Edgar Filing: INNOVATIVE DESIGNS INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended January 31, 2009

¨	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: 000-5179

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 ¨ NO x

As of March 26, 2009, there were 18,720,743 shares of the Registrant’s common stock, par value $.0001 per share, outstanding.

Transitional Small Business Disclosure Format: YES ¨ NO x

EXPLANATORY NOTE

Innovative Designs, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q to amend our Quarterly Report on Form 10-kQ for the three month period ended January 31, 2009, which was filed with the US Securities and Exchange commission ( the “SEC”) ( the Original Filing”).

The purpose of this Amendment No.1 is to respond to certain comments received from the staff of the SEC. The following sections of the Original Filing have been revised to reflect the staff’s comments:

Item T

Item2

Exhibit 31.1

This Amendment No.1 does not reflect events that that occurred after the filing of Original Filing and does not modify or update the disclosure therein in any way other than as required to reflect the matters set forth above.. Accordingly, this Amendment No.1 should be read along with our other filings made with the SEC.

Innovative Designs, Inc.

Index

Form 10-Q for the Quarter Ended January 31, 2009

		Page No.

Part I — Financial Information

Item 1.	Condensed Financial Statements (unaudited)

	Condensed Balance Sheets at January 31, 2009 (Unaudited) and October 31, 2008	1

	Condensed Statements of Operations for the Three Months Ended January 31, 2009 and 2008	2

	Condensed Statement of Changes in Stockholders’ Equity (Deficit) at January 31, 2009 and October 31, 2008	3

	Condensed Statements of Cash Flows for the Three Months Ended January 31, 2009 and 2008	4

	Notes to Condensed Financial Statements	5 - 7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8 - 10

Item T.	Controls and Procedures	10

Part II — Other Information

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	11

Item 6.	Exhibits	11

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

CONDENSED BALANCE SHEETS

January 31, 2009 (Unaudited) and October 31, 2008

	2009			2008

ASSETS

CURRENT ASSETS:
Cash	$	177,556		$	22,523
Accounts receivable		234,995			159,128
Inventory		786,610			732,295
Deposits on inventory		53,817			305,000
Total current assets		1,252,978			1,218,946

PROPERTY AND EQUIPMENT, NET		9,478			10,675

TOTAL ASSETS	$	1,262,456		$	1,229,621

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	38,041		$	88,889
Customer deposits		-			9,823
Current portion of notes payable		116,813			169,530
Accrued interest expense		118,000			118,000
Accounts payable - related party		28,220			28,220
Related party debt		95,000			128,000
Shareholders advances		272,564			328,500
Accrued expenses		2,772			17,485
Total current liabilities		671,410			888,447

LONG-TERM LIABILITIES:
Long-term portion of notes payable		392,427			397,115
Total long term liabilities		392,427			397,115

TOTAL LIABILITIES		1,063,837			1,285,562

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.0001 par value, 100,000,000 shares authorized
Common stock, $.0001 par value, 500,000,000 shares authorized, 18,546,743 and 18,455,243 shares issued and outstanding		1,856			1,846
Additional paid in capital		5,594,485			5,565,045
Accumulated deficit		(5,397,722	)		(5,622,832	)
Total stockholders' equity (deficit)		198,619			(55,941	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	1,262,456		$	1,229,621

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

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INNOVATIVE DESIGNS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended
	January 31, 2009			January 31, 2008

REVENUE	$	591,164		$	234,183

OPERATING EXPENSES:
Cost of sales		254,700			135,825
Non-cash stock compensation		450			2,400
Selling, general and administrative expenses		105,439			113,853
		360,589			252,078

Income (loss) from operations		230,575			(17,895	)

INTEREST EXPENSE		(5,465	)		(7,021	)

Net income (loss)	$	225,110		$	(24,916	)

Per share information - basic and fully diluted

Weighted Average Shares Outstanding		18,449,910			17,522,343

Net income (loss) per share		.012			(.001	)

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

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INNOVATIVE DESIGNS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

January 31, 2009 (Unaudited) and October 31, 2008

	Common Stock				Additional
	Shares		Amount		Paid in Capital		Retained Deficit			Total

Balance at October 31, 2007		17,096,193	$	1,711	$	5,049,064	$	(9,180,051	)	$	(4,129,276	)

Shares issued for cash		505,050		50		208,716		-			208,766

Shares issued for services		594,000		59		216,291		-			216,350

Shares issued for extinguishment of debt		260,000		26		90,974		-			91,000

Net income		-		-		-		3,557,219			3,557,219

Balance at October 31, 2008		18,455,243		1,846		5,565,045		(5,622,832	)		(55,941	)

Shares issued for services		1,500		1		449		-			450

Shares issued for cash		90,000		9		28,991		-			29,000

Net income		-		-		-		225,110			225,110

Balance at January 31, 2009		18,546,743	$	1,856	$	5,594,485	$	(5,397,722	)	$	198,619

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

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INNOVATIVE DESIGNS, INC.

