Form 10-QSB Innovative Designs, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 333-103746
INNOVATIVE DESIGNS, INC.
(Exact name of registrant as specified in its charter)
Delaware 03-0465528
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
223 North Main Street, Suite 1
Pittsburgh, Pennsylvania 15215
(Address of principal executive offices) (Zip Code)
412-799-0350
(Registrant's telephone number, including area code)
Not applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
All Correspondence to:
Brenda Lee Hamilton, Esquire
Hamilton, Lehrer & Dargan, P.A.
2 East Camino Real, Suite 202
Boca Raton, Florida 33432
(561) 416-8956
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
As of November 11, 2003, there were 16,067,175 shares of the registrant's
common stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
Innovative Designs, Inc.
INDEX
Part I. Financial Information
Item 1. Financial Statements and Notes to Financial Statements......1
Item 2. Plan of Operations..........................................6
Item 3. Controls and Procedures....................................24
Part II. Other Information
Item 1. Legal Proceedings..........................................24
Item 2. Changes in Securities......................................24
Item 3. Defaults upon Senior Securities............................31
Item 4. Submission of Matters to a Vote of Security Holders........31
Item 5. Other Information..........................................31
Item 6. Exhibits and Reports on Form 8-K...........................32
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Innovative Designs, Inc.
(A Development Stage Company)
Balance Sheet
July 31, 2003
(Unaudited)
Assets
Current assets:
Cash $ 12,339
Accounts receivable 4,820
Inventory 230,250
------------------
Total current assets 247,409
------------------
Property and equipment, net 80,966
------------------
Other assets:
Due from related party 5,000
------------------
$ 333,375
==================
Liabilities and stockholders' (deficit)
Current liabilities:
Accounts payable $ 2,162
Current portion of note payable 2,618
Note payable - related party 183,712
Due to shareholders 7,000
------------------
Total current liabilities 195,492
------------------
Note payable - related party 509,092
Note payable 40,828
------------------
549,920
------------------
Stockholders' (deficit):
Preferred stock, $.0001 par value,
100,000,000 shares authorized, -
Common stock, $.0001 par value,
500,000,000 shares authorized,
15,553,875 shares issued and outstanding 1,555
Additional paid in capital 1,577,455
(Deficit) accumulated during the development stage (1,991,047)
------------------
(412,037)
------------------
$ 333,375
==================
See the accompanying notes to the financial statements.
-1-
Innovative Designs, Inc.
(A Development Stage Company)
Statements of Operations
Three Months Ended July 31, 2003, Period From Inception (June 25, 2002) to July 31, 2002,
Nine Months Ended July 31, 2003, Period From Inception (June 25, 2002) to July 31, 2002 and
Period From Inception (June 25, 2002) to July 31, 2003
(Unaudited)
Three Months Inception Nine Months Inception Inception
Ended to Ended to to
July 31, July 31, July 31, July 31, July 31,
2003 2002 2003 2002 2003
------------ ------------ ------------ ------------ ------------
Revenue $ 32,206 $ - $ 47,795 $ - $ 47,795
------------ ------------ ------------ ------------ ------------
Operating expenses:
Cost of sales 18,679 - 29,072 - 29,072
Non-cash stock compensation - 469,030 1,050,000 469,030 1,529,030
Selling, general and
administrative expenses 79,750 24,683 256,802 24,683 355,834
------------ ------------ ------------ ------------ ------------
98,429 493,713 1,335,874 493,713 1,913,936
------------ ------------ ------------ ------------ ------------
(Loss) from operations (66,223) (493,713) (1,288,079) (493,713) (1,866,141)
------------ ------------ ------------ ------------ ------------
Other expense:
Interest 50,247 - 124,906 - 124,906
------------ ------------ ------------ ------------ ------------
50,247 - 124,906 - 124,906
------------ ------------ ------------ ------------ ------------
Net (loss) $ (116,470) $ (493,713) $(1,412,985) $ (493,713) $(1,991,047)
============ ============ ============ ============ ============
Per share information - basic
and fully diluted:
Weighted average shares
outstanding 15,553,875 14,711,653 15,479,685 14,711,653 15,047,322
============ ============ ============ ============ ===========
Net (loss) per share $ (0.01) $ (0.03) $ (0.09) $ (0.03) $ (0.13)
============ ============ ============ ============ ============
See the accompanying notes to the financial statements.
-2-
Innovative Designs, Inc.
(A Development Stage Company)
Statements of Cash Flows
Nine Months Ended July 31, 2003, Period From Inception (June 25, 2002) to July 31, 2002, and
Period From Inception (June 25, 2002) to July 31, 2003
(Unaudited)
Nine Months Inception Inception
Ended to to
July 31, July 31, July 31,
2003 2002 2003
---------------- ---------------- ----------------
Cash flows from operating activities:
Net cash (used in) operating activities $ (379,810) $ (44,832) $ (564,649)
---------------- ---------------- ----------------
Cash flows from investing activities:
Net cash (used in) investing activities (73,381) - (91,137)
---------------- ---------------- ----------------
Cash flows from financing activities:
Net cash provided by financing activities 350,250 46,375 668,125
---------------- ---------------- ----------------
Net increase (decrease) in cash (102,941) 1,543 12,339
Beginning - cash balance 115,280 - -
---------------- ---------------- ----------------
Ending - cash balance $ 12,339 $ 1,543 $ 12,339
================ ================ ================
See the accompanying notes to the financial statements.
-3-
Innovative Designs, Inc.
(A Development Stage Company)
Notes to Financial Statements
July 31, 2003
(Unaudited)
(1) Basis Of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP") for interim financial information. They do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only 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 to be expected for the full year. For further
information, refer to the financial statements of the Company as of October 31,
2002 and the period from inception (June 25, 2002) to October 31, 2002 including
notes thereto.
(2) Earnings Per Share
The Company calculates net income (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During the periods presented common stock
equivalents were not considered as their effect would be anti-dilutive.
(3) Stockholders' (Deficit)
During the three months ended January 31, 2003, the Company sold 175,125 shares
of common stock for $2 per share or $350,250 and canceled 25,000 shares of
common stock previously issued for non-performance of services by a consultant.
In addition, the Company issued 525,000 shares of common stock for services
valued at $2 per share or $1,050,000.
-4-
(4) License Agreement and Related Party Note Payable
On November 25, 2002, the Company purchased a product license for $1,250,000
from a company owned by the majority shareholder of Innovative. The License
Agreement is for 10 years and gives the Company the exclusive right to
manufacture and market Eliotex, a fabric used in recreational products. The
Company will have the option to renew the agreement for four subsequent terms of
ten years each.
The Company paid $50,000 upon signing in November 2002, with the remaining
amount payable at $400,000 per year for the next three years. The note bears no
interest, therefore the Company discounted the payments due under the agreement
using a discount rate of 30 percent. Imputed interest expense of $124,659 has
been recorded for the nine months ended July 31, 2003. The discounted value of
the note payments in addition to the $50,000 already paid total $618,144.
Because the license was purchased from a company owned by the majority
shareholder, it must be recorded at the shareholder's cost which was $0. The
$618,144 the Company paid in excess of the shareholder's cost was recorded as a
reduction of paid in capital.
(5) Going Concern
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.
