Innovative Designs (IVDN) 10-Q 24 Sep 18 2018 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Jul. 31, 2018	Sep. 18, 2018
Document And Entity Information
Entity Registrant Name	INNOVATIVE DESIGNS INC
Entity Central Index Key	1,190,370
Document Type	10-Q
Trading Symbol	IVDN
Document Period End Date	Jul. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--10-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		27,334,560
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,018

CONDENSED BALANCE SHEETS (Unaud

CONDENSED BALANCE SHEETS (Unaudited) - USD ($)	Jul. 31, 2018	Oct. 31, 2017
CURRENT ASSETS
Cash	$ 112,130	$ 214,871
Accounts receivable - net of allowance for doubtful accounts of $8,623 and $0 as of July 31, 2018 and October 31, 2017, respectively	917	23,805
Inventory - net of obsolete inventory reserve of $75,468 and $51,000 as of July 31, 2018 and October 31, 2017, respectively	757,894	729,845
Inventory on consignment	1,625	1,625
Deposits on inventory	57,330	70,000
Prepaid expenses	13,320	14,653
Total current assets	943,216	1,054,799
PROPERTY AND EQUIPMENT - NET	138,486	160,862
OTHER ASSETS
Advance to employees	8,200	4,000
Deposits on equipment	617,000	617,000
Total other assets	625,200	621,000
TOTAL ASSETS	1,706,902	1,836,661
CURRENT LIABILITIES
Accounts payable	193,910	129,278
Current portion of notes payable	17,718	18,096
Accrued interest expense	56,832	44,184
Due to shareholders	146,850	118,500
Accrued expenses	10,775	25,102
Total current liabilities	426,085	335,160
Long-term portion of notes payable	104,611	119,262
TOTAL LIABILITIES	530,696	454,422
STOCKHOLDERS' EQUITY
Common stock, $0.0001 par value, 100,000,000 shares authorized, and 27,234,560 and 26,392,310 issued and outstanding as of July 31, 2018 and October 31, 2017	2,724	2,639
Additional paid-in capital	9,977,787	9,725,412
Accumulated deficit	(8,804,305)	(8,345,812)
Total stockholders' equity	1,176,206	1,382,239
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 1,706,902	$ 1,836,661

CONDENSED BALANCE SHEETS (Unau3

CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Jul. 31, 2018	Oct. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 8,623	$ 0
Inventory obsolete reserve	$ 75,468	$ 51,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized	100,000,000	100,000,000
Common stock, issued	27,234,560	26,392,310
Common stock, outstanding	27,234,560	26,392,310

CONDENSED STATEMENTS OF OPERATI

CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Income Statement [Abstract]
REVENUES - NET	$ 34,149	$ 41,811	$ 167,515	$ 250,183
OPERATING EXPENSES:
Cost of sales	52,415	39,463	134,877	145,537
Selling, general and administrative expenses	127,604	183,868	473,303	562,080
Total Operating Expenses	180,019	223,331	608,180	707,617
LOSS FROM OPERATIONS	(145,870)	(181,520)	(440,665)	(457,434)
OTHER EXPENSE
Miscellaneous expense			1,034	2,559
Interest expense	8,351	5,446	16,794	16,099
Total other expense	8,351	5,446	17,828	18,658
NET LOSS	$ (154,221)	$ (186,966)	$ (458,493)	$ (476,092)
PER SHARE INFORMATION
Net Loss Per Common Share (in dollars per share)	$ (0.006)	$ (0.007)	$ (0.017)	$ (0.019)
Weighted Average Number of Common Shares Outstanding (in shares)	27,228,038	25,616,962	26,997,658	25,461,892

CONDENSED STATEMENTS OF CHANGES

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Balance at beginning at Oct. 31, 2016	$ 2,537	$ 9,455,674	$ (7,712,757)	$ 1,745,454
Balance at beginning (in shares) at Oct. 31, 2016	25,370,310
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued for services	$ 30	97,670		97,700
Shares issued for services (in shares)	300,000
Sale of stock	$ 72	172,068		172,140
Sale of stock (in shares)	722,000
Net loss			(633,055)	(633,055)
Balance at end at Oct. 31, 2017	$ 2,639	9,725,412	(8,345,812)	1,382,239
Balance at end (in shares) at Oct. 31, 2017	26,392,310
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued for services	$ 11	30,889		30,900
Shares issued for services (in shares)	110,000
Sale of stock	$ 74	221,486		221,560
Sale of stock (in shares)	732,250
Net loss			(458,493)	(458,493)
Balance at end at Jul. 31, 2018	$ 2,724	$ 9,977,787	$ (8,804,305)	$ 1,176,206
Balance at end (in shares) at Jul. 31, 2018	27,234,560

