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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

For the quarterly period ended September 30, 2001

For the transition period from _______________ to _______________

Commission file number       000-31949    

INNOFONE.COM, INC.

4390 Paletta Court, Burlington, Ontario L7L 5R2, Canada

(905) 637-9442

N/A

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [   ]   No [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

At November 15, 2001: 100,000,000 common shares

Transitional Small Business Disclosure Format (Check one): Yes [   ]   No [X]

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INNOFONE.COM, INC.

FORM 10-QSB
FOR THE PERIOD ENDED SEPTEMBER 30, 2001

INDEX

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PART I -– FINANCIAL INFORMATION

Item 1. Financial Statements.

     The consolidated financial statements for the quarter ended September 30, 2001 and 2000 include, in the opinion of Innofone.com, Inc. (the “Company”), all adjustments necessary to present fairly the results of operations for such periods. Results of operations for the three months ended September 30, 2001 are not necessarily indicative of results of operations that will be realized for the year ending June 30, 2002. The financial statements should be read in conjunction with the Company’s Form 10-KSB which contains financial statements for the year ended June 30, 2001.

     These Financial Statements are presented below.

Item 2. Management’s Discussion and Analysis or Plan of Operation.

Forward-Looking Statements

     The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto for the year ended June 30, 2001 included in the Company’s Form 10-KSB, as amended, originally filed with the SEC on October 15, 2000. This Quarterly Report on Form 10-QSB includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Words such as “may,” “plans,” “expects,” “anticipates,” “approximates,” “believes,” “estimates,” “intends,” “hopes,” “potential,” or “continue”, and variations of such words and similar expressions are intended to identify such forward-looking statements. The Company intends such forward-looking statements, all of which are qualified by this statement, to be covered by the safe harbor provisions for forward-looking statements contained in the Private Litigation Securities Reform Act of 1995 and is including this statement for purposes of complying with these safe harbor provisions. The Company has based these statements on its current expectations and projections about future events. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Forward-looking statements include but are not limited to:

     Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s views only as of the date hereof. The Company is not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report on Form 10-QSB might not occur. Readers should carefully review the risk factors described in the Form 10-KSB and any other documents the

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Company files from time to time with the Securities and Exchange Commission, including any future Annual Reports on Form 10-KSB and Quarterly Reports on Form 10-QSB.

Overview

     As previously reported, on May 3, 2001, a court adjudged the Company’s existing operating subsidiary Innofone Canada, Inc. bankrupt under the Bankruptcy and Insolvency Act (Canada). During the period from January 15, 2001 to May 3, 2001, Innofone Canada was delayed in billing all of its customers for long distance, cellular, and Internet services rendered. Raymond Chabot, Inc., the court-appointed trustee, subsequently processed those billings, and is in the process of liquidating the assets of Innofone Canada. As a result of the bankruptcy of Innofone Canada, the Company suspended its business operations.

     On October 15, 2001, two weeks after the end of the calendar quarter reported on in this Form 10-QSB (September 30, 2001), the Company concluded a Plan of Reorganization, and acquired all of the common shares of Digital Micro Distribution Canada Inc. (“DMD”) in exchange for 67,000,000 shares of the Company’s common stock. The exchanged shares of the Company are “restricted securities” as defined under Rule 144(a) of the General Rules and Regulations under the Securities Act of 1993, as amended. Completion of the transaction was subject to obtaining the necessary regulatory and third party consents and satisfaction of customary conditions on closing, all of which were completed. At closing of this transaction, the Company had a total of 100,000,000 common shares issued and outstanding, and DMD became the sole operating subsidiary of the Company. As the former shareholder of DMD held sixty-seven percent (67%) of the outstanding common shares of the Company immediately subsequent to the transaction, the transaction between the two companies has been accounted for as a recapitalization by DMD effectively as if DMD had issued common shares for consideration equal to the net monetary assets of the Company.

Revenues

     Since the Company suspended operations in May 2001, there were no revenues reported in the fiscal quarter ended September 30, 2001. Revenues for the comparable period ended September 30, 2000 were $416,768. Readers should note that revenues for DMD are not disclosed in this report because the acquisition transaction was completed subsequent to the quarter end, on October 15, 2001. DMD is currently in the process of filing its own audited year-end statements and will do so in no later than 60 days, as reported in its Form 8-K Current Report filed on September 25, 2001. DMD revenues will be disclosed in the Company’s next quarterly report for the fiscal quarter ending December 31, 2001.

Selling, General and Administrative Expenses

     Since the Company conducted no active operations during the quarter ended September 30, 2001, its selling, general, and administrative expenses declined significantly, from $1,052,545 in the period ended September 30, 2000 to $62,657 in the period ended September 30, 2001. The major costs incurred during the fiscal quarter were comprised of professional fees, filing, legal, and auditing expenses.

