UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





x
            ANNUAL
      REPORT UNDER SECTION 13 OR 15 (d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the fiscal year ended: JULY 31,
      2009 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      transition period from _____ to _____.





Commission
File Number 333-48746





CHINA NUVO SOLAR ENERGY,
INC.


(Name of
small business issuer in its charter)





NEVADA
            87-0567853(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      Number)





319
Clematis Street – Suite 703, West Palm Beach, Florida 33401


(Address
of principal executive offices)(Zip Code)





Issuer's
telephone number, including area code: (561) 514-9042





Securities
registered pursuant to Section 12(b) of the Exchange Act: None





Securities
registered under Section 12(g) of the Exchange Act: None





Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act:  ̈YesxNo





Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.  ̈





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange 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: xYes ̈No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained in this form, and will not be contained, to the
best of the Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: x





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer:


Large
      Accelerated Filer  ̈
            Accelerated
      Filer  ̈Non-Accelerated
      Filer  ̈
            Smaller
      Reporting Company x





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act):  ̈YesxNo





The
aggregate market value of the voting common equity held by non-affiliates of the
issuer as of November 11, 2009 was $1,555,264, based on the last sale price of
the issuers common stock ($0.0074 per share) as reported by the OTC
Bulletin Board.





The
Registrant had 301,617,837 shares of common stock outstanding as of November 11,
2009.





Documents
incorporated by reference: None





CHINA
NUVO SOLAR ENERGY, INC.


FORM
10-K





THIS
REPORT MAY CONTAIN CERTAIN “FORWARD-LOOKING” STATEMENTS AS SUCH TERM IS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE SECURITIES AND
EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE
REGISTRANT’S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS
CONCERNING THE REGISTRANT’S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL
CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE
OPERATIONAL PLANS.  FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN
THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS
SUCH AS “MAY”, “EXPECT”, “BELIEVE”, “ANTICIPATE”, “INTENT”, “COULD”, “ESTIMATE”,
“MIGHT”, OR “CONTINUE” OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE
TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS.  THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE REGISTRANT’S CONTROL,
AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT
FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION,
MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE COMPANY AND ITS
SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED IN THIS
AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.





PART
I





ITEM
1.  DESCRIPTION OF BUSINESS.





(a)           General
Business development.





We were
originally organized under the laws of the State of Nevada in 1996 as Zacman
Enterprises, Inc. and subsequently changed our name to eNutrition, Inc.
eNutrition was a direct mail marketing company engaged in the development and
marketing of nutritional supplements.  Operation commenced in June
2000 by securing the exclusive rights to market the nutritional supplement,
HI-Q.  In September 2001, eNutrition entered into a License Agreement
with HI-Q Nutrition, Inc., a Nevada corporation, granting them the exclusive
right to engage in the business of marketing and distributing nutritional
products under the trade name HI-Q.





On April
30, 2002, we entered into an agreement with HI-Q Nutrition, Inc. for the sale of
all of our assets relating to our HI-Q brand of nutritional supplements,
including the brand name, trademark, product formulations, customer base and
marketing ideas, which comprised all of the assets and business of our
company.  The agreement closed and became effective on May 20, 2002,
immediately prior to our acquisition of the Torpedo business described below. We
received cash consideration of $10,000, plus forgiveness of any uncollected
royalties owed to HI-Q Nutrition, Inc.  In addition, HI-Q Nutrition,
Inc. assumed all liabilities relating to the HI-Q brand products.  At
a special shareholders' meeting held on May 17, 2002, our stockholders approved
the sale of all of eNutrition's assets, and the assumption of all liabilities,
to HI-Q Nutrition, Inc. Our stockholders also approved a one share for 1.8870314
share reverse stock split and the purchase and retirement of 4,478,430
post-reverse-split shares.





-1-


On May
17, 2002, our stockholders also approved our acquisition of all of the issued
and outstanding securities of Torpedo Delaware in exchange for 8,000,000 shares
of our common stock issued to the Torpedo USA stockholders.  On May
20, 2002 we changed our name to Torpedo Sports USA, Inc.  Torpedo USA,
through its wholly-owned subsidiary Torpedo Canada, was a manufacturer and
distributor of outdoor recreational products for children, such as, toboggans,
baby sleds, snowboards, tricycles, scooters and skateboards. The transaction was
recorded as a reverse acquisition based on factors demonstrating that Torpedo
USA constituted the accounting acquirer.





In
January 2004, Torpedo Canada filed in Canada, a notice of its intention to make
a proposal to its creditors for the restructuring of its debts.  The
proposal procedure allowed Torpedo Canada to continue to operate its business
subject to protection of the secured interests of its lenders and suspended
efforts by creditors to collect their debts while Torpedo Canada reviewed and
analyzed its financial condition.  On May 6, 2004, Torpedo Canada
filed for protection under the Bankruptcy and Insolvency Act of Canada with the
intention to liquidate its assets.  Torpedo Canada ceased its
operating activities in May 2004.  In June 2007, we executed a Stock
Purchase Agreement by and between the Company and CLB Investment Corp. (“CLB”),
pursuant to which CLB acquired all of the capital stock of Torpedo Canada in
exchange for $10.00. As a result of this transaction, approximately $2.3 million
in liabilities of Torpedo were eliminated from the consolidated balance sheet
and therefore no longer reflected on our financial statements.





On
February 1, 2005, we acquired all of the issued and outstanding common stock of
Interactive Games, Inc. (“Interactive”).  Pursuant to terms of the
merger agreement, in exchange for all of the issued and outstanding common
shares of Interactive we issued 27,037,282 shares of our common stock to the
former Interactive shareholders in order for them to own 51% of our outstanding
common stock on the closing date of the merger, on a fully diluted
basis.  We agreed to issue additional shares if certain agreed upon
criteria, to be determined, were met in order to allow the former Interactive
security holders to hold 54% of our outstanding common stock (based on the
shares outstanding at the time of closing).  As of October 30, 2007,
we did not issue any of these additional shares.  In connection with
the merger agreement, the former Interactive shareholders agreed to use their
best efforts post-closing to cause our company to raise sufficient funds to
pay-off or otherwise dispose of up to $250,000 of our liabilities.  As
of October 31, 2007, $100,000 has been paid.  Finally, if Torpedo USA
did not dispose of all of assets and liabilities within three months following
the acquisition closing date, we were required to issue an additional 500,000
shares to the former Interactive shareholders.  The Company has
determined that it will issue such shares once Torpedo USA has raised sufficient
shares to satisfy up to $250,000 of its liabilities.





In
conjunction with the merger agreement, we changed our name to Interactive Games,
Inc. and approved an increase in our authorized common stock from 50,000,000
shares to 100,000,000 shares.





The
acquisition of Interactive by us was accounted for as a reverse merger because
on a post-merger basis, the former Interactive shareholders held a majority of
the outstanding common stock of our company on a voting and fully diluted
basis.  As a result, Interactive was deemed to be the acquirer for
accounting purposes.




-2-


In June
2007, our stockholders, through a written consent executed by stockholders
holding a majority of the outstanding shares of our common stock entitled to
vote, adopted and approved Amended and Restated Articles of Incorporation and
ratified the Amended and Restated Bylaws of the Company, which were adopted by
our board of directors on June 26, 2007.





The
Amended and Restated Articles of Incorporation increased the authorized capital
stock of the Company from 105,000,000 shares to 500,000,000 shares, of which
25,000,000 shares now may be preferred stock having the voting powers,
designations, preferences, limitations, restrictions and relative rights as
determined by the board of directors from time to time.  The Company’s
stockholders also authorized our chief executive officer to change our name to
China Nuvo Solar Energy, Inc. at such time as the chief executive officer deemed
appropriate in his sole discretion.





Generally,
the Amended and Restated Bylaws of the Company updated our former bylaws to
reflect changes to applicable law.  For example, under the Amended and
Restated Bylaws stockholders may now take action by written action signed by
stockholders holding a majority of the shares entitled to vote on the given
action.





Pursuant
to an Agreement and Plan of Reorganization dated as of April 23, 2007, as
amended on July 25, 2007 (the “Share Exchange Agreement”), by and between
the Company and Nuvo Solar Energy, Inc., a Colorado corporation (“Nuvo”), we and
Nuvo entered into a share exchange whereby all of the issued and outstanding
capital stock of Nuvo, on a fully-diluted basis, was exchanged for like
securities of the Company, and whereby Nuvo became our wholly owned subsidiary
(the “Share Exchange”).  The Share Exchange was effective as of July
25, 2007, upon the completed filing of Articles of Exchange with the Nevada
Secretary of State and a Statement of Share Exchange with the Colorado Secretary
of State.  Contemporaneously with the Share Exchange, we changed our
name to “China Nuvo Solar Energy, Inc.”





Immediately
prior to the effective time of the Share Exchange, Nuvo had outstanding
5,500,000 shares of its common stock (“Nuvo Common Stock”) and no shares of
preferred stock.  In accordance with the Share Exchange Agreement,
each share of Nuvo Common Stock was acquired by us in exchange for approximately
24.24 shares of our common stock for a total of 133,333,255 shares
issued.  Accordingly, after giving effect to the Share Exchange, the
Company had approximately 189,915,355 shares of Common Stock outstanding
immediately following the transaction.





As a
result of the Share Exchange, the former Nuvo shareholders together held
approximately 66.6% of the Company’s outstanding common stock immediately
following the transaction, on a fully-diluted basis.  Accordingly, the
Share Exchange constituted a change of control of the Company.  As a
result of the Share Exchange, Nuvo constituted the accounting acquirer in the
Share Exchange; however, we elected to have a July 31 fiscal year end, which is
the same fiscal year end that Interactive Games, Inc. had prior to the Share
Exchange.





On June
9, 2006, Nuvo signed a license agreement with Photovoltaics.com, Inc. (“PV”),
which is based in Hutchinson Island, Florida. Nuvo acquired exclusive worldwide
rights to PV's solar cell technology relating to a multiple stacked solar cell
using wave guide transfers. This license agreement includes all patents issued
pursuant to certain patents applications or amendments that have been filed and
the rights to use all applicable copyrights, trademarks and related intellectual
property obtained on or in connection with the process and products. As
consideration for this license, Nuvo agreed to pay a total aggregate license fee
of $250,000, of which $150,000 was paid on June 9, 2006 and $100,000 was paid on
August 11, 2006.  The term of the license was for 10 years and
automatically renewable for successive ten-year terms under the same terms and
conditions as provided for in the license agreement.





-3-


On
January 23, 2008, we purchased from PV the patents related to our solar
technology in exchange for 2,000,000 restricted shares of our common
stock.  We now own all rights, title and interest in the patents,
including all issued patents or other intellectual property arising from the
patents worldwide.





On
November 27, 2007, we executed a Collaboration and Development Agreement (the
“Collaboration Agreement”) with Pioneer Materials, Inc. (“PMI”) of Torrance,
California.  PMI is a manufacturer and supplier of materials for the
semiconductor, hard drive media, optical media and photonic
industries.  PMI is developing for the solar energy industry advanced
materials for thin film photovoltaics (solar cell) processing.  Under
the terms of the Agreement, PMI was to help us build, equip, operate and manage,
for our benefit, a product development, testing and prototype manufacturing
facility in PMI’s Chengdu, Sichuan, China facility located in Chengdu’s West
High Tech development zone.  The agreement with PMI had the objective
to develop, test and manufacture prototypes of solar energy products using our
licensed technology based on an invention titled “Photovoltaic cell with integral
light transmitting waveguide in a ceramic
sleeve”.  Additionally, PMI was to provide technical,
engineering development, testing and manufacturing employees and support
staff.  The term of the Agreement was for one year, with automatic
six-month renewal periods unless terminated by the parties.  Pursuant
to the terms of the Agreement, the Company was to pay PMI $2,500 per month and
PMI was eligible to receive up to 4,000,000 shares of the Company’s common stock
upon the satisfactory completion of certain milestone accomplishments in the
Agreement, of which 500,000 shares of common stock were issued upon the
execution of the Agreement.  In May of 2008, the Chengdu region of
China experienced a catastrophic earthquake.  As a result of this
earthquake and the after effects including significant problems with the
delivery of electricity, PMI suspended their development work for a significant
period of time and has not performed under the agreement.





On
December 10, 2008 we executed a Patent and Trademark Purchase Agreement (the
“Purchase Agreement”) with Photovoltaics, Inc..  Through this
agreement we acquired certain patent rights and trademarks in exchange for
$39,900 paid in installments from December 2008 through July 2009.








(b)           Financial
information about segments.





Through
July 31, 2009, we operated in only one industry segment.





(c)           Narrative
description of business.





We are a
development-stage company that is working to develop and design, with a view
toward manufacturing, solar photovoltaic (PV) cell technology products. We own
certain patent applications and patent rights and other photovoltaic
intellectual property.  Our primary technology involves a unique
patent pending solar cell technology based on photovoltaic cells with integral
light-transmitting wave guides in a ceramic sleeve.  The advantage of this
technology is that less exposed surface area is required to generate
electricity. The light-transmitting particles act as wave guides and allow the
sun-exposed conversion area of the solar cell to be shifted readily from
horizontal to vertical to capture more sunlight. The ceramic sleeve eliminates
the need for expensive vacuum chambers, thereby allowing less expensive
materials to be used in solar cell production.





-4-


We are
working to develop, with plans to eventually manufacture and market in
conjunction with strategic partners, innovative solar cells and solar power
products for a wide range of applications based on our technology that increases
light-trapping while enabling a variety of materials to be used.  Our
primary technology employs multiple stacked solar cells in a ceramic sleeve that
uses nano-particles and crystal wave guides to carry light from the opening down
to the last junction in the solar cell.  Competitors’ processes that
use vacuum chambers (instead of a ceramic sleeve) generally don’t allow for
material substitution because of contamination issues. We believe our primary
technology also will allow manufacturers to quickly and economically shift to
new materials if a shortage of any one type of material occurs. We believe our
technology will offer a flexible, cost-effective solution for increased
light-trapping and therefore increased efficiency.





Our
business plan is focused on developing cost-effective, highly-efficient,
environmentally-friendly solar energy products.  We plan to enter into
strategic partnerships with companies that can help advance our technology and
may also acquire technologies and businesses that will help us implement our
business strategy in certain circumstances.  In order to do so, we
must develop working prototypes that can be readily adapted to larger scale
production and manufacturing.





In an
attempt to minimize the start-up costs of solar cell manufacturing, we signed an
agreement with PMI to establish a pilot production line by building out and
modifying PMI’s existing manufacturing facility located in the Chengdu West High
Tech Development Zone in Chengdu, Sichuan, China.  Following a serious
earthquake in the Chengdu, China region, Pioneer ceased performing under the
contract.  While continuing discussions with PMI as part of the
Collaboration Agreement, we are also seeking other partners to assist us with
the development of our technology with a view toward
commercialization.





Currently,
the Company has begun searching for a U.S.-based technology advisor or chief
technology officer to assist the Company with the development of its
photovoltaic intellectual property.  The Company believes that if the
technology can be proven effective utilizing a production ready prototype, it
will be able to attract a strategic partner to assist in the development of
production and manufacturing activities.





We have
identified the solar energy category as extremely promising because of its
worldwide commercialization efforts to date. Solar power is a distributed energy
technology that uses solar cells to convert the sun's energy to electricity. The
major advantage of solar is its abundance for all purposes.  Today,
the cost of solar power substantially exceeds the cost of power furnished by the
electric utility grid. As a result, federal, state and local governmental bodies
in many countries, most notably the United States, Japan and Germany, have
provided subsidies in the form of cost reductions, tax write-offs and other
incentives to end users, distributors, systems integrators and manufacturers of
solar power products to promote the use of solar energy in on-grid applications
and to reduce dependency on other forms of energy. Nuvo intends to locate and
utilize such incentives in the development of its technology, if and when
available.





-5-


Our
Technology





The
science used in our primary solar cell technology is based on an invention
entitled, “Photovoltaic cell
with integral light transmitting waveguide in a ceramic sleeve”, and
utilizes Cadmium/Tellurium Cadmium/Sulfide powders layered in a ceramic sleeve
with a copper back contact.  The solar cell can utilize a variety of
materials in powdered form layered in a ceramic sleeve with a conductive metal
back contact.  The ceramic sleeve eliminates the need for vacuum
chambers or a vat with a molten material.  A removable lens is clamped
on to the cell.  By having a removable lens, we are able to repair or
add materials to the cell if necessary unlike existing
technology.  The cell utilizes a wave guide to carry light through the
cell.  In addition, the wave guide can photo generate an electrical
potential in the cell.  The material and amount of layers determines
voltage while amperage is dependent in part upon particle size.  In
essence, a multiple stacked solar cell using a wave guide transfers the square
conversion area of the solar cell exposed to the sun from the horizontal to the
vertical.





Our
patent pending technology incorporates a process that is conducive to
manufacturing using a batch process.  This is possible because the
solar cell cylinder itself replaces the necessity to use expensive vacuum
chambers during production.  We believe this approach is the most
expeditious and cost-effective alternative to development of manufacturing
capability.





Our
technology uses a ceramic sleeve as a receptacle for the various materials used
for a solar cell.  The ceramic sleeve replaces typical equipment such
as expensive vacuum chambers thereby permitting the interchangeability of
materials.  Production processes using a vacuum chamber in many cases
cannot interchange materials because of contamination issues. We believe that by
utilizing the technology, if a shortage of one type of material occurs, a shift
can be made quickly and economically to a more cost effective but complementary
material.  The materials that can be used in these cells goes from
soft materials like Cadmium/Tellurium to hard materials like
Silicon.





