Global Innovation (GINV) 10-Q 2008 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2008

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______________ to _______________

Commission File Number: 000-30794

GLOBAL INNOVATION CORP.
(Exact name of registrant as specified in its charter)

Delaware	20-5268517
(State of incorporation)	(I.R.S. Employer Identification No.)
901 Hensley Lane	75098
Wylie, Texas	(Zip Code)
(Address of principal executive offices)

Issuer's telephone number: (214) 291-1427

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 [    ]

Check whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]   No [X]

At June 12, 2008 there were 10,179,337 shares of the issuer's common shares outstanding.

GENERAL INDEX

		Page
		Number
PART I -
FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS	14
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	16
ITEM 4.	CONTROLS AND PROCEDURES	16
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	16
ITEM 5.	OTHER INFORMATION	17
ITEM 6.	EXHIBITS	17
SIGNATURES		18

GLOBAL INNOVATION CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
			April 30,		July 31,
	ASSETS		2008		2007
Current assets:
	Cash	$	958,426	$	1,210,996
	Trade accounts receivable, net of allowance for doubtful   accounts and returns of $104,097 and $89,697 respectively.		4,849,797		4,182,374
	Prepaid expenses and other		148,181		616,310
	Inventory		4,308,388		3,213,104
	Deferred income tax asset		491,756		290,903
	Total current assets		10,756,548		9,513,687
Property and equipment, net			9,226,029		8,015,744
Other assets:
	Deferred income tax asset - non-current		4,644		-
	Goodwill		7,309,264		8,151,712
	Customer base, net		2,484,391		2,890,927
			9,798,299		11,042,639
	Total assets	$	29,780,876	$	28,572,070
	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable	$	4,481,611	$	3,367,423
	Accrued expenses (including interest owed to related party    of $198,800 and $113,867, respectively)		991,001		1,345,910
	Income tax payable		390,749		126,624
	Interest rate risk management liability		398,478		84,720
	Line of credit		358,300		1,480,000
	Note payable to related party		4,200,000		-
	Notes payable, current portion		1,370,382		839,929
	Total current liabilities		12,190,521		7,244,606
Noncurrent liabilities:
	Notes payable, net of current maturities		7,165,866		6,209,166
	Note payable to related party		-		4,200,000
	Deferred income tax liability		-		889,258
	Total long-term liabilities		7,165,866		11,298,424
Stockholders' equity:
	Common stock; par value $0.01; 25,000,000 shares authorized;
	10,179,337 issued and outstanding		101,792		101,792
	Additional paid-in capital		18,321,284		18,321,284
	Accumulated deficit		(7,735,592)		(8,340,637)
	Accumulated other comprehensive loss		(262,995)		(53,399)
	Total stockholders' equity		10,424,489		10,029,040
	Total liabilities and stockholders' equity	$	29,780,876	$	28,572,070

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

GLOBAL INNOVATION CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
		Three		Three		Nine		Nine
		Months Ended		Months Ended		Months Ended		Months Ended
		April 30, 2008		April 30, 2007		April 30, 2008		April 30, 2007
Net sales	$	8,323,644	$	7,619,536	$	25,059,423	$	25,132,450
Cost of salesincluding $204,326 and $264,668 for the three months ended April 30, 2008 and 2007 respectively and $556,531 and $627,488 for the nine months ended April 30, 2008 and 2007 respectively to a related party.		6,594,942		5,942,904		19,608,307		20,335,103
Gross profit		1,728,702		1,676,632		5,451,116		4,797,347
Expenses:
Selling, general and administrative expenses including $8,700 for each three months ended April 30, 2008 and 2007 and $26,100 and $29,874 for the nine months ended April 30, 2008 and 2007 respectively to a related party.		1,133,369		1,045,975		3,384,420		3,379,761
Amortization of customer base		135,512		135,512		406,537		406,537
		1,268,881		1,181,487		3,790,957		3,786,298
Income from operations		459,821		495,145		1,660,159		1,011,049
Other income (expense):
Interest expense		(145,826)		(135,975)		(469,590)		(383,685)
Interest expense - related party		(84,000)		(83,067)		(255,733)		(254,800)
Other income		4,131		6,347		19,344		24,550
		(225,695)		(212,695)		(705,979)		(613,935)
Income before provision
for income taxes		234,126		282,450		954,180		397,114
Provision for income taxes		47,533		101,625		349,135		133,064
Net income		186,594		180,825		605,045		264,050
Other comprehensive income (loss):
Deferred interest rate hedge,
net of tax (cost) benefit of     ($16,598) and $29,099 for the     three months ended April 30,     2008 and 2007 respectively and     $109,584 and $54,690, for the     nine months ended April 30,     2008 and 2007 respectively.		42,747		(46,786)		(209,596)		(97,290)
Comprehensive income	$	229,341	$	134,039	$	395,449	$	166,760
Net income per share
Basic	$	0.02	$	0.02	$	0.06	$	0.04
Diluted	$	0.02	$	0.02	$	0.06	$	0.03
Weighted average common shares
Basic		10,179,337		10,179,337		10,179,337		7,197,318
Diluted		10,179,337		10,179,337		10,179,337		10,179,337