CONDENSED STATEMENTS OF CASH FL

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (458,493)	$ (476,092)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for doubtful accounts	8,623
Allowance for obsolete inventory	24,468
Common stock issued for services	30,900	47,700
Depreciation	26,634	22,856
(Increase) decrease from changes in:
Accounts receivable	14,265	57,581
Inventory	(52,517)	142,212
Deposits on inventory	12,670
Prepaid expenses	1,333	(376)
Advance to employees	(4,200)
Increase (decrease) from changes in:
Accounts payable	64,632	34,497
Accrued interest expense	12,648	5,599
Accrued expenses	(14,327)	(31,798)
Net cash used in operating activities	(333,364)	(197,821)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(4,258)	(14,900)
Net cash used in investing activities	(4,258)	(14,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock	221,560	40,590
Proceeds from shareholder advances	53,350
Payments on shareholder advances	(25,000)	(43,900)
Payments on notes payable	(15,029)	(21,838)
Net cash provided by (used in) financing activities	234,881	(25,148)
Net decrease in cash	(102,741)	(237,869)
CASH, BEGINNING OF YEAR	214,871	502,777
CASH, END OF THE PERIOD	112,130	264,908
Supplemental disclosure of cash flow information:
Cash paid for interest	$ 4,146	$ 11,001

ACCOUNTING CHANGES AND ERROR CO

ACCOUNTING CHANGES AND ERROR CORRECTIONS	9 Months Ended
	Jul. 31, 2018
Accounting Changes and Error Corrections [Abstract]
ACCOUNTING CHANGES AND ERROR CORRECTIONS	NOTE 1.

BASIS OF PRESENTATION

BASIS OF PRESENTATION	9 Months Ended
	Jul. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION	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 and nine month periods ended July 31, 2018 and 2017 are not necessarily indicative of operating results for the full year.

GOING CONCERN

GOING CONCERN	9 Months Ended
	Jul. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
GOING CONCERN	NOTE 3. GOING CONCERN The Company had a net loss of $458,493 and a negative cash flow from operations of $333,364 for the nine month period ended July 31, 2018. In addition, the Company has an accumulated deficit of $8,804,305. Management of the Company has represented that they will be able to continue to support the Company’s cash needs through sales, sales of Company stock, and borrowings from private parties.

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE	9 Months Ended
	Jul. 31, 2018
Accounts Receivable, Net [Abstract]
ACCOUNTS RECEIVABLE	NOTE 4. ACCOUNTS RECEIVABLE Management evaluates its receivables on a quarterly basis to assess the validity of remaining receivables. Management has determined that there is significant doubt regarding the receivable balance over 90 days of $8,623 as of the quarter ended July 31, 2018 and an allowance is applied on this receivable balance over 90 days. No allowance was deemed necessary for the fiscal year ended October 31, 2017.

INVENTORY

INVENTORY	9 Months Ended
	Jul. 31, 2018
Inventory Disclosure [Abstract]
INVENTORY	NOTE 5. 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 apparel inventory at July 31, 2018 and October 31, 2017 of $75,468 and $51,000, respectively. Management has determined that no allowance is currently necessary on their House Wrap Inventory. Management will continue to evaluate its obsolete inventory reserve throughout the year and make adjustments as needed.

EARNINGS PER SHARE

EARNINGS PER SHARE	9 Months Ended
	Jul. 31, 2018
PER SHARE INFORMATION
EARNINGS PER SHARE	NOTE 6. 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”

INCOME TAXES

INCOME TAXES	9 Months Ended
	Jul. 31, 2018
Income Tax Disclosure [Abstract]
INCOME TAXES	NOTE 7. INCOME TAXES The Company accounts for income taxes in accordance with ASC Topic 740 “Income Taxes” 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.

SHIPPING AND HANDLING COSTS

SHIPPING AND HANDLING COSTS	9 Months Ended
	Jul. 31, 2018
Shipping And Handling Costs Abstract
SHIPPING AND HANDLING COSTS	NOTE 8. 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 $13,000 and $16,000 for the nine month periods ended July 31, 2018 and 2017, respectively.

