x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934.
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934.
|
Delaware
|
03-0465528
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Page
No.
|
||||
Part
I —
Financial Information
|
|
|||
|
||||
Item
1.
|
Condensed
Financial Statements (unaudited)
|
|
||
|
||||
Condensed
Balance Sheets at April 30, 2007 and October 31, 2006
|
1
|
|||
|
||||
Condensed
Statements of Operations for the Three Months Ended April 30, 2007
and
2006, Six months ended April 30, 2007 and 2006
|
2
|
|||
|
||||
Condensed
Statement of Changes in Stockholders’ Deficit at April 30, 2007 and
October 31, 2006
|
3
|
|||
|
||||
Condensed
Statements of Cash Flows for the Six Months Ended April 30, 2007
and
2006
|
4
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|||
|
||||
Notes
to Condensed Financial Statements
|
5
-
8
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|||
|
||||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
8
-
11
|
||
|
||||
Item
3.
|
Controls
and Procedures
|
11
|
||
|
||||
Part
II — Other Information
|
|
|||
|
||||
Item
6.
|
Exhibits
|
12
|
2007
|
|
2006
|
|||||
CURRENT
ASSETS:
|
|||||||
Cash
|
$
|
57,449
|
$
|
66,275
|
|||
Accounts
receivable
|
250,496
|
283,251
|
|||||
Inventory
|
795,445
|
820,413
|
|||||
Other
assets
|
8,679
|
11,572
|
|||||
Total
current assets
|
1,112,069
|
1,181,511
|
|||||
PROPERTY
AND EQUIPMENT, NET
|
18,103
|
20,497
|
|||||
TOTAL
ASSETS
|
$
|
1,130,172
|
$
|
1,202,008
|
|||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Current
liabilities not subject to compromise:
|
|||||||
Accounts
payable
|
$
|
6,881
|
$
|
6,881
|
|||
Current
portion of notes payable
|
114,700
|
391,412
|
|||||
Accrued
interest expense on debt not subject to compromise
|
78,508
|
62,200
|
|||||
Current
liabilities not subject to compromise
|
200,089
|
460,493
|
|||||
Current
liabilities subject to compromise:
|
|||||||
Accounts
payable - related party
|
28,220
|
28,220
|
|||||
Current
portion of related party debt
|
111,000
|
111,000
|
|||||
Due
to shareholders
|
101,500
|
41,500
|
|||||
Accrued
expenses
|
481
|
4,925
|
|||||
Accrued
liability related to arbitration award
|
4,176,000
|
4,176,000
|
|||||
Deferred
revenue
|
199,512
|
213,781
|
|||||
Current
liabilities subject to compromise
|
4,616,713
|
4,575,426
|
|||||
Total
current liabilities
|
4,816,802
|
5,035,919
|
|||||
LONG-TERM
LIABILITIES NOT SUBJECT TO COMPROMISE:
|
|||||||
Long-term
liabilities not subject to compromise:
|
|||||||
Long-term
portion of notes payable
|
580,047
|
426,458
|
|||||
Total
long term liabilities not subject to compromise
|
580,047
|
426,458
|
|||||
TOTAL
LIABILITIES
|
5,396,849
|
5,462,377
|
|||||
STOCKHOLDERS'
DEFICIT:
|
|||||||
Preferred
stock, $.0001 par value, 100,000,000 shares authorized
|
|||||||
Common
stock, $.0001 par value, 500,000,000 shares
|
|||||||
authorized,
16,901,193 and 19,224,291 shares
|
|||||||
issued
and outstanding