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

GLOBAL INNOVATION CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
					Nine months ended April 30,
					2008		2007
Cash flows from operating activities:
	Net income			$	605,045	$	264,050
		Adjustments to reconcile net income to net cash provided by
		operating activities:
			Depreciation and amortization		1,184,411		996,100
			Deferred tax expense		(148,146)		(30,906)
			Changes in operating assets and liabilities:
			Trade accounts receivable		(667,423)		451,383
			Inventory		(1,095,284)		(296,732)
			Prepaid expenses and other		468,129		(254,956)
			Income tax receivable (payable)		264,125		(67,383)
			Accounts payable		1,114,188		(601,059)
			Accrued expenses		(354,909)		(13,124)
			Interest paid to related parties		-		(340,667)
		Net cash provided by operating activities			1,370,136		106,706
Cash flows from investing activities:
	Acquisition of property and equipment				(729,905)		(7,295,308)
		Net cash used in investing activities			(729,905)		(7,295,308)
Cash flows from financing activities:
	Borrowing on new term note				-		7,596,204
	Borrowing on line of credit				-		1,180,000
	Payments on notes payable				(892,801)		(2,460,607)
		Net cash provided by financing activities			(892,801)		6,315,597
Net decrease in cash					(252,570)		(873,005)
Cash, beginning of period					1,210,996		1,850,405
Cash, end of period				$	958,426	$	977,400
Supplementary disclosure of cash flow information:
	Interest paid			$	464,146	$	650,227
	Income taxes paid			$	245,000	$	235,621
Non-cash financing activities:
	Property and equipment purchased with debt			$	1,258,255	$	147,649

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

Global Innovation Corp. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
April 30, 2008
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

UNAUDITED FINANCIAL INFORMATION

The unaudited condensed consolidated financial statements have been prepared by Global Innovation Corp. and its subsidiaries (the "Company" or "GIC") pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments consisting of normal recurring entries which, in the opinion of the Company, are necessary to present fairly the results for the interim periods. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the year ending July 31, 2008.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended July 31, 2007, filed on October 29, 2007.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain reclassifications have been made in prior period financial statements to conform to current period presentation.

Inventory

Inventory consists of finished goods, work in process and raw materials and is priced at lower of cost or market (determined product by product based on management's knowledge of current market conditions and existing sales levels). Cost of raw materials is determined on a weighted average basis; cost of work in process and finished goods is determined using specific identification. A valuation allowance is established and adjusted periodically to provide for estimated obsolescence based upon the aging of inventory and market trends. The allowance for obsolescence at April 30, 2008 was $399,296. At April 30, 2008, inventory consisted of $1,579,463 in raw materials, $1,086,809 in work in process, and $2,041,412 in finished goods.

During the nine months ended April 30, 2008, the Company changed its methodology of determining the valuation allowance for certain inventory overage items. Overage items are finished goods manufactured that are in excess of specific order quantities due to manufacturing process parameters and which are available and used for the fulfillment of future sales. The change in the estimate resulted in an increase to inventory at April 30, 2008 in the amount of approximately $205,000, and a decrease to cost of sales in the same amount for the nine months ended April 30, 2008.

Revenue Recognition

The Company generates revenue from custom built printed circuit boards, made to order using engineering and designs provided by the customer. All orders are manufactured to specific industry standards. The Company recognizes revenues when persuasive evidence of a sales arrangement exists, the sales terms are fixed and determinable, title and risk of loss have transferred, and collectibility is reasonably assured, generally when products are shipped to the customer.

The Company does not give rebates to any of its customers. The Company does not have customer acceptance provisions; the Company does, however, provide customers a limited right of return for defective products. Because all orders are manufactured to specific industry standards and are electrically tested to insure compliance with such standards prior to shipment, returns have historically been minimal and the amount of returns has been immaterial.

Derivative Financial Instruments

The Company uses derivatives only to hedge against changes in interest rates related to debt, as opposed to their use for trading purposes. SFAS No.133,Accounting for Derivative Instruments and Hedging Activities, requires that derivatives be recorded on the balance sheet at fair value. The fair value of swap contracts is determined based on the difference between the derivative's fixed contract price and the underlying market price at the determination date and is confirmed by counterparts to the derivative.

Realized and unrealized gains and losses on derivatives that are not designated as hedges, as well as on the ineffective portion of hedge derivatives, are recorded as a derivative fair value gain or loss in the income statement. Unrealized gains and losses on effective cash flow hedge derivatives, as well as any deferred gain or loss realized upon early termination of effective hedge derivatives, are recorded as a component of accumulated other comprehensive income (loss). When the hedged transaction occurs, the realized gain or loss, as well as any deferred gain or loss, on the hedge derivative is transferred from accumulated other comprehensive income (loss) to earnings. Realized gains and losses on interest rate hedge derivatives are recognized as a component of interest expense and settlements of derivatives are included in cash flows from operating activities.

