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 July 31, 2010

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: 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 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 September 13, 2010, there were 18,710,743 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/A for the Quarter Ended July 31, 2010

   
Page No.
     
Part I — Financial Information
     
Item 1.
Condensed Financial Statements
1
     
 
Condensed Balance Sheets at July 31, 2010 (Unaudited) and October 31, 2009
1
     
 
Condensed Statements of Operations for the Three Months Ended July 31, 2010 and 2009, Nine Months Ended July 31, 2010 and 2009
2
     
 
Condensed Statement of Changes in Stockholders’ Equity at July 31, 2010 (Unaudited) and October 31, 2009
3
     
 
Condensed Statements of Cash Flows for the Nine Months Ended July 31, 2010 and 2009
4
     
 
Notes to Condensed Financial Statements
5 - 7
     
Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8 - 11
     
Item 4 T.
Controls and Procedures
11
     
Part II — Other Information
     
Item 1.
Legal Proceedings
12
     
Item 2.
Unregistered Sale of Equity Securities and Use of Proceeds
12
     
Item 6.
Exhibits
13

 
 
 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

CONDENSED BALANCE SHEETS
July 31, 2010 (Unaudited) and October 31, 2009

   
2010
    
2009
  
             
ASSETS
            
             
CURRENT ASSETS:
            
Cash
   $ 27,985     $ 26,872  
Accounts receivable
     28,049       119,123  
Inventory
     935,956       811,730  
Deposits on inventory
     86,858       123,312  
Total current assets
     1,078,848       1,081,037  
                 
LONG-TERM ASSETS
                
Property and equipment - net
     812       4,642  
Total long-term assets
     812       4,642  
                 
TOTAL ASSETS
   $ 1,079,660     $ 1,085,679  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
CURRENT LIABILITIES:
                
Accounts payable
   $ 35,462     $ 53,983  
Current portion of notes payable
     169,707       177,029  
Accrued interest expense
     94,688       98,800  
Accounts payable - related party
     28,220       28,220  
Related party debt
     47,300       84,000  
Shareholders advances
     206,364       214,764  
Accrued expenses
     -       896  
Total current liabilities
     581,741       657,692  
                 
LONG-TERM LIABILITIES:
                
Long-term portion of notes payable
     377,009       388,928  
Total long term liabilities
     377,009       388,928  
                 
TOTAL LIABILITIES
     958,750       1,046,620  
                 
STOCKHOLDERS' EQUITY:
                
Preferred stock, $.0001 par value, 100,000,000 shares authorized
                
Common stock, $.0001 par value, 500,000,000 shares authorized, 18,715,743 and 18,703,743 shares issued and outstanding
     1,875       1,873  
Additional paid in capital
     5,640,416       5,638,018  
Accumulated deficit
     (5,521,381 )     (5,600,832 )
Total stockholders' equity
     120,910       39,059  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $ 1,079,660     $ 1,085,679  
 
The accompanying notes are an integral part of these financial statements.
 
 
- 1 -
 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

STATEMENTS OF OPERATIONS
Three Months Ended July 31, 2010 and 2009, Nine Months Ended July 31, 2010 and 2009
(Unaudited)

   
Three Months Ended July 31,
    
Nine Months Ended July 31,
  
   
2010
    
2009
    
2010
    
2009
  
                         
REVENUE
   $ 28,347     $ 26,616     $ 783,437     $ 675,446  
                                 
OPERATING EXPENSES:
                                
Cost of sales
     12,703       11,810       336,866       298,023  
Selling, general and administrative expenses
     83,058       66,766       340,460       340,373  
      95,761       78,576       677,326       638,396  
                                 
(Loss)/income from operations
     (67,414 )     (51,960 )     106,111       37,050  
                                 
OTHER (EXPENSE)/INCOME:
                                
Interest income
     255       -       255       -  
Interest expense
     (10,721 )     (4,456 )     (26,915 )     (12,828 )
Total other (expense)/income
     (10,466 )     (4,456 )     (26,660 )     (12,828 )
                                 
Net (loss)/income before income taxes
     (77,880 )     (56,416 )     79,451       24,222  
Income taxes
     -       -       -       -  
                                 
