INNOVATIVE DESIGNS INC - Quarter Report: 2012 July (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended July 31, 2012

OR

For the transition period from _______ to ________.

Commission File Number: 000-51791

INNOVATIVE DESIGNS, INC.

(Exact Name of Registrant as Specified in its Charter)

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)

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 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 posted on its corporate web site, 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  ¨

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)

(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 September 14, 2012, there were 18,910,743 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 July 31, 2012

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

CONDENSED BALANCE SHEETS

July 31, 2012 (Unaudited) and October 31, 2011

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

INNOVATIVE DESIGNS, INC.

CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended July 31, 2012 and 2011, Nine Months Ended July 31, 2012 and 2011

(Unaudited)

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

INNOVATIVE DESIGNS, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

July 31, 2012 (Unaudited) and October 31, 2011

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

INNOVATIVE DESIGNS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

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

INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the Nine Month Period Ended July 31, 2012 (Unaudited)

INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the Nine Month Period Ended July 31, 2012 (Unaudited)

INNOVATIVE DESIGNS, INC.

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, 2011.

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 outdoor apparel, and cold weather gear called “Arctic Armor” that are made from INSULTEX, a material with buoyancy, scent block and thermal resistant proprieties. We also market our House Wrap product line which is a building material with thermal qualities. House Wrap is also made from INSULTEX. We obtain INSULTEX through a license agreement with the owner and manufacturer of the material. Since our formation we have devoted our efforts to:

INNOVATIVE DESIGNS, INC.

Results of Operations

Comparison of the Three Months Ended July 31, 2012 with the Three Months Ended July 31, 2011.

The following table shows a comparison of the results of operations between the three month periods ended July 31, 2012 and July 31, 2011:

Revenues for the quarter ended July 31, 2012, were $7,165 compared to revenues of $38,961 for the quarter ended July 31, 2011. The decrease is attributable to the Company’s sale cycle which is at its lowest during this time of the year on account of the warm weather. Also, due to the warmer winter that was experienced, our customers are ordering later in the year. Approximately 47% of our revenue for the period was from our Arctic Armor product line. Approximately 15% was for our House wrap product.

Our selling, general and administrative expenses were $83,528 for the three months ended July 31, 2012 compared to $73,023 for the three months ended July 31, 2011. Part of the increase was a result of an increase in professional fees and part was attributable to the cost associated with getting our testing equipment for our House Wrap product up and running.

INNOVATIVE DESIGNS, INC.

Results of Operations

Comparison of the Nine Months Ended July 31, 2012 with the Nine Months Ended July 31, 2011.

The following table shows a comparison of the results of operations between the nine month periods ended July 31, 2012 and July 31, 2011:

Revenues for the nine months ended July 31, 2012, were $604,407 compared to revenues of $754,131 for the nine months ended July 31, 2011. The decrease was a result of the warmer weather that was experienced in the geographic areas that we market our cold weather apparel.

Our selling, general and administrative expenses were $493,500 for the nine months ended July 31, 2012 compared to $376,763 for the nine months ended July 31, 2011. The increase was a result of an increase in professional fees, bank service charges and the costs of getting our testing equipment for House Wrap operational.

As a result of the warm winter just experienced, we believe that orders for our cold weather products for the forthcoming season will be placed later than usual as customers try to determine what the extent of the cold season will be.

In February 2012, we announced in a press release that our House Wrap product had drawn the interest of several large homebuilders and that samples had been sent to them for evaluation. In order for such homebuilders to buy our House Wrap it must have an ICC certification. ICC is the International Code Council. The lab which we use is in the process of getting its ICC certification. We completed the building of a testing machine that will ensure the House Wrap complies with ICC standards. We are currently debugging the testing machine. We are also in advanced discussions with a large nationwide retailer to sell our House Wrap. We are using an independent sales force experienced in this industry.

INNOVATIVE DESIGNS, INC.

The House Wrap Product will be produced, on a purchase order basis, by a third party manufacturer located in the Northeastern section of the Unites States. The finished product will be stored at our warehouse facility and at the manufacturer’s plant.

We are also having a seam tape, made to our specifications, produced that will be sold with the House Wrap.

Liquidity and Capital Recourses

During the quarter ended July 31, 2012, we funded our operations from revenues from sales. During the quarter, we received three short-term advances totaling $152,000 from private lenders, and $50,000 from Joseph Riccelli, our President and CEO.

Short Term: We will continue to fund our operations from sales and short term borrowings from shareholders and others and the possible sale of our securities. We currently have no commercial credit facilities available to us. We continue to pay our creditors when payments are due.

Long Term: The Company will continue to fund its operations from revenues, borrowings from private parties and the possible sale of our securities. We have ceased trying to obtain commercial lending. Should we not be able to rely on the private sources for borrowing, our operations would be severely effected as we would not be able to fund our purchase orders to our suppliers for finished goods.

INNOVATIVE DESIGNS, INC.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In July, 2012, we filed a civil complaint in the District Court for the Western District of Pennsylvania against Striker Brands, LLC and Korky’s Outpost, LLC. We assert in the complaint that the defendants make deceptive claims in their advertising and promotions that are aimed at our Arctic Armor products in order to gain an unfair competitive advantage over our products. We are asking for damages from each defendant in excess of $75,000. We are currently awaiting an answer from the defendants.

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

On July 2, 2012, the Company issued 100,000 shares of its restricted common stock to Mr. James Kearney for professional services. The shares were valued at $.25 per share for an aggregate price of $25,000. The shares were issued without registration under the Securities Act, of 1933, as amended, pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

ITEM 3. QUANTITATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information otherwise required by this Item.

ITEM 4T. CONTROLS AND PROCEDURES

Management has developed and implemented a policy and procedures for reviewing, on a quarterly basis, our disclosure controls and procedures. During the fourth quarter ended October 31, 2011, our principle executive/financial officer concluded that these controls and procedures were ineffective. During the fourth quarter ended October 31, 2011 and the first quarter ended January 31, 2012, the Company was not able to close the books and records in a timely fashion. Consequently, the Company was not able to file its Form 10-K or its Form 10-Q within the timeline established by the SEC. There were no reclassifications made during the first quarter of 2012. Management has taken action and as a result the second quarter Form 10-Q was filed in a timely manner.

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.

INNOVATIVE DESIGNS, INC.

ITEM 6. EXHIBITS

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.