A
recently published independent report by the Joannopoulos Research Group at the
Massachusetts Institute of Technology (“MIT”) determined that light trapping by
wave guides they put into photovoltaic cells was increased by
37%.  This was accomplished by placing clear crystal particles as
waveguides within the solar cell’s layered or stacked semiconductor
materials.  We believe our technology offers a number of significant
advantages in light trapping efficiencies and certain production economies
compared to current technologies.  We believe our technology can
increase light trapping even further than the MIT method by inter-dispersing
these clear crystal particles in a random manner.  In addition, these
wave guides allow even more layers of photovoltaic materials to be put
down.   The wave guides bring the light down even further than
the few microns it can now travel in most materials.  We believe these
ceramic sleeve solar cells with wave guides lend themselves to ideal cells for
use in a concentrator system and other specialty applications.





How it
works





Our
photovoltaic cells consist of:


·
            An
      initial semiconductor layer, comprised of N type semiconductor1 material having a top surface and a
      bottom surface. Light-transmitting particles are interspersed within the N
      type semiconductor material; and


·
            A
      second semiconductor layer, consisting of P type semiconductor material
      having a top surface and a bottom surface. Light-transmitting particles
      are interspersed within the P type semiconductor material. The top surface
      of the second layer is in direct physical and electrical contact with the
      bottom surface of the first layer to form an N-P junction2.




1
Semiconductors are typically categorized into either N-type or P-type
semiconductors.


2www.freshpatents.com/Photovoltaic-cell-with-integral-light-transmitting-waveguide-in-a-ceramic-sleeve-dt20070920ptan20070215201.php.




-6-


The
generation of electrical current from the lower N-P junctions of a stacked
multi-layer photovoltaic cell results from the transmission of light through
each semiconductor layer to the lower semiconductor layers. As a result,
photovoltaic cells are produced which exhibit greater current-generating
capacity for a given surface area of sunlight exposure.





The
technology utilizes light-transmitting materials reduced to a powder form,
typically through grinding the material to a size of 5 micrometers to 150
micrometers, followed by a further reduction in the particle size to 400 to 800
nanometers.





A wave
guide carries light through the cell. This is achieved by exciting metallic
structures that cause the conduction electrons to oscillate. Conduction
electrons improve the absorption and emission of light from thin planar
semiconductor layers by coupling the light with the wave guide modes of the
semiconductor layer. Enhancing absorption through the use of conduction
electrons also avoids the increase in surface recombination that occurs with
conventional light-trapping methods.





The wave
guide mode concentrates electrical potential in the cell. The material and
amount of layers determines voltage while amperage is determined by particle
size. The multiple stacked solar cell and wave guide mode enables sunlight-
exposed conversion areas to be maximized by shifting the orientation from
horizontal to vertical.





In
addition, the technology enables PV cells to be packaged in any desired physical
shape and with a reduced overall surface area such as cubes or elongated tubular
structures designed to fit within specific size and shape constraints. This
design flexibility greatly reduces the difficulty and costs ofshipping, storing,
deploying, and securing large solar module arrays.





During
the fiscal year 2009, we acquired additional patents and provisional patents
that we believe may further increase the efficiency and lower the cost of our
primary wave guide photovoltaic technology as well as currently available
technology.





Industry
Information





Energy
demand





Electricity
consumption is strongly influenced by economic and population growth in the
world’s developing economies. Demand for electrical power is projected to
increase significantly over the next several decades. Demand increases may be
most dramatic in developing countries where some two billion people still lack
access to electricity, and addressing that issue is a high public
priority.





With the
world population growing at a rate currently estimated at 1.8% annually from an
estimated 6.7 billion currently to 8.9 billion by 2050, energy demand will also
increase substantially. Population growth and rising standards of living in
developing countries should drive an increase in energy demand over the next few
decades.  The US Department of Energy predicts world energy
consumption will grow roughly 70% by 2030.





-7-


The US
Energy Information Administration is predicting that US solar thermal and solar
photovoltaic installed net summer generating capacity will increase to nearly
400 megawatts by the year 2030.





Solar energy industry
trends





Solar
energy offers a clean, safe alternative to energy produced from coal, oil or
natural gas. Electricity is produced at low variable costs and solar energy
plants don’t emit carbon dioxide. Despite these advantages, solar energy
currently accounts for only a small fraction of the world's energy usage. Solar
photovoltaic installations worldwide reached a record high of 3,800 megawatts in
2007.  According to published reports, in 2007 grid-connected
photovoltaic electricity was the fastest growing energy source, with
installations of all photovoltaics increasing by 83% in 2009 to bring the total
installed capacity to 15 GW.





With
government support in more than 40 markets, end-user demand for solar power
significantly exceeds production capacity.  Germany, Japan and the US
are the largest photovoltaic markets.  Solar cell production increased
by 50% in 2007, to 3,800 megawatts, and has been doubling every two years.
Nearly half of the increase was in Germany, now the world's largest consumer of
photovoltaic electricity (followed by Japan).





Silicon
Supplies





Silicon
is the basic material used in the production of solar cells based on crystalline
technology, which account for a vast majority of the world market. During the
mid 2000's silicon usage increased from 14,000 tons in 2004 to 19,000 tons in
2006 and silicon prices rose with demand.  While prices have fallen
and silicon supplies have increased, future silicon shortages and rising prices
would compress the margins of solar cell manufacturers who rely on poly-silicon
semiconductor materials, despite strong demand for solar photovoltaics. Because
CNUV’s solar cell technology can use a variety of materials, the Company would
not be impacted by potential silicon shortages and might actually benefit from
market share gains made at the expense of higher- cost solar cell manufacturers
if it were to reach production.





High oil
prices





Rising
oil prices make solar energy an increasingly attractive and affordable power
alternative. After surging nearly 58% in 2007 (the biggest annual gain in
a decade), crude oil prices reached a high of over $140 per barrel in
2008.  While prices have since fallen to below $50 at times during
2009, prices have increased to more than $80 in the fourth quarter of
2009.





Competition





Companies
pursuing similar technologies including different but related fields represent
substantial competition. Many of these organizations are some of the largest
companies in the world and have substantially greater capital resources,
research and development staffs and facilities, as well as greater manufacturing
and marketing capabilities than we do.   These organizations also
compete with Nuvo to attract qualified personnel, parties for acquisitions,
joint ventures or other collaborations.  As a result, there is no
assurance that our technology will prove viable or that it will be able to
compete with these larger organizations to produce any product or
service.





-8-


Government
Regulation




The
market for electricity generation products is heavily influenced by foreign,
federal, state and local government regulations and policies concerning the
electric utility industry, as well as internal policies and regulations
promulgated by electric utilities. These regulations and policies often relate
to electricity pricing and technical interconnection of customer-owned
electricity generation. In the United States and in a number of other countries,
these regulations and policies are being modified and may continue to be
modified. We will also be required to comply with all foreign, federal, state
and local regulations regarding protection of the
environment.





Compliance
with Environmental Laws





We are
required to comply with all foreign, federal, state and local regulations
regarding protection of the environment. If more stringent regulations are
adopted in the future, the costs of compliance with these new regulations could
be substantial. We may need to procure certain governmental and other permits to
conduct our business. If we fail to comply with present or future environmental
regulations, however, we may be required to pay substantial fines, suspend
future production or cease operations. The manufacture of our potential products
may use, generate and discharge toxic, volatile and otherwise hazardous
chemicals and wastes. Any failure by us to control the use of, or to restrict
adequately the discharge of, hazardous substances could subject us to
potentially significant monetary damages and fines or suspensions in our
business operations. In addition, under some foreign, federal and state statutes
and regulations, a governmental agency may seek recovery and response costs from
operators of property where releases of hazardous substances have occurred or
are ongoing, even if the operator was not responsible for such release or
otherwise at fault.





Employees





The
Company currently does not have any full or part-time employees other than its
officers.





ITEM
1A.  RISK FACTORS





In
General.  The purchase of shares of our common stock is very
speculative and involves a very high degree of risk.  An investment in
us is suitable only for the persons who can afford the loss of their entire
investment.  Accordingly, investors should carefully consider the
following risk factors, as well as other information set forth herein, in making
an investment decision with respect to securities of the Company.





The market price of our common stock
may fluctuate significantly.





The
market price of our common shares may fluctuate significantly in response to
factors, some of which are beyond our control, such as:





·
            the
      announcement of new products or product enhancements by us or our
      competitors;


·
            developments
      concerning intellectual property rights and regulatory
      approvals;


·
            quarterly
      variations in our and our competitors’ product development activities or
      results of operations;


·
            changes
      in earnings estimates or recommendations by securities
      analysts;


·
            developments
      in our industry; and


·
            general
      market conditions and other factors, including factors unrelated to our
      own operating performance.





-9-


Further,
the stock market in general has recently experienced extreme price and volume
fluctuations.  Continued market fluctuations could result in extreme
volatility in the price of our common shares, which could cause a decline in the
value of our common shares.  You should also be aware that price
volatility might be worse if the trading volume of our common shares is
low.





Because
we gained access to the public markets through a share exchange, we may not be
able to attract the attention of major brokerage firms.





Additional risks may exist since we
gained access to the public markets through a share
exchange.  Security analysts of major brokerage firms may not cover us
since there is no incentive to brokerage firms to recommend the purchase of our
common stock.  No assurance can be given that brokerage firms will
want to conduct any secondary offerings on our behalf in the
future.





Trading
of our common stock is limited.





Trading
of our common stock is conducted on the National Association of Securities
Dealers’ Over-the-Counter Bulletin Board, or “OTC Bulletin Board.” This has
adversely effected the liquidity of our securities, not only in terms of the
number of securities that can be bought and sold at a given price, but also
through delays in the timing of transactions and reduction in security analysts'
and the media's coverage of us. This may result in lower prices for our common
stock than might otherwise be obtained and could also result in a larger spread
between the bid and asked prices for our common stock.





Because it is a “penny stock,” it will
be more difficult for you to sell shares of our common stock.





Our common stock is a “penny stock.”
Broker-dealers who sell penny stocks must provide purchasers of these stocks
with a standardized risk-disclosure document prepared by the SEC. This document
provides information about penny stocks and the nature and level of risks
involved in investing in the penny-stock market. A broker must also give a
purchaser, orally or in writing, bid and offer quotations and information
regarding broker and salesperson compensation, make a written determination that
the penny stock is a suitable investment for the purchaser, and obtain the
purchaser’s written agreement to the purchase. The penny stock rules may make it
difficult for you to sell your shares of our stock. Because of the rules, there
is less trading in penny stocks. Also, many brokers choose not to participate in
penny-stock transactions.  Accordingly, you may not always be able to
resell shares of our common stock publicly at times and prices that you feel are
appropriate.





-10-





Risks Related to Our
Business





We
currently have no product revenues and will need to raise additional capital to
operate our business.





To date,
we have generated minimal product revenues.  Until we are able to
prove that our proprietary solar technology will work on a large commercial
scale and can set up adequate manufacturing facilities ourselves or find a
strategic partner to do so for us, we will not have product revenues. Therefore,
for the foreseeable future, we will have to fund all of our operations and
capital expenditures from additional financing, which may not be available on
favorable terms, if at all.  If we are unable to raise additional
funds on acceptable terms, or at all, we may be unable to complete the
development of our solar technology and set up adequate manufacturing facilities
to produce a commercially viable product.  In addition, we could be
forced to discontinue product development at any time.  Any additional
sources of financing will likely involve the sale of our equity securities or
issuance of debt instruments that may be convertible into our common stock,
which could have a substantial dilutive effect on our stockholders.





We
are not currently profitable and may never become profitable.





We have a
history of losses and expect to incur substantial losses and negative operating
cash flow for the foreseeable future, and we may never achieve or maintain
profitability. Even if we succeed in developing and commercializing one or more
products, we expect to incur substantial losses for the foreseeable future and
may never become profitable.  We also expect to continue to incur
significant operating and capital expenditures and anticipate that our expenses
will increase substantially in the foreseeable future as we continue to
undertake research and development of potential alternative energy
sources.





We also expect to experience negative
cash flow for the foreseeable future as we fund our operating losses and capital
expenditures. As a result, we will need to generate significant revenues in
order to achieve and maintain profitability. We may not be able to generate
these revenues or achieve profitability in the future. Our failure to achieve or
maintain profitability could negatively impact the value of our
stock.





We
have a lack of operating history in which to base an investment
decision.





We are a
relatively new company that has a very limited operating history.  Our
acquisition of solar cell technology provides us with an opportunity for new
business development, which carries continued unique risks inherent with any new
business opportunity.  As a relatively new company, Nuvo is subject to
unforeseen costs, expenses, problems and difficulties inherent in new business
ventures.





Our
operations to date have been limited to organizing the company, acquiring and
securing the proprietary technology, and limited product development. These
operations provide a limited basis for you to assess our ability to
commercialize any product and the advisability of investing in our
securities.





No
assurance of success or profitability.





We have
no current business operations and expect to incur significant losses and
negative operating cash flow for the foreseeable future, and we may never
achieve or maintain profitability. Even if we succeed in developing and
commercializing one or more products, we expect to incur losses for the
foreseeable future and may never become profitable.





-11-


We
currently have outstanding debt that is convertible into shares of our common
stock at prices that may be significantly below the market price at any given
time and therefore significant dilution could occur to our current
stockholders.





At July
31, 2009, we had a total of $624,000 in debt that is convertible into shares of
our common stock at a discount of up to 25% of the market price for our common
stock at any given time.  The conversion of any or all of this debt
could result in significant dilution to our stockholders at the time such debt
is converted.





We
currently have stock options and common stock purchase warrants outstanding that
may be exercisable at prices below the market price for our common stock at any
given time that could result in significant dilution to our
stockholders.





At July
31, 2009, we had a total of 11,537,107 stock options and common stock purchase
warrants outstanding exercisable at a weighted average exercise price of $0.09
at that date.  The conversion of any or all of these options and
warrants could occur at prices below the market price of our common stock at a
given time and could cause substantial dilution to our
stockholders.  In addition, as we seek to raise additional capital to
fund our future business operations, we could issue additional stock options and
warrants at prices below market that cause additional dilution to our
stockholders.


We
may fail to successfully bring to market products based on our technology, which
may prevent us from achieving product sales and market share.
 
 We expect
to derive a substantial portion of our revenues from sales of new solar power
products that are under development and not yet commercially available. If we
fail to successfully develop our new solar power products or technologies, we
will likely be unable to recover the losses we may incur to develop these
products and technologies and may be unable to establish our sales and market
share and become profitable. Many of our proposed product and manufacturing
technologies are novel and represent a departure from conventional solar power
technologies, and it is difficult to predict whether we will be successful in
completing their development.





Evaluating
our business and future prospects may be difficult due to the rapidly changing
market landscape.
 
 The
market we are attempting to enter is rapidly evolving and is experiencing
technological advances and new market entrants. Our future success will require
us to commercialize our technology and we have limited experience upon which to
predict whether it will be successful. As a result, you should consider our
business and prospects in light of the risks, expenses and challenges that we
will face as an early-stage company seeking to develop and manufacture new
products in a growing and rapidly evolving market.





Any
future solar power products may not gain market acceptance, which would prevent
us from achieving increased sales and market share.
 
 The
development of a successful market for solar power products may be adversely
affected by a number of factors, many of which are beyond our control,
including:
  -12-


·
              our
      failure to produce solar power products that compete favorably against
      other solar power products on the basis of cost, quality and
      performance;
 ·
              whether
      or not customers will accept our new technology and any products based on
      that technology; and
 ·
              our
      failure to develop and maintain successful relationships with
      distributors, systems integrators and other resellers, as well as
      strategic partners.





If our
proposed solar power products fail to gain market acceptance, we would be unable
to establish sales and market share and to achieve and sustain
profitability.





Technological
changes in the solar power industry could render any future solar power products
uncompetitive or obsolete, which could reduce our market share and cause our
sales to decline.
 
 Our
failure to develop our technology and introduce new solar power products could
cause our technology to become uncompetitive or obsolete, which could reduce our
ability to sell products or gain market share and cause potential sales to
decline. The solar power industry is rapidly evolving and competitive. We will
need to invest significant financial resources in future research and
development to keep pace with technological advances in the solar power industry
and to effectively compete in the future. Our development efforts may be
rendered obsolete by the technological advances of others and other technologies
may prove more advantageous for the commercialization of solar power
products.





Our
success in the future may depend on our ability to establish and maintain
strategic alliances, and any failure on our part to establish and maintain such
relationships would adversely affect our market penetration and revenue
growth.
 
 We may be
required to establish strategic relationships with third parties in the solar
power industry, including in international markets.  Our ability to
establish strategic relationships will depend on a number of factors, many of
which are outside our control, such as the competitive position of our
technology and our products relative to our competitors. We can provide no
assurance that we will be able to establish other strategic relationships in the
future.
 
 In
addition, any strategic alliances that we establish, will subject us to a number
of risks, including risks associated with sharing proprietary information, loss
of control of operations that are material to developed business and
profit-sharing arrangements. Moreover, strategic alliances may be expensive to
implement and subject us to the risk that the third party will not perform its
obligations under the relationship, which may subject us to losses over which we
have no control or expensive termination arrangements. As a result, even if our
strategic alliances with third parties are successful, our business may be
adversely affected by a number of factors that are outside of our
control.





Our
management team may not be able to successfully implement our business
strategies.
 
 Our
management team has limited experience in the alternative energy
sector.  If our management team is unable to execute on its business
strategies, then our product development, the establishment of manufacturing
operations and distribution network and our sales and marketing activities would
be materially and adversely affected. In addition, we may encounter difficulties
in effectively managing the budgeting, forecasting and other process control
issues presented by any future growth. We may seek to augment or replace members
of our management team or we may lose key members of our management team, and we
may not be able to attract new management talent with sufficient skill and
experience.





-13-


We
will compete with organizations of all sizes from multinational manufacturing
and energy companies to similar sized startup companies as well as research and
educational institutions.   Developments by competitors may
render our technologies or potential products obsolete or
non-competitive.





