UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB/A


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

For the quarterly period ended April 30, 2007

OR

o
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: 333-103746

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 o
 
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 May 31, 2007, there were 16,901,193 shares of the Registrant’s common stock, par value $.0001 per share, outstanding.

Transitional Small Business Disclosure Format:  YES o NO x

 
 
 

Innovative Designs, Inc.

Index

Form 10-QSB/A for the Quarter Ended April 30, 2007

     
Page No.
 
Part I — Financial Information
  
 
       
 
Item 1.
  
Condensed Financial Statements (unaudited)
  
 
       
 
   
Condensed Balance Sheets at April 30, 2007 and October 31, 2006
  
1
       
 
   
Condensed Statements of Operations for the Three Months Ended April 30, 2007 and 2006, Six months ended April 30, 2007 and 2006
  
2
       
 
   
Condensed Statement of Changes in Stockholders’ Deficit at April 30, 2007 and October 31, 2006
  
3
       
 
   
Condensed Statements of Cash Flows for the Six Months Ended April 30, 2007 and 2006
  
4
       
 
   
Notes to Condensed Financial Statements
  
5 - 8
       
 
Item 2.
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
8 - 11
       
 
Item 3.
  
Controls and Procedures
  
11
       
 
 
Part II — Other Information
  
 
       
 
Item 6.
  
Exhibits
  
12
 
 
 
 
 
PART I - FINANCIAL INFORMATION
 
The Form 10-QSB/A-1 was amended in response to comments received from the staff of the SEC. The comments generally related to enhancing certain disclosures in the Form 10-QSB/A as well as to the financial statements and related notes. The financial statements were also restated to defer revenue previously recognized from a national retailer until the related cash payments are received.

 
 
 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

INNOVATIVE DESIGNS, INC.

CONDENSED BALANCE SHEETS
(Debtor-in-Possession)
April 30, 2007 (Unaudited) and October 31, 2006
 
ASSETS

   
2007
 
2006
  
           
CURRENT ASSETS:
          
Cash
  
$
57,449
  
$
66,275
  
Accounts receivable
    
250,496
    
283,251
  
Inventory
    
795,445
    
820,413
  
Other assets
    
8,679
    
11,572
  
Total current assets
    
1,112,069
    
1,181,511
  
               
PROPERTY AND EQUIPMENT, NET
    
18,103
    
20,497
  
               
TOTAL ASSETS
  
$
1,130,172
  
$
1,202,008
  
               
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
CURRENT LIABILITIES:
              
Current liabilities not subject to compromise:
              
Accounts payable
  
$
6,881
  
$
6,881
  
Current portion of notes payable
    
114,700
    
391,412
  
Accrued interest expense on debt not subject to compromise
    
78,508
    
62,200
  
Current liabilities not subject to compromise
    
200,089
    
460,493
  
               
Current liabilities subject to compromise:
              
Accounts payable - related party
    
28,220
    
28,220
  
Current portion of related party debt
    
111,000
    
111,000
  
Due to shareholders
    
101,500
    
41,500
  
Accrued expenses
    
481
    
4,925
  
Accrued liability related to arbitration award
    
4,176,000
    
4,176,000
  
Deferred revenue
    
199,512
    
213,781
  
Current liabilities subject to compromise
    
4,616,713
    
4,575,426
  
Total current liabilities
    
4,816,802
    
5,035,919
  
               
LONG-TERM LIABILITIES NOT SUBJECT TO COMPROMISE:
              
Long-term liabilities not subject to compromise:
              
Long-term portion of notes payable
    
580,047
    
426,458
  
Total long term liabilities not subject to compromise
    
580,047
    
426,458
  
               
TOTAL LIABILITIES
    
5,396,849
    
5,462,377
  
               
STOCKHOLDERS' DEFICIT:
              
Preferred stock, $.0001 par value, 100,000,000 shares authorized
              
Common stock, $.0001 par value, 500,000,000 shares
              
authorized, 16,901,193 and 19,224,291 shares
              
issued and outstanding
    
1,691
    
1,691
  
Additional paid in capital
    
4,971,084
    
4,971,084
  
Accumulated deficit
    
(9,239,452
)
  
(9,233,144
)
Total stockholders' (deficit)
    
(4,266,677
)
  
(4,260,369
)
               
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  
$
1,130,172
  
$
1,202,008
  
 
The accompanying notes are an integral part of these financial statements.

