Edgar Filing: INNOFONE COM INC

B.	Conferences, including the U.S. IPv6 Summit, Coalition Summit for IPv6, as well as anticipated events starting in 2007 with the IPv6 Summit in Reston Virginia on March 26--29, 2007.

C.	Consulting, including v6 Transition Plans, Project Plans and other types of IPv6 related consulting engagements.

D.	Training, including one day Federal Chief Information Officer IPv6 Transition Workshops and anticipated five day customized trainings for both technology and business aspects of IPv6.

2. Product Development and new Organic Growth Areas. With the advent of our Innofone Philippines entity and its employees, Innofone has initiated the development of a highly skilled internal research and development capability that we anticipate will generate new products at regular intervals starting in 2007.

3. Strategic Mergers and Acquisitions: Innofone is considering the potential for acquisition of several companies which Management believes could lead to the consummation of certain transactions that could result in the positioning of Innofone for accelerated growth in areas such as secure Internet applications, video-over-IPv6, and mobile phone applications such as mobile TV that will be potentially enhanced by using IPv6. We have started on this path via the acquisitions described hereinabove.

5. Results of Operations

On August 8, 2005, Innofone purchased 100% of the issued and outstanding shares of IPv6 Summit, Inc. As a result, IPv6 has been accounted for as the accounting acquirer similar to a reverse merger in that the historical accounting information is that of IPv6. Accordingly, the results of operation discussion for the years ended June 30, 2006 and 2005 are that of IPv6.

For the Three Months Ended December 31, 2006 Compared to the Three Months Ended December 31, 2005

Revenues Innofone derives revenues primarily from attendance fees of summit conferences held, corporate sponsorships related to such summits, consulting fees, and fees for mobile technology services. Attendance fees are recognized when the conference has been held. During the three months ended December 31, 2006, Innofone had revenues of $77,512 as compared to revenues of $354,670 for the three months ended Decmeber 31, 2005; a decrease of 78%. The decrease was due the timing of the conferences—there was a major conference in December 2005—and the decrease in consulting revenue due to the restructuring of the division, offset by the revenues of a new subsidiary of $77,512.

We currently have one conference scheduled over the next 3 months: US IPv6 Summit booked for March 26-29, 2007at the Hyatt Reston in Virginia with projected attendees of 700 people. We are in the process of re-organizing our Consulting division. We have previously cancelled the Asia IPv6 Summit intended for February 2007 at the Makati Shangri-la Hotel.

Cost of Revenues and Gross Profit

Cost of revenues primarily relate to summit conference room rentals, food accommodations, advertising, and fees for access to mobile telephone lines. Cost of revenues was $11,816 for the three months ended December 31, 2006, compared to $76,044 for the three months ended December 31, 2005. Innofone’s gross profit was 85% for the three months ended December 31, 2006, compared to 79% for the three months ended December 31, 2005. The cost of revenues decrease is proportion to the related decrease in conference revenues.

Selling, General and Administrative Expenses

Selling, general and administrative expenses totaled $1,672,611 and $938,609 for the quarters ended December 31, 2006 and 2005, respectively. The increase of $734,002 primarily related to operating expenses of the new subsidiaries and divisions of approximately $250,000, and an increase in payroll and in professional fees such as legal and accounting by approximately $150,000, and $390,000, respectively. The increase in professional fees primarily related to costs associated with filings with the Securities and Exchange Commission, and the legal costs associated with litigation.

Net Loss

Net losses totaling $3,849,300 and $908,155 for the quarters ended December 31, 2006 and 2005, respectively, increased by $2,941,145 as result of the factors previously mentioned above, and costs related to the various debt agreements entered into by the Company.

For the Six Months Ended December 31, 2006 Compared to the Six Months Ended December 31, 2005

Revenues

During the six months ended December 31, 2006, Innofone had revenues of $104,059 as compared to revenues of $404,690, a decrease of 74%. As noted above, the decrease was due the timing of the conferences and the decrease in consulting revenue due to the restructuring of the division, offset by the revenues of a new subsidiary of $103,331.

