INNOVATIVE DESIGNS, INC. 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
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 theFederal 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 endedOctober 31, 2021 . 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 onJune 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 distributers, 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 July 31, 2022 , with the Three Month
Period Ended July 31, 2021 .
Three Month Period Three Month Period Increase
Ended July 31, 2022 % of Sales Ended July 31, 2021 % of Sales (Decrease) % Change
REVENUE - NET $ 135,048 100 % $ 110,475 100 % $ 24,573 22 %
OPERATING EXPENSES
Cost of sales 56,224 42 % 50,712 46 % 5,512 11 %Selling, general and administrative expenses 115,385
85 % 58,518 53 % 56,867 97 %
171,609 127 % 109,230 99 % 62,379 57 %
(Loss) Income from operations (36,561 )
-27 % 1,245 1 % (37,806 ) -3037 %
Other income (expense) 260,000 193 % 33,652 30 % 226,348 0 %
Other Expense
Interest expense (10,710 ) -8 % (13,417 ) -12 % 2,707 -20 %
Depreciation expense (372 ) 0 % (8,327 ) -8 % 7,955 -96 %
Net (Loss) Income $ 212,357 157 % $ 13,153 12 % $ 199,204 1515 %
Revenues for the three month period ended July 31, 2022 were $135,048 compared
to revenues of $110,475 for the three month period ended July 31, 2021 . The
increase in revenue is attributable to more sales of our HouseWrap product line.
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 July 31, 2022 was ($213,357 ).
Our selling, general and administrative expenses were $115,385 for the three
month period ended July 31, 2022 , compared to $58,518 for the three month period
ended July 31, 2021 . The increase is primarily the result of an increase in
payroll as we brought back two employees who had been furloughed as a result of
the pandemic.
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INNOVATIVE DESIGNS, INC.
Comparison of the Nine Month Period Ended
The following table shows a comparison of the results of operations between the
nine month periods ended
Nine Month Period Nine Month Period Increase
Ended July 31, 2022 % of Sales Ended July 31, 2021 % of Sales (Decrease) % Change
REVENUE - NET $ 235,164 100 % $ 176,388 100 % $ 58,776 33 %
OPERATING EXPENSES
Cost of sales 109,884 47 % 78,352 44 % 31,532 40 %
Selling, general andadministrative expenses 545,212 232 %
251,017 142 % 294,195 117 %
655,096 279 % 329,369 187 % 325,727 99 %
Loss from operations (419,932 ) -179 % (152,981 ) -87 % (266,951 ) 174 %
Other income (expense) 260,000 111 % 62,475 35 % 197,525 0 % Other Expense Interest expense (34,450 ) -15 % (30,810 ) -17 % (3,640 ) 12 % Depreciation expense (1,118 ) 0 %
(24,981 ) -14 % 23,863 -96 %
Net Loss $ (195,500 ) -83 % $ (146,297 ) -83 % $ (49,203 ) 34 %
Revenues for the nine month period ended July 31, 2022 were $235,164 compared to
revenues of $176,388 for the nine month period ended July 31, 2021 . The increase
is the result of more sales of our HouseWrap product line. The apparel sales
were adversely affected by warm weather. See Note 13 of the Notes to the
Condensed Financial Statements appearing elsewhere in this Report for a
description of our segment product sales. During the nine month period ended
July 31, 2022 House Wrap sales totaled $176,038 in comparison with $126,713
during the nine month period ended July 31, 2021 . Our net loss for the nine
month period ended July 31, 2022 , was ($195,500 ).
Our selling, general and administrative expenses were $545,212 for the nine
months ended July 31, 2022 , compared to $251,017 for the nine month period ended
July 31, 2021 . The increase was a result, in part, by an increase in payroll
expenses of approximately $101,000 as we brought back two employees who had been
furloughed during the pandemic. we also incurred $50,000 in marketing cost
through the issuance of our common stock. Directors' fees increased by $33,000
as we issued common stock to members of the Board of Directors. Shipping costs
increased by $9,000 from the prior nine month period.
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INNOVATIVE DESIGNS, INC.
Liquidity and Capital Resources
During the nine period ended
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 inDecember 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. The Company has not made an estimate of the cost required for bringing the operation of the machine into compliance with the environmental regulations, but it is considered to be a substantial amount. We are in the permitting stage relating to environmental issues necessary to begin the installation of the equipment. However, given our current limited financial resources we are not devoting the resources needed to complete the permitting process. 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 equipment for our HouseWrap product line. A deposit of$7,320 has been made however, we do not have a full cost estimate from the builder. We have estimated a cost of approximately$100,000 . 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. Subsequent to the period onAugust 29, 2022 , we received approximately$200,000 as partial payment on the amount owed under the settlement agreement with theFTC . See Note 14 of the Notes to the Condensed Financial Statement appearing elsewhere in this Report. 15INNOVATIVE DESIGNS, INC.
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