 
-1-
 
 
INNOVATIVE DESIGNS, INC.

STATEMENTS OF OPERATIONS
(Debtor-in-Possession)
Three Months Ended April 30, 2007 and 2006, Six Months Ended April 30, 2007 and 2006
(Unaudited)
 
   
Three Months Ended April 30,
  
Six Months Ended April 30,
 
   
2007
  
2006
  
2006
  
2005
  
                   
REVENUE
  
$
42,951
  
$
7,138
  
$
258,634
  
$
19,379
  
                           
OPERATING EXPENSES:
                          
Cost of sales
    
18,038
    
2,998
    
103,946
    
8,139
  
Non-cash stock
                         
compensation
    
-
   
-
   
-
   
168,000
  
Selling, general and
                         
administrative expenses
    
64,658
    
82,606
    
134,352
    
142,128
  
     
82,696
    
85,604
    
238,298
    
318,267
  
                           
(Loss)/income from operations
    
(39,745
)
  
(78,466
)
  
20,336
    
(298,888
)
                           
OTHER INCOME AND (EXPENSE):
                  
Interest income (expense)
    
(19,445
)
  
395,006
    
(26,644
)
  
390,868
  
Extinguishment of
                          
related party debt
    
-
   
568,144
    
-
   
568,144
  
Total other income
                          
and (expense)
    
(19,445
)
  
963,150
    
(26,644
)
  
959,012
  
                           
NET (LOSS)/INCOME
  
$
(59,190
)
$
884,684
  
$
(6,308
)
$
660,124
  
                           
Per share information -
                         
basic and fully diluted
                          
                           
Weighted Average
                         
Shares Outstanding
    
16,906,193
    
18,470,740
    
16,906,028
    
19,032,617
  
                           
Net income/(loss) per share
  
$
(.004
)
$
0.048
  
$
(.001
)
$
0.035
  

The accompanying notes are an integral part of these financial statements.
 
 
-2-
 
 
INNOVATIVE DESIGNS, INC.

STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Debtor-in-Possession)
April 30, 2007 (Unaudited) and October 31, 2006
 
   
Common Stock
      
Additional
          
   
Shares
  
Amount
  
Paid in Capital
  
Retained Deficit
  
Total
  
                       
Balance at October 31, 2005
    
19,224,291
  
$
1,923
  
$
4,813,676
  
$
(5,032,704
)
$
(217,105
)
                                 
Shares issued for services
    
625,000
    
63
    
259,688
    
-
    
259,751
  
                                 
Shares issued for cash
    
611,000
    
61
    
261,059
    
-
    
261,120
  
                                 
Shares returned for
nonperformance of services
    
(1,650,000
)
  
(165
)
  
(168,035
)
  
200
    
(168,000
)
                                 
Reverse shares issued for
extinguishment of note payable
    
(1,909,098
)
  
(191
)
  
(763,448
)
  
-
    
(763,639
)
                                 
Reversal of license agreement
with RMF Global
    
-
    
-
    
568,144
    
-
    
568,144
  
                                 
Net loss
    
-
    
-
    
-
    
(4,200,640
)
  
(4,200,640
)
                                 
Balance at October 31, 2006
    
16,901,193
    
1,691
    
4,971,084
    
(9,233,144
)
  
(4,260,369
)
                                 
Net loss
    
-
    
-
    
-
    
(6,308
)
  
(6,308
)
                                 
Balance at April 30, 2007
    
16,901,193
  
$
1,691
  
$
4,971,084
  
$
(9,239,452
)
$
(4,266,677
)
 
The accompanying notes are an integral part of these financial statements.
 