Cost of Revenues and Gross Profit

Cost of revenues was $36,609 for the six months ended December 31, 2006, compared to $76,958 for the six months ended December 31, 2005. Innofone’s gross profit was 65% for the six months ended December 31, 2006, compared to 81% for the six months ended December 31, 2005. The cost of revenues decreased in proportion to the related decrease in conference revenues. The gross profit decreased due to the decrease in the consulting revenue that yielded higher than the average margins for the company.

Selling, General and Administrative Expenses

Selling, general and administrative expenses totaled $2,945,459 and $1,528,916 for the six months ended December 31, 2006 and 2005, respectively. The increase of $1,416,543 primarily related to operating expenses of the new subsidiaries and divisions of approximately $378,000, and an increase in Payroll expense, outside services, and professional fees, such as legal and accounting, by approximately $150,000, $180,000 and $320,000, respectively. Other increases related to the increase in infrastructure to support the growth of the business.

Net Loss

Net losses totaling $16,467,663 and $1,498,140 for the six months ended December 31, 2006 and 2005, respectively, increased by $14,969,523 as result of the factors previously mentioned above, and costs related to the various debt agreements entered into by the Company.

6. Liquidity and Capital Resources

As of December 31, 2006, the Company had total current assets of $888,636 and total current liabilities of $6,994,430 resulting in a working capital deficit of $6,105,794. As of December 31, 2006, the Company had cash totaling $374,363. Our cash flow from operating activities for the six months ended December 31, 2006 resulted in a deficit of $2,692,004. Our cash flow from investing activities resulted in a surplus of $251,195. Our cash flows from financing activities resulted in a surplus of $2,715,000. Overall, the Company’s cash flows for the six months ended December 31, 2006, netted a surplus of $274,191. The Company believes its current cash balance along with the cash flow from current operating activities will be sufficient to provide necessary capital for the Company’s operations for the next twelve months. Additionally subsequent to December 31, 2006; the Company entered into a legal settlement agreement with Lawrence Hughes, whereby Mr. Hughes will forgive $2,000,000 debt owed to him by the Company, and entered into a new debt financing arrangement with an unrelated party with net proceed of $800,000.

On January 16, 2007, the Company issued a promissory note to Lakewood Group LLC (“Lakewood”) in the principal amount of $1,000,000 for the purchase price of $800,000 (the “Note”). The Maturity Date of the Note is September 16, 2007. Cash amortizing payments of the outstanding principal amount of the Note commence on the fifth month anniversary date of the Note and on the same day of each month thereafter (each a “Repayment Date”) until the principal amount has been repaid in full. On each Repayment Date, the Company shall make payments to Lakewood in the amount of twenty-five percent (25%) of the principal amount, and any other amounts. In the event of default by the Company, the Company will be required to pay interest on the principal amount equal to fifteen percent (15%) per annum (calculated on a 360 day year). The Company has the option to prepay the Note in an amount equal to 110% of the purchase price, no sooner than thirty (30) days from the Note issuance date. Further, in the event that the Company raises funds from the sale of debt instruments, equity instruments or instruments convertible into equity in excess of $2,500,000 of gross proceeds (“Excess Proceeds”), then the Maturity Date of the Note with respect to an amount of principal amount equal to the Excess Proceeds shall be automatically accelerated to the fifth business day after the date the Company receives the actual or beneficial Excess Proceeds and the Company must use such Excess Proceeds to pay amounts payable under this Note.

On June 2, 2006, pursuant to a securities purchase agreement, we sold in a private placement to Cogent Capital Investments LLC (“CCI”) (i) 1,850,000 shares of our common stock (“Common Stock”) and (ii) 4,815,000 shares of our Series A Convertible Preferred Stock (“Preferred Stock”) for an aggregate purchase price of $50,000,000, which was paid in the form of U.S. Treasury Bonds (the “Bonds”). Pursuant to an Amended and Restated Certificate of Designation filed by Innofone, the Preferred Stock issued to Cogent has no voting rights, no dividend rights (unless the Board of Directors elects otherwise) and each shares of Preferred Stock shall be convertible into ten (10) shares of Common Stock, subject to certain adjustments (“Conversion Ratio”). Further, no sooner than two years after June 2, 2006, the issuance date, Innofone has the option to redeem all (but not less than all) of the outstanding Preferred Stock by paying in cash the market price (the trailing ten (10) average of the Common Stock) multiplied by the Conversion Ratio. The Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, senior to any other security issued by Innofone.

