UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-Q





x
            Quarterly
      Report pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of
      1934





For the
quarterly period ended October 31, 2009










 ̈
              Transition
      Report pursuant to 13 or 15(d) of the Securities Exchange
      Act   of 1934





For the
transition period fromto________________


Commission
File
Number                      000-33391


EV
      INNOVATIONS, INC.(Exact
      name of Small Business Issuer as specified in its
  charter)





Nevada
                      
                      88-0490890(State
      or other jurisdiction of
                        incorporation
      or organization)
                      
                      (IRS
      Employer Identification
No.)





4894
      Lone Mountain #168, Las Vegas NV
                      
                      89130(Address
      of principal executive offices)
                      
                      (Postal
      or Zip
Code)





Issuer's
telephone number, including area code:  702-425-7376





Former
      name, former address and former fiscal year, if changed since last
      report)





Check  whether
the issuer (1) filed all reports  required to be filed by Section 13
or 15(d) of the  Exchange  Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing requirements for
the past 90 days. x Yes
 ̈
No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  ̈    No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a smaller reporting company.  (Check
One):





Large
accelerated filer   ̈                                                                           Accelerated
filer   ̈





Non-accelerated
filer     ̈                                                                           Smaller
reporting company  x


(Do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes  ̈ No
x





APPLICABLE
ONLY TO CORPORATE ISSUERS




The
number of shares outstanding the issuer's common stock, $.001 par value, was
21,569,101 as of December 1, 2009.








EV
INNOVATIONS, INC.





I N D E
X





TABLE OF
CONTENTS





Page No.PART
      I. FINANCIAL INFORMATIONITEM
      I - Unaudited Consolidated Financial StatementsConsolidated
      Balance Sheets as of October 31,  2009 and July 31, 2009
      (Unaudited)
                        
                        2Consolidated
      Statements of Operations for the Three Months Ended October 31, 2009 and
      2008 (Unaudited)
                        
                        3Consolidated
      Statement of Comprehensive Loss (Unaudited)
                        
                        4Consolidated
      Statement of Stockholders Deficiency (Unaudited)
                        
                        5Consolidated
      Statements of Cash Flows  for the Three Months Ended October
      31,  2009 and 2008 (Unaudited)
                        
                        6Notes
      to Unaudited Consolidated Financial Statements
                        
                        7ITEM
      2 - Management's Discussion and Analysis of  Financial Condition
      and Results of Operations.
                        
                        21ITEM
      3 – Quantitative and Qualitative Disclosures About Market
    Risk
                        
                        25ITEM
      4T– Controls and Procedures.
                        
                        26PART
      II. OTHER INFORMATION
                        
                        26ITEM
      1 - Legal
      Proceedings.
                        
                        26ITEM
      6 – Exhibits.
                        
                        26EXHIBIT
      31 - Certification pursuant to Section 302 of the Sarbanes- Oxley Act of
      2002EXHIBIT
      32 - Certification pursuant to Section 906 of the Sarbanes- Oxley Act of
      2002


2





PART I.
FINANCIAL INFORMATION





Item
1. Financial Statements





Certain
information and footnote disclosures required under accounting
principles generally accepted in the United States of America have been
condensed or omitted from the following consolidated financial statements pursuant
to the rules and regulations of the Securities and Exchange Commission. It is
suggested that the following consolidated financial statements be read in conjunction
with the year-end consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
July 31, 2009.





The
results of operations for the three months ended October 31, 2009 and 2008 are
not necessarily indicative of the results for the entire fiscal year or for any
other period.


1


EV
INNOVATIONS, INC.
 
 Consolidated
Balance Sheets
 (UNAUDITED)
 
 October
      31,
              
              
              July
      31,ASSETS
              
              2009
              
              
              2009Current
      assets:Cash
              
              $
              10,874
              
              
              $
              5,182Accounts
      receivable, net of allowance fordoubtful
      accounts of $0
              
              
              -
              
              
              
              13,522Inventories
              
              
              116,580
              
              
              
              227,826Employee
      advances
              
              
              3,475
              
              
              
              1,508Other
      current assets
              
              
              14,640
              
              
              
              18,009Total
      current assets
              
              
              145,569
              
              
              
              266,047Property
      and equipment, net
              
              
              1,973,363
              
              
              
              1,989,981Other
      long term assets:Deferred
      patent costs
              
              
              24,258
              
              
              
              24,258Total
      other long term assets
              
              
              24,258
              
              
              
              24,258$
              2,143,190
              
              
              $
              2,280,286LIABILITIES
      AND DEFICIENCYCurrent
      liabilities:Current
      portion of long-term debt
              
              $
              35,433
              
              
              $
              39,702Accounts
      payable and accrued expenses
              
              
              1,160,388
              
              
              
              999,749Customer
      deposits
              
              
              314,222
              
              
              
              391,199Deferred
      revenue
              
              
              3,178
              
              
              
              3,808Advances
      from related parties
              
              
              272,125
              
              
              
              97,940Total
      current liabilities
              
              
              1,785,346
              
              
              
              1,532,398Long-term
      debt - less current portion above
              
              
              3,914,438
              
              
              
              3,774,668Commitments
      and contingencies
              
              
              -
              
              
              
              -Deficiency:EV
      Innovations, Inc. deficiency:Preferred
      stock, $.001 par value, 5,000,000 sharesauthorized,
      no shares issued
              
              
              -
              
              
              
              -Common
      stock, $.001 par value, 50,000,000 authorized;outstanding
      21,284,101 at October 31, 2009 and20,884,101
      at July 31, 2009, respectively
              
              
              21,284
              
              
              
              20,884Additional
      paid-in-capital
              
              
              56,090,774
              
              
              
              55,731,174Deficit
      accumulated during the development stage
              
              
              (59,654,894
              )
              
              
              (58,765,425
              )Cumulative
      other comprehensive loss
              
              
              (13,758
              )
              
              
              (13,413
              )Total
      EV Innovations, Inc. deficiency
              
              
              (3,556,594
              )
              
              
              (3,026,780
              )Noncontrolling
      interest
              
              
              -
              
              
              
              -Total
      deficiency
              
              
              (3,556,594
              )
              
              
              (3,026,780
              )Total
      liabilities and deficiency
              
              $
              2,143,190
              
              
              $
              2,280,286
  SEE
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


2




EV INNOVATIONS,
INC.
 
