Inova Technology 10Q/A 2009 Q2 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended October 31, 2008

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
	For the transition period from ______________ to _____________

	Commission file number	000-27397

INOVA TECHNOLOGY INC.

(Exact name of small business issuer in its charter)

Nevada		98-0204280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

233 Wilshire Blvd, Suite 400,

Santa Monica, CA, 90401

(Address of principal executive offices)

89146		(310) 857-6666
(Postal Code)		(Issuer's telephone number)

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. x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filler”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filet ¨ Accelerated Filer ¨ Non-accelerated Filer ¨ Smaller reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

State the number of shares of outstanding of each of the issuer’s classes of common equity, as of December 15, 2008: 2,426,643

Inova Technology, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	October 31, 2008			April 30, 2008
	Restated			Restated
ASSETS

Current assets
Cash	$	624,324		$	12,167
Accounts receivable		4,380,597			3,003,170
Inventory		345,084			101,679
Prepaid and other current assets		164,790			433,300
Total current assets		5,514,795			3,550,316

Fixed assets		1,779,952			183,926
Intangible assets		1,754,908			845,332
Goodwill		9,066,249			5,904,782
Total assets	$	18,115,904		$	10,484,356

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Accounts payable	$	3,707,991		$	1,746,889
Accrued liabilities		271,460			270,061
Current maturities of long-term debt		1,472,000			403,792
Current maturities of long-term debt (related party)		1,258,214			1,200,855
Deferred income		519,172			2,648,678
Total current liabilities		7,228,837			6,270,275
Long term debt (related party)		3,251,609			-
Long term debt - net of current maturities		2,411,982			2,812,133
Total liabilities		12,892,428			9,082,408

Stockholders' equity
Convertible preferred stock, $0.001 par value; 25,000,000		1,500			4,951
shares authorized; 1,500,000 and 4,951,000 shares
issued and outstanding, respectively
Common stock, $0.001 par value; 7,500,000 and 600,000		2,427			1,500
shares authorized; 2,426,643 and 600,000 shares
outstanding, respectively
Additional paid-in capital		7,292,608			3,463,158
Accumulated equity		(2,073,059	)		(2,067,661	)
Total stockholders' equity (deficit)		5,223,476			1,401,948
Total liabilities and stockholders' equity (deficit)	$	18,115,904		$	10,484,356

Inova Technology, Inc. and Subsidiaries

Consolidated Statements of Operations

For the three months ended October 31, 2008 and 2007 (Unaudited)

				2007
	2008			Restated


Revenues	$	6,781,040		$	90,954

Cost of revenues		(4,956,556	)		(65,255	)
Operating expenses		(1,615,338	)		(142,620	)
Operating income		209,146			(116,921	)

Other income (expense):
Interest expense		(516,360	)		(127,163	)

Net income (loss)	$	(307,214	)	$	(244,084	)

Basic and diluted income (loss) per share:

Weighted average common shares outstanding		2,426,643			1,814,660


Earnings (Loss) per share		(0.13	)		(0.13	)

Inova Technology, Inc. and Subsidiaries

Consolidated Statements of Operations

For the six months ended October 31, 2008 and 2007 (Unaudited)

					Restated
		2008			2007


Revenues		$	12,673,355		$	476,066

Cost of revenues			(8,996,785	)		(210,518	)
Operating expenses			(2,902,685	)		(295,731	)

	Operating income		773,885			(30,183	)

Other income (expense):
	Interest expense		(779,283	)		(175,998	)

Net income (loss)		$	(5,398	)	$	(206,181	)

Basic and diluted income (loss) per share:


Weighted average common shares outstanding			2,426,643			1,814,660

Earnings (Loss) per share			(0.00	)		(0.11	)

Inova Technology, Inc. and Subsidiaries

Consolidated Statements of Operations

For the six months ended October 31, 2008 and 2007 (Unaudited)

				2007
	2008			Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,398	)	$	(206,181	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization expense		185,123			9,129
Amortization expense - loan discount		376,294			-
Additional shares issued for conversion of debt		-			80,150
Amortization of deferred financing costs		77,069			-
Amortization expense - intangible		262,957			60,108
Management fee		30,000			-
Additional interest expense		126,340			-
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		(1,377,427	)		127,739
Increase (decrease) in inventory		(115,062	)		272
Cost in excess of billing		128,311			-
Prepaid expenses and other current assets		(643	)		335,899
Increase (decrease) in deferred income		115,380			-
Increase (decrease) in accounts payable		1,960,754			40,736
Increase (decrease) in accrued expense		139,055			58,305
CASH PROVIDED BY OPERATING ACTIVITIES		1,902,753			506,157

