U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB/A-1

x Annual report under section 13 or 15(d) of the Securities Act of 1934.
For the fiscal year ended October 31, 2006

o Transition report under section 13 or 15(d) of the Securities 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)

 
03-0465528
 
(I.R.S. Employer
incorporation or organization)
 
Identification Number)

223 North Main Street, Suite 1
Pittsburgh, Pennsylvania 15215
(Address and zip code of principal executive offices)

(412) 799-0350
(Registrant’s telephone number including area code)

Securities to be registered pursuant to Section 12(b) of the Exchange Act:
 


Securities registered or to be registered pursuant to Section 12(g) of the Exchange Act:
 


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 past 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

Check if no disclosure of delinquent filers to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x

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

The issuer’s revenues for its most recent fiscal year were $291,794.

The aggregate market value of the voting stock, consisting solely of common stock, held by non-affiliates of the issuer computed by reference to the closing price of such stock was $7,610,036 as of January 26, 2007.

The number of shares of the issuer’s common stock outstanding, as of January 26, 2007 was 16,911,192.

Transitional Small Business Disclosure Format:  Yes o No x 


 

PART I

The Form 10-KSB/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-KSB/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.

-2-

 
 
ITEM 1. DESCRIPTION OF BUSINESS.

The Company, which was incorporated in the State of Delaware on June 25, 2002, we market recreational products that are made from INSULTEX, a material with buoyancy and thermal resistant properties. Since our formation and as more fully explained throughout this Form 10-KSB, we have devoted our efforts to:

·
Formulating and developing our business plan;
 
·
Raising capital through a private placement of our stock;
 
·
Developing our marketing plan;
 
·
Developing our web site;
 
·
Completing the development, design, and prototypes of certain products;
 
·
Obtaining retail stores to offer and sell our products; and
 
 
·
Executing an agreement with a manufacturers representative group to sell our products to retail chains.

RMF Global, Inc. was incorporated on April 1, 1999 in the State of Pennsylvania and was owned and controlled solely by our Chief Executive Officer, Joseph Riccelli. On March 2, 2003, RMF Global entered into a written license agreement with Ko-Myung Kim for the exclusive distribution rights to INSULTEX in the United States, Canada, Mexico, India, the United Kingdom and Turkey. In 2006, this licensing agreement was terminated with RMF Global. A new licensing agreement was signed and put into place between Ko-Myung Kim and Innovative Designs, Inc. RMF Global was dissolved and no longer exists as a business. Mr. Kim owns the patent to the process to make the INSULTEX material. On November 25, 2002, we entered into a written sublicense agreement with RMF Global for the exclusive rights to produce and distribute three products made with INSULTEX, which RMF Global developed, and to use INSULTEX in products that we develop. We plan to market our products containing INSULTEX, three of which were developed by RMF Global under the label "i.d.i.gear".

We have had no material reclassification, merger, consolidation, purchase, or sale of a significant amount of assets outside the ordinary course of business.

We currently have no plans to seek a merger, acquisition, or business reorganization or to otherwise enter into a business combination with another entity.

The distribution rights we have are derived from our November 25, 2002 written sublicense agreement with RMF Global, an affiliated entity, to: (a) produce and distribute sleeping bags, Swimeez, and stadium pack products containing INSULTEX, which RMF Global developed; and (b) to use INSULTEX in products which we produce and develop are now solely in place with Innovative Designs, Inc.

We currently have no distribution rights, exclusive or otherwise, to be a distributor of INSULTEX; however, Innovative Designs, Inc., does have exclusive distribution rights to distribute INSULTEX in the United States, Canada, Mexico, Indonesia, the United Kingdom and Turkey, in accordance with the 2006 written license agreement with Mr. Kim which is described in more detail on pages 4. As such, we purchase INSULTEX to be used in the manufacturing of our products. Similarly, other companies are free to purchase INSULTEX from Innovative Designs, Inc. assuming that it is a company within the distribution jurisdiction that Innovative Designs, Inc. covers. Innovative Designs, Inc. is the supplier/distributor of the raw material "INSULTEX”.

-3-

 

We offer the following three products containing INSULTEX which were developed by RMF Global:

 
·
Floating Swimwear: Product under our product name "Swimeez". Our swimwear is designed to be a swim aid. The interior lining of our swimwear product is made from INSULTEX, which enhances floatability.

 
·
Sleeping Bag Products: Our sleeping bag products, available in both rectangular and mummy styles, are water resistant, windproof and weigh less than 2 pounds each. The INSULTEX insulation enables our sleeping bags to have a temperature rating of 15 degrees to 20 degrees Fahrenheit.

 
·
Stadium Pack: The use of INSULTEX in this product provides protection from weather conditions such as rain and cold. By altering the configuration of the folds and zippers, the product can be used as a:

·
Stadium seat cushion or pillow;

·
Thermal rain parka with a zip-out hood;

·
Sleeping Bag;

·
Flotation Raft; and

·
Double Comforter.

We use INSULTEX to provide protection from harsh weather conditions in the following products which we developed:

 
·
Windshirts: Our windshirts are available in only one style and in five colors: grey, navy, red, black, and khaki.

 
·
Jackets: Our jackets are available in only one style and in five colors: grey, navy, red, black, and khaki.

 
·
Hunting Apparel Line: Our hunting apparel provides almost total block from odors provided by the INSULTEX material. The Hunting Apparel Line is being endorsed by Bill Maas, former all pro National Football League football player and Fox Sports Analyst. We have also added Mr. Tom Nelson, “The American Archer” to our pro staff and have introduced the new “American Archer” - Tom Nelson Hunting Line for 2007. Tom is seen on the Outdoor Channel and is recognized as one of the premier archers in the industry.

 
·
Arctic Armor Line: The Arctic Armor line, introduced in April of 2006, consists of a jacket, bib and gloves. The suit contains 3 layers of INSULTEX for uncompromised warmth and provides the user with guaranteed buoyancy. The gloves contain a single layer of INSULTEX and are windproof, waterproof and good to sub-zero temperatures as does the jacket and bibs.

 
·
Fishing Apparel Line: We plan to introduce a full line of fishing apparel featuring INSULTEX, which will be endorsed by professional fisherman, Jose Wejebe, under the name “Jose Wejebe Spanish Fly Fishing Apparel.”

-4-

 

Our hunting apparel line is being endorsed by Bill Maas and Tom Nelson, and we are in the development stage of introducing a full line of fishing apparel as discussed above.

These prototypes were manufactured at the facility we currently utilize in Indonesia. We assumed no material costs associated with the design, prototyping, and testing of these products because: (a) we did not utilize the services of any outside consultant or company for these purposes; (b) although we used the services of our Chief Executive Officer and Vice President of Sales and Marketing for these purposes, their efforts were part of their normal responsibilities; (c) prior to the time we had undertaken to design and prototype of these products, we purchased the materials to accomplish these tasks, the cost of which did not exceed $1000; and (d) the testing of these products was performed in the "field" by our employees and our Manufacturer's Representative groups, as part of their normal responsibilities.

From February 2001 and until approximately January of 2002, RMF Global searched for sources of INSULTEX and eventually located Mr. Kim, a citizen of Korea. RMF Global entered into a verbal agreement with Mr. Kim in June of 2002. From approximately June 2002 until March 2, 2003, RMF Global, our sublicensor, purchased INSULTEX on an as needed basis from Mr. Kim, in accordance with a verbal agreement. The same terms of the verbal agreement were set forth in a written agreement on March 2, 2003. On March 2, 2003, RMF Global entered into a written agreement with Mr. Kim, whereby Mr. Kim granted RMF Global the exclusive, unlimited, irrevocable right and license, with the right to grant sublicenses to third parties, to purchase, use, develop, commercialize, market, have marketed, sell and have sold, manufacture and have manufactured products related to or utilizing INSULTEX whether present or future for all countries in the world other than Korea and Japan. This agreement has been terminated and an identical agreement has been signed by Innovative Designs, Inc. Under the terms of the agreement Mr. Kim agreed to promptly deliver to Innovative Designs, Inc. within twenty-eight (28) days of receiving an order from Innovative Designs, Inc., all INSULTEX ordered by Innovative Designs, Inc. Under the terms of the agreement, Innovative Designs, Inc. is required to pay a fixed amount per meter of INSULTEX. This fixed amount will not change under the agreement for a period of ten (10) years after the date of the agreement was signed. The agreement provides that after the ten (10) year period, the price of the INSULTEX shall be adjusted for a subsequent ten (10) year term, no more than twelve percent (12%) per the subsequent ten (10) year period. Innovative Designs, Inc. shall order INSULTEX from Mr. Kim from time to time as needed and shall not be required to purchase any minimum amount of INSULTEX during the term of this agreement, and Innovative Designs, Inc. is not required to make any minimum annual payment to Mr. Kim. However, should Innovative Designs, Inc. place an order, any quantity ordered must be a minimum of 55,000 meters of INSULTEX. Innovative Designs, Inc. is not required to pay to Mr. Kim any part of any sublicense fee that Innovative Designs, Inc. receives from third party sublicensees, and Innovative Designs, Inc. shall not pay any fees to Mr. Kim. This agreement will be in full legal force and effect for an initial term of ten (10) years from the date of its execution. Innovative Designs, Inc. will have the option to renew this agreement for up to four (4) successive terms of ten (10) years each by giving notice to Mr. Kim of its intention to so renew not less than ninety (90) days prior to the expiration of the then-current term.

On June 16, 2003, we completed an agreement with Haas Outdoors in which Haas Outdoors granted us a non-exclusive wholesale license in North America to: (a) manufacture, or sell products or to have manufactured for us, and to sell licensed products of Haas Outdoors; and (b) use the licensed trademark of Haas Outdoors in association with the marketing and sale of licensed products. The agreement defines licensed products as a product which bears or otherwise includes Haas Outdoors' licensed design and is further restricted to mean only our stadium pack. "Licensed design" is defined in the agreement as the camouflage pattern(s) known as the Mossy Oak Break-Up and/or New BreakUp patterns and which is covered by Haas Outdoors' copyrights, including but limited to United States Copyright Registration No. 2,227,642. The agreement defines "licensed trademark" as Haas Outdoors' trademarks Mossy Oak, Break-Up and/or or New BreakUp. The term of the agreement is two years from the effective date of the agreement, May 30, 2003. During 2005, the Company extended the terms of this agreement with Haas Outdoors. We paid a one time $250 licensing fee for these rights. We are also required to pay to Haas Outdoors a running royalty, which is included in the price of fabrics purchased from licensed vendors of Haas Outdoors.
 
