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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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
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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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incorporation
or organization)
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Identification
No.)
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Large
Accelerated Filer o
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Accelerated
Filer o
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Non-accelerated
Filer o
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Smaller
reporting company x
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·
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Section
302 Certifications
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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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Condensed
Balance Sheets at July 31, 2009 (Unaudited) and October 31,
2008
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1
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Condensed
Statements of Operations for the Three Months Ended July 31, 2009 and
2008, Nine Months Ended July 31, 2009 and 2008
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2
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Condensed
Statement of Changes in Stockholders’ Equity (Deficit) at July
31, 2009 (Unaudited) and October 31, 2008
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3
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Condensed
Statements of Cash Flows for the Nine Months Ended July 31, 2009 and
2008
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4
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Notes
to Condensed Financial Statements
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5 -
8
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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9 -
12
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Item
T.
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Controls
and Procedures
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12
- 13
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Part
II — Other Information
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||
Item
2.
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Unregistered
Sale of Equity Securities and Use of Proceeds
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14
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Item
6.
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Exhibits
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15
- 15
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2009
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2008
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|||||||
ASSETS
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||||||||
CURRENT
ASSETS:
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||||||||
Cash
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$ | 15,836 | $ | 22,523 | ||||
Accounts
receivable
|
14,592 | 159,128 | ||||||
Inventory
|
813,166 | 732,295 | ||||||
Deposits
on inventory
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117,061 | 305,000 | ||||||
Total
current assets
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960,655 | 1,218,946 | ||||||
LONG-TERM
ASSETS
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||||||||
Property
and equipment - net
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7,083 | 10,675 | ||||||
Total
long-term assets
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7,083 | 10,675 | ||||||
TOTAL
ASSETS
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$ | 967,738 | $ | 1,229,621 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
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$ | 43,643 | $ | 88,889 | ||||
Customer
deposits
|
- | 9,823 | ||||||
Current
portion of notes payable
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13,076 | 169,530 | ||||||
Accrued
interest expense
|
92,000 | 118,000 | ||||||
Accounts
payable - related party
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28,220 | 28,220 | ||||||
Related
party debt
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65,000 | 128,000 | ||||||
Shareholders
advances
|
295,164 | 328,500 | ||||||
Accrued
expenses
|
728 | 17,485 | ||||||
Total
current liabilities
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537,831 | 888,447 | ||||||
LONG-TERM
LIABILITIES:
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||||||||
Long-term
portion of notes payable
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388,626 | 397,115 | ||||||
Total
long term liabilities
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388,626 | 397,115 | ||||||
TOTAL
LIABILITIES
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926,457 | 1,285,562 | ||||||
STOCKHOLDERS'
EQUITY (DEFICIT):
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||||||||
Preferred
stock, $.0001 par value, 100,000,000 shares authorized
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||||||||
Common
stock, $.0001 par value, 500,000,000 shares authorized, 18,703,743 and
18,455,243 shares issued and outstanding
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1,873 | 1,846 | ||||||
Additional
paid in capital
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5,638,018 | 5,565,045 | ||||||
Accumulated
deficit
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(5,598,610 | ) | (5,622,832 | ) | ||||
Total
stockholders' equity (deficit)
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41,281 | (55,941 | ) | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$ | 967,738 | $ | 1,229,621 |
Three Months Ended July 31,
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Nine Months Ended July 31,
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|||||||||||||||
2009
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2008
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2009
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2008
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|||||||||||||
REVENUE
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$ | 26,616 | $ | 85,141 | $ | 675,446 | $ | 353,457 | ||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Cost
of sales
|
11,810 | 74,127 | 298,023 | 382,425 | ||||||||||||
Non-stock
compensation
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(9,300 | ) | 14,000 | 44,000 | 23,600 | |||||||||||
Selling,
general and administrative expenses
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76,066 | 84,055 | 296,373 | 308,128 | ||||||||||||
78,576 | 172,182 | 638,396 | 714,153 | |||||||||||||
(Loss)/income
from operations