NET (LOSS)/INCOME
   $ (77,880 )   $ (56,416 )   $ 79,451     $ 24,222  
                                 
Weighted Average Shares Outstanding
     18,727,743       18,646,743       18,503,801       19,321,799  
                                 
Net income/(loss) per share
   $ (.004 )   $ (.003 )   $ .004     $ .001  

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

 
- 2 -
 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY
July 31, 2010 (Unaudited) and October 31, 2009

   
Common Stock
          
Additional
              
   
Shares
    
Amount
    
Paid in Capital
    
Retained Deficit
    
Total
  
                               
Balance at October 31, 2008
     18,455,243     $ 1,846     $ 5,565,045     $ (5,622,832 )   $ (55,941 )
                                         
Shares issued for services
     185,500       21       54,779       -       54,800  
                                         
Shares issued for cash
     90,000       9       28,991       -       29,000  
                                         
Return of shares for non-performance of services
     (27,000 )     (3 )     (10,797 )     -       (10,800 )
                                         
Net income
     -       -       -       22,000       22,000  
                                         
Balance at October 31, 2009
     18,703,743       1,873       5,638,018       (5,600,832 )     39,059  
                                         
Shares issued for services
     12,000       2       2,398       -       2,400  
                                         
Net income
     -       -       -       79,451       79,451  
                                         
Balance at July 31, 2010
     18,715,743     $ 1,875     $ 5,640,416     $ (5,521,381 )   $ 120,910  

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

 
- 3 -
 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

STATEMENTS OF CASHFLOW
For Nine Months Ended July 31, 2010 and 2009
(Unaudited)

   
For the Nine Months Ended
  
   
July 31, 2010
    
July 31, 2009
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income
   $ 79,451     $ 24,222  
Adjustments to reconcile net income to cash provided by operating activities:
                
Common stock issued for services
     2,400       54,800  
Depreciation
     3,830       3,592  
Common stock returned for noncompliance of services
     -       (10,800 )
Changes in operating assets and liabilities:
                
Accounts receivable
     91,074       144,536  
Inventory
     (124,226 )     (80,871 )
Deposits on inventory
     36,454       187,939  
Accounts payable
     (18,521 )     (45,246 )
Accrued expenses
     (896 )     (16,757 )
Customer deposits
     -       (9,823 )
Accrued interest on notes payable
     (4,112 )     (26,000 )
Net cash provided by operating activities
     65,454       225,592  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Payments on note payable
     (134,241 )     (164,943 )
Payment on note payable - related party
     (36,700 )     (63,000 )
Proceeds from notes payable
     115,000       -  
Payment of shareholder advances
     (8,400 )     (33,336 )
Common stock issued for cash
     -       29,000  
Net cash used in financing activities
     (64,341 )     (232,279 )
                 
Net increase/(decrease) in cash
   $ 1,113     $ (6,687 )
                 
Cash - beginning of year
   $ 26,872     $ 22,523  
Cash - end of period
   $ 27,985     $ 15,836  
                 
Supplemental cash flow information:
                
                 
Cash paid for interest
   $ 16,193     $ 12,832  
 
The accompanying notes are an integral part of these financial statements.

 
 
- 4 -
 

INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
July 31, 2010

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, 2009.  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, 2010 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.

 
- 5 -
 

INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
July 31, 2010

4.
GOING CONCERN AND LEGAL PROCEEDINGS

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's ability to continue as a going concern is contingent upon its ability to expand its operations and secure additional financing.  The Company is currently pursuing financing for its operations and seeking to expand its operations.  Failure to secure such financing or expand its operations may result in the Company not being able to continue as a going concern. During the quarter ended July 31, 2010, the Company entered into new short-term borrowings of $115,000 with various individuals in addition to loans made to us by our Chief Executive Officer.

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.

On July 30, 2008, Elio D. Cattan and Eliotex srl filed a Motion to Strike Satisfaction of Judgment in the action filed at 04-00593 in the United States District Court for the Western District of Pennsylvania.  The basis for the relief requested was Cattan’s averment that Innovative Designs defrayed certain of the expenses in Greystone, Inc.’s litigation in the United States, and that assistance violated Pennsylvania public policy regarding champerty and maintenance.