-5-


In addition, the agreement provides that we, as the licensee in the agreement are required to: (a) place on the licensed products in a manner prescribed by copyright laws and unless otherwise indicated, a sufficient copyright notice including the copyright notice, the year of publication, and an identification of Haas Outdoors as the owner; and (b) in all instances where Haas Outdoors so desires, we will include on licensed products the authorized trademark associated with the authorized design. We also agreed that nothing in the agreement will confer upon us any proprietary interest in the licensed designs, the licensed trademarks, or any other copyright, trademark and patents rights owned by Haas Outdoors. In addition, we agreed that Haas Outdoors is the owner of the licensed designs and licensed trademarks and that we will not contest the validity or enforceability of the licensed trademarks or Haas Outdoors copyrights in the licensed designs.

Swimeez Product

Our Swimeez product is intended for use by the following groups that are in the Company’s target market for these products:

·
Toddlers and children from the ages of 3 to 12 who are learning to swim;
 
·
Handicapped persons; and
 
·
Adults learning to swim.

Sleeping Bags

Our sleeping bag products are intended for use by the following groups that are in the Company’s target market for these products:

·
Outdoor enthusiasts, such as hikers, climbers, mountain bikers and kayakers;
 
·
Campers;
 
·
Boy Scouts and Girl Scouts;
 
·
Motorcyclists; and
 
·
Hunters and Fishermen.

Stadium Pack

Our stadium pack products are intended for use by the following groups that are in the Company’s target market for these products:

·
Colleges;
 
·
Child/Amateur sport organizations; and
 
·
Hunting/Fishing enthusiasts.

-6-

 

Windshirts

Our windshirt products are intended for use by the following consumer groups that are in the Company’s target market for these products:

·
Golf club pro shops;
 
·
Golf tournament organizers;
 
·
Corporate promotional organizations; and
 
·
Sporting organizations and teams.

Jackets

Our jacket products are intended for use by the following consumer groups that are in the Company’s target market for these products:

·
Colleges;
 
·
Sporting teams; and
 
·
Corporations.

Hunting Line

Our hunting line products are intended for use by the following consumer group that are in the Company’s target market for these products:

·
Hunting enthusiasts; and
 
·
Professional hunters.

Fishing Line

Our fishing line products are intended for use by the following consumer groups that are in the Company’s target market for these products:

·
Professional fisherman; and
 
·
Fishing enthusiasts.
 
Arctic Armor Line

Our Arctic Armor line products are intended for use by the following consumer groups that are in the Company’s target market for these products:

·
Ice fisherman
 
·
Snowmobilers
 
·
Utility workers
 
·
Oil/gas pipeline workers.

Website and Retailers

We sell both wholesale and retail products on our website. Our website, located at www.idigear.com, became operational in October 2002 and contains information on our products, technical information on INSULTEX insulation, e-commerce capabilities with "shopping cart", wholesaler information and order forms, company contact information, and links to retailers that carry our products. We have obtained the services of BA Web Productions who assists us in designing and continually developing our website. Our website features a "wholesaler only" area, allowing our wholesalers access to information, ordering, and recalls.

-7-


The web site is hosted by Nidhog Hosting. The secure payment gateway provider for our online e-commerce is SkipJack Financial Services.

The following retailers, distributors and companies purchase our products at wholesale prices which they plan to sell at their retail prices, or use within their industry:

Accuracy Plus
 
Peterborough
 
Ontario
American Outdoor Sports
 
Farmingdale
 
New York
Archery Headquarters
 
Rochester
 
Minnesota
Archery Shop Ohio
 
Minster
 
Ohio
Archery Shop WV
 
Summersville
 
West Virginia
Arrowsmith's
 
Lake Geneva
 
Wisconsin
Back Country Sports
 
Red Deer
 
Alberta
Bailey's
 
Various locations
 
Various locations
Bashaw Sports Centre
 
Bashaw
 
Alberta
Battle River
 
Stetler
 
Alberta
Bay Archery
 
Essexville
 
Michigan
Bogensport
 
Hochschwarzwald
 
Germany
Boutique Aventure Plein Air Inc. - Peche
 
Ste. Anne Des Monts
 
Quebec
Bowhuntingstore.com
 
Plano
 
Texas
Bowman - Peche
 
Bowman
 
Quebec
Canfield Sports
 
Omaha
 
Nebraska
Catafan
 
Sylvan Lake
 
Alberta
Centre D'Outillage AML Inc. - Peche
 
Senneterre
 
Quebec
Coureur Des Bois Mont Laurier - Peche
 
Mont Laurier
 
Quebec
Courtney Archery
 
Quakertown
 
Pennsylvania
D & D Sports
 
Various locations
 
Various locations
Delta Sports Center
 
Delta
 
Utah
Depanneur Du Boul. - Peche
 
L.S. Quevillon
 
Quebec
Depanneur L. Gauvin - Peche
 
La Tuque
 
Quebec
DHD Sports
 
Minot
 
North Dakota
Dick's Sporting Goods
 
Various locations
 
Various locations
DNW
 
Jonesboro
 
Arkansas
Draves
 
Effingham
 
Illinois
Dunham's
 
Various locations
 
Various locations
Dunkelberger's
 
Stroudsburg
 
Pennsylvania
East Side Sports Inc. - Peche
 
Edmundston
 
Quebec
Efingers
 
Boundbrook
 
New Jersey
Endzone
 
Norton
 
Kansas
Erie Sports Store
 
Erie
 
Pennsylvania
Felmax - Peche
 
Gracefield
 
Quebec
Ferlac Inc. - Peche
 
St. Felicien
 
Quebec
Fish 307
 
Lake George
 
New York
Fox Ridge Outfitters
 
Rochester
 
New Hampshire
Frank's Great Outdoors
 
Linwood
 
Michigan
Gilles Flibotte Sport 1983 Inc. - Peche
 
St. Hyacinthe
 
Quebec
Glace Carnaval
 
Val D' Or
 
Quebec
Goschinskis
 
Ashland
 
Ohio
Grand Outdoors
 
Grove
 
Oklahoma
Grunst
 
Rhinelander
 
Wisconsin
Hick's Outdoors
 
Clio
 
Michigan
Hilltop Sports
 
Greenville
 
Michigan
Holliday True Value
 
Montello
 
Wisconsin
 
-8-

 
Hunter's Choice
 
Conway
 
Arkansas
Hunter's Gallery
 
Hamlin
 
Pennsylvania
J.L. L'Heureux & Fils Inc. - Peche
 
Forestville
 
Quebec
Jack's Sport Shop
 
Kalkaska
 
Michigan
Jay's Sporting Goods
 
Clare
 
Michigan
Jo Hubert - Peche
 
Maniwaki
 
Quebec
KD Outdoors
 
Waterford
 
Michigan
Keystone Country Store
 
Ft. Loudon
 
Pennsylvania
Kittery
 
Kittery
 
Maine
KTL
 
Mississauga
 
Ontario
La Boutique De l'Archer Enr. - Peche
 
Riviere-Du-Loup
 
Quebec
La Cible - Peche
 
St. Barbe
 
Quebec
Le Centre Du Travailleur Plus - Peche
 
Amos
 
Quebec
Le Coureur Des Bois Enr. - Peche
 
L'Annonciation
 
Quebec
Legends of Fall Outfitters
 
Tully
 
New York
LL Cote
 
Errol
 
New Hampshire
M & M Sportshop
 
New Lisbon
 
Wisconsin
Mahoney's
 
Johnson City
 
Tennessee
Mel's
 
Rhinelander
 
Wisconsin
Michel Maheu Sport Inc. - Peche
 
Victoriaville
 
Quebec
Midwestern Shooters
 
Lomira
 
Wisconsin
Mike's Archery
 
St. Cloud
 
Minnesota
Miller's Gun Shop
 
Mill Hall
 
Pennsylvania
Mossy Point
 
Fort Smith
 
Arkansas
Nord Select - Peche
 
Matagami
 
Quebec
Pacific Gas & Oil
 
Auburn
 
California
Pat's Archery
 
Okmulgee
 
Oklahoma
Peche Plus - Peche
 
Val-D'Or
 
Quebec
Performance Chasse & Peche Inc. - Peche
 
Repentigny
 
Quebec
PM Bearpaw
 
Rice Lake
 
Wisconsin
Propac Des 7 Rivieres Enr. - Peche
 
Port Cartier
 
Quebec
Propac Rive Sud - Peche
 
Ste. Catherine
 
Quebec
Propac Sorel-Tracy - Peche
 
Sorel-Tracy
 
Quebec
Propac Terrebonne - Peche
 
Terrebonne
 
Quebec
Ramakko's
 
Sudbury
 
Ontario
Reddings Hardware
 
Gettysburg
 
Pennsylvania
Renald Gosselin - Peche
 
Nantes
 
Quebec
Renaud Richards Sport Enr. - Peche
 
Thetford Mines
 
Quebec
Richland Shooter's Supply
 
Richland
 
Pennsylvania
Robfam - Peche
 
Ville Marie
 
Quebec
Royaume Des Sport - Peche
 
Lac Des Ecorse
 
Quebec
Rt. 66 Sporting Goods
 
Shippenville
 
Pennsylvania
Scott's Inc.
 
Jay
 
Florida
Shyda's
 
Lebanon
 
Pennsylvania
Sierra Trading Post
 
Cheyenne
 
Wyoming
Skip's Sport Shop
 
Grayling
 
Michigan
Smith's Sports Store
 
St. Mary's
 
Pennsylvania
Sports Center
 
Natchez
 
Mississippi
Sportsman's Warehouse
 
Various locations
 
Various locations
Stoney Creek
 
Whitecourt
 
Alberta
Stoney Rapids
 
Saskatoon
 
Saskatchewan
 
-9-

 
Straight Arrow
 
Oneida
 
New York
Surplus Du Nord - Peche
 
Lasarre
 
Quebec
Tackle Shack
 
Grand Prairie
 
Alberta
Tad's
 
Monticello
 
Arkansas
The Pitt Stop
 
Pittsburgh
 
Pennsylvania
Tri-State Outdoors
 
St. Francis
 
Kansas
Veritas
 
Calgary
 
Alberta
Villemure Chasse & Peche Inc. - Peche
 
Grand Mere
 
Quebec
W.E. Sell
 
Hanover
 
Pennsylvania
Walleyedan
 
Lake Shore
 
Minnesota
White Oak
 
Opp
 
Alabama
White Sands
 
White Sands
 
New Mexico
Whitetail Ridge
 
Debolt
 
Alberta
Woodlands World
 
Uniontown
 
Pennsylvania

We have no verbal or written agreement with these retailers and we currently have no intention of entering into any such agreement. These retailers purchase our products from us strictly on a purchase order basis.

