U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission file number: 000-51791

Innovative Designs, Inc.

(Exact name of registrant as specified in its charter)

(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:

(Title of Class)

Common Stock, $.0001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒No

Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or Section 15 (d) of the Act.

☐ Yes ☒No

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 ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ No ☐

Indicate by check mark if disclosure of delinquent filers to Item 405 of Regulation S-K (sec. 229.405) is not contained herein, and will not 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-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check One)

(DoEmerging reporting Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not check if a smaller reporting company)to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The issuer’s revenues for its most recent fiscal year were $367,955.$ 347,763.

The aggregate market value of the voting stock and non-voting stock held by non-affiliates of the issuer based onregistrant computed by reference to the closingprice at which the common equity was sold, or the average bid and asked price of $0.75 on January 25, 2018,such common equity, as reported byof the OTCQB,last business day of the registrant’s most recently completed second fiscal quarter was $13,889,874.$ 6,706,230. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purposes.

The number of shares of the issuer’sregistrant’s common stock outstanding as of January 25, 2018,on February 13, 2024, was 26,793,310.37,924,003.

Transitional Small Business Disclosure Format: Yes ☐ No ☒

The Company was incorporated in the State of Delaware on June 25, 2002. We operate in two separate business segments; cold weather clothing andsegments: a house wrap for the building construction industry.industry and cold weather clothing. Both of our segment lines use products made from INSULTEX,Insultex, which is a low density foamedlow-density polyethylene semi-crystalline, closed cell foam in which the cells are totally evacuated. with buoyancy, scent block, and thermal resistant properties. We have a license agreement directly with the owner of the INSULTEX Technology.Insultex technology. In December 2015, we took delivery of equipment capable of producing INSULTEX. We intend to useInsultex. Given the time and cost of bringing the equipment into production mode and our current financial condition until we are able to produce our own INSULTEX for use in our house wrap product as well as sale of INSULTEX to others. Webegin manufacturing Insultex, we will continue to operate under the license agreement for the manufacture of INSULTEXInsultex used in our cold weather clothing.products.

Other companies are free to purchase INSULTEXInsultex from us assuming that it is a company within the distribution jurisdiction that we have, which is worldwide with the exception of Korea and Japan. Other than Korea and Japan, we are the sole worldwide supplier/distributor of the INSULTEXInsultex material.

We offer the following products containing INSULTEX:Insultex:

We also offer a product that helps restore the waterproof character of the outer side of our Arctic Armor clothing. In addition, we offer cold weather headgear and a base insulation clothing product.

OurWe no longer manufacture our apparel products containing INSULTEX are manufactured, under agreement, at a facility we currently utilize in Indonesia.Insultex. 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 and (b) although we used the services ofonly sell from our Chief Executive Officer and Vice President of Sales and Marketing for these purposes, their efforts are part of their normal responsibilities.existing inventory. Our INSULTEXInultex House Wrap product is manufactured in the United States through a third-party manufacturer.

manufacturers.

For financial information regarding each segment, please see Note 910 of the Notes to Financial Statements appearing elsewhere in this Report.

The INSULTEXInsultex License and Manufacturing Agreement

Under the terms of the agreement between us and the Ketut Group, Ketut Group agrees to promptly deliver to Innovative Designs, Inc. within twenty-eight (28) days of receiving an order, all INSULTEXInsultex ordered by us. Under the terms of the agreement, we are required to pay a fixed amount per meter of INSULTEX.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, which was April 1, 2006. The agreement provides that after the ten (10) year period, the price of the INSULTEXInsultex shall be adjusted for a subsequent ten (10) year term, no more than twelve percent (12%) for the subsequent ten (10) year period. We order INSULTEXInsultex from time to time as needed and are not required to purchase any minimum amount of INSULTEXInsultex during the term of the agreement, and we are not required to make any minimum annual payment. However, should we place an order; any quantity ordered must be a minimum of 100,000 yards of INSULTEX.Insultex. We are not required to pay any part of any sublicense fee that we receive from third party sub-licensees, and we are not required to pay any fees to the Ketut Group. This agreement will be in full legal force and effect for an initial term of ten (10) years from the date of its execution. We have the option to renew this agreement for up to three (3) successive terms of ten (10) years each by giving notice of our intention to so renew not less than ninety (90) days prior to the expiration of the then-current term. The Company has exercised the first ten-year renewal option. We purchased the equipment capable of producing INSULTEXInsultex from the Ketut Group.

COLD WEATHER CLOTHING PRODUCTS

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: We are currently only selling these products form our existing inventory.

Website and Retailers

We sell both wholesale and retail products on our web site. Our web site, located at www.idigear.com, contains information on our products, technical information on INSULTEXInsultex 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 web site features a “wholesaler only” area, allowing our wholesalers access to information, ordering, and reordering. Our products are offered and sold by retailers, distributors and through our web site in all states and Canada. Except for products sold through our web site, others who purchase our products do so at wholesale prices which they plan to sell at their retail prices or use within their industry.

Sales

We primarily sell our products online, to distributors and through independent sales agents and agencies. Once we have made contact with a potential sales agency or solo agent, we evaluate their existing accounts, the capacity and potential for them to effectively push our products. We also look at their current product lines through the sales channel. Our primary market area is the outdoor industry which includes all activity done in cold weather. These activities include recreational such as hunting, ice fishing, snowmobiling, and industries such as oil and gas, utilities and construction. Once we agree to bring on an independent sales agent or agency, we enter into a standard agreement.

A typical sales representative agreement will have a term of one year with the right of either party to terminate upon thirty days written notice. We do not provide any free samples of our products and all sales expenses are the sole obligation of the sales agent.

Certain retailers buy directly from us. We have no verbal or written agreements with them. These retailers purchase our products strictly on a purchase order basis. During our last fiscal year, we sold our products to such retailers as Canadian Tire and Dick’s Sporting Goods.Corporation Limited. Some of our distributors during the last fiscal year were Triple S Pro Fishing Supplies and Fleece Corner. We distribute our products to the following:

Swimeez Products

We distribute our Swimeez products through our web site.

Hunting Apparel Line

We distribute our hunting apparel through our web site.

Our hunting apparel consists of a six pocket pants, 1/2 zip pullover jacket with collar, parka jacket, fleece jacket, bib coveralls in light weight, and bib coveralls in arctic weight.

Arctic Armor Line

We distribute the Arctic Armor Line through our web site, to retailers and to distributors across the United States and Canada. These products are also marketed to utility companies, oil/gas pipeline workers, railroad workers, police and first responders, and to construction workers.

During our last fiscal year, four customers accounted for more than ten percent of our cold weather clothing products sales, Fleece Corner (18.2%), Canadian Tire (12.0%), Pro Fishing Supplies (25.0%) and Dick’s Sporting Goods (17.2%).