On February 5, 2009, The Honorable Arthur J. Schwab entered an Order on the Motion of Elio Cattan and Eliotex, SRL (collectively, “Cattan”) to strike the assignment and satisfaction of judgment filed at Docket No. 04-00593 by Elite Properties, LLC.  Counsel for Innovative Designs, Inc. sought to preclude the District Court from rendering any determination on the merits as to the ownership of the Judgment or the propriety of the State Court execution proceedings by which ownership of the Judgment was transferred.

The District Court did not adopt or substantiate the legal argument brought forward by Counsel for Cattan, and did not render any findings on the merits that would disturb Elite Properties, LLC’s ownership of the IDI Judgment at the time it was satisfied.

On March 31, 2009, Eliotex, srl (“Eliotex”) and Elio Cattan (“Cattan”) filed a Motion to Strike Assignment and Satisfaction of Judgment in the Court of Common Pleas of Allegheny County, Pennsylvania at Case No. GD-06-011327.  The Motion requests that the Court invalidate State Court execution proceedings on the default judgment entered against Eliotex and Cattan by Greystone, Inc. (“Greystone”) by which Greystone purchased at Sheriff Sale the default judgment against IDI entered in favor of Eliotex and Cattan in Italian arbitration proceedings and confirmed by the District Court.  The Motion further requests that the Court strike the purchase of an assignment of that judgment from Greystone, and its subsequent satisfaction, by Elite Properties, LLC.  IDI consented to the issuance of a Rule to Show Cause why the relief should not be granted.

 
- 6 -
 

INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
July 31, 2010

On June 10, 2009, Eliotex and Cattan filed a Verification to their Motion.  IDI filed its Answer to Rule to Show Cause on June 23, 2009.  Eliotex and Cattan conducted no discovery within the 60 day time period provided for by the Order issuing the Rule, and no oral argument on the Rule has been requested.  The Motion is dormant and likely to remain so for the foreseeable future.

On January 22, 2010 , counsel for IDI and Eliotex/Cattan participated in a oral argument before the Honorable R. Stanton Wettick, Jr. of the Court of Common Pleas of Allegheny County, Pennsylvania on the Rule to Show Cause regarding Eliotex/Cattan’s Motion to Strike Assignment of Judgement. The Judge heard arguments, and has asked the parties to brief two issues: (1) whether Eliotex/Cattan have standing to challenge the assignment from Greystone to Elite Properties; and (2) whether the dealings between IDI and Greystone constitute champerty and maintenance.

On June 2, 2010, the Honorable R. Stanton Wettick, Jr. of the Court of Common Pleas of Allegheny County, Pennsylvania entered an Order denying Elio D. Cattan and Eliotex, SRL’s motion to strike assignment and satisfaction of judgment.  As Judge Arthur J. Schwab of the United States District Court for the Western District of Pennsylvania specifically deferred the question of the ownership of the judgment to the State Court, Judge Wettick’s Order represents a final adjudication of this matter on the merits, and resolved the case in IDI’s favor.  IDI’s legal counsel will now request that Judge Schwab reform the Federal Court docket to comport with the State Court’s ruling.

On July 23, 2010, IDI filed a motion with the United States District Court for the Western District of Pennsylvania in Case No. 04-00593 requesting that Judge Schwab enter an Order to conform the District Court docket in light of the State Court adjudication.  On July 26, 2010, Judge Schwab entered an Order: (1) striking the assignment to Elio Cattan and Eliotex, SRL filed by Greystone, Inc. on March 25, 2009; (2) vacating the Order of February 5, 2009 striking the Assignment and Satisfaction of Judgment filed by Elite Properties, LLC on May 27, 2008; and (3) deeming satisfied the Judgment entered in favor of Elio Cattan and Eliotex, SRL and against RMF Global, Inc. and Innovative Designs, Inc. on May 9, 2006.  Counsel for Elio Cattan and Eliotex, SRL represented to counsel for IDI that they would not oppose the Motion.

