July 31, 2010 and three months ended July 31,
2009:
|
Three
Months
Ended
July 31, 2010
|
% of
Sales
|
Three Months
Ended
July 31, 2009
|
% of
Sales
|
$ Increase
(Decrease)
|
% Change
|
|||||||||||||||||||
|
REVENUE
|
$ | 28,347 | 100.0 | % | $ | 26,616 | 100.0 | % | $ | 1,731 | 6.5 | % | ||||||||||||
|
OPERATING
EXPENSES
|
||||||||||||||||||||||||
|
Cost
of sales
|
12,703 | 44.8 | % | 11,810 | 44.4 | % | 893 | 7.6 | % | |||||||||||||||
|
Selling,
general and administrative expenses
|
83,058 | 293.0 | % | 66,766 | 250.8 | % | 16,292 | 24.4 | % | |||||||||||||||
| 95,761 | 337.8 | % | 78,576 | 295.2 | % | 17,185 | 21.9 | % | ||||||||||||||||
|
Loss
from operations
|
(67,414 | ) | (237.8 | )% | (51,960 | ) | 195.2 | % | (15,454 | ) | (29.7 | )% | ||||||||||||
|
OTHER
(EXPENSE)/INCOME
|
||||||||||||||||||||||||
|
Interest
income
|
255 | .9 | % | - | - | 255 | 100.0 | % | ||||||||||||||||
|
Interest
(expense)
|
(10,721 | ) | (37.8 | )% | (4,456 | ) | (16.7 | )% | (6,265 | ) | (140.6 | )% | ||||||||||||
| (10,466 | ) | (36.9 | )% | (4,456 | ) | (16.7 | )% | (6,010 | ) | (134.9 | )% | |||||||||||||
|
Net
loss
|
$ | (77,880 | ) | (274.7 | )% | $ | (56,416 | ) | (212.0 | )% | $ | (21,464 | ) | (38.0 | )% | |||||||||
Three
Months Ended July 31, 2010 and 2009
The
increase in revenue for the three months ended July 31, 2010 compared to the
corresponding period ended July 31, 2009, is the result of our entry into the
Alaska market with its longer cold season and the addition of more
retailers. Nearly all of our sales for the period were for our Arctic
Armor line of products. During the period we had a $2,400 expense
related to our issuance of our common stock for services. This
expense is included in the selling, general and administrative expenses
category.
- 9
-
INNOVATIVE
DESIGNS, INC.
July 31,
2010
The
following table shows a comparison of the results of operations between the nine
months ended July 31, 2010 and nine months ended July 31, 2009.
|
Nine Months
Ended
July 31, 2010
|
% of
Sales
|
Nine Months
Ended
July 31, 2009
|
% of
Sales
|
$ Increase
(Decrease)
|
% Change
|
|||||||||||||||||||
|
REVENUE
|
$ | 783,437 | 100.0 | % | $ | 675,446 | 100.0 | % | $ | 107,991 | 16.0 | % | ||||||||||||
|
OPERATING
EXPENSES
|
||||||||||||||||||||||||
|
Cost
of sales
|
336,866 | 43.0 | % | 298,023 | 44.1 | % | 38,843 | 13.0 | % | |||||||||||||||
|
Selling,
general and administrative expenses
|
340,460 | 43.5 | % | 340,373 | 50.4 | % | 87 | .03 | % | |||||||||||||||
| 677,326 | 86.5 | % | 638,396 | 94.5 | % | 38,930 | 6.1 | % | ||||||||||||||||
|
Income
from operations
|
106,111 | 13.5 | % | 37,050 | 5.5 | % | 69,061 | 186.4 | % | |||||||||||||||
|
OTHER
(EXPENSE)/INCOME
|
||||||||||||||||||||||||
|
Interest
income
|
255 | .03 | % | - | - | 255 | 100.0 | % | ||||||||||||||||
|
Interest
(expense)
|
(26,915 | ) | (3.4 | )% | (12,828 | ) | (1.9 | )% | (14,087 | ) | (109.8 | )% | ||||||||||||
| (26,660 | ) | (3.4 | )% | (12,828 | ) | (1.9 | )% | (13,832 | ) | (107.8 | )% | |||||||||||||
|
Net
income
|
$ | 79,451 | 10.1 | % | $ | 24,222 | 3.6 | % | $ | 55,229 | 228.0 | % | ||||||||||||
Nine
Months Ended July 31, 2010 and 2009
The
increase in revenue for the nine month period ended July 31, 2010, over the
corresponding period ended July 31, 2009, was a result of our adding more
retailers, internet sales and the entry into the Alaska
market. During the period substantially all of our sales were for our
Arctic Armor line of products. We expanded our Arctic Armor product
line by adding mitts, hats and a tasseled cap. We also introduced a
special edition Arctic Armor suit that is oil and jet fuel resistance and is
anti-static. The suit costs more than our standard suit and will be
offered on a limited supply basis.
