UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)



|  |                                                                                   |          
|- | --------------------------------------------------------------------------------- | ---------
|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | For the quarterly period ended January 31, 2009                                  
|  |                                                                                  
| ̈ | 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 13or 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 filer  ̈ 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  March
13, 2009: 2,427,060











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Item 1. Financial Statements





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|                                           |                                                                 |                                                   |            |             |          
|------------------------------------------ | --------------------------------------------------------------- | ------------------------------------------------- | ---------- | ----------- | ---------
|Inova Technology, Inc. and Subsidiaries    |                                                                
|Balance Sheets-consolidated (unaudited)    |                                                                
|                                           |                                                                
|                                           |                                                                 |                                                   | 1/31/2009  |             | 4/30/2008
|ASSETS                                     |                                                                 |                                                   |           
|                                           |                                                                 |                                                   |            |             |          
|Current assets                             |                                                                 |                                                   |           
|                                           | Cash                                                            |                                                   | $ 316,805  |             | 12,167   
|                                           | Accounts receivables, net of reserve                            | 3,197,010                                         |            | 3,003,170  
|                                           | Inventory                                                       |                                                   | 726,421    |             | 101,679  
|                                           | Prepaid and other current assets                                | 142,798                                           |            | 433,300    
|                                           |                                                                 |                                                   |            |             |          
|                                           |                                                                 | Total current assets                              | 4,383,034  |             | 3,550,316
|                                           |                                                                 |                                                   |            |             |          
|                                           | Fixed assets, net of depreciation                               | 1,761,173                                         |            | 183,926    
|                                           | Intangible assets, net of amortization                          | 1,558,348                                         |            | 845,332    
|                                           | Goodwill                                                        |                                                   | 9,066,249  |             | 5,904,782
|                                           |                                                                 |                                                   |            |             |          
|                                           |                                                                 |                                                   |            |             |          
|Total assets                               | $ 16,768,804                                                    |                                                   | 10,484,356
|                                           |                                                                 |                                                   |            |             |          
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                 |                                                   |           
|                                           |                                                                 |                                                   |            |             |          
|Current liabilities                        |                                                                 |                                                   |           
|                                           | Accounts payable                                                | $ 2,019,477                                       |            | 1,746,889  
|                                           | Accrued liabilities                                             | 372,437                                           |            | 270,061    
|                                           | Current maturities of long-term debt, net of discount           | 3,530,531                                         |            | 2,648,678  
|                                           | Current maturities of long-term debt (related
    parties)      | 2,519,672                                         |            | 1,200,855  
|                                           | Deferred income                                                 | 503,576                                           |            | 403,792    
|                                           |                                                                 |                                                   |            |             |          
|                                           |                                                                 | Total current liabilities                         | 8,945,693  |             | 6,270,275
|                                           |                                                                 |                                                   |            |             |          
|                                           |                                                                 |                                                   |            |             |          
|                                           | Long term debt (related
    parties)-net of current liabilities | 323,987                                           |            |            
|                                           | Long term debt - net of current maturities & discount           | 2,703,119                                         |            | 2,812,133  
|                                           |                                                                 |                                                   |            |             |          
|Total liabilities                          | 11,972,799                                                      |                                                   | 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        |            |             |          
|                                           |                                                                 | issued and outstanding, respectively              |            |             |          
|                                           | Common stock, $0.001 par value; 3,000,000,000 and 600,000,000   | 2,427                                             |            | 1,500      
|                                           |                                                                 | shares authorized; 2,427,060 and 1,500,000 shares |            |             |          
|                                           |                                                                 | outstanding, respectively                         |            |             |          
|                                           | Additional paid-in capital                                      | 7,202,608                                         |            | 3,373,158  
|                                           | Accumulated deficit                                             | (2,410,530)                                       |            | (1,977,661)
|                                           |                                                                 |                                                   |            |             |          
|                                           |                                                                 | Total stockholders' equity                        | 4,796,005  |             | 1,401,948
|                                           |                                                                 |                                                   |            |             |          
|Total liabilities and stockholders' equity | $ 16,768,804                                                    |                                                   | 10,484,356
|                                           |                                                                 |                                                   |            |             |          



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Inova Technology, Inc. and Subsidiaries