 Consolidated Statements of
Operations
 (UNAUDITED)
 
 THREE
      MONTHS ENDEDOctober
      31,2009
              
              
              2008Sales
              
              $
              124,910
              
              
              $
              1,945Costs
      and expenses:Cost
      of sales
              
              
              165,497
              
              
              
              -General
      and administrative
              
              
              371,322
              
              
              
              483,901Research
      and development
              
              
              432,621
              
              
              
              416,252969,440
              
              
              
              900,153Loss  from
      operations
              
              
              (844,530
              )
              
              
              (898,208
              )Other
      income (expense):Interest
      expense
              
              
              (62,564
              )
              
              
              (27,293
              )Interest
      income
              
              
              -
              
              
              
              7,077Other
      income
              
              
              17,625
              
              
              
              19,415Net
      loss from operations
              
              
              (889,469
              )
              
              
              (899,009
              )Provision
      for (benefit from) income tax
              
              
              -
              
              
              
              -Net
      loss
              
              
              (889,469
              )
              
              
              (899,009
              )Less:
      Net loss attributable to noncontrolling interest
              
              
              -
              
              
              
              -Net
      loss attributable to EV Innovations, Inc.
              
              $
              (889,469
              )
              
              $
              (899,009
              )Loss
      per share - basic and diluted:Loss
      per common share attributable to EV Innovations, Inc.common
      shareholders
              
              $
              (0.04
              )
              
              $
              (0.04
              )Weighted
      shares outstanding - basic and diluted
              
              
              21,014,535
              
              
              
              23,347,257Amounts
      attributable to EV Innovations, Inc. common shareholders:Net
      loss
              
              $
              (889,469
              )
              
              $
              (899,009
              )
  SEE
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


3




EV INNOVATIONS,
INC.
 
 Consolidated Statement of Comprehensive
Loss
 (UNAUDITED)


THREE MONTHS
      ENDED
              October
      31,2009
            
            
            2008Net loss
            
            $
            (889,469
            )
            
            $
            (899,009
            )Other comprehensive
      incomeCurrency translation
      adjustment
            
            
            (345
            )
            
            
            2,361Comprehensive
      loss
            
            
            (889,814
            )
            
            
            (896,648
            )Comprehensive loss
      attributable to
              noncontrolling
      interest
            
            
            -
            
            
            
            -Comprehensive
      loss attributable to
              EV
      Innovations, Inc.
            
            $
            (889,814
            )
            
            $
            (896,648
            )




SEE
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


4


EV INNOVATIONS,
INC.
 
 Consolidated Statement of Stockholders'
Equity (Deficiency)
 (UNAUDITED)
 
 CumulativeAdditional
              
              
              
              
              
              OtherCommon
      stock
              
              
              
              
              
              Paid-in
              
              
              
              
              
              Comprehensive
              
              
              NoncontrollingShares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              Income
      (loss)
              
              
              Interest
              
              
              TotalBalance
      July 31, 2008
              
              
              23,347,257
              
              
              $
              23,347.00
              
              
              $
              47,790,509.00
              
              
              $
              (51,947,451.00
              )
              
              $
              5,630.00
              
              
              $
              -
              
              
              $
              (4,127,965.00
              )Stock
      issuancesExercise
      of options (valued at $0.90 per share)
              
              
              3,500
              
              
              
              4
              
              
              
              (4
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -1:3
      Reverse stock split adjustment
              
              
              (15,566,844
              )
              
              
              (15,567
              )
              
              
              15,567
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Value
      of stock options issued (valued at $0.90 per share)
              
              
              -
              
              
              
              -
              
              
              
              2,630,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,630,000Common
      stock issued as collateral on loan
              
              
              11,666,664
              
              
              
              11,667
              
              
              
              (11,667
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Exercise
      of options (valued at $0.90 per share)
              
              
              1,433,524
              
              
              
              1,433
              
              
              
              1,285,417
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,286,850Conversion
      of loan to equity
              
              
              -
              
              
              
              -
              
              
              
              4,000,000
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              4,000,000Conversion
      of accrued interest to equity
              
              
              -
              
              
              
              -
              
              
              
              21,352
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              21,352Net
      (loss) for the period
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,817,974
              )
              
              
              -
              
              
              
              -
              
              
              
              (6,817,974
              )Foreign
      currency transactions
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (19,043
              )
              
              
              -
              
              
              
              (19,043
              )Balance
      July 31, 2009
              
              
              20,884,101
              
              
              
              20,884
              
              
              
              55,731,174
              
              
              
              (58,765,425
              )
              
              
              (13,413
              )
              
              
              -
              
              
              
              (3,026,780
              )Stock
      issuancesExercise
      of options (valued at $0.90 per share)
              
              
              400,000
              
              
              
              400
              
              
              
              359,600
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              360,000Net
      (loss) for the period
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (889,469
              )
              
              
              -
              
              
              
              -
              
              
              
              (889,469
              )Foreign
      currency transactions
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (345
              )
              
              
              
              
              
              
              (345
              )Balance
      October 31, 2009
              
              
              21,284,101
              
              
              $
              21,284
              
              
              $
              56,090,774
              
              
              $
              (59,654,894
              )
              
              $
              (13,758
              )
              
              $
              -
              
              
              $
              (3,556,594
              )
  SEE NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
 
 5
 EV INNOVATIONS,
INC.
 
 Consolidated Statements of Cash
Flows
 (UNAUDITED)
 
 THREE
      MONTHS ENDEDOctober
      31,2009
                
                
                2008Cash
      provided by (used in) Operating Activities:Net
      (loss)
                
                $
                (889,469
                )
                
                $
                (899,009
                )Items
      not affecting cash flowsDepreciation
      and amortization
                
                
                21,469
                
                
                
                19,617Changes
      in operating assets and liabilites(Increase)
      decrease in accounts receivable
                
                
                13,522
                
                
                
                (119,560
                )(Increase)
      decrease in inventories
                
                
                111,246
                
                
                
                (41,781
                )(Increase)
      in employee advances
                
                
                (1,967
                )
                
                
                (3,564
                )Decrease
      in prepaid expenses and other assets
                
                
                3,369
                
                
                