HOUSE WRAP

House Wrap

In early January 2008, we announced that we had completed our research and development effort on a new use for INSULTEXInsultex as a house wrap for the home building construction industry. This house wrap provides barrier protection plus moisture vapor transmission and the feature of approximately R-3 and R-6 value insulation. The INSULTEXInsultex House Wrap was designed to specifically add enhanced insulating characteristics. In addition, the house wrapHouse Wrap is priced competitively with existing house wraps that do not provide any insulation. The development efforts were conducted by our own personnel and an outside consultant. In December 2016, we temporarily suspended any advertising for our House Wrap product line as we are currentlywere in litigation with the Federal Trade Commission (“FTC”). Please see “Legal Proceedings” appearing elsewhereThe litigation has concluded as to the matters set forth in this report.the FTC complaint and in March 2021, we resumed advertising for our House Wrap products.

INSULTEXInsultex House Wrap

During our last fiscal year, twothe following customers each accounted for more than ten percent of our total sales of our House Wrap product, A-Team Building Supplies, LLC (42.3%(30.9%), NorthStar Systembuilt (19.1%) and Well Done Insulation (15.1%Compound Construction (10.2%).

Competition

Many companies offer a type of house wrap, some with insulating properties. These companies have large operations and are well financed. Some of the larger companies are DuPont, Owens-Corning and Kimberly Clark. The Company expects to face intense competition with others who have much greater resources in the building construction supply industry.

Our marketing program consists of the following:

MARKETING COMPONENT

We 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 works to:

(a) sell our merchandise to retail chain stores.

(b) initiate relationships with local and national recreational organizations; and

(c) provide support to our distributor representatives

Contract with Manufacturer

We utilize the services of sales agencies to represent our products in the United States and Canada.

Design and Develop

We presently use our own staff 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. At such time as we have sufficient funding, we intend to contract out some of these services. We no longer manufacture the R-3 House Wrap.

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. We currently have five domestic distributors and one international. Each distributor has a certain territory. Our domestic distributors collectively cover the following jurisdictions: Texas, Oklahoma, Louisiana, North and South Dakota, Minnesota, Iowa, Michigan, Ohio, Pennsylvania, New York, West Virginia, Maryland and Virginia. Our international distributor territory covers the UK, EU the Commonwealth countries except for Canada and Africa.

We ship wholesale product orders by United Parcel Service or trucking companies. Retail orders from our website are shipped United Parcel Ground Service or Federal Express overnight. The costs of shipping our finished goods are 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.

INSULTEXInsultex is used in all our Arctic Armor finished goods, except for our headwear, and is purchased directly from the Ketut Group.headwear.

All of our cold weather clothing products, except for our gloves, which are purchased from a supplier in the U.S., are sub-manufactured by PT Lidya and Natalia located in Indonesia. Indonesia does not impose quotas that limit the time period or quantity of items which can be imported. The U.S. Customs Service imposes an importation duty of 6.5% on all our imported products.

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 products, including our House Wrap, are manufactured on a per order basis.

The fulfillment process involved in completing wholesale orders for non-stocked Arctic Armor products and House Wrap product is described below:

Any apparel inventory we maintain is stored at our warehousing facility. Our warehouse facility has the capacity to hold 250,000 units of finished products in inventory. Our House Wrap inventory is stored in our facility and in the facility that manufactures it.

In 2004, we were granted a trademark for our name “idigear” with the United States Patent and Trademark Office.

In 2007, we were granted the mark “INSULTEX” by the United States Patent and Trademark Office.

In 2011, we were granted a trademark for “INSULTEX HOUSE WRAP”“Insultex” by the United States Patent and Trademark Office.

In December 2009,2011, we filedwere granted a patent application, No. 12 642714, withtrademark for “Insultex House Wrap” by the United States Patent and Trademark Office for our Composite House Wrap. The application is still pending. In order to obtain the broadest possible patent protection for this invention Innovative Designs, Inc. has appealed a portion of the decision of the Patent Trial and Appeal Board (PTAB) entered in Appeal 2015-006289 to the Court of Appeals for the Federal Circuit (CAFC) under 35 U.S.C. §141. The portion of the decision of the Patent Trial and Appeal Board (PTAB) entered in Appeal 2015-006289 reversing the examiner’s rejection has not been appealed. Innovative Designs, Inc. expects a favorable action allowing for the broadest possible patent protection to be obtained.Office.

We hadThe Company has rights under a U.S Patent titled “Composite Fabric Material and Apparel Made Therefrom” which issued April 30, 2013.

The Company has rights under a U.S. Paten titled “Composite Materials” which issued February 21, 2017, published on September 5, 2013.

The Company caused to have filed a utility patent application on December 18, 2009, titled “Composite House Wrap” which claimed priority to provisional patent application intitled “Composite House Wrap” on December 18, 2008. TheA patent is currently held by our Chief Executive Officer and a consultant toapplication was published on June 24, 2010. Although no patent issued from this original disclosure, this publication prevents third parties from patenting concepts obvious over these original teaching of the Company.

In February of 2010, our Chief Executive OfficerThe Company caused to have filed a utility patent application for a composite fabric material and apparel made therefrom. The patent has been allowed. The patent has been assigned to the Company.

Inon May 2016, our Chief Executive Officer and a consultant to the Compliant filed a patent application relating to INSULTEX entitled31, 2017, titled “Process for Forming Closed Cell Expanded Low Densitydensity Polyethylene Foam and Products Formed Thereby”., published January 24, 2018. The Company then caused to have filed a utility patent application on July 31, 2020, which application was published February 11, 2021. In January 2023, the U.S Patent and Trademark Office issue a Notice of Allowance and a patent shall issue in due course.

Additional patent application on other property concepts are also being planned.

Our production costs are limited to the invoices we receive for Insultex from our sub-manufacturer, PT LidyaKetut Group and Natalia, on a per production basis and for our gloves from our supplier in the U.S and for our House Wrap product from the manufacturer.

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:

United States Customs Service

We are required to pay a 6.5% importation duty to the United States Customs Service on all imported products. We import INSULTEXInsultex from Indonesia from the Ketut Group, in accordance with Innovative Design’sour agreement with the Ketut Group.

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 companiescompanies’ 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 effect on our business, results of operations, and financial condition.

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 effect 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 5 employees, 3 of which aretwo full time employees and 2 of which areemployees. We hire part-time employees.personnel as needed.

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 wideworldwide website maintained by the Securities and Exchange Commission at www.sec.gov.

Pending Litigation

We are a defendant in a complaint brought by the FTC. While we believe we have a defense to the allegation asserted by the FTC, should there be an adverse ruling we may be forced to disgorge all revenues derived from the sale of our House Wrap product line, and we would not be able to sell the product. The result of this action would have a materially adverse effect on the Company’s revenues and operations. See “Legal Proceeding” appearing elsewhere in this report.

