Innovative Designs: Should Value Investors Avoid This Micro-cap?

Introduction

Innovative Designs Inc (PINK:IVDN) was founded in 2002 and is headquartered in Pittsburgh, Pennsylvania. It is a development stage company, dealing in products for the recreation industry, which are made from eliotex; a thin, lightweight material that has bouyancy and thermal resistant characteristics. Designs, Inc. primarily sells its products through independent sales agents, agencies, retailers, and distributors, as well as through its Web site, www.idigear.com in the United States, Canada, the Russian Federation, and Finland.

Stock Snapshot

Innovative Designs Inc (PINK:IVDN)’s stock closed at USD 0.35 on 31st December’2012, with an average volume of 1,811 shares over the last three months. The stock has a total market capitalization of USD 6.62 million. During the last 52 weeks, Innovative Designs Inc (PINK:IVDN)’s stock has traded between USD 0.08 and USD 0.60. The stock has been trading at a trailing P/S of 6.38. A brief snapshot of the key fundamentals for the company’s stock is presented below:

 Financial Highlights

 Topline   

For 9MFY12, the Company recorded revenues of USD .604 million, as compared to USD 0.754 million for the corresponding period last year. The 19.8% drop in revenues was a result of the warmer weather that was experienced in the geographic areas where the company markets its cold weather apparel.

Bottom Line For 9MFY12, the Company recorded total net loss of 0.173 million, as compared to USD 0.017 million for the corresponding period last year. The net profit margin for 9MFY12 was recorded at -28.6% as compared to -2.3%. The major reason for this variance was the substantial decline in sales, decline in gross margins and an increase in selling, general and administration expenses.

Capital Resources

As of 31^st July’ 2012, the company had total debt of USD 698,180. The company has a cash value per share of USD 0.01 as a result of its cash& cash equivalents of 87,910 as at 31^st  July’ 2012. For the short term, the Company funds its operations from sales and short term borrowings from shareholders and others and the possible sale of its securities. The Company doesn’t have any commercial credit facilities available to it. For the longer term, the Company plans to fund its operations from revenues, borrowings from private parties and the possible sale of its securities.

Outlook

Value investors should watch out for the following factors:

• Increasing losses experienced by the Company!
• Decreasing sales!