                57,300Increase
      in accounts payable and accrued expenses
                
                
                192,840
                
                
                
                98,198Increase
      (decrease) in customer deposits
                
                
                (76,977
                )
                
                
                110,171(Increase)
      in deferred revenue
                
                
                (630
                )
                
                
                -Cash
      used in operating activities
                
                
                (626,597
                )
                
                
                (778,628
                )Cash
      provided by (used in) Investing Activities:Purchase
      of property and equipment
                
                
                (4,851
                )
                
                
                (11,838
                )Cash
      provided by (used in) Financing Activities:Proceeds
      from the issuance of debt
                
                
                113,941
                
                
                
                306,995Advances
      from related parties
                
                
                740,266
                
                
                
                681,087Payments
      of related party advances
                
                
                (206,081
                )
                
                
                (270,292
                )Payments
      of debt
                
                
                (10,641
                )
                
                
                (8,347
                )Cash
      provided by financing activities
                
                
                637,485
                
                
                
                709,443Effect
      of exchange rate changes on cash and cash equivalents
                
                
                (345
                )
                
                
                (17,600
                )Net
      increase (decrease) in cash
                
                
                5,692
                
                
                
                (98,623
                )Cash
      at beginning of period
                
                
                5,182
                
                
                
                101,095Cash
      at end of period
                
                $
                10,874
                
                
                $
                2,472Supplemental
      information:Cash
      paid during the year for:Interest
      paid
                
                $
                26,615
                
                
                $
                -Income
      taxes paid
                
                $
                -
                
                
                $
                -Non
      - cash financing activities:Shares
      issued for related party advances
                
                $
                360,000
                
                
                $
                -Accrued
      expenses transferred to long term debt
                
                $
                32,201
                
                
                $
                -
  SEE
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6


EV
INNOVATIONS, INC.


Notes
to Unaudited Consolidated Financial Statements


October
31, 2009





Note
1. Financial statement presentation





The
financial statements have been prepared in accordance with Securities Exchange
Commission requirements for interim financial statements.  Therefore,
they do not include all information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements.  These financial statements should be read in conjunction
with the financial statements and notes thereto contained in the Company's
Annual Report on form 10-K for the year ended July 31, 2009 as filed with the
Securities Exchange Commission.





The
results of operations for the interim periods shown in this report are not
necessarily indicative of results to be expected for the full
year.  In the opinion of management, the information contained herein
reflects all adjustments necessary to make the results of operations for the
interim period a fair statement of such operations.  All such
adjustments are of a normal recurring nature.





History
and Nature of Business


EV
Innovations, Inc. (formerly Hybrid Technologies, Inc.) was incorporated under
the laws of the State of Nevada on April 12, 2000. EV Innovations, Inc.'s (the
“Company”) original business was the exploration and development of mineral
interests. The Company abandoned these interests in 2003.





The
Company is currently pursuing the development and marketing of electric powered
vehicles and products based on the advanced lithium battery technology it has
developed. As of July 31, 2009 the Company no longer considered itself a
development stage company as planned principal operations have began in its
primary line of business. The Company is organized by line of business and
geographic area. The Company had two businesses, telecommunication services and
the development and sale of electric powered vehicles.





On April
16, 2008, the Company sold their controlling interest of approximately 69% of
the outstanding common stock in Zingo, Inc. (now Superlattice Power, Inc.,
“SPI”). Prior to April 16, 2008, SPI was a related party who provided
telecommunication services to business and residential customers utilizing VOIP
technology and currently is researching and developing rechargeable lithium ion
batteries.





Effective
April 15, 2008, the Company entered into a license agreement with SPI providing
for their license to SPI of their patent applications and technologies for
rechargeable lithium ion batteries for electric vehicles and other applications
(“licensed products”). Under the license agreement, the Company has the right to
purchase their requirements of lithium ion batteries from SPI, and their
requirements of lithium ion batteries shall be supplied by SPI in preference to,
and on a priority basis as compared with, supply and delivery arrangements in
effect for other customers of SPI. The Company’s cost for lithium ion batteries
purchased from SPI shall be SPI’s actual manufacturing costs for such batteries
for the fiscal quarter of SPI in which the Company’s purchase takes
place.





Under the
terms of the license agreement, SPI has agreed to invest a minimum of $1,500,000
in each of the next two years in development of the technology for the Licensed
Products. To date, investments have been made in the amount of $314,517 in the
development of technology, and therefore, is not in compliance with its
obligations under this covenant of the license agreement.  The Company has
advised SPI in a letter dated October 1, 2009, that it will not give notice of
default against SPI for their failure to comply with this covenant in the first
year of the term of the license agreement.





Basis
of presentation


The
Company’s financial statements for the three months ended October 31, 2009 have
been prepared on a going concern basis which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of
business. As of October 31, 2009, the Company had a working capital deficiency
of approximately $1.5 million and a deficiency of approximately $3.5 million. In
addition, during the year ended July 31, 2009, the Company defaulted on interest
payments on a loan and the shares used as collateral to secure the loan to
Wyndom Capital Investments, Inc. (“Wyndom”) was used to extinguish the loan and
all unpaid interest. The 10,000,000 shares to Wyndom to extinguish the debt
represents 47.9% of the Company’s outstanding shares, sufficient to make Wyndom
the controlling shareholder. The Company currently is still in default on the
interest payments for the second loan. See Note 5 for further information.
Management recognized that the Company’s continued existence is dependent upon
its ability to obtain needed working capital through additional equity and/or
debt financing and revenue to cover expenses as the Company continues to incur
losses.





7




EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





The
Company’s business is subject to most of the risks inherent in the establishment
of a new business enterprise. The likelihood of success of the Company must be
considered in light of the expenses, difficulties, delays and unanticipated
challenges encountered in connection with the formation of a new business,
rising operating and development capital, and the marketing of a new
product.  There is no assurance the Company will ultimately achieve a
profitable level of operations.