To designate a derivative as a cash flow hedge, at the hedge's inception, management documents its assessment that the derivative will be highly effective in offsetting expected changes in cash flows from the item hedged. This assessment is generally based on the most recent relevant historical correlation between the derivative and the item hedged. The ineffective portion of the hedge is calculated as the difference between the change in fair value of the derivative and the estimated change in cash flows from the item hedged. If, during the derivative's term, management determines the hedge is no longer highly effective, hedge accounting is prospectively discontinued and any remaining unrealized gains or losses on the effective portion of the derivative are reclassified to earnings when the underlying transaction occurs. If it is determined that the designated hedge transaction is not likely to occur, any unrealized gains or losses are recognized immediately in the income statement as a derivative fair value gain or loss.

Stock-Based Employee Compensation

As of August 1, 2006, the Company adopted SFAS 123(R), which requires the measurement and recognition of compensation expense for all equity awards made to employees and directors, including employee stock options, restricted stock and employee stock purchases related to all stock-based compensation plans based on estimated fair values.

During the three and nine months ended April 30, 2008 and 2007, no grants or stock-based compensation were awarded.

Earnings Per Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and the conversion of the Company's notes payable.

The following table sets forth the computation of basic and diluted net income per share:

		For the Three Months Ended April 30,				For the Nine Months Ended April 30,
		2008		2007		2008		2007
Numerator
Numerator for basic earnings per share - net income	$	186,594	$	180,825	$	605,045	$	264,050
Effect of dilutive securities on net income		-		-		-		-
Numerator for diluted earnings per share	$	186,594	$	180,825	$	605,045	$	264,050
Denominator
Denominator for basic earnings per share		10,179,337		10,179,337		10,179,337		7,197,318
Convertible note		-		-		-		2,981,985
Denominator for diluted earnings per share		10,179,337		10,179,337		10,179,337		10,179,303
Basic earnings per share	$	0.02	$	0.02	$	0.06	$	0.04
Diluted earnings per share	$	0.02	$	0.02	$	0.06	$	0.03

Common shares issuable upon conversion of convertible notes payable to related parties were excluded from the calculation of diluted earnings per share for the nine months ended April 30, 2007 because the effect of the conversion was antidilutive. Warrants to purchase a total of 21,267 shares of common stock were excluded from the calculation of diluted earnings per share because the exercise prices were greater than the average market prices and the effect would be antidilutive. Also see Note 9.

NOTE 3 - CONCENTRATIONS OF RISK

At April 30, 2008, two customers accounted for approximately 32% of the total accounts receivable. For the three and nine months ended April 30, 2008, these customers accounted for approximately 31% and 35% respectively, of net sales. For the three and nine months ended April 30, 2007, four customers accounted for approximately 53% and 52%, respectively, of net sales.

NOTE 4 - INCOME TAXES

The income tax provision for the nine months ended April 30, 2008 and 2007 consists of the following:

		For the three months ended April 30				For the nine months ended April 30
		2008		2007		2008		2007
Current expense	$	82,876	$	138,812	$	497,281	$	163,970
Deferred expense		(35,343)		(37,187)		(148,146)		(30,906)
	$	47,533	$	101,625	$	349,135	$	133,064

Significant temporary differences used in the computation of deferred tax assets and liabilities at April 30, 2008 and July 31, 2007 are as follows:

			April 30,		July 31,
			2008		2007
Deferred tax assets, current
	Allowance for bad debts and sales returns	$	36,435	$	33,161
	Accrued bonus		8,750		65,037
	Reserve for obsolescence		139,753		-
	Accrued vacation		103,744		109,480
	Accrued interest		67,592		51,904
	Interest rate risk management liability		135,483		31,321
		$	491,756	$	290,903
Deferred tax assets (liabilities), non-current
	Depreciation of property and equipment	$	167,355	$	179,518
	Net operating loss carry forward		2,649,727		2,823,527
	Valuation allowance		(1,967,745)		(2,823,527)
	Customer base		(844,693)		(1,068,776)
		$	4,644	$	(889,258)

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the existence of, or generation of, taxable income in the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. For the period ended April 30, 2008, management determined that there was sufficient and consistent evidence that the company will be able to realize the benefit of the NOL carry forward for the next five fiscal years. As a result of this assessment, management recorded a decrease in the valuation allowance of $842,448. The decrease to the valuation allowance was recorded as an adjustment to goodwill as the allowance was originally recorded in connection with a business combi nation.

At April 30, 2008, the Company had tax net operating loss carry forwards ("NOLs") of approximately $7.3 million that begin to expire in 2018. The utilization of these NOLs is limited due to a change in ownership of a majority of the outstanding shares of the Company in November 2004. During the nine months ended April 30, 2008, the Company utilized NOLs totaling $353,970.

