The following information should be read in conjunction with the financial statements and accompanying notes and in conjunction with the MD&A on Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended.
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding future results of operation, made in this Quarterly Report on Form 10-Q are forward-looking statements. We use words such as expects, believes, intends, and similar expressions to identify forward-looking statements. Forward looking-looking statements reflect management's current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others, , competition in our cold weather markets, our ability to sell out HouseWrap product line, our inability to secure sufficient funding to maintain and/or expand our current level of operations and the seasonality of our cold weather product line. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management's expectations, are described in greater detail in our Annual Report on Form 10-K for the fiscal year ended
October 31, 2020. The Company undertakes no obligation to publicity update or revise any forward-looking statement, whether as a result of new information, future events or otherwise except as required by law. Background
Innovative Designs, Inc.(hereinafter referred to as the "Company", "we" or "our") was formed on June 25, 2002. We market and sell clothing products such as outdoor apparel, and cold weather gear called "Arctic Armor" that are made from INSULTEX, a material with buoyancy, scent block and thermal resistant properties. We also market our House Wrap product line which is a building material with thermal qualities. House Wrap is also made from INSULTEX. We obtain INSULTEX through a license agreement with the owner and manufacturer of the material. Since our formation we have devoted our efforts to: ? Completing the development, design and prototypes of our products, ? Obtaining retail stores or sales agents to offer and sell our products, ? Developing our website to sell more of our products. -12- INNOVATIVE DESIGNS, INC.Results of Operations
Comparison of the completed three-month period
Three Month Three Month Period Ended Period Ended Januray 31, % of Januray 31, % of Increase 2021 Sales 2020 Sales (Decrease) % Change REVENUE - NET
$ 40,017100 % $ 47,426100 % $ (7,409 )-16 %
Cost of sales 18,635 47 % 20,388 43 % (1,753 ) -9 % Selling, general and administrative expenses 72,883 182 % 83,218 175 % (10,335 ) -12 % 91,518 229 % 103,606 218 % (12,088 ) -12 % Loss from operations (51,501 ) -129 % (56,180 ) -118 % 4,679 -8 %
Other income (expense) 28,823 72 % 833 2 % 27,990 3360 % Other Expense Interest expense (4,960 ) -12 % (5,216 ) -11 % 256 -5 % Depreciation expense (8,327 ) -21 % (8,327 ) -18 % - 0 % Net Loss
$ (35,965 )-90 % $ (68,890 )
$ 32,925-48 % Revenues for the three month period ended January 31, 2021were $40,017compared to revenues of $47,426for the three month period ended January 31, 2020. The decrease in revenue is attributable a decrease in our apparel products revenue, $33,937for the period compared to $ 43,661for the three month period ended January 31, 2020. The decrease in revenue for our apparel products is attributable, in part, to the fact that during the period we devoted a significant portion of our limited resources to the Federal Trade Commissionlegal matter. HouseWrap sales were $6,080for the period compared to $3,765in sales for the period ended January 31, 2020. We believe our HouseWrap sales were adversely affected by the COVID pandemic as many contractors could not access other building materials on account of supply chain bottlenecks. See Note 13 of the Notes to the Condensed Financial Statements appearing elsewhere in this Report for a description of our segment products sales. Our net loss for the three month period ended January 31, 2021was ( $35,965). Our Cost of Goods sold expenses were $18,635for the three month period ended January 31, 2021compared to $20,388for the three month period ended January 31, 2020. Professional fees for the three month period ended January 31, 2021were $24,555compared to $6,660for the three month period ended January 31, 2020. The majority of our professional fees relate to the legal fees incurred in connection to the FTCmatter. We expect our professional fees to decrease going forward. -13- INNOVATIVE DESIGNS, INC.
Liquidity and capital resources
During the three month period ended
January 31, 2021, we funded our operations from revenues from sales, a loan of $200,000and sale of our common stock in the amount of $25,000. In May of 2020, we were granted a Paycheck Protection Program loan in the amount of $ 33, 652. The loan was forgiven in June 2021. Short Term: We will continue to fund our operations from sales and the sale of our securities. We continue to pay our creditors when payments are due. We will require more funds to be able to order the material for our INSULTEX products and to purchase equipment needed for the manufacture of the INSULTEX product. The Company reached an agreement with the manufacturer of the INSULTEX material to purchase a machine capable of producing the INSULTEX material. Also included in the proposed agreement will be the propriety formula that creates INSULTEX. The Companytook delivery of the equipment in December 2015. The Company will have to have the machine installed and ensure that it can be operated in compliance with all environmental rules and regulations. It is the Company intentions to have the equipment operational but cannot currently provide a time estimate. Among the factors affecting the time estimate are financial resources available to the Company, finding a suitable facility and bringing technical personal from abroad to install the equipment. The Company has currently made deposits of $600,000on the equipment. The Company has incurred $17,000of additional expenses related to shipping. The Company will produce INSULTEX under its own brand name. See Note 10 of the Notes to the Condensed Financial Statements. Long Term: The Company will continue to fund its operations from revenues, borrowings from private parties and the possible sale of our securities. Should we not be able to rely on the private sources for borrowing and /or increased sales, our operations would be severely affected as we would not be able to fund our purchase orders to our suppliers for finished goods and our efforts to produce our own INSULTEX would be delayed.
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