Companies
pursuing similar technologies including different but related fields represent
substantial competition. Many of these organizations are some of the largest
companies in the world and have substantially greater capital resources,
research and development staffs and facilities, as well as greater manufacturing
and marketing capabilities than we do.   These organizations also
compete with us to attract qualified personnel, parties for acquisitions, joint
ventures or other collaborations.  As a result, there is no assurance
that our technology will prove viable or that we will be able to compete with
these larger organizations to produce any product or service.





Existing
regulations and changes to such regulations may present technical, regulatory
and economic barriers to the purchase and use of solar power products, which may
significantly reduce demand for our products.
 
 The
market for electricity generation products is heavily influenced by foreign,
federal, state and local government regulations and policies concerning the
electric utility industry, as well as internal policies and regulations
promulgated by electric utilities. These regulations and policies often relate
to electricity pricing and technical interconnection of customer-owned
electricity generation. In the United States and in a number of other countries,
these regulations and policies are being modified and may continue to be
modified. Customer purchases of, or further investment in the research and
development of, alternative energy sources, including solar power technology,
could be deterred by these regulations and policies, which could result in a
significant reduction in the potential demand for our solar power products. For
example, utility companies commonly charge fees to larger, industrial customers
for disconnecting from the electric grid or for having the capacity to use power
from the electric grid for back-up purposes. These fees could increase the cost
to our customers of using our solar power products and make them less desirable,
thereby harming our business, prospects, results of operations and financial
condition. We anticipate that our solar power products and their installation
will be subject to oversight and regulation in accordance with national and
local ordinances relating to building codes, safety, environmental protection,
utility interconnection and metering and related matters. There is also a burden
in having to track the requirements of individual states and design equipment to
comply with the varying standards. Any new government regulations or utility
policies pertaining to our solar power products may result in significant
additional expenses to us and our resellers and their customers and, as a
result, could cause a significant reduction in demand for our solar power
products.





-14-


Compliance
with environmental regulations can be expensive, and noncompliance with these
regulations may result in adverse publicity and potentially significant monetary
damages and fines.
 
 We are
required to comply with all foreign, federal, state and local regulations
regarding protection of the environment. If more stringent regulations are
adopted in the future, the costs of compliance with these new regulations could
be substantial. We may need to procure certain governmental and other permits to
conduct our business. If we fail to comply with present or future environmental
regulations, however, we may be required to pay substantial fines, suspend
future production or cease operations. The manufacture of our potential products
may use, generate and discharge toxic, volatile and otherwise hazardous
chemicals and wastes. Any failure by us to control the use of, or to restrict
adequately the discharge of, hazardous substances could subject us to
potentially significant monetary damages and fines or suspensions in our
business operations. In addition, under some foreign, federal and state statutes
and regulations, a governmental agency may seek recovery and response costs from
operators of property where releases of hazardous substances have occurred or
are ongoing, even if the operator was not responsible for such release or
otherwise at fault.
 
 Product
liability claims against us could result in adverse publicity and potentially
significant monetary damages.
 
 Like
other retailers, distributors and manufacturers of products that are used by
consumers, we may face an inherent risk of exposure to product liability claims
in the event that the use of the solar power products we intend to sell results
in injury. Since our intended products are electricity producing devices, it is
possible that consumers could be injured or killed by potential products,
whether by product malfunctions, defects, improper installation or other causes.
In addition, we cannot predict whether product liability claims will be brought
against us in the future or the effect of any resulting adverse publicity on our
business. Moreover, we may not have adequate resources in the event of a
successful claim against us. We will need to evaluate the potential risks we
face and procure appropriate levels of insurance for product liability
claims.  There is no assurance we will be able to afford such coverage
to adequately protect the Company and its stockholders.  The
successful assertion of any future product liability claims against us could
result in potentially significant monetary damages and if any insurance
protection is inadequate to cover these claims, they could require us to make
significant payments.





If
we fail to adequately protect or enforce our intellectual property rights or
secure rights to patents of others, the value of our intellectual property
rights would diminish.





Our
success, competitive position and future revenues will depend in part on our
ability, and the abilities of any licensors we may engage, to obtain and
maintain patent protection for our products, methods, processes and other
technologies, to preserve our trade secrets, to prevent third parties from
infringing on our proprietary rights and to operate without infringing the
proprietary rights of third parties.





We cannot
predict:





the
      degree and range of protection any patents will afford us against
      competitors, including whether third parties will find ways to invalidate
      or otherwise circumvent our licensed
patents;


·
            if
      and when patents will issue;


·
            whether
      or not others will obtain patents claiming aspects similar to those
      covered by our licensed patents and patent applications;
  or


·
            whether
      we will need to initiate litigation or administrative proceedings which
      may be costly whether we win or
lose.





-15-


Our
success also depends upon the skills, knowledge and experience of our scientific
and technical personnel, our consultants and advisors as well as any licensors
and contractors.  To help protect our proprietary know-how and our
inventions for which patents may be unobtainable or difficult to obtain, we will
rely on trade secret protection and confidentiality agreements.  To
this end and to the extent possible, we intend to require all of our employees
and consultants to enter into agreements which prohibit the disclosure of
confidential information and, where applicable, require disclosure and
assignment to us of the ideas, developments, discoveries and inventions
important to our business. These agreements may not provide adequate protection
for our trade secrets, know-how or other proprietary information in the event of
any unauthorized use or disclosure or the lawful development by others of such
information.  If any of our trade secrets, know-how or other
proprietary information is disclosed, the value of our trade secrets, know-how
and other proprietary rights would be significantly impaired and our business
and competitive position would suffer.





If
we infringe the rights of third parties we could be prevented from selling
products, forced to pay damages, and defend against litigation.





If our
products, methods, processes and other technologies infringe the proprietary
rights of other parties, we could incur substantial costs and we may have
to:





·
            obtain
      licenses, which may not be available on commercially reasonable terms, if
      at all;


·
            redesign
      our products or processes to avoid
infringement;


·
            stop
      using the subject matter claimed in the patents held by others, which
      could cause us to lose the use of one or more of our product
      candidates;


·
            pay
      damages; or


·
            defend
      litigation or administrative proceedings which may be costly whether we
      win or lose, and which could result in a substantial diversion of our
      valuable management resources.





We
rely on key executive officers and scientific advisors, and their knowledge of
our business and technical expertise would be difficult to replace.





We
currently do not have a key scientific advisor or chief technical officer with
knowledge of our technology.  As such, we have been unable to
significantly advance the development of our intellectual property during the
past fiscal year.  We also do not have “key person” life insurance
policies for any of our officers.  The loss of the technical knowledge
and management and industry expertise of any of our current or future key
personnel could result in delays in product development, loss of customers and
sales and diversion of management resources, which could adversely affect our
operating results.





If
we are unable to hire additional qualified personnel, our ability to grow our
business may be harmed.





We will
need to hire additional qualified personnel with expertise in solar cell
technology, government regulation, development and manufacturing, and sales and
marketing. We may face significant competition for qualified individuals, and we
cannot be certain that our search for such personnel will be successful.
Attracting and retaining qualified personnel will be critical to our
success.





-16-


Risks
Related to Doing Business in China





Adverse changes
in political and economic policies of the Peoples Republic of China (PRC)
government could have a material adverse effect on the overall economic growth
of China, which could reduce the demand for our anticipated products and
materially and adversely affect our competitive position.





We have
intentions to conduct certain business operations in China and a portion of our
potential sales could be made in China in the future. Accordingly, our business,
financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The
Chinese economy differs from the economies of most developed countries in many
respects, including:





·
            the
      amount of government involvement;


·
            the
      level of development;


·
            the
      growth rate;


·
            the
      control of foreign exchange; and


·
            the
      allocation of resources.





While the
Chinese economy has grown significantly in recent years, the growth has
been uneven, both geographically and among various sectors of the economy. The
PRC government has implemented various measures to encourage economic growth and
guide the allocation of resources. Some of these measures benefit the overall
Chinese economy, but may also have a negative effect on us. For example, our
financial condition and results of operations may be adversely affected by
government control over capital investments or changes in tax regulations that
are applicable to us.





The
Chinese economy has been transitioning from a planned economy to a more
market-oriented economy. Although in recent years the PRC government has
implemented measures emphasizing the utilization of market forces for economic
reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises, a
substantial portion of the productive assets in China is still owned by the PRC
government. The continued control of these assets and other aspects of the
national economy by the PRC government could materially and adversely affect our
business. The PRC government also exercises significant control over Chinese
economic growth through the allocation of resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies. Efforts by the PRC
government to slow the pace of growth of the Chinese economy could result in
decreased capital expenditure by solar energy users, which in turn could reduce
demand for our anticipated products.





Any
adverse change in the economic conditions or government policies in China could
have a material adverse effect on the overall economic growth and the level of
renewable energy investments and expenditures in China, which in turn could lead
to a reduction in demand for our anticipated products and consequently have a
material adverse effect on our businesses.





-17-





Uncertainties
with respect to the Chinese legal system could have a material adverse effect on
us.





We could
conduct a substantial portion of our business through an agreement with third
parties that conducts a majority of their business in China. These arrangements
may be subject to laws and regulations applicable to foreign investment in China
and, in particular, laws applicable to foreign-owned enterprises. The PRC legal
system is based on written statutes. Prior court decisions may be cited for
reference but have limited precedential value. Since 1979, PRC legislation and
regulations have significantly enhanced the protections afforded to various
forms of foreign investments in China. However, since these laws and regulations
are relatively new and the PRC legal system continues to rapidly evolve, the
interpretations of many laws, regulations and rules are not always uniform and
enforcement of these laws, regulations and rules involve uncertainties, which
may limit legal protections available to us. In addition, any litigation in
China may be protracted and result in substantial costs and diversion of
resources and management attention.





Restrictions on
currency exchange may limit our ability to receive and use our revenues
effectively.





Foreign
exchange transactions by companies under China’s capital account continue to be
subject to significant foreign exchange controls and require the approval of PRC
governmental authorities.








ITEM
2.  PROPERTIES.





Our
executive offices are located at 319 Clematis Street – Suite 703, West Palm
Beach, Florida 33401 and are provided to us on a month to month basis by a
corporation in which our officers and director are affiliated.  This
space was provided to rent free during the year ended July 31, 2009 and included
the use of office space and the occasional use of fax machines, copy machines
and other office equipment for which we paid nominal service fees.








ITEM
3.  LEGAL PROCEEDINGS.





Our
company is not a party in to any bankruptcy, receivership or other legal
proceeding, and to the best of our knowledge, no such proceedings by or against
us have been threatened.








ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
HOLDERS.





None.








-18-





PART
II





ITEM
5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.





(a)           Market
information.





Our
common stock is quoted on the Over-the-Counter Bulletin Board, or “OTC Bulletin
Board” under the trading symbol “CNUV”.  The following table lists the
high and low bid information for our common stock as quoted on the OTC Bulletin
Board for the fiscal years ended 2008 and 2009, respectively:





Price
      RangeQuarter
      Ended
            
            High
      ($)
            
            Low
      ($)October
      31, 2007
            
            .13
            
            .06January
      21, 2008
            
            .17
            
            .06April
      30, 2008
            
            .12
            
            .04July
      31, 2008
            
            .06
            
            .02October
      31, 2008
            
            .027
            
            .01January
      21, 2009
            
            .016
            
            .005April
      30, 2009
            
            .01
            
            .004July
      31, 2009
            
            .014
            
            .005





The above
quotations from the OTC Bulletin Board reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.




(b)           Holders.





The
number of record holders of our common stock as of November 11, 2009, was
approximately 83 based on information received from our transfer
agent.  This amount excludes an indeterminate number of shareholders
whose shares are held in “street” or “nominee” name with a brokerage firm or
other fiduciary.





(c)           Dividends.





We have
not paid or declared any dividends on our common stock and we do not anticipate
paying dividends on our common stock for the foreseeable future.





(d)           Securities
authorized for issuance under equity compensation plans.





We have
the following securities authorized for issuance under our equity compensation
plans as of July 31, 2009.  This includes our 2002 Stock Option Plan,
covering up to 1,000,000 shares of our common stock, our 2003 Stock Option Plan
covering up to 2,500,000 shares of our common stock and our 2007 Stock Option
Plan covering up to 18,000,000 shares of our common stock.


-19-








Equity
Compensation Plan Information


Plan
      category
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
            
            (b)
            
            (c)Equity
      compensation plans approved by security holders
            -0-
            
            $-0-
            
            -0-Equity
      compensation plans not approved by security holders
            6,500,000
            
            $0.07
            
            15,000,000Total
            6,500,000
            
            $0.07
            
            15,000,000





The
purpose of both the 2003 Stock Option  Plan and the 2007 Stock
Option  Plan (together the “Plans”) is to increase shareholder value
and to advance the interests of the Company by furnishing a variety of economic
incentives designed to attract, retain and motivate employees, directors and
consultants.  Incentives may consist of opportunities to purchase or
receive shares of the Company’s common stock.  Grants may include both
purchase options as well as direct grants of common shares upon conversion of
accrued salaries, bonuses, notes payable, fees or other similar payments due
from us to an eligible participant.  The Plans are administered by our
board of directors which determines the terms of all grants including their
term, exercise price and vesting period, if applicable.  Generally,
grants must be at least 100% of the fair market value of our common stock on the
date of grant and may be exercisable for up to ten years.





Recent Sales of Unregistered
Equity Securities





On May 4,
2009, the Company issued 6,357,666 shares of its common stock upon the
conversion of $17,500 of convertible debentures and $1,573 of accrued interest
to non-affiliated third parties.  The shares were converted at $0.003
per share.





On June
5, 2009 the Company issued 7,092,195 shares of its common stock upon the
conversion of $25,000 of convertible debentures to non-affiliated third parties.
The shares were converted at $0.003525 per share.





On July
27, 2009 the Company issued 21,697,324 shares of its common stock upon the two
year mandatory conversion of the Company’s preferred stock of $98,650 (the
“Stated Value”). Per the terms of the Certificate of Designation, the preferred
stock converted at the result of the Stated Value multiplied by 120%, divided by
the average of the closing price for the twenty (20) days prior to the
conversion multiplied by seventy five percent (75%).  This conversion
represents only a portion of the preferred stock outstanding.  The
remaining amount of preferred stock outstanding at July 31, 2009 is $437,241 and
the holders of those shares and the Company have agreed to extend the mandatory
conversion period for one additional year to July 27, 2010.





On July
30 and 31, 2009, the Company issued in the aggregate 10,424,089 shares of its
common stock upon the conversion of $42,500 of convertible debentures and $2,063
of accrued interest to non-affiliated third parties. The shares were converted
at $0.004275 per share.





-20-


Also on
July 31, 2009 the Company issued in the aggregate 16,673,152 shares of its
common stock upon the conversion of $7,375 of accrued expenses related party,
$73,132 and $3,372 of related party notes payable and accrued interest
thereon.  The debt was converted at an average price of approximately
$.005 per share.





We
offered and sold the securities in reliance on an exemption from federal
registration under Section 4(2) of the Securities Act of 1933 and Rule 506
promulgated thereunder. We relied on this exemption and rule based on the fact
that there were a limited number of investors, all of whom were accredited
investors and (i) either alone or through a purchaser representative, had
knowledge and experience in financial and business matters such that each was
capable of evaluating the risks of the investment, and (ii) we had obtained
subscription agreements from such investors indicating that they were purchasing
for investment purposes only. The securities were not registered under the
Securities Act and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements. The
disclosure contained herein does not constitute an offer to sell or a
solicitation of an offer to buy any securities of the Company, and is made only
as permitted by Rule 135c under the Securities Act.








ITEM
6.    SELECTED FINANCIAL DATA





Not
applicable.





ITEM
7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.





General:





The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes thereto for the years ended July 31, 2009 and
2008.





The
independent auditors’ report on our financial statements for the years ended
July 31, 2009 and 2008 includes a “going concern” explanatory paragraph that
describes substantial doubt about our ability to continue as a going
concern.  Management’s plans in regard to the factors prompting the
explanatory paragraph are discussed below and also in Note 1 to the audited
consolidated financial statements.





While our
independent auditor has presented our financial statements on the basis that we
are a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
length of time, they have raised a substantial doubt about our ability to
continue as a going concern.




(a)           Liquidity
and Capital Resources.





For the
year ended July 31, 2009, net cash used in operating activities was $133,082
compared to $553,302 for the year ended July 31, 2008.  Net loss was
$787,050 for the year ended July 31, 2009 compared to $1,310,229 for the year
ended July 31, 2008. The net loss in the current period includes net non-cash
expenses of $388,352, of which $157,708 are costs associated with the issuance
of common stock and warrants and $304,950 of depreciation and
amortization.  These non cash expenses were offset by a change in the
minority interest of $74,402.  The net loss in the year ago period
includes net non-cash expenses of $555,731 of which $572,010 are costs
associated with the issuance of common





-21-





stock and
warrants and $323,424 of depreciation and amortization expense.  These
expenses were offset by a decrease of $278,417 in the derivative liabilities of
the Company related to the unsecured convertible debentures, and $61,286 for
minority interest.





Net cash
used in investing activities for the years ended July 31, 2009 and 2008 was
$39,900 and $3,501 respectively. The 2009 amount was a result of payments made
to acquire intellectual property rights.





Net cash
provided by financing activities for the year ended July 31, 200 was $172,344
compared to $524,721 for the year ended July 31, 2008. For the year ended July
31, 2009, the Company received net proceeds of $157,405, offset by the repayment
of $4,409 of notes payable.  Additionally the Company received
payments of $19,858 from collections on notes and interest
receivables.  For the year ended July 31, 2008, the Company received
net proceeds of $718,285 on the issuance of notes payable and convertible
debentures and $50,000 from the sale of subsidiary common stock.  The
Company also repaid $144,605 of notes payable, $76,650 paid for placement fees
related to convertible debentures and $23,300 paid in exchange for a note
receivable from a related party.





