UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xxQUARTERLY ~~QUARTERLY~~ REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January ~~October~~ 31, ~~2012~~2013

ooTRANSITION ~~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	(I.R.S. Employer Identification No.)
organization)

2300 W. Sahara Ave. Suite 800 Las Vegas, NV 89102

(Address of principal executive offices)

89146	(800) 757-9808
(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 o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes o 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 o

Accelerated Filer o

Non-accelerated Filer o

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 ~~November~~March 1219, ~~2012~~2013: 92105,~~636~~817,~~083~~779

Inova Technology Inc.

Form 10-Q

Table of Contents

	PART I	Page
Item 1.	Financial Statements	3

Item 2.	Management Discussion and Analysis of Financial Condition and Result of Operations	12

Item 4.	Controls and Procedures	13

	PART II

Item 1.	Legal Proceedings	14

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 3.	Defaults Upon Senior Securities	14

Item 4.	Other Information	14

Item 5.	Exhibits	14

Signatures		15

Item 1. Financial Statements

INOVA TECHNOLOGY, INC.

INOVA TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	January 31, 2013			April 30, 2012

ASSETS

Current assets
Cash		249,452		$	752,011
Accounts receivable, net of allowance of $81,283 and $81,283		38,225			107,471
Contract receivables, net of allowance of $21,746 and $21,746		597,069			1,126,221
Credit facility receivable		700,184			1,477,930
Inventory		65,026			98,921
Costs in excess of billing and estimated earnings		30,372			201,602
Prepaid and other current assets		11,499			52,484

Total current assets		1,691,827			3,816,640

Fixed assets, net		88,460			113,308
Revenue earning equipment, net		258,018			586,896
Goodwill, net		4,157,596			4,157,596
Intangibles		73,892			-

Total assets	$	6,269,793		$	8,674,440

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Accounts payable		497,460		$	1,739,006
Accrued liabilities		7,140,646			4,479,224
Deferred income		376,423			395,781
Derivative liabilities		785,021			1,461,265
Notes payable - related parties		1,689,688			1,689,688
Notes payable		10,107,755			9,904,192
Total current liabilities		20,596,993			19,669,156

Notes payable - related parties, net of current maturities		142,532			142,532

Total liabilities		20,739,525			19,811,688

Stockholders' deficit
Convertible preferred stock, $0.001 par value; 25,000,000 shares
authorized; 1,500,000 shares issued and outstanding (the cost of the
shares are included in non-controlling interest)					-
Common stock, $0.001 par value; 500,000,000 shares
authorized; 105,657,887 and 76,364,065 shares issued and outstanding		105,658			76,364
Additional paid-in capital		5,484,229			5,249,518
Accumulated deficit		(21,367,125	)		(17,770,636	)
Total Inova Technology, Inc stockholders' deficit		(15,777,238	)		(12,444,754	)
Non-controlling interest		1,307,506			1,307,506
Total stockholders' deficit		(14,469,732	)		(11,137,248	)

Total liabilities and stockholders' deficit	$	6,269,793		$	8,674,440

See summary of accounting policies and notes to unaudited consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	October 31, 2012			April 30, 2012
ASSETS
Current assets
Cash		1,156,430		$	752,011
Accounts receivable, net of allowance of $81,283 and $81,283		51,959			107,471
Contract receivables, net of allowance of $21,746 and $21,746		629,191			1,126,221
Credit facility receivable		564,126			1,477,930
Inventory		129,129			98,921
Costs in excess of billing and estimated earnings		200,202			201,602
Prepaid and other current assets		43,904			52,484
Total current assets		2,774,941			3,816,640
Fixed assets, net		96,003			113,308
Revenue earning equipment, net		367,433			586,896
Goodwill, net		4,157,596			4,157,596
Intangibles		73,892			-
Total assets	$	7,469,865		$	8,674,440
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable		264,835		$	1,739,006
Accrued liabilities		4,891,324			4,479,224
Deferred income		382,179			395,781
Derivative liabilities		1,118,446			1,461,265
Notes payable - related parties		1,689,688			1,689,688
Notes payable		10,121,277			9,904,192
Total current liabilities		18,467,749			19,669,156
Notes payable - related parties, net of current maturities		114,219			142,532
Total liabilities		18,581,968			19,811,688
Stockholders' deficit
Convertible preferred stock, $0.001 par value; 25,000,000 shares authorized; 1,500,000 shares issued and outstanding (the cost of the shares are included in non-controlling interest)					-
Common stock, $0.001 par value; 500,000,000 shares authorized; 92,626,703 and 76,364,065 shares issued and outstanding		92,626			76,364
Additional paid-in capital		5,347,212			5,249,518
Accumulated deficit		(17,859,447	)		(17,770,636	)
Total Inova Technology, Inc stockholders' deficit		(12,419,609	)		(12,444,754	)
Non-controlling interest		1,307,506			1,307,506
Total stockholders' deficit		(11,112,103	)		(11,137,248	)
Total liabilities and stockholders' deficit	$	7,469,865		$	8,674,440