The Company has experienced a significant loss from operations as a result of
its investment necessary to achieve its operating plan, which is long-range in
nature. For the period ended July 31, 2003 the Company incurred a net loss of
$1,412,985 and has a stockholders' deficit of $412,037 at July 31, 2003. In
addition, the Company has no significant revenue generating operations.
The Company's ability to continue as a going concern is contingent upon its
ability to attain profitable operations and secure financing. In addition, the
Company's ability to continue as a going concern must be considered in light of
the problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which the Company
operates.
The Company is pursuing equity financing for its operations. Failure to secure
such financing or to raise additional capital or borrow additional funds may
result in the Company depleting its available funds and not being able pay its
obligations.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
(6) Subsequent Events
During the period through October 23, 2003 the Company issued 73,300 shares of
common stock for cash aggregating $146,600 and 450,000 shares of common stock
for services.
-5-
ITEM 2. PLAN OF OPERATIONS
Plan of Operations
The following discussion provides information that we believe is relevant to our
Plan of Operations, and should be read in conjunction with our financial
statements and related notes appearing elsewhere in this Form 10-QSB. This
discussion contains forward-looking statements based on our current
expectations, assumptions, and estimates. The words or phrases "believe,"
"expect," "may," "anticipates," or similar expressions are intended to identify
"forward-looking statements." Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of risks and
uncertainties pertaining to our business, including: (a) Our limited operating
history and our history of losses makes it difficult for you to evaluate our
current and future business and prospects and future financial results; (b) If
we are unable to obtain additional financing, we will be unable to proceed with
our Plan of Operations and even if we obtain additional debt or equity
financing, your equity interest in our stock will be diluted; (c) If RMF Global,
Inc. violates the terms of its agreement with Ko-Myung Kim or we violate our
agreement with RMF Global, Inc., we may have no eliotex by which to manufacture
our products and we will have to terminate our business, and you will lose your
entire investment; (d)If our products are found to cause injury, have defects,
or fail to meet industry standards, we will incur substantial litigation,
judgment, product liability, and product recall costs, which will increase our
losses and negatively affect our brand name reputation and product sales; (e)
Because we offer only six products and our competitors have a variety of
products, we may not obtain consumer acceptance of our products, which may
adversely affect our ability to generate revenues; (f) We have not established
the Innovative Design brand name or the "idigear" label, and eliotex has little,
if any, name recognition, which may prevent us from generating revenues and
reduce the value of your investment; (g) we do not have written agreements with
certain companies and persons providing us with services and instead receive
such services on a per project basis; and (h) other risk factors discussed in
our Form SB-2 Registration Statemment which is available for review at
www.sec.gov. The terms "we," our" or "us" are used in this discussion refer to
Innovative Designs, Inc. Statements made herein are as of the date of the filing
of this Form 10-QSB with the Securities and Exchange Commission and should not
be relied upon as of any subsequent date. Unless otherwise required by
applicable law, we do not undertake, and we specifically disclaim any
obligation, to update any forward-looking statements to reflect occurrences,
developments, unanticipated events or circumstances after the date of such
statement.
-6-
We cannot continue to satisfy our current cash requirements for a period of
twelve (12) months through our existing capital. We anticipate total estimated
capital expenditures of approximately $31,350 per month or an aggregate of
$376,200 over the next twelve (12) months, in the following areas:
o Hire approximately 2 additional consultants and 2 employees;
o Update and develop our web site and develop our online marketing campaign;
o Contract with manufacturer representatives to sell our products;
o Design and develop literature, displays, and media and advertising
materials;
o Develop and maintain public relations campaigns;
o Develop trade show booths;
o Attend trade shows;
o Develop and initiate online marketing campaign;
o Establish relationships with retail chain outlets and mass merchandisers;
and
o Warehouse lease payments.
Our current cash of $71,569 as of October 31, 2003 will satisfy our cash
requirements for only approximately two months.
Accordingly, we will be unable to fund our expenses for our entire one year plan
of operations through our existing assets or cash. Our Chief Executive Officer
and President have each verbally agreed to loan us up to $400,000 for our
operational needs which will be sufficient to meet our Plan of Operations or
Alternative Plans of Operation. We may still need additional financing through
traditional bank financing or a debt or equity offering; however, because we are
a development stage company with no operating history and a poor financial
condition, we may be unsuccessful in obtaining such financing or the amount of
the financing may be minimal and therefore inadequate to implement our Plan of
Operations. In addition, if we only have nominal funds by which to conduct our
operations, we may have to curtail advertising or be unable to conduct any
advertising, both of which will negatively impact development of our brand name
and reputation. In the event that we do not receive financing or our financing
is inadequate, we may have to liquidate our business and undertake any or all of
the following actions:
o Sell or dispose of our assets, if any;
o Pay our liabilities in order of priority, if we have available cash to pay
such liabilities;
o If any cash remains after we satisfy amounts due to our creditors,
distribute any remaining cash to our shareholders in an amount equal to the
net market value of our net assets;
o File a Certificate of Dissolution with the State of Delaware to dissolve
our corporation and close our business;
o Make the appropriate filings with the Securities and Exchange Commission so
that we will no longer be required to file periodic and other required
reports with the Securities and Exchange Commission, if, in fact, we are a
reporting company at that time; and
o Make the appropriate filings with the National Association of Security
Dealers to affect a delisting of our stock.
-7-
Based upon our current assets, however, we will not have the ability to
distribute any cash to our shareholders.
If we have any liabilities that we, or our President and/or Chief Executive
Officer on our behalf, are unable to satisfy and we qualify for protection under
the U.S. Bankruptcy Code, we may voluntarily file for reorganization under
Chapter 11 or liquidation under Chapter 7. Our creditors may also file a Chapter
7 or Chapter 11 bankruptcy action against us. If our creditors or we file for
Chapter 7 or Chapter 11 bankruptcy, our creditors will take priority over our
shareholders. If we fail to file for bankruptcy under Chapter 7 or Chapter 11
and we have creditors; such creditors may institute proceedings against us
seeking forfeiture of our assets, if any.
We do not know and cannot determine which, if any, of these actions we will be
forced to take. If any of these foregoing events occur, you could lose your
entire investment in our shares.
Our Plan of Operations to Date
We have accomplished the following in our Plan of Operations from our inception
of June 2002 to date:
Reviewing Professional Marketing Organizations
From June 2002 to December 2002, our Chief Executive Officer, Joseph Riccelli,
interviewed and considered approximately 10 professional marketing organizations
for marketing, sales distribution, product endorsements and promotion of our
products. In October 2002, MCM Communications, Inc., a marketing and advertising
firm located in Pittsburgh, Pennsylvania, informed us that it would provide us
with marketing and advertising services. To date, this firm has developed and
designed our initial web site, product literature, and the graphic design of
"Point of Sale" displays.
Completion of Design, Prototype and Testing Phase of New Products
In November 2002, we completed the design, prototype, and testing phase of our
windshirts and our jackets. In January 2003, we completed the design and testing
phase of our ball caps. We assumed no direct material costs associated with the
design, prototype, and testing of these products because: (a) we did not utilize
the services of any outside consultant or company for these purposes; (b)
although we used the services of our Vice President of Sales and Marketing and
Chief Executive Officer for these purposes, their efforts were part of their
normal responsibilities; (c) prior to the time we had undertaken the design and
prototype of these products, we had purchased the materials to accomplish these
tasks, and such materials were purchased for less than $1000; and (d) the
testing of these products was performed in-house and were conducted by our Vice
President of Sales and Marketing and Chief Executive Officer as part of their
normal responsibilities. The design, prototype, and testing of the Swimmeez,
sleeping bag and stadium pillow products in which we had obtained an exclusive
license to sell such products from our affiliated entity, RMF Global, had been
completed by RMF Global.