Lack of Sufficient Operating FundsFunds-Going Concern

Our independent registered public accounting firm for the fiscal year ended October 31, 2023, has included an explanatory paragraph in their opinion that accompanies our audited financial statements for the fiscal year ended October 31, 2023, indicating that as a result of the Company having had net losses and negative cash flows and an accumulated deficit there is substantial doubt about the Company’s ability to continue as a going concern. Because we are not able to generate sufficient funds from sales and because we are unable to access commercial sources of credit, we are consistently underfunded. As a result, our growth is very limited, and we have difficulty in sustaining our current level of operations. We are not able to initiate adequate marketing programs, hire additional staff, develop new products or have flexibility in ordering productsInsultex from our manufacturers. In addition, the action by the FTC has adversely affectedmanufacturer. Additionally, we must replace our ability to sellquality control testing equipment for our House Wrap product line.line which we estimate may cost $100,000. In the past, we have depended on borrowings from our CEO and other private parties, primarily shareholders andstockholders in the private sale of our common stock.stock or debt. Should we not be able to continue to rely on these sources of funding and increase our revenue stream to at least meet our current level of operations our revenue streamand to purchase new testing equipment the ability of the Company to continue as a going concern will be adversely affected.

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 includes 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 for our House Wrap product line are;

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

We compete in the following ways:

A.       Emphasize the Advantages of our Products.

Arctic Armor Line

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

INSULTEXInsultex provides a scent barrier which we had a permeation test performed on at the Texas Research Institute Austin, Inc. The product was subjected to gas stimulant 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.

HOUSE WRAP

Our House Wrap product

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

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 Arctic Armor apparel sales fluctuate based on temperature and weather conditions. Our products are suitable primarily for cold weather conditions. This will causehave a cyclical effect on sales. It also makes our revenues totally dependent on cold weather.weather for this product line. For the fiscal year ended October 31, 2023, our cold weather products accounted for approximately 10% of our total revenue.

Material Acquisition

All of the materials and items required to manufacture our cold weather clothing products are purchased by our manufacturer in Indonesia.

The Company currently has only one supplier of INSULTEX,Insultex, the special material which is manufactured within the apparel of our cold weather products and our House Wrap product. Additionally, we have one manufacturer that produces the apparel on behalf of the Company, located in Indonesia. Currently, we are only selling apparel from our inventory. Any delays in getting INSULTEX and/or our finished productsInsultex will adversely affect our revenue stream. Once we have our own equipment operating, we will be able to produce INSULTEX.Insultex. We intend to use such INSULTEXInsultex for our House Wrap product.

Our Indonesia based manufacturer, PT Lidya and Natalia, has sole discretion inproduct.at the sourcing and ordering of materials for their production runs, the costs of which we reimburse PT Lidya and Natalia.present time.

Geographic Concentration

Most of the Company’s sales for its cold weather clothing products to retailers are concentrated in colder climates of the United States and Canada. To the extent that any regional economic downturn impacts these regions, the Company will be adversely affected.

Management

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

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.

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.

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, exclusive of one’s residence, 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:

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 forof our securities may be adversely affected, with a corresponding decrease in the price of our securities.

None.

We do not maintain any information systems that would be subject to a cybersecurity threat. Our credit card processing is outsourced to a third party that uses a double authentication protocol. 

In October 2002, we arranged for theWe lease of warehouse space for our inventory and raw materials at 124 Cherry Street, Etna, Pennsylvania. We also use this space as our principal executive offices. 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, and we pay $3,500 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 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. Mr. Frank Riccelli is the brother to our Chief Executive Officer and the owner of the property. The condition of our leased property is good.

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 propertygood 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. We consider the condition of our leased property to be suitable for our needs.

On November 4, 2016, the FTC filed a complaint against the Company in the U.S. District Court Western District of Pennsylvania, number 16-1669. In the complaint, the FTC alleges that, among other matters, the Company does not have substantiation of claims made by the Company regarding the R value and energy efficiency of its INSULTEX House Wrap products. The complaint asks as to redress a rescission of revenue the Company received from the sale of House Wrap and a permanent injunction. The parties are currently in the expert discovery phase.

The Company strongly denies the allegation and intends to vigorously defend itself. It is the Company’s belief that the complaint is based on improper testing of the INSULTEX products using the wrong type of testing equipment.PART II

PART II

BelowOur Common Stock is the market information pertaining to the range of the high and low bid information of our common stock for each quarter for the last two fiscal years. Our common stock is quotedtraded on the OTC Bulletin BoardOTCQB tier under the symbol IVDN. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

On January 25, 2018, the closing bid price was $0.75.

The source of the above data is www.otcmarkets.com.

Holders

As of January 25, 2018,February 12, 2024, we had 195249 holders of record of our common stock. stock (not including beneficial holders of stock held in street names).

We have one class of stock outstanding. We have no shares of our preferred stock outstanding.

Dividends.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.

Recent Sales of Unregistered Securities.

During the quarter ended January 31, 2017, there was no stock sold or issued.

During the quarter ended April 30, 2017, the Company issued 30,000 shares of common stock to one director for services performed during February 2017 valued at $7,500. The stock was issued at a price of $0.25 per share.

During the quarter ended July 31, 2017, the Company issued 130,000 shares of common stock to two shareholders for services performed in April and May 2017 valued at $40,200 in total. The stock was issued at a price of $0.30 and $0.34 per share.

Additionally, for the quarter ended July 31, 2017, the Company sold 217,000 shares of common stock to three previous stockholders for total proceeds of $40,590. The stock was issued at a price ranging from $0.18-$0.22 per share. We believe that Section 4(2) of the Securities Act of 1933, as amended, was available because these transactions and the transaction cited above did not involve a public offering and there was no general solicitation or general advertising involved in these transactions. We placed legends on the stock certificates stating that the securities were not registered under the Securities Act and set forth the restrictions on their transferability and sale.

During the quarter ended October 31, 2017, the Company issued 140,000 shares of common stock to one shareholder and one individual for services performed in September and October 2017 valued at $50,000 in total. The stock was issued at a price of $0.25 and $0.40 per share. We believe that Section 4(2) of the Securities Act of 1933, as amended, was available because these transactions did not involve a public offering and there was no general solicitation or general advertising involved in this transaction. We placed legends on the stock certificates stating that the securities were not registered under the Securities Act and set for the restrictions on the transferability and sale.

Additionally, for the quarter ended October 31, 2017, the Company sold 505,000 shares of common stock for total proceeds of $131,950. The stock was issued at a price ranging from $0.25 - $0.40 per share to three new investors and three stockholders. We believe that Section 4(2) of the Securities Act of 1933, as amended, was available because these transactions did not involve a public offering and there was no general solicitation or general advertising involved in these transactions. We placed legends on the stock certificates stating that the securities were not registered under the Securities Act and set forth the restrictions on their transferability and sale.

Subsequent to October 31, 2017, the Company sold 351,000 shares of stock for $111,560 to three individuals.

Additionally, subsequent to October 31, 2017, the Company issued 50,000 shares to one individual for services valued at $20,000. We believe that Section 4(2) at the Securities Act of 1933, as amended, was available because these transactions and the transaction noted above did not involve a public offering and there was no general solicitation of general advertising involved in these transactions. We placed legends on the stock certificates stating that the securities were not registered under the Securities Act and set forth the restrictions on the transferability and sale. 

As a smaller reporting company, under SEC regulations, we are not required to furnish selected financial data.