The
Company presently does not have sufficient liquid assets to finance its
anticipated funding needs and obligations.  The Company’s continued
existence is dependent upon its ability to obtain needed working capital through
additional equity and/or debt financing and achieve a level of sales adequate to
support its cost structure. Management is actively seeking additional capital to
ensure the continuation of its current activities and complete its proposed
activities. However, there is no assurance that additional capital will be
obtained. These uncertainties raise substantial doubt about the ability of the
Company to continue as a going concern. The accompanying financial statements do
not include any adjustments that might result from the outcome of these
uncertainties should the Company be unable to continue as a going
concern.





In
January 2009, the Company’s shareholders approved a one-for-three reverse stock
split of its outstanding common shares which became effective on February 19,
2009. Also on February 19, 2009 the authorized shares of the Company was
increased from 35,714,285 to 50,000,000 shares.





SIGNIFICANT
ACCOUNTING POLICIES





Basis
of consolidation


The
consolidated financial statements included the accounts and records of the
Company and its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The Company does
not have any special purpose entities. For those consolidated subsidiaries in
which the company's ownership is less than 100 percent (100%), the outside
stockholders' interests are shown as noncontrolling interest.  The
noncontrolling interest of the company's earnings or loss is classified as net
income (loss) attributable to noncontrolling interest in the consolidated
statement of operations.





The
following is a listing of the Company's subsidiaries and its ownership
interests:




Global
      Electric, Corp.
              
              
              67.57
              %R
      Electric Car, Co.
              
              
              67.57
              %Solium
      Power, Corp.
              
              
              67.57
              %Hybrid
      Technologies USA Distributing Inc.
              
              
              100.00
              %Hybrid
      Electric Vehicles India Pvt. Ltd.
              
              
              100.00
              %





Estimates


The
preparation of financial statements prepared in accordance with the accounting
standards generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those
estimates.


8


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Fair
value of financial instruments


The fair
value of accounts receivables, accounts payable and accrued expenses, long term
debt, customer advances, and advances from related parties approximates fair
value based on their short maturities.





The
Company adopted FASB ASC 820, Fair Value Measurements and Disclosures (“ASC
820”) on January 1, 2008, for all financial assets and liabilities that are
recognized or disclosed at fair value in the condensed consolidated financial
statements on a recurring basis or on a nonrecurring basis during the reporting
period. While the Company adopted the provisions of ASC 820 for nonfinancial
assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring basis, no such assets or liabilities existed
at the balance sheet date. As permitted by ASC 820, the Company delayed
implementation of this standard for all nonfinancial assets and liabilities
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis and adopted these provisions effective August 1,
2009.





The fair
value is an exit price, representing the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  The Company utilizes market
data or assumptions that market participants would use in pricing the asset or
liability.  ASC 820 establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value.  These
tiers include:  Level 1, defined as observable inputs such as quoted
market prices in active markets; Level 2, defined as inputs other than quoted
prices in active markets that are either directly or indirectly observable; and
Level 3, defined as unobservable inputs about which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.





As of
October 31, 2009, the Company held certain financial assets that are measured at
fair value on a recurring basis.  These consisted of cash and cash
equivalents. The Company does not have any financial assets measured at fair
value on a recurring basis as Level 2 or Level 3 and there were no transfers in
or out of Level 2 or Level 3 during the three months ended October 31,
2009.





The
following table sets forth by level, within the fair value hierarchy, the
Company’s financial assets accounted for at fair value on a recurring basis as
of October 31, 2009.


Assets at fair value as of October 31, 2009 usingQuoted prices inactive markets for
                                                                          
                                                                          Significan other
                                                                          
                                                                          Significantidentical assets
                                                                          
                                                                          observable inputs
                                                                          
                                                                          unobservableTotal
                                                                          
                                                                          (Level 1)
                                                                          
                                                                          (Level 2)
                                                                          
                                                                          inputs (Level 3)Cash
      and cash equivalents
                                                                          $
                                                                          10,874
                                                                          
                                                                          $
                                                                          10,874
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          $
                                                                          -




The
Company had no financial assets accounted for on a non-recurring basis as of
October 31, 2009.





There
were no changes to the Company’s valuation techniques used to measure asset fair
values on a recurring or nonrecurring basis during the three months ended
October 31, 2009 and the Company did not have any financial liabilities as of
October 31, 2009.





The
Company has other financial instruments, such as receivables, accounts payable
and other liabilities which have been excluded from the tables
above.  Due to the short-term nature of these instruments, the
carrying value of receivables, accounts payable and other liabilities
approximate their fair values.





Cash
and cash equivalents


Cash and
cash equivalents consist of highly liquid investments, which are readily
convertible into cash with original maturities of three months or
less.


9


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Accounts
receivable


The
Company provides credit to customers in the normal course of business. An
allowance for accounts receivable is estimated by management based in part on
the aging of receivables and historical transactions. Periodically management
reviews accounts receivable for accounts that appear to be uncollectible and
writes off these uncollectible balances against the allowance
accordingly.





Inventories


Inventories
are stated at the lower of cost or market. Cost is based on the specific
identification method.





Property
and equipment


Property
and equipment are recorded at cost less accumulated depreciation. Depreciation
of property and equipment are accounted for by accelerated methods over the
following estimated useful lives:





Lives
                        
                        MethodsBuilding
      improvements
                        39
      years
                        
                        Straight
      lineFurniture
      and fixtures
                        10
      years
                        
                        AcceleratedSoftware
                        3-5
      years
                        
                        Straight
      lineComputers
                        5
      years
                        
                        Straight
      line





Deferred
patent costs


The
Company capitalizes costs directly incurred in pursuing patent applications as
deferred patent costs. When such applications result in an issued patent, the
related costs are amortized over the remaining legal life of the patents, which
is assumed to be 17 years, using the straight-line method. On a quarterly basis,
the Company reviews the issued patents and pending patent applications and if
the Company determines to abandon a patent application, or an issued patent no
longer has economic value, the unamortized balance in deferred patent costs
relating to that patent is immediately expensed. As of October 31, 2009 there
were only pending patent applications.





Stock
based compensation


The
Company issues stock options to employees and other certain service providers
under stockholder approved stock option programs that provide the right to
purchase the Company’s stock pursuant to stock purchase programs. The Company
also issued common stock for services performed.  The fair value of
the stock options issued is estimated on the date of grant using the Black
Scholes Option Pricing Model.  The fair value of common stock issued
for services is estimated on the date of issuance based on the value of the
stock issued or the consideration received.  See Note 8 of Notes to
Consolidated Financial Statements for further disclosures and
discussions.