-8-
Leased Warehousing Space
In October, 2002, we arranged for the lease of warehouse space for our
inventory, eliotex, and other raw materials storage at 124 Cherry Street, Etna,
Pennsylvania from Frank Riccelli, our President/Director. The warehouse space is
being utilized for the following: (a) inventory/raw material storage, (b) sales
offices, (c) conference/ presentation room, (d) sample/ source area, (e)
distribution center and (f) an aquatic area that tests our products.
Website Development, Point of Sale Display, Website Design and
Advertising/Product Literature Layout
In October 2002, we obtained the services on a per project basis of a website
marketing consultant, BA Web Productions, located in Pittsburgh, Pennsylvania,
to assist with marketing and developing our website, which has included adding
new product selections, a product page, and links. Our website became
operational on November 10, 2002.
In October 2002, we retained the services on a per project basis of MCM
Communications, Inc. located in Pittsburgh, Pennsylvania, to provide us with
marketing and advertising services, including creating our point of sale
display, text for website, product information, and marketing literature, all of
which have been completed.
Retailers
In November 2002, the website retailer, Woodlandsoutdoorworld.com, began
ordering our sleeping bag and wind shirt products on a wholesale basis for their
retail sale. In addition, Woodlands Outdoor World, a retail store, located in
Farmington, Pennsylvania, began carrying our sleeping bag product and our wind
shirt products and Nemacolin Woodlands Resort and Spa's retail store located in
Farmington, Pennsylvania began carrying our wind shirt product in its retail
store.
In June 2003, the following retail stores began carrying our "Swimeez" products:
o Pool Nation located in Pittsburgh, Pennsylvania;
o B & R Pools located in Pittsburgh, Pennsylvania;
o Knabes Swim Shop located in Monroeville, Pennsylvania; and
o Ross and Sons Pools located in Punxsutawney, Pennsylvania.
In June 2003, the Pittsburgh Shop located in Pittsburgh, Pennsylvania began
carrying our windshirts and hats.
Contract with Manufacturer Representative Group
In November of 2002, we entered into a verbal agreement with a manufacturer
representative group, Havel-Giarusso and Associates, located in Big Lake,
Minnesota to sell our products to outdoor retail chains. This manufacturer
representative group has relationships with outdoor retailers located in various
states.
-9-
Additional Hiring
From March 2003 to May 2003, we hired our Vice Presidents, Joseph A. Riccelli,
Jr. and Michelle Griffith, on a full time, salaried position basis. From March
2003 to present, we hired two part time employees for clerical and warehouse
duties at the rate of $7.00 per hour.
Letter Agreement with Victory Junction Gang Camp
On March 6, 2003, we agreed to partner with Victory Junction Gang Camp in a
cause related marketing alliance, and have added the Victory Junction Gang Camp
logo and Internet link to our web site.
Services of First Impression Printing
In April of 2003, we hired First Impression Printing in Pittsburgh, Pennsylvania
on a one time project basis to design and print our product catalogue, sleeping
bag Point of Sale posters and mailing labels. The project was completed on April
22, 2003. The total cost for these marketing and advertising materials was
$7309.17.
Services of Professional Trade Show Marketing Agency/Promoter
On June 12, 2003, we arranged for Discovery Marketing Associates, Inc. to
represent us and our products at the 2003 Mid-Atlantic Market Week Showcase Rent
A Rep from July 7 to July 11, 2003. Discovery Marketing Associates has indicated
that it will represent us at future trade shows on a per project invoice basis.
Manufacturers Agreement
On June 16, 2003, we completed an agreement with Haas Outdoors, Inc. located in
West Point, Mississippi, which grants a non-exclusive license in North America
to manufacture or sell products or to have manufactured, and to sell Haas
Outdoors licensed products. In conjunction with the rights conferred to us in
this agreement, we plan to use Haas Outdoors Mossy Oak fabric on the outside
portion of our Stadium Pillow products using the trademarked and registered
"Mossy Oak" pattern and "Mossy Oak" hang tags.
Packaging Design and Manufacture
During September 2003, we arranged with Packaging Specialists, Inc., a box
manufacturing firm located in Pittsburgh, Pennsylvania, to design and
manufacture the boxes for all of our products. On October 1, 2003, Packaging
Specialists provided us with 2400 boxes for our various products.
Hired Marketing Employee on an Hourly Basis
On October 13, 2003, we hired Gina Leone to draft brand and advertising related
marketing materials. Ms. Leone is compensated on an hourly basis for
approximately 20 hours per week.
-10-
Our Future Plan of Operations
Our Plan of Operations over the next twelve (12) months, from September 2003 to
September 2004, will consist of the following:
September 2003 - December 2003
Utilize Consultants/Employees for Management and Operations
From September 2003 through December 2003, we intend to utilize outside web
design, marketing, and public relations firms on a part-time, as needed basis,
including BA Web Productions. We estimate the cost for these consultants will be
approximately $50,000. To date, apart from obtaining the services of BA Web
Productions, MCM Communications, Inc., and First Impression Printing, on a one
time project basis, we have not hired any other consultants due to our lack of
financial resources to do so. We entered into verbal employment agreements with
our Vice Presidents Joseph A. Riccelli, Jr. and Michelle Griffith as permanent
full time salaried employees.
September 2003 - September 2004
Hire In House Hourly Employees for Shipping, Receiving, Customer Service, Data
Entry and Invoicing.
We plan to hire up to 3 part time and 3 full time employees which we plan to
compensate on an hourly basis to perform shipping, receiving, customer service,
data entry and invoicing services; however, the number of employees that we hire
will be dependent upon the number of product orders we receive. Initially, we
plan to hire 2 part time employees, one of which will be responsible for our
shipping and receiving and another which will be responsible for customer
service, data entry and invoicing. We will pay these hourly employees $7 per
hour. On March 10, 2003 we hired two part time employees at the rate of $7.00
per hour to assist with warehouse and clerical duties.
September 2003 - September 2004
Increase the Utility of our Web Site
We intend to continually improve the utility and design of our website. We have
added the following features since March 1, 2003:
o Simple navigational menu;
o Testimonials and third party product reviews, including a customer
testimonial for our sleeping bag;
o Product information and pictures/graphics;
o Wholesaler only area disclosing confidential price list; and
o Links to pertinent/affiliated websites, including a link to the Victory
Junction Gang Camp's website.
We estimate that the cost of web site layout modification and continuing
development will be $20,000, including approximately $75.00 per month for web
site hosting and payment provider fees.
-11-
September 2003 - September 2004
Develop and Initiate Online Marketing Campaign
We will utilize marketing professionals to focus on increasing our website page
rank, which is the numerical location or position of our web site among search
engine results. BA Web Productions updates, expands, and develops our web site.
This ongoing campaign will start with search engine optimization strategies, and
continue with banner advertisements and reciprocal linking campaigns with
established web sites with complementary or relevant products and/or services to
the company's products.