General

The following information should be read in conjunction with the financial statements and the notes thereto appearing elsewhere in this report.

Disclosure Regarding Forward-Looking Statements

Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute “forward-looking statements” within the meaning of the federal securities laws. When used in this report, the words “believes,” “expects,” “estimates,” “intends,” and similar expressions are intended to identify forward-looking statements. Statements regarding future events and developments and our future performance, as well as our expectations, beliefs, plans, intentions, estimates, or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of such statements in this report include descriptions of our plans and strategies with respect to developing certain market opportunities, and our overall business plan. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Weprojected we believe that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligations to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

Background

Innovative Designs, Inc. (hereafter referred to as the “Company”, “we” or “our”) was formed on June 25, 2002. We marketproduces and sell cold weather clothing products called “Arctic Armor” that are, except for our headwear, made from INSULTEX,sells a house wrap product using Insultex a material with buoyancy, scent blockthermal resistance and thermal resistantbuoyancy properties. We also offer our House Wrapa cold weather product line called “Artic Armor” which is also madeuses Insultex. We no longer produce any Artic Armor products. We are only selling from INSULTEX.our existing inventory. We obtain INSULTEX for our cold weather clothing productsInsultex through a license agreement with the owner and manufacturer of the material. In December 2015, we took delivery of equipment capable of producing our own INSULTEX. WeInsultex. At such time as we have sufficient funding, we intend to put the equipment into production and use the INSULTEXInsultex from this equipment in the production of our House Wrap product and for the sale of INSULTEXInsultex to others.

Results of Operations

Comparison of the fiscal year ended October 31, 2017,2022, with the fiscal year ended October 31, 2016.2021.

The following table shows a comparison of the results of operations between the fiscal years ended October 31, 20172023, and October 31, 2016:2022:

Results of Operations

Revenues for the fiscal year ended October 31, 2017,2023, were $367,955$ 347,763 compared to revenues of $602,062$258,734 for the comparable period ending October 31, 2016.2022. House Wrap product revenue totaled $370,794 last year$312,983 for the period compared to $184,294$193,302 for Fiscal Yearfiscal year ended October 31, 2017. Nearly all2022. All of the remaining revenues were derived from our Arctic Armor and related product linelines which totaled $183,661$34,780 for Fiscal Year ended October 31, 2017the period compared to revenues of $231,268$65.432 for the Fiscal Yearfiscal year ended October 31, 2016. The decrease in revenue is attributable to the FTC matter with regard to our House Wrap products as we no longer advertise the insulating quality of these products. The decrease in revenue for our apparel product line is attributable to the fact that we are devoting significant portion of our limited resources to the FTC matter.2022. Revenues are net of returns and discounts. We estimate that approximately sixty percentcontinue to work on rebuilding our House Wrap product line brand after doing no advertising during the time of the FTC litigation, November 2016 to July 2021, and the effect of the litigation on our cold weather apparelHouse Wrap products acceptance, and the use of Insultex in other applications in the marketplace.

However, until we are soldable to outdoor sportsmen, primarily those engaged in ice fishing.have Insultex ICC-ES certified we do not believe we will be able to significantly increase our revenue from our House Wrap product.

Selling, general and administrative expenseexpenses decreased from $865,310$666,339 in fiscal year 2016,2022, to $755,836$464,065 in the fiscal year ending October 31, 2017.2023. This decrease reflects, in part, a decreased costdecrease in stock-based compensation of seasonal help of $29,162, commissions of $14,642, and$200,000, professional fees decreased by $,9,000, payroll decreased by $18,000 and office supplies decreased by $8,000. Some of $47,266. The professional fees which totaled $317,456 are primarily related to the FTC matter.increases were travel expenses increased by $17,000, shipping costs increased by $8,000, product testing increased by $8,000 and sales commission increased by $5,000.

Our cost of sales decreasedincreased from $303,544$146,912 as of October 31, 20162022, to $216,250$16,00 as of October 31, 2017.2023, as a result of more sales.

Liquidity and Capital Resources

During the fiscal year ended October 31, 2017,2023, we funded our operations from revenues and the private sales of our common stock and the exercise of certain common stock purchase warrants. We received a total of $355,000 from the sale of stock and warrant exercise. During the period we repaid advances from stockholders totaling $107,630. Subsequent to the period, we receive proceeds totaling $ 218,831 from the sale of our common stock. We will continue to fund our operations from these sourcesrevenues, private borrowings and the sale of our common stock until we are able to produce sales sufficient to cover our cost structure or to secure commercial lending arrangements.

On July 12, 2015, the Company reached an agreement with Ketut Jaya to purchase machinery and equipment utilized to produce the INSULTEX material. The purchase price is $700,000 and to be made in four installments. The first installment of $300,000 is to be made at the execution of the agreement. The second installment of $200,000 is to be made when the machinery and equipment is ready to be shipped to the United States. The third installment of $100,000 is to be made once the machinery and equipment is producing INSULTEX, and the fourth and final installment of $100,000 is to be made after the first commercial production run of INSULTEX is completed. As of October 31, 2016, the Company has made payments of $600,000. In addition to the final payments, the Company will have to have the equipment and machines installed and ensure that the machine can be operated in compliance with environmental regulations. The Company has not made an estimate of the costs required for bringing the machine into compliance, but it is considered to be substantial. Given the expected time and cost of bringing the equipment into production mode and our current financial condition we are unable to estimate when we will be able to do so.

We also must purchase new quality control testing equipment for use in testing Insultex. The testing equipment is finished, and we are in discussions with the vendor regarding certain charges. Once we take delivery of the equipment it will have to go through a certification process. Once the testing equipment is certified, we intend to begin the process of having Insultex certified by ICC Evaluation Services, LLC (“ICC-ES”). ICC-ES certifies, among other items, building materials and products of which our House Wrap falls under. The reason we need to have ICC-ES certification is that we believe in order to get large orders for House Wrap ICC-ES certification will be required. The other component part of the House Wrap produced by a third party is ICC-Es certified. Getting ICC-ES certification is costly and time consuming.

During the period we paid ${Amount} on our loans. Subsequent to the period we paid an additional $[Amount} on the loans.

Short Term: We funded our operations with revenues from sales, private sales of our common stock and from loans from our Chief Executive Officer and others.a legal settlement. We could not access commercial lines of credit during our last fiscal year.

Our existing debt obligations consist of the following:

The Company intends to repay these debt obligations with funds it generates from revenues, from the possible sale of its securities, either debt or equity, from advances from its CEOour stockholders or other stockholders.others. Because we cannot currently access commercial lending facilities, should we not be able to continue to obtain funding from our CEO and/or other individuals or sell our securities orthese sources should our revenues decrease, our operations would be severely effectedaffected as we would not be able to fund our purchase orders to our suppliers for finished goods. The Company continues to pay its creditors when payments are due.

Long Term: The Company will continue to fund operations from revenues, borrowings and the possible sale of its securities. Should we not be able to continue to rely on these sources our operations would be severely effectedaffected as we would not be able to fund our purchase orders to our suppliers for finished goods.