In November 2002, we entered into a verbal agreement with Havel-Giarusso and Associates, a manufacturer representative located in Big Lake, Minnesota, to be the manufacturer representative of our products.

Havel-Giarusso and Associates determined that there would be a conflict of interest with their other clients if they became the manufacturer representative of our products. Therefore, Innovative Designs and Havel-Giarusso mutually agreed to terminate the verbal agreement in April 2004.

In March 2004, we entered into a formalized agreement for the manufacture representation services of Evernham & Anderson Associates, Inc. This agreement was terminated.

In 2005, we entered into a formalized agreement with William J. Gartland & Associates for representation services. This agreement was terminated in 2006.

The following sales agencies are currently being used for sales representation across Canada and the United States:

David Baker & Associates
5033 Marble Arch Road
Winston-Salem, NC 27104

Representatives:
David Baker
Al Roberts
Charles Sadler
Ken Worthington

Jim Korth Agencies, LTD
Box 490, 103 Stockton Point
Okotoks, AB Canada T1S 1A7

-10-


Representatives:
Terry Korth
Chris Chudzy
Jeff Brown
Steve Corlett
Mauricio Rizkallah
Cody Villard

G.A. Tolton & Associates
200 Deer Field Road
Mt. Pleasant, PA 15666

Representatives:
Ray Kelly
Layton Lyon
Dave Miller Jr.
Dave Miller Sr.
Joe Miller
Kirk Necciai
Ron Steigerwalt

DWP & Associates
31559 Warner
Warren, MI 48092

Representatives:
Dan Potter
Justin Porlier
Brent Rueb
Tom Whitehead

We plan to distribute our products to the following:

Sleeping Bag Products

We plan to distribute our sleeping bag products through sporting goods catalogs, sporting shows and trade shows, and retail outlets and chains.

Swimeez Products

We plan to distribute our Swimeez products through sporting goods catalogs, trade shows, and retail outlets and chains.

Stadium Pack Products

We plan to distribute our Stadium Pack products through sporting goods catalogs, trade shows, sporting shows, and retail outlets and chains.

Windshirts and Jackets

We plan to distribute our windshirts and jackets through various wholesalers, retail outlets and chains, and trade shows.

-11-


Hunting Apparel Line

We plan to distribute our hunting apparel through national and local retail chains.

Six pocket pants, 1/2 zip pullover jacket with collar, parka jacket, fleece jacket, guide series shirt, bib coveralls in light weight, bib coveralls in arctic weight and fishing apparel line. We plan to distribute these products, which we are in the development stage of introducing to the public, through trade shows, product information mailings to prospective retail buyers, and private showings to targeted buyers in the retail industry.

Arctic Armor Line

We plan to distribute the Arctic Armor Line to retailers and distributors across the United States and Canada. These products will also be sold to utility companies (i.e. - oil/gas pipeline workers).

Our planned marketing program will consist of the following:

MARKETING COMPONENT

Webside Development and Internet Marketing

We plan to contract with marketing consultants to:

(a) increase visitation to our website;
 
(b) link with other established websites;
 
(c) issue press releases to on-line publications;
 
(d) conduct banner advertising;
 
(e) develop arrangements with online retailers that purchase our products on a wholesale basis.

Sales Representatives

Our vice president of sales and marketing plans to:

(a) sell our merchandise to retail chain stores;
 
(b) attend and network trade shows to establish industry related contracts;
 
(c) initiate relationships with local and national recreational organizations; and
 
(d) provide support to our manufacturer representatives

Contract with manufacturer

Innovative Designs Inc. utilizes the services of the above-mentioned sales agencies to represent their products in the United States and Canada.

Public relations campaign

We plan to contract with marketing consultants to develop and distribute press releases regarding company status, product innovations, and other notable events and developments

Design and develop

We are and continue to contract with marketing consultants for services related to literature, displays, develop brochures, point-of-sale displays, mailers, media materials, and literature and sales tools for our sales representatives and manufacturer representatives.
 
-12-


Establish wholesale

We are and continue to develop relationships or distribution relationships with retail points for our products to retail chain outlets and mass merchandisers to sell our products.

Develop trade show booth

We are and continue to contract with marketing consultants to design and develop a portable display booth, and product materials to be used in sporting goods and outdoor apparel trade shows.   

We plan to ship wholesale product orders by United Parcel Service or trucking companies. Retail orders from our website will be shipped United Parcel Ground Service or Federal Express overnight. The costs of shipping our finished goods is paid by our customers. We have not instituted any formal arrangements or agreements with United Parcel Service, Federal Express or trucking companies, and we do not intend to do so.

Our "idigear" label is sewn on all of our products. Haas Outdoors, Inc.'s Mossy Oak and New Break Up hang tags are attached only to our "Mossy Oak pattern" stadium pack products. Additionally, we will be utilizing the Mossy Oak camouflage on the new products that we are in the development stages of introducing, which will feature the Mossy Oak hang tag with our "idigear" hang tag. Our new hunting apparel line also includes a hang tag noting such endorsement.

INSULTEX will be used in all our finished goods and will be purchased directly from the inventor.

All of our products are sub-manufactured by PT Lidya and Natalia. Because the predominant function of the Stadium Pack is a sleeping bag, they are imported as sleeping bags. Indonesia does not impose quotas that limit the time period or quantity of items which can be imported. The United States Customs Service imposes a 9% importation duty for Indonesia based goods imported into the United States.

We have no verbal or written agreements or long term agreements with PT Lidya and Natalia and we do not plan to obtain any such agreements. Our sub-manufacturer manufactures our products on a per order basis.

The fulfillment process involved in completing wholesale orders for non stocked swimsuit, sleeping bag, windshirt and jacket products is described below:

DAY
 
ACTION
1
 
We receive a purchase order for a certain number of items from a wholesale purchaser by hand delivery, fax, courier, or mail, with an authorized signature of the purchaser. We do not accept telephone orders.
 
 
 
 
 
We contact a raw material supplier to send a certain number of yards of raw materials to our sub-manufacturers. Raw materials are ordered according to need.
     
 
 
We contact our sub-manufacturers with the details of the order, including the number of units to be produced according to design or model, size, or color.
     
 
 
We complete and forward a purchase order to the manufacturer. The manufacturer approves or disapproves a purchase order.
 
 
 
 
 
If the purchase order is approved, the manufacturer responds with a final cost, production schedule and date the goods will be delivered to us.
 
-13-


DAY
 
ACTION
10
 
Our sub-manufacturers ship finished goods to us.
 
 
 
14
 
We receive finished goods, and facilitate turn-around for shipment to retailers. Goods are received in our distribution center where they are packaged in Master Packs, hang tags attached, and UPC/UCC codes labels applied to items for retailer distribution.

The basis for the above time estimates has been derived from Innovative Designs, Inc. prior experience with these sub-manufacturers.

The fulfillment process involved in completing wholesale orders for our Stadium Pack products is described below:

DAY
 
ACTION
1
 
We receive an order for a certain number of items from a wholesale purchase by hand delivery, fax, courier, or mail with an authorized signature of the purchaser.
 
 
 
 
 
We contact our sub-manufacturers with details of the order, including the number of units to be produced according to color combinations. The sub-manufacturers then procure the raw materials.
 
 
 
7
 
Our sub-manufacturers receive raw materials from suppliers and begin production.
 
 
 
25 - 30
 
Within 25-30 days, our sub-manufacturers ship finished goods to us, pending no international freight or shipping issues.
 
 
 
56 - 61
 
We receive finished goods, and facilitates shipment to the buyer.
 
The basis for the above time estimates has been derived from Innovative Designs, Inc. prior experience with these sub-manufacturers.

Any inventory we maintain will be stored at our warehousing facility. Our warehouse facility has the capacity to hold 250,000 finished products in inventory and raw materials or INSULTEX. The amount of raw materials or INSULTEX we store at our warehousing facility is dependent upon the size of production runs at any one time and cannot be estimated with any certainty.

On March 4, 2003, we applied for trademark protection for our name "idigear" with the United States Patent and Trademark Office. On December 24, 2003, we received a Notice of Publication from the United States Patent and Trademark Office, informing us that the "idigear" mark appears to be entitled to registration and would be published in the Official Gazette on January 13, 2004 to ascertain whether there would be any opposition by any person who believes he will be damaged by the registration of the mark and that if no opposition is filed within the time specified by Trademark rules, the Commissioner of Patents and Trademarks may issue a certificate of registration. We have not received any other communication or any disposition regarding this trademark application and there is no assurance that we will ever receive trademark approval for our idigear name.

-14-

 
On February 17, 2005, our CEO, Joseph Riccelli, applied for registration of the mark "INSULTEX" with the United States Patent and Trademark Office.

The patent states that it is the "object of the present invention to eliminate the above mentioned drawbacks [bulkiness and being cumbersome in practical use] by providing a foamed expanded super lightweight sheet having superior buoyancy and cold and heat resistance properties. Another object of the present invention is to provide a thin and super lightweight lining for garments and sports articles and other related equipment which are cumbersome and bulky, while yet combining both buoyancy and thermal resistance properties."

We do not have the actual patent described above; rather, we have been granted a license by for the exclusive marketing and distribution rights for use of INSULTEX in sleeping bags, swimeez, and stadium packs and the rights to purchase INSULTEX for the manufacture of other apparel and accessory items containing INSULTEX. As explained immediately below, the inventor of INSULTEX and patent recipient, Mr. Moon, assigned the patent to Mr. Kim. Innovative Designs, Inc. obtained its license rights from Mr. Kim.

Our production costs are limited to the invoices we receive from our submanufacturer, PT Lidya and Natalia, on a per production basis.

Because we plan to use sub-manufacturers for our products, we will not require any equipment for manufacturing and we do expect to incur any material costs affiliated with purchase of plant and significant equipment. We do not currently have any plant or significant equipment to sell.

We have spent no funds on research and development of our products. In March of 1999, our ex-affiliate, RMF Global, hired and paid $5,275 to Vartest Laboratories, Inc. to perform testing of the INSULTEX material. Other than the testing performed by Vartest Laboratories, Inc, Innovative Designs, Inc. has spent no funds on research and development.