Our online marketing campaigns will entail the following:
o Reciprocal linking with well-established websites with related content
and/or complementary products;
o Issuance of press releases about our products to targeted on-line
publications; and
o Strategic placement of banner advertisements on websites.
The estimated cost of this online marketing campaign is $500 per month or $6,000
per year, including travel expenses and lodging, business lunches/dinners, and
telephone charges.
To date, we have not accomplished anything regarding this step in our Plan of
Operations due to insufficient cash resources.
January 2004 - March 2004
Hire Sales People
From January 2004 through March 2004, we will advertise in trade journals to
recruit sales representatives. Our Chief Executive Officer and Vice President of
Sales and Marketing will conduct the pre-qualification and personal interviews
of candidates. In addition, we may utilize placement agencies for assistance in
fulfilling our personnel needs. The estimated cost for the classified
advertisements and/or placement agency fees is $1,200. We originally planned to
hire 3 sales representatives at a base starting salary of $30,000 with no
commission by July 2003; however, because we have been utilizing manufacturers
representatives affiliated with Havel-Giarosso and Associates since July 2003 to
a greater extent than originally anticipated, and their representatives are
compensated on a commission basis only, we have chosen to delay the salary
expenditures associated with hiring 3 sales representatives until January 2004.
These sales representatives will market our products to and service retail chain
stores, facilitate trade shows, initiate and nurture relationships with relevant
local and national organizations, and provide support to manufacturer
representatives of our products.
-12-
In March 2003, we entered into a verbal agreement and hired one independent
representative: Mr. George Douglas, of Concord, North Carolina. Mr. Douglas is
an independent contractor whose compensation is 10% of any Purchase Orders he
receives for our products.
January 2004 - August 2004
Initially Contract with five (5) Manufacturer Representatives
Our Vice President of Sales and Marketing will interview and contact additional
established apparel representatives from manufacturer representative
organizations. Compensation to these manufacture representatives will be on a
commission basis only. We do not anticipate any expenses associated with this
activity.
September 2003 - August 2004
Design and Development of Literature, Displays, and Media Materials
We will develop literature, point-of-sale and media materials in our attempt to
integrate our products into large retail store outlets. We will utilize
marketing consultants to develop and implement professional photography and
graphics, brochures, point-of-sale displays, mailers and literature, which we
plan to use as trade show exhibits, and sales tools for our sales
representatives and manufacturer representatives. We estimate that our total
expenditure in this area will be $60,000.
September 2003 - June 2004
Develop and Initiate Print Advertising
Throughout our Plan of Operations and as a congruent part of our overall
marketing strategy, we intend to initiate our targeted print advertising
campaign in specific newspapers, magazines, and trade journals. We plan on
beginning an advertising campaign with "Teaser Ads," advertisements stating
product and company information but not specific ads on one particular product,
in outdoor publications and magazines along with trade show brochures.
Additionally we will utilize ad space in chain store news and inserted flyers.
We will utilize marketing/ advertising agencies to assist in the design,
development, printing, and distribution of these advertising campaigns, along
with our Chief Executive Officer and Vice President of Sales and Marketing. The
total estimated cost for our print advertisements is $30,000.
To date, we have not placed any print advertisements due to our lack of cash
resources to do so.
January 2004 - September 2004
Develop and Maintain Public Relations Campaigns
Starting in January 2004 and continuing throughout our Plan of Operations, we
intend to utilize marketing consultants to develop advertisements and press
releases for apparel and outdoor gear magazines and trade journals. The press
releases and advertisements will discuss issues such as company status, product
innovations, and other notable events and developments. The estimated cost is
$3,000 for consultant services, advertisements, press release submission via PR
Newswire, software and administrative expenses.
-13-
September 2003 - January 2004
Develop Trade Show Booth
We will utilize marketing consultants to design and develop our portable display
booth to be used in participating in sporting goods and outdoor apparel specific
trade shows. The show booth development includes a modular wall design, display
pedestals and tables, carpeting, and company signage. We estimate the cost of
the booth to be $5,000.
We received 3 bids for design of a trade show booth for the Shot Show scheduled
for February 2004. By approximately November 2003, we will decide which company
we will contract with for these design services.
We contracted with Reed Exhibitions, a convention management firm located in
Philadelphia, Pennsylvania, for our booth space at the 2004 Shot Show to be held
in Las Vegas, Nevada on February 12 - 14, 2004. On October 6, 2004, we paid
$4,350 for this booth space.
November 2003 to February 2004
Attend Trade Shows
We will utilize marketing consultants to assist our Chief Executive Officer,
Vice President of Sales and Marketing, and our sales representatives to attend
and/or participate in various sporting goods trade shows, apparel trade shows,
and outdoor shows. We originally planned on attending the following trade shows:
o Swimwear Show, July 19-23, 2003, Miami, Florida
o Outdoor Retailer Summer Market, August 14-17, 2003, Salt Lake City, Utah
o MAGIC Textile and Apparel, August 26-29, 2003, Las Vegas, Nevada
o Action Sports Retailer Trade Expo, September 5-7, 2003, San Diego,
California
Our Chief Executive Officer and our Vice President of Sales and Marketing did
not attend these trade shows. Instead, we decided to preserve our cash resources
by having manufacturer representatives affiliated with Havel-Giarosso and
Associates attend these trade shows, which they attended on the above dates.
We now plan to attend the following shows:
o National Association of Sporting Goods Wholesaler Show, November 4-8, 2003,
Phoenix, Arizona
o Sporting Goods Manufacturer Association Show, January 12-14, 2004,
Orlando, Florida
o Atlantic City Pool & Spa Show, January 27-29, 2004, Atlantic City,
New Jersey
o Shot Show, February 10-16, 2004, Las Vegas, Nevada
Our Vice President of Sales and Marketing, Michelle Griffith, attended the "Shot
Show" that was held in Orlando, Florida from February 13 to 17, 2003. The total
estimated cost of attending all of these shows is $6,500 for travel and
accommodations.
-14-
September 2003 - September 2004
Establish Wholesale Relationships with Retail Chain Outlets and Mass
Merchandisers to Carry Our Products and Product Promotion
We plan to develop wholesale relationships or distribution points for our
products. Throughout our Plan of Operations, we plan to implement sales
campaigns to established retailers with the goal of establishing wholesale
relationships. Our Chief Executive Officer and Vice President of Sales and
Marketing will initiate these campaigns. Our sales campaigns will be an ongoing
process and will consist of our sales representatives accomplishing the
following:
o Lead Generation - Accomplished through cold calling, follow-up contacts
from tradeshows and mailers, and networking with outdoor gear and apparel
industry associations;
o Personal Presentations to Executives and Purchasing Departments of Targeted
Retailers - Through these sales presentations, we will attempt to convince
the retailer to purchase our products at wholesale prices for resale in
their store or chain of stores. The orientation of the presentation will be
an introduction of the innovative aspects of
our products, as well as the advantages of our products over some of our
competitors. For example, we will highlight the light weight, compactness,
thermal insulation, and buoyancy features of eliotex used in our products.