For the
year ended July 31, 2009, cash and cash equivalents increase by $638 compared to
a decrease of $32,082 for the year ended July 31, 2008.  Ending cash
and cash equivalents at July 31, 2009 was $304 compared to $942 at July 31,
2008.





We have
limited cash and cash equivalents on hand and need to raise funds to continue to
be able to support our operating expenses and to meet our other obligations as
they become due.  Sources available to us that we may utilize include
the sale of unsecured convertible debentures, as well as the exercise of
outstanding options and warrants, all of which may cause dilution to our
stockholders.





(b)              Results
of Operations.





OPERATING
EXPENSES





Operating
expenses for the year ended July 31, 2009 were $520,168 compared to expenses of
$1,290,518 for the year ended July 31, 2008.  The 2009 expenses
includes stock compensation costs of $157,708 comprised of deferred stock
compensation expensed, management fees paid to related parties of $180,750,
consulting and accounting and legal costs of $66,109 and $47,533 respectively
and $68,068 of general and administrative costs. The 2008 expenses includes
stock compensation costs of $572,010 comprised of the issuance of 5,000,000
options to  directors and officers of the Company valued at $285,000
(based on the Black-Scholes option pricing model), the issuance of 1,100,000
shares of common stock, valued at $0.08 per share (the market price of the
common stock on the date of issuance) issued to the placement agent as part of
their fee related to convertible debentures, the Black Scholes option pricing
model cost of $35,125 for the issuance to two third parties of the aggregate of
375,000 warrants to purchase shares of common stock at





-22-





$0.10 per
share, the extension of warrants, valued at $8,250 (based on the Black-Scholes
option pricing model), that were to expire, $35,000 deferred stock compensation
expensed, $4,500 for the issuance of 50,000 shares of common stock valued at
$0.07 (the market price of the common stock on the date of issuance) and $24,376
amortization of stock based compensation.  The 375,000 warrants were
issued in conjunction with notes payable issued of $125,000.  Legal
and accounting expenses of $86,992 were incurred for the year ended July 31,
2008 related to the Share Exchange, as well as public company
expenses.  Management and consulting fees of $298,750 are comprised of
fees we pay our chief executive officer ($10,000 per month), corporate secretary
($3,000 per month) and a financial consultant ($2,250 per month beginning in
October 2007), and $5,000 per month under our Licensing Agreement with
PV.  Other expenses of $183,016 were general and administrative
costs.





OTHER
INCOME (EXPENSE)





Other
income, net for the year ended July 31, 2009 was $270,048 compared to $26,311
for the year ended July 31, 2008.  The expense for the change in
derivative liabilities included in other income (expenses) for the year ended
July 31, 2009 was $96 compared to a credit of $278,417 for the year ended July
31, 2008.  Interest expense for the years ended July 31, 2009 and 2008
is summarized as:





July
      31,2009
            
            
            2008Amortization
      of debenture note discounts
            
            $
            277,390
            
            
            $
            296,833Debenture
      interest
            
            
            26,951
            
            
            
            23,890Notes
      interest, related
            
            
            24,383
            
            
            
            27,709Note
      and other interest
            
            
            17,605
            
            
            
            20,239$
            346,329
            
            
            $
            393,671




(c)           Off-Balance
sheet arrangements





During
the fiscal year ended July 31, 2009, the Company did not engage in any
off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation
S-B.








ITEM
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Market
risk is the potential loss arising from adverse changes in market rates and
prices, such as interest rates and a decline in the stock market. We do not
enter into derivatives or other financial instruments for trading or speculative
purposes. We have limited exposure to market risks related to changes in
interest rates. We do not currently invest in equity instruments of public or
private companies for business or strategic purposes.





The
principal risks of loss arising from adverse changes in market rates and prices
to which we are exposed relate to interest rates on debt. We have only fixed
rate debt. We had $744,440 of debt outstanding as of July 31, 2009, which has
been borrowed at fixed rates ranging from 8% to 12% All of this fixed rate debt
is due on demand or is due during the current fiscal year.


-23-


ITEM
8.  FINANCIAL STATEMENTS.





The
financial statements and related information required to be filed are indexed
and begin on page F-1 and are incorporated herein.








ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE





Not
applicable.








ITEM
9A(T).  CONTROLS AND PROCEDURES.





Evaluation of Disclosure
Controls and Procedures





A review
and evaluation was performed by the Company's management, including the
Company's Chief Executive Officer (the "CEO") and Chief Financial Officer (the
“CFO”), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the period covered by this
quarterly report. Based on that review and evaluation, the CEO and CFO have
concluded that as of July 31, 2009 disclosure controls and procedures, were
effective at ensuring that the material information required to be disclosed in
our Exchange Act reports is recorded, processed, summarized and reported as
required in the application of SEC rules and forms.





Management’s Report on
Internal Controls over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is a
set of processes designed by, or under the supervision of, a company’s principal
executive and principal financial officers, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP and includes
those policies and procedures that:





•
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect our transactions and dispositions of our
      assets;


•
            Provide
      reasonable assurance our transactions are recorded as necessary to permit
      preparation of our financial statements in accordance with GAAP, and that
      receipts and expenditures are being made only in accordance with
      authorizations of our management and directors;
  and


•
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statement.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. It should be noted that any system of internal
control, however well designed and operated, can provide only reasonable, and
not absolute, assurance that the objectives of the system will be met. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.





-24-


Our CEO
and CFO have evaluated the effectiveness of our internal control over financial
reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the
end of the period covered by this report based upon criteria established in
“Internal Control-Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) to the extent possible given the
limited personnel resources and technological infrastructure in place to perform
the evaluation.  Based upon our management’s discussions with our
auditors and other advisors, our CEO and CFO believe that, during the period
covered by this report, such internal controls and procedures were not effective
as described below.





In
connection with the 2008 audit and the 2009 quarterly reviews, our independent
registered public accounting firm has advised us and our Board of Directors that
there are material weaknesses in our internal controls and
procedures.  The identified material weaknesses primarily relate to
the limited number of Company employees engaged in the authorization, recording,
processing and reporting of transactions, as well as the overall financial
reporting process.  These material weaknesses have caused significant
delays in our financial reporting process.  We are currently
considering certain steps to correct the material weaknesses by enhancing our
reporting process in the future.  Enhancing our internal controls to
correct the material weaknesses will result in increased costs to
us.





This
Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this annual
report.





Changes in Internal Control
over Financial Reporting





There
have been no changes in the Company’s internal controls over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Company’s internal controls over financial reporting.








ITEM
9B.   OTHER INFORMATION.





Not applicable.








PART
III





ITEM
10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.





(a)(b)           Identification
of directors and executive officers.





-25-





The
following table sets forth the name, age, position and office term of each
executive officer and director of the Company.





Name
            Age
            PositionHenry
      Fong
            74
            President,
      Chief Executive Officer and DirectorStephen
      D. King
            54
            DirectorRichard
      W. Perkins
            78
            DirectorChristopher
      T. Dahl
            66
            DirectorBarry
      S. Hollander
            52
            Chief
      Financial OfficerThomas
      B. Olson
            43
            Secretary





(c)           Identification
of significant employees.





Not
applicable.





(d)           Identification
of family relationships.





None.





(e)           Business
experience.





Henry
Fong.  Mr.
Fong has been the president, chief executive officer, and a director of the
Company since March 2002 and president and a director of Nuvo since its
inception in April 2006.  Mr. Fongwas the president, treasurer
and a director of Hydrogen Power, Inc., a pubicly traded alternative energy
company, from its inception in 1983 until January 2, 2007. Mr. Fong has been a
director of FastFunds Financial Corporation, a publicly traded company that
currently has limited business operations, since June 2004. Mr. Fong has been
the president and a director of AlumiFuel Power Corporation since its inception
in May 2004. AlumiFuel Power is a publicly held company developing hydrogen
generation products. From 1959 to 1982, Mr. Fong served in various accounting,
finance and budgeting positions with the Department of the Air Force. During the
period from 1972 to 1981 he was assigned to senior supervisory positions at the
Department of the Air Force headquarters in the Pentagon. In 1978, he was
selected to participate in the Federal Executive Development Program and in
1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he
attended the Woodrow Wilson School, Princeton University and was a Princeton
Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian
Service Award in 1982. Mr. Fong has passed the uniform certified public
accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as
Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream
Team."





Stephen D.
King.Mr. King has been a director since November
2006.  Mr. King was elected chief executive officer of Wits Basin
Precious Minerals, Inc., a publicly traded mineral exploration company,
effective September 15, 2006 and has served as a director since July 8,
2004.  Mr. King also served as president of Wits Basin from May 15,
2006 to September 15, 2006. Since October 2000, Mr. King has served as president
of SDK Investments, Inc., a private investment firm located in Atlanta, Georgia
specializing in corporate finance and investing. He served as president, from
January 1994 until July 2000 and chairman until October 2000, of PopMail.com,
Inc., a publicly traded company with businesses in the hospitality and Internet
sectors.





-26-


Richard W.
Perkins.Mr. Perkins has over 50 years experience in the investment
business, has been President and Investment Manager for Perkins Capital
Management since October 1984.  Perkins Capital Management is a
registered investment advisor with significant experience in individual and
institutional capital management including working directly with the public
markets emphasizing the micro-cap sector.Mr. Perkins is also
a director of several public companies including: Synovis Life Technologies,
Inc. since 1984, Nortech Systems, Inc. since 1993, and Vital Images, Inc. since
1985.





Christopher T.
Dahl.For the
past five years Mr. Dahl has been the President and owner of CTD Properties, a
privately-held company that manages various investments including real estate
ownership and development.  Mr. Dahl, who was the founder and
President of Children’s Broadcasting Corp., has significant past experience in
the media industry including executive management and board of director
positions with publicly-traded companies that owned and operated radio stations
and provided public media content.





Barry S.
Hollander.Mr. Hollander has been chief financial officer of
the Company since 2002.  Mr. Hollander has been the acting Chief
Executive Officer of FastFunds Financial Corporation, a publicly traded company
with limited business operations, since January 2007.  Mr. Hollander
has been the chief financial officer of VP Sports, a privately-held company,
since March 1999.  From 1994 to 1999, Mr. Hollander was the chief
financial officer of California Pro Sports, Inc., an in-line skate importer,
marketer and distributor.  In 1999 California Pro merged with
Imaginon, Inc.  Mr. Hollander has a BS degree from Fairleigh Dickinson
University and passed the uniform certified public accountant exam.





Thomas B.
Olson.Mr.
Olson has been secretary of the Company since March 2002 and has been secretary
and treasurer of Nuvo since its inception in April 2006.Mr.
Olson was secretary of Hydrogen Power, Inc., a publicly-traded alternative
energy company, from January 1988 to April 5, 2007.  Mr. Olson served
as a director of Chex Services, formerly a subsidiary of Hydrogen Power, Inc.,
from May 2002 to January 2006. Mr. Olson has been the secretary of AlumiFuel
Power Corporation since its inception in May 2004. AlumiFuel Power is a publicly
held company developing hydrogen generation products. Mr. Olson has attended
Arizona State University and the University of Colorado at Denver.





(f)           Involvement
in certain legal proceedings.





Not applicable.





(g)           Promoters
and control persons.





Not applicable





Code of
Ethics





In 2003
we adopted a Code of Ethics for Senior Financial Management to promote honest
and ethical conduct and to deter wrongdoing.  This Code applies to our
Chief Executive Officer, Chief Financial Officer, controller, principal
accounting officer and other employees performing similar
functions.  The obligations of the Code of Ethics supplement, but do
not replace, any other code of conduct or ethics policy applicable to our
employees generally.





-27-





Under the
Code of Ethics, all members of the senior financial management
shall:





·
            Act
      honestly and ethically in the performance of their duties at our
      company,


·
            Avoid
      actual or apparent conflicts of interest between personal and professional
      relationships,


·
            Provide
      full, fair, accurate, timely and understandable disclosure in reports and
      documents that we file with, or submits to, the SEC and in other public
      communications by our company,


·
            Comply
      with rules and regulations of federal, state and local governments and
      other private and public regulatory agencies that affect the conduct of
      our business and our financial
reporting,


·
            Act
      in good faith, responsibly, with due care, competence and diligence,
      without misrepresenting material facts or allowing the member's
      independent judgment to be
subordinated,


·
            Respect
      the confidentiality of information acquired in the course of work, except
      when authorized or legally obtained to disclosure such
      information,


·
            Share
      knowledge and maintain skills relevant to carrying out the member's duties
      within our company,


·
            Proactively
      promote ethical behavior as a responsible partner among peers and
      colleagues in the work environment and
  community,


·
            Achieve
      responsible use of and control over all assets and resources of our
      company entrusted to the member,
and


·
            Promptly
      bring to the attention of the Chief Executive Officer any information
      concerning (a) significant deficiencies in the design or operating of
      internal controls which could adversely to record, process, summarize and
      report financial date or (b) any fraud, whether or not material, that
      involves management or other employees who have a significant role in our
      financial reporting or internal
controls.





We will
provide a copy of the Code of to any person without charge, upon
request.  Requests can be sent to China Nuvo Solar Energy, Inc., 319
Clematis Street, Suite 703, West Palm Beach, Florida 33401.





Corporate
Governance





There
have been no material changes to procedures by which security holders may
recommend nominees to our board of directors.





We
currently have no standing audit or nominating committees of our board of
directors.  Our entire board of directors currently performs these
functions.  While we currently have no standing audit or nominating
committee, we have determined that Mr. Dahl would be considered an audit
committee financial expert.





Director
Independence





Our board
of directors has four directors and has no standing sub-committees at this time
due to the associated expenses and the small size of our board.  We
are not currently listed on a national securities exchange that has requirements
that a majority of the board of directors be independent, however, the board has
determined that Stephen D. King, Richard W. Perkins, and Christopher T. Dahl are
each “independent” under the definition set forth in the listing standards of
the NASDAQ Stock Market, Inc., which is the definition that our board has chosen
to use for the purposes of the determining independence.


-28-


In
performing the functions of the audit committee, our board oversees our
accounting and financial reporting process.  In this function, our
board performs several functions.  Our board, among other duties,
evaluates and assesses the qualifications of the Company’s independent auditors;
determines whether to retain or terminate the existing independent auditors;
meets with the independent auditors and financial management of the Company to
review the scope of the proposed audit and audit procedures on an annual basis;
reviews and approves the retention of independent auditors for any non-audit
services; reviews the independence of the independent auditors; reviews with the
independent auditors and with the Company’s financial accounting personnel the
adequacy and effectiveness of accounting and financial controls and considers
recommendations for improvement of such controls; reviews the financial
statements to be included in our annual and quarterly reports filed with the
Securities and Exchange Commission; and discusses with the Company’s management
and the independent auditors the results of the annual audit and the results of
our quarterly financial statements. While we do not currently have a standing
compensation committee, our non-employee director considers executive officer
compensation, and our entire board participates in the consideration of director
compensation.  Our non-employee board members oversee our compensation
policies, plans and programs.  Our non-employee board members further
review and approve corporate performance goals and objectives relevant to the
compensation of our executive officers; review the compensation and other terms
of employment of our Chief Executive Officer and our other executive officers;
and administer our equity incentive and stock option plans.  Each of
our directors participates in the consideration of director
nominees.  In addition to nominees recommended by directors, our board
will consider nominees recommended by shareholders if submitted in writing to
our secretary.  Our board believes that any candidate for director,
whether recommended by shareholders or by the board, should be considered on the
basis of all factors relevant to our needs and the credentials of the candidate
at the time the candidate is proposed.  Such factors include relevant
business and industry experience and demonstrated character and
judgment.








ITEM
11.   EXECUTIVE COMPENSATION.





(m)           General.





The
following tables set forth all of the compensation awarded to, earned by or paid
to:





In Table
(1):  (i) each individual serving as our principal executive officer
during the fiscal years ended July 31, 2009 and 2008; (ii) each other individual
that served as an executive officer at the conclusion of the fiscal year ended
July 31, 2009 and who received in excess of $100,000 in the form of salary and
bonus during such fiscal year.





-29-





(n)           Summary
compensation tables.





Table
1. Summary Compensation of Executive Officers





Name
      and Principal Position
            
            Year
            
            Salary
      (1)
            
            Bonus
            
            Equity
              Awards
      (2)
            
            Option
              Awards(2)
            
            All
      Other Compensation
            
            TotalHenry
      Fong
              Chief
      Executive Officer & President
            
            2009
              
              2008
            
            $120,000
              
              $120,000
            
            -
              
              -
            
            -
              
              -
            
            -
              
              $57,000
            
            -
              
              -
            
            $120,000
              
              $177,000





(1)
            Based
      on an accrual of $10,000 per month. During the fiscal year ended July 31,
      2009 Mr. Fong received cash compensation of $0 and is owed
      $166,000.





(2)
            Amount
      reflects the dollar amount recognized for financial statement reporting
      purposes for the fiscal year ended July 31, 2009 and 2008, in accordance
      with SFAS 123(4) of stock option awards.  Assumptions used in
      calculating these amounts are included in Note 6 to our audited financial
      statements for the fiscal year ended July 31, 2009, which are included
      elsewhere in this report.





(o)           Narrative
disclosure to summary compensation table.





There are
no written agreements with respect to the employment of any of our executive
officers including Mr. Fong.





In August
2007, the Board of Directors approved a bonus plan for Mr. Fong through which
Mr. Fong is to be paid an annual bonus equal to 2.5% of the increase in market
capitalization for the Company’s common stock.  There was no bonus
accrued or paid for the fiscal years ended July 31, 2009 or 2008.