IDI has prevailed in all of the outstanding litigation involving the foregoing, and believes the matter to be concluded.

5.
COMMON STOCK

On May 25, 2010, we issued 12,000 shares of our common stock for professional services for $.20 per share or $2,400.  The shares were issued without registration pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.

6.
SUBSEQUENT EVENTS

The Company has evaluated subsequent events in accordance with Accounting Standards Codification Topic 855, Subsequent Events, through September 13, 2010, which is the date financial statements were available to be issued.  During the evaluation no subsequent event items were identified by the Company.

 
- 7 -
 

INNOVATIVE DESIGNS, INC.

July 31, 2010

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, 2009.

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.

 
- 8 -
 

INNOVATIVE DESIGNS, INC.

July 31, 2010

Results of Operations

Comparison of the Three Months Ended July 31, 2010 with the Three Months Ended July 31, 2009.

Revenues

The following table shows a comparison of the results of operations between the three months ended July 31, 2010 and three months ended July 31, 2009:

   
Three Months
Ended
July 31, 2010
    
% of
Sales
    
Three Months
Ended
July 31, 2009
    
% of
Sales
    
$ Increase
(Decrease)
    
% Change
  
REVENUE
   $ 28,347       100.0 %   $ 26,616       100.0 %   $ 1,731       6.5 %
                                                 
OPERATING EXPENSES
                                                
Cost of sales
     12,703       44.8 %     11,810       44.4 %     893       7.6 %
Selling, general and administrative expenses
     83,058       293.0 %     66,766       250.8 %     16,292       24.4 %
      95,761       337.8 %     78,576       295.2 %     17,185       21.9 %
Loss from operations
     (67,414 )     (237.8 )%     (51,960 )     195.2 %     (15,454 )     (29.7 )%
                                                 
OTHER (EXPENSE)/INCOME
                                                
Interest income
     255       .9 %     -       -       255       100.0 %
Interest (expense)
     (10,721 )     (37.8 )%     (4,456 )     (16.7 )%     (6,265 )     (140.6 )%
      (10,466 )     (36.9 )%     (4,456 )     (16.7 )%     (6,010 )     (134.9 )%
                                                 
Net loss
   $ (77,880 )     (274.7 )%   $ (56,416 )     (212.0 )%   $ (21,464 )     (38.0 )%

Three Months Ended July 31, 2010 and 2009

The increase in revenue for the three months ended July 31, 2010 compared to the corresponding period ended July 31, 2009, is the result of our entry into the Alaska market with its longer cold season and the addition of more retailers.  Nearly all of our sales for the period were for our Arctic Armor line of products.  During the period we had a $2,400 expense related to our issuance of our common stock for services.  This expense is included in the selling, general and administrative expenses category.

 
- 9 -
 

INNOVATIVE DESIGNS, INC.

July 31, 2010

The following table shows a comparison of the results of operations between the nine months ended July 31, 2010 and nine months ended July 31, 2009.

   
Nine Months
Ended
July 31, 2010
    
% of
Sales
    
Nine Months
Ended
July 31, 2009
    
% of
Sales
    
$ Increase
(Decrease)
    
% Change
  
REVENUE
   $ 783,437       100.0 %   $ 675,446       100.0 %   $ 107,991       16.0 %
                                                 
OPERATING EXPENSES
                                                
Cost of sales
     336,866       43.0 %     298,023       44.1 %     38,843       13.0 %
Selling, general and administrative expenses
     340,460       43.5 %     340,373       50.4 %     87       .03 %
      677,326       86.5 %     638,396       94.5 %     38,930       6.1 %
Income from operations
     106,111       13.5 %     37,050       5.5 %     69,061       186.4 %
                                                 
OTHER (EXPENSE)/INCOME
                                                
Interest income
     255       .03 %     -       -       255       100.0 %
Interest (expense)
     (26,915 )     (3.4 )%     (12,828 )     (1.9 )%     (14,087 )     (109.8 )%
      (26,660 )     (3.4 )%     (12,828 )     (1.9 )%     (13,832 )     (107.8 )%
                                                 
Net income
   $ 79,451       10.1 %   $ 24,222       3.6 %   $ 55,229       228.0 %

Nine Months Ended July 31, 2010 and 2009

The increase in revenue for the nine month period ended July 31, 2010, over the corresponding period ended July 31, 2009, was a result of our adding more retailers, internet sales and the entry into the Alaska market.  During the period substantially all of our sales were for our Arctic Armor line of products.  We expanded our Arctic Armor product line by adding mitts, hats and a tasseled cap.  We also introduced a special edition Arctic Armor suit that is oil and jet fuel resistance and is anti-static.  The suit costs more than our standard suit and will be offered on a limited supply basis.