These personal presentations of our products will be on-location at
prospects' facilities to executives and purchasing departments and will
include a product display and a video demonstration of the products in use;
o Order Acquisition and Management - Once the retailer places an order for
products, the sales representative is responsible for managing the order
fulfillment process, forwarding the purchase order to the distribution
manager who will then arrange the shipping specifics, as well as
coordinating the physical merchandising of our products on the shelves of
the client stores. By maintaining this hands-on approach, we will attempt
to continue successful relationships with our distributors; and
o Relationship Management - The sales representative is also responsible for
maintaining an ongoing relationship with acquired distributors. Our Vice
President of Sales and Marketing will enforce a regimented account
management program. This program is to include monthly telephone contacts,
and personal visits, once per six months minimum, with the distributor.
To date, we have not accomplished any aspect of this part of our Plan of
Operations.
September 2003 to September 2004
Sub-Manufacturing, Raw Materials Procurement and Fulfillment Process
We will conduct our sub-manufacturing, raw materials procurement and fulfillment
Process, as follows:
-15-
Sources and Availability of Raw Materials
eliotex will be used in all our finished goods and will be purchased from our
affiliate/licensor, RMF Global.
Raw Materials to be Provided for our Floating Swimwear Products:
o eliotex
eliotex will be used to create the buoyant quality of our floating
swimwear product.
o Lycra
We will purchase Lycra from Yasha Fabrics which is located in Los Angeles,
California. Lycra is an elastic polyurethane fiber or fabric used
especially for close-fitting sports clothing and will be used for the outer
shell and inside lining of our floating swimwear product.
o Zippers
We will purchase zippers from Barbie International Corporation which is
located in New York, New York.
The delivery time involved for these raw materials from the date of order to
date of delivery is less than two weeks.
Raw Materials to be provided for our Sleeping Bags and Stadium Pillow Products:
o eliotex
eliotex will be used in our sleeping bags, Swimeez and stadium pillow
products as insulation and to provide buoyancy to these products.
o Rip Stop Nylon
We will purchase Rip Stop Nylon from Roberts Textile Company located in New
York, New York. Rip Stop Nylon is a manufactured fiber that is strong and
is resistant to both abrasion and damage from many chemicals. Rip Stop
Nylon fabric is non-absorbent, durable, fast drying, resistant to moths and
other insects, water, perspiration and standard dry cleaning agents. The
Rip Stop Nylon fabric also contains an added nylon cross weave to prevent
tearing of the material. Rip Stop Nylon is commonly used in women's
hosiery, knitted or woven lingerie, socks and sweaters, rugs and carpets,
sleeping bags, duffle bags, racquet strings, and fishing lines. Rip Stop
Nylon is used in our sleeping bags and stadium pillow products as the
exterior shell.
o Nylon polyester tricot
We will purchase nylon tricot from Roberts Textile Company or Fab
Industries, both of which are located in New York, New York. Nylon tricot
is made from very fine or single yarns, providing a suede-like texture.
Nylon tricot is typically used for underwear, sportswear, bathing suits and
gloves. Nylon tricot is used in our sleeping bags as the inside lining.
-16-
o Compression sacks
We will purchase compression sacks form Equinox located in Williamsport,
Pennsylvania. Compression sacks are small Rip Stop Nylon bags,
approximately 12 inches by 8 inches. They are separate from our sleeping
bag and are used to compress our sleeping bag when not in use. Rip Stop
Nylon is the sole component of the compression sacks.
o Mossy Oak Break and New Break-Up Camouflage Patterns
We will purchase Mossy Oak Break and New Break Up camouflage patterns from
Haas Outdoors, Inc. for the outside portion of our stadium pillow products.
Raw Materials to be provided for our Jackets, Windshirts, and Ball Caps
o eliotex
eliotex will be used to provide insulation in our jackets, windshirts, and
ball caps.
o Polyester peached microfiber
We will purchase polyester peached microfiber which is a type of grade
microfiber from Roberts Textile Company located in New York, New York. It
is durable and water repellent treated for our jackets, windshirts, and
ball caps.
o Rib knit
We will purchase rib knit for our jackets, windshirts and ball caps from
Green Mountain located in Knitter, Vermont. Rib knit is a mix of cotton
and Lycra and is elastic and is used for the trip around the collars,
waistbands and cuffs.
The delivery time involved for our raw materials from the date of order to the
date of delivery is less than one week for all stocked materials. Non-stocked
materials or special orders may take up to two weeks for delivery.
The only "raw product" we store on a continual basis is "eliotex" which we store
in our warehouse. Our warehouse space is sufficient for our storage of eliotex.
For the other raw materials that are below 1000 piece goods, we have the
materials shipped directly to the sub-manufacturer. For production runs in
excess of 1000 piece goods, we arrange for the raw materials to be shipped to
our warehouse facility, which is sufficient for that use; thereafter, we
distribute to the sub-manufacturer the quantity needed for each production run
and we store the remaining quantity. Payment typically will be due on an average
of 30 to 60 days after receipt of the raw materials by our sub-manufacturer or
our warehouse facility. Our Indonesia based manufacturer, PT. Lidya & Natalia,
has sole discretion in the sourcing and ordering of raw materials for their
production runs, the costs of which we reimburse them.
-17-
Manufacturing
Swimeez Products
Our completed Swimeez swim suit products are sub-manufactured by R & M Apparel
located in Gallitzen, Pennsylvania.
Sleeping Bag Products
Our completed sleeping bag products are sub-manufactured by Equinox located in
Williamsport, Pennsylvania.
Stadium Pillow, Ballcap, and Jacket Products
Our completed Stadium Pillow, ball cap, and jacket products are sub-manufactured
by PT. Lidya & Natalia located in Sidoarjo, Indonesia. Because the predominant
function of the Stadium Pillows is a sleeping bag, they are imported as sleeping
bags. Indonesia does not impose quotas that limit the time period or quantity of
items which can be imported. The United States Customs Service imposes a 9%
importation duty for Indonesia based goods imported into the United States.
Windshirts
Our completed wind shirt products are sub-manufactured by CMT Contractors
located in Butler, Pennsylvania.
We have no verbal or written agreements or long term agreements with any of our
sub-manufacturers, and we do not plan to obtain such agreements. Our
sub-manufacturers manufacture our products on a per order basis.
Purchase Orders
We have submitted the following purchase orders to our manufacturers to effect
manufacturing of our products:
o August 30, 2002 - We submitted a purchase order to PT Lidya & Natalia
to manufacture 6,000 of our stadium pillows;
o January 12, 2003 - We submitted a purchase order to PT Lidya &
Natalia to manufacture 5,000 compression sacks for our sleeping bags,
and 1550 jackets;
o March 21, 2003 - We submitted a purchase order to R & M Apparel to
manufacture 648 of our windshirts.
-18-
Fulfillment Process
The fulfillment process involved in completing wholesale orders for non stocked
swimsuit, sleeping bag, wind shirt, jacket, and ball cap products is described
below:
------- ------------------------------------------------------------------------
Day Action
------- ------------------------------------------------------------------------
1 o We receive a purchase order for a certain number of items from a
wholesale purchaser by hand delivery, fax, courier, or mail, with an
authorized signature of the purchaser. We do not accept telephone
orders.
o We contact a raw material supplier to send a certain number of yards
of raw materials to our sub-manufacturers. Raw materials are ordered
according to need.
o We contact our sub-manufacturers with the details of the order,
including the number of units to be produced according to design or
model, size, or color.
o We complete and forward a purchase order to the manufacturer. The
manufacturer approves or disapproves a purchase order.
o If the purchase order is approved, the manufacturer responds with a
final cost, production schedule and date the goods will be delivered
to us.