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for fixed assets		-			(2,215	)
Investment in Desert		-			(100,000	)
Purchase of Right Tag		-			(325,000	)
Cash acquired in acquisiton of Trakkers/Tesselon		66,614			-
Cash paid for acquisition of Trakkers/Tesselon		(2,717,900	)		-
CASH USED IN INVESTING ACTIVITIES		(2,651,286	)		(427,215	)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on debt - related parties		56,031			273,396
Borrowings on debt		3,412,023			-
Principal payments on debt		(2,014,832	)		-
Principal payments on debt - related parties		(92,532	)		(350,295	)
CASH PROVIDED BY FINANCING ACTIVITIES		1,360,690			(76,899	)

NET INCREASE IN CASH		612,157			2,043
CASH AT BEGINNING OF YEAR		12,167			22,847
CASH AT YEAR END	$	624,324		$	24,890

INOVA TECHNOLOGY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 –BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Inova have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in Inova’s latest Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements that would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-KSB have been omitted.

Restatements:

Inova’s acquisition of Web’s Biggest:

During 2008, Inova determined that the original accounting for the merger with Web’s Biggest in 2005 was incorrect. Both companies were operating companies and the intent of the combined entity was to continue on with both operations. Inova should have accounted for the transaction as a reverse acquisition whereby Web’s Biggest purchased Inova and fair value and purchase accounting would apply. The purchase price was $2,464,908 (70,425,950 shares issued at their market value of $0.035 per share on June 1, 2005) and the fair value of the net liabilities assumed was $508,037, resulting in goodwill and intangible assets totaling $2,972,945. Inova recorded goodwill of $2,612,304 and intangible asset of $360,641 through additional paid in capital. Inova also recorded $230,410 amortization of intangible asset through reduction of retained earnings. An impairment analysis at April 30, 2008 has been undertaken and a reduction to goodwill of $324,310 has been booked.

Unrecorded management fees:

During 2008, Inova identified that there were management fees of $15,000 per month for prior periods which were not recognized but which are now being realized as an increase in expense and in paid in capital. This totaled $270,000, which increases net loss for fiscal 2007.

Inova Technology, Inc. and Subsidiaries

Consolidated Balance Sheets Impacts

(Unaudited)

The following table sets forth the effects of the restatement adjustments on the consolidated balance sheet as of October 31, 2008.

	October 31, 2008
	As Previously						October 31, 2008			April 30, 2008
	Reported			Adjustments			Restated			Restated
ASSETS

Current assets
Cash	$	624,324		$	-		$	624,324		$	12,167
Accounts receivable		4,380,597			-			4,380,597			3,003,170
Inventory		345,084			-			345,084			101,679
Prepaid and other current assets		164,790			-			164,790			433,300
Total current assets		5,514,795			-			5,514,795			3,550,316

Fixed assets		1,779,952			-			1,779,952			183,926
Intangible assets		1,754,908			-			1,754,908			845,332
Goodwill		9,066,249			-			9,066,249			5,904,782
Total assets	$	18,115,904		$	-		$	18,115,904		$	10,484,356

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Accounts payable	$	3,707,991		$	-		$	3,707,991		$	1,746,889
Accrued liabilities		271,460			-			271,460			270,061
Current maturities of long-term debt		1,472,000			-			1,472,000			403,792
Current maturities of long-term debt (related party)		1,258,214			-			1,258,214			1,200,855
Deferred income		519,172			-			519,172			2,648,678
Total current liabilities		7,228,837			-			7,228,837			6,270,275
Long term debt (related party)		3,251,609			-			3,251,609			-
Long term debt - net of current maturities		2,411,982			-			2,411,982			2,812,133
Total liabilities		12,892,428			-			12,892,428			9,082,408