 
-3-
 
 
INNOVATIVE DESIGNS, INC.

STATEMENTS OF CASHFLOW
(Debtor-in-Possession)
(Unaudited)
 
   
For the Six Months Ended
  
   
April 30, 2007
  
April 30, 2006
  
           
CASH FLOWS FROM OPERATING ACTIVITIES
          
Net income (loss)
  
$
(6,308
)
$
660,124
  
Adjustments to reconcile net income (loss) to cash
             
provided by (used in) operating activities:
              
Common stock issued for services
    
-
   
174,000
  
Depreciation and amortization
    
5,287
    
6,926
  
Extinguishment of related party debt
    
-
   
(568,144
)
Interest (reversal) added to related party note
    
-
   
(395,495
)
Changes in operating assets and liabilities:
              
Accounts receivable
    
32,755
    
50,263
  
Inventory
    
24,968
    
(126,977
)
Accounts payable
    
-
   
(6,627
)
Accrued expenses
    
(4,444
)
  
7,120
  
Prepaid commissions
    
-
   
(8,500
)
Deferred revenue
    
(14,269
)
  
-
 
Accrued interest on notes payable
    
16,308
    
(8,321
)
Net cash provided by (used in) operating activities
    
54,297
    
(215,631
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Payments on note payable
    
(123,123
)
  
(38,952
)
Receipt of shareholder advances
    
60,000
    
-
 
Shareholder advances
    
-
   
27,000
  
Proceeds from note payable
    
-
   
150,400
  
Common stock issued for cash
    
-
   
96,120
  
Net cash (used in) provided by financing activities
    
(63,123
)
  
234,568
  
               
Net increase (decrease) in cash
  
$
(8,826
)
$
18,937
  
               
Cash - beginning of year
  
$
66,275
  
$
42,434
  
Cash - end of period
  
$
57,449
  
$
61,371
  
               
Supplemental cash flow information:
              
               
Cash paid for interest
  
$
4,250
  
$
-
  
 
The accompanying notes are an integral part of these financial statements.
 
 
-4-
 
 
INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
April 30, 2007
 
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-QSB. 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-KSB/A for the fiscal year ended October 31, 2006. 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, 2007 or any future period.

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

In December 2004, FASB issued SFAS 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.
 
 
-5-
 
 
INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
April 30, 2007
 
4.
GOING CONCERN

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 has experienced a significant loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the three month period ended April 30, 2007 and 2006, the Company incurred a net (loss)/income of ($59,190) and $884,684, respectively. The Company incurred significant losses since inception. The Company has working capital of ($3,704,733) and $363,445 and a stockholders’ (deficit) of ($4,266,677) and ($50,500) at April 30, 2007 and 2006, respectively.

On November 15, 2006, the Honorable M. Bruce McCullough granted the Petition for Relief filed by Petitioning Creditors with the United States Bankruptcy Court for the Western District of Pennsylvania. The Company and its external legal counsel believe the granting of this petition to be in error. Given the nature of the proceeding, the Company’s legal counsel moved to convert the case to one under Chapter 11, which was granted.

Although the Company intends to continue its normal business operations during the pendency of the bankruptcy proceedings, the financial statements and notes to the financial statements have been prepared using the guidance of Statement of Position 90-7 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (SOP 90-7).

Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petitions for relief under the federal bankruptcy laws are stayed while the Company continues business operations as Debtor-in-possession. These claims are reflected in the April 30, 2007 and October 31, 2006 balance sheets as “liabilities subject to compromise.” Additional claims (liabilities subject to compromise) may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Company’s assets (“secured claims”) also are stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured primarily by liens on various Company assets as well as the personal property of Joseph Riccelli, Chief Executive Officer.