See summary of accounting policies and notes to unaudited consolidated financial statements.

INOVA TECHNOLOGY, INC.

INOVA TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended January 31, 2013 and 2012
(Unaudited)

	2013			2012

Revenues	$	2,552,002		$	3,738,630

Cost of revenues		(1,834,872	)		(2,631,874	)
Selling, general and administrative		(1,632,640	)		(1,343,704	)
Depreciation expense		(7,540	)		(19,222	)

Operating loss		(923,050	)		(256,170	)

Other income (expense):
Gain on derivative liabilities		222,476			159,990
Interest expense		(2,807,104	)		(561,253	)

net loss	$	(3,507,678	)	$	(657,433	)

Basic and diluted loss per share	$	(0.04	)	$	(0.01	)

Weighted average common shares outstanding		95,143,458			71,444,179

See summary of accounting policies and notes to unaudited consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended October 30, 2012 and 2011

(Unaudited)

	2012			2011
Revenues	$	5,613,455		$	5,658,150
Cost of revenues		(4,022,696	)		(4,301,072	)
Selling, general and administrative		(1,368,126	)		(1,083,783	)
Depreciation expense		(8,378	)		(26,211	)
Operating loss		214,255			247,084
Other income (expense):
Gain on derivative liabilities		94,813			824,336
Other income		-			6,210
Interest expense		(280,281	)		(814,401	)
Net income	$	28,787		$	263,229
Basic and diluted loss per share	$	0.00		$	0.00
Weighted average common shares outstanding-basic		90,553,955			62,942,954
Weighted average common shares outstanding-diluted		98,138,677			314,902,950

See summary of accounting policies and notes to unaudited consolidated financial statements.

INOVA TECHNOLOGY, INC.

INOVA TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended January 31, 2013 and 2012 (Unaudited)

	2013			2012

Revenues	$	14,642,366		$	14,444,892

Cost of revenues		(10,681,630	)		(10,485,211	)
Selling, general and administrative		(4,555,966	)		(4,003,397	)
Depreciation expense		(25,472	)		(64,288	)

Operating loss		(620,702	)		(108,004	)

Other income (expense):
Gain (Loss) on derivative liabilities		540,231			1,675,209
Other income		-			10,997
Gain (Loss) on debt extinguishment		-			87,582
Interest expense		(3,516,018	)		(2,152,582	)

Net loss	$	(3,596,489	)	$	(486,798	)

Basic and diluted income (loss) per share	$	(0.04	)	$	(0.01	)

Weighted average common shares outstanding-basic		88,004,017			65,325,212
Weighted average common shares outstanding-diluted		88,004,017			65,325,212

See summary of accounting policies and notes to unaudited consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the six months ended October 30, 2012 and 2011 (Unaudited)

	2012			2011
Revenues	$	12,090,364		$	10,706,262
Cost of revenues		(9,065,594	)		(7,853,337	)
Selling, general and administrative		(2,704,490	)		(2,659,693	)
Depreciation expense		(17,932	)		(45,066	)
Operating loss		302,348			148,166
Other income (expense):
Gain (Loss) on derivative liabilities		317,755			1,515,219
Other income		-			10,997
Gain (Loss) on debt extinguishment		-			87,582
Interest expense		(708,914	)		(1,591,329	)
Net income (loss)	$	(88,811	)	$	170,635
Basic and diluted income (loss) per share	$	(0.00	)	$	0.00
Weighted average common shares outstanding-basic		84,030,624			62,288,279
Weighted average common shares outstanding-diluted		84,030,624			87,355,292

See summary of accounting policies and notes to unaudited consolidated financial statements.

INOVA TECHNOLOGY, INC.