The
increase during the period in our selling, general and administrative expenses
was partly on account of approximately $28,000 in professional
expenses. We expect our fourth quarter to show a substantial increase
in revenue over the comparable period. We continue to add more
retailers including Canadian Tire. We continue to await the results
of the sample yardage of our building wrap we sent out to builders and
distributors.
- 10
-
INNOVATIVE
DESIGNS, INC.
July 31,
2010
Liquidity
and Capital Resources
During
the quarter ended July 31, 2010, we funded our operations with revenues from
sales and new short-term borrowings of $115,000 in addition to loans made to us
by our Chief Executive Officer. We will continue to fund operations
from revenues and borrowings and the possible sale of securities. Our
ability to obtain outside funding of either debt or equity is being adversely
affected in part, by the general inability to obtain commercial
lending.
Short
Term: We funded our operations with revenues from sales and short-term
borrowings. The financial institution has restricted the amounts we
can borrow on our lines of credit and they will not increase our borrowing
capacity on the lines of credit. The Company continues to pay its
creditors when payments are due and has been successful in expanding its sales
base and adding new products to its Arctic Armor product line.
Long
Term: The Company will continue to fund operations from revenues, borrowings and
the possible sale of its securities. The Company is currently pursing
financing to fund its long-term liquidity needs, however, the general state of
the credit industry has made borrowing more difficult.
ITEM 4 T.
CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
As of the
end of the reporting period covered by this report, June 30, 2010, our Chief
Executive Officer, who also serves as our Chief Financial Officer, carried out
an evaluation of the effectiveness of our disclosure controls and procedures as
defined in Securities Exchange Act Rule 13a-15(e).
Based
upon that evaluation our management concluded that our disclosure controls and
procedures were adequate and effective.
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.
- 11
-
INNOVATIVE
DESIGNS, INC.
July 31,
2010
PART
II
ITEM
1. LEGAL PROCEEDINGS
On June
2, 2010, the Honorable R. Stanton Wettick, Jr. of the Court of Common Pleas of
Allegheny County, Pennsylvania entered an Order denying Elio D. Cattan and
Eliotex, SRL’s motion to strike assignment and satisfaction of
judgment. As Judge Arthur J. Schwab of the United States District
Court for the Western District of Pennsylvania specifically deferred the
question of the ownership of the judgment to the State Court, Judge Wettick’s
Order represents a final adjudication of this matter on the merits, and resolved
the case in IDI’s favor. IDI’s legal counsel will now request that
Judge Schwab reform the Federal Court docket to comport with the State Court’s
ruling.
On July
23, 2010, IDI filed a motion with the United States District Court for the
Western District of Pennsylvania in Case No. 04-00593 requesting that Judge
Schwab enter an Order to conform the District Court docket in light of the State
Court adjudication. On July 26, 2010, Judge Schwab entered an Order:
(1) striking the assignment to Elio Cattan and Eliotex, SRL filed by Greystone,
Inc. on March 25, 2009; (2) vacating the Order of February 5, 2009 striking the
Assignment and Satisfaction of Judgment filed by Elite Properties, LLC on May
27, 2008; and (3) deeming satisfied the Judgment entered in favor of Elio Cattan
and Eliotex, SRL and against RMF Global, Inc. and Innovative Designs, Inc. on
May 9, 2006. Counsel for Elio Cattan and Eliotex, SRL represented to
counsel for IDI that they would not oppose the Motion.
IDI has
prevailed in all of the outstanding litigation involving the foregoing, and
believes the matter to be concluded.
ITEM 2.
UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
On May
25, 2010, we issued 12,000 shares of our common stock for marketing services for
$.20 per share or $2,400 to one person. The shares were issued
without registration pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, as an offering not involving a public
offering.
- 12
-
INNOVATIVE
DESIGNS, INC.
July 31,
2010
ITEM 6.
EXHIBITS
|
*3.1
|
Certificate
of Incorporation
|
|
*3.2
|
By
Laws
|
|
|
10.1
|
Loan
Agreement dated July 28, 2010 – Xunjin
Hua
|
|
|
10.2
|
Loan
Agreement dated July 15, 2010 – Corinthian Development
LLC
|
|
|
10.3
|
Loan
Agreement dated June 10, 2010 – Frank
Riccelli
|
|
|
10.4
|
Loan
Agreement dated June 10, 2010 – Frank
Riccelli
|
|
31.1
|
Rules
13a–14(a)) Certification of Chief Executive Office and Chief Financial
Officer
|
|
32.1
|
Section
1350 Certification of Chief Executive Officer and Chief Financial
Officer
|
|
*
|
Incorporated
by reference to the Company’s registration statement on Form SB-2, filed
March 11, 2003
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
Innovative Designs, Inc.
|
|
|
Registrant
|
|
|
Date:
September 13, 2010
|
/s/ Joseph Riccelli
|
|
Joseph
Riccelli, Chief Executive Officer
|
|
|
and
Chief Financial Officer
|
- 13
-