Revenue
recognition


The
Company recognizes revenue in accordance with the guidance contained in
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 605, “Revenue Recognition”, (“ASC 605”) and other relevant accounting
literature.  Revenue is recognized when the product has been delivered
and title and risk of loss have passed to the customer, collection of the
resulting receivable is deemed reasonably assured by management, persuasive
evidence of an arrangement exists and the sale price is fixed and
determinable.





Shipping
and handling


Shipping
and handling costs related to services and product sales are expensed as
incurred.





Advertising


Advertising
costs are expensed as incurred and are included in general and administrative
expenses. Total advertising expenditures for the three months ended October 31,
2009 and 2008 and amounted to approximately $18,000 and $170,000,
respectively.


10


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Research
and development


No set
amount has been set aside for research and development (“R&D”) but all
projects and purchases must be approved before being started or purchased. As of
October 31, 2009, there have been expenses put toward research and development.
For the three months ending October 31, 2009, salaries, payroll taxes, and
benefits amounted to approximately $406,000 in R&D, parts and supplies was
approximately $14,000, shipping charges, battery management systems and other
R&D were approximately $5,000, $8,000 and $200, respectively.





Concentration
of risk


The
Company maintains cash deposit accounts and certificates of deposits which at
times may exceed federally insured limits. These accounts have not experienced
any losses and the Company believes it is not exposed to any significant credit
risk related to cash.





Income
taxes


The
Company accounts for income taxes using an asset and liability approach under
which deferred income taxes are recognized by applying enacted tax rates
applicable to future years to the differences between the financial statement
carrying amounts and the tax bases of reported assets and
liabilities.





The
principal item giving rise to deferred taxes is the net operating loss carry
forward.





Effective
August 1, 2007, uncertain tax positions are accounted for in accordance with
FASB ASC 740, “Income Taxes” (“ASC 740”).





Long-lived
assets


The
Company accounts for long-lived assets in accordance with FASB ASC 360-10-35,
“Impairment or Disposed of Long-lived Assets”, (“ASC 360-10-35”). The carrying
value of long-lived assets is reviewed on a regular basis for the existence of
facts and circumstances that may suggest impairment. The Company recognizes
impairment when the sum of undiscounted future cash flows is less than the
carrying amount of the asset. The write down of the asset is charged to the
period in which the impairment occurs.





Foreign
currency translation


The
functional currency for some foreign operations is the local currency. Assets
and liabilities of foreign operations are translated at balance sheet date rates
of exchange and income, expense and cash flow items are translated at the
average exchange rate for the period. Translation adjustments in future periods
will be recorded in Cumulative Other Comprehensive Income (Loss). The
translation losses for the three months ended October 31, 2009 and 2008 were
approximately $300 and $2,400, respectively.





Comprehensive
loss


The
Company reports comprehensive loss in accordance with the requirements of FASB
ASC 220-10-15, “Comprehensive Income”, (“ASC 220-10-15”). For the three months
ended October 31, 2009 and 2008, the difference between net loss and
comprehensive loss is foreign currency translation.





Loss
per Share


Basic
loss per common share is computed by dividing net loss by the weighted average
number of common shares outstanding during the specified
period.  Diluted loss per common share is computed by dividing net
loss by the weighted average number of common shares and potential common shares
during the specified period. All potentially dilutive securities, which include
options and warrants convertible into 1,185,000 and 1,019,000 common shares at
October 31, 2009 and 2008, respectively, have been excluded from the
computations, as their effect is anti-dilutive.





11




EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Recently
issued pronouncements


During
the first quarter of 2009, the Company implemented additional interim
disclosures about fair value of financial instruments, as required by FASB ASC
Paragraph 825-10-65-1.  Prior to implementation, disclosures about
fair values of financial instruments were only required to be disclosed
annually.  As the required modifications only related to additional
disclosures of fair values of financial instruments in interim financial
statements, the adoption did not affect the Company’s financial position or
results of operations.





Beginning
in the first quarter of 2009, the Company must disclose the date through which
subsequent events have been evaluated, in accordance with the requirements in
FASB ASC Paragraph 855-10-50-1.  With regards to the condensed
consolidated financial statements and notes to those financial statements
contained in this Form 10-Q, the Company has evaluated all subsequent events
through December 7, 2009 (the date the Company’s financial statement are
issued).




In
September 2009, the FASB implemented certain modifications to FASB ASC Topic
860, Transfers and Servicing, as a means to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets, the effects of a transfer on its financial position, financial
performance, and cash flows, and a transferor’s continuing involvement, if any,
in transferred financial assets. These modifications must be applied as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009. The Company does not expect the adoption of this
standard to have an impact on the Company’s results of operations, financial
condition or cash flows.




During
the first quarter of 2009, the Company adopted the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles in
accordance with FASB ASC Topic 105, “Generally Accepted Accounting Principles”
(the “Codification”).  The Codification has become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. Effective with the Company’s adoption on July 1, 2009, the
Codification has superseded all prior non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification has become non-authoritative. As the adoption of
the Codification only affected how specific references to GAAP literature have
been disclosed in the notes to the Company’s condensed consolidated financial
statements, it did not result in any impact on the Company’s results of
operations, financial condition or cash flows.





Updates to the FASB
Codification Applicable to the Company





The FASB
has published FASB Accounting Standards Update No. 2009-12, Fair Value Measurements and
Disclosures (Topic 820)—Investments in Certain Entities That Calculate Net Asset
Value per Share (or Its Equivalent). This Update amends Subtopic 820-10,
Fair Value Measurements and
Disclosures—Overall, to permit a reporting entity to measure the fair
value of certain investments on the basis of the net asset value per share of
the investment (or its equivalent). This Update also requires new disclosures,
by major category of investments, about the attributes of investments included
within the scope of this amendment to the Codification. The guidance in this
Update is effective for interim and annual periods ending after December 15,
2009. The Company does not expect the adoption of this standard to have an
impact on the Company’s results of operations, financial condition or cash
flows.