Concurrently with the consummation of the private placement to CCI, we entered into an equity swap transaction with Cogent Capital Financial LLC (“CCF”), an affiliate of CCI (the “Equity Swap”). The Equity Swap is a fixed versus floating price swap with respect to a notional amount of 37,500,000 shares of our Common Stock, with CCF being the floating equity price payor and Innofone being the fixed equity price payor. The fixed price under the Equity Swap is $1.333333 per share. The Equity Swap has a maturity date of December 2, 2010, though under certain conditions this date can be extended, and provides for periodic settlements and reductions of the notional amount of the Equity Swap over a 30 month period, provided that Innofone has satisfied certain conditions. Among these conditions is a requirement that Innofone maintain an effective registration statement with respect to specified portions of the Common Stock purchased by CCI and the Common Stock into which the Preferred Stock purchased by CCI is convertible. The portion of such Common Stock to be covered by the registration statement increases over a 30 month period to a maximum of 55,000,000 shares. This registration statement is being provided by Innofone to satisfy, on an initial basis, this condition of the Equity Swap. Continued satisfaction of this condition will depend on the maintenance of this registration statement and the provision at later dates of one or more additional registration statements. To secure Innofone's performance of the Equity Swap, Innofone has pledged to CCF, and deposited in a custodian account subject to a lien in favor of CCF, the Bonds. As the notional amount of the Equity Swap is reduced, a corresponding portion of the pledged Bonds are to be released to Innofone, subject to any required partial settlement of the Equity Swap resulting from the reduction in the notional amount. Cogent will not need to provide any form of consent to cause a release of funds to the Company under the contemplated Equity Swap. The purchase price paid by Cogent in the form of treasury bonds (the “Bonds”) was released from the escrow account on June 2, 2006, at which point the private placement was closed. At that time, we pledged the Bonds, in a separate collateral account, to secure our performance under the Equity Swap. Cogent is contractually obligated to cause proportionate amounts of the Bonds to be released with each monthly settlement of the Equity Swap. To further clarify that the Bonds are serving only as collateral for the Equity Swap and are no longer in escrow, Cogent is establishing standing instructions with the collateral agent under which the collateral agent will, each month, release the appropriate portion of the Bonds upon receipt of specified correspondence from us and our counsel confirming the then effective status of the registration statement. The release of the Bonds is not subject to Cogent's discretion and is not subject to any substantive condition other than the continued effectiveness of the resale registration statement. The Equity Swap establishes a schedule over 30 months during which time the notional share amount of the Equity Swap will reduce, provided we have satisfied the conditions. With each reduction, a corresponding portion of the pledged Bonds will be released from the collateral account. If for the relevant monthly period, the 10-trading-day average price exceeds the fixed price, then Cogent will be obligated to pay us an amount equal to the reduction in the notional share amount multiplied by this excess. Conversely, if for the relevant monthly period, the fixed price exceeds the 10-trading-day average price, then we will be obligated to pay Cogent an amount equal to the reduction in the notional amount multiplied by this excess.

In connection with and as consideration for CCF's obligations under the Equity Swap, Innofone paid to CCF an initial amount consisting of (i) $568,750 (out of approximately $1,375,000 to be paid); (ii) 5,000,000 shares of Common Stock; and (iii) a warrant to purchase 5,000,000 shares of Common Stock, during a 5-year term, at an initial exercise price per share of $1.20. The remaining approximately $806,250 (of the $1,375,000) due is accruing interest and will be deducted and paid from the first 3 collateral releases. In addition, the Company paid CCI $100,000 as an initial fee and has agreed to pay CCF an amount equal to the interest on $50,000,000, at LIBOR plus 1.45% up through the Trigger Date then decreasing for the next 30 months based upon the decrease value in the notional stock amount. Innofone and CCF entered into a registration rights agreement granting CCF certain demand and piggyback registration rights with respect to these shares of Common Stock.