As a smaller reporting company under SEC Regulation, we are not required to provide this information.

Our

INNOVATIVE DESIGNS, INC.

FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED

OCTOBER 31, 2023 AND 2022

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Innovative Designs, Inc. (the Company) as of October 31, 2023 and 2022, the related statements of operations, changes in stockholders’ equity and cash flows, for each of the years in the two year period ended October 31, 2023, and the related notes (collectively, the financial statements). In our opinion, the financial statements may be found beginning on Page 30 elsewherepresent fairly, in this report.all material respects, the financial position of the Company as October 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that that Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had net losses and negative cash flows from operations for the years ended October 31, 2023 and 2022 and an accumulated deficit at October 31, 2023 and 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance date of these financial statements. Management’s plans are described in Note 2. Our procedures included an evaluation of management’s plans to continue as a going concern and a conclusion as to whether management’s plans appear reasonable and achievable. The financial statements do not include adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

Critical Audit Matter Description

The Company’s recognition of revenue involves the evaluation against five criteria described by generally accepted accounting principles. With regards to the Company’s transaction classes the primary criteria is the satisfaction of their performance obligations.

How the Critical Audit Matter Was Addressed in the Audit

Our procedures related to the Company meeting their performance obligations included evaluation of initial sale transaction documentation, shipping records, and invoices.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

Critical Audit Matter Description

Due to the financial position and results of cumulative losses the Company evaluates it ability to continue as a going concern and has a plan in place to be able to conclude that it will be able to continue as a going concern for one year from the issuance date of the financial statements.

How the Critical Audit Matter Was Addressed in the Audit

Our procedures included an evaluation of management’s plans to continue as a going concern and a conclusion as to whether management’s plans appear reasonable and achievable.

RW Group, LLC

We have served as the Company’s auditor since 2021.

Kennett Square, PA

February 22, 2024

5020

INNOVATIVE DESIGNS, INC.

BALANCE SHEETS

OCTOBER 31, 2023 AND OCTOBER 31, 2022

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

INNOVATIVE DESIGNS, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022

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

INNOVATIVE DESIGNS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022

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

INNOVATIVE DESIGNS, INC. 

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022 

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

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

Innovative Designs, Inc. (the “Company”), which was incorporated in the State of Delaware on June 25, 2002, markets cold weather recreational and industrial clothing products, as well as house wrap, which are made from INSULTEX, a low density foamed polyethylene, a material with buoyancy, scent block, and thermal resistant properties. The Company’s clothing and house wrap is offered and sold by retailers, distributors, and companies throughout the United States and Canada.

The Company operates two reportable segments: apparel and house wrap. The apparel segment offers a wide variety of extreme cold weather apparel and related items. The house wrap segment offers the INSULTEX house wrap which has an R-value of 3 and an R-value of 6, as well as the Company’s seam tape.

BASIS OF ACCOUNTING

The financial statements of the Company have been prepared on the accrual basis of accounting and, accordingly, report all significant receivables, payables, and other liabilities as prescribed by accounting principles generally accepted in the United States of America (“U.S. GAAP”).

FISCAL YEAR END

The Company’s fiscal year ends on October 31^st. The fiscal years ended October 31, 2023 and 2022 are referred to as 2023 and 2022, respectively, throughout the Company’s financial statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company defines cash and cash equivalents as those highly liquid investments purchased with a maturity of three months or less.

INNOVATIVE DESIGNS, INC. 

NOTES TO FINANCIAL STATEMENTS

REVENUE RECOGNITION

Revenues are measured based on the amount of consideration specified in a contract with a customer. The Company recognizes revenue when and as performance obligations (i.e., obligations to transfer goods and/or services) are satisfied, which generally occurs with the transfer of control of the goods or services to the customer.

To determine proper revenue recognition, the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and whether a combined or single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment, and the decision to combine contracts or separate a combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. Contracts are considered to contain a single performance obligation if the promise to transfer individual goods or services is not separately identifiable from other promises in the contracts.

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and net accounts receivable approximates fair value. The fair value of the Company’s debt instruments approximates their fair values as the interest is tied to or approximates market rates.

ESTIMATED UNCOLLECTIBLE ACCOUNTS

Management evaluates its receivables on a quarterly basis to assess the validity of remaining receivables. Management has determined that there is not a significant doubt regarding the receivable balance as of October 31, 2023. Management has determined that there is significant doubt regarding the receivable balance over 90 days and applied an allowance of $5,860 for fiscal year ended October 31, 2022.

OPENING AND CLOSING BALANCE OF RECEIVABLES

The opening balance of accounts receivables was $1,201 which was net of the allowance for doubtful accounts of $5,860. The ending balance of accounts receivable was $31,050. There was not an allowance for doubtful accounts at the end of the period. The Company also does not have any contract assets or contract liabilities at the end of the period.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

INVENTORY

Inventory consists primarily of finished goods. Inventory is stated at the lower of cost or net realizable value and is valued based on first-in first-out. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

During the fiscal year ended October 31, 2010, the Company discontinued its hunting and swimming lines of apparel. Therefore, a reserve of $65,600 and $75,468 was recorded as of October 31, 2023 and 2022, respectively. The reserve is evaluated on a quarterly basis and adjusted accordingly.

DEPOSITS ON INVENTORY

The Company has one manufacturer located in Indonesia that produces the apparel on behalf of the Company. The Company sends deposits to the manufacturer for future production of the apparel based on approved purchase orders between the Company and the manufacturer. Once finished, purchase orders are received by the Company and the deposits associated with the purchase orders are transferred into inventory. The Company did not have deposits on inventory as of October 31, 2023. Deposits on inventory amounted to $80,000 as of October 31, 2022.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Additions, improvements, and major replacements are capitalized. The cost and accumulated depreciation related to assets sold or retired are removed from the accounts and any gain or loss is recorded on the statements of operations.

For financial reporting purposes, depreciation is primarily computed using the straight-line method over the estimated useful lives of depreciable assets, which range from 5 to 7 years.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

DEPOSITS ON EQUIPMENT

On July 12, 2015, the Company reached an agreement with Ketut Jaya to purchase the machinery and equipment utilized to produce the INSULTEX material. The purchase price is $700,000 and to be made in four installments. The first installment of $300,000 is to be made at the execution of the agreement. The second installment of $200,000 is to be made when the machinery and equipment is ready to be shipped to the United States. The third installment of $100,000 is to be made once the machinery and equipment is producing INSULTEX, and the fourth and final installment of $100,000 is to be made after the first commercial production run of INSULTEX is completed. As of October 31, 2018, the Company has made payments of $500,000 in accordance with the agreement and made a $100,000 pre-payment as the machine is not yet producing INSULTEX. Additionally, the Company has incurred $17,000 of additional expenses related to shipping, site improvements and installation of the equipment. During 2019, the Company determined the shipping costs of $17,000 were impaired and these costs were written off the balance due. In February 2023 and August 2023, the Company made an additional prepayment of $10,000 and $6,000, respectively, on the equipment.