The Vartest Laboratories test results establish the buoyancy and insulation qualities of INSULTEX. The results are as follows:

Issue
 
Test Result
Fabric Weight
 
0.042 oz./square yard
Low
Fabric Thickness
 
0.021 inches
Thin
Thermal Retention
 
Clo value: 2.0
Good
Air Permeability (protection from wind)
 
0.01 cubic feet of air/min/ft2 of material (Good)
Low
Moisture Permeability (protection from water)
 
5 grams/sq. meter/24 hrs. (Good)
Low

During 2005, the Company hired Texas Research Institute Austin, Inc. to perform testing on the permeation of gas on the INSULTEX product. The testing was based upon accepted industry practices. The permeation test resulted in almost no detection of the gas through the INSULTEX throughout the testing procedures.

-15-


Although we are not aware of the need for any government approval of our principal products, we may be subject to such approvals in the future.

United States and foreign regulations may subject us to increased regulation costs, and possibly fines or restrictions on conducting our business. We are subject, directly or indirectly, to governmental regulations pertaining to the following government agencies:

Department of Transportation

Our shipment of raw materials to our manufacturers is and will be subject to United States Department of Transportation regulations.

Federal Trade Commission

The product suppliers and manufacturers of our products, to the extent that they are involved in the manufacturing, processing, formulating, packaging, labeling and advertising of the products, may be subject to regulations by the Federal Trade Commission which may bring injunctive action to terminate the sale of such products, impose civil penalties, criminal prosecutions, product seizures, and voluntary recalls. Should we or our suppliers become subject to any such orders or actions, our brand name reputation and that of our suppliers and products will be adversely affected and our business would be negatively affected.

United States Customs Service

We are required to pay a 9% importation duty to the United States Customs Service on all finished goods, based upon our completed Stadium Pack and jacket products, all containing "INSULTEX", which are sub-manufactured by PT Lidya and Natalia and then imported into the United States. Innovative Designs, Inc. is required to pay a 6.5% importation duty to the United States Customs Service for the importation of INSULTEX, regarding its importation of INSULTEX from South Korea or Indonesia from Mr. Kim, in accordance with Innovative Design’s agreement with Mr. Kim. Innovative Designs imports INSULTEX from South Korea because this is the location of his manufacturing facilities for INSULTEX. Innovative Designs imports INSULTEX from Indonesia because Mr. Kim has additional warehousing facilities to store INSULTEX in Indonesia

United States Department of Labor's Occupational Safety and Health Administration

Because our sub-manufacturers manufacture our completed products, we and our sub-manufacturers will be subject to the regulations of the United States Department of Labor's Occupational Safety and Health Administration.

We are not aware of any governmental regulations that will affect the Internet aspects of our business. However, due to increasing usage of the Internet, a number of laws and regulations may be adopted relating to the Internet covering user privacy, pricing, and characteristics and quality of products and services. Furthermore, the growth and development of Internet commerce may prompt more stringent consumer protection laws imposing additional burdens on those companies conducting business over the Internet. The adoption of any additional laws or regulations may decrease the growth of the Internet, which, in turn, could decrease the demand for Internet services and increase the cost of doing business on the Internet. These factors may have an adverse affect on our business, results of operations, and financial condition.

-16-


Moreover, the interpretation of sales tax, libel, and personal privacy laws applied to Internet commerce is uncertain and unresolved. We may be required to qualify to do business as a foreign corporation in each such state or foreign country. Our failure to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties. Any such existing or new legislation or regulation, including state sales tax, or the application of laws or regulations from jurisdictions whose laws do not currently apply to our business, could have a material adverse affect on our business, results of operations and financial condition.

We currently have no costs associated with compliance with environmental regulations. Because we do not manufacture our products, but rather they are manufactured by our sub-manufacturers, we do not anticipate any costs associated with environmental compliance. Moreover, the delivery and distribution of our products will not involve substantial discharge of environmental pollutants. However, there can be no assurance that we will not incur such costs in the future.

We estimate that all of our revenues will be from the sale of our products. We will sell our products at prices above our original cost to produce our products. Prices for some of our products will be lower than similar products of our competitors, while others will be higher. We expect our product prices to be lower than network marketing companies, but higher compared with retail establishments that directly manufacture their own products.

Products that are sold directly by our website will be priced according to our Manufacturer Suggested Retail Prices. Our wholesale clients will purchase our products at our wholesale prices. We recommend that our retailer clients sell our products at the Manufacturer Suggested Retail Prices that we provide to them which are the same prices for products on our website; however, they are not required to do so and may price our products for retail sale at their discretion. We have established M.A.P. (minimum advertised pricing) on our Arctic Armor™ suit in an attempt to allow all retailers and distributors carrying the line to obtain reasonable gross margin dollars.

We currently have a total of 7 employees, 4 of which are full time employees and 3 of which are part time employees. Our full time employees are:

·
Joseph Riccelli, our Chief Executive Officer;
 
·
Joseph A. Riccelli, our Vice President;
 
·
Gregory P. Domian, Vice President of Sales and Marketing; and
 
·
David Shondeck, our Director of Finance.

We have the following part-time employees:

·
Anthony Fonzi, our Chief Financial Officer; and
 
·
2 part-time clerical/warehouse employees.

We have no collective bargaining or employment agreements.

Reports and Other Information to Shareholders

We are subject to the informational requirements of the Securities Exchange Act of 1934. Accordingly, we file annual, quarterly and other reports and information with the Securities and Exchange Commission. You may read and copy these reports and other information we file at the Securities and Exchange Commission's public reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Our filings are also available to the public from commercial document retrieval services and the Internet world wide website maintained by the Securities and Exchange Commission at www.sec.gov.

-17-

 
ITEM 1A RISK FACTORS

Competition

The markets served by the Company are highly competitive. Competitive pricing pressure could result in loss of customers or decreased profit margins. Competition by product type include the following:

The markets for our products are increasingly competitive. Our competitors have substantially longer operating histories, greater brand name and company name recognition, larger customer bases and greater financial, operating, and technical resources than us. Because we are financially and operationally smaller than our competitors, we will encounter difficulties in capturing market share. Our competitors are able to conduct extensive marketing campaigns and create more attractive pricing of their target markets than we are.

Some of our biggest competitors in the floating swimwear market are:

·
www.floatingswimwear.com;
 
·
www.maui.net/-welck; and
 
·
www.hotshop.at/enlisch/swimc.
 
·
Welck-em Floats located in Lahaina, Hawaii;
 
·
Aqua Leisure Industries located in Avon, Massachusetts; and
 
·
Swim Coach websites located in the United Kingdom.

Some of our biggest competitors in the sleeping bag market are:

·
North Face located in San Leandro, California or www.thenorthface.com;
 
·
Slumberjack located in Saint Louis, Missouri or www.slumberjack.com;
 
·
Sierra Designs located in Emeryville, California;
 
·
Kelly Pack, Inc. located in Boulder, Colorado; and
 
·
Marmot Mountain, Ltd. located in Santa Rosa, California.

Some of our biggest competitors in our stadium pack market are:

·
North Face located in San Leandro, California or www.thenorthface.com;
 
·
Slumberjack located in Saint Louis, Missouri or www.slumberjack.com
 
·
Sierra Designs located in Emeryville, California;
 
·
Kelly Pack, Inc. located in Boulder, Colorado; and
 
·
Marmot Mountain, Ltd. located in Santa Rosa, California.

Some of our biggest competitors in our windshirts market are:

·
www.zerorestriction.com;
 
·
www.innerharborshirts.com; and
 
·
www.cutterbuckapparel.com.

-18-


Some of our biggest competitors in our jacket markets are:

·
www.zerorestriction.com;
 
·
cutterbuckapparel.com; and
 
·
North Face located in San Leandro, California or www.thenorthface.com.

Some of our biggest competitors in the hunting apparel line are:

·
Russell Athletics
 
·
Scentlock
 
·
Various big-box private labels

Some of our biggest competitors in the Arctic Armor™ line are:

·
Ice Clam Corporation
 
·
Vexilar
 
·
Mustang Survival

We plan to compete in the following ways:

A. Emphasize the Advantages of our Products Sleeping Bag Products

We plan to emphasize the following characteristics of our sleeping bag products:

·
inherent buoyancy of INSULTEX;
 
·
low weight;
 
·
compactness;
 
·
water repellency;
 
 
·
thermal insulation properties which makes a thinner, more compact, and warmer sleeping bag than some of our competitors; and
 
 
·
having these multiple advantages.

Floating Swimwear Products

We plan to emphasize the following characteristics of our swimeez swimsuit product:

 
·
inherent buoyancy of INSULTEX which is sewn into our swimsuit and results in a less obtrusive swimming experience while still retaining buoyancy in comparison to some of our competitors; and
 
 
·
low weight.

Stadium Pillow Products

We plan to emphasize the following advantages of our Stadium Pack product:

 
·
Our Stadium Pack product has multiple uses by acting as a stadium seat cushion or pillow, thermal rain parka, sleeping bag, flotation raft and double comforter; and
 
 
·
Our Stadium Pack product has the advantages of low weight, compactness, water repellency, and thermal insulation properties.

-19-


Windshirts and Jackets

We plan to emphasize the following advantages of our windshirt and jacket products:

·
low weight;
 
·
compactness;
 
·
water repellency;
 
 
·
thermal insulation properties which makes a thinner, more compact product than some of our competitors; and
 
 
·
having these multiple advantages.

Hunting and Fishing Line

We plan to emphasize the following characteristics and advantages of our hunting and fishing line products:

·
low weight;
 
·
compactness;
 
·
water proof;
 
 
·
thermal insulation properties which makes a thinner more compact and warmer garment or accessory than some of our competitors;
 
 
·
competitive wholesale and retail prices; and
 
 
·
introduction of a new proprietary technical insulation, i.e. "INSULTEX", to the hunting industry that has fewer such technical insulations in use by that industry; and
 
 
·
scent barrier.

Arctic Armor Line

We plan to emphasize the following characteristics and advantages of our Arctic Armor line products:

 
·
Low weight
 
 
·
Waterproof
 
 
·
Windproof
 
 
·
Sub-Zero Protection
 
 
·
Buoyancy

The basis for our above product claims is derived from the Vartest Lab Results, a fiber/yarn, fabric and apparel testing firm, located in New York, New York that RMF Global retained and paid $5,275 to conduct testing of the INSULTEX material. The March 1999 Vartest Lab Results appear under our "Research and Development" Section.

INSULTEX provides a scent barrier which we had a permeation test performed on at the Texas Research Institute Austin, Inc., at a cost of $650. The product was subjected to gas simulant for an eight-hour period. The product was tested for permeation of the gas every three minutes for the duration of the test with almost no detection of the gas throughout the test. The testing was based upon accepted industry practices as well as the test method used. We applied for a trade mark on the name “Scent Barrier” on September 26, 2005, and were informed that these words can not be trademarked as they are ‘characteristics’ and thus not usable as a trademark.