|
1,691
|
1,691
|
|||||
Additional
paid in capital
|
4,971,084
|
4,971,084
|
|||||
Accumulated
deficit
|
(9,239,452
|
)
|
(9,233,144
|
)
|
|||
Total
stockholders' (deficit)
|
(4,266,677
|
)
|
(4,260,369
|
)
|
|||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
1,130,172
|
$
|
1,202,008
|
Three
Months Ended April 30,
|
Six
Months Ended April 30,
|
||||||||||||
2007
|
2006
|
2006
|
2005
|
||||||||||
REVENUE
|
$
|
42,951
|
$
|
7,138
|
$
|
258,634
|
$
|
19,379
|
|||||
OPERATING
EXPENSES:
|
|||||||||||||
Cost
of sales
|
18,038
|
2,998
|
103,946
|
8,139
|
|||||||||
Non-cash
stock
|
|||||||||||||
compensation
|
-
|
-
|
-
|
168,000
|
|||||||||
Selling,
general and
|
|||||||||||||
administrative
expenses
|
64,658
|
82,606
|
134,352
|
142,128
|
|||||||||
82,696
|
85,604
|
238,298
|
318,267
|
||||||||||
(Loss)/income
from operations
|
(39,745
|
)
|
(78,466
|
)
|
20,336
|
(298,888
|
)
|
||||||
OTHER
INCOME AND (EXPENSE):
|
|||||||||||||
Interest
income (expense)
|
(19,445
|
)
|
395,006
|
(26,644
|
)
|
390,868
|
|||||||
Extinguishment
of
|
|||||||||||||
related
party debt
|
-
|
568,144
|
-
|
568,144
|
|||||||||
Total
other income
|
|||||||||||||
and
(expense)
|
(19,445
|
)
|
963,150
|
(26,644
|
)
|
959,012
|
|||||||
NET
(LOSS)/INCOME
|
$
|
(59,190
|
)
|
$
|
884,684
|
$
|
(6,308
|
)
|
$
|
660,124
|
|||
Per
share information -
|
|||||||||||||
basic
and fully diluted
|
|||||||||||||
Weighted
Average
|
|||||||||||||
Shares
Outstanding
|
16,906,193
|
18,470,740
|
16,906,028
|
19,032,617
|
|||||||||
Net
income/(loss) per share
|
$
|
(.004
|
)
|
$
|
0.048
|
$
|
(.001
|
)
|
$
|
0.035
|
Common
Stock
|
Additional
|
|||||||||||||||
Shares
|
Amount
|
Paid
in Capital
|
Retained
Deficit
|
Total
|
||||||||||||
Balance
at October 31, 2005
|
19,224,291
|
$
|
1,923
|
$
|
4,813,676
|
$
|
(5,032,704
|
)
|
$
|
(217,105
|
)
|
|||||
Shares
issued for services
|
625,000
|
63
|
259,688
|
-
|
259,751
|
|||||||||||
Shares
issued for cash
|
611,000
|
61
|
261,059
|
-
|
261,120
|
|||||||||||
Shares
returned for
nonperformance
of services
|
(1,650,000
|
)
|
(165
|
)
|
(168,035
|
)
|
200
|
(168,000
|
)
|
|||||||
Reverse
shares issued for
extinguishment
of note payable
|
(1,909,098
|
)
|
(191
|
)
|
(763,448
|
)
|
-
|
(763,639
|
)
|
|||||||
Reversal
of license agreement
with
RMF Global
|
-
|
-
|
568,144
|
-
|
568,144
|
|||||||||||
Net
loss
|
-
|
-
|
-
|
(4,200,640
|
)
|
(4,200,640
|
)
|
|||||||||
Balance
at October 31, 2006
|
16,901,193
|
1,691
|
4,971,084
|
(9,233,144
|
)
|
(4,260,369
|
)
|
|||||||||
Net
loss
|
-
|
-
|
-
|
(6,308
|
)
|
(6,308
|
)
|
|||||||||
Balance
at April 30, 2007
|
16,901,193
|
$
|
1,691
|
$
|
4,971,084
|
$
|
(9,239,452
|
)
|
$
|
(4,266,677
|
)
|
For
the Six Months Ended
|
|||||||
April
30, 2007
|
April
30, 2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
income (loss)
|
$
|
(6,308
|
)
|
$
|
660,124
|
||
Adjustments
to reconcile net income (loss) to cash
|
|||||||
provided
by (used in) operating activities:
|
|||||||
Common
stock issued for services
|
-
|
174,000
|
|||||
Depreciation
and amortization
|
5,287
|
6,926
|
|||||
Extinguishment
of related party debt
|
-
|
(568,144
|
)
|
||||
Interest
(reversal) added to related party note
|
-
|
(395,495
|
)
|
||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
32,755
|
50,263
|
|||||
Inventory
|
24,968
|
(126,977
|
)
|
||||
Accounts
payable
|
-
|
(6,627
|
)
|
||||
Accrued
expenses
|
(4,444
|
)
|
7,120
|
||||
Prepaid
commissions
|
-
|
(8,500
|
)
|
||||
Deferred
revenue
|
(14,269
|
)
|
-
|
||||
Accrued
interest on notes payable
|
16,308
|
(8,321
|
)
|
||||
Net
cash provided by (used in) operating activities
|
54,297
|
(215,631
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Payments
on note payable
|
(123,123
|
)
|
(38,952
|
)
|
|||
Receipt
of shareholder advances
|
60,000
|
-
|
|||||
Shareholder
advances
|
-
|
27,000
|
|||||
Proceeds
from note payable
|
-
|
150,400
|
|||||
Common
stock issued for cash
|
-
|
96,120
|
|||||
Net
cash (used in) provided by financing activities
|
(63,123
|
)
|
234,568
|
||||
Net
increase (decrease) in cash
|
$
|
(8,826
|
)
|
$
|
18,937
|
||
Cash
- beginning of year
|
$
|
66,275
|
$
|
42,434
|
|||
Cash
- end of period
|
$
|
57,449
|
$
|
61,371
|
|||
Supplemental
cash flow information:
|
|||||||
Cash
paid for interest
|
$
|
4,250
|
$
|
-
|
1. |
BASIS
OF PRESENTATION - INTERIM FINANCIAL STATEMENTS
|
2.
|
ADOPTION
OF SFAS NO. 123 (REVISED 2004) SHARE-BASED
PAYMENT
|
3. |
EARNINGS
PER SHARE
|
4.
|
GOING
CONCERN
|
5. |
CONTINGENCIES
AND UNCERTAINTIES
|
6. |
SUBSEQUENT
EVENT
|
· |
Formulating
and developing our business plan;
|
· |
Raising
funding either through the sale of our common stock or through
borrowing;
|
· |
Developing
our marketing plan;
|
· |
Completing
the development, design and prototypes of our products,
and
|
· |
Obtaining
retail stores to offer and sell our
products.
|
Three
Months
Ended
April
30, 2007
|
%
of
Sales
|
Three
Months
Ended
April
30, 2006
|
%
of
Sales
|
$
Increase
(Decrease)
|
%
Change
|
||||||||||||||
REVENUE
|
$
|
42,951
|
100
|
%
|
$
|
7,138
|
100
|
%
|
$
|
35,813
|
501.7
|
%
|
|||||||
OPERATING
EXPENSES
|
|||||||||||||||||||
Cost
of sales
|
18,038
|
42.0
|
%
|
2,998
|
42.0
|
%
|
15,040
|
501.7
|
%
|
||||||||||
Selling,
general
and
administrative
expenses
|
64,658
|
150.5
|
%
|
82,606
|
1,157.3
|
%
|
(17,948
|
)
|
(21.7
|
%)
|
|||||||||
82,696
|
192.5
|
%
|
85,604
|
1,199.3
|
%
|
(2,908
|
)
|
(3.4
|
%)
|
||||||||||
Income
(loss)
from
operations
|
(39,745
|
)
|
(92.5
|
%)
|
(78,466
|
)
|
(1,099.2
|
)%
|
38,721
|
(49.3
|
%)
|
||||||||
OTHER
INCOME (EXPENSE)
|
|||||||||||||||||||
Interest
income
(expense)
|
(19,445
|
)
|
(45.3
|
%)
|
395,006
|
5,533.8
|
%
|
(414,451
|
)
|
(104.9
|
%)
|
||||||||
Extinguishment
of
related party
debt
|
-
|
-
|
568,144
|
7,959.4
|
%
|
(568,144
|
)
|
(100
|
%)
|
||||||||||
(19,445
|
)
|
(45.3
|
%)
|
963,150
|
13,493.2
|
%
|
(982,595
|
)
|