12


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Note
2. Inventories





Inventories
consist of the following:





October
      31,
                                
                                
                                July
      31,2009
                                
                                
                                2009Raw
      materials
                                
                                $
                                68,758
                                
                                
                                $
                                119,153Work
      in progress
                                
                                
                                47,822
                                
                                
                                
                                108,673Finished
      goods
                                
                                
                                -
                                
                                
                                
                                -$
                                116,580
                                
                                
                                $
                                227,826





Raw
materials, work in progress and finished goods for the three months ended
October 31, 2009, and year ended July 31, 2009, is related to the Company’s
planned sales of electric powered vehicles.





Note
3. Property and equipment





Property
and equipment consist of:





October
      31,
                                
                                
                                July 31,2009
                                
                                
                                2009Building
      and improvements
                                
                                $
                                1,275,086
                                
                                
                                $
                                1,274,636Furniture
      and fixtures
                                
                                
                                30,582
                                
                                
                                
                                29,023Office
      equipment
                                
                                
                                143,965
                                
                                
                                
                                143,965Machinery
      and equipment
                                
                                
                                36,971
                                
                                
                                
                                36,971Vehicles
                                
                                
                                60,979
                                
                                
                                
                                60,979Software
      costs
                                
                                
                                35,766
                                
                                
                                
                                32,924Land
                                
                                
                                700,000
                                
                                
                                
                                700,0002,283,349
                                
                                
                                
                                2,278,498Less
      accumulated depreciation
                                
                                
                                (309,986
                                )
                                
                                
                                (288,517
                                )$
                                1,973,363
                                
                                
                                $
                                1,989,981





Depreciation
expense for the three months ended October 31, 2009 and 2008 was $21,469 and
$19,617, respectively.





Note
4. Advances from related parties and related party transactions





The
Company received and repaid additional advances from SSRI (owned by a Company
stockholder) for the three months ended October 31, 2009 and year ended July 31,
2009 in amounts of approximately $729,000 and $452,000, respectively for October
2009 and $2,174,400 and $827,600, respectively, for July 2009. As of October 31,
2009 and July 31, 2009, the amount due to SSRI was $374,671 and $97,940,
respectively.





The
Company received and repaid additional advances from Greg Navone (Director of
the Company) for the three months ended October 31, 2009 and year ended July 31,
2009 in amount of $0 and $0, respectively for October 2009 and $51,000 and
$51,000, respectively, for July 2009. As of October 31, 2009 and July 31, 2009,
the amount due to the Company was $0 and $0, respectively. Mr.
Navone resigned as a Director of the Company on July 10, 2009.





The
Company received and repaid additional advances from Superlattice Power, Inc.
(prior subsidiary) for the three months ended October 31, 2009 and year ended
July 31, 2009 in amounts of $10,800 and $113,346, respectively for October 2009
and $0 and $0, respectively, for July 2009. As of October 31, 2009 and July 31,
2009, the amount due to the Company was $102,546 and $0,
respectively.





Due from
related parties and advances from related parties are reported as current assets
or liabilities. These advances are not subject to written agreements and have no
specific repayment terms but are deemed due on demand and are not interest
bearing notes except for the Greg Navone note.





13




EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Note
5. Long-term debt





Long-term
debt consists of:





October
      31,
                                              
                                              
                                              July
      31,2009
                                              
                                              
                                              200910.875%
      note payable to Bayview LoanServicing,
      LLC, payable in monthlyinstallments
      of approximately $11,388 includinginterest,
      collateralized by real propertydue
      in full on or before December 2022 (1)
                                              
                                              $
                                              946,931
                                              
                                              
                                              $
                                              954,63110%
      note payable to Crystal CapitalVentures,
      payable in May 2011collateralized
      by 7,500,000 shares ofthe
      Company's common stock (2)
                                              
                                              
                                              3,000,000
                                              
                                              
                                              
                                              2,853,85915.8%
      note payable to AllegianceDirect
      Bank, payable in monthlyinstallments
      of approximately $525,due
      in full on October 2008 (3)
                                              
                                              
                                              2,940
                                              
                                              
                                              
                                              5,8803,949,871
                                              
                                              
                                              
                                              3,814,370Less
      current portion
                                              
                                              
                                              (35,433
                                              )
                                              
                                              
                                              (39,702
                                              )$
                                              3,914,438
                                              
                                              
                                              $
                                              3,774,668





Principal
maturities on continuing operations are as follows for the years ended July
31:





2010
                        
                        $
                        29,0622011
                        
                        
                        3,038,8072012
                        
                        
                        43,2452013
                        
                        
                        48,1892014
                        
                        
                        53,699Thereafter
                        
                        
                        736,869$
                        3,949,871





(1) In
November 2007, the Company refinanced a loan on a building. The Company paid the
remainder of the loan to Richard Howard, with $50,000 in cash and $1,000,000
from the new loan proceeds. The new loan with Bayview Loan Servicing, LLC is
$1,000,000. The loan has an interest rate at 10.875% per annum with a monthly
payment of $11,388, including interest. The loan is due on December 1, 2022.
Interest expense for the three months ended October 31, 2009 and 2008 for
Bayview Loan Servicing, LLC is approximately $26,500 and $27,300,
respectively.





(2) On
May 5, 2008, the Company entered into a loan agreement with Crystal Capital
Ventures Inc. (“Crystal Capital”). The loan agreement provides for loans to the
Company of up to $3,000,000, with a minimum initial loan of $500,000 taking
place on May 19, 2008. The notes bear interest payable monthly in arrears at the
rate of 10% per annum; and mature and are due and payable May 4, 2011. The loans
under the loan agreement are secured by shares of the Company’s common stock
held by Crystal Capital. The Company is required to issue shares as collateral
at the rate of two and one half shares of the Company’s common stock for each
dollar principal amount of the loan advanced to the
Company.  Following disbursement of the first $1,000,000 of funds
pursuant to the loan agreement, on May 27, 2008, the Company issued 7,500,000
shares of common stock as collateral to Crystal Capital. After the 1:3 reverse
stock split in February 2009 the Company issued Crystal an additional 5,000,000
shares to make their shares held as collateral total 7,500,000.


14


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





As of
October 31, 2009, the Company has borrowed the full $3,000,000 under the loan
agreement from Crystal Capital. The Company paid interest to Crystal Capital of
approximately $0 for the three months ended October 31, 2009 and $0 for the
three months ended October 31, 2008, respectively. The Company went into default
on the loan agreement in August 2008 but, as of December 7, 2009, the Company
had not received notice of default from Crystal Capital.