B.
Utilize our web site to promote, market, and sell our products to consumers.

-20-


C.
Utilize professional sales representatives and manufacturer representatives to sell our  products to established retailers, especially sporting goods retailers.

D.
Utilize product endorsements from professional athletes and sports figures to bolster awareness and image of our products. We currently have former all pro national football league player Bill Maas endorsing our hunting apparel line and Jose Wejebe, professional fisherman, endorsing our fishing apparel line. We recently added Mr. Tom Nelson, “The American Archer”, who is, and has been seen regularly on The Outdoor Channel.

Our products have the following disadvantages in comparison to the products of our competitors:

·
Lack of a broad range of product designs or styles; lack of product line depth.

·
Preference for less insulated sleeping bag.

Because our sleeping bags are developed for use in cold conditions, outdoor enthusiasts in warmer climates may prefer a less insulated sleeping bag offered by our competitors.

 
·
Lack of brand name recognition or recognition of the properties of INSULTEX and its advantages. We, as well as our products, have little brand name recognition compared to our competitors. Our Stadium Pillow products, as new products, will especially encounter difficulties in establishing product recognition. Also, although our products have insulation properties, the material "down" has a widespread and established reputation as being the superior insulation in the market, while the properties and advantages of INSULTEX has little public recognition.

There can be no assurance that we will be able to compete in the sale of our products, which could have a negative impact upon our business.

We do not expect our business to be dependent on one or a few customers or retailers; however, there is no assurance that we will not become so dependent.

Cyclicality

The Company’s apparel sales fluctuate based on temperature and weather conditions. This may cause a cyclical effect on sales.

Raw Material Acquisition

The Company has only one supplier of INSULTEX, the special material which is manufactured within the apparel of the Company. Additionally, the Company has one manufacturer that produces the apparel on behalf of the Company, located in Indonesia.

Primary Raw Materials by product consist of the following:

Raw Materials to be provided for our Floating Swimwear Products:

INSULTEX will be used to create the buoyant quality of our floating swimwear product. 

-21-


·
Lycra
 
 
We plan to purchase Lycra from Yasha Fabrics which is located in Los Angeles, California. Lycra is an elastic polyurethane fiber or fabric used especially for close-fitting sports clothing and is used for the outer shell and inside lining of our floating swimwear product.

·
Zippers

 
We plan to purchase zippers from Barbie International Corporation, located in New York, New York.

The delivery time involved for these raw materials from the date of order to date of delivery is less than two weeks.

Raw Materials to be provided for our Sleeping Bags and Stadium Pack Products:

·
INSULTEX

INSULTEX is used in our sleeping bags and stadium pack products as insulation and to provide buoyancy to these products.

·
Rip Stop Nylon

We plan to purchase Rip Stop Nylon from Roberts Textile Company located in New York, New York. Rip Stop Nylon is a manufactured fiber that is strong and is resistant to both abrasion and damage from many chemicals. Rip Stop Nylon fabric is non-absorbent, durable, fast drying, resistant to moths and other insects, water, perspiration and standard dry cleaning agents. The Rip Stop Nylon fabric also contains an added nylon cross weave to prevent tearing of the material. Rip Stop Nylon is commonly used in women's hosiery, knitted or woven lingerie, socks and sweaters, rugs and carpets, sleeping bags, duffle bags, racquet strings, and fishing lines. Rip Stop Nylon is used in our sleeping bags and stadium pillow products as the exterior shell.

·
Nylon polyester tricot

We plan to purchase nylon tricot from Roberts Textile Company or Fab Industries, both of which are located in New York, New York. Nylon tricot is made from very fine or single yarns, providing a suede-like texture. Nylon tricot is typically used for underwear, sportswear, bathing suits and gloves. Nylon tricot is used in our sleeping bags as the inside lining.

·
Compression sacks

We plan to purchase compression sacks from Equinox located in Williamsport, Pennsylvania. Compression sacks are small Rip Stop Nylon bags, approximately 12 inches by 8 inches. They are separate from our sleeping bag and are used to compress our sleeping bag when not in use. Rip Stop Nylon is the sole component of the compression sacks. 

-22-


·
New Products Utilizing the Mossy Oak Brand Camouflage Pattern

We plan to purchase the Mossy Oak Brand camouflage fabric from a licensed distributor for Haas Outdoors, Inc, MAHCO, based in Bentonville, Arkansas. This fabric will be shipped to our submanufacturer, PT Lydia and Natalia, Indonesia. PT Lydia and Natalia, at their discretion, will source the additional raw materials for the completion of each garment or accessory.

Raw Materials to be provided for our Jackets and Windshirts

·
INSULTEX

INSULTEX will be used to provide insulation in our jackets and windshirts.

·
Polyester peached microfiber

We plan to purchase polyester peached microfiber which is a type of grade microfiber from Roberts Textile Company located in New York, New York. It is durable and water repellent treated for our jackets and windshirts.

·
Rib knit

We plan to purchase rib knit for our jackets and windshirts from Green Mountain located in Knitter, Vermont. Rib knit is a mix of cotton and Lycra and is elastic and is used for the trip around the collars, waistbands and cuffs.

The delivery time involved for our raw materials from the date of order to the date of delivery is less than one week for all stocked materials. Non-stocked materials or special orders may take up to two weeks for delivery.

The only "raw product" we store on a continual basis is "INSULTEX" which is stored in our warehouse. Our warehouse space is sufficient for our storage of INSULTEX. For the other raw materials that are below 1000 piece goods, we have the materials shipped directly to the sub-manufacturer. For production runs in excess of 1000 piece goods, we arrange for the raw materials to be shipped to our warehouse facility, which is sufficient for that use. Thereafter, we distribute to the sub-manufacturer the quantity needed for each production run and we store the remaining quantity. Payment typically will be due on an average of 30 to 60 days after receipt of the raw materials by our sub-manufacturer or our warehouse facility. Our Indonesia based manufacturer, PT Lidya and Natalia, has sole discretion in the sourcing and ordering of raw materials for their production runs, the costs of which we reimburse PT Lidya and Natalia.

Geographic Concentration

Many of the Company’s sales to retailers are concentrated in colder climates of the United States and Canada. To the extent that any regional downturn impacts these regions, the Company will be adversely affected.

Management

The Company is dependent on the management of Joseph Riccelli, Chief Executive Officer. The loss of Mr. Riccelli’s services could have a negative impact on the performance and growth of the Company for some period of time.

-23-


Stock Price

The Company’s stock is thinly traded. Should a major shareholder decide to liquidate its position, there could be a negative effect on the price of the stock until this condition is resolved.

Sarbanes-Oxley

Unless the current requirement for compliance with Section 404 of the Sarbanes-Oxley is changed, the Company will experience higher internal and auditing costs to comply by the end of fiscal 2007.

Significant Customer

Earned revenues for the fiscal year ending October 31, 2006 include earned to three major customers. The three major customers accounted for approximately 57%. Performance of these three customers in their own markets could have negative impact on the Company’s sales and results of operations.

Information Systems

The Company is currently in its infancy stages. Accordingly, they are in the process of devising their information systems which would currently only consist of financial accounting systems. All manufacturing of products and shipping of products are performed by independent third parties. These service providers maintain their own information systems.

ITEM 2. DESCRIPTION OF PROPERTY.

Since May 2002, we have maintained our executive offices of 1500 square feet at 223 North Main Street, Suite 1, Pittsburgh, Pennsylvania 15215. We pay monthly rent of $700.00 to Riccelli Properties, a property management firm owned by our Chief Executive Officer, Joseph Riccelli. We have a verbal lease agreement with Riccelli Properties to pay Riccelli Properties $700 per month. This verbal agreement further provides that we or Riccelli Properties may terminate this verbal lease at any time with 30 days written notice. Neither we nor Innovative Designs, Inc. have any verbal or written agreement regarding these offices.

In October 2002, we arranged for the lease of warehouse space for our inventory and raw materials at 124 Cherry Street, Etna, Pennsylvania. This facility encompasses 13,000 square feet of storage space on the first floor and 2,000 square feet for our sales department offices located on the second floor. We have entered into a verbal agreement with the owner of the building, Frank Riccelli, and we pay $2,600 per month for the space. This facility is composed of: (a) warehouse and storage areas including four (4) shipping bays and a distribution area consisting of square footage to store in upward of 250,000 finished goods products; and (b) four (4) offices, one (1) conference room, with presentation area and sample display and (2) bathrooms totaling approximately 2,000 square feet located on the second floor. The building in which our offices are located is owned by Frank Riccelli, and is subject to a $120,000 mortgage. We do not own any property nor do we have any plans to own any property in the future. We do not currently intend to develop properties. We are not subject to competitive conditions for property and currently have no property to insure. We have no policy with respect to investments in real estate or interests in real estate and no policy with respect to investments in real estate mortgages. Further, we have no policy with respect to investments in securities of or interests in persons primarily engaged in real estate activities.

-24-


ITEM 3. LEGAL PROCEEDINGS.

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.

The Company became aware, by virtue of communication from certain of its customers and/or prospective customers, of their receipt of a letter from attorneys purporting to represent Elio Cattan, informing said parties that the Company was infringing on a patent held by Mr. Cattan in its manufacture and use of products containing INSULTEX. Said letter went on to threaten unspecified reprisals against any party that continued to so infringe, and further actively solicited the purchase of INSULTEX from Mr. Cattan.

In response, the Company caused to be filed a Declaratory Judgment Action in the United States District Court for the Western District of Pennsylvania at Case No. Cv04-0593 on April 20, 2004. In said Action, in which the Company was joined by RMF Global, Inc., the Company seeks:
 
(1)
a declaration that it did not infringe on U.S. Patent No. 6,083,999;
 
(2)
a declaration that said patent is invalid and unenforceable;
 
(3)
a declaration that the plaintiffs have not infringed on the INSULTEX trademark;
 
 
(4)
an injunction prohibiting any further tortuous interference with the Company's business and contractual relations;
 
(5)
an injunction prohibiting any further engaging in unfair competition; and
 
 
(6)
RMF Global uses new and improved INSULTEX. The new INSULTEX holds a Korean Patent No. 04 26429.

Without answering or denying any of the Company's allegations, Mr. Cattan sought to stay the District Court proceedings, pending an arbitration proceeding to determine the merits of the dispute among the parties. That Motion was granted by the Court. A subsequent Motion was filed by the Company, seeking to dismiss any claims the Court might find to be arbitral, and lift the stay with respect to the remaining claims so that Mr. Cattan's allegations may be subject to the scrutiny of a court of law. That Motion was denied by the Court.

