NOTES
TO THE CONDENSED FINANCIAL STATEMENTS
Three
Month Period Ended January 31, 2018 and 2017 (Unaudited)
|
NOTE
1.
|
In
the opinion of management, the accompanying unaudited financial statements contain all
adjustments necessary to present fairly Innovative Designs, Inc.’s financial position
as of January 31, 2018, the changes therein for the three period then ended and the results
of operations for the three month period ended January 31, 2018 and 2017.
|
|
NOTE
2.
|
The
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, 2017. The results of operations for the three month period ended
January 31, 2018 and 2017 are not necessarily indicative of operating results for the
full year.
|
NOTE
3.
|
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. Innovative Designs, Inc. (the “Company”) has decided to discontinue the
selling of its hunting and swimming line of apparel. The Company has booked a reserve against this inventory at January 31,
2018 and October 31, 2017 of $51,000. Management will continue to evaluate its obsolete inventory reserve throughout the year
and make adjustments as needed.
|
|
NOTE
4.
|
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. As a result, diluted earnings per share was not calculated.
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.
INNOVATIVE
DESIGNS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS
Three
Month Period Ended January 31, 2018 and 2017 (Unaudited)
|
NOTE
6.
|
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 $5,500 and $7,900 for
the three month periods ended January 31, 2018 and 2017, respectively.
During
the three month period ended January 31, 2018, the Company sold 351,000 shares of common stock to three investors for total proceeds
of $111,560. The stock was issued for prices from $0.30 - $0.32 per share. In addition, the Company issued 50,000 shares to one
individual for services performed during the period. The shares issued were valued at $0.40 per share for a price of $20,000.
We believe that Section 4(2) of the Securities Act of 1933, as amended, was available because these transactions did not involve
a public offering and there was no general solicitation or general advertising involved in these transactions. We placed legends
on the stock certificates stating that the securities were not registered under the Securities Act and set forth the restrictions
on their transferability and sale.
During
the three month period ended January 31, 2017 the Company issued no stock.
|
NOTE
8.
|
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 which was to be paid in four installments. The first installment of
$300,000 was to be paid at the execution of the agreement. The second installment of $200,000 was to be paid when the
machinery and equipment is ready to be shipped to the United States. The third installment of $100,000 is to be paid once the
machinery and equipment is producing INSULTEX, and the fourth and final installment of $100,000 is to made after the first
commercial production run of INSULTEX is completed. As of January 31, 2018, the Company has made payments of $500,000 in
accordance with the agreement, and made an advanced payment of $100,000 as the machine is not yet producing INSULTEX.
Additionally, the Company has incurred $17,000 of additional expenses related to shipping, site improvements and installation
of the equipment.
|
NOTE 9.
|
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
.
INNOVATIVE
DESIGNS, INC.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS
Three
Month Period Ended January 31, 2018 and 2017 (Unaudited)
The
following tables present our business segment information for the three month period ended January 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Revenues:
|
|
|
|
|
|
|
Apparel
|
|
$
|
86,063
|
|
|
$
|
146,063
|
|
House
Wrap
|
|
|
30,140
|
|
|
|
23,147
|
|
Total
Revenues
|
|
$
|
116,203
|
|
|
$
|
169,210
|
|
Assets:
|
|
|
|
|
|
|
|
|
Apparel
|
|
$
|
581,654
|
|
|
$
|
955,112
|
|
House
Wrap
|
|
|
1,274,279
|
|
|
|
1,251,554
|
|
Total
|
|
$
|
1,855,933
|
|
|
$
|
2,206,666
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
House
Wrap
|
|
$
|
4,258
|
|
|
$
|
10,000
|
|
Total
|
|
$
|
4,258
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
Apparel
|
|
$
|
2,853
|
|
|
$
|
1,775
|
|
House
Wrap
|
|
|
6,025
|
|
|
|
5,955
|
|
Total
|
|
$
|
8,878
|
|
|
$
|
7,730
|
|
|
NOTE
10.
|
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, number 16-1669. In the complaint, the FTC alleges, that, among other matters, the Company does 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 redress of rescission of revenue the Company received from the sale of House Wrap and a permanent injunction.
The parties are currently in the expert discovery phase.
The
Company strongly denies the allegation and intends to vigorously defend itself. It is the Company’s belief that the complaint
is based on improper testing of the INSULTEX products using the wrong type of testing equipment.
|
NOTE
11.
|
SUBSEQUENT
EVENTS
|
The
Company has evaluated subsequent events in accordance with ASC Topic 855, “
Subsequent Events
”, through March
14, 2018, which is the date financial statements were available to be issued. The Company identified the below subsequent events.
The
Company sold 256,250 shares to two individuals for total proceeds of $80,000.
The
Company verbally extended the Riccelli Properties note with no set maturity date.
INNOVATIVE
DESIGNS, INC.