Edgar Filing: INNOVATIVE DESIGNS INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended April 30, 2011

¨	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: 000-51791

INNOVATIVE DESIGNS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		03-0465528
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

223 North Main Street, Suite 1

Pittsburgh, Pennsylvania 15215

(Address of Principal Executive Offices, Zip Code)

(412) 799-0350

(Issuer’s Phone Number Including Area Code)

N/A

(Former Name or Former Address, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and 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.

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posited on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). YES x NO x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act.

(Check One)

Large Accelerated Filer ¨	Accelerated Filer ¨

Non-accelerated Filer ¨	Smaller reporting company x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

As of June 14, 2011, there were 18,775,743 shares of the Registrant’s common stock, par value $.0001 per share, outstanding.

Transitional Small Business Disclosure Format: YES ¨ NO x

Innovative Designs, Inc.

Index

Form 10-Q for the Quarter Ended April 30, 2011

		Page No.
Part I — Financial Information

Item 1.	Condensed Financial Statements

	Condensed Balance Sheets at April 30, 2011 (Unaudited)
	and October 31, 2010	1

	Condensed Statements of Operations for the Three Months Ended
	April 30, 2011 and 2010, Six Months Ended April 30, 2011 and 2010	2

	Condensed Statement of Changes in Stockholders’ Equity at
	April 30, 2011 (Unaudited) and October 31, 2010	3

	Condensed Statements of Cash Flows for the Six Months
	Ended April 30, 2011 and 2010	4

	Notes to Condensed Financial Statements	5 - 6

Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	7 - 10

Item T.	Controls and Procedures	10

Part II — Other Information

Item 6.	Exhibits	11

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

CONDENSED BALANCE SHEETS

April 30, 2011 (Unaudited) and October 31, 2010

	2011			2010
ASSETS

CURRENT ASSETS:
Cash	$	103,112		$	116,950
Accounts receivable		43,491			152,207
Inventory - net of obsolete inventory reserve of $126,192		543,486			904,487
Deposits on inventory		173,528			-
Total current assets		863,617			1,173,644

PROPERTY AND EQUIPMENT, NET		1,536			1,805

TOTAL ASSETS	$	865,153		$	1,175,449

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	40,912		$	43,511
Current portion of notes payable		35,859			280,859
Accrued interest expense		92,464			104,620
Accounts payable - related party		28,220			28,220
Related party debt		3,916			41,416
Shareholders advances		146,964			209,364
Accrued expenses		1,015			896
Total current liabilities		349,350			708,886

LONG-TERM LIABILITIES
Long-term portion of notes payable		367,729			373,277
Total long term liabilities		367,729			373,277

TOTAL LIABILITIES		717,079			1,082,163

STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value, 100,000,000 shares authorized
Common stock, $.0001 par value, 500,000,000 shares
authorized, 18,775,743 and 18,730,743 issued and
outstanding		1,880			1,875
Additional paid in capital		5,648,161			5,643,666
Accumulated deficit		(5,501,967	)		(5,552,255	)
Total stockholders' equity		148,074			93,286

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	865,153		$	1,175,449

The accompanying notes are an integral part of these financial statements.

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ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

STATEMENTS OF OPERATIONS

Three Months Ended April 30, 2011 and 2010, Six Months Ended April 30, 2011 and 2010

(Unaudited)

	Three Months Ended April 30,						Six Months Ended April 30,
	2011			2010			2011			2010

REVENUE - NET	$	34,161		$	118,414		$	715,170		$	755,090

OPERATING EXPENSES:
Cost of sales		29,826			59,591			329,123			324,163
Selling, general and administrative expenses		144,369			107,878			303,740			257,402
		174,195			167,469			632,863			581,565

(Loss)/income from operations		(140,034	)		(49,055	)		82,307			173,525

OTHER EXPENSE:
Interest expense		(9,617	)		(4,295	)		(32,019	)		(16,193	)
Total other expense		(9,617	)		(4,295	)		(32,019	)		(16,193	)

Net income/(loss) before income taxes		(149,651	)		(53,350	)		50,288			157,332
Income taxes		-			-			-			-

NET (LOSS)/INCOME	$	(149,651	)	$	(53,350	)	$	50,288		$	157,332

Weighted Average Shares Outstanding		18,722,743			18,646,743			18,722,743			18,425,802

Net income/(loss) per share	$	(.008	)	$	(.003	)	$	.003		$	.009

The accompanying notes are an integral part of these financial statements.

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INNOVATIVE DESIGNS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

April 30, 2011 (Unaudited) and October 31, 2010

	Common Stock						Additional			Accumulated
	Shares			Amount			Paid in Capital			Deficit			Total

Balance at October 31, 2009		18,703,743		$	1,873		$	5,638,018		$	(5,600,832	)	$	39,059

Shares issued for services		32,000			3			7,397			-			7,400

Return of shares for non-performance of services		(5,000	)		(1	)		(1,749	)		-			(1,750	)

Net income		-			-			-			48,577			48,577

Balance at October 31, 2010		18,730,743			1,875			5,643,666			(5,552,255	)		93,286

Shares issued for services		45,000			5			4,495			-			4,500

Net income		-			-			-			50,288			50,288

Balance at April 30, 2011		18,775,743		$	1,880		$	5,648,161		$	(5,501,967	)	$	148,074

The accompanying notes are an integral part of these financial statements.