Stockholders' equity
Convertible preferred stock, $0.001 par value; 25,000,000		1,500			-			1,500			4,951
shares authorized; 1,500,000 and 4,951,000 shares
issued and outstanding, respectively
Common stock, $0.001 par value; 7,500,000 and 600,000		2,427			-			2,427			1,500
shares authorized; 2,426,643 and 600,000 shares
outstanding, respectively
Additional paid-in capital		7,202,608			90,000			7,292,608			3,463,158
Accumulated equity		(1,983,059	)		(90,000	)		(2,073,059	)		(2,067,661	)
Total stockholders' equity (deficit)		5,223,476			-			5,223,476			1,401,948
Total liabilities and stockholders' equity (deficit)	$	18,115,904		$	-		$	18,115,904		$	10,484,356

NOTE 2 – PURCHASE OF TRAKKERS, TESSELON AND INNOPHONE

Inova Technology acquired Trakkers LLC and a related entity Tesselon LLC on September 1, 2008. Inova acquired Trakkers for $6.2 million including $2 million paid in the form of a seller note and $1.5 million of preferred stock (convertible and nonvoting). In order to fund the acquisition of Trakkers, Inova raised money through debt financing from its existing shareholders (including two private equity groups) and one major existing lender.

Trakkers manufactures unique multi featured RFID scanners. In September 2007, Trakkers launched the “mi” scanner. This scanner reads RFID, 1 and 2d bar code as well as mag stripes. The Mi is also GPRS enabled which allows the scanner to transmit data to any location by using wireless mobile phone networks. This combination of features and functionality makes the Mi the only device of its kind in the world. Trakkers has filed a patent application and the Mi is currently patent pending.

Trakkers will apply its RFID technology to several verticals. Trakkers currently utilizes its technology to provide the most secure and advanced lead retrieval systems in the trade show industry worldwide. Trakkers systems are compatible with 3 different badge formats - RFID, 2d barcode and RFID. There are many synergies between Trakkers and Inova. The RFID component in the Mi scanner is provided by Inova subsidiary RightTag. More about Trakkers can be found at www.trakkers.com.

The acquisition of Trakkers will enable Inova to accelerate its business plan and provides Inova with additional proprietary RFID products, critical RFID expertise and many new customers that have already adopted the use of RFID technology. The purchase price allocation for Trakkers/Tesselon is based on a valuation of the assets and liabilities acquired. Intangibles in the amount of $1,021,713 for Trakkers and $143,391 for Tesselon were assigned to customer list, employment agreements and IP. These are amortized over a 3 year period. The estimated fair values of the assets acquired and the liabilities assumed at September 1, 2008 are as follows:

Cash	$	66,614
Accounts receivable		—
Inventory		58,000
Prepaid expense		14,000
Fixed assets		1,781,149
Goodwill/Intangibles		4,326,571
Accounts Payable and accrued liabilities		(345	)

Total	$	6,245,989

The results of these acquisitions are included in the consolidated financial statements from the date of acquisition. The following shows the unaudited pro forma results of operations as though the purchases of Trakkers and Tesselon had been completed on May 1, 2007:

	(Proforma) Six Months Ended October 31, 2008			(Proforma) Six Months Ended October 31, 2007
Revenues	$	13,489,700		$	11,473,262
Income (Loss) from continuing operations		(81,118	)		1,113,719
Basic and diluted net income per share		(0.03	)		0.74
Weighted average common shares		2,426,643			1,500,000

NOTE 3 – RELATED PARTY TRANSACTIONS

Loans payable from related parties consists of advances from existing shareholders. These notes are unsecured, bear interest at 7% to 8%, and are repayable in two to three years. Amount due to Southbase is $117,716 and due to Advisors, LLC is $93,141. During the three months ended October 31, 2008 14,414 shares of common stock were issued to Advisors, LLC as full payment of the balance of $44,137 and interest of $806 from a note payable.

Seller notes for $2,028,089 were established in connection with the Trakkers/Tesselon purchase. They have interest rates of 7-10%, are secured and terms up to 36 months.

During the second quarter of 2009, 1,500,000 shares of preferred stock were issued in conjunction with the purchase of Trakkers and Tesselon. This is Series B, non-voting preferred, which has a dissolution value of $1 per share. Inova may redeem the preferred stock any time over the three years from issuance and if redeemed Inova can choose from the following 3 redemption options: 1) $1,500,000 payment of cash 2) Issuance of 375,000 common shares 3) Transfer of 10% of the Trakkers/Tesselon companies.

NOTE 4 –NOTES PAYABLE

Note Payable - Ascendiant:

In July 2008, a note payable of $500,000 was issued for 1.5 years by Ascendiant. It is secured by all assets of Desert.