NOTE 5 - LINE OF CREDIT

The Company has a $3 million line of credit agreement ("LOC") with Amegy bank, which is due on demand, bears interest at LIBOR + 1.5% (4.26% at April 30, 2008) and matures August 14, 2008. The LOC is subject to certain financial and other covenants and is collateralized by all of the Company's accounts receivable and inventory.

At April 30, 2008, $358,300 was outstanding under the LOC and the Company was in compliance with all its covenants.

NOTE 6 - NOTES PAYABLE

Notes payable consists of the following at April 30, 2008:

Note payable to financial institution payable in monthly Installments of $33,333 plus interest at Libor + 1.75% (4.51% at April 30, 2008), matures August 15, 2011. (1)		$	1,333,333
Note payable to financial institution payable in monthly Installments of $22,916 plus interest at Libor + 1.75% (4.51% at April 30, 2008), remaining balance of $3,575,000 due August 15, 2013. (1)			5,041,667
Note payable to financial institution payable in monthly Installments of $38,524 plus interest at 7.75%, matures October 31, 2012. (1)			2,118,834
Other			42,414
			8,536,248
Less current maturities of long-term debt			(1,370,382)
Total long-term debt, less current maturities		$	7,165,866
(1)	These notes are financed with our senior lender and collectively are secured by substantially all of the assets of the Company.

Interest Rate Swap

In connection with the real estate loan, on August 23, 2006, the Company entered into an interest rate swap transaction with Amegy Bank. The notational amount of the swap is $5.5 million subject to amortization and the term runs concurrent with the real estate note maturing in seven years. The fixed rate applicable to this transaction is 7.25%. The Company recorded the fair value of the arrangement as an interest rate risk management liability in the amount of $398,478 at April 30, 2008. This amount, net of a tax benefit in the amount of $135,483, has been recorded as other comprehensive income.

NOTE 7 - NOTES PAYABLE TO RELATED PARTY

On November 24, 2004, the Company issued convertible promissory notes in the principal amounts of $1 million and $3.2 million (collectively, the "Notes") to Brad Jacoby in conjunction with a business combination. The Notes bore interest at 8% and were convertible into common stock at any time at a conversion price of $3.75 per share. Interest on the $1 million note was payable semi-annually, and the principal balance was due November 30, 2007. Interest on the $3.2 million notes was payable monthly, and the principal was originally due February 28, 2005, and later extended to July 31, 2005. The Notes were secured by all assets of the Company and LSC (a wholly owned subsidiary), and by the outstanding stock of LSC and by the Company common stock owned by D. Ronald Allen ("Allen"), former chief executive officer, controlling shareholder and director of the Company. On October 28, 2005, both the Notes were refinanced and combined into a single note (the "New Not e"), bearing interest at 8% payable semi-annually, with the principal due September 30, 2008. The New Note is convertible under the same terms and secured by the same assets as the Notes.

NOTE 8 - RELATED PARTY TRANSACTIONS AND GUARANTEES

The Company leases its assembly facility and part of a facility used for equipment storage from an entity majority owned by Mr. Jacoby and his wife. For the quarters ended April 30, 2008 and 2007, the Company incurred lease expense totaling $36,000 in each period, related to these operating leases. For the nine months ended April 30, 2008 and 2007, expenses were $108,000 and $149,935 respectively. The Company previously leased its primary manufacturing facility from an entity controlled by Mr. Jacoby and subsequently purchased that facility. The term of the lease for the assembly facility is ten years. The storage facility was leased in 2006 and is month to month.

The Company contracts the machining of parts from Chogie Manufacturing, an entity owned by the spouses of the Company's CEO and COO. The Company incurred expense of $177,026 and $237,368 for the quarters ended April 30, 2008 and 2007 respectively, and $474,631 and $507,427 for the nine months ended April 30, 2008 and 2007 respectively, for these services.

The Company incurred interest expense on the $4,200,000 related party note in the amount of $84,000 and $83,067 for the quarters ended April 30, 2008 and 2007 respectively and $255,733 and $254,800 for the nine months ended April 30, 2008 and 2007, respectively.

NOTE 9 - STOCK OPTIONS AND WARRANTS

As of April 30, 2008, there were 20,000 outstanding warrants to purchase common stock held by certain employees. These warrants have an exercise price of $18.75 per share and expire November 5, 2009.

As of April 30, 2008, there were 1,267 outstanding warrants to purchase common stock held by former debt holders. These warrants have an exercise price of $37.50 per share and expire February 8, 2011.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Litigation

We are a party to the various legal proceedings noted below. While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on (1) our net income in the period in which the ruling occurs and (2) our business and financial condition.

Gehan Properties II, Ltd. v. Integrated Performance Systems, Inc. f/k/a ESOP, Inc., PC Dynamics of Texas, Inc., North Texas PC Dynamics, Inc., Performance Interconnect Corp., W.I. Technology Holding, Inc., Performance Interconnect Corp. of North Texas, Inc., and D. Ronald Allen, Individually; Cause No. 03-12216-G; Pending in the 95^th Judicial District Court, Dallas County, Texas.