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(51,960 | ) | (87,041 | ) | 37,050 | (360,696 | ) | |||||||||
OTHER
(EXPENSE)/INCOME:
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||||||||||||||||
Interest
expense
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(4,456 | ) | (566 | ) | (12,828 | ) | (34,572 | ) | ||||||||
Reversal
of arbitration award
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- | 4,176,000 | - | 4,176,000 | ||||||||||||
Total
other (expense)/income
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(4,456 | ) | 4,175,434 | (12,828 | ) | 4,141,428 | ||||||||||
Net
(loss)/income before income taxes
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(56,416 | ) | 4,175,434 | 24,222 | 3,780,732 | |||||||||||
Income
taxes
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- | - | - | - | ||||||||||||
NET
(LOSS)/INCOME
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$ | (56,416 | ) | $ | 4,088,393 | $ | 24,222 | $ | 3,780,732 | |||||||
Weighted
Average Shares Outstanding
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18,646,743 | 18,034,743 | 19,321,799 | 18,052,743 | ||||||||||||
Net
income/(loss) per share
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$ | (.003 | ) | $ | 22.7 | $ | .001 | $ | 20.9 |
Common Stock
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Additional
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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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||||||||||||||||
Balance
at October 31, 2007
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17,096,193 | $ | 1,711 | $ | 5,049,064 | $ | (9,180,051 | ) | $ | (4,129,276 | ) | |||||||||
Shares
issued for cash
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505,050 | 50 | 208,716 | - | 208,766 | |||||||||||||||
Shares
issued for services
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594,000 | 59 | 216,291 | - | 216,350 | |||||||||||||||
Shares
issued for extinguishment of debt
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260,000 | 26 | 90,974 | - | 91,000 | |||||||||||||||
Net
income
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- | - | - | 3,557,219 | 3,557,219 | |||||||||||||||
Balance
at October 31, 2008
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18,455,243 | 1,846 | 5,565,045 | (5,622,832 | ) | (55,941 | ) | |||||||||||||
Shares
issued for services
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185,500 | 21 | 54,779 | - | 54,800 | |||||||||||||||
Shares
issued for cash
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90,000 | 9 | 28,991 | - | 29,000 | |||||||||||||||
Return
of shares for non-performance of services
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(27,000 | ) | (3 | ) | (10,797 | ) | - | (10,800 | ) | |||||||||||
Net
income
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- | - | - | 24,222 | 24,222 | |||||||||||||||
Balance
at July 31, 2009
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18,703,743 | $ | 1,873 | $ | 5,638,018 | $ | (5,598,610 | ) | $ | 41,281 |
For
the Nine Months Ended
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||||||||
July 31, 2009
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July 31, 2008
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|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
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||||||||
Net
income
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$ | 24,222 | $ | 3,780,732 | ||||
Adjustments
to reconcile net income to cash provided by (used in) operating
activities:
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||||||||
Common
stock issued for services
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54,800 | 23,600 | ||||||
Depreciation
and amortization
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3,592 | 1,879 | ||||||
Common
stock returned for noncompliance of services
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(10,800 | ) | - | |||||
Accrued
liability related to arbitration
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- | (4,176,000 | ) | |||||
Changes
in operating assets and liabilities:
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||||||||
Accounts
receivable
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144,536 | 133,550 | ||||||
Inventory
|
(80,871 | ) | 154,702 | |||||
Deposits
on inventory
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187,939 | (285,000 | ) | |||||
Accounts
payable
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(45,246 | ) | (915 | ) | ||||
Accrued
expenses
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(16,757 | ) | 16,864 | |||||
Customer
deposits
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(9,823 | ) | 58,750 | |||||
Accrued
interest on notes payable
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(26,000 | ) | 6,410 | |||||
Net
cash provided by (used in) operating activities
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225,592 | (285,428 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Payments
on note payable
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(164,943 | ) | (54,866 | ) | ||||
Payment
on note payable - related party
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(63,000 | ) | (32,800 | ) | ||||
Proceeds
from shareholder advances
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- | 78,000 | ||||||
Payment
of shareholder advances
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(33,336 | ) | - | |||||
Common
stock issued for cash
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29,000 | 349,513 | ||||||
Net
cash (used in) provided by financing activities
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(232,279 | ) | 339,847 | |||||
Net
(decrease)/increase in cash
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$ | (6,687 | ) | $ | 54,419 | |||
Cash
- beginning of year
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$ | 22,523 | $ | 6,555 | ||||
Cash
- end of period
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$ | 15,836 | $ | 60,974 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for interest
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$ | 12,832 | $ | 566 |
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, 2008. 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, 2009 or any future
period.
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2.
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ADOPTION OF SFAS NO.
123 (REVISED 2004) SHARE-BASED
PAYMENT
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3.
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EARNINGS PER
SHARE
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4.
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GOING CONCERN AND
LEGAL PROCEEDINGS
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5.