This loan has the following financial requirements:

1) Maintain availability under IBM $2.5 million line of credit of $250,000 or greater;

2) EBITDA of $1.7 million for 12 month period ending December 31, 2008 and $300,000 for each 3-month period beginning December 31, 2007;

3) No concentration above $2.5 million to any supplier through the IBM facility;

4) No concentration above 20% to any single customer;

5) No single accounts payable more than the greater of $300,000 or 20% of the accounts receivable balance under 60 days. The portion beyond 90 days past due must be less than 10% of the total accounts receivable.

As of October 31, 2008, we were in compliance with these covenants.

132,241 warrants were issued to Ascendiant with this note. The warrants expire in July 2013. They have an aggregated exercise price of $200. The fair value of these warrants was calculated using the Black-Scholes Model using these assumptions (1) 3% discount rate, (2) warrant life of 5 years, (3) expected volatility of 365%, and (4) zero expected dividends. The warrants relative fair value created a discount of $166,183.

Inova signed a put option agreement with Ascendiant whereby anytime between January 1, 2010 and July 1, 2013, Ascendiant can require Inova to repurchase from Ascendiant up to 122,446 shares of Common Stock for $250,000. The Put is not in effect until Ascendiant exercises their warrants. As of October 31, 2008, the warrants had not been exercised.

Inova analyzed the notes and warrants for derivative accounting consideration under SFAS 133 and EITF 00-19. Inova determined that derivative accounting is not applicable. Inova then analyzed the conversion option under EITF 98-5 and EITF 0-27 and determined there was a beneficial conversion feature resulting in a discount to the note of $280,942.

Inova entered into a registration agreement with Ascendiant requiring that a filing be done for the number of Registrable Securities equal to the lesser of (i) the total number of Registrable Securities and (ii) one-third of the number of issued and outstanding shares of Common Stock that are held by non-affiliates. Regristrable securities are (i) all Warrant Shares (ii) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the Warrants (iii) all Put Shares (iv) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event. Inova shall pay to Bonne an amount in cash, as partial liquidated damages and not as a penalty, equal to 2.00% of the aggregate purchase price paid by Ascendiant pursuant to the Purchase Agreement for any unregistered Registrable Securities then held by Ascendiant. The parties agree that Inova shall not be liable for liquidated damages under this Agreement with respect to any Warrants or Warrant Shares. Inova analyzed the registration right arrangement under the guidance of FSP EITF 00-19-b and determined that the contingent obligation to make future payments under the registration payment arrangement is not probable and can not be reasonably estimated at inception because currently Ascendiant has not yet exercised the outstanding warrants and the registration right arrangement would not be effective until the warrants are exercised and become Common Shares.

Notes Payable - Boone:

In September/October 2008, notes payable of $2,183,000 were issued for 1 to 2.5 years by Boone. They are secured by all assets including the shares Inova holds of each of Inova’s subsidiaries.

These loans have the following financial requirements:

1) Maintain availability under IBM $2.5 million line of credit of $250,000 or greater;

2) EBITDA of $1.7 million for 12 month period ending December 31, 2008 and $300,000 for each 3-month period beginning December 31, 2007;

3) No concentration above $2.5 million to any supplier through the IBM facility;

4) No concentration above 20% to any single customer;

The company is on track to meet these covenants.

For $1,680,000 of the loans 460,873 warrants were issued to Boone with this note. The warrants expire in 2013. They have an aggregated exercise price of $200. The fair value of these warrants was calculated using the Black-Scholes Model using these assumptions (1) 4.49% discount rate, (2) warrant life of 5 years, (3) expected volatility of 364%, and (4) zero expected dividends. The warrants relative fair value created a discount of $632,307.

Inova signed a put option agreement with Boone whereby anytime between 2010 and 2013, Boone can require Inova to repurchase from Boone up to 460,873 shares of Common Stock for $800,000. The Put is not in effect until Boone exercises their warrants. As of October 31, 2008, the warrants had not been exercised.