On May 25, 2006, we entered into a Letter Agreement (“Agreement”) with the NIR Group for the repayment (the “Repayment”) of certain notes (“Notes”) and cancellation of certain warrants (“Warrants”) issued on or about August 31, 2005 and October 31, 2005 pursuant to that certain Securities Purchase Agreement (the “SPA”) by and between Innofone and AJW Partners, LLC (“Partners”), New Millennium Capital Partners, II, LLC (“Millennium”), AJW Offshore, Ltd. (“Offshore”) and AJW Qualified Partners, LLC (“Qualified, with Partners, Millennium and Offshore, collectively, the “NIR Group”). The Repayment was applied to the outstanding principal and interest owing under the Notes and as consideration for the cancellation of the Warrants issued to the NIR Group, and the termination of any and all UCC-1s filed in favor of NIR. Further, in connection with the SPA, Notes and Warrants, the following ancillary documents were executed and/or filed: (1) Guaranty and Pledge Agreement, dated August 31, 2005, by and between Innofone, Mr. Alex Lightman, Innofone's President and Chief Executive Officer, and NIR (“Pledge Agreement”); (2) Security Agreement by and between Innofone and NIR, dated August 31, 2005 (“Security Agreement”); and (3) UCC-1 Financing Statements (“UCC-1s”) filed by NIR in Nevada (the Notes, SPA, Warrants, Pledge Agreement and Security Agreement are referred to collectively as “Original Documents”).

In connection with the Repayment, Innofone and NIR executed and delivered the Agreement, a new promissory note (the “New Notes”), a new stock purchase warrant (the “New Warrants”), and a new registration rights agreement (“New Registration Agreement”) (the Agreement, New Notes, New Warrants and New Registration Agreement and the UCC-3s shall be referred to collectively as the “New Documents”, each of which is filed herewith as an Exhibit). Further, NIR is required to file UCC-3 Termination Statements (“UCC-3s”) necessary to terminate any perfected security interest they had obtained pursuant to the Security Agreement.

The terms of the Repayment, as provided in the Agreement are as follows: (a) upon signing of Agreement, Innofone made a cash Payment to NIR in the amount of $2,635,400 to be applied to the repayment of all amounts of principal and interest owing and outstanding under the Notes; (b) upon signing of the Agreement, Innofone issued to NIR the New Notes in the aggregate amount of $1,200,000. The New Notes are self-amortizing over a one-year time period commencing on July 1, 2006, with each installment payment due on the twelve consecutive monthly anniversaries beginning July 1, 2006. Further, pursuant to the New Notes, Innofone will pay to NIR an aggregate of $100,000 per month. The New Notes may be prepaid by Innofone at anytime without penalty; (c) upon signing of the Agreement, Innofone shall issued to NIR the New Warrants exercisable into an aggregate of 750,000 shares of Innofone's Common Stock (the “Warrant Shares”). The New Warrants shall have a term of five years and an exercise price equal to $1.79. The New Warrants may be exercised on a cashless basis only in the event that there is no effective registration statement covering the Warrant Shares. NIR may exercise the New Warrants by utilizing any amounts still owing under the New Notes. Innofone may buy back all of the New Warrants from NIR for an aggregate of $100,000 at any time prior to the New Warrants being exercised; (d) upon signing of the Agreement, Innofone and NIR executed and delivered the New Registration Agreement providing for the registration of the Warrant Shares with the Securities and Exchange Commission. The New Registration Agreement provides for one piggyback registration right no sooner than six months from the date of hereof; (e) NIR agrees not to sell Innofone's Common Stock short, either directly or indirectly through its affiliates, principals or advisors; (f) the Original Documents were terminated in all respects, and were rendered null and void and no longer binding NIR or Innofone to any obligations, duties and responsibilities contained therein. Further, NIR and Innofone mutually agree that the New Documents shall supersede the Original Documents in all respects; (g) Innofone filed a Form AW to withdraw the Registration Statement on Form SB-2 currently on file with the Securities and Exchange Commission covering the shares of common stock underlying the Notes and the Warrants; (h) All security interests perfected by NIR on the “Collateral” (as defined in the Security Agreement), pursuant to the Original Documents, including the Security Agreement, shall be terminated. Accordingly, NIR agreed to file within (2) days of the Agreement, UCC-3 Termination Statement. As of December 31, 2006 we owed NIR a total of $600,000. As of February 14, 2007, we owe a balance of $300,000 to complete the payoff of NIR in full.