The Company is of the strong opinion and belief, as is its counsel, that the District Court has erred in its interpretation of both the facts and the law in this case, and is in the process of taking an appeal of Judge Schwab's Orders before the Third Circuit Court of Appeals of the United States District Court. The Company is confident of its position, and the likelihood of its success on the merits, and views the actions of Mr. Cattan as desperate delay tactics designed to enable him to attempt the perpetuation of a fraud upon both the Company and its customers and prospective customers.

Subsequent to October 31, 2005, the end of our fiscal year, the Company learned that Elio Cattan and INSULTEX s.r.l. obtained an arbitration award against the Company in the amount of $4,176,000.00, on May 6, 2005 from an Italian Arbitration Tribunal. The Company was later informed that Defendant’s counsel filed a subsequent motion in the District Court to confirm and enforce the Tribunal’s award against the Company and to add Joseph Riccelli as a part to the litigation. As of the date of this filing, no ruling had been made on the above motion.

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 IDI in Italy as discussed above. IDI 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 IDI of an expert analysis of the U.S. patent owned by Elio D. Cattan. The analysis prepared for IDI indicates that the patent was obtained improperly, is a verbatim repetition of a prior patent and should not have been issued.

-25-

 
IDI 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 IDI 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 IDI. IDI 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.

Consequently, due to the case being administratively closed and the pending appeal in the United States Court of Appeals for the Third Circuit, the Company recorded a charge to its 2006 operations to reflect the recording of this contingent liability in accordance with Statement of Financial Accounting Standard No. 5, “Accounting for Contingencies,” issued March 1975. The Company does not believe that it will have to pay this award and has instructed its counsel to take all actions necessary and proper to protect the interests of both the Company, its shareholders and all other entities and individuals with which it conducts business.

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 IDI. IDI 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 IDI is generally paying its debts when due (in fact IDI 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 IDI’s Motion to Dismiss, and directed IDI to answer the petition. On November 15, 2006, the Court granted the Petition for Relief, thereby placing IDI in bankruptcy. IDI’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 IDI for later proceedings. IDI thereafter filed a Motion for Reconsideration, which Motion is pending in the Bankruptcy Court.

IDI 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 IDI 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 IDI are stayed by the bankruptcy filing, IDI is maintaining normal business operations during the pendency of the Case.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

-26-


PART II

Market Information

Below is the market information pertaining to the range of the high and low bid information of our common stock for each quarter since our common stock has been quoted on the OTC Bulletin Board. Our common stock is quoted on the OTC Bulletin Board under the symbol IVDN.OB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

2006
 
Low
 
High
 
Fourth Quarter
 
$
.32
 
$
.36
 
Third Quarter
 
$
.32
 
$
.35
 
Second Quarter
 
$
.32
 
$
.35
 
First Quarter
 
$
.33
 
$
.36
 
 
           
2005
 
 
Low
 
 
High
 
Fourth Quarter
 
$
.30
 
$
.75
 
Third Quarter
 
$
.17
 
$
.51
 
Second Quarter
 
$
.13
 
$
.58
 
First Quarter
 
$
.20
 
$
.80
 

The source of the above data is http://finance.yahoo.com.

No regular trading market exists for our common stock and there is no assurance that a regular trading market will develop, or if developed be sustained. A shareholder in all likelihood, therefore, will not be able to resell their securities should he or she desire to do so when eligible for public resales. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.

Holders.

As of January 26, 2007, we had 150 holders of record of our common stock. We have one class of stock outstanding. We have no shares of our preferred stock outstanding. As of January 26, 2007, there were 3,277,075 shares of our stock held by non-affiliates and 13,634,118 shares of our stock held by affiliates that Rule 144 of the Securities Act of 1933, defines as restricted securities.

Options.

We have no shares of our common equity that are subject to outstanding options to purchase.

Penny Stock Considerations.

Our shares are "penny stocks" as that term is generally defined in the Securities Exchange Act of 1934 as equity securities with a price of less than $5.00. Our shares may be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

-27-


Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or "accredited investor" must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

 
·
Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

·
Disclose commissions payable to the broker-dealer and its registered representatives and current bid and offer quotations for the securities;

·
Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and

 
·
Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our stock, which may affect the ability of shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities if our securities become publicly traded. In addition, the liquidity for our securities may be adversely affected, with a corresponding decrease in the price of our securities. Our shares may someday be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.

Dividends.

We have not declared any cash dividends on our stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payment of dividends will depend on our earnings and financial position and such other factors as the Board of Directors deems relevant.

-28-


Securities Authorized for Issuance under Equity Compensation Plans.
 
EQUITY COMPENSATION PLAN INFORMATION

Plan category
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
Weighted-average exercise price of outstanding options, warrants and rights
 
Number of securities remaining available for future issuance under equity compensation plans (excluding reflected in column (a))
 
 
 
(a)
 
(b)
 
(c)
 
Equity compensation plans approved by security holders
 
$
400,000
 
$
0.42
(2)
$
180,000
(1)
 
(1)
 
The Company has issued an additional 317,000 shares of its stock to various consultants in exchange for past and future services. The weight average price per share was $0.2818.
     
(2)
 
Weighted average price was based on the market value of the shares on or about the date the service was performed. Market value of the price per share ranged from $2.00 to $0.15 per share over the period of time in which the various services were performed.
     
(3)
 
All stock that has been issued by the Company out of the equity compensation plan was for the exchange of professional services. No shares were sold for cash.

Use of Proceeds from Registered Securities.

Not applicable

ITEM 5. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Results of Operations

Fiscal Year Ended October 31, 2006

Revenues for the fiscal year ended October 31, 2006 were $291,794, a decrease of $20,692 or 7% from the fiscal year ended October 31, 2005. The Company had greater sales in each quarter of 2006 compared to 2005 except for the fourth quarter of 2006. There was a $92,174 or 35% decrease in the fourth quarter of 2006 compared to 2005. This decrease is primarily contributable to legal proceedings against the Company. Certain customers received letters from attorneys informing said parties they were infringing on a patent, as discussed more fully in Item 3 of the 10KSB. The letter threatened unspecific reprisals against any party that contributed to so infringe any further actively solicited the purchase of Eliotex, the material used in the construction of the apparel manufactured and sold by the Company.

-29-


Cost of sales for the fiscal year ended October 31, 2006, had an increase of $98,124 from the fiscal year ended October 31, 2005. This increase is attributable to an increase in the cost of shipping costs for inventory received.

Non-cash stock compensation for the fiscal year ended October 31, 2006, a net increase of $8,950 or an 11% increase from the fiscal year ended October 31, 2005. The net increase is primarily attributable to an increase over stock cancelled for services for the fiscal year ended October 31, 2005 over the fiscal year October 31, 2006 of $39,400.

Selling, General and Administrative Expenses

For the fiscal year ended October 31, 2006, a decrease of $3,247 or 1% from the fiscal year ended October 31, 2005. This decrease is a result of a decrease in travel expense, shipping, and postage, utilities, commissions, warehouse expense, and miscellaneous expense of $70,343. This was partially offset with an increase of $65,245 for professional fees. Additionally, there were small net decreases in selling, general and administrative expenses of $1,851.

During the fiscal year ended October 31, 2005, the Company received grant income from the Redevelopment Authority of Allegheny County of $11,138. The Company qualified for the grant due to the significant loss of inventory, raw materials, and equipment when its leased warehouse, in which it maintained these items, was flooded by the remnants of Hurricane Ivan in September 2004.

The Company reversed interest expense of $395,495 related to the extinguishment of related party debt of $568,144 which was used to finance the exclusive rights to acquire the license to develop, use, sell, manufacture, and market products of Eliotex. This agreement was terminated and the debt and related interest was forgiven.

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 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.

None

-30-


ITEM 9A. CONTROLS AND PROCEDURES

As of October 31, 2006 and 2005, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including our Chief Executive Officer and Principal Financial Officer, concluded that our disclosure controls and procedures were effective as of October 31, 2006 and 2005.

There have been no significant changes in our internal control over financial reporting during the fiscal year ended October 31, 2006 and 2005, or subsequent to October 31, 2006, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

Our executive officers are elected annually by our board of directors. A majority vote of the directors who are in office is required to fill vacancies on the board. Each director shall be elected for the term of one (1) year and until his successor is elected and qualified, or until his earlier resignation or removal. The directors named above will serve until the next annual meeting of our shareholders which is held within sixty (60) days of our fiscal year end, or until a successor is elected and has accepted the position.

None of our directors hold directorships in any Securities and Exchange Commission reporting companies. Our directors and executive officers are as follows:

Name
 
Age
 
Position
 
Term
Joseph Riccelli
 
56
 
Chief Executive Officer/Chairman
 
1 year
Dean P. Kolocouris
 
34
 
Director
 
1 year
Robert D. Monsour
 
52
 
Director
 
1 year
Anthony Fonzi
 
58
 
Chief Financial Officer/Director
 
1 year
Joseph A. Riccelli
 
25
 
Vice President
 
Not Applicable

Family Relationships

Joseph A. Riccelli, our Vice President, is the son of our Chief Executive Officer, Joseph Riccelli.

Joseph Riccelli has been our Chief Executive Officer and Chairman of the Board since our inception in June 2002. Joseph Riccelli now spends approximately 40 hours per week to implement our Plan of Operations. Joseph Riccelli was the owner of Pittsburgh Foreign and Domestic, a sole proprietor car dealership located in Glenshaw, Pennsylvania. Joseph Riccelli attended Point Park College located in Pittsburgh, Pennsylvania from 1971 to 1972.

-31-


Dean P. Kolocouris has been one of our Directors since our inception in June 2002. From December 1996 to present, Mr. Kolocouris has been a Loan Officer and Assistant Vice President at Eastern Savings Bank located in Pittsburgh, Pennsylvania. In June 1993, Mr. Kolocouris received a Bachelors Degree in Finance from Duquesne University located in Pittsburgh, Pennsylvania.

Robert D. Monsour has been one of our Directors since our inception in June 2002. From July 1984 to November 1997, Mr. Monsour was the owner and founder of his own law firm, Robert D. Monsour, Esq., P.C., located in Pittsburgh, Pennsylvania. From November 1997 to present, Mr. Monsour has been the Administrator of RGM Medical Management, a medical management firm headquartered in Pittsburgh, Pennsylvania. Mr. Monsour received the following degrees from the University of Pittsburgh located in Pittsburgh, Pennsylvania: (a) Juris Doctor Degree in May 1983; (b) completed the course of study for a Masters Degree in International Affairs at the Graduate School of Public and International Affairs in May 1983, with the exception of a required Masters Thesis; and (c) Bachelor of Arts Degree in Political Science in May 1978.