On
November 27, 2007, the Board of Directors granted 1,000,000 options to purchase
shares of common stock under our 2007 Stock Option Plan (the “2007 Plan”) to Mr.
Fong.  The options granted have an exercise price of $0.07 per share
(the market price of our common stock on the date of the grant) and expire
November 27, 2017.  These options were valued using the Black-Scholes
option pricing model and determined to have a value of $57,000, which amounts
are included as “Option Awards” in the Summary Compensation Table for the fiscal
year ended July 31, 2008.  No such awards were granted during the
fiscal year ended July 31, 2009.





Beginning
in July 2007, our board of directors authorized a management fee of $10,000 per
month for Mr. Fong.  This amount is accrued and paid as cash flow
permits.  As of July 31, 2009, Mr. Fong was owed $166,000 in accrued
but unpaid management fees.





(p)           Outstanding
equity awards at fiscal year end table.





The
following table sets forth information regarding each unexercised option and
non-vested stock award held by each of our named executive officers as of July
31, 2009.


-30-








Name
            
            Number
      of Securities Underlying Unexercised
              Options
      Exercisable
            
            Number
      of Securities Underlying Unexercised Options Unexercisable
            
            Option
      Exercise
              Price
      ($)
            
            Option
              Expiration
      DateHenry
      Fong
            
            1,000,000
            
            -
            
            $0.07
            
            11/27/2012642,857
            
            -
            
            $0.10
            
            7/28/2010




(q)           Additional narrative disclosure.





We
currently have no retirement plans or similar benefits for our
officers.  We also have no contracts or agreements with our officers
for payments that may result neither from their resignation, retirement, or
other termination, nor in the event of a change in control.





(r)           Compensation
of directors.





We do not
pay fees to our directors for attendance at meetings of the board; however, we
may adopt a policy of making such payments in the future.  We will
reimburse out-of-pocket expenses incurred by directors in attending board and
committee meetings.





On
November 27, 2007, the Board of Directors granted 1,000,000 options to purchase
shares of common stock under our 2007 Stock Option Plan (the “2007 Plan”) to
each of our independent directors Messrs. King, Perkins and Dahl.  The
options granted have an exercise price of $0.07 per share (the market price of
our common stock on the date of the grant) and expire November 27,
2017.  These options were valued using the Black-Scholes option
pricing model and determined to have a value of $171,000, or $57,000 per
director.








ITEM
12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





(d)           Securities
authorized for issuance under equity compensation plans.





We have
the following securities authorized for issuance under our equity compensation
plans as of July 31, 2009.  This includes our 2002 Stock Option Plan,
covering up to 1,000,000 shares of our common stock, our 2003 Stock Option Plan
covering up to 2,500,000 shares of our common stock and our 2007 Stock Option
Plan covering up to 18,000,000 shares of our common stock.


-31-








Equity
Compensation Plan Information


Plan
      category
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
            
            (b)
            
            (c)Equity
      compensation plans approved by security holders
            -0-
            
            $-0-
            
            -0-Equity
      compensation plans not approved by security holders
            6,500,000
            
            $0.07
            
            15,000,000Total
            6,500,000
            
            $0.07
            
            15,000,000





The
purpose of both the 2003 Stock Option  Plan and the 2007 Stock
Option  Plan (together the “Plans”) is to increase shareholder value
and to advance the interests of the Company by furnishing a variety of economic
incentives designed to attract, retain and motivate employees, directors and
consultants.  Incentives may consist of opportunities to purchase or
receive shares of the Company’s common stock.  Grants may include both
purchase options as well as direct grants of common shares upon conversion of
accrued salaries, bonuses, notes payable, fees or other similar payments due
from us to an eligible participant.  The Plans are administered by our
board of directors which determines the terms of all grants including their
term, exercise price and vesting period, if applicable.  Generally,
grants must be at least 100% of the fair market value of our common stock on the
date of grant and may be exercisable for up to ten years.





(a)           Security
ownership of certain beneficial owners.


(b)           Security
ownership of management.





The
following table sets forth information known to the Company with respect to the
beneficial ownership (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of the outstanding common stock of the Company
as of November 11, 2009 by: (1) each person known by the Company to
beneficially own 5% or more of the Company’s outstanding common stock;
(2) each of the named executive officers as defined in Item 402(a)(3);
(3) each of the Company’s directors; and (4) all of the Company’s
named executive officers and directors as a group. The number of shares
beneficially owned is determined under rules promulgated by the SEC, and the
information is not necessarily indicative of beneficial ownership for any other
purpose.  Including those shares in the tables does not, however,
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares.


-32-








Name of Beneficial Owner
            Number
      of shares
              of
      Preferred Stock Beneficially Owned
            Percent
      of
              Common
      Stock (1)
            Number
      of Shares of Common Stock
              Beneficially
      Owned
            Percent
      of
              Common
      Stock (1)Henry
      Fong
              319
      Clematis Street – Ste 703
              West
      Palm Beach, FL 33401
            323,652
      (2)
            74.0%
            27,559,553
      (3)
            9.0%Stephen
      D. King
              900
      IDS Center
              80
      South 8th
      Street,
              Minneapolis,
      MN 55402
            
            
            4,000,000
      (4)
            1.3%Richard
      W. Perkins
              730
      E Lake Street
              Wayzata,
      MN 55391
            
            
            31,367,406
      (5)
            10.3%Christopher
      T. Dahl
              5404
      Intercachen Blvd
              Edina,
      MN 55436
            
            
            5,424,241
      (6)
            1.8%All
      Executive Officers and
              Directors
      as a Group (5 persons)
            323,652    74.0%
            
            71,681,750
      (7)
            22.5%Wayne
      W. Mills
              2125
      Hollybush Rd
              Medina,
      MN  55340
            
            
            18,160,595
      (8)
            6.0%Gulfstream
      Financial Partners
              319
      Clematis Street – Ste. 703
              West
      Palm Beach, FL 33401
            36,110
      (9)   8.25%
            
            18,059,614
      (9)
            6.0%Barry
      Hollander
              319 Clematis Street, Suite 703
              West Palm Beach, FL 33401
            
            
            3,330,550
      (10)
            1.1%


__________





(1)
            As
      of October 31, 2009, 301,617,837 shares of our common stock and 437,240 of
      our preferred stock were
outstanding.


(2)
            Includes
      (i) 36,110 shares of preferred stock held by a partnership in which Mr.
      Fong is a partner, (ii) 164,473 shares of preferred stock held by a
      corporation in which Mr. Fong is an 80% shareholder, (iii) 123,069 shares
      of preferred stock held by another corporation in which Mr. Fong is an 80%
      shareholder.


(3)
            In
      addition to 1,692,591 shares of common stock and warrants to purchase
      642,857 shares of common stock owned directly by Mr. Fong, this includes:
      (i) 3,000,000 shares underlying options granted under our 2007 Stock
      Option Plan; (ii)  17,930,650 shares of common stock and
      warrants to purchase 128,964 shares of common stock owned by Gulfstream
      Financial Partners, of which Mr. Fong is the sole partner (which is
      separately identified in this stockholder table); (iii) 587,400 shares of
      common stock and warrants to purchase 587,400 shares of common stock owned
      by a corporation in which Mr. Fong is an officer and director; (iv)
      439,533 shares of common stock and warrants to purchase 439,533 shares of
      common stock held by another corporation in which Mr. Fong is an 80%
      shareholder; and (v) 2,000,000 shares owned by Mr. Fong’s
      children.


(4)
            Consists
      of warrants to purchase 1,000,000 shares of the Company’s common stock and
      3,000,000 shares underlying options granted under our 2007 Stock Option
      Plan.


(5)
            In
      addition to 1,000,000 shares of common stock held directly by Mr. Perkins,
      this includes: (i) 3,000,000 shares underlying options granted under our
      2007 Stock Option Plan; (ii) 1,500,000 shares of common stock and warrants
      to purchase 625,000 shares of common stock held by a limited partnership
      of which Mr. Perkins is the general partner; (iii) 1,000,000 shares owned
      by a Corporation in which Mr. Perkins is a principal and stockholder; and
      (iv) 24,242,406 shares of common stock held by Richard W. Perkins Trust
      U/A 6/14/78 FBO Richard W. Perkins.


(6)
            In
      addition to 2,424,421 shares owned personally by Mr. Dahl, this includes
      3,000,000 shares underlying options granted under our 2007 Stock Option
      Plan.


(7)
            Includes
      13,400,000 shares underlying options granted under our 2007 Stock Option
      Plan, and warrants to purchase 3,745,183 shares of our common
      stock.


(8)
            Includes
      (i) 4,863,632 shares of common stock held directly by Mr. Mills, (ii)
      3,000,000 shares and warrants to purchase 600,000 shares of common stock
      each held by a limited liability company of which Mr. Mills is the sole
      member, and (iii) 9,696,963 shares held by limited liability company of
      which Mr. Mills holds 50% of the membership
  interest.


(9)
            Mr.
      Fong, our President, Chief Executive Officer and Director, is a partner of
      Gulfstream Financial Partners. Includes warrants to purchase 128,964
      shares of our common stock.


(10)   Includes
      warrants to purchase 321,429 shares of common stock and 1,400,000 shares
      underlying options granted under our 2007 Stock Option
    Plan.





-33-


(c)           Changes
in control.





We are
not aware of any arrangements that could result in a change in control of the
Company.








ITEM
13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.





(a)           Transactions
with related persons.





During
the fiscal year ended July 31, 2009, we issued promissory notes totaling $33,500
to Henry Fong, our President and Chief Executive Officer.  We also
converted $30,739 of principal and $1,274 of accrued interest due Mr. Fong to
6,437,874 shares of common stock, at a conversion price of $0.0049725 per share.
We owe Mr. Fong a principal balance of $5,500 with accrued interest of $568 at
July 31, 2009.  The remaining balance outstanding carries an interest
rate of 10% and is due on demand.





During
the fiscal year ended July 31, 2009, we issued promissory notes totaling $69,850
to corporations controlled by Henry Fong, our President and Chief Executive
Officer, and repaid $4,409 of notes.  We also converted $42,393 of
principal and $2,099 of accrued interest due the corporations to 8,947,596
shares of common stock, at a conversion price of $0.0049725 per
share.  As of July 31, 2009, we owed the corporations $33,941 in
principal and accrued interest of $1,737.  The remaining balances on
these notes carry an interest rate of 10% and are due on demand.





During
the fiscal year ended July 31, 2009 we issued a promissory note with a stated
interest rate of 8% per annum in the amount of $17,500, to Richard Perkins, a
director of the Company. This amount remains outstanding at July 31, 2009 as
well as accrued and unpaid interest of $1,028. The note is due on demand and at
the option of the lender, the principal and any accrued and unpaid interest may
be converted to shares of common stock of the Company at $0.01 per share. In
addition we owe a limited partnership of which corporation controlled by Mr.
Perkins is the in the form of a convertible promissory note $125,000 as of July
31, 2009 as well as accrued and unpaid interest of $25,513.The note may be
converted at a fifteen percent (15%) discount to the price of any offering the
Company does that raises a minimum of $500,000. This note is due December 31.
2010.





-34-


ITEM
14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES





RR
Hawkins & Associates, International (f/ka/ Hawkins Accounting, Inc.) served
as our certifying accountant for the fiscal years ended July 31, 2009 and
2008.





Fiscal
Year ended July 31, 2009





Audit
Fees





Fees for
audit services billed for the fiscal year ended July 31, 2009 were $40,500 and
consisted of (i) audit of the Company’s annual financial statements; (ii)
reviews of the Company’s quarterly financial statements; (iii) consultations on
financial accounting and reporting matters arising during the course of the
audit and reviews.





Audit-Related
Fees





There
were no other aggregated fees  billed in the fiscal year ended July
31, 2009 for assurance and related services by the principal accountants that
were reasonably related to the performance of the audit or review of the
financial statements that were not reported above.





-35-


Tax Fees





There
were no aggregate fees billed in the fiscal year ended July 31, 2009 for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning.





All Other
Fees





There
were no other fees billed in the fiscal year ended July 31, 2009 for any other
service provided by Hawkins accounting.





Fiscal Year ended July 31,
2008





Audit
Fees





Fees for
audit services billed for the fiscal year ended July 31, 2008 were $38,100 and
consisted of (i) audit of the Company’s annual financial statements; (ii)
reviews of the Company’s quarterly financial statements; (iii) consultations on
financial accounting and reporting matters arising during the course of the
audit and reviews.





Audit-Related
Fees





There
were no other aggregate fees billed in the fiscal year ended July 31, 2008 for
assurance and related services by the principal accountants that were reasonably
related to the performance of the audit or review of the financial statements
that were not reported above.





Tax Fees





There
were no aggregate fees billed in the fiscal year ended July 31, 2008 for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning.





All Other
Fees





There
were no other fees billed in the fiscal year ended July 31, 2008 for any other
service provided by Hawkins accounting.








ITEM
15.    EXHIBITS





Exhibits





2.1
            Agreement
      and Plan of Reorganization by and between the Company and Nuvo Solar
      Energy, Inc. dated April 23, 2007. (incorporated by reference to
      Company’s Form 8-K filed on May 1, 2007)2.2
            Amendment
      No. 1 to Agreement and Plan of Reorganization by and between the Company
      and Nuvo Solar Energy, Inc. dated July 25, 2007. (incorporated by reference to
      Company’s Form 8-K filed on July 31, 2007)2.3
            Articles
      of Exchange relating to the share exchange by and between Interactive
      Games, Inc. and Nuvo Solar Energy, Inc. as filed with the Nevada Secretary
      of State on July 25, 2007. (incorporated by reference to
      Company’s Form 8-K filed on July 31, 2007)2.4
            Statement
      of Share Exchange relating to the share exchange by and between
      Interactive Games, Inc. and Nuvo Solar Energy, Inc. as filed with the
      Colorado Secretary of State on July 25, 2007. (incorporated by reference to
      Company’s Form 8-K filed on July 31, 2007)3.1
            Amended
      and Restated Articles of Incorporation of Interactive Games, Inc. (incorporated by reference to
      Company’s Form 8-K filed on July 5, 2007).3.2
            Amended
      and Restated Bylaws of Interactive Games, Inc. (incorporated by reference to
      Company’s Form 8-K filed on July 5, 2007).3.3
            Amended
      and Restated Articles of Incorporation of China Nuvo Solar Energy,
      Inc.  (incorporated by reference to
      Company’s Form 8-K filed on July 31, 2007)3.4
            Certificate
      of Designation of Series A Preferred Stock. (incorporated by reference to
      Company’s Form 8-K filed on July 31,
  2007)  -36-
   4.1
            Form
      of promissory note made by the Company in favor of certain investors in
      July 2007. (incorporated
      by reference to Company’s Form 8-K filed on July 31,
      2007)4.2
            Form
      of warrant issued by the Company to certain investors on July 2007. (incorporated by reference to
      Company’s Form 8-K filed on July 31, 2007)10.1
            Agreement
      between the Company and Photovoltiacs.com, Inc. dated June 9, 2006, as
      amended. (incorporated
      by reference to Company’s Form 8-K filed on July 31,
      2007)14.1
            Code
      of Ethics. (filed
      herewith)21.1
            List
      of Subsidiaries. (filed
      herewith).31.1
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed
      herewith).31.2
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed
      herewith).32.1
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
      herewith).32.2
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
      herewith).





-37-


SIGNATURES





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








CHINA
      NUVO SOLAR ENERGY, INC.(Registrant)Date:
      December 15,
      2009
            By:
      /s/
      Henry FongHenry
      FongPrincipal
      Executive OfficerBy:
      /s/
      Barry S. HollanderBarry
      S. HollanderPrincipal
      Financial Officer











In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.











Date:
      December 15,
      2009
            /s/ Henry FongHenry
      FongDirectorDate:
      December 15,
      2009
            /s/ Stephen D. KingStephen
      D. KingDirectorDate:
      December 15,
      2009
            /s/ Richard W. PerkinsRichard
      W. PerkinsDirectorDate:
      December 15,
      2009
            /s/ Christopher T. DahlChristopher
      T. DahlDirector









CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 FOR
THE YEARS ENDED JULY 31, 2009 AND 2008
 
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      financial statements:Consolidated
      balance sheet
              F-3Consolidated
      statements of operations
              F-4Consolidated
      statement of changes in stockholders' deficit and other comprehensive
      income
              F-5Consolidated
      statements of cash flows
              F-6
      – F-7Notes
      to consolidated financial statements
              F-8
      – F24
 
 
  
 R.R.
Hawkins & Associates International, a Professional Service
Corporation
 Board of
Directors
 China
Nuvo Solar Energy, Inc.
 West Palm
Beach, Florida
 
  Report of Independent
Registered Public Accounting Firm
 
  We have
audited the balance sheet of China Nuvo Solar Energy, Inc. as of July 31, 2009,
the related statements of operations, stockholders’ equity and cash flows for
the years ending July 31, 2009.  These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board in the United States of America.  Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the schedule of accounts receivable is free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the schedule of accounts
receivable.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Nuvo Solar Energy, Inc. as of
July 31, 2009, the results of operations and its cash flows for the year ended
July 31, 2009 in conformity with generally accepted accounting principles in the
United States of America.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 1 to the financial
statements, the Company has incurred net losses since inception, which raise
substantial doubt about its ability to continue as a going
concern.  The financial statements do not include any adjustment that
might result from the outcome of this uncertainty.
 