As of March 8, 2007, the Company has not filed its plan of reorganization with the United States Bankruptcy Court, nor has it determined its reorganization value. Consequently, the assets and liabilities are reflected in the April 30, 2007 and October 31, 2006 financial statements, at historical cost with no adjustments being made to reflect estimated settlement amounts. The Company continues to pay its obligations, as they become due.

The Company's ability to continue as a going concern is contingent upon its ability to expand its operations and secure additional financing and emerge out of bankruptcy. The Company is currently pursuing financing for its operations and seeking to expand its operations. The Company and its legal counsel have been and will continue to resolve its bankruptcy matter. Failure to secure such financing or expand its operations may result in the Company not being able to continue as a going concern.
 
 
-6-
 
 
INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
April 30, 2007
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 or to emerge from bankruptcy.

5.
CONTINGENCIES AND UNCERTAINTIES

District Court Case No. 04-00593-AJS

This Case was administratively closed by presiding Judge Arthur J. Schwab immediately after entering a Judgment on behalf of Elio D. Cattan and Eliotex SRL on May 9, 2006 based upon a purported default judgment entered against the Company in Italy as discussed above. The Company intends to file a Motion to Open Administratively Closed Case in order to pursue the adjudication of the patent non-infringement, declaration of invalidity of patent and trademark non-infringement claims that were the principal focus on its suit, and which have yet to be adjudicated. The basis of this Motion is the receipt by the Company of an expert analysis of the U.S. patent owned by Elio D. Cattan. The analysis prepared for the Company indicates that the patent was obtained improperly, is a verbatim repetition of a prior patent and should not have been issued.

The Company filed an appeal in the United States Court of Appeals for the Third Circuit at Appeal No. 06-2203 from the aforementioned Judgment, as well as from the Interlocutory Order of Judge Schwab binding the Company to the terms of an arbitration clause set forth in a contract that it did not sign, and which contract expired by its terms prior to the creation of the Company. The Company filed its Appellant’s Initial Brief and Appendix on January 26, 2007, and is confident that its appeal will be upheld by the Third Circuit. There has been no change in the status of this matter since January 26, 2007.

Bankruptcy Case No. 06-23921-MBM

During 2006, an Involuntary Chapter 7 Petition by petitioning Creditors Elio D. Cattan, Eliotex, SRL and Adriano Battistotti, Italian counsel for Cattan and Eliotex, SRL. The Petitioners asserted the aforementioned Judgment as the basis of their claim, and averred its non-payment by the Company. The Company responded with a Motion to Dismiss the Petition, averring that the Petitioners were not entitled to relief pursuant to the provisions of 11 U.S.C. § 303, in that the number of Petitioning Creditors was inadequate, all of the claims relate to the same Judgment, subject to appeal, and the Company is generally paying its debts when due (in fact the Company is current on all of its financial obligations, with the exception of the Judgment subject to pending appeal).

In response to the Motion to Dismiss, the Petitioning Creditors recruited three additional Petitioning Creditors, the members of the arbitration panel in Italy who purported to render the Italian arbitration award. Bankruptcy Judge M. Bruce McCullough dismissed the Company’s Motion to Dismiss, and directed the Company to answer the petition. On November 15, 2006, the Court granted the Petition for Relief, thereby placing the Company in bankruptcy. The Company’s counsel immediately thereafter made an oral motion for the Case to be converted to Chapter 11, which was granted. The Court further indicated that it would reserve the issue of sanctions against the Petitioning Creditors and an award of counsel fees to the Company for later proceedings. The Company thereafter filed a Motion for Reconsideration, which Motion is pending in the Bankruptcy Court.
 
 
-7-
 
 
INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
April 30, 2007
The Company thereupon made Application for an Order Allowing the Use of Cash Collateral, which Order was granted by Judge McCullough on January 17, 2007. This Order permits the Company to maintain and continue all of its pre-Petition financing agreements with its principal lenders, Enterprise Bank and the Small Business Administration. As all actions against the Company are stayed by the bankruptcy filing, the Company is maintaining normal business operations during the pendency of the Case. There has been no change in the status of this matter since January 17, 2007.