Consolidated Statements of Operations

For theThree months ended January 31, 2009 and 2008 (unaudited)





|                                   |                         | 01/31/09  |             | 01/31/08 
|---------------------------------- | ----------------------- | --------- | ----------- | ---------
|                                   |                         |           |             |          
|                                   |                         |           |             |          
|Revenues                           | $ 5,338,688             |           | $ 1,018,853
|                                   |                         |           |             |          
|Cost of revenues                   | (3,249,600)             |           | (676,320)  
|Operating expenses                 | (1,940,366)             |           | (752,705)  
|                                   |                         |           |             |          
|                                   | Operating income (loss) | 148,722   |             | (410,172)
|                                   |                         |           |             |          
|Other income (expense):            |                         |           |            
|                                   |                         |           |             |          
|                                   | Interest expense        | (576,198) |             | (441,022)
|                                   |                         |           |             |          
|                                   |                         |           |             |          
|                                   |                         |           |             |          
|Net loss                           | $ (427,476)             |           | $ (851,194)
|                                   |                         |           |             |          
|                                   |                         |           |             |          
|Basic and diluted loss per share: 
|                                   |                         |           |             |          
|Weighted average common
    shares | 2,419,384               |           | 1,896,706  
|                                   |                         |           |             |          
|                                   |                         |           |             |          
|Net loss Per share                 | $ (0.18)                |           | $ (0.45)   



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Inova Technology, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Nine months ended January 31, 2009 and 2008 (unaudited)





01/31/0901/31/08Revenues$ 18,012,044$ 1,494,919Cost of revenues(12,246,387)(886,838)Operating expenses(4,843,046)(1,007,178)Operating income922,611(399,097)Other income (expense):Interest expense(1,355,480)(598,170)Net loss$
    (432,869)$ (997,267)Basic and diluted
    loss per share:Weighted average common shares2,407,1161,843,580Net
    Loss Per share$ (0.18)$
    (0.54)






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Inova Technology, Inc. and Subsidiaries

Consolidated Statements of Cash flows

Nine Months ended January 31, 2009 and 2008





CASH FLOWS FROM OPERATING ACTIVITIES1/31/20091/31/2008Net loss$ (432,869)$ (997,267)Adjustments to reconcile net loss to net cashprovided by operating activities:Depreciation expense203,902208,690Amortization expense - loan discount455,198-Amortization of deferred financing costs96,224-Amortization expense - intangible446,189-Management fee30,00045,000Additional shares issue for
    interest expense126,339268,444Changes in operating assets and liabilities:Accounts receivable(193,840)146,246Cost in excess of billing & Inventory(368,087)(27,952)Prepaid expenses and other current assets15,522317,776Deferred income99,784390,568Accounts payable271,747829,139Accrued expenses213,473-CASH PROVIDED BY OPERATING ACTIVITIES963,5821,180,644CASH FLOWS FROM INVESTING ACTIVITIESCash paid for fixed assets(2,215)Cash paid for acquisition of Desert-(3,725,000)Cash paid for acquisition of Right Tag-(325,000)Cash acquired in acquisition of Trakkers/Tesselon66,614-Cash paid for acquisition of Trakkers/Tesselon(2,717,900)-CASH USED IN INVESTING ACTIVITIES(2,651,286)(4,052,215)CASH FLOWS FROM FINANCING ACTIVITIESBorrowings on debt - related parties125,670-Borrowings on debt4,573,2973,920,510Capital contributions-15,520Principal payments on debt(2,163,665)(791,619)Principal payments on debt - related parties(542,960)-CASH PROVIDED BY FINANCING ACTIVITIES1,992,3423,144,411NET INCREASE IN CASH304,638272,840CASH AT BEGINNING OF YEAR12,16722,847CASH AT YEAR END$ 316,805$ 295,687




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SUPPLEMENTAL INFORMATION:

1/31/20091/31/2008Shares issued for conversion of loans692,324Shares issued for accounts payable-related parties57,250Discount on notes payable from related parties-BCF54,427Discount on notes payable from related parties-Warrants541,628Net liabilities assumed under the Right Tag acquisition111,572Net assets acquired under the Desert acquisition1,662,326Seller financing of Desert Acquisition2,475,000Discount on notes payable -BCF280,942Discount on notes payable -Warrants166,183Common stock issued for debt1,087,247Preferred stock converted to common stock120,573Seller financing of Trakkers2,020,089Tax paid45,00030,000Reclassification
    of related party notes2,697,884--










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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.