Inova entered into a registration agreement with Boone requiring that a filing be done for the number of Registrable Securities equal to the lesser of (i) the total number of Registrable Securities and (ii) one-third of the number of issued and outstanding shares of Common Stock that are held by non-affiliates. Regristrable securities are (i) all Warrant Shares (ii) any additional shares of Common Stock issuable in connection with any anti-dilution provisions in the Warrants (iii) all Put Shares (iv) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event. Inova shall pay to Bonne an amount in cash, as partial liquidated damages and not as a penalty, equal to 2.00% of the aggregate purchase price paid by Boone pursuant to the Purchase Agreement for any unregistered Registrable Securities then held by Boone. The parties agree that Inova shall not be liable for liquidated damages under this Agreement with respect to any Warrants or Warrant Shares. Inova analyzed the registration right arrangement under the guidance of FSP EITF 00-19-b and determined that the contingent obligation to make future payments under the registration payment arrangement is not probable and can not be reasonably estimated at inception because currently Boone has not yet exercised the outstanding warrants.

All discounts will be amortized over the life of the notes using the effective interest method.

Other new debt:

	1)	A lease facility (secured by the assets of DCI) with IBM was established for $542,056. It has an interest rate of 9.88% and is payable over 48 months.
	2)	Seller notes for $2,028,089 were established in connection with the Trakkers/Tesselon purchase. They have interest rates of 7-10%, are secured by Trakkers’s assets and have terms up to 36 months.

Other significant debt transactions during the six months ended October 31, 2008:

During the quarter ended October 31, 2008, Inova made the following cash repayments on its outstanding notes payable:

Notes payable to IBM	$	482,531
Notes payable to Boone/Ascendiant	$	945,751
Notes payable to Desert/Trakkers/Right Tag previous owners	$	586,552

Total cash paid	$	2,014,834

During the three months ended October 31, 2008, Inova recognized $206,525 of amortization expense on the loan discounts originated from its financing arrangements with Boone and Agile.

NOTE 5 –COMMON STOCK

During the first two quarters of 2009 34,312 common shares were issued to a related party as partial payment of a note payable and account payable with carrying values totaling $90,557.

During fiscal 2007 and 2008, Inova issued more common shares to its related parties than the number of shares previously authorized. These shares were authorized by the board to be issued to the related parties of the Company for the conversion of preferred stock and certain outstanding debts. In July 2008, number of authorized shares was increased to 3,000,000,000 shares. 892,279 shares previously agreed to be issued to the related parties were issued. These shares were valued at $1,156,937. At the same time the outstanding preferred stock was converted to common stock.

NOTE 6 – PREFERRED STOCK

During the second quarter of 2009, 1,500,000 shares of preferred stock were issued in conjunction with the purchase of Trakkers and Tesselon. This is Series B, non-voting preferred, which has a dissolution value of $1 per share. The agreement was amended on December 18, 2008, effective for the period ending October 31, 2008. Inova may redeem the preferred stock any time over the three years from issuance and if redeemed Inova can choose from the following 3 redemption options: 1) $1,500,000 payment of cash 2) Issuance of 375,000 common shares 3) Transfer of 10% of the Trakkers/Tesselon companies The original preferred stock agreement required the company to redeem and gave Inova the option of issuing 3,750 shares under option 2. Inova determined the requirement to redeem and the share amount under option 2 were errors. The amendment did not modify options 1 or 3.

NOTE 7 –SEGMENT INFORMATION

Inova has three reportable segments, one providing IT solutions and services, one providing hardware and cabling and one which manufactures standards compliant and durable RFID (Radio Frequency Identification) equipment. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly in deciding how to allocate resources and in assessing performance.

	Edgetech			Scanners/RFID		DCI			Total
Sales	$	102,253		$	610,474	$	6,174,477		$	6,887,204
Operating income (expense)		(346,419	)		61,457		(22,252	)		(307,214	)
Per share										(.13	)

NOTE 8 – SUBSEQUENT EVENTS

The company has received confirmation from Nasdaq OMX confirming that the reverse split at a ratio of 400:1 was effective November 12, 2008 and that the trading symbol of the company was changed to INVA.

All share and related information presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the reduced number of shares resulting from this action.

The Roy litigation

In February 2006, Mr. Charles Roy sued the Company in the Superior Court of the State of California for the County of Los Angeles. The lawsuit alleged that the Company breached a consulting agreement by not paying him the amounts contained in the agreement and sought monetary damages.

At approximately the same time as Mr. Xavier Roy resigned as CEO, the Company discovered that Xavier Roy had executed the agreement. The agreement required the Company to pay Mr. Charles Roy $4,500 per month for 24 months. The agreement also states that the Company must pay a minimum of $108,000 in the event that Mr. Charles Roy is terminated.