On April 27, 2006, Innofone entered into a term sheet with Mr. Lawrence Hughes providing for an investment by Mr. Hughes in the aggregate amount of $4,000,000 in exchange for approximately 3,478,260 shares of Innofone's restricted common stock at $1.15 per share. Further, pursuant to the term sheet, Innofone is to issue a warrant to purchase 400,000 shares of Innofone's restricted common stock at an exercise price equal to eighty percent (80%) of the five (5) day trading average close price of Innofone's common stock. Definitive agreements between Innofone and Mr. Hughes will be entered forthwith. On January 10, 2007, the Company reached a binding and immediately enforceable settlement with InfoWeapons, Inc., InfoWeapons Corporation and Lawrence Hughes (collectively the "InfoWeapons Parties"), whereby the Company, InfoWeapons Acquisition Corporation, Alex Lightman (collectively the “Innofone Parties”) and the InfoWeapons Parties agreed to the following material terms memorialized before the Honorable Margaret A. Nagle, United States Magistrate Judge for the Central District of California, and to be followed in writing hereafter: (i) unconditional cancellation and termination of the Merger Agreement in all respects; (ii) dismissal with prejudice of both Complaints against one another, with all parties to both Complaints including InfoWeapons Corporation granting full and complete general and mutual releases to the broadest extent permitted by law; (iii) Mr. Hughes is to return to the Company the 3,478,260 shares of the Company's Common Stock that he purchased for $4 million on April 27, 2006; (iv) Mr. Hughes is to cancel and terminate and forever forgive that certain promissory note issued to him by the Company on September 7, 2006 in the principal amount of $2 million; (v) the InfoWeapons Parties to pay the Company the sum of $180,000 on or before February 12, 2007; (vi) the termination of all agreements, contracts and obligations whatsoever between the Innofone Parties and the InfoWeapons Parties; and (vii) the mutual non-disparagement and non-solicitation of employees by and between the Innofone Parties and the InfoWeapons Parties; and (viii) certain other provisions that were read into the record at the conclusion of the settlement conference before Judge Nagle on January 10, 2007. All of the material performance requirements of the Settlement Agreement with the InfoWeapons Parties have been fulfilled to date.

Critical Accounting Policies

The preparation of our financial statements requires our management to make estimates and assumptions that affect the reported amounts on our financial statements. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The Notes to the consolidated financial statements included in this filing contain a discussion of our significant accounting policies and recent accounting pronouncements applicable to us.

Recent Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. This statement is not expected to have a material effect on the Company's consolidated financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company's first fiscal year that begins after September 15, 2006. This statement is not expected to have a material effect on the Company's consolidated financial position or results of operations.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on the Company's consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair values. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management believes that the adoption of SFAS No. 157 will not have a material impact on the consolidated financial results of the Company.