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COMMON
STOCK
|
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·
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Completing
the development, design and prototypes of our
products,
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·
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Obtaining
retail stores or sales agents to offer and sell our products,
and
|
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·
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Developing
our website to sell more of our
products.
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Three Months
Ended
July 31, 2009
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% of
Sales
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Three Months
Ended
July 31, 2008
|
% of
Sales
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$ Increase
(Decrease)
|
% Change
|
|||||||||||||||||||
REVENUE
|
$ | 26,616 | 100 | % | $ | 85,141 | 100 | % | $ | (58,525 | ) | (68.7 | )% | |||||||||||
OPERATING
EXPENSES
|
||||||||||||||||||||||||
Cost
of sales
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11,810 | 44.4 | % | 74,127 | 87.1 | % | (62,317 | ) | (84.1 | )% | ||||||||||||||
Non-stock
compensation
|
(9,300 | ) | (34.9 | )% | 14,000 | 16.4 | % | (23,300 | ) | (166.4 | )% | |||||||||||||
Selling,
general and administrative expenses
|
76,066 | 285.8 | % | 84,055 | 98.7 | % | (7,989 | ) | (9.5 | )% | ||||||||||||||
78,576 | 295.2 | % | 172,182 | 202.2 | % | (93,606 | ) | (54.4 | )% | |||||||||||||||
Loss
from operations
|
(51,960 | ) | 195.2 | % | (87,041 | ) | (102.2 | )% | 35,081 | 40.3 | % | |||||||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||||||||||
Interest
expense
|
(4,456 | ) | (16.7 | )% | (566 | ) | (.67 | )% | (3,890 | ) | (687.3 | )% | ||||||||||||
Reversal
of arbitration award
|
- | - | 4,176,000 | 4,904.8 | % | (4,176,000 | ) | (100 | )% | |||||||||||||||
(4,456 | ) | (16.7 | )% | 4,175,434 | 4,904.1 | % | (4,179,894 | ) | (100.1 | )% | ||||||||||||||
Net
(loss)/income
|
$ | (56,416 | ) | (212.0 | )% | $ | 4,088,393 | 4,801.9 | % | $ | (4,144,809 | ) | (101.4 | )% |
Nine Months
Ended
July 31, 2009
|
% of
Sales
|
Nine Months
Ended
July 31, 2008
|
% of
Sales
|
$ Increase
(Decrease)
|
% Change
|
|||||||||||||||||||
REVENUE
|
$ | 675,446 | 100 | % | $ | 353,457 | 100 | % | $ | 321,989 | 91.1 | % | ||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||||||||||
Cost
of sales
|
298,023 | 44.1 | % | 382,425 | 108.2 | % | (84,402 | ) | (22.1 | )% | ||||||||||||||
Non-stock
compensation
|
44,000 | 6.5 | % | 23,600 | 6.7 | % | 20,400 | 86.4 | % | |||||||||||||||
Selling,
general and administrative expenses
|
296,373 | 43.9 | % | 308,128 | 87.2 | % | (11,755 | ) | (3.8 | )% | ||||||||||||||
638,396 | 94.5 | % | 714,153 | 202.0 | % | (75,757 | ) | 10.6 | % | |||||||||||||||
Income/(loss)
from operations
|
37,050 | 5.5 | % | (360,696 | ) | (102.0 | )% | 397,746 | 110.3 | % | ||||||||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||||||||||
Interest
(expense) income
|
(12,828 | ) | (1.9 | )% | (34,572 | ) | (9.8 | )% | 21,744 | (62.9 | )% | |||||||||||||
Reversal
of arbitration award
|
- | - | 4,176,000 | 1,181.5 | % | 4,176,000 | 100 | % | ||||||||||||||||
(12,828 | ) | (1.9 | )% | 4,141,428 | (1,171.7 | )% | (4,128,400 | ) | (99.7 | )% | ||||||||||||||
Net
income/(loss)
|
$ | 24,222 | 3.6 | % | $ | 3,780,732 | 1,069.6 | % | $ | (3,756,510 | ) | (99.4 | )% |
*3.1
|
Certificate
of Incorporation
|
*3.2
|
By
Laws
|
31.1
|
Rules
13a–15(e) and 15d-15(e) 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
|
Innovative Designs,
Inc.
|
|
Registrant
|
|
Date:
January 9, 2010
|
/s/ Joseph
Riccelli
|
Joseph
Riccelli, Chief Executive Officer
|
|
and
Chief Financial
Officer
|