(3) On
January 31, 2009 the Company financed a workman’s compensation policy with
Allegiance Direct Bank for the period January 31, 2009 to January 31, 2010 for
$6,396.  The Company was required to make a down payment of
approximately $1,966 in January 2009 and monthly payments including interest of
15.8%. Interest expense for the three months ended October 31, 2009 and 2008
Allegiance Direct Bank is approximately $152 and $98, respectively.





Note
6. Stockholders’ equity





In
January 2008, the Company’s shareholders approved a 1:7 reverse stock
split.  Except for the presentation of common shares authorized and
issued on the consolidated balance sheet and shares presented in the
consolidated statement of stockholders’ equity (deficit), all shares and par
share information has been revised to give retroactive effect to the reverse
stock split.  Authorized shares were 50,000,000 and were increased to
250,000,000 on December 24, 2007. Crystal Capital Ventures Inc. holds 7,500,000
post reverse stock split shares as collateral for a loan up to $3,000,000 as
discussed in Note 5.





On
January 15, 2009, the Company’s shareholders approved a 1:3 reverse stock split
for the outstanding shares but it did not take effect until February 19, 2009.
Common stock, authorized shares was 35,714,285 and was increased to 50,000,000
on February 19, 2009. On February 20, 2009, the Company issued Wyndom Capital
Investments, Inc. an additional 6,666,665 shares as collateral for a loan that
in June 2009 went into default and the share collateral for which was taken by
the lender. Crystal Capital Ventures Inc. was issued 4,999,999 shares so they
again hold 7,500,000 post reverse stock split shares as of February 20, 2009, as
collateral for a loan of up to $3,000,000 as discussed in Note 5.





The
remainder of the shares under the 2006 stock option plan were granted and
exercised on February 24, 2009, which closed that plan. The Company has
registered the 2009 stock option plan with the SEC for 3,000,000 shares, and of
those 2,900,000 shares have been granted at an exercise price of $0.90 per
share. 400,000 shares were exercised for the three months ended October 31,
2009.





Note
7. Segment information





FASB
Statement No. 131,Disclosures about Segments of an Enterprise and Related Information,
establishes standards for reporting information about operating segments.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by
management. The Company is organized by geographical area for the sale of
electric powered vehicles.


15


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





The
following is financial information relating to the Company’s business
segments:





THREE
      MONTHS ENDEDOctober
      31,2009
                                    
                                    
                                    2008Revenues
      from external customers:United
      States
                                    
                                    $
                                    124,910
                                    
                                    
                                    $
                                    1,945Hong
      Kong
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -India
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Total
      revenues
                                    
                                    $
                                    124,910
                                    
                                    
                                    $
                                    1,945Loss
      from operations:United
      States
                                    
                                    $
                                    (842,773
                                    )
                                    
                                    $
                                    (873,437
                                    )Hong
      Kong
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1
                                    )India
                                    
                                    
                                    
                                    (1,835
                                    )
                                    
                                    
                                    (24,770
                                    )Total
      loss
                                    
                                    $
                                    (844,608
                                    )
                                    
                                    $
                                    (898,208
                                    )





Note
8. Share based compensation





The
Company records compensation expense in its consolidated statement of operations
related to employee stock-based options and awards in accordance with FASB ASC
718, “Compensation”, (“ASC 718”).





The
Company recognizes the cost of all employee stock options on a straight-line
attribution basis over their respective contractual terms, net of estimated
forfeitures. The Company has selected the modified prospective method of
transition.





On
September 30, 2009, 400,000 stock options were exercised at an exercised price
of $.90 for a value of $360,000.





Stock
Option Plan





As of
October 31, 2009, 1,285,000 shares of common stock remain available for issuance
under the stock option plan.





A summary
of the option activity under the Company’s stock option plan as of July 31, 2009
and changes during the three months ended October 31, 2009, is presented
below.





Weighted
                                
                                WeightedAverage
                                
                                Average
                                
                                AggregateExercise
      Share
                                
                                Remaining
                                
                                IntrinsicOptions
                                
                                Shares
                                
                                
                                Price
                                
                                Contractual
                                
                                ValueOutstanding
      at July 31, 2009
                                
                                
                                1,585,000
                                
                                
                                $
                                2.90Options
      granted
                                
                                
                                -
                                
                                
                                $
                                0.90Options
      exercised
                                
                                
                                (400,000
                                )
                                
                                $
                                0.90Options
      cancelled/expired
                                
                                
                                -Outstanding
      at October 31, 2009
                                
                                
                                1,185,000
                                
                                
                                $
                                0.90
                                
                                4.68
      years
                                
                                $
                                580,650Exercisable
      at October 31, 2009
                                
                                
                                1,185,000
                                
                                
                                $
                                0.90





Stock
compensation expense applicable to stock options for the three months ended
October 31, 2009 and 2008 was approximately $0 and $0, respectively. The
aggregate intrinsic value of options outstanding as of October 31, 2009 was
$580,650.


16


EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





1,185,000
of the Company’s outstanding options were exercisable as of October 31,
2009.





Note
9. Net loss per common share





Loss per
share is computed based on the weighted average number of shares outstanding
during the year. Diluted loss per common share is computed by dividing net loss
by the weighted average number of common shares and potential common shares
during the specified periods. The Company has no outstanding options, warrants
or other convertible instruments that could affect the calculated number of
shares.





The
following table sets forth the reconciliation of the basic and diluted net loss
per common share computations for the three months ended October 31, 2009 and
2008.





THREE
      MONTHS ENDEDOctober
      31,2009
                          
                          
                          2008Basic
      and diluted EPS:Net
      loss ascribed to common shareholders - basic and diluted
                          
                          $
                          (889,547
                          )
                          
                          $
                          (899,009
                          )Weighted
      shares outstanding - basic and diluted
                          
                          
                          21,014,535
                          
                          
                          
                          23,347,257Basic
      and diluted net loss per common share
                          
                          $
                          (0.04
                          )
                          
                          $
                          (0.04
                          )





Net loss
per common share for the three months ended October 31, 2008 has been
revised.  This revision was immaterial to the Company’s consolidated
results of operations and financial position. See below for further discussion.
All share and per share amounts have been restated to reflect the one-for-seven
and one-for-three reverse stock split as discussed in Note 6.