------- ------------------------------------------------------------------------
10 o Our sub-manufacturers ship finished goods to us.
------- ------------------------------------------------------------------------
14 o We receive finished goods, and facilitate turn-around for shipment
to the sporting goods store. Goods received in distribution center
where they are packaged in Master Packs, hang tags attached, and
UPC/UCC codes labels applied to items for distribution to retailer.
------- ------------------------------------------------------------------------
The basis for the above time estimates has been derived from RMF Global's
prior experience with these sub-manufacturers.
The fulfillment process involved in completing wholesale orders for our Stadium
Pillow products is described below:
------- ------------------------------------------------------------------------
Day Action
------- ------------------------------------------------------------------------
1 o We receive an order for a certain number of items from a wholesale
purchase by hand delivery, fax, courier, or mail with an authorized
signature of the purchaser.
o We contact our sub-manufacturers with the details of the order,
including the number of units to be produced according to color
combinations. The sub-manufacturers then procure the raw materials.
------- ------------------------------------------------------------------------
7 o Our sub-manufacturers receive raw materials from suppliers and begin
production.
------- ------------------------------------------------------------------------
25 - 30 o Within 25-30 days, our sub-manufacturers ship finished goods to us,
pending no international freight or shipping issues.
------- ------------------------------------------------------------------------
56 - 61 o We receive finished goods, and facilitate shipment to the buyer.
------- ------------------------------------------------------------------------
The basis for the above time estimates has been derived from RMF Global's prior
experience with these sub-manufacturers.
-19-
September 2003 to September 2004
Product Design and Development
We plan to expand our sleeping bag and floating swimwear products and research
and develop other apparel and accessory items containing "eliotex". We plan to
continually evaluate trends, monitor the needs and desires of consumers by
conducting customer purchase follow-up, ongoing market research, and maintaining
open channels of communication with our distributor retailers and manufacturer
representatives. We plan to consult with our sub-manufacturers and raw material
suppliers regarding the development and use of new materials and the enhancement
of our product designs. In addition, we will continually evaluate our product
lines for proper positioning in the marketplace, by:
o Consulting with experts in the textiles and design engineering; and
o Consulting with third-party apparel designers and outdoor equipment experts.
The steps involved in our prospective design and development are:
o Product conception and design by our Chief Executive Officer, Vice
Presidents, and/or third party designers;
o Patterns made from design concept;
o Pattern cut and distributed to contracted sub-manufacturer;
o Sample manufactured - The manufacturer constructs one or a few of the
sample garments by combining and sewing the appropriate materials as
specified in the design presentation;
o Sample testing - We plan to forward the sample garment to Vartest
Laboratories, Inc. for testing regarding weight, water repellency, and
thermal insulation properties or other aspects depending on the type of
product being tested and product functions. In addition, our Officers and
Directors will be asked to use the prototype products to provide feedback
to the designer of the product and possible product improvements; and
o Final manufacturing plans submitted to manufacturer for production sample.
Based on previous product development experience, we expect that our product
development cycle, from initial design to product introduction will take three
to twelve months, depending upon the complexity of the design and associated
testing. Based on our previously established relationships with garment
manufacturers, we estimate new product design and development costs at roughly
$5,000 per new item. We estimate that we will develop no more than two new
products during our Plan of Operations from September 2003 to September 2004. We
have not yet designed or commenced development of any new products.
Although we are not currently developing products that will contain eliotex for
use in the military and airline industries, we may do so in the future. Because
eliotex has insulation and water repellent properties, it potentially has
widespread application to products that may be used by the military and airline
industries, such as additional sleeping bag products or flotation devices. We
anticipate that we will not begin to develop such products until we have
effectively penetrated the sporting goods market or established sufficient
market share that enables us to allocate resources for this type of industry
specific application development and material testing procedures, which we do
not anticipate until we complete our Plan of Operations over the next 12 months
as detailed above.
-20-
Summary of Costs Affiliated with our Plan of Operations
Based on the above Plan of Operations, we will have total estimated costs of
$376,200, composed of the following:
--------------------------------------------------------------- ---------------
PLAN OF OPERATIONS TASK ESTIMATED COST
--------------------------------------------------------------- ---------------
Utilize Consultants for Management and Operations $50,000
--------------------------------------------------------------- ---------------
Increase the Utility of our Web Site $20,000
--------------------------------------------------------------- ---------------
Finding and Hiring Sales persons $2,500
--------------------------------------------------------------- ---------------
Travel expenses affiliated with contracting with $500
manufacturing representatives
--------------------------------------------------------------- ---------------
Design and development of literature and media materials $60,000
--------------------------------------------------------------- ---------------
Develop and maintain public relations campaigns $3,000
--------------------------------------------------------------- ---------------
Develop trade booth for trade shows $5,000
--------------------------------------------------------------- ---------------
Attending trade shows $6,500
--------------------------------------------------------------- ---------------
Hiring of professionals for our online marketing campaign $19,500
--------------------------------------------------------------- ---------------
Establishing sales campaigns, relationships, and $18,000
agreements with retailers and affiliate marketers
which will include travel expenses, lodging, business
lunches, dinners and telephone charges
--------------------------------------------------------------- ---------------
Print advertising $30,000
--------------------------------------------------------------- ---------------
Product design and development $10,000
--------------------------------------------------------------- ---------------
Warehouse Lease $31,200
--------------------------------------------------------------- ---------------
Salaries $120,000*
--------------------------------------------------------------- ---------------
Total Costs $376,200
--------------------------------------------------------------- ---------------
*Estimated salaries consist of: (a) $40,000 annual salary to Joseph A. Riccelli,
our Vice President; (b) $55,000 annual salary to Michelle Griffith, our Vice
President of Sales and Marketing; and (c) $25,000 annual salary to Dave
Shondeck, our Director of Product Development Research. Does not include
commission costs paid to manufacturer representatives based on total purchase
order amount which cannot be determined at this time. Does not include hourly
wages, the specific amount of which can not be determined at this time.