The increase during the period in our selling, general and administrative expenses was partly on account of approximately $28,000 in professional expenses.  We expect our fourth quarter to show a substantial increase in revenue over the comparable period.  We continue to add more retailers including Canadian Tire.  We continue to await the results of the sample yardage of our building wrap we sent out to builders and distributors.

 
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INNOVATIVE DESIGNS, INC.

July 31, 2010

Liquidity and Capital Resources

During the quarter ended July 31, 2010, we funded our operations with revenues from sales and new short-term borrowings of $115,000 in addition to loans made to us by our Chief Executive Officer.  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 and short-term borrowings.  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 and adding new products to its Arctic Armor product line.

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

ITEM 4 T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the reporting period covered by this report, June 30, 2010, our Chief Executive Officer, who also serves as our Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined in Securities Exchange Act Rule 13a-15(e).

Based upon that evaluation our management concluded that our disclosure controls and procedures were adequate and effective.

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.

July 31, 2010

PART II

ITEM 1. LEGAL PROCEEDINGS

On June 2, 2010, the Honorable R. Stanton Wettick, Jr. of the Court of Common Pleas of Allegheny County, Pennsylvania entered an Order denying Elio D. Cattan and Eliotex, SRL’s motion to strike assignment and satisfaction of judgment.  As Judge Arthur J. Schwab of the United States District Court for the Western District of Pennsylvania specifically deferred the question of the ownership of the judgment to the State Court, Judge Wettick’s Order represents a final adjudication of this matter on the merits, and resolved the case in IDI’s favor.  IDI’s legal counsel will now request that Judge Schwab reform the Federal Court docket to comport with the State Court’s ruling.

On July 23, 2010, IDI filed a motion with the United States District Court for the Western District of Pennsylvania in Case No. 04-00593 requesting that Judge Schwab enter an Order to conform the District Court docket in light of the State Court adjudication.  On July 26, 2010, Judge Schwab entered an Order: (1) striking the assignment to Elio Cattan and Eliotex, SRL filed by Greystone, Inc. on March 25, 2009; (2) vacating the Order of February 5, 2009 striking the Assignment and Satisfaction of Judgment filed by Elite Properties, LLC on May 27, 2008; and (3) deeming satisfied the Judgment entered in favor of Elio Cattan and Eliotex, SRL and against RMF Global, Inc. and Innovative Designs, Inc. on May 9, 2006.  Counsel for Elio Cattan and Eliotex, SRL represented to counsel for IDI that they would not oppose the Motion.

IDI has prevailed in all of the outstanding litigation involving the foregoing, and believes the matter to be concluded.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 25, 2010, we issued 12,000 shares of our common stock for marketing services for $.20 per share or $2,400 to one person.  The shares were issued without registration pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as an offering not involving a public offering.

 
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INNOVATIVE DESIGNS, INC.

 
July 31, 2010
 
ITEM 6. EXHIBITS

*3.1
Certificate of Incorporation

*3.2
By Laws

 
10.1
Loan Agreement dated July 28, 2010 – Xunjin Hua

 
10.2
Loan Agreement dated July 15, 2010 – Corinthian Development LLC

 
10.3
Loan Agreement dated June 10, 2010 – Frank Riccelli

 
10.4
Loan Agreement dated June 10, 2010 – Frank Riccelli
 
31.1
Rules 13a–14(a)) 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: September 13, 2010
/s/ Joseph Riccelli
 
Joseph Riccelli, Chief Executive Officer
 
and Chief Financial Officer

 
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