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ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

STATEMENTS OF CASHFLOW

(Unaudited)

	For the Six Months Ended
	April 30, 2011			April 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	50,288		$	157,332
Adjustments to reconcile net income to cash provided by operating activities:
Common stock issued for services		4,500			-
Depreciation		269			3,830
Changes in operating assets and liabilities:
Accounts receivable		108,716			57,876
Inventory		361,001			291,726
Deposits on inventory		(173,528	)		(231,605	)
Accounts payable		(2,599	)		(21,382	)
Accrued expenses		119			-
Accrued interest on notes payable		(12,156	)		(6,800	)
Net cash provided by operating activities		336,610			250,977

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable		(250,548	)		(130,836	)
Payment on note payable - related party		(37,500	)		(29,000	)
Payment of shareholder advances		(62,400	)		(8,400	)
Net cash used in financing activities		(350,448	)		(168,236	)

Net (decrease)/increase in cash	$	(13,838	)	$	82,741

Cash - beginning of year	$	116,950		$	26,872
Cash - end of period	$	103,112		$	109,613

Supplemental cash flow information:

Cash paid for interest	$	16,923		$	16,193

The accompanying notes are an integral part of these financial statements.

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INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

April 30, 2011

1.	BASIS OF PRESENTATION - INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the general instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. These interim financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2010. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year ending October 31, 2011 or any future period.

2.	FASB ACCOUNTING STANDARDS CODIFICATION TOPIC 718 SHARE-BASED PAYMENT (FASB ASC 718)

FASB ASC 718 establishes standards for the accounting and transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Accounting Standard Codification does not change the accounting guidance for share-based payment transactions with parties other than employees provided in FASB ASC 718 as originally issued and EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” This Accounting Standard Codification does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans. The adoption of FASB ASC 718 by the Company did not have a material impact on the Company’s financial position, results of operations or cash flows. There was no change in the status of outstanding shares or in the Equity Compensation Plan since October 31, 2006, and no shares were granted to employees of the Company for services rendered or to be rendered.

3.	EARNINGS PER SHARE

Innovative Designs, Inc. (the “Company”) calculates net income (loss) per share as required by FASB ASC Topic 260, Earnings per Share. Basic earnings (loss) per share is calculated by dividing 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.

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INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

April 30, 2011

4.	INCOME TAXES

The Company follows FASB ASC Topic 740 “Accounting for Income Taxes.” Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in asset or liability each period. The Company has net operating losses (NOLs) carry forwards that can be used to eliminate the tax liability in the current period and therefore no tax liability or tax provision is reflected in these current quarterly financial statements.

The Company will continue to evaluate its income tax obligation throughout the year and will record a tax provision when it is necessary.

5.	COMMON STOCK

On April 11, 2011, the Company issued 25,000 shares of our stock to Ashley Kane for professional services. The shares issued to Ashley Kane were valued at $.10 a share or an aggregate price of $2,500. We believe 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. 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 April 11, 2011, the Company issued 20,000 shares of our stock to Gregory Domion for professional services. The shares issued to Gregory Domion were valued at $.10 a share or an aggregate price of $4,000. We believe 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. 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.

6.	SUBSEQUENT EVENTS

The Company has evaluated subsequent events in accordance with Accounting Standards Codification Topic 855, Subsequent Events, through June 14, 2011, which is the date financial statements were available to be issued. During the evaluation no subsequent event items were identified by the Company.

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INNOVATIVE DESIGNS, INC.

April 30, 2011

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following information should be read in conjunction with the consolidated financial statements and the notes thereto and in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 31, 2010.

Disclosure Regarding Forward-Looking Statements

Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute “forward-looking statements” within the meaning of the federal securities laws. When used in this report, the words “believes,” “expects,” “estimates,” “intends” and similar expressions are intended to identify forward-looking statements. Statements regarding future events and developments and our future performance, as well as our expectations, beliefs, plans, intentions, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of such statements in this report include descriptions of our plans and strategies with respect to developing certain market opportunities. and our overall business plan. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. We believe that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligations to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

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 hunting apparel, and cold weather gear called “Artic Armor” that are made from INSULTEX, a material with buoyancy, scent block and thermal resistant proprieties. 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, and

Developing our website to sell more of our products.

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INNOVATIVE DESIGNS, INC.

April 30, 2011

Results of Operations

Comparison of the Three Months Ended April 30, 2011 with the Three Months Ended April 30, 2010.