COMMON STOCK

COMMON STOCK	9 Months Ended
	Jul. 31, 2018
Equity [Abstract]
COMMON STOCK	NOTE 9. COMMON STOCK During the nine month period ended July 31, 2018, the Company sold 732,250 shares of common stock to seven investors for total proceeds of $221,560. The stock was issued for prices ranging from $0.20 - $0.32 per share. In addition, the Company issued 110,000 shares to three individuals for services performed during the period. The shares issued were valued ranging between $0.18 - $0.40 per share for a total price of $30,900. 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 nine month period ended July 31, 2017, the Company issued 160,000 shares of stock for service. The Company issued one director 30,000 shares at a price of $0.25 per share for services valued at $7,500. The Company issued one stockholder 100,000 shares at a price of $0.30 per share for services valued at $30,000. The Company also issued 30,000 shares of stock to an individual at a price of $0.34 per share for services valued at $10,200. Pursuant to Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Form 10-Q includes new certifications by our principal executive officer and principal financial officer under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. Additionally, for the nine month period ended July 31, 2017, the Company sold stock for a price ranging from $0.18-$0.22 per share. The Company sold 217,000 shares of stock for an aggregate price of $40,590. 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 this transaction. We placed legends on the stock certificates stated that the securities were not registered under the Securities Act and set for the restrictions on their transferability and sale.

DEPOSITS ON EQUIPMENT

DEPOSITS ON EQUIPMENT	9 Months Ended
	Jul. 31, 2018
Deposit Assets [Abstract]
DEPOSITS ON EQUIPMENT	NOTE 10. 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 be made after the first commercial production run of INSULTEX is completed. As of July 31, 2018, the Company has made payments of $500,000 in accordance with the agreement and made a $100,000 pre-payment 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. Due to various environmental regulations regarding propane emitted from the machine into the air and other costs to assemble the machine the Company expects to incur costs in excess of the current deposit agreement. Management of the Company currently can not reasonably estimate the costs.

SEGMENT INFORMATION

SEGMENT INFORMATION	9 Months Ended
	Jul. 31, 2018
Segment Reporting [Abstract]
SEGMENT INFORMATION	NOTE 11. 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 nine month periods ended July 31, 2018 and 2017: 2018 2017 Revenues: Apparel $ 96,971 $ 161,015 House Wrap 70,544 89,168 Total Revenues $ 167,515 $ 250,183 Assets: Apparel $ 498,341 $ 680,465 House Wrap 1,208,561 1,202,835 Total $ 1,706,902 $ 1,883,300 Capital Expenditures: Apparel $ 4,258 $ — Housewrap — $ 14,900 Total $ 4,258 $ 14,900 Depreciation: Apparel $ 8,962 $ 5,184 House Wrap 17,672 17,672 Total $ 26,634 $ 22,856

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS	9 Months Ended
	Jul. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
LEGAL PROCEEDINGS	NOTE 12. 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. A trial date has been set for January 22, 2019. 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.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	9 Months Ended
	Jul. 31, 2018
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 13. SUBSEQUENT EVENTS The Company has evaluated subsequent events in accordance with ASC Topic 855, “ Subsequent Events On August 2, 2018, the Company sold 100,000 shares of stock for total proceeds of $25,000 or $0.25 per share.

SEGMENT INFORMATION (Tables)

SEGMENT INFORMATION (Tables)	9 Months Ended
	Jul. 31, 2018
Segment Reporting [Abstract]
Schedule of business segment information	The following tables present our business segment information for the nine month period ended July 31, 2018 and 2017: 2018 2017 Revenues: Apparel $ 96,971 $ 161,015 House Wrap 70,544 89,168 Total Revenues $ 167,515 $ 250,183 Assets: Apparel $ 498,341 $ 680,465 House Wrap 1,208,561 1,202,835 Total $ 1,706,902 $ 1,883,300 Capital Expenditures: Apparel $ 4,258 $ — Housewrap — $ 14,900 Total $ 4,258 $ 14,900 Depreciation: Apparel $ 8,962 $ 5,184 House Wrap 17,672 17,672 Total $ 26,634 $ 22,856

GOING CONCERN (Details Narrativ

GOING CONCERN (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net loss	$ (154,221)	$ (186,966)	$ (458,493)	$ (476,092)	$ (633,055)
Cash flow from operations			(333,364)	$ (197,821)
Accumulated deficit	$ 8,804,305		$ 8,804,305		$ 8,345,812

ACCOUNTS RECEIVABLE (Details Na

ACCOUNTS RECEIVABLE (Details Narrative) - USD ($)	Jul. 31, 2018	Oct. 31, 2017
Accounts Receivable, Net [Abstract]
Bad debts	$ 8,623	$ 0

INVENTORY (Details Narrative)