INOVA TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended January 31, 2013 and 2012 (Unaudited)


	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,596,489	)	$	(486,798	)
Adjustments to reconcile net loss to net cash used provided by
operating activities:
Depreciation expense, $0 and $344,995 included in cost of revenues		353,726			392,542
Amortization expense - loan discounts and deferred financing costs		-			282,000
Paid in kind interest		18,932			33,197
Gain on debt extinguishment		-			(87,582	)
Stock issued for services		17,000			72,000
Legal expenses paid directly by third party debtholder		222,751			-
Derivative gain		(540,231	)		(1,675,209	)
Changes in operating assets and liabilities:
Accounts receivable		636,623			294,152
Credit facility receivable		777,746			3,277
Inventory		(4,330	)		9,830
Costs in excess of billing and estimated earnings		171,230			209,384
Prepaid expenses and other current assets		40,985			7,361
Other assets		-			16,634
Accounts payable and accrued expenses		1,525,191			1,092,099
Deferred revenues		(19,358	)		(24,777	)
Net cash provided by operating activities of operations		(396,224	)		138,110

CASH FLOW INVESTING ACTIVITIES
					-
Net cash used in investing activities		-			-

CASH FLOW FINANCING ACTIVITIES
Proceeds from notes payable		65,814			82,500
Payment of legal fees capitalized		(118,877	)		10,000
Repayments made on notes payable		(53,272	)		(111,463	)
Net cash used in financing activities		(106,335	)		(18,963	)

NET CHANGE IN CASH		(502,559	)		119,147
CASH AT BEGINNING OF YEAR		752,011			396,140
CASH AT END OF YEAR	$	249,452		$	515,287

SUPPLEMENTAL INFORMATION:
Interest paid	$	536,966		$	165,485
Income taxes paid	$	21,904		$	30,000

NON-CASH INVESTINGAND FINANCING ACTIVITIES:
Common stock issued for conversion of notes payable		37,100			45,251
Purchase of patent with stock		73,892			-
Common stock issued for settlement of accounts payable					125,000
Settlement of derivative liabilities due to conversion of related notes payable		136,013			62,842
Discount on notes payable from derivative liabilities		-			282,000

See summary of accounting policies and notes to unaudited consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended October 30, 2012 and 2011 (Unaudited)

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(88,811	)	$	170,635
Adjustments to reconcile net loss to net cash used provided by operating activities:
Depreciation expense, $218,836 and $344,995 included in cost of revenues		236,768			263,902
Amortization expense - loan discounts and deferred financing costs		-			282,000
Paid in kind interest		18,932			33,197
Gain on debt extinguishment		-			(87,582	)
Stock issued for services		-			48,000
Legal expenses paid directly by third party debtholder		222,751			-
Derivative gain		(317,755	)		(1,515,219	)
Changes in operating assets and liabilities:
Accounts receivable		552,542			524,807
Credit facility receivable		913,804			(300,708	)
Inventory		(30,208	)		(6,468	)
Costs in excess of billing and estimated earnings		1,400			9,627
Prepaid expenses and other current assets		8,580			21,948
Other assets		-			6,121
Accounts payable and accrued expenses		(1,046,710	)		686,184
Deferred revenues		(13,602	)		98,258
Net cash provided by operating activities of operations		457,691			234,702
CASH FLOW INVESTING ACTIVITIES
		-			-
Net cash used in investing activities		-			-
CASH FLOW FINANCING ACTIVITIES
Proceeds from notes payable		-			82,500
Common stock issued for cash		-			10,000
Repayments made on notes payable		(53,272	)		(67,661	)
Net cash used in financing activities		(53,272	)		24,839
NET CHANGE IN CASH		404,419			259,541
CASH AT BEGINNING OF YEAR		752,011			396,140
CASH AT END OF YEAR	$	1,156,430		$	655,681
SUPPLEMENTAL INFORMATION:
Interest paid	$	116,441		$	129,197
Income taxes paid	$	21,904		$	30,000
NON-CASH INVESTINGAND FINANCING ACTIVITIES:
Common stock issued for conversion of notes payable		15,000			33,251
Purchase of patent with stock		73,892			-
Settlement of derivative liabilities due to conversion of related notes payable		25,064
Discount on notes payable from derivative liabilities		-			282,000

See summary of accounting policies and notes to unaudited consolidated financial statements.

INOVA TECHNOLOGY, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 –BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Inova Technology, Inc. (“we”, “our”, “Inova” or the “Company”) 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 (“SEC”) 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-K. 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-K have been omitted.