Revenues

The following table shows a comparison of the results of operations between the three months ended April 30, 2011 and three months ended April 30, 2010:

	Three Months Ended April 30, 2011			% of Sales			Three Months Ended April 30, 2010			% of Sales			$ Increase (Decrease)			% Change
REVENUE - NET	$	34,161			100	%	$	118,414			100	%	$	(84,253	)		(71.2	)%

OPERATING EXPENSES
Cost of sales		29,826			78.6	%		59,591			50.3	%		(29,765	)		(50	)%
Selling, general and administrative expenses		144,369			380.4	%		107,878			91.1	%		36,491			33.8	%
		174,195			380.4	%		167,469			141.4	%		6,726			4.0	%
Loss from operations		(140,034	)		(409.9	)%		(49,055	)		(41.4	)%		(90,979	)		(185.5	)%

OTHER EXPENSE
INTEREST EXPENSE		(9,617	)		25.3	%		(4,295	)		(3.6	)%		(5,322	)		(123.9	)%
		(9,617	)		25.3	%		(4,295	)		(3.6	)%		(5,322	)		(123.9	)%

Net (loss)/income	$	(149,651	)		(438.1	)%	$	(53,350	)		(45.1	)%	$	(96,301	)		(180.5	)%

Three Months Ended April 30, 2011 and 2010.

Revenues for the quarter ended April 30, 2011, were $34,161 compared to revenues of $118,414 for the quarter ended April 30, 2010. The decrease was partially attributable to the fact that during the quarter ended April, 30, 2010, we has just entered the Alaskan market which accounted for a surge in orders for our cold weather products. Our revenue for the period was also affected by a sales return of approximately $14,000 that was a result of a double shipment. Nearly all of our revenue for the period was from our Arctic Armor product line.

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INNOVATIVE DESIGNS, INC.

April 30, 2011

The following table shows a comparison of the results of operations between the six months ended April 30, 2011 and six months ended April 30, 2010:

	Six Months Ended April 30, 2011			% of Sales			Six Months Ended April 30, 2010			% of Sales			$ Increase (Decrease)			% Change
REVENUE - NET	$	715,170			100	%	$	755,090			100	%	$	(39,920	)		(5.3	)%

OPERATING EXPENSES
Cost of sales		329,123			45.8	%		324,163			42.9	%		4,960			1.5	%
Selling, general and administrative expenses		303,740			42.2	%		257,402			34.1	%		46,338			18.0	%
		632,863			88.0	%		581,565			77.0	%		51,298			8.8	%
Income from operations		82,307			12.0	%		173,525			23.0	%		(91,218	)		(52.6	)%

OTHER EXPENSE
INTEREST INCOME (EXPENSE)		(32,019	)		(4.5	)%		(16,193	)		(2.1	)%		(15,826	)		(97.7	)%
		(32,019	)		(4.5	)%		(16,193	)		(2.1	)%		(15,826	)		(97.7	)%

Net income	$	50,288			7.5	%	$	157,332			20.8	%	$	(107,044	)		(68.0	)%

Revenue for the six months ended April 30, 2011, was $715,170 compared to revenues of $755,090 for the six months ended April 30, 2011. The decrease is a result, in part, of the fact that during 2010, we had just entered the Alaskan market. This resulted in a surge in orders. The third quarter is historically a slow period given the cold weather nature of our main product line.

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INNOVATIVE DESIGNS, INC.

April 30, 2011

Liquidity and Capital Resources

During the quarter ended April 30, 2011, we funded our operations with revenues from sales. We will continue to fund operations from revenues and borrowings and the possible sale of securities. Our ability to obtain outside funding of either debt or equity is being adversely affected in part, by the general inability to obtain commercial lending.

Short Term: We funded our operations with revenues from sales. The financial institution has restricted the amounts we can borrow on our lines of credit and they will not increase our borrowing capacity on the lines of credit. The Company continues to pay its creditors when payments are due and has been successful in expanding its sales base into the oil and gas industry and to the railroad industry as well as to other sectors of the market.

Long Term: The Company will continue to fund operations from revenues, borrowings and the possible sale of its securities. The Company continues to purse financing to fund its long-term liquidity needs, however, the general state of the credit industry has made borrowing more difficult.

ITEM T. CONTROLS AND PROCEDURES

Management has developed and implemented a policy and procedures for reviewing, on a quarterly basis, our disclosure controls and procedures and our internal control over financial reporting. Effective March 19, 2008, our Chief Executive Officer temporarily assumed the duties of our Chief Financial Officer. As of the date of filing this Form 10-Q, the Chief Executive Officer continues these duties. During the second quarter of 2009, the Company hired an outside Certified Public Accountant to analyze and prepare the books and records on a quarterly basis. As such, only immaterial reclassifications were made during the first and second quarter of 2011.

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13(a)-15 or 15d-15 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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INNOVATIVE DESIGNS, INC.

April 30, 2011

PART II

ITEM 6. EXHIBITS

*3.1		Certificate of Incorporation

*3.2		By Laws

31.1		Rule 13a - 14a Certification of Chief Executive Office and Chief Financial Officer

32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial officer

*		Incorporated by reference to the Company’s registration statement on Form SB-2, filed March 11, 2003

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Innovative Designs, Inc.
		Registrant

Date: June 14, 2011	by:	/s/ Joseph Riccelli
		Joseph Riccelli, Chief Executive Officer
		and Chief Financial Officer

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