During the fiscal year ended October 31, 2022, the Company made deposits on a separate piece of equipment of $7,370. During the fiscal year ended October 31, 2023, the Company made additional deposits of $29,574 on this piece of equipment. Total deposits for this piece equipment as of October 31, 2023 total $36,944.

Total deposits made were $652,944 and $607,370 as of October 31, 2023 and 2022, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS

Management considers the valuation and depreciation of property and equipment. Management considers both the current and future levels of undiscounted cash flow generated by the Company and the continuing value of property and equipment to determine when and if an impairment has occurred. Any write-downs due to impairment are charged to operations at the time the impairment is identified. No such write-downs due to impairment have been recorded for the fiscal years ended October 31, 2023 and 2022.

INCOME TAXES

The Company accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes”, which requires an asset and liability approach for financial reporting purposes.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

Deferred income taxes are provided for differences between the tax bases of assets and liabilities and the financial reporting amounts at the end of the period, and for net operating loss and tax credit carryforwards available to offset future taxable income. Changes in enacted tax rates or laws result in adjustments to recorded deferred tax assets and liabilities in the periods in which the tax laws are enacted or tax rates are changed.

In addition, FASB ASC Topic 740 clarifies the accounting for uncertainty in tax positions and requires that a company recognize the impact of a tax position in its financial statements only if it is more likely than not of being sustained upon examination, based on the technical merits of the position. The Company did not recognize any material adjustments to the liability for unrecognized income tax benefits.

The Company is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

CONCENTRATION OF CREDIT RISK

The Company maintains its cash balances with a financial institution which management believes to be of high credit quality. The accounts are insured by the Federal Deposit Insurance Company (“FDIC”) up to $250,000 in coverage. The balances in the accounts may, at times, exceed the federally insured limits. The Company has not experienced any losses on deposits and management believes the Company is not exposed to any significant credit risk related to these accounts.

SHIPPING AND HANDLING

The Company pays shipping and handling costs on behalf of customers for purchased apparel merchandise. These costs are billed back to the customer through the billing invoice. The shipping and handling costs associated with merchandise ordered by the Company are included as part of inventory as these costs are allocated across the merchandise received. With house wrap orders, the customer pays the shipping cost. The shipping and handling costs associated with customer orders was approximately $32,962 and $24,791 for the fiscal years ended October 31, 2023 and 2022, respectively.

WARRANTIES

The Company provides a ten-year limited warranty covering defects in workmanship. These warranties are included in the contract and do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications. The Company does not consider these assurance-type warranties to be separate performance obligations.

Management has determined that no warranty reserve is currently necessary on the Company’s products. Management will continue to evaluate the need for a warranty reserve throughout the year and make adjustments as needed.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

EARNINGS PER SHARE

The Company calculates net loss per share in accordance with FASB ASC Topic 260 “Earnings Per Share”. Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the fiscal year. During the fiscal years presented, the Company only has common stock outstanding. In 2021, the Company issued a convertible debt instrument. In addition, the Company also has stock warrants of 954,000 and 994,000 as of October 31, 2023 and 2022, respectively. The Company has calculated diluted earnings (loss) per share utilizing the outstanding stock warrants and convertible debt.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718 “Compensation – Stock Compensation”. In accordance with the provisions of FASB ASC Topic 718, share-based payment transactions with employees are measured based on the fair value of the nonequity instruments issued on the grant date or on the fair value of the liabilities incurred. Share-based payments to nonemployees are measured and recognized using the fair value method, based on the fair value of the equity instruments issued or the fair value of goods and services received, whichever is more reliably measured.

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company had net losses of ($301,378) and ($225,489) and negative cash flows from operations of ($209,489) and ($99,685) for the fiscal year ended October 31, 2023 and 2022, respectively. In addition, the Company has an accumulated deficit of ($10,636,957). These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. Management’s plans include cash receipts through sales, sales of Company stock, and borrowings from private parties. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

FASB ASC Topic 842, “Leases”, establishes a right of use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheets. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. ROU assets are reduced each period by an amount equal to the difference between the lease expense and the amount of interest expense on the lease liability, using the effective interest method. The Company used the average commercial real estate interest rate of 5.50% to calculate the present value of the lease. The Company recognizes lease expense on a straight-line basis over the leased term on the statements of operations.

The Company entered into a lease for office space at the time the Company was formed through June 2022. Effective July 2022, the Company is leasing the office space on a month to month basis. As a result, the Company has elected to apply the short-term lease exemption to its lease of the facilities and therefore has not recorded a ROU asset and related lease liability.

Property and equipment are summarized by major classifications as follows:

Depreciation expense for the fiscal years ended October 31, 2023 and 2022 was $3,074 and $1,490, respectively.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

In July 2005, the Company was approved for a low interest promissory note from the U.S. Small Business Administration in the amount of $280,100. In January 2006, the Company amended the promissory note to increase the principal balance to $430,500. The note calls for monthly payments of $1,820, bears interest at an annual rate of 2.9%, and matures on July 13, 2035. A payment of $40,672 was made on the note during the fiscal year ended October 31, 2017, due to the sale of real estate by Riccelli Properties that was collateral on the promissory note.

As of October 31, 2023 and 2022, the note payable had the following balances:

ROBERTA RICCELLI

In February 2012, the Company entered into a loan agreement with Robert Riccelli for $8,000 to fund operations of the Company. This loan is due on demand, including interest at an annual rate of 10% with an original maturity date of June 2012. The loan was extended through a verbal agreement and currently has no set maturity date.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

CORINTHIAN DEVELOPMENT

In January 2013, the Company entered into a loan agreement with Corinthian Development for $20,000 to fund operations of the Company. This loan is due on demand, including interest at an annual rate of 10% with an original maturity date of May 2013. This loan was extended through a verbal agreement and currently has no set maturity date.

RICCELLI PROPERTIES

During August 2017, the Company entered into a loan agreement with Riccelli Properties, which is wholly owned and operated by the Company’s CEO, Joseph Riccelli, Sr., in the amount of $40,672 which reflects the payment made by Riccelli Properties on the U.S. Small Business Administration note payable. The loan had a term of six months, including an annual interest rate of 10%. The loan was paid in full during the fiscal year ended October 31, 2023.

JOSEPH RICCELLI, SR.

In December 2019, the Company entered into a loan agreement with its CEO, Joseph Riccelli, Sr., for $38,000 to fund operations of the Company. This loan is due on demand, including interest at an annual rate of 10% with an original maturity date of November 2013. This loan was paid in full during the fiscal year ended October 31, 2023.

LAWRENCE FRASER

In December 2020, the Company entered into a loan agreement with Lawrence Fraser for $200,000. The loan is payable in yearly installments of $66,666, with the balance due and payable in December 2023 at an annual interest rate of 12%. The loan is secured by one of the Company’s patents.