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Liquidity and Capital Resources

     Since the Company’s inception, it has financed operations through the proceeds from the sale and issuance of equity securities, loans from stockholders, and from bank financing. During the quarter ended September 30, 2001, no new equity security, loans from stockholders, or bank financing was obtained, other than advances from the Company’s officers and directors as disclosed in earlier filings.

     Due to the bankruptcy of Innofone Canada, the Company’s then sole operating subsidiary, at September 30, 2001 the Company had no operating business and no assets except for its claim as an unsecured creditor on a portion of the liquidation proceeds of Innofone Canada. The Company believes it is entitled to approximately 60%-70% of the proceeds remaining after Innofone Canada’s secured creditors are paid some Can. $340,000 (approximately US$226,000). Depending on the balance of the liquidation proceeds remaining after the secured claims are paid, the Company believes it is reasonable to expect to receive between Can. $300,000 and Can. $400,000 (approximately between US$200,000 and US$270,000). However, the receipt of this amount, or of any proceeds at all, will be dependent upon, among other factors, the actual amounts of unsecured claims that are filed against Innofone Canada, the ultimate determination of the claims of secured creditors, and the amount for which the bankruptcy trustee is able to sell the business of Innofone Canada. There can be no assurance that the Company will receive the amount of the proceeds it is expecting, or that it will receive any proceeds at all, from the liquidation. In addition, approximately Can. $150,000 (US$100,000) has been assigned to creditors of the Company once the recoveries from the Canadian company are realized.

     Commencing October 1, 2001, Innofone.com Inc. anticipates financing its operations through its new sole operating subsidiary Digital Micro Distribution Canada. Inc.

PART II -– OTHER INFORMATION

Item 1. Legal Proceedings.

     Material developments in the single legal proceeding involving the Company and its sole subsidiary during the quarter ending September 30, 2001, specifically, the bankruptcy proceeding of Innofone Canada, are discussed in the notes to the Company’s financial statements filed with Part I, Item 1, Financial Statements, and Part I, Item 2, Management’s Discussion and Analysis, above.

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Item 6. Exhibits and Reports on Form 8-K.

SIGNATURES

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

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INNOFONE.COM, INCORPORATED

Consolidated Balance Sheets

September 30, 2001 with comparative figures as at June 30, 2001

See accompanying notes to consolidated financial statements.

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INNOFONE.COM, INCORPORATED

Consolidated Statements of Operations
(Stated in United States dollars)

For the three months ended September 30, 2001 with comparative figures for the three months ended September 30, 1999 and the year ended June 30, 2001

See accompanying notes to consolidated financial statements.

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INNOFONE.COM, INCORPORATED

Consolidated Statements of Shareholders’ Deficiency and Comprehensive Loss
(Stated in United States dollars)

Three months ended September 30, 2001 with comparative figures for the year ended June 30, 2001

See accompanying notes to consolidated financial statements.

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INNOFONE.COM, INCORPORATED

Consolidated Statements of Changes in Financial Position
(Stated in United States dollars)

For the quarter ended September 30, 2001 with comparative figures for the year ended June 30, 2001

Cash interest paid for the quarter ended September 30, 2001 and the year ended June 30, 2001 was $0 and $32,003 respectively.

See accompanying notes to consolidated financial statements

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INNOFONE.COM, INCORPORATED

Notes to Consolidated Financial Statements
(Stated in United States dollars)
(Unaudited)
For the quarter ended September 30, 2001

Innofone.com, Incorporated (the “Company”) is incorporated under the laws of the State of Nevada. The Company’s legal subsidiary Innofone Canada, Inc. (“Innofone Canada”) that operated in Canada, was engaged in the business of long distance telephone and internet telephony until being declared bankrupt on May 3, 2001. Innofone Canada’s assets are under the control of a Canadian Trustee in Bankruptcy. In addition, the Company has another wholly owned subsidiary, Hotcaller.com Inc. which is dormant and has no operating assets. During the year, the Company disposed of its other wholly-owned subsidiary, Access South Inc. which had no assets and was inactive.

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INNOFONE.COM, INCORPORATED

Notes to Consolidated Financial Statements
(Stated in United States dollars)
(Unaudited)
For the quarter ended September 30, 2001

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INNOFONE.COM, INCORPORATED
 

Notes to Consolidated Financial Statements (continued)
(Stated in United States dollars)
(unaudited)
For the quarter ended September 30, 2001

     4. Segmented information:

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INNOFONE.COM, INCORPORATED

Notes to Consolidated Financial Statements (continued)
(Stated in United States dollars)
(unaudited)
For the quarter ended September 30, 2001

Reverse takeover of Digital Micro Distribution Inc.:

Conversion to common stock:

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