 /s/
R.R. Hawkins & Associates International, PSC
 December
14, 2009
 Los
Angeles, CA
    F-2
  CHINA
      NUVO SOLAR ENERGY, INC. AND SUBSIDIARY
                  Consolidated Balance
      Sheet
                  For the Years Ended July 31,
      2009 and 2008Assets2009
                
                
                2008Current
      AssetsCash
                
                $
                304
                
                
                $
                942Notes
      and interest receivable, related parties
                
                
                36,276
                
                
                
                53,649Prepaid
      expenses and other current assets
                
                
                —
                
                
                
                53,400Total
      current assets
                
                
                36,580
                
                
                
                107,991Fixed
      assets, less accumulated depreciation of $11,872 (2009)and
      $10,312 (2008)
                
                
                2,336
                
                
                
                3,896Solar
      intellectual property, less accumulated depreciation of$
      80,165 (2009) and $54,166 (2008)
                
                
                359,735
                
                
                
                345,834Debt
      issuance costs
                
                
                59,204
                
                
                
                108,199Total
      assets
                
                $
                457,855
                
                
                $
                565,920Liabilities
      and Shareholders’ DeficitCurrent
      liabilities:Accrued
      liabilities, related parties
                
                $
                682,242
                
                
                $
                527,239Accounts
      payable and accrued expenses
                
                
                352,588
                
                
                
                307,783Derivative
      liability convertible debentures
                
                
                572,334
                
                
                
                572,238Notes
      payable
                
                
                175,144
                
                
                
                175,644Notes
      payable, related party
                
                
                245,296
                
                
                
                164,932Total
      current liabilities
                
                
                2,027,604
                
                
                
                1,747,836Long-term
      liabilities:Convertible
      debentures payable, net
                
                
                172,904
                
                
                
                101,134Total
      liabilities
                
                
                2,200,508
                
                
                
                1,848,970Shareholders’
      deficit:Preferred
      stock, $.001 par value; 25,000,000 shares authorized,437,241
      (2009) and 535,891 (2008) shares issued and outstanding
                
                
                437,241
                
                
                
                535,891Common
      stock, $.001 par value, 475,000,00 shares authorized;284,951,179
      issued and outstanding (2009) and 204,676,437 (2008)
                
                
                284,951
                
                
                
                204,676Minority
      interest
                
                
                (135,688
                )
                
                
                (61,286
                )Deferred
      compensation
                
                
                -
                
                
                
                (133,333
                )Additional
      paid-in capital
                
                
                8,358,351
                
                
                
                8,071,460Retained
      earnings
                
                
                (10,687,508
                )
                
                
                (9,900,458
                )Total
      shareholders' deficit
                
                
                (1,742,653
                )
                
                
                (1,283,050
                )Total
      liabilities and shareholders' deficit
                
                $
                457,855
                
                
                $
                565,920
  See
accompanying notes to financial statements
  F-3
  CHINA
      NUVO SOLAR ENERGY, INC. AND SUBSIDIARY
                  Consolidated Statements of
      Operations
                  For the Years Ended July 31,
      2009 and 2008From
      InceptionApril
      16, 2006-2009
                
                
                2008
                
                
                July
      31, 2009Revenues:Revenues
                
                $
                3,166
                
                
                $
                6,600
                
                
                $
                9,766Cost
      of revenues
                
                
                
                
                
                
                -Gross
      profit
                
                
                3,166
                
                
                
                6,600
                
                
                
                9,766Operating
      costs and expenses:Selling,
      general and administrativeBonus,
      related party
                
                
                
                
                
                
                -
                
                
                
                275,561Consulting
      fees
                
                
                66,109
                
                
                
                149,750
                
                
                
                331,859Management
      fees, related parties
                
                
                180,750
                
                
                
                298,750
                
                
                
                545,000Stock
      compensation cost
                
                
                157,708
                
                
                
                572,010
                
                
                
                729,718Legal
      and accounting
                
                
                47,533
                
                
                
                86,992
                
                
                
                181,072Other
                
                
                68,068
                
                
                
                183,016
                
                
                
                296,235Total
      operating costs and expenses
                
                
                520,168
                
                
                
                1,290,518
                
                
                
                2,359,445Operating
      loss
                
                
                (517,002
                )
                
                
                (1,283,918
                )
                
                
                (2,349,679
                )Other
      (expenses) incomeInterest
      expense, related parties
                
                
                (24,382
                )
                
                
                (28,518
                )
                
                
                (60,235
                )Interest
      expense, other
                
                
                (321,947
                )
                
                
                (340,153
                )
                
                
                (666,234
                )Interest
      income, related parties
                
                
                1,975
                
                
                
                2,657
                
                
                
                4,632Minority
      interest
                
                
                74,402
                
                
                
                61,286
                
                
                
                135,688mpairment
      of goodwill
                
                
                
                
                
                
                
                
                
                
                (8,000,000
                )Derivative
      liability expense
                
                
                (96
                )
                
                
                278,417
                
                
                
                258,380Total
      other income (expenses)
                
                
                (270,048
                )
                
                
                (26,311
                )
                
                
                (8,327,769
                )Net  (loss)
      income
                
                $
                (787,050
                )
                
                $
                (1,310,229
                )
                
                
                (10,677,448
                )Basic
      and diluted net loss per common share
                
                $
                (0.01
                )
                
                $
                (0.01
                )Basic
      and diluted weighted average common shares outstanding
                
                
                215,342,414
                
                
                
                200,777,284
    F-4
  Common
      stock
                
                
                Additionalpaid-in
                
                
                Deferred
                
                
                
                
                
                
                
                
                Accumulated
                
                
                Totalstockholders'Shares
                
                Amount
                
                
                capital
                
                
                compensation
                
                
                Minority
      interest
                
                
                Preferred
      stock
                
                
                (deficit)
      equity
                
                
                deficitBalance
      at August 1, 2007
                
                
                193,552,462
                
                
                $
                193,552
                
                
                $
                6,474,764
                
                
                $
                -
                
                
                $
                -
                
                
                $
                535,891
                
                
                $
                (8,590,229
                )
                
                $
                (1,386,022
                )Issuance
      of shares upon conversion of subordinated debentures
                
                
                6,473,975
                
                
                
                6,474
                
                
                
                320,448
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                326,922Issuance
      of shares for services
                
                
                1,650,000
                
                
                
                1,650
                
                
                
                350,850
                
                
                
                (235,000
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                117,500Amortization
      of deferred compensation
                
                
                
                
                
                
                
                
                
                
                0
                
                
                
                101,667
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                101,667Issuance
      of options and warrants
                
                
                
                
                
                
                
                
                
                
                328,375
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                328,375Issuance
      of shares pursuant to conversion of notes   and
      interest  payable
                
                
                1,000,000
                
                
                
                1,000
                
                
                
                99,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                100,000Issuance
      of shares for purchased technology
                
                
                2,000,000
                
                
                
                2,000
                
                
                
                148,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                150,000Sale
      of subsidiary common stock
                
                
                
                
                
                
                
                
                
                
                50,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                50,000Issuance
      of shares of subsidiary common stock for notes andand
      interest payable, related parties
                
                
                
                
                
                
                
                
                
                
                300,023
                
                
                
                
                
                
                
                (61,286
                )
                
                
                
                
                
                
                
                
                
                
                238,737Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,310,229
                )
                
                
                (1,310,229
                )Balances,
      July 31, 2008
                
                
                204,676,437
                
                
                
                204,676
                
                
                
                8,071,460
                
                
                
                (133,333
                )
                
                
                (61,286
                )
                
                
                535,891
                
                
                
                (9,900,458
                )
                
                
                (1,283,050
                )Issuance
      of shares upon conversion of subordinateddebentures
      and accrued interest
                
                
                41,904,256
                
                
                
                41,904
                
                
                
                142,732
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                184,636Issuance
      of shares upon conversion of notes payable, related andaccrued
      interest payable, related
                
                
                15,385,470
                
                
                
                15,385
                
                
                
                61,119
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                76,504Issuance
      of shares upon conversion of accounts payable, related
                
                
                1,287,692
                
                
                
                1,288
                
                
                
                6,087
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7,375Issuance
      of common stock upon mandatory conversion ofpreferred
      stock
                
                
                21,697,324
                
                
                
                21,697
                
                
                
                76,953
                
                
                
                
                
                
                
                
                
                
                
                (98,650
                )
                
                
                
                
                
                
                0Amortization
      of deferred compensation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                133,333
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                133,333Minority
      interest
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (74,402
                )
                
                
                
                
                
                
                
                
                
                
                (74,402
                )Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (787,050
                )
                
                
                (787,050
                )284,951,179
                
                
                $
                284,951
                
                
                $
                8,358,351
                
                
                $
                -
                
                
                $
                (135,688
                )
                
                $
                437,241
                
                
                $
                (10,687,508
                )
                
                $
                (1,742,653
                )
    F-5
  CHINA
      NUVO SOLAR ENERGY, INC. AND SUBSIDIARYConsolidated
      Statement of Cash FlowsFor
      the Years Ended July 31, 2009 and 2008From
      InceptionApril
      16, 2006-2009
                
                
                2008
                
                
                July
      31, 2009Cash
      flows from operating activities:Net
      income (loss)
                
                $
                (787,050
                )
                
                $
                (1,310,229
                )
                
                $
                (10,665,244
                )Adjustments
      to reconcile net income (loss)to
      net cash used in operating activities:
                
                
                -
                
                
                
                -
                
                
                
                (1,519,381
                )Loss
      on impairment
                
                
                -
                
                
                
                -
                
                
                
                8,000,000Decrease
      in derivative liability
                
                
                96
                
                
                
                (278,417
                )
                
                
                (262,666
                )Change
      in minority interest
                
                
                (74,402
                )
                
                
                (61,286
                )
                
                
                (135,688
                )Amortization
      of discount on debentures payable
                
                
                252,770
                
                
                
                245,984
                
                
                
                706,872Amortization
      of debt issuance costs
                
                
                24,620
                
                
                
                50,858
                
                
                
                95,961Common
      stock and warrant based compensation
                
                
                157,708
                
                
                
                572,010
                
                
                
                1,161,307Depreciation
                
                
                1,560
                
                
                
                1,582
                
                
                
                5,435Amortization
      of intellectual property
                
                
                26,000
                
                
                
                25,000
                
                
                
                80,166Change
      in operating assets and liabilities:
                
                
                
                
                
                
                
                
                
                
                302,115Decrease
      (increase)  in prepaid expenses and other current
      assets
                
                
                53,400
                
                
                
                (7,400
                )
                
                
                12,917(Increase)
      in notes and interest receivable
                
                
                (1,975
                )
                
                
                (2,657
                )
                
                
                (32,324
                )Increase
      in accounts payable and accrued expenses
                
                
                55,816
                
                
                
                103,989
                
                
                
                249,345Increase
      in amounts due to related parties
                
                
                158,375
                
                
                
                107,264
                
                
                
                729,466Net
      cash used in operating activities
                
                
                (133,082
                )
                
                
                (553,302
                )
                
                
                (1,271,719
                )Cash
      flows from investing activities:Purchase
      of property and equipment
                
                
                (39,900
                )
                
                
                (3,501
                )
                
                
                (293,401
                )Net
      cash used in investing activities
                
                
                (39,900
                )
                
                
                (3,501
                )
                
                
                (293,401
                )Cash
      flows from financing activities:Proceeds
      from sale of common stock
                
                
                
                
                
                
                -
                
                
                
                687,500Proceeds
      from issuance of third party notes payable
                
                
                -
                
                
                
                164,000
                
                
                
                521,000Proceeds
      from debentures payable
                
                
                -
                
                
                
                505,000
                
                
                
                505,000Proceeds
      from sale of subsidiary common stock
                
                
                
                
                
                
                50,000
                
                
                
                50,000Proceeds
      from payments received on notes receivable, related
parties
                
                
                19,848
                
                
                
                -
                
                
                
                19,848Placement
      fees paid
                
                
                -
                
                
                
                (75,650
                )
                
                
                (75,650
                )Proceeds
      from advances and loans from related parties
                
                
                157,405
                
                
                
                49,285
                
                
                
                541,483Payment
      of related party notes payable
                
                
                (4,409
                )
                
                
                (90,017
                )
                
                
                (474,777
                )Payment
      to related party for notes receivable
                
                
                (500
                )
                
                
                (23,300
                )
                
                
                (23,800
                )Payment
      of notes payable
                
                
                -
                
                
                
                (54,588
                )
                
                
                (220,354
                )(Decrease)
      increase in bank overdraft
                
                
                -
                
                
                
                (9
                )
                
                
                0Net
      cash provided by financing activities
                
                
                172,344
                
                
                
                524,721
                
                
                
                1,530,250Net
      increase (decrease) in cash and cash equivalents
                
                
                (638
                )
                
                
                (32,082
                )
                
                
                (34,870
                )
  Continued
  F-6
  CHINA
      NUVO SOLAR ENERGY, INC. AND SUBSIDIARYConsolidated
      Statement of Cash Flows (Continued)For
      the Years Ended July 31, 2009 and 2008From
      InceptionApril
      16, 2006-2009
                  
                  
                  2008
                  
                  
                  July
      31, 2009Cash
      and cash equivalents, beginning of period
                  
                  
                  942
                  
                  
                  
                  33,024
                  
                  
                  
                  35,174Cash
      and cash equivalents, end of period
                  
                  $
                  304
                  
                  
                  $
                  942
                  
                  
                  $
                  304Supplemental
      disclosures of cash flow information:
                  
                  
                  
                  
                  
                  
                  -Cash
      paid during the year for interest
                  
                  $
                  17,571
                  
                  
                  $
                  75,968
                  
                  
                  $
                  98,340Cash
      paid during the year for taxes
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Non-cash
      investing and financial activities:Fair
      value of options and shares issued for notes payable,subordinated
      debentures and services
                  
                  $
                  268,515
                  
                  
                  $
                  872,797
                  
                  
                  $
                  3,133,055Fair
      value of subsidiary common stock issued for notes andinterest
      payable
                  
                  $
                  -
                  
                  
                  $
                  300,023
                  
                  
                  $
                  300,023Common
      stock issued in connection with merger
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  133,333
    F-7
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting
      policies:
 
 Organization
 
 China
      Nuvo Solar Energy, Inc. (the “Company”), was formerly known as Interactive
      Games, Inc., a Nevada Corporation (
  "Interactive").
 
 In
      June 2007, our stockholders, through a written consent executed by
      stockholders holding a majority of the outstanding shares of our common
      stock entitled to vote, adopted and approved Amended and Restated Articles
      of Incorporation and ratified the Amended and Restated Bylaws of the
      Company, which were adopted by our board of directors on June 26,
      2007.
 
 The
      Amended and Restated Articles of Incorporation increased the authorized
      capital stock of the Company from 105,000,000 shares to 500,000,000
      shares, of which 25,000,000 shares now may be preferred stock having the
      voting powers, designations, preferences, limitations, restrictions and
      relative rights as determined by the board of directors from time to
      time.  The Company’s stockholders also authorized our chief
      executive officer to change our name to China Nuvo Solar Energy, Inc. at
      such time as the chief executive officer deemed appropriate in his sole
      discretion.
 
 Generally,
      the Amended and Restated Bylaws of the Company updated our former bylaws
      to reflect changes to applicable law.  For example, under the
      Amended and Restated Bylaws stockholders may now take action by written
      action signed by stockholders holding a majority of the shares entitled to
      vote on the given action.
 
 Pursuant
      to an Agreement and Plan of Reorganization dated as of April 23, 2007, as
      amended on July 25, 2007 (the “Share Exchange”), by and between the
      Company and Nuvo Solar Energy, Inc., a Colorado corporation (“Nuvo”)
      incorporated on April 13, 2006, we and Nuvo entered into a share exchange
      whereby all of the issued and outstanding capital stock of Nuvo, on a
      fully-diluted basis, was exchanged for like securities of the Company, and
      whereby Nuvo became our wholly owned subsidiary (the “Share
      Exchange”).  The Share Exchange was effective as of July 25,
      2007, upon the completed filing of Articles of Exchange with the Nevada
      Secretary of State and a Statement of ShareExchange with the
      Colorado Secretary of State.  Contemporaneously with the Share
      Exchange, we changed our name to “China Nuvo Solar Energy,
      Inc.”
 
 Immediately
      prior to the effective time of the Share Exchange, Nuvo had outstanding
      5,500,000 shares of its common stock (“Nuvo Common Stock”) and no shares
      of preferred stock.  In accordance with the Share Exchange
      Agreement, each share of Nuvo Common Stock was acquired by us in exchange
      for approximately 24.24 shares of our common stock for a total of
      133,333,255 shares issued.  Accordingly, after giving effect to
      the Share Exchange, the Company had approximately 189,915,355 shares of
      Common Stock outstanding immediately following the
      transaction.  The shares issued were valued at approximately $8
      million or $.06 per share (the market price of the common stock on the
      date of issuance).  The Company allocated the value of the
      shares to goodwill as the fair value of the liabilities assumed exceeded
      the fair value of the assets acquired. Management has determined that as
      of July 31, 2007 the goodwill amount of $8 million was impaired and
      recorded the write down of goodwill for the year ending July 31,
      2007.
 
 
  F-8
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Organization
      (continued)
 
 As
      a result of the Share Exchange, the former Nuvo shareholders together held
      approximately 66.6% of the Company’s outstanding common stock immediately
      following the transaction, on a fully-diluted
      basis.  Accordingly, the Share Exchange constituted a change of
      control of the Company.  As a result of the Share Exchange, Nuvo
      constituted the accounting acquirer in the Share Exchange; however, we
      elected to have a July 31 fiscal year end, which is the same fiscal year
      end that Interactive Games, Inc. had prior to the Share
      Exchange.
 
 Nuvo
      was formed on April 13, 2006 for the purpose of seeking a business
      opportunity in the alternate energy or “next-generation energy" sector.
      This industry sector encompasses non-hydro carbon based energy production
      and renewable energy technologies that are “net-zero" or emissions
      free.
 