The Company claimed that the agreement was procured by fraud and in breach of Xavier Roy’s fiduciary duty to the Company, and that as a result, Mr. Roy did not have authority to enter into the agreement.

The case was tried in April 2007, and the jury found that Inova breached the agreement with Charles Roy.

The Company agreed to settle with the Roys by paying a total of $237,000. The agreement requires the Company to make monthly payments of $10,000 toward this amount. If the Company pays the Roys $170,000 during the first twelve months after the date of the first payment, then the amount owed to the Roys will be reduced by an additional $20,000, for a total of $217,000. At that time, the Roys will file a partial satisfaction of judgment with the court in the amount of $190,000. As long as Inova makes the monthly payments, the Roys agreed not to take any action to execute their judgment on Inova’s assets.

Item 2. Management Discussion and Analysis of Financial Condition and Result of Operations.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operation contains “forward looking statements.” Actual results may materially differ from those projected in the forward looking statements as a result of certain risks and uncertainties set forth in this report. Although our management believes that the assumptions made and expectations reflected in the forward looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be materially different from the expectations expressed in this Annual Report. The following discussion should be read in conjunction with the unaudited Consolidated Financial Statements and related Notes included in Item 1.

RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED OCTOBER 31, 2008

Net revenues increased from $90,954 in the three-month period ending October 31, 2007 to $6,781,040 for the three-month period ending October 31, 2008. This is due to the revenues from the newly-acquired Desert Communications and Trakkers.

Operating expenses increased from $142,620 for the three months ending October 31, 2007 to $1,615,338 for the same period in 2008. This was mainly due to the expenses from the newly-acquired Desert Communications and Trakkers.

Net loss from continuing operations increased from $244,084 for the three months ending October 31, 2007 to $307,214 for the same period in 2008. This is due to the interest expense from the newly-acquired Desert Communications and Trakkers.

There is also a disproportionate amount of interest expense in the current period due to the use of the effective interest method for amortizing loan discounts. We expect interest in the next 2 quarters to be significantly less than this quarter for the existing debt.

RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED OCTOBER 31, 2008

Net revenues increased from $476,066 in the three-month period ending October 31, 2007 to $12,673,355 for the three-month period ending October 31, 2008. This is due to the revenues from the newly-acquired Desert Communications and Trakkers.

Operating expenses increased from $295,731 for the three months ending October 31, 2007 to $2,902,685 for the same period in 2008. This was mainly due to the expenses from the newly-acquired Desert Communications and Trakkers.

Net income from continuing operations decreased from ($206,181) for the three months ending October 31, 2007 to $(5,398) for the same period in 2008. This is due to the profit from the newly-acquired Desert Communications and Trakkers.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations for the six month period ended October 31, 2008 was $1,902,753, as compared to cash provided by operations of $506,157 for the six months ended October 31, 2007. The change is primarily due to the acquisition of Desert and Trakkers. Cash used in investing activities for the six month period ended October 31, 2008 was $2,651,286, as compared to $427,215 for the six months ended October 31, 2007. The change was due to acquisitions. Cash provided by financing activities for the six month period ended October 31, 2008 was $1,360,690, as compared to $76,899 used for the six months ended October 31, 2007. The change was due to significant loans obtained during this year.

Our operating activities for the six months ended October 31, 2008, have generated adequate cash to meet our operating needs. As of October 31, 2008, we had cash and cash equivalents totaling $624,324, and accounts receivable of $4,380,597.

EBITDA for the 3 month period is $341,468 and $1,090,873 for 6 months. EBITDA is Earnings before interest, tax, depreciation and amortization:

	3 months ending 10/31/08			6 months ending 10/31/08

Net income	$	(307,214	)	$	(5,398	)
Interest	$	516,360		$	779,283
Tax	$	15,000		$	15,000
Amortization/Depreciation	$	117,322		$	301,988

EBITDA	$	341,468		$	1,090,873

Management believes that existing cash, cash equivalents, together with any cash generated from operations will be sufficient to meet normal operating requirements including capital expenditures for the next twelve months.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of the end of the period covered by this report and concluded that our disclosure controls and procedures were not effective to ensure that all material information required to be disclosed in this Quarterly Report on Form 10-Q has been made known to them in a timely fashion. We are in the process of improving our internal control over financial reporting in an effort to remediate these deficiencies through improved supervision and training of our accounting staff. These deficiencies have been disclosed to our Board of Directors. We believe that this effort is sufficient to fully remedy these deficiencies and we are continuing our efforts to improve and strengthen our control processes and procedures. Our Chief Executive Office, Chief Financial Officer and directors will continue to work with our auditors and other outside advisors to ensure that our controls and procedures are adequate and effective.