As of October 31, 2023 and 2022, stockholder loans had the following balances:

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

Maturity of the stockholder loans is as follows:

Management, during fiscal year ended October 31, 2022, reevaluated certain disputed accounts payable amounts and have determined that accrued professional fees of $111,000 were no longer payable. In addition, the Company received $260,000 for costs recovered for defending a lawsuit. As such, total miscellaneous income was $371,000 for the fiscal year ended October 31, 2022.

On April 16, 2006, the Company entered into an exclusive licensing and manufacturing agreement with the Ketut Group, with an effective date of April 1, 2006, whereby the Company acquired an exclusive license to develop, use, sell, manufacture, and market products related to or utilizing the INSULTEX brand, Korean patent number 0426429, or any INSULTEX technology. At the behest of the Board of Directors, the INSULTEX trademark was chosen as the mark to identify the product utilized by the Company since its inception and was originally registered to Joseph Riccelli, Sr. on February 17, 2005. The new trademark, intended to avoid confusion arising from the use of the old Eliotex trademark in association with a new, subsequent, different, and separately patented product, was assigned by Joseph Riccelli to the Company on April 25, 2006, with that assignment to become effective upon final approval of the statement of use by the United States Patent and Trademark Office. The license was awarded by the Korean inventor, an individual who is part of the Ketut Group, and the manufacturer of INSULTEX. The Company received an exclusive forty year worldwide license, except for Korea and Japan, with an initial term of ten years and an option to renew the license for up to three successive ten year terms. The first ten year option was exercised. Additionally, the Company was granted the exclusive rights to any current or future inventions, improvements, discoveries, patent applications, and letters of patent which the Ketut Group controls, or may control, related to INSULTEX. Furthermore, the Company has the right to grant sub-licenses to other manufacturers for the use of INSULTEX or any INSULTEX technology.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

Revenues from two customers were approximately 45% and 35% of the Company’s revenues for the fiscal years ended October 31, 2023 and 2022, respectively.

The Company only has one supplier of INSULTEX, the special material which is manufactured for the Company. Additionally, the Company only has one manufacturer in Massachusetts that produces house wrap on behalf of the Company.

In prior years, the Company incurred net operating losses and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. For the 2022 tax year, fiscal year ended October 31, 2023, the Company had net operating loss carryforwards of approximately $8,001,000 for tax purposes. The carryforwards are available to offset taxable income of future periods and begin to expire after the Company’s 2038 tax year, fiscal year ending October 31, 2039. Effective for tax years ending in 2019 or later, net operating losses cannot be carried back, but can be carried forward to future tax years indefinitely. Realization of the deferred tax benefit related to the carryforward is dependent on the Company generating sufficient taxable income in the future, against which the loss can be offset, which is not guaranteed.

Deferred income taxes reflect the net tax effect of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as tax benefits of net operating loss carryforwards. The significant components of the Company’s deferred tax assets and liabilities relate to the following:

For financial reporting purposes, the Company has incurred losses in previous years. Based on the available objective evidence, including the Company’s previous losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets as of October 31, 2023 and 2022, respectively.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

The effective income tax rate varied from the statutory Federal tax rate as follows:

The Company’s effective income tax rate is lower than what would be expected if the Federal statutory rate were applied to income (loss) before taxes, primarily due to net operating loss carryforwards.

The Company leases its executive offices/warehouse space from Frank Riccelli, a stockholder and brother of Joseph Riccelli, Sr., the Company’s CEO, for $3,500 a month. The lease is based on a verbal agreement with month-to-month terms. For the fiscal years ended October 31, 2023 and 2022, rent expense was $35,000 and $42,000, respectively.

The Company has organized operations into two segments as discussed in Note 1 to the financial statements, based on an internal management reporting process that provides segment information for purposes of making financial decisions and allocating resources.

The following tables present the Company’s business segment information for the fiscal years ended October 31, 2023 and 2023:

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

During the fiscal year ended October 31, 2023, the Company sold 1,635,000 shares of common stock to sixteen investors for total proceeds of $355,000, one investor exercised 40,000 warrants for stock for total proceeds of $10,000, and 230,000 shares were issued to two investors for services valued at $41,940. The stock was issued between $0.20 and $0.25 per share. Management believes that Section 4(2) of the Securities Act of 1933, as amended, was available because these transactions did not involve a public offering and there was no general solicitation of general advertising involved in these transactions. The Company placed legends on the stock certificate stating that the securities were not registered under the Securities Act and set for the restrictions on their transferability and sale.

During the fiscal year ended October 31, 2022, the Company sold 460,000 shares of common stock to seven investors for total proceeds of $86,200, and 875,000 shares of common stock were issued to eight individuals for services valued at $210,000. The stock was issued between $0.17 and $0.25 per share. Management believes that Section 4(2) of the Securities Act of 1933, as amended, was available because these transactions did not involve a public offering and there was no general solicitation of general advertising involved in these transactions. The Company placed legends on the stock certificate stating that the securities were not registered under the Securities Act and set for the restrictions on their transferability and sale.

The Company has entered into various loan agreements with related parties. These agreements are classified as stockholder loans as described in Note 6 to the financial statements.

The Company has also entered into a verbal lease agreement as described in Notes 3 and 11 to the financial statements.

INNOVATIVE DESIGNS, INC.

NOTES TO FINANCIAL STATEMENTS

On November 4, 2016, the Federal Trade Commission (“FTC”) filed a complaint against the Company in the U.S. District Court Western District of Pennsylvania, Case number 16-1669. In the complaint, the FTC alleges that, among other matters, the Company did not have substantiation of claims made by the Company regarding the R value and energy efficiency of its INSULTEX house wrap products. The complaint asks to redress a rescission of revenue the Company received from the sale of the house wrap and a permanent injunction. On September 24, 2020, a judgment was entered in favor of the Company as to all claims set forth in the FTC complaint. It was further ordered that as there were no remaining claims in the action the case shall be marked as closed.

On November 23, 2020, the Company was informed that the FTC had filed a notice of appeal in regard to the case. The appeal is from the District Court’s September 24, 2020, Order granting the Company’s Motion for Judgment on Partial Findings Pursuant to Fed. R. Civ. P. 52(c) and subsequent Judgment in favor of the Company and from the District Court’s February 14, 2020, striking Dr. David Yarbrough’s expert testimony made on behalf of the FTC. The FTC filed its appeal and on March 24, 2021, the Company filed its answer.

On July 22, 2021, the Registrant was informed that the U.S. Court of Appeals for the Third District affirmed the District Court’s ruling in favor of the Registrant. The ruling was in connection with the FTC complaint filed against the Registrant in November 2016, alleging, among other matters, that the Registrant did not have substantiation for claims made by the Registrant regarding the R-value and energy efficiency of its INSULTEX house wrap products.

In November 2021, in connection with the FTC litigation, the Company filed an application for attorney fees, expenses and cost in the U.S. District Court for the Western District of Pennsylvania, Case No.2:16-cv-01669-NBF. On June 29, 2022, a settlement order was signed by the Court. Pursuant to the Order, the FTC paid the Company $260,000 to resolve all such claims. The parties agreed to waive all rights to appeal or otherwise challenge or contest the validity of the Order.