6.
SUBSEQUENT EVENT

During fiscal 2006, the Company entered into a sales agreement with a national retailer. Under the terms of the sales agreement the retailer may return any of the Company’s products that it had not sold over the term of the sales agreement. During May 2007, the Company was informed by the national retailer that it was returning the unsold product to them. The Company had an outstanding receivable balance from this national retailer of approximately $200,000 at April 30, 2007. The Company has not entered into any other sales agreements with the right of return feature since fiscal 2006.

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-KSB/A for the fiscal year ended October 31, 2006.

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.
 
 
-8-
 
 
INNOVATIVE DESIGNS, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
April 30, 2007

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 sleeping bags, 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:

·
Formulating and developing our business plan;
 
·
Raising funding either through the sale of our common stock or through borrowing;
 
·
Developing our marketing plan;
 
·
Completing the development, design and prototypes of our products, and
 
·
Obtaining retail stores to offer and sell our products.

In November 2006, we were placed into involuntary Chapter 7 bankruptcy proceeding which was subsequently converted to a Chapter 11 proceeding.

Results of Operations

Comparison of the Three and Six Months Ended April 30, 2007 with the Three and Six Months Ended April 30, 2006.

Revenues

The following table shows a comparison of the results of operations between the three months ended April 30, 2007 and three months ended April 30, 2006:

   
Three Months
Ended
April 30, 2007
  
% of
Sales
  
Three Months
Ended
April 30, 2006
  
% of
Sales
  
$ Increase
(Decrease)
  
% Change
  
REVENUE
  
$
42,951
    
100
%
$
7,138
    
100
%
$
35,813
    
501.7
%
                                       
OPERATING EXPENSES
                              
Cost of sales
    
18,038
    
42.0
%
  
2,998
    
42.0
%
  
15,040
    
501.7
%
Selling,
general and
administrative
expenses
    
64,658
    
150.5
%
  
82,606
    
1,157.3
%
  
(17,948
)
  
(21.7
%)
     
82,696
    
192.5
%
  
85,604
    
1,199.3
%
  
(2,908
)
  
(3.4
%)
Income (loss)
from operations
    
(39,745
)
  
(92.5
%)
  
(78,466
)
  
(1,099.2
)%
  
38,721
    
(49.3
%)
                                       
OTHER INCOME (EXPENSE)
                              
Interest income
(expense)
    
(19,445
)
  
(45.3
%)
  
395,006
    
5,533.8
%
  
(414,451
)
  
(104.9
%)
Extinguishment
of related party
debt
    
-
   
-
   
568,144
    
7,959.4
%
  
(568,144
)
  
(100
%)
     
(19,445
)
  
(45.3
%)
  
963,150
    
13,493.2
%
  
(982,595
)
  
(102.0
%)
                                       
Net income (loss)
  
$
(59,190
)
  
(137.8
%)
$
884,684
    
12,394.0
%
$
(943,874
)
  
(106.7
%)
 
 
-9-
 
 
INNOVATIVE DESIGNS, INC.
 
Three Months ended April 30, 2007 and 2006

Revenues for the three months ended April 30, 2007, were $42,951 compared to $7,138 for the three months ended April 30, 2006. The increase in revenue is a result of more retailers using our products. Because of our adverse financial condition as a result of our being in bankruptcy, we are only offering our cold weather products, Artic Armor and our hunting line. Therefore, there is a very seasonal nature to our sales cycle. Customers did not purchase our current product lines to any large extent during the three months ended April 30, 2007. We do not anticipate purchases to be very significant for the next three month period. However, as discussed below we do have written orders for delivery late in the year. And as the year progresses, we expect orders to continue to increase as the cold season approaches.