NOTE 2  PURCHASE OF TRAKKERS, TESSELON AND INNOFONE



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 (non-convertible and nonvoting). In order to fund the acquisition of Trakkers, Inova raised money in the form of 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. Management believes that 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.



Inova intends to apply Trakkers RFID technology to several new verticals. Trakkers currently utilizes its technology to provide a secure and advanced lead retrieval solution for the trade show industry worldwide. Trakkers lead retrieval solutions are compatible with 3 different badge formats - RFID, 1 & 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    |  
|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:





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ProformaProforma3 months3 monthsEndedEnded01/31/0901/31/08Revenue$ 5,338,689$ 3,771,657Net income (loss) from continuing operations(427,472)44,447Weighted average common shares2,427,0601,988,811Basic and diluted net income (loss) per share$ (0.18)$ 0.02ProformaProforma9 months9 monthsEndedEnded01/31/0901/31/08Revenue$ 17,618,356$ 14,070,820Net income (loss) from continuing operations(250,064)1,013,765Weighted average common shares2,427,0601,988,811Basic and diluted net income (loss) per share$ (0.10)$ 0.51




NOTE 3  RELATED PARTY TRANSACTIONS



Loans payable from related parties consists of advances from existing shareholders. These notes are secured, bear interest at 7% to 8%, and are repayable in two to three years. Amount due to Southbase is $122,716 and $81,544 to Advisors, LLC. During the nine months ended January 31, 2009,
34,311 shares of common stock were issued to Advisors, LLC as full payment of $76,832 for the balance including interest 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.  At the option of the Registrant 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 ownership of 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 cash plus availability under IBM $2.5 million line of credit of $250,000 or greater;





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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 January 31, 2009, 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 torepurchase 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 January 31, 2009, 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/November 2008, notes payable of $2,417,400 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 cash plus availability under IBM $2.5 million line of credit of $250,000 or greater;





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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.



The company met all of 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 torepurchase 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 January 31, 2009, 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 $595,173.



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 with IBM was established for $542,056. It has an interest rate of 9.88% and is payable over 48 months.   
|2) | A lease facility with Everest was established for $375,000. It has an interest rate of 24%, and is payable over 24 months.



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|   |                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3) | 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 9 months ended January 31, 2009:



The original Boone Note was $1,792,000 with the option to increase to $2,016,000. Inova borrowed additional $234,000 from Boone during the quarter ended July 31, 2008. The terms of this additional borrowing are the same as the original Boone borrowing.



During the nine months ended January 31, 2009, Inova made the following cash repayments on its outstanding notes payable:



Notes payable to Boone/Ascendiant/Agile$1,408,488Notes payable to IBM482,531Notes payable to
    Other169,666Notes payable to Desert/Trakkers/Right Tag previous owners$645,940Total cash paid$2,706,625














During the nine months ended January 31, 2009, Inova recognized $547,663 of amortization expense on the loan discounts originated from its financing arrangements with Boone, Ascendiant and Agile.



Principal portions of long term debt are due as follows:



12 months ending 1/31/11$ 1,791,44812 months ending 1/31/121,142,72712 months ending 1/31/12 or later92,9313,027,106






NOTE 5 COMMON STOCK



During the nine months ended January 31, 2009, 34,411 shares of common stock were issued to Advisors, LLC as full payment of $76,832 for the balance including interest from a note payable.

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.



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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 third 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 January 31, 2009.  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 network solutions 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.



3 month Segment info:



EdgetechScanners/RFIDDCITotalSales$94,009716,3024,528,3775,338,688Net loss(291,243)(86,441)(49,792)(427,476)Assets (gross)6,284,8676,883,7193,600,21816,768,804






9 month Segment info:EdgetechScanners/RFIDDCITotalSales$ 283,5801,343,37416,385,490$ 18,012,444Net income (loss)(888,332)(36,704)492,166(432,870)Assets (gross)6,284,8676,883,7193,600,21816,768,804






NOTE 8- LEGAL



In February 2006, 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 trialed 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.





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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.



On December 8, 2008, the Company entered into an agreement to settle the judgment rendered against the Company in the Roy litigation. 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.