On or about November 18, 2003 the plaintiff sued the Company, D. Ronald Allen, and several other entities seeking $259,651.99 plus attorneys' fees and interest pursuant to fraudulent transfer theories. The plaintiff alleges that the judgment debtor, Performance Interconnect Corp., fraudulently transferred its stock in two entities, PC Dynamics of Texas, Inc. and Varga Investments, Inc., to the Company in December 1999. Among other things, the Company asserts that the stock transferred to the Company was worthless at the time of the transfers and therefore the transfers do not constitute fraudulent transfers. The Company also asserts that the plaintiff's claims are time-barred by the applicable statute of repose. On October 20, 2006, Performance Interconnect Corp. filed a Voluntary Petition pursuant to Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, Case No. 06-34482-7. The bankruptcy cour t recently remanded the case back to the state district court. No trial date has been set.

IntegratedPerformance Systems, Inc. and Best Circuit Boards, Inc. v. D. Ronald Allen, China Voice Holding Corp., China Voice Corp., Integrated Performance Business Services Corp., Associates Funding Group, Inc., B C & Q Corp., CMLP Group, Ltd., Landmark Lakes Ltd., Southern Cross Realty Corporation, Touchstone Enterprises, Inc., Winterstone Management, Inc., Syspower Corporation, and Custer Company, Inc.; Cause No. 05-12164-F; Pending in the 116^th Judicial District Court, Dallas County, Texas.

On December 5, 2005 the Company sued D. Ronald Allen and several entities affiliated with Allen. The Company asserts claims against Allen for, among other things, fraud, breach of contract arising out of the agreement for the Merger. The Company also seeks indemnity for liquidated and other as-yet unliquidated claims for potential indemnifiable costs. The Company asserts claims for constructive trusts against the entity defendants regarding the Company's Common Stock held by those entities as of the date of the closing of the Merger Agreement. The case has been abated pending resolution of the Gehan Properties lawsuit described above.

Anna Stock, Permanent Dependent Administrator for the Estate of Dennis R. Ranzou, Deceased v. Integrated Performance Systems, Inc, Sundial Development Corp., and Global Innovation Corp.;Cause No. 340,914; Pending in the Probate Court No. 1 of Harris County, Texas

On May 23, 2007 the plaintiff sued the Company and another entity asserting claims for breach of contract for failure to pay a promissory note dated April 2, 2002 in the principal amount of $210,000.00 plus interest. The current principals of the Company had no knowledge of any such note and the same was not disclosed prior to completing the Merger. This case is in the very early stages and discovery is ongoing. No trial date has been set.

ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This report may contain "Forward Looking Statements" which are our expectations, plans and projections, including statements concerning expected income and expenses and the adequacy of our sources of cash to finance current and future operations. These expectations, plans and projections may or may not materialize and are subject to various risks and uncertainties. Factors which could cause actual results to materially differ from our expectations include the following: general economic conditions and growth in the high tech industry; competitive factors and pricing pressures; changes in product mix; the timely development and acceptance of new products; the effects of the contingencies described herein; the availability of capital; loss of key suppliers, significant customers or key management personnel; payment defaults by our customers; changes in our business strategy or development plans; and the risks described from time to time in our other filings with the Securities and Exchange Commission ("SEC"). When used in this report, the words "may," "will," "believe," "expect," "project," "anticipate," "estimate," "continue," "intend" and similar expressions are intended to identify forward-looking statements. These forward-looking statements speak only as of the date of this report, and we have based our forward-looking statements on our current assumptions and expectations about future events. We have expressed our assumptions and expectations in good faith, and we believe there is a reasonable basis for them. However, we cannot assure you that our assumptions and expectations will prove to be accurate. We expressly disclaim any obligation or undertaking to release publicly any updates or change in our expectations or any change in events, conditions or circumstances on which any such statement may be based, except as may be otherwise required by the securities laws.

Overview

Global Innovation Corp. (the "Company" or "GIC") is a Delaware corporation, doing business through its subsidiary Best Circuit Boards, Inc. On November 9, 2006 we reincorporated in Delaware by merging into GIC with GIC continuing as the surviving corporation.

The Company was a New York corporation originally incorporated on November 29, 1990 under the name "ESPO's, Inc." On April 4, 2001 we changed our name to Integrated Performance Systems, Inc. ("IPS").

On November 24, 2004 a wholly owned subsidiary of the Company merged with Best Circuit Boards, Inc., d/b/a Lone Star Circuits ("Lone Star Circuits" or "LSC"), and LSC became a wholly owned subsidiary of the Company. Brad Jacoby ("Jacoby"), the beneficial owner of LSC, acquired a controlling interest in the Company. The transaction was accounted for as a reverse merger (the transaction being referred to in this quarterly report as the "Merger"). This means the Merger has been treated as if LSC acquired the Company and, consequently, the historical financial statements of LSC became the historical financial statements of the Company for all periods presented.