STATEMENTS OF CASHFLOW

(Unaudited)

	For the Three Months Ended
	January 31, 2009			January 31, 2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	225,110		$	(24,916	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Common stock issued for services		450			2,400
Depreciation and amortization		1,197			1,197
Changes in operating assets and liabilities:
Accounts receivable		(75,867	)		53,573
Inventory		(52,315	)		(15,192	)
Deposit on inventory		251,183			-
Accounts payable		(50,848	)		(9,314	)
Accrued expenses		(14,713	)		(8,271	)
Customer deposits		(9,823	)		-
Net cash provided by (used in) operating activities		274,374			(523	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on note payable		(57,405	)		(24,534	)
Payment on related party debt		(33,000	)		(20,000	)
Payment of shareholder advances		(55,936	)		-
Common stock issued for cash		27,000			249,518
Net cash (used in) provided by financing activities		(119,341	)		204,984

Net increase in cash	$	155,033		$	204,461

Cash - beginning of year	$	22,523		$	6,555
Cash - end of period	$	177,556		$	211,016

Supplemental cash flow information:

Cash paid for interest	$	5,465		$	3,049

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

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INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

January 31, 2009

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, 2008. 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, 2009 or any future period.

2.	ADOPTION OF SFAS NO. 123 (REVISED 2004) SHARE-BASED PAYMENT

In December 2004, FASB issued FASB No. 123 (Revised 2004) Share-Based Payment. This Statement 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 Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in Statement 123 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 Statement 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 SFAS 123 (Revised 2004) 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 Statement of Financial Accounting Standard No. 128, 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

January 31, 2009

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.

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.

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. We applied for a federal trademark for the name “Artic Armor” which was approved by the Patent and Trademark Office. The application has been opposed by a third party who objects to the word “Armor”. We are attempting to resolve the matter.

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. In the event that any further such action is brought, it must be filed in the State Court, the forum in which the execution proceedings took place, and in which those proceedings were specifically approved and authorized by the Court.

Management and the Company’s Counsel believes that the results of the above-referenced litigation were beneficial to the Company, and that the likelihood of further proceedings, or of any outcome detrimental to the Company, is remote.

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INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

January 31, 2009

5.	COMMON STOCK

On December 11, 2008, we issued a total of 20,000 shares of our common stock for cash for $.40 per share or $8,000. The shares were issued without registration pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.

On December 30, 2008, we issued a total of 70,000 shares of our common stock for cash for $.30 per share or $21,000. The shares were issued without registration pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.

On December 30, 2008, we issued a total of 1,500 shares of our common stock for services for $.30 per share or $450. The Company’s CEO and the service provider negotiated the value of the services to be performed on behalf of the Company. The negotiated value was divided by the approximate trading value of the Company’s common stock on the date the transaction was entered into to calculate the number of shares issued to the service provider. The shares were issued without registration pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended.

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INNOVATIVE DESIGNS, INC.

January 31, 2009

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, 2008.

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.

January 31, 2009

Results of Operations

Comparison of the Three Months Ended January 31, 2009 with the Three Months Ended January 31, 2008

Revenues

The following table shows a comparison of the results of operations between the three months ended January 31, 2009 and three months ended January 31, 2008:

	Three Months Ended January 31, 2009			% of Sales			Three Months Ended January 31, 2008			% of Sales			$ Increase (Decrease)			% Change
REVENUE	$	591,164			100	%	$	234,183			100	%	$	356,981			152.4	%

OPERATING EXPENSES
Cost of sales		254,700			43.1	%		135,825			58.0	%		118,875			87.5	%
Non-stock compensation		450			0.08	%		2,400			1.0	%		(1,950	)		(81.3	)%
Selling, general and administrative expenses		105,439			17.8	%		113,853			48.6	%		(8,414	)		(7.4	)%
		360,589			61.0	%		252,078			107.6	%		108,511			43.0	%
Income (loss) from operations		230,575			39.0	%		(17,895	)		(7.6	)%		248,470			(1,388.5	)%