 On
      June 9, 2006 Nuvo signed a license agreement with Photovoltaics.com, Inc.
      (“PV”), Hutchinson Island, Florida.  Nuvo acquired exclusive
      worldwide rights to PV's solar cell technology relating to a multiple
      stacked solar cell using wave guide transfers. This license agreement
      includes all patents issued pursuant to certain patent applications or
      amendments that have been filed and the rights to use all applicable
      copyrights, trademarks and related intellectual property obtained on or in
      connection with the process and products. As consideration for this
      license, Nuvo paid a total aggregate license fee of
      $250,000.   The term of the license is for 10 years,
      automatically renewable for successive ten year terms under the same terms
      and conditions as provided for in this agreement.  Nuvo also
      agreed to pay PV a fee of $180,000 over the first three years of the
      agreement to act as a consultant.
 
 On
      November 27, 2007, we executed a Collaboration and Development Agreement
      (the “Collaboration Agreement”) with Pioneer Materials, Inc. (“PMI”) of
      Torrance, California.
 
 Under
      the terms of the Agreement, PMI will build, equip, operate and manage, for
      our benefit, a product development, testing and prototype manufacturing
      facility in PMI’s Chengdu, Sichuan, China facility located in Chengdu’s
      West High Tech development zone.  The agreement with PMI has the
      objective to develop, test and manufacture prototypes of solar energy
      products using our licensed technology based on an invention titled “Photovoltaic cell with
      integral light transmitting waveguide in a ceramic
      sleeve”.  Additionally, PMI will provide technical,
      engineering development, testing and manufacturing employees and support
      staff.  The term of the Agreement is for one year, with
      automatic six-month renewal periods unless terminated by the
      parties.
 
  F-9
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Organization
      (continued)
 
 Pursuant
      to the terms of the Agreement, the Company will pay PMI $2,500 per month
      and PMI is eligible to receive up to 4,000,000 shares of the Company’s
      common stock upon the satisfactory completion of certain milestone
      accomplishments in the Agreement, of which 500,000 shares of common stock
      were issued upon the execution of the Agreement.  The Company
      valued the shares at $0.07 per share (the market price of the common stock
      on the date the parties agreed to the number of shares to be issued) and
      recorded $35,000 as stock compensation for the year ended July 31, 2008.
      PMI is a manufacturer and supplier of materials for the semiconductor,
      hard drive media, optical media and photonic industries.  PMI is
      developing for the solar energy industry advanced materials for thin film
      photovoltaics (solar cell) processing. In May of 2008, the Chengdu region
      of China experienced a catastrophic earthquake.  As a result of
      this earthquake and the after effects including significant problems with
      the delivery of electricity, PMI originally suspended and has now
      discontinued their development work on our behalf. There has been no
      significant progress on product development and we continue to explore
      alternative avenues for development of our technology. We have suspended
      paying the $2,500 monthly fee.
 
 The
future milestones and potential shares that may be issued if we decide to
continue the project with PMI are as follows:
 
 Hiring
      of staff and readying of equipment
              
              500,000Demonstration
      of working single-junction solar cell with efficiency greater than
      4%
              
              500,000Demonstration
      of working single-junction or multiple junction cell with efficiency
      greater than 10%
              
              2,500,000
 
 None of
the above have been met as November 11, 2009.
 
 On
      November 27, 2007, the Registrant appointed Mr. Richard W. Perkins and Mr.
      Christopher T. Dahl to its Board of Directors. Additionally, the Company
      granted 5,000,000 options from its 2007 Stock Option Plan (See Note 5) to
      its officers and directors. Each option has an exercise price of $0.07 per
      share and expires on November 27,
2012.
 
 On
      January 23, 2008, the Company purchased from PV the patents related to the
      solar technology in exchange for 2,000,000 restricted shares of common
      stock of the Company. The Company now owns all rights, title and interest
      in the patents, including all issued patents or other intellectual
      property arising from the patents worldwide. The Company valued the common
      stock at $0.075 per share (the market price of the common stock on
      November 16, 2007, the date the parties agreed to the number of shares to
      be issued) and accordingly, increased its intellectual property asset by
      $150,000 on the balance sheet included
herein.
 
  F-10
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Going
concern and management’s plans
 
 The
      Company had a working capital deficit of approximately $1,991,000 at July
      31, 2009. Additionally, the Company to date has generated minimal
      revenues. Accordingly, the Company has no ready source of working capital.
      These factors raise substantial doubt about the Company's ability to
      continue as a going concern. The consolidated financial statements do not
      include any adjustments relating to the recoverability and classification
      of assets or the amounts and classification of liabilities that might be
      necessary should the Company be unable to continue as a going concern.
      While management believes the Company may be able to raise funds through
      the issuance of debt or equity instruments, there is no assurance the
      Company will be able to raise sufficient funds to operate in the future.
      The debt financing may include loans from our officers and
      directors.  Although our balance sheet includes current
      liabilities of approximately $2,028,000, a portion of this amount are in
      the form of a derivative liability of $572,334 and convertible notes of
      $300,000 (of which $125,000 is a related party).  These amounts,
      plus other related party loans of approximately $120,000 and accrued and
      unpaid interest may be converted to common stock, thereby reducing
      considerably our debt service obligations.  Nevertheless, we
      will be required to raise funds in order to fund our operations and costs
      associated with being a public
company.
 
 As
      part of our initial planned operations, our main focus was to be the
      development of a viable manufacturing process for our
      technology.  As discussed above we initially planned that our
      arrangement with PMI would provide us with the facilities and expertise in
      China necessary to develop a pilot manufacturing process and eventually, a
      full manufacturing facility assuming the pilot process is
      successful.  Since this has not been successful we are
      continuing to develop our business plan. We do not intend to enter into
      any additional direct development of our
      technology.   Rather, we plan to become an incubator of the
      solar technology we currently own and technology that we may acquire in
      the future. We currently do not have any agreements to acquire any
      additional technology.  In order to acquire additional
      technology we would either have to raise additional money through equity
      or debt financing or in the alternative issue shares of our common stock.
      We intend to study the feasibility of sub-licensing or entering into other
      types of agreements with third parties, whereby the third party will
      compensate us by paying a license fee and subsequent
      royalties.  The compensation may be in the form of cash or in
      the licensee’s common stock.  Through our established
      relationships we plan to focus on the identification, acquisition and
      potential license or resale of renewable and alternative energy
      technologies.
 
 We
      will require additional capital to fund any additional acquisitions of any
      technology as   well as for general corporate working
      capital to fund our day-to-day operations and costs associated with being
      a publicly-traded company.  This amount does not include any
      amounts which may be necessary to pay off existing debt or accrued
      expenses.  We presently believe the source of funds will
      primarily consist of debt financing, which may include debt instruments
      that may include loans from our officers or directors, or the sale of our
      equity securities in private placements or other equity offerings or
      instruments.
 
  F-11
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Basis
      of presentation
 
 The
      consolidated financial statements for the year ending July 31, 2009 and
      2008 include the accounts of the Company and our majority owned subsidiary
      Interactive Entertainment Group, Inc, (f/k/a/ Interactive Games, Inc.) a
      Florida Corporation (“IGAM”) and and our wholly owned subsidiary
      Nuvo.  All of the intercompany accounts have been eliminated in
      consolidation.  Certain reclassifications to amounts reported in
      the July 31, 2008 consolidated financial statements have been made to
      conform to the July 31, 2009
presentation.
 
 Significant
      accounting policies:
 
 Use
      of estimates
 
 The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and
      assumptions that affect certain reported amounts and disclosures.
      Accordingly, actual results will differ from those
    estimates.
 
 The
      Company records intangible assets in accordance with Statement of
      Financial Accounting Standard (SFAS) Number 142, “Goodwill and Other
      Intangible Assets.” Goodwill and other intangible assets deemed to have
      indefinite lives are not subject to annual amortization. Intangible assets
      which have finite lives are amortized on a straight line basis over their
      remaining useful life; they are also subject to annual impairment
      reviews.
 
 Revenue
recognition
 
 The
      Company recognizes revenue in accordance with Staff Accounting Bulletin
      No. 104, “Revenue Recognition in Financial Statements”.  This
      statement established that revenue can be recognized when persuasive
      evidence of an arrangement exists, the services have been delivered, all
      significant contractual obligations have been satisfied, the fee is fixed
      or determinable and collection is reasonably
  assured.
 
 Cash
and cash equivalents
 
 The
      Company considers all highly liquid investments with original maturities
      of three months or less to be cash
equivalents.
 
 Concentration
      on credit risks
 
 The
      Company is subject to concentrations of credit risk primarily from cash
      and assets from discontinued
operations.
 
 The
      Company minimizes its credit risks associated with cash, including cash
      classified as assets from discontinued operations, by periodically
      evaluating the credit quality of its primary financial
      institutions.
 
  F-12
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  
 
 1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Significant
accounting policies
 
 Stock-based
compensation
 
 Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards No. 123 (revised 2004), Share Based Payment (“SFAS No,
      123R”).  SFAS No. 123R establishes the financial accounting and
      reporting standards for stock-based compensation plans.  As
      required by SFAS No. 123R, the Company will recognize the cost resulting
      from al stock-based payment transactions including shares issued under its
      stock option plans in the financial
statements.
 
 Prior
      to January 1, 2006, the Company accounted for stock-based employee
      compensation plans (including shares issued under its stock option plans)
      in accordance with APB Opinion No. 25 and followed the pro forma net
      income, pro forma income per share, and stock-based compensation plan
      disclosure requirements set forth in the Statement of Financial Accounting
      Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No.
      123”).  The Company did not issue any stock options during the
      years ended July 31, 2007.  On November 27, 2007, the Company
      granted options to purchase 6,500,000 shares of common stock of which
      5,000,000 options to purchase shares of common stock were to directors and
      officers.  The options have an exercise price of $0.07 per share
      and expire in November 2017.  There are 13,037,107 stock options
      and warrants outstanding at July 31,
2009.
 
 Fair
      value of financial instruments
 
 The
      carrying value of cash, assets of discontinued operations, accounts
      payable and accrued expenses approximate their fair value due to their
      short-term maturities. The carrying amount of the note payable and due to
      related parties approximate their fair value based on the Company's
      incremental borrowing rate.
 
 Income
      taxes
 
 Income
      taxes are accounted for in accordance with SFAS No. 109, Accounting for
      Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets
      and liabilities to reflect the future tax consequences of events that have
      been recognized in the Company's financial statements or tax returns.
      Measurement of the deferred items is based on enacted tax laws. In the
      event the future consequences of differences between financial reporting
      bases and tax bases of the Company's assets and liabilities result in a
      deferred tax asset, SFAS No. 109 requires an evaluation of the probability
      of being able to realize the future benefits indicated by such assets. A
      valuation allowance related to a deferred tax asset is recorded when it is
      more likely than not that some or all of the deferred tax asset will not
      be realized.
 
  F-13
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Significant
accounting policies (continued):
 
 Loss
per common share
 
 Loss
      per share of common stock is computed based on the weighted average number
      of common shares outstanding during the period.  Stock options,
      warrants and common stock underlying convertible
      promissory  notes at July 31, 2009 and 2008 were 197,272,401 and
      83,247,891 , respectively, are not considered in the calculation as the
      impact of the potential common shares would be to decrease loss per share
      and therefore no diluted loss per share figures are
    presented.
 
 Accounting
for obligations and instruments potentially settled in the Company’s common
stock
 
 In
      connection with any obligations and instruments potentially to be settled
      in the Company's stock, the Company accounts for the instruments in
      accordance with EITF Issue No. 00-19, Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in a Company’s
      Own Stock.  This issue addresses the initial balance
      sheet classification and measurement of contracts that are indexed to, and
      potentially settled in, the Company's
stock.
 
 Under
      EITF 00-19, contracts are initially classified as equity or as either
      assets or liabilities, depending on the situation. All contracts are
      initially measured at fair value and subsequently accounted for based on
      the then current classification. Contracts initially classified as equity
      do not recognize subsequent changes in fair value as long as the contracts
      continue to be classified as equity. For contracts classified as assets or
      liabilities, the Company reports changes in fair value in earnings and
      discloses these changes in the financial statements as long as the
      contracts remain classified as assets or liabilities. If contracts
      classified as assets or liabilities are ultimately settled in shares, any
      previously reported gains or losses on those contracts continue to be
      included in earnings. The classification of a contract is reassessed at
      each balance sheet date.
 
 Derivative
instruments
 
 In
      connection with the issuances of equity instruments or debt, the Company
      may issue options or warrants to purchase common stock. In certain
      circumstances, these options or warrants may be classified as liabilities,
      rather than as equity. In addition, the equity instrument or debt may
      contain embedded derivative instruments, such as conversion options or
      listing requirements, which in certain circumstances may be required to be
      bifurcated from the associated host instrument and accounted for
      separately as a derivative liability instrument. The Company accounts for
      derivative instruments under the provisions of SFAS No. 133, Accounting for Derivative
      Instruments and Hedging
Activities.
 
 F-14
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND
2008
 1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Significant
accounting policies (continued):
 
 Recent
accounting pronouncements
 
 In
      February 2007, the FASB issued SFAS No. 159, “Fair Value Option for
      Financial Assets and Financial Liabilities”, which permits entities to
      choose to measure many financial instruments and certain other items at
      fair value that are not currently required to be measured at fair value
      and establishes presentation and disclosure requirements designed to
      facilitate comparisons between entities that choose different measurement
      attributes for similar types of assets and liabilities. SFAS No. 159 is
      effective for fiscal years beginning after November 15, 2007. The Company
      did not adopt SFAS No. 159 on any individual instrument as of January 1,
      2008.
 
 In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141R”). SFAS No. 141R is a revision to SFAS No.
      141 and includes substantial changes to the acquisition method used to
      account for business combinations (formerly the “purchase accounting”
      method), including broadening the definition of a business, as well as
      revisions to accounting methods for contingent consideration and other
      contingencies related to the acquired business, accounting for transaction
      costs, and accounting for adjustments to provisional amounts recorded in
      connection with acquisitions. SFAS No.141R retains the fundamental
      requirement of SFAS No. 141 that the acquisition method of accounting be
      used for all business combinations and for an acquirer to be identified
      for each business combination. SFAS No. 141R is effective for periods
      beginning on or after December 15, 2008, and will apply to all business
      combinations occurring after the effective date. The Company is currently
      evaluating the requirements of SFAS No.
141R.
 
 The
      FASB also issued SFAS No. 160, “Non-controlling Interests in Consolidated
      Financial Statements – an amendment of Accounting Research Bulletin No.
      51, Consolidated Financial Statements” in December 2007.   This
      statement amends ARB No. 51 to establish new standards that will govern
      the (1) accounting for and reporting of non-controlling interests in
      partially owned consolidated subsidiaries and (2) the loss of control of
      subsidiaries.  Non-controlling interest will be reported as part of
      equity in the consolidated financial statements.  Losses will be
      allocated to the non-controlling interest, and, if control is maintained,
      changes in ownership interests will be treated as equity
      transactions.  Upon a loss of control, any gain or loss on the
      interest sold will be recognized in earnings.  SFAS No. 160 is
      effective for periods beginning after December 15, 2008.  The Company
      is currently evaluating the requirements of SFAS No.
  160.
 
 The
      FASB also issued SFAS No. 161 “Disclosures about Derivatives Instruments
      and Hedging Activities” in March 2008.  This statement requires
      enhanced disclosures about an entity’s derivative and hedging activities
      and thereby improves the transparency of
  financial
 
  F-15
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  1.
              Organization,
      basis of presentation and summary of significant accounting policies
      (continued):
 
 Significant
      accounting policies (continued):
 
 Recent
      accounting pronouncements
(continued)
 
 reporting.  This
statement is effective for financial statements for fiscal years and interim
periods beginning after November 15, 2008, with earlier application
encouraged.  The Company is currently evaluating the requirements of
SFAS No. 161.
 
 The
      Company does not believe that any other recently issued, but not yet
      effective, accounting standards will have a material will have an effect
      on the Company’s consolidated financial position, results of operations or
      cash flow.
 
 2.
              Notes
      and interest receivable, related
parties:
 
 Notes and
interest receivable, related parties at July 31, 2009 and 2008 are as
follows:
 
 2009
              
              
              2008Due
      from VP Development
              
              $
              31,300
              
              
              $
              31,300Due
      from Inhibiton, Inc.
              
              
              -
              
              
              
              16,500Due
      from E2000, Inc.
              
              
              2,500
              
              
              
              2,000Interest
      on above amounts
              
              
              2,476
              
              
              
              3,849$
              36,276
              
              
              $
              53,649
 
 3.
              Solar
      Intellectual Property
 
 Solar
      intellectual property at July 31, 2009 and 2008 are as
      follows:
 
 2009
              
              
              2008License
      for solar cell technology
              
              $
              250,000
              
              
              $
              250,000Patents
      for solar cell technology
              
              
              189,900
              
              
              
              150,000Accumulated
      amortization
              
              
              (80,165
              )
              
              
              (54,166
              )$
              359,735
              
              
              $
              345,834
 
 Amortization
      expense for the years ended July 31, 2009 and 2008 was $26,000 and
      $25,000, respectively.
 