The following discussion provides information to assist in the understanding of our financial condition and results of operations for the three and six months ended January 31, 2008 and 2007. It should be read in conjunction with the financial information for the year ended July 31, 2007, appearing in the Company's annual Form 10-K filed on October 29, 2007.

Results of Operations

Revenues.Net sales increased to $8,323,644 for the three months ended April 30, 2008 from $7,619,536 for the same period in 2007, a net increase of $704,108 or 9.2%. Net sales decreased to $25,059,423 for the nine months ended April 30, 2008 from $25,132,450 for the same period in 2007, a net decrease of $73,027 or 0%. The increase for the three months ended April 30, 2008 is due primarily to the addition of new customers that the company has been pursuing over the past twelve months. The addition of the new customers is directly related to the capability and process improvements we have implemented over the past several quarters that include new equipment and skilled professional employees.

Gross Profit. Gross profit for the three months ended April 30, 2008 was $1,728,702 compared to $1,676,632 for the same period in 2007, an increase of $52,070 or 3.1%. Gross profit for the nine months ended April 30, 2008 was $5,451,116, versus a gross profit of $4,797,347 for the same period in 2007. Gross margin improved from 19.1% for the nine months ended April 30, 2007 to 21.8% for the same period in the current year as a result of higher technology products being shipped. Gross margin for the three months ended April 30, 2008 decreased slightly to 20.8% from 22.0% for the same period in 2007 as a result of some price pressure in Asia as well as an increase in materials used in our Wylie manufacturing facility.

Selling, general and administrative expenses.Selling, general and administrative ("SG&A") expenses consist primarily of direct charges for sales, promotion and marketing, as well as the cost of executive, administrative and accounting personnel, and related expenses and professional fees. SG&A expense increased to $1,133,369 for the three months ended April 30, 2008 from $1,045,974 for the same period in 2007, an increase of $87,394 or 8.4%. SG&A expenses increased to $3,384,420 for the nine months ended April 30, 2008 from $3,379,761 for the same period in 2007, a net increase of $4,659 or 0%. The increase is primarily attributable to an increase in selling expenses, including marketing, customer service and commissions.

Amortization of Customer Base.The customer base was recorded as a result of the Merger with Best Circuit Boards, Inc. on November 24, 2004 and amortization was $135,512 during the three months ended April 30, 2008 and 2007, respectively, and $406,537 during the nine months ended April 30, 2008 and 2007, respectively.

Other Expense, Net. Other expense net, includes interest expense on notes payable and notes payable to related parties. Other expense net, increased from $212,695 to $225,695 for the three months ended April 30, 2007 and 2008, respectively. This increase is primarily due to an increase of in interest expense on additional borrowing. Other expense increased from $613,935 to $705,979 for the nine months ended April 30, 2007 and 2008, respectively. The increase in net expense during the nine months ended April 30, 2008 is primarily due to interest expense on the additional borrowing for equipment purchases.

Income Tax Provision.The income tax provision decreased to $47,533 for the three months ended April 30, 2008, from $101,625 for the same period in the prior year. The decrease in the provision is due primarily to the change in value of the interest rate swap as rates improved slightly. The income tax provision increased to $349,135 for the nine months ended April 30, 2008 from $133,064 as a result of an increase in pre-tax profits.

Liquidity and Capital Resources

We have generally financed our business from cash generated by operations and borrowings under our senior secured credit facility. Our principal uses of cash have been to fund working capital, meet debt service requirements, and fund capital expenditures. We expect that these uses will continue to be the principal demands on our cash in the future.

Net working capital for the period ended April 30, 2008 decreased to ($1.43 million) from $2.27 million as of July 31, 2007. The decrease in working capital is primarily attributable to the $4.2 million in related party debt due September 30, 2008.

For the period ended April 30, 2008, we have current liabilities in excess of current assets. The related party debt of $4,200,000 became current during the period ended October 31, 2007. It is management's intent to negotiate an extension of the maturity date with the related party prior to September 2008. Based upon initial discussions with the related party, management believes that they will be able to successfully negotiate an extension to the maturity date of the $4.2 million related party note and return to a positive working capital balance. Based upon the renegotiation of the related party debt, current available borrowing capacity and our current level of operations, we believe that cash provided by operations along with funds available under our line of credit (see "Indebtedness and guarantees" below) will be sufficient to fund our working capital needs, finance capital expenditures and service our debt for the next twelve months and beyond.

Capital expenditures planned for the next twelve months consist of equipment to maintain the current operating capacity and technology level as well as the replacement of equipment that has reached the end of its useful life.

Cash flows from operations.Net cash of $1,370,136 provided by operations during the nine months ended April 30, 2008 consisted of $1,784,034 provided by net income as adjusted for non-cash items, offset by $413,898 used by working capital. This compares to net cash provided by operations of $106,706 during the same period in the prior year, which consisted of $1,260,150 provided by net income as adjusted for non-cash items, offset by $1,153,444 used by working capital.