Fair Value Measurements

Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

As of ~~October~~January 31, ~~2012~~2013, Inova measured its derivative liabilities using Level 3 inputs as defined by ASC 820 with a total fair value of $1785,~~118,446~~021.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 – GOING CONCERN

As shown in the accompanying consolidated financial statements, we have an accumulated deficit and negative working capital and are in default on the majority of our notes payable as of ~~October~~January 31, ~~2012~~2013. These conditions raise substantial doubt as to our ability to continue as a going concern. The consolidated financial statements contained herein do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence. Our ability to continue as a going concern is dependent upon our ability to generate sufficient cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations. However, there is no assurance that profitable operations or sufficient cash flows will occur in the future. Management is trying to raise additional capital through sales of stock and refinancing debt.

NOTE 3 – RELATED PARTY TRANSACTIONS

Note Payable to Southbase, LLC

Loans payable from Southbase, LLC consists of advances from existing shareholders. These notes are unsecured, bear interest at 7%, and are due in May 21, 2017. The amount due to Southbase, LLC, a company related to Adam Radly, was $~~114~~142,~~219~~532 as of ~~October~~January 31, ~~2012~~2013.

Desert Sellers

Seller notes with a balance of $1,389,107 relate to the Desert Communications, Inc. (“Desert”) purchase in December of 2007. They have interest rates of 18%, are secured by all of the common stock of Desert Communications, Inc. and were due in December of 2010. The notes are now in default.

Trakkers President

Seller notes with a balance of $300,581, to the president of Trakkers, relate to the Trakkers purchase in 2008. They have interest rates of 7-10%, are secured by all of the member units of Trakkers and were due in 2011. The notes are now in default.

NOTE 4 - DERIVATIVE LIABILITIES

ASC 815-40 Put Warrant Liabilities

Under ASC 815-40 “Put Warrants”, warrants for put shares should be classified as liabilities and measured at fair value at the end of each reporting period with the change in fair value recorded to earnings. As a result, the fair value of the warrants granted to Inova’s debt holders in prior years were recorded as derivative liabilities at inception. These liabilities are subsequently measured at fair value at the end of each reporting period with the changes recorded to earnings. As of ~~October~~January 31, ~~2012~~2013, Inova had $~~252~~785,~~548~~021 of derivative liabilities as a result of these provisions.

ASC 815-15 Conversion Option and Warrant Liabilities

During fiscal 2010, Inova determined that the instruments embedded in a convertible put note exercised by one of Inova’s lenders should be classified as liabilities and recorded at fair value due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

Because the number of shares to be issued upon settlement cannot be determined under these instruments, Inova cannot determine whether it will have sufficient authorized shares at a given date to settle any other of its share-settleable instruments. As a result of this, under ASC 815-15 “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company's Own Stock” (formerly EITF 00-19), the conversion options noted above and all other share-settleable instruments are classified as liabilities. Inova has three conversion options embedded in notes payable agreements and 8,839,513 warrants to purchase Inova common stock that are classified as liabilities as a result of the provisions of the convertible put notes. As of ~~October~~January 31, ~~2012~~2013, Inova had $~~865~~785,~~898~~021 of derivative liabilities as a result of these provisions.

The following table summarizes the derivative liabilities included in the consolidated balance sheet:

Derivative Liabilities
Balance at April 30, 2012	$	1,461,265
Settlement of derivative liabilities due to conversion of related notes payable		(25136,~~064~~013	)
Change in fair value		(~~317~~540,~~755~~231	)
Balance at October 31, 2012	$	1,118,446
Balance at January 31, 2013	$	785,021

Valuation Models

Inova values its warrant derivatives and simple conversion option derivatives using the Black-Scholes option-pricing model. Assumptions used include (1) 40.15% risk-free interest rate, (2) warrant life is the remaining contractual life of the warrants, (3) expected volatility 261% to 390%, (4) zero expected dividends (5) exercise prices as set forth in the agreements, (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted.

Inova valued the conversion options and reset provisions under its convertible put exercise note with Boone using a Monte Carlo simulation model utilizing present value and various probabilities of events. Assumptions used include (1) 0.3415% risk free rate, (2) conversion prices as set forth in the agreement, (3) expected Inova stock price volatility of ~~261~~322%, (4) expected Desert stock price volatility of 25%, and (6) common stock price of the underlying share on the valuation date. Inova valued the note as a combination of the underlying debt payment and series of two options. Since the options are mutually exclusive, the Monte Carlo simulation was used to estimate when either of the options is exercisable. When both are exercisable Inova assumed that the more valuable of the two would be exercised.