OTHER INCOME (EXPENSE)
INTEREST EXPENSE		(5,465	)		(.9	)%		(7,021	)		(3.0	)%		1,556			(22.2	)%
		(5,465	)		(.9	)%		(7,021	)		(3.0	)%		1,556			(22.2	)%

Net income (loss)	$	225,110			38.1	%	$	(24,916	)		(10.6	)%	$	250,026			(1,003.5	)%

The increase in sales revenue for the three months ended January 31, 2009 over the corresponding period ending January 31, 2008 is a result of our selling more of our Artic Armor line of products. We also utilized a television advertising campaign during the period that was very effective for our internet sales. We do not pay sales commissions on such sales. We are also offering more of a selection in terms of color and other refinements to our Artic Armor line that has increased its acceptance to the railroad industry as well as EMS and police units. Most of our sales during the period were for this product line.

Because of the seasonal nature of our current product lines, Artic Armor and our hunting line. We do not expect the next quarter to show as strong sales of these items as in the prior quarter.

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INNOVATIVE DESIGNS, INC.

January 31, 2009

Our increase in the cost of sales is the result of selling more of our products. During the period ending January 31, 2009, we paid approximately $23,000 in legal expenses.

Liquidity and Capital Resources

During the quarter ended January 31, 2009, we funded our operations with revenues from sales and the selling of our securities in private transactions. 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 the sale of our securities. We sold approximately $29,000 worth of our common stock in private transactions during the period and we repaid approximately $88,000 in related party debt and shareholder advances. 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 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 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. Management, including our principal executive and financial officer, evaluated the effectiveness of the design and operation of disclosure controls and procedures as of January 31, 2009 and, based on their evaluation, our principal executive and financial officers have concluded that these controls and procedures were ineffective. 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 fourth quarter of 2008, a number of adjusting journal entries were recorded in order to adjust the ending inventory balance to the correct balance. The nature of these entries related primarily to inventory valuation with regards to the correct balance. Consequently, during the first quarter of 2009, a number of adjustments were recorded in order to correct the Company’s books and records. The adjustments included the following: adjustments were made to ending cash balances which were not properly reconciled; inventory was adjusted for items which were received during this quarter but not entered into the inventory system by the Company and not reflected in the ending inventory balance; notes payables were corrected for payments made by the Company to lenders; and adjustments were made in order to adjust cost of sales to the correct balances. Throughout the reporting period, the Company’s former Chief Financial Officer would calculate the Company’s monthly cost of sales and month end inventory using the retail method of accounting. Under the retail method, which is a method widely used by merchandising firms to value or estimate ending inventory, a “cost-to-retail” factor (a percentage) is applied to sales to determine an estimate of the amount of inventory that was sold to produce monthly sales. After the Company estimated the inventory sold, it would reduce its end of the month inventory balance by this amount. At the end of each quarter, the Company takes a physical count of the product on hand and trues up the value of the inventory on hand in its general ledger as a result of the physical count. However, the Company did not true up the value of inventory on hand in its general ledger at the end of the first quarter of 2009. At the time when the error was found, the Company maintained a separate inventory subsidy ledger. The error was discovered when the Company’s Chief Financial Officer was comparing the ending balance in its inventory subsidy ledger to the ending inventory balance in the general ledger.

With the discovery of the error, the Company ceased the retail method of accounting to account for its monthly cost of sales and ending inventory balances, effective February 2009. The Company also purchased integrated inventory software that tracks purchases and sales of inventory using actual inventory values rather than a factor under the retail method of accounting. The Company began using this software effective February 1, 2009 with the purchase of the inventory software and no longer using the retail method of accounting. Management believes the change in its controls and procedures will mitigate errors from occurring in inventory with respect to inventory cost.

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INNOVATIVE DESIGNS, INC.

January 31, 2009

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.

PART II

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

On December 11, 2008, we issued a total of 20,000 shares of our common stock for cash for $.40 per share or $6,000 to one investor in a private placement. 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.

On December 30, 2008, we issued a total of 70,000 shares of our common stock for cash for $.30 per share or $21,000 to one investor in a private placement. 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.

On December 30, 2008, we issued a total of 1,500 shares of our common stock for services to a sales consultant for $.30 per share or $450. 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.

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

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INNOVATIVE DESIGNS, INC.

January 31, 2009

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: November 19, 2009	/s/ Joseph Riccelli
	Joseph Riccelli, Chief Executive Officer
	and Chief Financial Officer

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