Item 3. Evaluation of Disclosure Controls and Procedures[

As previously disclosed, the Company will have to restate certain of its financial statements. The Company concluded that it will have to restate its financial statements on December 21, 2006 and notified the public that certain previously issued financial statements should no longer be relied upon and that the Company will have to amend to restate such financial statements contained in the following periods: (i) Form 10-KSB for the year ended June 30, 2006; and (ii) the following quarterly reports: (a) Form 10-QSB for the quarter ended September 30, 2006; (b) Form 10-QSB for the quarter ended March 31, 2006; (c) Form 10-QSB for the quarter ended December 31, 2005; and (d) Form 10-QSB for the quarter ended September 30, 2005 (collectively, the “Financial Statements”). Further, the Company will have to restate the financial statements contained in this Form 10-QSB for the quarter ended December 31, 2006. The determination was made by the Company and following consultation with the Company's senior management, advisors and independent registered public accounting firm. Until such time as the Company files the restated Financial Statements with the Commission to address proper accounting treatment of certain items, the Financial Statements, including the financial statements contained in the Form 10-QSB, should not be relied upon.

Based on the foregoing, our Chief Executive Officer and our Chief Financial Officer reviewed and evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The disclosure controls and procedures we reviewed and evaluated included, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our Chief Executive Officer and our Chief Financial Officer determined that our disclosure controls and procedures during the period covered by this Report were effective and that the described restatement of prior financial reports arises from the differing interpretation taken by the SEC accounting staff in its review of the accounting guidelines with respect to the Cogent Capital Investments, LLC, AJW and NIR transactions. These transactions are complex, non-recurring and unique and as such the accounting guidelines are not necessarily specific and are subject to interpretation. Accordingly, we do not believe that the restatement results from a failure of our controls and procedures.

Since the end of the period covered by this report, management has determined to retain the services of independent financial consultants experienced in the requirements of reporting to the SEC to assist management with preparing our reports whenever we undertake a complex, unique transaction where the accounting guidelines are not conclusive and are subject to interpretation. We believe that retaining additional consultants and advisors will assist us in making a more thorough review of all relevant accounting guidelines prior to the publication of our reports whenever we engage in unique, complex transactions.

PART II- OTHER INFORMATION.

Item 1. Legal Proceedings.

On November 15, 2006, the Company received a Summons and Complaint filed against it in the Superior Court of the State of California by Caneum, Inc. (“Caneum”) for (1) breach of contract and (2) money due for goods sold and delivered and/or services rendered. Caneum is seeking approximately $198,203 in damages, fees and interest.

On December 28, 2006, the Company filed an Answer to the Caneum Complaint generally and specifically denying all aspects and causes of action contained in the Complaint. Simultaneously with the filing of the Answer, the Company filed a Cross-Complaint against Caneum and Roes 1-20 for Breach of Contract, Declaratory Relief and Fraud. The Company disputes each of the claims made in Caneum’s Complaint and intends to vigorously prosecute each of the claims made in the subject Cross-Complaint against Caneum which arise out of Caneum and certain of Caneum’s employees/agents failure to perform under contract and intentional misrepresentation of services to be provided to the Company.

On January 10, 2007, the Company reached a binding and immediately enforceable settlement with InfoWeapons, Inc., InfoWeapons Corporation and Lawrence Hughes (collectively the "InfoWeapons Parties"), whereby the Company, InfoWeapons Acquisition Corporation, Alex Lightman (collectively the “Innofone Parties”) and the InfoWeapons Parties agreed to the following material terms memorialized before the Honorable Margaret A. Nagle, United States Magistrate Judge for the Central District of California, and to be followed in writing hereafter: (i) unconditional cancellation and termination of the Merger Agreement in all respects; (ii) dismissal with prejudice of both Complaints against one another, with all parties to both Complaints including InfoWeapons Corporation granting full and complete general and mutual releases to the broadest extent permitted by law; (iii) Mr. Hughes is to return to the Company the 3,478,260 shares of the Company's Common Stock that he purchased for $4 million on April 27, 2006; (iv) Mr. Hughes is to cancel and terminate and forever forgive that certain promissory note issued to him by the Company on September 7, 2006 in the principal amount of $2 million; (v) the InfoWeapons Parties to pay the Company the sum of $180,000 on or before February 12, 2007; (vi) the termination of all agreements, contracts and obligations whatsoever between the Innofone Parties and the InfoWeapons Parties; and (vii) the mutual non-disparagement and non-solicitation of employees by and between the Innofone Parties and the InfoWeapons Parties; and (viii) certain other provisions that were read into the record at the conclusion of the settlement conference before Judge Nagle on January 10, 2007. Each of the material performance requirements of the settlement agreement with the InfoWeapons Parties has been satisfied.