(102.0
|
%)
|
|||||||||
Net
income (loss)
|
$
|
(59,190
|
)
|
(137.8
|
%)
|
$
|
884,684
|
12,394.0
|
%
|
$
|
(943,874
|
)
|
(106.7
|
%)
|
Six
Months
Ended
April
30, 2007
|
%
of
Sales
|
Six
Months
Ended
April
30, 2006
|
%
of
Sales
|
$
Increase
(Decrease)
|
%
Change
|
||||||||||||||
REVENUE
|
$
|
258,634
|
100
|
%
|
$
|
19,379
|
100
|
%
|
$
|
239,255
|
1,234.6
|
%
|
|||||||
OPERATING
EXPENSES
|
|||||||||||||||||||
Cost
of sales
|
103,946
|
40.2
|
%
|
8,139
|
42.0
|
%
|
95,807
|
1,177.1
|
%
|
||||||||||
Non-stock
compensation
|
-
|
168,000
|
866.9
|
%
|
(168,000
|
)
|
(100
|
%)
|
|||||||||||
Selling,
general
and
administrative
expenses
|
134,352
|
51.9
|
%
|
142,128
|
733.4
|
%
|
(7,776
|
)
|
5.5
|
%
|
|||||||||
238,298
|
92.1
|
%
|
318,267
|
1,642.3
|
%
|
(79,969
|
)
|
25.1
|
%
|
||||||||||
Income
(loss)
from
operations
|
20,336
|
7.9
|
%
|
(298,888
|
)
|
(1,542.3
|
)%
|
319,224
|
(106.8
|
%)
|
|||||||||
OTHER
INCOME (EXPENSE)
|
|||||||||||||||||||
Interest
income
(expense)
|
(26,644
|
)
|
(10.3
|
%)
|
390,868
|
2,017.0
|
%
|
(417,512
|
)
|
(106.8
|
%)
|
||||||||
Extinguishment
of
related party
debt
|
-
|
-
|
568,144
|
2,931.8
|
%
|
(568,144
|
)
|
(100
|
%)
|
||||||||||
(26,644
|
)
|
(10.3
|
%)
|
959,012
|
4,948.8
|
%
|
(985,656
|
)
|
(102.8
|
%)
|
|||||||||
Net
(loss) income
|
$
|
(6,308
|
)
|
(2.4
|
%)
|
$
|
660,124
|
3,406.4
|
%
|
$
|
(666,432
|
)
|
(100.9
|
%)
|
Management
has developed and implemented a policy and procedures for reviewing,
on a
quarterly basis, our disclosure controls and procedures and our internal
control over financial reporting. Management, including our principal
executive and financial officer, evaluated the effectiveness of the
design
and operation of disclosure controls and procedures as of April 30,
2007
and, based on their evaluation, our principal executive and financial
officers have concluded that these controls and procedures are operating
effectively. Disclosure controls and procedures are controls and
other
procedures that are designed to ensure that information we are required
to
disclose in the reports we file or submit under the Exchange Act
is
recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be
disclosed in the reports we file under the Exchange Act is accumulated
and
communicated to management, including the principal executive and
financial officers, as appropriate to allow timely decisions regarding
required disclosure.
|
*3.1
|
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
|
|
32.1
|
Section
1350 Certification of Chief Executive Officer
|
|
32.2
|
Section
1350 Certification of Chief Financial Officer
|
|
* | Incorporated by reference to the Company’s registration statement on Form SB-2, filed March 11, 2003 |
Innovative
Designs, Inc.
Registrant
|
||
|
|
|
Date: August 23, 2007 | /s/ Joseph Riccelli | |
Joseph
Riccelli, Chief Executive Officer
|
Date: August 23, 2007 | /s/ Anthony Fonzi | |
Anthony
Fonzi, Chief Financial
Officer
|