Anthony Fonzi has been one of our Directors and our Chief Financial Officer and Chief Accounting Officer since our inception in June 2002. From our inception to April 14, 2003, Mr. Fonzi spent approximately 10 hours a week as our Chief Financial Officer and Chief Accounting Officer. Since April 15, 2003, Mr. Fonzi has spent approximately 20 hours a week as our Chief Financial Officer and Chief Accounting Officer. From June 1995 to present, Mr. Fonzi has been a Tax Director at D. Cerniglia and Associates, a Certified Public Accounting firm located in Monroeville, Pennsylvania. As Tax Director, Mr. Fonzi is responsible for all tax functions on behalf of D. Cerniglia and Associates. In May 1985, Mr. Fonzi received a Masters Degree in Taxation from Robert Morris College located in Pittsburgh, Pennsylvania. In May 1970, Mr. Fonzi received a Bachelors Degree in Accounting from Robert Morris College.

Joseph A. Riccelli, Jr., 25, has been our Vice President since May 15, 2003. From November of 2002 until May 14, 2003, Mr. Riccelli was our Vice President on a consultant basis. As Vice President, Mr. Joseph A. Riccelli assists our Chief Executive Officer on a full-time basis by overseeing our daily operations and our distribution center. From June 2002 to October 2002, Joseph A. Riccelli was our outside consultant to assist in overseeing our daily operations. From June 2001 to June 2002, Mr. Riccelli was the Vice President of RMF Global. Mr. Riccelli has no other employment experience. Joseph A. Riccelli has been attending the University of Pittsburgh since September 2001 and is majoring in Business Administration.

Significant Employees

We have the following additional significant employees:

Dave Shondeck, 37, has been our Director of Finance since April 15, 2003, and spends approximately 30 hours per week regarding this position. From January 2003 until April 14, 2003, Mr. Shondeck was our Director of Product Development Research on a consultant basis. During only June 2002, Mr. Shondeck was our consultant to assist in formulating our business plan. From June 2000 to November 2002, Mr. Shondeck was employed as a Marketing and Financial Consultant by Fonzi and Associates, an accounting and financial services firm located in Pittsburgh, Pennsylvania. From May 1996 to February 2001, Mr. Shondeck was employed as a Sales and Marketing Product Manager with Dt Technologies, Inc., a manufacturing technology firm located in Pittsburgh, Pennsylvania. In May 1987, Mr. Shondeck obtained a BSBA Degree in accounting from Duquesne University located in Pittsburgh, Pennsylvania.

-32-

 
Gregory P. Domian, 50, has been our Vice President of Sales and Marketing since May 2005 and spends approximately 45 hours per week regarding this position. Gregory manages the sales force across the United States and Canada, attends all major trade shows for Innovative Designs, Inc. and performs inventory control. Prior to this, Mr. Domion was employed with 84 Lumber performing analysis of product sales from April 2000 to September 2003. Mr. Domion also worked at Dicks Sporting Goods performing assortment planning, purchasing, and advertising from 1994 to 1996. Mr. Domion has an Associates Degree from Duquesne University located in Pittsburgh, Pennsylvania.

ITEM 11. EXECUTIVE COMPENSATION

The following Executive Compensation Chart highlights the terms of compensation for our Executives.

Summary Compensation Chart
 
                               
       
Annual Compensation
 
Long-Term Compensation
 
Name and Position
 
Year
 
Sales ($)
 
Bonus ($)
 
Other ($)
 
Restricted ($)
 
Stock Options ($)
 
Awards ($)
 
Joseph Riccelli
   
2005
   
-
   
-
   
-
   
-
   
-
   
-
 
Chief Executive
                                           
Officer Chairman
                                           
                                             
Joseph Riccelli
   
2006
   
-
   
-
   
-
   
-
   
-
   
-
 
Chief Executive
                                           
Officer Chairman
                                           
                                             
Joseph A. Riccelli
   
2005
   
-
   
-
   
-
   
-
   
-
   
-
 
Vice President
                                           
                                             
Joseph A. Riccelli
   
2006
   
-
   
-
   
-
   
-
   
-
   
-
 
Vice President
                                           
 
There are no employment agreements between us and our executive officer Joseph Riccelli. We have a May 2003 verbal agreement with Joseph A. Riccelli, our Vice President, which provides that we pay Joseph A. Riccelli a $31,000 annual salary for the period from May 2003 to May 2004. This verbal agreement was renewed through May of 2007 to continue the same annual salary of $31,000. There are no change of control arrangements, either by means of a compensatory plan, agreement, or otherwise, involving our current or former executive officers. There are no automobile lease agreements or key man life insurance policies that are to the benefit of our executive officers, in which we would make such payments. There are no standard or other arrangements in which our directors are compensated for any services as a director, including any additional amounts payable for committee participation or special assignments. There are no other arrangements in which any of our directors were compensated during our last fiscal year for any service provided as a director.

-33-

 
 
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the ownership as of January 25, 2007 (a) by each person known by us to be the beneficial owner of more than five percent (5%) of our outstanding common stock, and/or (b) by each of our directors, by all executive officers, our directors as a group, or related party shareholders.

To the best of our knowledge, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in our control.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS (CONTINUED)

Security Ownership of Management
 
Title of Class
 
Name and Address
   
Amount
 
Nature
 
Percent
 
Common Stock
   
Joseph Riccelli
     
10,100,000
   
Direct
   
59.76
%
   
Chief Executive Officer
                     
   
Chairman of the Board of Directors
(1
)
 
1,000,000
   
Indirect
   
5.71
%
   
142 Loire Valley Drive
           
 
       
   
Pittsburgh, PA 15209
           
 
       
     
 
           
 
       
Common Stock
   
Robert D. Monsour
     
40,500
   
Direct
   
0.24
%
   
Director
           
 
       
   
6131 Saltzburg Road
                     
   
Murrysville, PA 15668
                     
     
 
                     
Common Stock
   
Dean P. Kolocouris
     
27,000
   
Direct
   
0.16
%
   
Director
                     
   
120 Timberglen Drive
                     
   
Imperial, PA 15126
                     
     
 
                     
Common Stock
   
Anthony Fonzi
     
20,000
   
Direct
   
0.12
%
   
Director/Chief Financial Officer
                     
   
2912 Bryer-Ridge Ct.
                     
   
Export, PA 15632
                     
     
 
                     
Common Stock
   
Gregory P. Domian
                     
   
Vice President of Sales
                     
   
1929 Main Street
                     
   
Pittsburgh, PA 15215
     
10,000
   
Direct
   
0.06
%
     
 
           
 
       
Common Stock
   
Joseph A. Riccelli Trust
(1
)
 
250,000
   
Direct
   
1.48
%
   
Vice President
                     
   
223 N. Main Street
                     
   
Apartment 6
                     
   
Pittsburgh, PA 15215
                         
Total
   
 
     
11,447,500
         
66.25
%
 
(1)
represents 750,000 shares of common stock held in the Gino Riccelli Trust and 250,000 shares of common stock held in the Joseph A. Riccelli Trust. Mr. Joseph Riccelli is the trustee of both trusts.

-34-


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our officers and directors may encounter conflicts of interests between our business objectives and their own interests. We have not formulated a policy for the resolution of such conflicts. Future transactions or arrangements between or among our officers, directors and shareholders, and businesses they control, may result in conflicts of interest, and the conflicts may be resolved in favor of businesses that our officers or directors are affiliated, which may have an adverse affect on our revenues.

Our officers and directors have the following conflicts of interests:

 
·
We lease our executive offices from Riccelli Properties, which is solely owned by our Chief Executive Officer, Joseph Riccelli, for which we pay $700 per month. RMF Global shares our executive offices rent-free; and

 
·
Our officers, directors and key consultants have the following family relationships: (a) Joseph Riccelli, our Chief Executive Officer/Chairman of the Board, is the father of Joseph A. Riccelli, Vice President and is the son of our Chief Executive Officer, Joseph Riccelli.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for the fiscal years ended October 31, 2006 and 2005 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-KSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows: (a) during fiscal year ended October 31, 2006 and 2005, our current auditors, Louis Plung & Company billed the Company $7,000 and $5,500 for professional services, respectively.

Audit Related Fees
None.
 
Tax Fees
None.

All Other Fees
None.

-35-


ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K

Exhibit Number
 
Description
3.1
 
Certificate of Incorporation*
     
3.2
 
Bylaws*
     
4
 
Specimen Stock Certificate*
     
5
 
Opinion of Hamilton, Lehrer and Dargan, P.A.***
     
10.1
 
Agreement between us and RMF Global, Inc.*
     
10.2
 
Exclusive Agency, Distribution and Marketing Agreement between RMF Global and Mr. Ko-Myung Kim.*
     
31.1
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1
 
Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
     
 
Test Results from Vartest Lab*
     
100
 
Test Results from Texas Research Institute Austin, Inc.

 
*
Previously filed as exhibits to Registration Statement on Form SB-2 filed on March 11, 2003
 
 
**
Previously filed as exhibits to Registration Statement on Form SB-2 Amendment 2 filed on July 8, 2003
 
 
***
Previously filed as exhibit to Registration Statement on Form SB-2 Amendment 3 filed on August 7, 2003
 
 
****
Previously filed as exhibit to Registration Statement on Form SB-2 Amendment 4 filed on September 9, 2003

We hereby incorporate the following additional documents by reference: (a) our Registration Statement on Form SB-2 and all amendments thereto which was filed on March 11, 2003, and amended on May 22, 2003, July 8, 2003, August 7, 2003, and September 9, 2003; (b) our Form 8-K filed on September 29, 2003 and amended on October 27, 2003; (c) our Form 8-K filed on June 29, 2004; and (d) our Form 8-K filed on September 23, 2004.

Reports on Form 8-K

On June 29, 2004, the registrant filed a Form 8-K under item 4 “Changes in Registrant’s Certifying Account.”

On September 23, 2004, the registrant filed a Form 8-K under item 8 “Other Events.” Other events consisted of the Company losing various inventory vehicles and other items from flooding caused by the remnants of Hurricane Ivan.

On May 3, 2005, the registrant filed a Form 8-K under item I Entry into a Material Definitive Agreement.