NOTE 5 –SEGMENT INFORMATION

Inova has three reportable segments, one providing management support to the other subsidiaries (Edgetech Services, Inc.), one providing network solutions (Desert Communications, Inc.) and one which manufactures standards compliant and durable RFID (Radio Frequency Identification) equipment (Trakkers, LLC & RightTag, Inc). 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.

The following table presents ~~three~~nine month segment information:

Trakkers,

LLC &

Desert

RightTag,

Communications,

Inc.

Corporate

Total

Revenues

~~353~~834,~~485~~914

513,~~259~~807,~~970~~452

514,~~613~~642,~~455~~366

Net income (loss)

(~~214~~856,~~634)~~943

)

~~326~~(163,~~801~~527

)

(832,~~380)~~576,019

)

28(3,~~787~~596,489

)

Total assets

1221,~~438,147~~837

21,~~635~~604,~~161~~205

34,~~396~~443,~~557~~751

76,~~469~~269,~~865~~793

NOTE 6 – WARRANTS

The following tables summarize common stock warrants outstanding by entity:

									Weighted
			Weighted						average
			average			Aggregate			remaining
Warrants to purchase Inova common			exercise			intrinsic			contractual
stock	Warrants		price			value			life (years)
Outstanding at April 30, 2012		9,839,513		$	0.03		$	77,441		1.57
Granted		-			-
Exercised		-			-
Forfeited		-			-
Expired		1,000,000			-
Outstanding at October 31, 2012		8,839,513		$	0.01		$	55,369		1.17
Outstanding at January 31, 2013		8,839,513		$	0.01		$	52,334		.97

								Weighted
			Weighted					average
			average			Aggregate		remaining
Warrants to purchase Trakkers			exercise			intrinsic		contractual
common stock	Warrants		price			value		life (years)
Outstanding at April 30, 2012		13.50		$	-		$		2.18
Granted		-			-
Exercised		-			-
Forfeited		-			-
Expired		-			-
Outstanding at October 31, 2012		13.50		$	-		$		1.67
Outstanding at January 31, 2013		13.50		$	-		$		1.42

All warrants above were exercisable as of ~~October~~January 31, ~~2012~~2013.

NOTE 7 – COMMON STOCK

During the ~~six~~nine months ended ~~October~~January 31, ~~2012~~2013, Inova purchased the intellectual property from Southbase International Limited (“Southbase), a related party due to ownership in Southbase by Inova’s CEO. The intellectual property purchased is a license to use ShopInova, an iPhone application, and its related intellectual property rights. Inova issued 12,315,270 shares of common stock for the intellectual property, for a total value of $73,892, based on the Inova stock trading price on the closing date.

InDuring ~~September~~the ofnine ~~2012,~~months ~~Inova~~ended ~~issued~~January 331,~~947,368~~ ~~shares~~2013 ofInova ~~common stock for the conversion of $15,000 of third party debt.~~issued:

14,471,177 shares of common stock for the conversion of $37,100 of third party debt.

2,507,375 with a fair value of $17,000 for services

NOTE 8 – DEBT

The following table summarizes outstanding debt as of ~~October~~January 31, ~~2012~~2013 and April 30, 2012:

	October 31,		April 30,
	January 31,		April 30,
	2012		2012
	2013		2012
	Carrying		Carrying
Lender	Amount		Amount
Boone Lenders, LLC	$	7,~~124~~005,~~859~~982	$	6,883,176
Ascendiant Opportunity Fund, LLC		1,~~153~~155,~~930~~018		1,153,930
Agile Opportunity Fund, LLC		173,500		173,500
IBM - Trakkers, LLC
Lease Facility		6066,~~584~~500		70,183
Desert Communications, Inc. Sellers		1,389,107		1,389,107
Trakkers, LLC Sellers		1,769,686		1,769,686
Southbase, LLC - Related Party		~~114~~142,~~220~~532		142,532
Other		~~139~~237,~~298~~650		154,298
Total	$	11,~~925~~939,~~184~~975	$	11,736,412

Of the total outstanding debt, $11,~~125~~797,~~175~~443 was in default as of ~~October~~January 31, ~~2012~~2013. Principal owed to Boone Lenders, LLC (“Boone”) increased due to the paid-in kind interest described below. $222,751of legal fees were added to the Boone notes, of which $118,877 was paid off by January 31, 2013.