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

Please refer to the Company’s Current Report on Form 8-K filed on January 17, 2007.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters requiring a vote of security holders during this period.

Item 5. Other Information.

On November 1, 2006, we entered into an amendment to the agreements which govern the Equity Swap transaction with CCI (Cogent). The Equity Swap is described under Item 2 of this Report, Management’s Discussion and Analysis of Financial Condition and Results of Operations. The amendment does not change any of the material terms of the Equity Swap transaction. The amendment is filed hereto as an Exhibit to this Report.

None.

Item 6. Exhibits

A. Exhibits:

10.1 Amendment to Equity Swap Agreements*

31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act.*

32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act.*

______

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	INNOFONE.COM, INCORPORATED

Date: February 14, 2007	By:	/s/ Alex Lightman
		Alex Lightman
		Title Chief Executive Officer, President, Principal Financial Officer and Director


Nevada	98-0202313
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


1431 Ocean Avenue, Suite 1100, Santa Monica, CA	90401
(Address of principal executive office)	(Zip Code)

Common Stock at Par Value $0.001	74,651,328
Title of Class	Number of Shares

Part I
Item 1 Financial Statements

Consolidated Balance Sheet (Unaudited)	3

Consolidated Statements of Operations (Unaudited)	4

Consolidated Statement of Stockholders' Equity (Unaudited)	5

Consolidated Statements of Cash Flows (Unaudited)	6

Notes to Consolidated Financial Statements (Unaudited)	7


Item 2 Management's Discussion and Analysis	15


Part II

Items 1-6. Other Information	25

Signatures	26





ASSETS

Current assets
Cash	$	374,363
Accounts receivable		219,272
Prepaid expenses and other assets		295,001
Total current assets		888,636

Fixed assets, net		73,767
Investment in U.S. Treasury Bonds - restricted		49,987,390
Unamortized debt discount and finance cost		448,493
Deposits for pending acquisitions		80,000
Goodwill		1,611,260
Other assets		70,832

Total assets	$	53,160,378


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued liabilities	$	2,075,436
Deferred revenue		173,994
Due to related party		700,000
Notes payable - short term		4,045,000
Total current liabilities		6,994,430

Long-term liabilities
Liability on equity swap agreement		13,825,132
Total liabilities		20,819,562

Minority interest		(17,406	)

Stockholders' equity
Preferred stock; $0.01 par value; 4,815,000 shares
authorized, issued and outstanding		48,150
Common stock; $0.001 par value; 950,000,000 shares
authorized, 74,651,328 issued and outstanding		74,651
Additional paid-in capital		70,743,369
Unamortized investment and loan fees paid
with common stock and warrants		(3,805,017	)
Stock payable for 72,000 shares of common stock		48,960
Related party stock payable for 800,000 shares of common stock		544,000
Other comprehensive income		(11,181	)
Accumulated deficit		(35,284,710	)
Total stockholders' equity		32,358,222

Total liabilities and stockholders' equity	$	53,160,378

	Three Months Ended December 31,						Six Months Ended December 31,
	2006			2005			2006			2005

Revenues	$	77,512		$	354,670		$	104,059		$	404,690

Cost of revenues		11,816			76,044			36,609			76,958

Gross profit		65,696			278,626			67,450			327,732

Operating expenses
Selling, general and administrative		1,672,611			938,609			2,945,459			1,528,916
Total operating expenses		1,672,611			938,609			2,945,459			1,528,916

Income (loss) from operations		(1,606,915	)		(659,983	)		(2,878,009	)		(1,201,184	)