INVENTORY (Details Narrative) - USD ($)	Jul. 31, 2018	Oct. 31, 2017
Inventory Disclosure [Abstract]
Inventory valuation reserves	$ 75,468	$ 51,000

SHIPPING AND HANDLING COSTS (De

SHIPPING AND HANDLING COSTS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017
Shipping And Handling Costs Abstract
Shipping and handling costs	$ 52,415	$ 39,463	$ 134,877	$ 145,537

COMMON STOCK (Details Narrative

COMMON STOCK (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Related Party Transaction [Line Items]
Number of shares issued during the period		217,000
Value of shares issued during the period	$ 221,560	$ 40,590	$ 172,140
Value of shares issued for services	$ 30,900		$ 97,700
Maximum [Member]
Related Party Transaction [Line Items]
Share price (in dollars per share)		$ 0.22
Minimum [Member]
Related Party Transaction [Line Items]
Share price (in dollars per share)		$ 0.18
Three Individual [Member]
Related Party Transaction [Line Items]
Number of shares issued for services (in shares)	110,000
Value of shares issued for services	$ 30,900
Three Individual [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Share price for shares issued for services (in dollars per share)	$ 0.40
Three Individual [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Share price for shares issued for services (in dollars per share)	$ 0.18
Seven Individual [Member]
Related Party Transaction [Line Items]
Number of shares issued during the period	732,250
Value of shares issued during the period	$ 221,560
Seven Individual [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Share price (in dollars per share)	$ 0.32
Seven Individual [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Share price (in dollars per share)	$ 0.20
One Director [Member]
Related Party Transaction [Line Items]
Number of shares issued during the period		160,000
Number of shares issued for services (in shares)		30,000
Value of shares issued for services		$ 7,500
Share price for shares issued for services (in dollars per share)		$ 0.25
One Stockholder [Member]
Related Party Transaction [Line Items]
Number of shares issued for services (in shares)		100,000
Value of shares issued for services		$ 30,000
Share price for shares issued for services (in dollars per share)		$ 0.30
Individual [Member]
Related Party Transaction [Line Items]
Number of shares issued for services (in shares)		30,000
Value of shares issued for services		$ 10,200
Share price for shares issued for services (in dollars per share)		$ 0.34

DEPOSITS ON EQUIPMENT (Details

DEPOSITS ON EQUIPMENT (Details Narrative) - USD ($)	Jul. 12, 2015	Jul. 31, 2018
Deposit Assets [Abstract]
Description of assets contract	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.
Purchase price of equipment	$ 700,000
First installment for equipment	300,000
Second installment for equipment	200,000
Third installment for equipment	100,000
Fourth installment for equipment	$ 100,000
Deposits on equipment		$ 500,000
Advanced payment on machine		100,000
Shipping, site improvements and installation of the equipment expenses		$ 17,000

SEGMENT INFORMATION (Details)

SEGMENT INFORMATION (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Jul. 31, 2017	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Segment Reporting Information [Line Items]
Total Revenues	$ 34,149	$ 41,811	$ 167,515	$ 250,183
Assets	1,706,902	1,883,300	1,706,902	1,883,300	$ 1,836,661
Capital Expenditures			4,258	14,900
Depreciation			26,634	22,856
Apparel Segment [Member]
Segment Reporting Information [Line Items]
Total Revenues			96,971	161,015
Assets	498,341	680,465	498,341	680,465
Capital Expenditures			4,258
Depreciation			8,962	5,184
House Wrap Segment [Member]
Segment Reporting Information [Line Items]
Total Revenues			70,544	89,168
Assets	$ 1,208,561	$ 1,202,835	1,208,561	1,202,835
Capital Expenditures				14,900
Depreciation			$ 17,672	$ 17,672

SEGMENT INFORMATION (Details Na

SEGMENT INFORMATION (Details Narrative)	9 Months Ended
	Jul. 31, 2018Segment
Segment Reporting [Abstract]
Number of reportable segments	2

SUBSEQUENT EVENTS (Details Narr

SUBSEQUENT EVENTS (Details Narrative) - USD ($)	Aug. 02, 2018	Jul. 31, 2018	Jul. 31, 2017	Oct. 31, 2017
Sale of stock		$ 221,560	$ 40,590	$ 172,140
Number stock sold (in shares)			217,000
Value of shares issued for services		$ 30,900		$ 97,700
Subsequent Event [Member]
Sale of stock	$ 100,000
Number stock sold (in shares)	25,000
Share price (in dollars per share)	$ 0.25