Cash used for investing activities.Net cash of $729,905 used in investing activities during the nine months ended April 30, 2008 consisted of purchases of equipment. Net cash of $7,295,308 used for investing activities during the same period in the prior year consisted of purchases of a building and equipment.

Cash flows from financing activities.Net cash used by financing activities during the nine months ended April 30, 2008 was $892,801 and consisted of payments on notes payable. Net cash provided by financing activities during the same period in the prior year was $6,315,597 and included borrowing $1,180,000 on our line of credit and $7,596,204 on term notes offset by payments of $2,460,607 on long-term debt. Non-cash financing activities included property and equipment purchased with debt of $1,258,255 and $147,649 for the three and nine months ended April 30, 2008, respectively.

Indebtedness and guarantees.We have a $3 million line of credit (the "LOC") described in Note 5 of our financial statements set forth in Part I, Item 1 above.

We issued $4.2 million in convertible promissory notes to Brad Jacoby in conjunction with the Merger in November 2004. These notes were refinanced on October 28, 2005, and now bear 8% interest payable semiannually, with the principal due September 30, 2008.

We expect that cash generated from operations will be sufficient to fund payments on our indebtedness as it becomes due, or that we will be able to refinance the debt under similar terms.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 4.      CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined inRule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Management has concluded that our disclosure controls and procedures are effective in ensuring that material information is timely communicated to appropriate management personnel, including the Chief Executive Officer and Chief Financial Officer, to enable such personnel to evaluate information and determine the information required to be included in our periodic SEC reports.

PART II - OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

Gehan Properties II, Ltd. v. Integrated Performance Systems, Inc. f/k/a ESOP, Inc., PC Dynamics of Texas, Inc., North Texas PC Dynamics, Inc., Performance Interconnect Corp., W.I. Technology Holding, Inc., Performance Interconnect Corp. of North Texas, Inc., and D. Ronald Allen, Individually; Cause No. 03-12216-G; Pending in the 95^th Judicial District Court, Dallas County, Texas.

On or about November 18, 2003 the plaintiff sued the Company, D. Ronald Allen, and several other entities seeking $259,651.99 plus attorneys' fees and interest pursuant to fraudulent transfer theories. The plaintiff alleges that the judgment debtor, Performance Interconnect Corp., fraudulently transferred its stock in two entities, PC Dynamics of Texas, Inc. and Varga Investments, Inc., to the Company in December 1999. Among other things, the Company asserts that the stock transferred to the Company was worthless at the time of the transfers and therefore the transfers do not constitute fraudulent transfers. The Company also asserts that the plaintiff's claims are time-barred by the applicable statute of repose. On October 20, 2006, Performance Interconnect Corp. filed a Voluntary Petition pursuant to Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, Case No. 06-34482-7. The bankruptcy cour t recently remanded the case back to the state district court. No trial date has been set.

IntegratedPerformance Systems, Inc. and Best Circuit Boards, Inc. v. D. Ronald Allen, China Voice Holding Corp., China Voice Corp., Integrated Performance Business Services Corp., Associates Funding Group, Inc., B C & Q Corp., CMLP Group, Ltd., Landmark Lakes Ltd., Southern Cross Realty Corporation, Touchstone Enterprises, Inc., Winterstone Management, Inc., Syspower Corporation, and Custer Company, Inc.; Cause No. 05-12164-F; Pending in the 116^th Judicial District Court, Dallas County, Texas.

On December 5, 2005 the Company sued D. Ronald Allen and several entities affiliated with Allen. The Company asserts claims against Allen for, among other things, fraud, breach of contract arising out of the agreement for the Merger. The Company also seeks indemnity for liquidated and other as-yet unliquidated claims for potential indemnifiable costs. The Company asserts claims for constructive trusts against the entity defendants regarding the Company's Common Stock held by those entities as of the date of the closing of the Merger Agreement. The case has been abated pending resolution of the Gehan Properties lawsuit described above.

Anna Stock, Permanent Dependent Administrator for the Estate of Dennis R. Ranzou, Deceased v. Integrated Performance Systems, Inc, Sundial Development Corp., and Global Innovation Corp.;Cause No. 340,914; Pending in the Probate Court No. 1 of Harris County, Texas

On May 23, 2007 the plaintiff sued the Company and another entity asserting claims for breach of contract for failure to pay a promissory note dated April 2, 2002 in the principal amount of $210,000.00 plus interest. The current principals of the Company had no knowledge of any such note and the same was not disclosed prior to completing the Merger. This case is in the very early stages and discovery is ongoing. No trial date has been set.

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

None

ITEM 5.      OTHER INFORMATION

Our Common Stock is traded over-the-counter on the OTC Bulletin Board® (OTCBB) under the symbol "GINV.OB". The annual report on Form 10-K was filed on October 29, 2007.