-21-
Alternative Plan of Operations With Funding of less than $376,200 Should we
receive funding of less than $376, 200, our alternative Plan of Operations,
based on funding of $250,700, will consist of the following costs and tasks that
have been described above:
PLAN OF OPERATIONS TASK ESTIMATED COST
--------------------------------------------------------------- ---------------
Salaries $120,000
--------------------------------------------------------------- ---------------
Warehouse Lease $ 31,200
--------------------------------------------------------------- ---------------
Establish Sales Campaign to be Conducted by
Our Chief Executive Officer and VP of Sales $ 18,000
--------------------------------------------------------------- ---------------
Attending Trade Shows $ 6,500
--------------------------------------------------------------- ---------------
Develop Trade Show Booth $ 5,000
--------------------------------------------------------------- ---------------
Travel Expenses Affiliated with Contracting with
Manufacturers Representatives to Our Product Line and
Thus Eliminate the Need to Hire Additional In-House
Full-Time Salaried Personnel $ 500
--------------------------------------------------------------- ---------------
Increase the Utility of our Website $ 20,000
--------------------------------------------------------------- ---------------
Print Advertising $ 30,000
--------------------------------------------------------------- ---------------
Hiring of Website and Advertising
Consultants for Online Marketing Campaign $ 19,500
--------------------------------------------------------------- ---------------
Total Costs $250,700
--------------------------------------------------------------- ---------------
-22-
Should we receive funding of less than $250,700, we will require funding of at
least $181,200 to continue our operations under an alternative Plan of
Operations, as follows:
PLAN OF OPERATIONS TASK ESTIMATED COST
--------------------------------------------------------------- ---------------
Salaries $120,000
--------------------------------------------------------------- ---------------
Warehouse Lease $ 31,200
--------------------------------------------------------------- ---------------
Establish Sales Campaign to be Conducted by
Our Chief Executive Officer and VP of Sales $ 18,000
--------------------------------------------------------------- ---------------
Attending Trade Shows $ 6,500
--------------------------------------------------------------- ---------------
Develop Trade Show Booth $ 5,000
--------------------------------------------------------------- ---------------
Travel Expenses Affiliated with Contracting with
Manufacturers Representatives to Our Product Line and
Thus Eliminate the Need to Hire Additional In-House
Full-Time Salaried Personnel $ 500
--------------------------------------------------------------- ---------------
Total Costs $181,200
--------------------------------------------------------------- ---------------
Source of Funds to Fund our Plan of Operations
We plan to fund our total costs of $376,200, or if necessary $250,700 or
$181,200 under Alternative Plans of Operations through the following:
o Our existing cash of $71,569 as of October 31, 2003;
o Possible revenue generated from our sale of products; and
o If necessary, loans from our Chief Executive Officer and/or our President.
Our Plan of Operations is dependent upon our ability to generate revenues to
fund our operations; however, our revenues may be insufficient to provide
adequate funding. If our revenues are insufficient, Joseph Riccelli, our Chief
Executive Officer, and Frank Riccelli, our President, have verbally agreed to
loan us sufficient funds to meet our Plan of Operations or Alternative Plans of
Operation. Messrs. Joseph and Frank Riccelli have further verbally agreed to
loan us these funds at no interest, with no specified term for the repayment of
the loan. We may seek financing through traditional bank financing. However,
because we are a development stage company with a poor financial condition,
financial institutions may not provide us with financing, in which case we may
have to curtail or cease our operations and you may lose your entire investment.
-23-
Liquidity and Capital Resources July 31, 2003.
Cash at July 31, 2003 amounted to $12,339. We have experienced significant
losses from our operations. For the period ended July 31, 2003, we incurred a
net loss of $1,412,985. In addition, we had an accumulated deficit of $1,991,047
and stockholder deficits of $412,037 at July 31, 2003. Our ability to continue
as a going concern is contingent upon our ability to attain profitable
operations and secure financing. Although we are pursuing financing to expand
our operations, there are no assurances that we will be successful in obtaining
such financing. Our failure to secure financing or expand our operations may
result in our not being able to continue as a going concern.
ITEM 3. CONTROLS AND PROCEDURES
As of July 31, 2003, an evaluation was performed under the supervision and
with the participation of our management, including our Chief Executive Officer
and Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on that evaluation,
our management, including our Chief Executive Officer and Principal Financial
Officer, concluded that our disclosure controls and procedures were effective as
of July 31, 2003.
There have been no significant changes in our internal control over financial
reporting during the quarter ended July 31, 2003, or subsequent to July 31,
2003, that have materially affected or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II-- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to dispute and litigation in the ordinary course of our business.
None of these matters, in the opinion of our management, is material or likely
to result in a material effect on us based upon information available at this
time.
ITEM 2. CHANGES IN SECURITIES
On September 15, 2003, we sold 10,000 shares of our stock to Stephen D. Seitz,
for a price of $2.00 per share or $20,000. We relied upon Section 4(2) of the
Act for the sale. We believed that Section 4(2) was available because the sale
did not involve a public offering and there was no general solicitation or
general advertising involved in the sale. Stephen D. Seitz had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Stephen D. Seitz
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
-24-
On September 16, 2003, we sold 2,500 shares of our stock to James and Joann
Gould, for a price of $2.00 per share or $5,000. We relied upon Section 4(2) of
the Act for the sale. We believed that Section 4(2) was available because the
sale did not involve a public offering and there was no general solicitation or
general advertising involved in the sale. James and Joann Gould had a
pre-existing relationship with Joseph Riccelli, our Officer and Director. James
and Joann Gould represented to us that they were purchasing the shares for
investment purposes without a view towards resale. 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.
On September 16, 2003, we sold 15,000 shares of our stock to Robert Giarusso,
for a price of $2.00 per share or $30,000. We relied upon Section 4(2) of the
Act for the sale. We believed that Section 4(2) was available because the sale
did not involve a public offering and there was no general solicitation or
general advertising involved in the sale. Robert Giarusso had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Robert Giarusso
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
On September 16, 2003, we sold 1,000 shares of our stock to Wayne Dennis, for a
price of $2.00 per share or $2,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Wayne Dennis had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Wayne Dennis represented to us
that he was purchasing the shares for investment purposes without a view towards
resale. 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.
On September 16, 2003, we sold 3,000 shares of our stock to David Holzer, for a
price of $2.00 per share or $6,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. David Holzer had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. David Holzer represented to us
that he was purchasing the shares for investment purposes without a view towards
resale. 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.
On September 16, 2003, we issued 450,000 shares of our stock to legal counsel,
Hamilton, Lehrer, & Dargan, PA, in payment for legal services rendered to us. We
relied upon Section 4(2) of the Act for the sale. We believed that Section 4(2)
was available because the sale did not involve a public offering.
-25-
On September 19, 2003, we sold 2,500 shares of our stock to John Spagnolo, Jr.,
for a price of $2.00 per share or $5,000. We relied upon Section 4(2) of the Act
for the sale. We believed that Section 4(2) was available because the sale did
not involve a public offering and there was no general solicitation or general
advertising involved in the sale. John Spagnolo, Jr. had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. John Spagnolo, Jr.
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
On September 24, 2003, we sold 250 shares of our stock to Bonnie Weissinger, for
a price of $2.00 per share or $500. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Bonnie Weissinger had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Bonnie Weissinger
represented to us that she was purchasing the shares for investment purposes
without a view towards resale. 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.
On September 24, 2003, we sold 250 shares of our stock to J. Wood Weissinger,
for a price of $2.00 per share or $500. We relied upon Section 4(2) of the Act
for the sale. We believed that Section 4(2) was available because the sale did
not involve a public offering and there was no general solicitation or general
advertising involved in the sale. J. Wood Weissinger had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. J. Wood Weissinger
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
On September 25, 2003, we sold 100 shares of our stock to Grady L. Hill, for a
price of $2.00 per share or $200. We relied upon Section 4(2) of the Act for the
sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Grady L. Hill had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Grady L. Hill represented to us
that he was purchasing the shares for investment purposes without a view towards
resale. 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.
-26-
On September 26, 2003, we sold 4,000 shares of our stock to Carol Yenchik, for a
price of $2.00 per share or $8,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Carol Yenchik had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Carol Yenchik represented to us
that she was purchasing the shares for investment purposes without a view
towards resale. 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.