(b) Changes in internal controls

There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

In January 2006, Top Layer Networks, Inc., a provider of hardware to our Canadian hardware sales business (“Top Layer”), sued Inova (then named Edgetech Services Inc.) in United States District Court in Massachusetts. Top Layer alleges that Inova purchased hardware over the course of several years and has failed to pay for it. Top Layer’s complaint requests damages in the amount of approximately $154,000.

On September 24, 2008, the Company paid Top Layer $10,000 to settle all claims relating to the lawsuit and any other claims that Top Layer might have had against Inova or any of its subsidiaries. This case is therefore now concluded.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the second quarter of 2009, 1,500,000 shares of preferred stock were issued in conjunction with the purchase of Trakkers and Tesselon. This is Series B, non-voting preferred, which has a dissolution value of $1 per share. The agreement was amended on December 18, 2008. Inova may redeem the preferred stock any time over the three years from issuance and if redeemed Inova can choose from the following 3 redemption options: 1) $1,500,000 payment of cash 2) Issuance of 375,000 common shares 3) Transfer of 10% of the Trakkers/Tesselon companies The original preferred stock agreement required the company to redeem and gave Inova the option of issuing 3,750 shares under option 2. Inova determined the requirement to redeem and the share amount under option 2 were errors. The amendment did not modify options 1 or 3.

These shares were issued pursuant to the exemption from registration set forth in Section 4(2) of the Securities Act.

Also in connection with the Trakkers and Tesselon acquisition, the Company issued a warrant to BOL Opportunity Fund I, LLC entitling it to purchase 460,873 shares of Inova common stock for an aggregate price of $100. This warrant carries cashless exercise rights. This warrant was issued pursuant to the exemption from registration set forth in Section 4(6) of the Securities Act.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 5. Other Information

On December 8, 2008, subsequent to the date of this quarterly report, the Company entered into an agreement to settle the judgment rendered against the Company in the Roy litigation discussed in our annual report. As explained in our annual report, Charles Roy and LeChuck World Company sued Inova for allegedly breaching a consulting agreement entered into with LeChuck World Company. The Company found that shortly before the resignation of the Company’s former CEO, Xavier Roy, Mr. Roy signed the agreement on behalf of the Company and obligated Inova to pay LeChuck World Company, a company controlled by Charles Roy, Xavier Roy’s son, the sum of $10,000 per month. The Company claimed that the agreement was void due to Xavier Roy’s lack of authority to sign it.

In April 2007, the case was tried in Los Angeles Superior Court and a judgment of $127,000 was rendered against the Company. The court later awarded LeChuck World Company attorney’s fees of $90,000 plus interest at the rate of 10% accruing from the date of judgment.

The Company later sued Xavier Roy and Charles Roy in Los Angeles Superior Court for conspiring to breach their fiduciary duties and commit fraud against Inova. On June 15, 2008, the court dismissed Inova’s case

Item 6. Exhibits

(A) Exhibits

Exhibit Number	Description
31.1	Certification of the Chief Executive Officer required by Rule 13a - 14(a) or Rule 15d - 14(a).
31.2	Certification of the Chief Financial Officer required by Rule 13a - 14(a) or Rule 15d - 14(a).
32.1	Certification of the Chief Executive Officer required by Rule 13a - 14(b) or Rule 15d - 14(b) and 18 U.S.C. 1350.
32.2	Certification of the Chief Financial Officer required by Rule 13a - 14(b) or Rule 15d - 14(b) and 18 U.S.C. 1350.

SIGNATURES

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

EDGETECH SERVICES INC.

By: /s/ Adam Radly

Chairman and CEO

Date: June 15, 2009

By: /s/ Bob Bates

Bob Bates, CFO

Date: June 15, 2009

Inova Technology (IVTH) Inactive 10-Q/A2009 Q2 Quarterly report (amended)