ITEM 6.      EXHIBITS

Exhibit Number	Description of Exhibit
2.1*	Agreement and Plan of Merger by and among Integrated Performance Systems, Inc. & Best Circuit Boards, Inc. (d/b/a Lone Star Circuits) dated October 22, 2004 (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed October 28, 2004).
2.2*	First Addendum to the Agreement and Plan of Merger between Integrated Performance Systems, Inc. and Best Circuit Boards, Inc. dated November 24, 2004 (filed as Exhibit 2.2 to the Company's Current Report on Form 8-K filed December 1, 2004).
2.3*	Closing Document between the Company and Best Circuit Boards, Inc. dated November 24, 2004 (filed as Exhibit 2.3 to the Company's Quarterly Report on Form 10-QSB filed April 27, 2005).
3.1*	Articles of Incorporation and Company Bylaws of Global Innovation Corp. dated November 9, 2006 (filed as Exhibit 3 to the Company's report on Form 8-K filed November 14, 2006).
10.1*	Amended and Restated Secured Promissory Note in the principal amount of $4,200,000 dated October 28, 2005 between the Company and Best Circuit Boards, Inc. and Brad Jacoby and payable to Brad Jacoby (filed as Exhibit 10.3 to the Company's report on Form 8-K filed November 18, 2005)
10.2*	Stock Escrow and Security Agreement between Ron Allen, the Company, Brad Jacoby and Best Circuit Boards, Inc. dated September 16, 2004 (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB filed October 20, 2004).
10.3*	Addendum to Stock Escrow and Security Agreement between Ron Allen, the Company, Brad Jacoby and Best Circuit Boards, Inc. dated November 24, 2004 (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB filed April 27, 2005).
10.4*	Employment Agreement dated November 30, 2004 by and between the Company and Brad Jacoby (filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-QSB filed April 27, 2005).
10.5*	Employment Agreement dated November 30, 2004 by and between the Company and Brad Peters (filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-QSB filed April 27, 2005).
10.6*	Employment Agreement dated November 30, 2004 by and between the Company and Brent Nolan (filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-QSB filed April 27, 2005).
10.7*	Employment Agreement dated November 30, 2004 by and between the Company and James B. Nolan (filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-QSB filed April 27, 2005).
10.8*	Lease of Personal Property dated March 21, 2005 by and between Best Circuit Boards, Inc. dba Lone Star Circuits and M&I First National Leasing Corp. (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB filed June 13, 2005).
10.9*	Amended and Restated Jacoby Loan Agreement (filed as Exhibit 10.1 to the Company's Form 8-K, filed November 17, 2006).
10.10*	Amended and Restated Jacoby Promissory Note (filed as Exhibit 10.2 to the Company's Form 8-K, filed November 17, 2006).
10.11*	Amended and Restated Jacoby Security Agreement - Best Circuit Boards, Inc (filed as Exhibit 10.3 to the Company's Form 8-K, filed November 17, 2006).
10.12*	Amended and Restated Jacoby Security Agreement - Global Innovation Corp. (filed as Exhibit 10.4 to the Company's Form 8-K, filed November 17, 2006).
10.13*	Interest rate swap agreement by and between Best Circuit Boards, Inc. and Amegy Bank (filed as Exhibit 10.7 to the Company's Form 8-K, filed August 24, 2006).
10.14*	Real Estate Promissory Note in the principal amount of $5,500,000 by and between Best Circuit Boards, Inc., Global Innovation Corp. and Amegy Bank N.A. dated August 18, 2006 (filed as Exhibit 10.6 to the Company's Form 8-K filed August 24, 2006)
10.15	Equipment Promissory Note in the principal amount of $2,000,000 by and between Best Circuit Boards, Inc., Global Innovation Corp. and Amegy Bank N.A. dated August 18, 2006 (filed as Exhibit 10.4 to the Company's Form 8-K filed August 24, 2006).
10.16*	Third Amendment to Loan Agreement by and among Best Circuit Boards, Inc., Global Innovation Corp., and Amegy Bank N.A. dated May 31, 2007.
10.17*	Additional Equipment Promissory Note by and between Best Circuit Boards, Inc., Global Innovation Corp., and Amegy Bank N.A. in the amount of $2,650,000, dated May 31, 2007.
10.18*	Amended and Restated Subordination Agreement by and between Best Circuit Boards, Inc., Global Innovation Corp, Brad Jacoby and Amegy Bank N.A. dated May 31, 2007.
10.19*	Revolving Credit Promissory Note by and between Best Circuit Boards, Inc., Global Innovation Corp. and Amegy Bank N.A. in the amount of $3,000,000 dated August 14, 2007.
21*	Subsidiaries of the Company. (filed as Exhibit 21 to the Company's Form 10-KSB as filed January 5, 2006).
31.1**	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*       Incorporated herein by reference to the respective filings identified above.

**     Filed herewith.

SIGNATURE

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GLOBAL INNOVATION CORP.
	(Registrant)
Date: June 16, 2008	By:    /s/ BRAD J. PETERS
	Brad J. Peters
	Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)