Boone is capitalizing and charging paid in kind interest on several of its notes. Each period, at a rate mutually agreed to by the Company and Boone, interest is recognized on the outstanding principal balance and added to the principal balance of the note. This started in May 2010 for Boone’s notes as a temporary arrangement which can be cancelled at any time. The interest rates range from 11% to 20% on various notes.

~~For~~During the ~~six~~nine months ended ~~October~~January 31, ~~2012~~2013, aInova ~~total~~and Boone re-negotiated the terms of ~~$18,932~~certain of their loans for which interest ~~was~~had ~~recognized~~previously ~~and~~been ~~recorded~~forgiven. As a result, Inova agreed to recognized additional interest expense during the ~~principal~~three ~~balance~~months of ~~loans~~ended ~~from~~January ~~Boone~~31, 2013 of approximately $1,900,000.

NOTE 9 – SUBSEQUENT EVENTS

InAs ~~November~~ of ~~2012~~March 1, ~~Inova~~2013 ~~issued~~Paul ~~2,507,375~~Aunger ~~shares~~resigned ofas ~~common~~director/secretary/treasurer. ~~stock~~The ~~for~~new ~~services~~secretary/treasurer ~~rendered~~is Adam Radly.

InSubsequent ~~December,~~to ~~Inova's~~January S131, ~~for~~2013, ~~the~~Asher ~~offering~~converted $24,750 of ~~375~~its debt for 9,~~000~~027,~~000~~311 shares ~~became effective~~.

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~~JANUARY 31, ~~2012~~2013

Net revenues decreased from $53,~~658~~738,~~150~~630 in the three-month period ending ~~October~~January 31, ~~2011~~2012 to $52,~~613~~552,~~455~~002 for the three-month period ending ~~October~~January 31, ~~2012~~2013. The ~~increase~~decrease in revenue is due to changes in the timing of various projects in Desert.

Cost of sales decreased from $42,~~301~~631,~~072~~874 in the three-month period ending ~~October~~January 31, ~~2011~~2012 to $41,~~022~~834,~~696~~872 for the three-month period ending ~~October~~January 31, ~~2012~~2013. The ~~increase~~decrease is a result of the revenue decrease described above.

Operating expenses increased from $1,~~083~~343,~~783~~704 for the three months ending ~~October~~January 31, ~~2011~~2012 to $1,~~368~~523,~~126~~222 for the same period in ~~2012~~2013. This was mainly due to the increase in professional fees.

Net ~~income~~loss ~~decreased~~increased from $~~263~~657,~~229~~433 for the three months ending ~~October~~January 31, ~~2011~~2012 to a net ~~income~~loss of $283,~~787~~507,678 for the same period in ~~2012~~2013. This is due to higher operating expenses and higher interest expense. The interest expense increase is primarily due to renegotiation of loan terms with our senior lender leading to the increase in interest expense.

RESULTS OF OPERATIONS FOR THE ~~SIX~~NINE MONTH PERIOD ENDED ~~OCTOBER~~JANUARY 31, ~~2012~~2013

Net revenues increased from $1014,~~706~~444,~~262~~892 in the ~~six~~nine-month period ending ~~October~~January 31, ~~2011~~2012 to $1214,~~090~~642,~~364~~366 for the ~~six~~nine-month period ending ~~October~~January 31, ~~2012~~2013. The increase in revenue is due to changes in the timing of various projects in Desert.

Cost of sales increased from $710,~~853~~485,~~337~~211 in the ~~six~~nine-month period ending ~~October~~January 31, ~~2011~~2012 to $910,~~065~~681,~~594~~630 for the ~~six~~nine-month period ending ~~October~~January 31, ~~2012~~2013. The increase is a result of the revenue increase described above.

Operating expenses increased from $24,~~659~~003,~~693~~397 for the ~~six~~nine months ending ~~October~~January 31, ~~2011~~2012 to $24,~~704~~227,~~490~~712 for the same period in ~~2012~~2013. This was mainly due to the increase in professional fees.