The Company has evaluated subsequent events in accordance with ASC Topic 855, “Subsequent Events”, through February 22, 2024, which is the date financial statements were available to be issued.

During December 2023, the Company entered into a convertible promissory note in the amount of $50,000 due and payable in December 2024 at an annual interest rate of 6.0%. Any principal and unpaid accrued interest outstanding as of the due date may be converted to common stock at a value of $0.20 per share.

Evaluation of Disclosure Controls and Procedures

Management of Innovative Designs, Inc. is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

At the end of the period covered by this report, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures and in connection with the audit of our financial statement, he concluded that during the period covered by this report, such disclosure controls and procedures were not effective. This was due to our limited resources, includingconclusion is based on the absenceidentification of a financial staff with accounting and financial expertise and deficienciesthe deficiency in the design or operation of our internal controlcontrols over financial reporting described below. Notwithstanding the deficiency that adversely affectedexisted as of October 31, 2023, our disclosure controls andChief Executive Officer/Chief Financial Officer has concluded that may be considered to be “material weaknesses.”

At this time, we do not have the financial resources to employ astatements included in this Annual report on Form 10-K present fairly, in all material respects, the financial staffposition, results of operations and cash flows of the Company in conformity with accounting and financial expertise, once we havegenerally accepted in the necessary financial resources, we plan to hire and designate an individual responsible for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient periodUnited States of time and management has concluded, through testing, that these controls are operating effectively.America.

Our Chief Executive Officer is also our Chief Financial Officer.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of October 31, 2017.2021. This evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework. Based upon such assessment, our Chief Executive Officer/Chief Financial Officer concluded that our internal controls over financial reporting were not effective as of October 31, 2017.2023. In particular, our controls over financial reporting were not effective in the specific areas described in the paragraphs below.

As of October 31, 2017,2023, our Chief Executive Officer/Chief Financial Officer identified the following specific material weaknesses in the Company’s internal controls over its financial reporting processes:

This was due to our limited resources, including the absence of an internal financial staff member with accounting and financial expertise and deficiencies in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls.

Management plans to address these matters by among actions, meeting more with its external accountant to ensure that issues such as described above are correct going forward. The Company will also look at hiring an external bookkeeper in order to have a single accounting system.

However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

There have been no significant changes in our internal control over financial reporting during the fiscal year ended October 31, 20172023, and 2016,2022, or subsequent to October 31, 2017,2022, that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting, except as discussed above.

PART III

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 below will serve until the next annual meeting of our shareholders or until a successor is elected and has accepted the position.

Our directors and executive officers are as follows:

JosephMr. Riccelli has been our Chief Executive Officer and Chairman of the Board since our inception in June 2002. Mr. Riccelli was the owner of Pittsburgh Foreign and Domestic, a sole proprietor car dealership located in Glenshaw, Pennsylvania. He attended Point Park College located in Pittsburgh, Pennsylvania from 1971 to 1972.

Dean P.Mr. Kolocouris has been one of our Directorsdirectors since our inception in June 2002. From December 1996 to December, Mr. Kolocouris was a Loan Officer and Assistant Vice President at Eastern Savings Bank located in Pittsburgh, Pennsylvania. Since that time, he has been in private lending. In June 1993, Mr. Kolocouris received a Bachelor’s Degreebachelor’s degree in Financefinance from Duquesne University located in Pittsburgh, Pennsylvania. Mr. Kolcouris has beenwas in banking for over fifteen years and his knowledge of finance and business experience is helpful to the Company.

Robert D. Monsour has been one of our Directors since our inception in June 2002. From November 1997 to 2005, Mr. Monsour was the Administrator of RGM Medical Management, a medical management firm headquartered in Pittsburgh, Pennsylvania. Thereafter he has acted as a consultant specializing in litigation support to various attorneys and law firms in Western 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 Master’s Degree in International Affairs at the Graduate School of Public and International Affairs in May 1983, with the exception of a required Master’s Thesis; and (c) Bachelor of Arts Degree in Political Science in May 1978. Mr. Monsour’s business experience and his knowledge of the law make him qualified to serve as a director of the Company.

Daniel P. Rains has been a director since March 2007. Mr. Rains is currently Vice President of business development at McCarl’s, Inc., a mechanical contracting firm. He has held this position for over fifteen years. From 1981 through 1987, Mr. Rains was a professional football player for the Chicago Bears. He is a graduate of the University of Cincinnati. Mr. Rains has been in professional sports and in business for over twenty years. His experience and knowledge of these fields are helpful to the Company. As the Company enters the building construction market with its House Wrap product, Mr. Rains’ experience in that industry will be especially helpful.

Section 16(a) Beneficial Ownership Reporting ComplianceDr. Garlotta has been a director since February 2022. He is currently the Technical Director at Airex Rubber Products Corporation as well as a technical advisor for the Company. Prior to his role at Airex Rubber Products Corporation, he worked at Lowe’s Home Improvement. He earned a Ph.D. in Polymer Science / Plastics Engineering from the University of Massachusetts at Lowell. He also holds a Master of Science Degree in Polymer Science from the University of Massachusetts at Lowell and a Baccalaureate Degree in Polymer Science from Pennsylvania State University.

During February 2017, we issued 30,000 sharesDr. Garlotta is an author or co-author of our Common Stockseveral peer-reviewed publications and patents related to one Director, biopolymers. He also has experience developing elastomers, water-soluble polymers, syntactic polymer foams and hands-on experience with extrusion and injection molding of plastics.

Mr. Robert Monsour. This wasAdams has been a reportable event within two days underdirector since November 2022. He has worked for the federal securities laws by filingDepartment of Defense for over thirty years. He graduated from Texas A&I University with a degree in Electrical Engineering.

Delinquent Section 16(a) Reports.

Dr. Donald Garlotta filed a Form 4 with the SEC. Mr. Monsour filed his Form 4 on March 28, 2017. In July 2017, Mr. Joseph Riccelli, our CEO, transferred 300,000 shares of his common stock. Mr. Riccelli filed his Form 4 in December 2017.late.

Audit Committee

We do not have a separate standing Audit Committee. Therefore, our entire Board of Directors acts as the Audit Committee. The Board of Directors has determined that Mr. Dean Kolocouris is its financial expert. Mr. Kolocouris is a former loan officer for a bank and has a degree in Finance.

Nominating and Compensation Committees

We do not have either a nominating committee or a compensation committee. The basis for the Board of Directors to not have a nominating committee is the fact that our principal stockholder who is also our CEO and Chairman of the Board controls approximately thirty-four percent of the voting stock. And the Company has never held an Annual Meeting of stockholders. New board members are recommended to the Board by the Chairman of the Board.

Board of Directors Meetings

During the last full fiscal year, there were no meetings of the Board of Directors.

Code of Ethics

We have not, as yet adopted a code of ethics. We have only one full time executive officer/ chief financial officer who also acts as our principal accounting officer. To date, our operations have been so minimal and our staff so small that we have not considered a formal standard relating to the conduct of our personnel.

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