Other income (expense)
Interest income		4,523			9,574			6,744			11,848
Interest expense and finance cost		(997,419	)		(246,618	)		(3,228,094	)		(297,676	)
Unrealized loss on equity swap agreement		(1,232,648	)		--			(10,355,909	)		--
Other income (expense)		(939	)		(11,128	)		10,326			(11,128	)
Total other income (expense)		(2,226,483	)		(248,172	)		(13,566,933	)		(296,956	)

Net income (loss) before provision for income taxes		(3,833,398	)		(908,155	)		(16,444,942	)		(1,498,140	)

Provision for income taxes		--			--			--			--

Net income (loss) before minority interest		(3,833,398	)		(908,155	)		(16,444,942	)		(1,498,140	)
Loss applicable to minority interest		(15,902	)		--			(22,721	)		--

Net income (loss)	$	(3,849,300	)	$	(908,155	)	$	(16,467,663	)	$	(1,498,140	)

Net income (loss) per common share - basic and diluted	$	(0.05	)	$	(0.01	)	$	(0.22	)	$	(0.03	)

Weighted average common shares outstanding -
basic and diluted		74,489,328			61,462,788			74,170,239			53,818,964

									Additional		Unamortized Investment						Related Party		Other						Total
	Preferred Stock				Common Stock				Paid-in		and Loan			Stock			Stock		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Fee			Payable			Payable		Income			Deficit			Equity
Balance, June 30, 2006		4,815,000	$	48,150		72,858,345	$	72,858	$	62,944,096	$	--		$	58,395		$	544,000	$	--		$	(18,817,047	)	$	44,850,452

Issuance of common stock related to
acquisition of Mobile Technology Group, Inc.
net of $101,020 net liabilities acquired		--		--		1,441,441		1,441		1,497,539		--			--			--		--			--			1,498,980

Issuance of common stock for services		--		--		280,542		281		225,433		--			--			--		--			--			225,714

Issuance of common stock related to
stock payable		--		--		71,000		71		58,324		--			(58,395	)		--		--			--			--

Issuance of warrants for 5,000,000 shares
of common stock related to debt with
55 South Investments totaling $1,000,000		--		--		--		--		5,481,314		(5,481,314	)		--			--		--			--			--

Issuance of warrants for 602,500 shares
of common stock related to various
debts totaling $415,000		--		--		--		--		503,047		(503,047	)		--			--		--			--			--

Amortization of investment and loan fee
paid with common stock and warrants		--		--		--		--		--		2,179,344			--			--		--			--			2,179,344

Vesting of employee stock options		--		--		--		--		23,585		--			--			--		--			--			23,585

Stock payable for 72,000 shares of common
stock related to services		--		--		--		--		--		--			48,960			--		--			--			48,960

Minority interest		--		--		--		--		10,031		--			--			--		--			--			10,031

Unrealized gain on US Treasury Bonds		--		--		--		--		--		--			--			--		(11,181	)		--			(11,181	)

Net income (loss)		--		--		--		--		--		--			--			--		--			(16,467,663	)		(16,467,663	)

Balance, December 31, 2006		4,815,000	$	48,150		74,651,328	$	74,651	$	70,743,369	$	(3,805,017	)	$	48,960		$	544,000	$	(11,181	)	$	(35,284,710	)	$	32,358,222


Debt discount related to 55 South Investment notes payable,
see Note 7	$	51,765
Debt discount related to NIR Group notes payable,
see Note 7		238,058
Debt discount related to Alex Lightman note payable
see Note 6		158,670

	$	448,493

Debt discount related to 55 South Investment notes payable,
see Note 7	$	3,546,733
Debt discount related to various notes payable
see Note 7		218,356

	$	3,765,089


Note payable to Alex Lightman related to Stock Purchase
Agreement(see Note 1 for detailed discussion), interest rate at
4%, payable in monthly installment payments of $83,333
(principal only) for each successive month starting on the date
of execution of the note contingent upon certain conditions
having been met, and ending October 17, 2006 which any
unpaid principal and interest would be due at that date	$	200,000

Note payable to Alex Lightman, interest rate at 5%, unsecured
and principal and interest due at maturity on April 17, 2007		500,000

	$	700,000