Net ~~income~~loss increased from $~~170~~486,~~635~~798 for the ~~six~~nine months ending ~~October~~January 31, ~~2011~~2012 to net loss of $883,~~811~~596,489 for the same period in ~~2012~~2013. This is due to a non-cash derivative gain of $1540,~~515,219~~231 for the ~~six~~nine months ended ~~October~~January 31, ~~2011~~2013 compared to a $~~317~~1,~~755~~675,209 gain for the ~~six~~nine months ended ~~October~~January 31, 2012. Interest also increased significantly due to the issue listed above.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations for the ~~six~~nine month period ended ~~October~~January 31, ~~2011~~2012 was $~~234~~138,~~702~~110 as compared to cash ~~provided~~used byin operations of $~~457~~515,~~691~~101 for the ~~six~~nine months ended January ~~October~~ 31, ~~2012~~2013. Cash used in investing activities for the ~~six~~nine month period ended ~~October~~January 31, ~~2011~~2012 and ~~October~~January 31, ~~2012~~2013 was $0. Cash ~~provided~~used byinfinancing ~~financing~~ activities for the period ended ~~October~~January 31, ~~2011~~2012 was $2418,~~839~~963, as compared to $5312,~~272~~542 used in financing activities for the ~~six~~nine months ended ~~October~~January 31, ~~2012~~2013.

Our operating activities for the ~~six~~nine months ended ~~October~~January 31, ~~2012~~2013, have generated adequate cash to meet our basic operating needs, but only sufficient to service debt on a limited basis. As of ~~October~~January 31, ~~2012~~2013, we had cash and cash equivalents totaling $1249,~~156~~452,~~430,~~ and receivables of $~~681~~1,~~150~~297,253.

As of the date of the filing the Company is attempting to restructure its debt with Boone and some other creditors. If successful there would be a significant decrease in the current portion of debt outstanding, interest rate reductions and extended maturity dates. If unsuccessful, we will continue to be in default on these loans and incur additional interest expense, and may face additional financial or legal issues.

EBITDA

Management believes adjusted EBITDA ~~for~~provides ~~the~~a ~~six~~more ~~month~~useful ~~period~~measure isof ~~$576,055~~company performance. ~~EBITDA~~This is ~~Earnings~~because ~~before~~there ~~interest,~~are ~~tax,~~several ~~depreciation~~measures included in GAAP net income which are related to warrant/derivative accounting. We consider these items to be unrelated to operating income and ~~amortization:~~performance, and they do not impact our cash flow or debt service.

EBITDA	31-October-12
Net income (loss)		(88,811	)
Interest		708,914
Derivative gain		(317,755	)
Tax		36,939
Depreciation/Amortization		236,768
EBITDA		576,055

However there is a limitation in using Adjusted EBITDA; each company may use a different definition of Adjusted EBITDA and therefore it is hard to compare them to each other. For example our company might use different add-backs to net income than our competitors, thus making it more difficult to compare us to them. We compensate for this by regularly including adjusted EBITDA in our filings so that our performance can be measured over time.

GAAP Financial statements: We therefore advise readers to refer to the GAAP financial statements as the format of those is standardized and uniform in comparison with any other audited company. In these we show net income as ($3,596,489) for the 9 months ending January 31, 2013. In addition, working capital ratios and other liquidity measures, total debt and debt/equity ratio are common measures used by companies to measure performance. These statements are audited whereas the adjusted EBITDA amounts are not opined to by the auditors but are a management tool.

Adjusted EBITDA for the 9 months ending January 31, 2013 was $(228,963). Adjusted EBITDA is Earnings before interest, tax, depreciation and amortization. Inova also excludes the non-cash loss on derivative liabilities, gain on debt extinguishment and impairment charges from its adjusted EBITDA calculation. Non-cash loss on derivative liabilities, gain on debt extinguishment, impairment charges, depreciation and amortization are excluded from adjusted EBITDA because they do not require cash payments.

Adjusted EBITDA	31-January-13
Net income (loss)		(3,596,489	)
Interest		3,516,018
Derivative gain		(540,231	)
Tax		38,013
Depreciation/Amortization		353,726
Adjusted EBITDA		(228,963)

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.

None

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: December 17, 2012	By:	/s/ Adam Radly
Dated: March 18, 2013	By:	/s/ Adam Radly
		Adam Radly
		Chief Executive Officer
Dated: December 17, 2012	By:	/s/ Bob Bates
Dated: March 18, 2013	By:	/s/ Bob Bates
		Bob Bates
		Chief Financial Officer

Filing Compare · Inova Technology Inc.