The following table shows a comparison of the results of operations between the six months ended April 30, 2007 and six months ended April 30, 2006:

   
Six Months
Ended
April 30, 2007
  
% of
Sales
  
Six Months
Ended
April 30, 2006
  
% of
Sales
  
$ Increase
(Decrease)
  
% Change
  
REVENUE
  
$
258,634
    
100
%
$
19,379
    
100
%
$
239,255
    
1,234.6
%
                                       
OPERATING EXPENSES
                              
Cost of sales
    
103,946
    
40.2
%
  
8,139
    
42.0
%
  
95,807
    
1,177.1
%
Non-stock
compensation
    
-
         
168,000
    
866.9
%
  
(168,000
)
  
(100
%)
Selling,
general and
administrative
expenses
    
134,352
    
51.9
%
  
142,128
    
733.4
%
  
(7,776
)
  
5.5
%
     
238,298
    
92.1
%
  
318,267
    
1,642.3
%
  
(79,969
)
  
25.1
%
Income (loss)
from operations
    
20,336
    
7.9
%
  
(298,888
)
  
(1,542.3
)%
  
319,224
    
(106.8
%)
                                       
OTHER INCOME (EXPENSE)
                              
Interest income
(expense)
    
(26,644
)
  
(10.3
%)
  
390,868
    
2,017.0
%
  
(417,512
)
  
(106.8
%)
Extinguishment
of related party
debt
    
-
   
-
   
568,144
    
2,931.8
%
  
(568,144
)
  
(100
%)
     
(26,644
)
  
(10.3
%)
  
959,012
    
4,948.8
%
  
(985,656
)
  
(102.8
%)
                                       
Net (loss) income
  
$
(6,308
)
  
(2.4
%)
$
660,124
    
3,406.4
%
$
(666,432
)
  
(100.9
%)

Six Months ended April 30, 2007 and 2006

Revenues for the six months ended April 30, 2007, were $258,634 compared to $19,379. The increase was due primarily to our use of sales agents who were familiar with the industries that had a need for our Artic Armor line of products. A strong majority of our sales for the six month period ended April 30, 2007 was for this product line.
 
 
-10-
 
 
INNOVATIVE DESIGNS, INC.
As of April 30, 2007, we had written orders for approximately $201,000 of our products. The orders are from retail customers and deliveries are scheduled for October, November and December of 2007. The orders do not require any monetary deposit and can be cancelled by the customer.

Liquidity and Capital Resources

During the quarter ended April 30, 2007, we funded our operations with revenues from sales and loans from 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 adversely affected by our status in bankruptcy.

Short Term: We funded our operations with revenues from sales and loans from our Chief Executive Officer. Our ability to obtain outside funding of either debt or equity was adversely affected by our status in bankruptcy. Further, the bankruptcy status has resulted in customers reducing their sales activity or ceasing to do business with us or all together. The loss of this revenue had an adverse impact on the Company’s short term liquidity. 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.

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.

ITEM 3. 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 April 30, 2007 and, based on their evaluation, our principal executive and financial officers have concluded that these controls and procedures are operating effectively. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file under the Exchange Act is accumulated and communicated to management, including the principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
-11-
 
 
INNOVATIVE DESIGNS, INC.
ITEM 6. EXHIBITS

*3.1
  
Certificate of Incorporation
     
*3.2
  
By Laws
     
31.1
  
Rule 13a - 14a Certification of Chief Executive Officer
     
31.2
  
Rule 13a - 14a Certification of Chief Financial Officer
     
32.1
  
Section 1350 Certification of Chief Executive Officer
     
32.2
  
Section 1350 Certification of 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: August 23, 2007 /s/ Joseph Riccelli
 
Joseph Riccelli, Chief Executive Officer
 
     
Date: August 23, 2007 /s/ Anthony Fonzi
 
Anthony Fonzi, Chief Financial Officer
 
 
-12-