On September 16, 2005, the registrant filed a Form 8-K under item 5 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On October 19, 2005, the registrant filed a Form 8-K under item I Entry into a Material Definitive Agreement.

-36-


On January 27, 2005, the registrant filed a Form 8-K under item 5 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On March 10, 2006, the registrant filed a Form 8-K under Item 8 Other Events; Disclosure of Status of Material Litigation Pending.

On April 10, 2006, the registrant filed a Form 8-K under Item 1.01 Entry into a Material Definitive Agreement.

On November 17, 2006, the registrant filed a Form 8-K under Item 8 Other Events; Disclosure of Status of Material Litigation Pending.

-37-

 
SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
 
INNOVATIVE DESIGNS, INC.
(Registrant)
 
 
 
 
 
 
Date: August 23, 2007 By:   /s/ Joseph Riccelli
 
Joseph Riccelli
Chief Executive Officer
 
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
     
Date: August 23, 2007  By:   /s/ Joseph Riccelli
 
Joseph Riccelli
Chief Executive Officer
Chairman of the Board of Directors
 
     
Date: August 23, 2007  By:   /s/ Anthony Fonzi
 
Anthony Fonzi
Chief Financial Officer,
Principle Accounting Officer,
and Director
 
     
Date: August 23, 2007 By:   /s/ Dean P. Kolocouris
 
Dean P. Kolocouris
Director
 
     
Date: August 23, 2007 By:   /s/ Robert D. Monsour
 
Robert D. Monsour
Director
 
     
Date: August 23, 2007  By:   /s/ Daniel Rains
 
Daniel Rains
Director
 
-38-

 
PART F/S

INNOVATIVE DESIGNS, INC.
(A Development Stage Company)

FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS’ REPORT
October 31, 2006 and 2005

-39-

 
INDEPENDENT AUDITORS’ REPORT


To the Shareholders and Board of Directors
Innovative Designs, Inc.
Sharpsburg, Pennsylvania

We have audited the accompanying balance sheets of Innovative Designs, Inc. as of October 31, 2006 and the related statements of operations, stockholders' deficit, and cash flows for the years October 31, 2006 and 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Innovative Designs, Inc. as of October 31, 2006, and the results of its operations, and its cash flows for the years ended October 31, 2006 and 2005, in conformity with accounting principles generally accepted in the United States of America.

The Form 10-KSB/A-1 has been amended to reflect the classification of certain expense items from extraordinary to other income and expense or to selling general and administrative expenses. Revenue was deferred for sales previously recognized from a sale to a national retailer until related cash payments are received as further discussed in Note 1. Further, the Company increased additional paid in capital for the cancellation of the licensing agreement.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred significant losses from operations and has working capital and stockholders’ deficiencies. Further during 2006, the Company was involuntarily petitioned into bankruptcy in the United States Bankruptcy Code for the Western District of Pennsylvania. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainies.

/s/ Louis Plung & Company, LLP

LOUIS PLUNG & COMPANY, LLP

Pittsburgh, Pennsylvania
January 26, 2007

-40-


INNOVATIVE DESIGNS, INC.

BALANCE SHEET
(Debtor-in-Possession)
October 31, 2006
 
   
2006
 
ASSETS
     
CURRENT ASSETS:
       
Cash
 
$
66,275
 
Accounts receivable
   
283,251
 
Inventory
   
820,413
 
Other assets
   
11,572
 
Total current assets
   
1,181,511
 
         
PROPERTY AND EQUIPMENT, NET
   
20,497
 
         
TOTAL ASSETS
 
$
1,202,008
 
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
         
CURRENT LIABILITIES:
       
Current liabilities not subject to compromise:
       
Accounts payable
 
$
6,881
 
Current portion of notes payable
   
391,412
 
Accrued interest expense on debt not subject to compromise
   
62,200
 
Current liabilities not subject to compromise
   
460,493
 
         
Current liabilities subject to compromise:
       
Accounts payable - related party
   
28,220
 
Current portion of related party debt
   
111,000
 
Due to shareholders 
   
41,500
 
Accrued expenses 
   
4,925
 
Accrued liability related to arbitration award
   
4,176,000
 
Deferred revenue
   
213,781
 
Current liabilities subject to compromise
   
4,575,426
 
Total current liabilities
   
5,035,919
 
         
LONG-TERM LIABILITIES NOT SUBJECT TO COMPROMISE:
       
Long-term liabilities not subject to compromise:
       
Long-term portion of notes payable
   
426,458
 
Total long term liabilities not subject to compromise
   
426,458
 
         
TOTAL LIABILITIES
   
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, respectively 
   
1,691
 
Additional paid in capital
   
4,971,084
 
Accumulated deficit
   
(9,233,144
)
Total stockholders' (deficit)
   
(4,260,369
)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
1,202,008
 

The accompanying notes are an integral part of these financial statements.
 
-41-


INNOVATIVE DESIGNS, INC.

STATEMENTS OF OPERATIONS
(Debtor-in-Possession)
For the Years Ended October 31, 2006 and 2005
 
   
2006
 
2005
 
REVENUE
 
$
78,013
 
$
312,486
 
               
OPERATING EXPENSES:
             
Cost of sales
   
34,147
   
29,226
 
Selling, general and
             
administrative expenses
   
386,286
   
380,583
 
Arbitration award
   
4,176,000
   
-
 
     
4,596,433
   
409,809
 
               
Loss from operations
   
(4,518,420
)
 
(97,323
)
               
OTHER INCOME AND (EXPENSE):
             
Grant revenue
   
-
   
11,138
 
Reversal of interest on related party debt
   
395,495
   
-
 
Interest expense
   
(77,715
)
 
(31,659
)
Other expense
   
-
   
(5,000
)
     
317,780
   
(25,521
)
               
Net loss
 
$
(4,200,640
)
$
(122,844
)
               
Per share information -
             
basic and fully diluted
             
               
Weighted Average
             
Shares Outstanding
   
18,028,022
   
17,178,135
 
               
Net income (loss)
   
(.23
)
 
(0.01
)

The accompanying notes are an integral part of these financial statements.
 
-42-


INNOVATIVE DESIGNS, INC.

STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Debtor-in-Possession)
For the Years Ended October 31, 2006 and 2005
 
   
Common Stock
     
Additional Paid in
 
Retained
     
   
Shares
 
Amount
 
Capital
 
Deficit
 
Total
 
Balance at October 31, 2004
   
16,903,625
 
$
1,691
 
$
3,948,259
 
$
(4,909,860
)
$
(959,910
)
                                 
Shares issued for services
   
317,000
   
32
   
122,118
   
-
   
122,150
 
                                 
Shares issued for cash
   
77,568
   
7
   
11,953
   
-
   
11,960
 
 
                               
Shares returned for  nonperformance
   
(33,000
)
 
(3
)
 
(39,597
)
 
-
   
(39,600
)
 
                               
Shares issued for settlement of  portion of note payable- related party
   
1,909,098
   
191
   
763,448
   
-
   
763,639
 
 
                               
Shares issued for loan fee
   
50,000
   
5
   
7,495
         
7,500
 
 
                               
Net loss
   
-
   
-
   
-
   
(122,844
)
 
(122,844
)
 
                               
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 income
   
-
   
-
   
-
   
(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
)

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

-43-


INNOVATIVE DESIGNS, INC.

STATEMENTS OF CASHFLOW
(Debtor-in-Possession)
For the Years Ended October 31, 2006 and 2005
 
   
2006
 
2005
 
CASH FLOWS FROM OPERATING ACTIVITIES
         
Net (loss)
 
$
(4,200,640
)
$
(122,844
)
Adjustments to reconcile net loss to cash
             
(used in) operating activities:
             
Common stock returned for noncompliance services
   
(168,200
)
 
(39,600
)
Common stock issued for services
   
259,688
   
122,150
 
Depreciation and amortization
   
11,229
   
15,548
 
Extinguishment of related party debt
   
(568,144
)
 
-
 
Interest reversed on related party note
   
(395,495
)
 
-
 
Interest added to note payable
   
-
   
22,000
 
Other receivables
   
-
   
5,000
 
Changes in operating assets and liabilities:
             
Accounts receivable
   
(12,451
)
 
(240,383
)
Inventory
   
(503,707
)
 
(30,396
)
Deposits
   
47,000
   
(47,000
)
Prepaid commissions
   
(6,381
)
 
-
 
Deferred financing
   
(7,558
)
 
-
 
Accounts payable
   
(48,563
)
 
(83,130
)
Accounts payable - related party
   
-
   
28,219
 
Accrued expenses
   
3,009
   
(11,680
)
Accrued interest on notes payable
   
39,879
   
8,321
 
Accrued liability related to arbitration award
   
4,176,000
   
-
 
Deferred revenue
   
213,781
   
-
 
Net cash (used in) operating activities
   
(1,160,553
)
 
(373,795
)
               
CASH FLOWS FROM INVESTING ACTIVITIES:
             
Purchase of property and equipment
   
-
   
(11,294
)
Net cash (used in) investing activities
   
-
   
(11,294
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
             
Payments on note payable
   
(20,681
)
 
(10,344
)
Payment on related party note
   
(93,000
)
 
(15,000
)
Payment of bank line of credit
   
(27,188
)
 
-
 
Payment of shareholder advances
   
(43,000
)
 
(5,500
)
Receipt of shareholder advances
   
44,000
   
-
 
Common stock issued for cash
   
261,059
   
11,960
 
Proceeds from bank line of credit
   
253,440
   
-
 
Proceeds from loan payable to related party
   
30,000
   
58,000
 
Proceeds from notes payable
   
211,620
   
361,023
 
Reversal of license agreement with RMF Global
   
568,144
   
-
 
Net cash provided by financing activities
   
1,184,394
   
400,139
 
               
Net increase in cash
   
23,841
   
15,050
 
               
Cash - beginning
   
42,434
   
27,384
 
Cash - ending
 
$
66,275
 
$
42,434
 

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

-44-


INNOVATIVE DESIGNS, INC.

STATEMENTS OF CASHFLOW
(Debtor-in-Possession)
For the Years Ended October 31, 2006 and 2005
 
   
2006
 
2005
 
Supplemental cash flow information:
         
           
Cash paid for interest
 
$
36,891
 
$
-
 
               
Non-cash investing and financing activities:
             
               
Interest expense converted to principal
 
$
-
 
$
22,000
 
Property and equipment acquired with note payable
 
$
-
 
$
10,294
 
Settlement of related party debt for equity
 
$
-
 
$
763,639
 
Reversal of interest on extinguishment of debt
 
$
395,495
 
$
-
 

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