On September 26, 2003, we sold 1,000 shares of our stock to Darla Oliastro, for
a price of $2.00 per share or $2,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Darla Oliastro had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Darla Oliastro represented to us
that she was purchasing the shares for investment purposes without a view
towards resale. 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.
On September 26, 2003, we sold 1,000 shares of our stock to Christopher
Oliastro, for a price of $2.00 per share or $2,000. We relied upon Section 4(2)
of the Act for the sale. We believed that Section 4(2) was available because the
sale did not involve a public offering and there was no general solicitation or
general advertising involved in the sale. Christopher Oliastro had a
pre-existing relationship with Joseph Riccelli, our Officer and Director.
Christopher Oliastro represented to us that he was purchasing the shares for
investment purposes without a view towards resale. 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.
On September 26, 2003, we sold 1,000 shares of our stock to John A. Wasuchno,
for a price of $2.00 per share or $2,000. We relied upon Section 4(2) of the Act
for the sale. We believed that Section 4(2) was available because the sale did
not involve a public offering and there was no general solicitation or general
advertising involved in the sale. John A. Wasuchno had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. John A. Wasuchno
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
-27-
On September 26, 2003, we sold 500 shares of our stock to Justin Oliastro, for a
price of $2.00 per share or $1,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Justin Oliastro had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Justin Oliastro
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
On September 26, 2003, we sold 200 shares of our stock to Harry J. Hilty, for a
price of $2.00 per share or $400. We relied upon Section 4(2) of the Act for the
sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Harry J. Hilty had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Harry J. Hilty represented to us
that he was purchasing the shares for investment purposes without a view towards
resale. 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.
On October 1, 2003, we sold 11,000 shares of our stock to Anthony Fazio, for a
price of $2.00 per share or $22,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Anthony Fazio had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Anthony Fazio represented to us
that he was purchasing the shares for investment purposes without a view towards
resale. 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.
On October 1, 2003, we sold 500 shares of our stock to Daniel C. Hudock, for a
price of $2.00 per share or $1,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Daniel C. Hudock had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Daniel C. Hudock
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
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On October 6, 2003, we sold 2,000 shares of our stock to Kathleen and Albert
Panza, for a price of $2.00 per share or $4,000. We relied upon Section 4(2) of
the Act for the sale. We believed that Section 4(2) was available because the
sale did not involve a public offering and there was no general solicitation or
general advertising involved in the sale. Kathleen and Albert Panza had a
pre-existing relationship with Joseph Riccelli, our Officer and Director.
Kathleen and Albert Panza represented to us that they were purchasing the shares
for investment purposes without a view towards resale. 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.
On October 10, 2003, we sold 1,000 shares of our stock to William A. Perry, for
a price of $2.00 per share or $2,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. William A. Perry had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. William A. Perry
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
On October 11, 2003, we sold 5,000 shares of our stock to Eric Jerpe, for a
price of $2.00 per share or $10,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Eric Jerpe had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Eric Jerpe represented to us
that he was purchasing the shares for investment purposes without a view towards
resale. 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.
On October 12, 2003, we sold 500 shares of our stock to Raymond A. Stevens, for
a price of $2.00 per share or $1,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Raymond A. Stevens had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Raymond A. Stevens
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
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On October 15, 2003, we sold 1,000 shares of our stock to Marina Posvar, for a
price of $2.00 per share or $2,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Marina Posvar had a pre-existing relationship
with Joseph Riccelli, our Officer and Director. Marina Posvar represented to us
that she was purchasing the shares for investment purposes without a view
towards resale. 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.
On October 15, 2003, we sold 500 shares of our stock to Mildred M. Posvar, for a
price of $2.00 per share or $1,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Mildred M. Posvar had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Mildred M. Posvar
represented to us that she was purchasing the shares for investment purposes
without a view towards resale. 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.
On October 23, 2003, we sold 2,000 shares of our stock to Daniel J. Upham, for a
price of $2.00 per share or $4,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Daniel J. Upham had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Daniel J. Upham
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
On October 23, 2003, we sold 5000 shares of our stock to Robert Giarusso, for a
price of $2.00 per share or $10,000. We relied upon Section 4(2) of the Act for
the sale. We believed that Section 4(2) was available because the sale did not
involve a public offering and there was no general solicitation or general
advertising involved in the sale. Robert Giarusso had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Robert Giarusso
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
-30-
On October 23, 2003, we sold 2,500 shares of our stock to Guy R. Leone, M.D.,
for a price of $2.00 per share or $5,000. We relied upon Section 4(2) of the Act
for the sale. We believed that Section 4(2) was available because the sale did
not involve a public offering and there was no general solicitation or general
advertising involved in the sale. Guy R. Leone, M.D. had a pre-existing
relationship with Joseph Riccelli, our Officer and Director. Guy R. Leone, M.D.
represented to us that he was purchasing the shares for investment purposes
without a view towards resale. 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
On October 21, 2003, we received notification from the National Association of
Securities Dealers that our common stock had been approved for Quotation on the
OTC Bulletin Board under the symbol "IVDN". On October 27, 2003, we received a
corporate listing and description in Standard and Poor's Corporation Records.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
3.1 Certificate of Incorporation*
3.2 Bylaws*
4 Specimen Stock Certificate*
5 Opinion of Hamilton, Lehrer & Dargan, P.A.***
10.1 Agreement between us and RMF Global, Inc.*
10.2 Exclusive Agency, Distribution and Marketing Agreement between RMF
Global and Mr. Ko-Myung Kim.*
10.3 Agreement between us and C. Dillow & Company, Inc.*
10.5 Agreement between Innovative Designs, Inc. and Haas Outdoors, Inc.**
10.6 Letter of commitment from Innovative Designs, Inc. to Victory Junction
Gang Camp**
23.1 Consent of Malone & Bailey PLLC, Certified Public Accountants ****
23.2 Consent of Hamilton, Lehrer & Dargan P.A. contained in Exhibit 5***
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant
To Section 906 of the Sarbanes-Oxley Act of 2002
99 Test Results from Vartest Lab*
* Previously filed as exhibits to Registration Statement on Form SB-2 filed on
March 11, 2003
** Previously filed as exhibits to Registration Statement on Form SB-2
Amendment 2 filed on July 8, 2003
*** Previously filed as exhibit to Registration Statement on Form SB-2
Amendment 3 filed on August 7, 2003
**** Previously filed as exhibit to Registration Statement on Form SB-2
Amendment 4 filed on September 9, 2003
We hereby incorporate the following additional documents by reference: (a) our
Registration Statement on Form SB-2 and all amendments thereto which was filed
on March 11, 2003, and amended on May 22, 2003, July 8, 2003, August 7, 2003,
and September 9, 2003; and (b) our Form 8-K filed on September 29, 2003 and
amended on October 27, 2003.
(b) Reports on Form 8-K
On September 29, 2003, the registrant filed a Form 8-K under Item 4, "Changes in
Registrant's Certifying Accountant". On October 27, 2003, the registrant filed
an amendment to this Form 8-K to correct a typographical error.
-32-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INNOVATIVE DESIGNS, INC.
By /s/Joseph Riccelli
Joseph Riccelli
Chief Executive Officer
By /s/Anthony Fonzi
Anthony Fonzi
Chief Financial Officer, Principal Accounting Officer, and Director
Date: November 12, 2003
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