NOTE 9  SUBSEQUENT EVENTS



In February 2009, Inova borrowed an additional note in the amount of $728,000 from Boone. The Company issued 180,662 warrants with this note and these warrants have a total exercise price of $100. These warrants have a put option of $487,500. The interest on this note is the higher of prime + 4% or 11.25%, with 15 principal payments of approximately $45,000 each month, starting in March 2009.



The loan has the following financial requirements:



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



2) 400% of EBITDA of $1.8 million on a quarterly basis



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 of more than 60 days past due to be 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.



These covenants will start being measured in May 2009.







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 JANUARY 31, 2009





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Net revenues increased from $1,018,853 in the three-month period ending January 31, 2008 to $5,338,688 for the three-month period ending January 31, 2009. The increase in revenue mainly came from the income generated by the newly-acquired Desert Communications and Trakkers.



Cost of sales increased from $676,320 in the three-month period ending January 31, 2008 to $3,249,600 for the three-month period ending January 31, 2009. The increase came from the revenue generated by the newly-acquired Desert Communications and Trakkers.

Operating expenses increased from $752,705 for the three months ending January 31, 2008 to $1,940,366 for the same period in 2009. This was mainly due to the expenses incurred by the newly-acquired Desert Communications and Trakkers.



Net loss from continuing operations decreased from ($851,194) for the three months ending January 31, 2008 to ($427,476) for the same period in 2009. This is due to the profit generated from the newly-acquired Desert Communications and Trakkers.



RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED JANUARY 31, 2009



Net revenues increased from $1,494,919 in the three-month period ending January 31, 2008 to $18,012,044 for the three-month period ending January 31, 2009. The increase in revenue mainly came from the income generated by the newly-acquired Desert Communications and Trakkers.



Cost of sales increased from $886,838 in the nine-month period ending January 31, 2008 to $12,246,387 for the nine-month period ending January 31, 2009. The increase came from the revenue generated by the newly-acquired Desert Communications and Trakkers.





Operating expenses increased from $1,007,178 for the three months ending January 31, 2008 to $4,843,046 for the same period in 2009. This was mainly due to the expenses incurred by the newly-acquired Desert Communications and Trakkers.



Net loss from continuing operations decreased from ($997,267) for the three months ending January 31, 2008 to $(432,870) for the same period in 2009. This is due to the profit generated from the newly-acquired Desert Communications and Trakkers.



LIQUIDITY AND CAPITAL RESOURCES



Cash provided by operations for the nine month period ended January 31, 2009 was $1,082,605, as compared to cash provided by operations of $1,180,644 for the nine months ended January 31, 2008. This change is primarily due to the income generated from Desert and Trakkers operations. Cash used in investing activities for the nine month period ended January 31, 2009 was $2,651,286, as compared to $4,052,215 for the nine months ended January 31, 2008. This change was because of the money spent by the Company for  the businese acquisitions. Cash provided by financing activities for the nine month period ended January 31, 2009 was $1,873,319, as compared to $3,144,411 used for the nine months ended January 31, 2008. This change was due to several significant loans obtained by the Company during the current year.



Our operating activities for the nine months ended January 31, 2009, have generated adequate cash to meet our operating needs. As of January 31, 2009, we had cash and cash equivalents totaling $316,805, and accounts receivable of $3,197,010.



EBITDA for the 3 month period is $540,842 and $1,749,037 for 9 months. EBITDA is Earnings before interest, tax, depreciation and amortization:



3 months ending 1/31/099 months ending 1/31/09Net income$(427,476)(432,869)




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Interest$576,1981,355,480Tax$30,00045,000Amortization/Depreciation$494,046796,034EBITDA$672,6781,763,645




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 February 2006, 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 trialed 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.



On December 8, 2008, the Company entered into an agreement to settle the judgment rendered against the Company in the Roy litigation. 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.



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



None



Item 3. Defaults Upon Senior Securities



Not Applicable.







Item 4. Other Information



None



Item 5. 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 Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
|32.2           | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002



SIGNATURES



In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |     |                         
|--------------------- | --- | ------------------------
|Dated: March 13, 2009 | By: | /s/ Adam Radly          
|                      |     | Adam Radly              
|                      |     | Chief Executive Officer 
|                      |     |                         
|Dated: March 13, 2009 | By: | /s/ Bob Bates           
|                      |     | Bob Bates               
|                      |     | Chief Financial Officer,