The accompanying condensed notes are an integral
part of these financial statements.
The accompanying condensed notes are an integral
part of these financial statements.
The accompanying condensed
notes are an integral part of these financial statements.
The accompanying condensed
notes are an integral part of these financial statements.
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
Six Month Periods
Ended April 30, 2016 and 2015 (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 April 30, 2016, the changes therein for the three and six month periods then ended and the results of operations for the three
and six month periods ended April 30, 2016 and 2015.
|
|
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 Company’s annual
report on Form 10-K for the fiscal year ended October 31, 2015. The results of operations for the three and six month periods
ended April 30, 2016 and 2015 are not necessarily indicative of operating results for the full year.
|
The Company is filing this amendment
to its Quarterly Report on Form 10-Q/A for the period ended April 30, 2016 to amend and restate the financial statements and other
financial information for the three months ended April 30, 2016. During 2016, the Company improperly calculated costs associated
with House Wrap that was produced during the current fiscal year.
The Company has reviewed all accounting
transactions for the quarters ended January 31, 2016 and April 30, 2016, and has determined that inventory, accrued expenses, cost
of sales, net income and earnings per share needed to be restated for the quarter ended April 30, 2016 related to improperly calculated
costs.
|
|
Three Month Periods Ended April 30,
|
|
|
Six Month Periods Ended April 30,
|
|
|
|
2016
|
|
|
2016
|
|
|
|
as reported
|
|
|
as adjusted
|
|
|
as reported
|
|
|
as adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
84,197
|
|
|
$
|
70,225
|
|
|
$
|
182,951
|
|
|
$
|
168,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(126,009
|
)
|
|
|
(112,037
|
)
|
|
|
(240,741
|
)
|
|
|
(226,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(145,535
|
)
|
|
$
|
(131,563
|
)
|
|
$
|
(278,747
|
)
|
|
$
|
(264,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Common Share
|
|
$
|
(0.006
|
)
|
|
$
|
(0.005
|
)
|
|
$
|
(0.011
|
)
|
|
$
|
(0.011
|
)
|
INNOVATIVE DESIGNS,
INC.
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
Six Month Periods
Ended April 30, 2016 and 2015 (Unaudited)
|
|
April 30, 2016
|
|
|
|
as reported
|
|
|
as adjusted
|
|
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory - net of obsolete reserve of $40,000
|
|
$
|
1,008,165
|
|
|
$
|
999,324
|
|
|
|
|
|
|
|
|
|
|
Total Asset
|
|
|
2,841,660
|
|
|
|
2,832,819
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
150,828
|
|
|
|
128,015
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
757,530
|
|
|
|
734,717
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
2,084,130
|
|
|
|
2,098,102
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities And Stockholders Equity
|
|
$
|
2,841,660
|
|
|
$
|
2,832,819
|
|
|
|
April 30, 2016
|
|
|
|
as reported
|
|
|
as adjusted
|
|
Statement of Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(278,747
|
)
|
|
$
|
(264,775
|
)
|
|
|
|
|
|
|
|
|
|
Stockholders deficit
|
|
|
(7,359,081
|
)
|
|
|
(7,345,109
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
$
|
2,084,130
|
|
|
$
|
2,098,102
|
|
Inventory consists principally of
purchased finished goods. 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 manufacturing of its hunting and swimming line of apparel.
The Company has booked a reserve against this inventory at April 30, 2016 and October 31, 2015 of $40,000. Management will continue
to evaluate its obsolete inventory reserve throughout the year and make adjustments as needed.
|
NOTE 5.
|
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.
INNOVATIVE DESIGNS,
INC.
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
Six Month Periods
Ended April 30, 2016 and 2015 (Unaudited)
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 7.
|
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 billed back to customer orders was approximately $17,000 and $10,000 for the six month periods ended April 30,
2016 and 2015, respectively. These amounts are included in both revenue and selling, general and administrative expenses.
During the three month period ended
January 31, 2016, the Company sold its stock to seven investors. The stock was issued for prices from $0.54 - $0.60 per share.
A total of 579,000 shares of common stock were sold, resulting in proceeds of $314,830. In addition, the Company issued 90,000
shares to three individuals for services performed during the period. The shares issued were valued at $0.50 - $0.73 per share
or an aggregate price of $52,200. 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 April 30, 2016, the Company sold its stock to four investors. The stock
was issued for prices from $0.52-$0.80 per share. A total of 300,000 shares of common stock were sold, resulting in proceeds of
$171,000. 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.
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Six Month Periods Ended April 30, 2016 and
2015 (Unaudited)
|
NOTE 9.
|
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 made after the first commercial production run of INSULTEX is completed. As of April 30, 2016, the
Company has made payments of $570,000. Additionally, the Company has incurred $17,000 of additional expenses related to shipping,
site improvements and installation of the equipment.
|
NOTE 10.
|
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 six month periods ended April 30, 2016 and 2015:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Apparel
|
|
$
|
193,201
|
|
|
$
|
325,616
|
|
Housewrap
|
|
|
144,963
|
|
|
|
177,165
|
|
Total Revenues
|
|
$
|
338,164
|
|
|
$
|
502,781
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Apparel
|
|
$
|
1,970,346
|
|
|
$
|
2,084,565
|
|
Housewrap
|
|
|
862,473
|
|
|
|
354,635
|
|
Total
|
|
$
|
2,832,819
|
|
|
$
|
2,439,200
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
|
|
Housewrap
|
|
$
|
88,299
|
|
|
$
|
-
|
|
Total
|
|
$
|
88,299
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
Apparel
|
|
$
|
921
|
|
|
$
|
945
|
|
Housewrap
|
|
|
6,684
|
|
|
|
3,866
|
|
Total
|
|
$
|
7,605
|
|
|
$
|
4,811
|
|
INNOVATIVE DESIGNS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Six Month Periods Ended April 30, 2016 and
2015 (Unaudited)
|
NOTE 11.
|
SUBSEQUENT EVENTS
|
The Company has evaluated subsequent
events in accordance with ASC Topic 855, “
Subsequent Events
”, through June 17, 2016, which is the date financial
statements were available to be issued. No
subsequent event items were identified except the item
discussed below by the Company.
On May 24, 2016, the Company was
informed by staff of the Federal Trade Commission that a non-public investigation concerning the R value of the Company’s
INSULTEX House Wrap products was complete. The Company is commencing discussion with the staff of the Federal Trade Commission
regarding potential resolution to these matters.
INNOVATIVE DESIGNS, INC.