 Expected
      amortization costs for each of the next five fiscal years are as
      follows:
 
 July
      31, 2010
              $40,000July
      31, 2011
              $40,000July
      31, 2012
              $40,000July
      31, 2013
              $40,000July
      31, 2014
              $40,000
 
  F-16
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  4.
              Accrued
      liabilities, related parties:
 
 Accrued
      liabilities, related parties at July 31, 2009 and 2008 are as
      follows:
 
 2009
              
              
              2008Officer
      bonus
              
              $
              275,561
              
              
              $
              275,561Management
      fees
              
              
              372,100
              
              
              
              237,000Accrued
      interest
              
              
              34,581
              
              
              
              14,678$
              682,242
              
              
              $
              527,239
 
 5.
              Convertible
      debentures payable:
 
 In
      April 2006, the Company executed a Securities Purchase Agreement (the
      “Purchase Agreement”) with various accredited investors (the “Holder” or
      “Holders”) for the issuance and sale of up to $700,000 of 6% unsecured
      convertible debentures in private transactions.  As of July 31,
      2006, the Company completed the sale of the aggregate $385,000 in
      Debentures under the Purchase Agreement.  We received $324,950
      from these transactions net of $60,050 of debt issuance costs paid to our
      placement agents, Divine Capital Markets, LLC (included in the
      accompanying balance sheet), which will be amortized as debt issuance
      costs over the three year term of the convertible notes.  For
      the year ended July 31, 2008, debt issuance costs were $50,859. The
      Debentures cannot be converted until nine (9) months after the issuance
      date of each Debenture.  During the year ended July 31, 2008,
      the Holders converted$299,125 of the 2006 Debentures to 6,079,573 shares
      of common stock at an average conversion price of approximately $0.049 per
      share.  At July 31, 2009 and 2008 the remaining face amount of
      the 2006 Debentures is $0.
 
 On
      October 21, 2007 the Board of Director of the Company authorized the sale
      of up to $700,000 of 6% unsecured convertible debentures (the “2007
      Debentures”).  During the year ended July 31, 2008, the Company
      executed a Securities Purchase Agreement with various accredited
      investors, whereby the Company sold in the aggregate $505,000 of the 2007
      Debentures.  We received net proceeds of $429,350 after $75,650
      of debt issuance costs (included in the accompanying balance sheet), paid
      to Divine, who acted as our placement agent.  The debt issuance
      costs will be amortized as debt issuance costs over the three year term of
      the 2007 Debentures.  The terms and conditions of the 2007
      Debentures are the same as the 2006 Debentures.  Accordingly,
      fair value of these derivative instruments have been recorded as a
      liability on the consolidated balance sheet with the corresponding amount
      recorded as a discount to the 2007 Debentures.  The change in
      the fair value of the liability will be credited or (charged) to other
      income or (expense) in the consolidated statement of
      operations.  The beneficial conversion feature included in the
      2007 Debentures resulted in an initial debt discount of $505,000 and an
      initial loss on the valuation of derivative liabilities of
      $219,878.  Based on the revaluation of the 2007 Debentures at
      July 31, 2009, the Company recorded a credit to expense of $96 and
      decreased the derivative liability on the balance sheet by
      $96.
 
  F-17
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  5.
              Convertible
      debentures payable (continued):
 
 The
      Debentures are due three years from the final Closing Date under the
      Purchase Agreement (the “Maturity Date”), unless prepayment of the
      Debentures is required in certain events, as described
      below.  The Debentures are convertible at a conversion price
      (the “Conversion Price”) for each share of common stock equal to 75% of
      the lowest closing bid price per share (as reported by Bloomberg, LP) of
      the Corporation’s common stock for the twenty (20) trading days
      immediately preceding the date of conversion.  In addition, the
      Debentures provide for adjustments for dividends payable other than in
      shares of common stock, for reclassification, exchange or substitution of
      the common stock for another security or securities of the Corporation or
      pursuant to a reorganization, merger, consolidation, or sale of assets,
      where there is a change in control of the
  Corporation.
 
 The
      outstanding principal balance of each Debenture bears interest, in
      arrears, at six percent (6%) per annum, payable (i) upon conversion, or
      (ii) on the Maturity Date, in shares of our common stock at the Conversion
      Price.  Upon the occurrence of an Event of Default (as defined
      in the Purchase Agreement), then the Corporation is required to pay
      interest to the Holder of each outstanding Debenture, at the option of the
      Holders (i) at the rate of lesser of eighteen percent (18%) per annum and
      the maximum interest rate allowance under applicable law, and (ii) the
      Holders may at their option declare the Debentures, together with all
      accrued and unpaid interest (the “Acceleration Amount”), to be immediately
      due and payable.
 
 The
      Corporation may at its option call for redemption all or part of the
      Debentures prior to the Maturity Date, as
  follows:
 
 The
Debentures called for redemption shall be redeemable for an amount (the
“Redemption Price”) equal to (x) if called for redemption prior to the date
which is nine months from the date of issuance (the “Issuance Date”), 115%, if
called for redemption on or after the date that is nine months after the
Issuance Date but prior to the first anniversary of the Issuance Date, 131%, in
either case of the principal amount called for redemption, plus (y) interest
accrued through the day immediately preceding the date of
redemption.
 
 (i)
              If
      fewer than all outstanding Debentures are to be redeemed, then all
      Debentures shall be partially redeemed on a prorata
      basis.
 
  F-18
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  5.
              Convertible
      debentures payable (continued):
 
 In
      connection with the Purchase Agreement, the Company entered into a
      Registration Rights Agreement, dated as of April 24, 2006 (“Registration
      Rights Agreement”), with the Holders of the Debentures to provide certain
      registration rights under the Securities Act of 1933, as amended (the
      “Securities Act”), and the rules and regulations
      thereunder.  Pursuant to the Registration Rights Agreement, the
      Company contemplates making an offering of common stock (or other equity
      securities convertible into or exchangeable for common stock) registered
      for sale under the Securities Act or proposes to file a Registration
      Statement covering any of its securities other than (i) a registration of
      Form S-8 or S-4, or any successor or similar forms; and (ii) a shelf
      registration under Rule 415 for the sole purpose of registering shares to
      be issued in connection with the acquisition of assets, the Company will
      at each such time give prompt written notice to the Holders’
      representative and the Holders of its intention to do so.  Upon
      the written request of any Holder made within thirty (30) days after the
      receipt of any such notice, the Company has agreed to use its best efforts
      to effect the registration of all such registrable securities which the
      Company has been so requested to register by the Holders, to the extent
      requisite to permit the disposition by the requesting Holders of their
      registrable securities pursuant to the Registration
    Statement.
 
 The
      Company determined that the conversion feature of the convertible
      Debentures represents an embedded derivative since the Debentures are
      convertible into a variable number of shares upon conversion. Accordingly,
      the convertible Debentures are not considered to be conventional debt
      under EITF 00-19 and the embedded conversion feature must be bifurcated
      from the debt host and accounted for as a derivative liability. The
      Company believes that the aforementioned embedded derivatives and
      freestanding warrants meet the criteria of SFAS 133 and EITF 00-19, and
      should be accounted separately as derivatives with a corresponding value
      recorded as a liability. Accordingly, the fair value of these derivative
      instruments have been recorded as a liability on the consolidated balance
      sheet with the corresponding amount recorded as a discount to the 2006
      Debentures. Such discount will be accreted from the date of issuance to
      the maturity date of the 2006 Debentures. The change in the fair value of
      the liability for derivative contracts will be credited to other income
      (expense) in the consolidated statements of operations. The $385,000 face
      amount of the 2006 Debentures were stripped of their conversion feature
      due to the accounting for the conversion feature as a derivative, which
      was recorded using the residual proceeds to the conversion option would be
      attributed to the debt. The beneficial conversion feature (an embedded
      derivative) included in the 2006 Debenture resulted in an initial debt
      discount of $385,000 and an initial loss on the valuation of derivative
      liabilities of $75,874.
 
 The
      Company issued 1,500,000 shares of its common stock to Divine Capital
      Markets, LLC and/or its designees as consideration for its services as the
      placement agent in connection with the financing transaction described
      above.
 
 
  F-19
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  5.
              Convertible
      debentures payable (continued):
 
 The
      following table summarizes the balance sheet amounts as of July 31, 2009,
      as well as the amounts included in the consolidated statement of
      operations for the year ended July 31,
2009.
 
 Balance
      Sheet
 
 Debentures
              
              Debt
      issuance costs
              
              Derivative
      liability
              
              Face
      value of Debentures
              
              Discount
      on Debentures2007
              
              $35,296
              
              $572,334
              
              $324,000
              
              $151,096
 
 
 Operating
      StatementDebentures
              
              Debt
      issuance costs expenses
              
              Increase
      (decrease) in derivative liability2007
              
              $24,620
              
              $96
 
 The
      initial beneficial conversion feature (embedded derivative) was calculated
      as if the debentures were converted on their initial issue date per the
      terms of the Purchase Agreement.  Those terms allowed for a
      conversion price equal to 75% of the lowest closing bid price per share as
      reported by Bloomberg, L.P. of the Company’s common stock for the twenty
      days immediately preceding the date of
  conversion.
 
 The
      following amounts were recorded for the 2006
  debentures:
 
 1
              
              2A)
              
              Date
              
              4/24/06
              
              5/31/06B)
              
              Face
      value
              
              $305,000
              
              $80,000C)
              
              Stock
      price
              
              $0.08
              
              $0.07D)
              
              Lowest
      20 day stock price
              
              $0.059
              
              $0.06E)
              
              75%
              
              $0.04425
              
              $0.045F)
              
              Potential
      shares (line b÷e)
              
              6,892,655
              
              1,777,778G)
              
              Black-Scholes
      value per share
              
              $0.055
              
              $0.046H)
              
              Derivative
      liability
              
              $379,096
              
              $81,178
 
 The
      initial total derivative liability initially recorded was
      $460,274.
 
  F-20
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  5.      Convertible
debentures payable (continued):
 
 The
      following amounts were recorded for the 2007
  debentures:
 
 1
              2
              3
              4
              5
              6A)
              10/28/07
              12/10/07
              1/8/08
              2/8/08
              4/30/08
              6/10/08B)
              $240,000
              $80,000
              $50,000
              $55,000
              $40,000
              $40,000C)
              $0.08
              $0.165
              $0.115
              $0.11
              $0.04
              $0.02D)
              $0.07
              $0.068
              $0.115
              $0.1025
              $0.04
              $0.015E)
              $0.0525
              $0.051
              $0.08625
              $0.076875
              $0.03
              $0.01125F)
              4,571,429
              1,568,627
              579,710
              715,447
              1,333,333
              3,555,556G)
              $0.056
              $0.145
              $0.095
              $0.087
              $0.033
              $0.02H)
              $256,000
              $227,451
              $55,072
              $62,244
              $44,000
              $71,111
 
 The
      initial total derivative liability recorded was
  $715,878.
 
 
 6.
              Convertible
      and other promissory notes and long-term debt, including related
      parties:
 
 Convertible
      and other promissory notes and long-term debt, including related parties
      at July 31, 2009 and 2008 consist of the
  following:
 
 2009
              
              
              2008Notes
      payable
              
              $
              175,144
              
              
              $
              175,644Notes
      payable, related parties [A]
              
              
              245,296
              
              
              
              164,932Convertible
      debentures, net of discount of $151,096 (2009) and $403,866
      (2008)
              
              
              172,904
              
              
              
              101,134$
              593,344
              
              
              $
              441,710Less
      current portion
              
              
              420,440
              
              
              
              340,576Long-term
      debt, net of current portion
              
              $
              172,904
              
              
              $
              101,134
 
 [A]
              The
      following table summarizes the activity of notes payable, related parties
      for the year ended July 31, 2009:
 
 Balance,
      August 1, 2008
              
              $
              164,932Converted
      to common stock
              
              
              (73,132
              )Reclassification
              
              
              500Issuance
      of new notes
              
              
              157,405Repayment
      of notes
              
              
              (4,409
              )Balance,
      July 31, 2009
              
              $
              245,296
 
  F-21
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  7.
              Stockholders’
      deficit:
 
 Common
stock
 
 On
      September 29, 2008, the Company issued 2,000,000 shares of its common
      stock upon the conversion of $22,500 of convertible debentures. The shares
      were converted at $0.01125 per
share.
 
 On
      February 6, 2009, the Company issued 3,030,301 shares of its common stock
      upon the conversion of $15,000 of convertible debentures. The shares were
      converted at $0.00495 per share.
 
 On
      March 13, 2009 the Company issued 4,999,998 shares of its common stock
      upon the conversion of $15,000 of convertible debentures. The shares were
      converted at $0.003 per share.
 
 On
      April 14 and 15, 2009 the Company issued in the aggregate 6,999,998 shares
      of its common stock upon the conversion of $21,000 of convertible
      debentures. The shares were converted at $0.003 per
  share.
 
 On
      May 4, 2009, the Company issued 6,357,666 shares of its common stock upon
      the conversion of $17,500 of convertible debentures and $1,573 of accrued
      interest.  The shares were converted at $0.003 per
      share.
 
 On
      June 5, 2009 the Company issued 7,092,195 shares of its common stock upon
      the conversion of $25,000 of convertible debentures. The shares were
      converted at $0.003525 per share.
 
 On
      July 27, 2009 the Company issued 21,697,324 shares of its common stock
      upon the two year mandatory conversion of the Company’s preferred stock of
      $98,650 (the “Stated Value”). Per the terms of the Certificate of
      Designation, the preferred stock converted at the result of the Stated
      Value multiplied by 120%, divided by the average of the closing price for
      the twenty (20) days prior to the conversion multiplied by seventy five
      percent (75%).  This conversion represents only a portion of the
      preferred stock outstanding.  The remaining amount of preferred
      stock outstanding at July 31, 2009 is $437,241 and the holders of those
      shares and the Company have agreed to extend the mandatory conversion
      period for one additional year to July 27,
2010.
 
 On
      July 30 and 31, 2009, the Company issued in the aggregate 10,424,089
      shares of its common stock upon the conversion of $42,500 of convertible
      debentures and $2,063 of accrued interest. The shares were converted at
      $0.004275 per share.
 
 Also
      on July 31, 2009 the Company issued in the aggregate 16,673,152 shares of
      its common stock upon the conversion of $7,375 of accrued expenses related
      party, $73,132 and $3,372 of related party notes payable and accrued
      interest thereon.  The debt was converted at an average price of
      approximately $.005 per share.
 
  F-22
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  7.
              Stockholders’
      deficit (continued):
 
 Stock
      options and warrants
 
 In
      March 2002, the Company adopted the 2002 Stock Option Plan, covering up to
      1,000,000 shares of the Company's common stock, and in July 2003, the
      Company adopted the 2003 Stock Option Plan covering up to 2,500,000 shares
      of the Company's common stock. There are currently no options outstanding
      under the 2002 and 2003 Stock Option Plans. In August 2007, the Company
      adopted the 2007 Stock Option Plan covering up to 18,000,000 shares of the
      Company’s common stock. As of July 31, 2009 there were 6,500,000 options
      to purchase the Company’s common stock outstanding under the 2007 Stock
      Option Plan.
 
 A
      summary of the activity of the Company’s outstanding options and warrants
      during fiscal 2009 and 2008 is as
follows:
 
 Options
      and warrants
              
              
              Weighted
      average exercise priceOutstanding,
      August 1, 2007
              
              
              8,812,107
              
              
              $
              0.13Granted
              
              
              6,875,000
              
              
              
              0.07Exercised
              
              
              -
              
              
              
              -Expired
              
              
              -
              
              
              
              -Outstanding
      and exercisable atJuly
      31, 2008
              
              
              15,687,107
              
              
              $
              0.10Granted
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -Expired
              
              
              2,650,000
              
              
              
              0.20Outstanding
      and exercisable atJuly
      31, 2009
              
              
              13,037,107
              
              
              $
              0.09
 
 Range
      of exercise prices
              Warrants
      outstanding and
      exercisable
              Weighted
      average remaining contractual life
              Weighted
      average exercise
  price$  0.05
              300,000
              0.02
              $  0.050.07
      - 0.10
              11,737,107
              4.55
              0.0830.12
              1,000,000
              0.18
              0.12
 
 The
      fair value of options granted to purchase our common stock were estimated
      on the date of the grant using the Black-Scholes Option Pricing Model with
      the following assumptions:
 
 July
      31, 2008Expected
      dividend yield
              
              
              0%Expected
      stock price volatility
              
              
              197%
      - 253%Risk
      free interest rate
              
              
              4%
      - 4.72%Expected
      life of options
              
              
              2
      -3 years
 
 The
      weighted average remaining contractual life of the terms of the warrants
      and options is 2.1 years.
  F-23
 
 CHINA
NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 THE
YEARS ENDED JULY 31, 2009 AND 2008
  8.      Income
taxes:
 
 Deferred
      income taxes reflect the net tax effect of temporary differences between
      the carrying amounts of assets and liabilities for financial reporting
      purposes and the amounts used for income tax purposes. Significant
      components of the net deferred taxes, as of July 31, 2009, are as
      follows:
 
 Deferred
      tax assets:Net
      operating loss carryforward
              
              $
              336,000Less
      valuation allowance
              
              
              (336,000
              )Total
      net deferred tax assets
              
              
              -
 
 The
      Company may have had a change of ownership as defined by the Internal
      Revenue Code Section 382. As a result, a substantial annual limitation may
      be imposed upon the future utilization of its net operating loss
      carryforwards. At this point, the Company has not completed a change in
      ownership study and the exact impact of such limitations is unknown. The
      company has no accrued tax liability, as the income was derived from the
      sale of a subsidiary and the liabilities were alleviated through formal
      bankruptcy proceedings.
 
 The
      federal statutory tax rate reconciled to the effective tax rate during
      fiscal 2009 and 2008, respectively, is as
  follows:
 
 2008
              
              
              2007Tax
      at U.S. Statutory Rate
              
              
              35.0
              %
              
              
              35.0
              %State
      tax rate, net of federal benefits
              
              
              5.0
              %
              
              
              5.0
              %Change
      in valuation allowance
              
              
              (40.0
              )
              
              
              (40.0
              )0.0
              %
              
              
              0.0
              %
 
 8.      Subsequent
Events:
 
 In
      August 2009, the Board of Directors of the Company granted options to
      purchase 10,000,000 shares of common stock of the Company, of which
      9,800,000 were granted to Officers and directors of the
      Company.  All of the options granted have a exercise price of
      $0.01 and expire on the ten year anniversary of the grant.  All
      of the options were granted under the 2007 stock option
    plan.