The
amounts previously reported, in October 2008, were as follows:





THREE
      MONHTS ENDEDOctober
      31,2008Basic
      and diluted loss per common share
                                
                                $
                                (0.35
                                )





Note
10. Going concern





The
Company's financial statements are prepared based on the going concern
principle. That principle anticipates the realization of assets and payments of
liabilities through the ordinary course of business.  No adjustments
have been made to reduce the value of any assets or record additional
liabilities, if any, if the Company were to cease to exist. The Company has
incurred significant operating losses since inception. These operating losses
have been funded by the issuance of capital, loans and advances. There are no
guarantees that the Company will continue to be able to raise the funds
necessary. Additionally, the lack of capital may limit the Company's ability to
establish a viable business.





Note
11. Commitments and contingencies





Effective
April 16, 2008, SPI agreed to lease approximately 5,000 square feet of space in
the Company’s North Carolina facility. The leased space will be suitable for,
and utilized by SPI for, SPI’s developmental and manufacturing operations for
licensed products pursuant to the license agreement. The leased space is leased
on a month-to-month basis at a monthly rental of $2,625, the monthly rental to
be escalated five (5%) percent annually. Although the lease was signed, the
space is only 80% completed as of October 20, 2009. Also, effective April 16,
2008, the Company sold specified equipment and supplies related to the licensed
agreement to SPI for the purchase price of $29,005. The Company also entered
into a month to month lease agreement for $750 with SPI for renting offices in
the Company’s Las Vegas corporate office.





17




EV
INNOVATIONS, INC.


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


October
31, 2009





Total
rent income for the three months ended October 31, 2009 and 2008 amounted to
approximately $18,000 and $17,000, respectively.





Surety
bond


EVI
applied to North Carolina Department of Motor Vehicles for a manufacturing
license. This application required a surety bond of $50,000 for three years
which the Company acquired from Kaercher Campbell & Associates. EVI was
licensed as a motor vehicle dealer to engage in the business of selling motor
vehicles on March 9, 2009, until March 31, 2010, by the State of North Carolina
DMV.





Legal
proceedings


The
Company is currently involved in various claims and legal proceedings.
Quarterly, the Company reviews the status of each significant matter and
assesses its potential financial exposure and if the potential loss from any
claim or legal proceeding is considered probable and the amount can be
reasonably estimated, the Company accrues a liability for the estimated
loss.





An
arbitration award in the amount of $70,803 was awarded to Keith Boucher against
the Company for attorney’s fees and costs incurred in arbitration. EV
Innovations, Inc. has filed a motion to vacate the award, which motion is
scheduled for hearing in December 2009, in the District Court of Nevada in Clark
County.





Barret
Lyon, an individual, has filed suit against the Company in the Superior Court of
California, San Mateo County, for alleged breach of warranty for a vehicle he
purchased from the Company seeking $68,222 in damages, plus attorney’s fees
estimated in the range of $10,000 to $30,000. The Company has entered into a
settlement agreement with Mr. Lyon.





F&C
Promptly, Inc., a collection agency, filed in February 2009 a lawsuit against
the Company in the District Court, Clark County, Nevada, for approximately
$32,000 for collection of the account of the Law Offices of Richard McKnight
assigned to F&C Promptly, Inc. for collection. The Company is separately
suing Richard McKnight and brought a third party complaint against McKnight and
his law office, alleging negligence and professional malpractice.





Caudle
& Spears has obtained a default judgment against the Company in Meckenberg
County, North Carolina, General Court, in the amount of $17,686. This law firm
represented us in our litigation against Martin Koebler, a former employee, whom
we successfully sued for return of Company property and other damages. The
Company is in settlement negotiations with Caudle & Spears, since its
judgment against Martin Koebler is still in the collection
process.


18





Item
      2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.





FORWARD
LOOKING STATEMENTS





This
quarterly report contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward- looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results are likely to differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in this section.





RESULTS
OF OPERATIONS





THREE
MONTHS ENDED OCTOBER 31, 2009 and 2008





We had
sales of $124,910 and incurred a net loss of $889,469 for the three months ended
October 31, 2009, which included general and administrative costs of $371,322
and research and development expense of $432,621.





Our net
loss for the  three-month  period  ended October
31, 2009 decreased from the
comparative period in fiscal 2008 (from $899,009 in 2008 to $889,469 in
2009). This was primarily due to an decrease in general and administrative
expense from $483,901 in the three-month period ended October 31, 2008, to
$371,322 for the comparable period in 2009, a higher research and development
expense of $432,621 in 2009 compared to $416,252 in 2008; and an increase in
sales from $1,945 in the three-month period ended October 31, 2008, to $124,910
in 2009.  Cost of sales in 2009 was $165,497, as compared to $-0- in
2008. In 2009, we also incurred interest expense of $62,564 related to loans
payable, as compared with $27,293 for the comparable period in
2008.





The
principal components of general and administrative costs in the three month
period ended October 31, 2009 were advertising and promotion for media marketing
of approximately $19,000, salaries of approximately $72,000, professional
consulting, legal and accounting fees of approximately $117,000, and
depreciation expense of approximately $21,000. General and administrative costs
also included finders and consulting fees of approximately $15,000, travel
expense of approximately $18,000, and rent and office expenses of approximately
$15,000. We incurred $432,621 in research and development costs in the three
months ended October 31, 2009. The principal components of research and
development costs in the three month period ended October 31, 2009 were
consulting fees, salaries and wages, including payroll taxes and expenses, of
approximately $406,000, and approximately $27,000 of costs related to project
development and parts and supplies.




Electric
Vehicle Operations





We
convert vehicles in our developmental facility in Mooresville, North Carolina.
Our team of highly qualified engineers oversee groups of electrical and
mechanical staff. This 40,000 square foot facility has room for both conversions
and storage with the potential for future growth, enabling us to work on many
projects and vehicles concurrently.





With the
license of our lithium battery technology described below, we are concentrating
on sales of our vehicles.  We have initiated several nationwide
newspaper advertising campaigns which have generated orders for our vehicles,
and we are also seeing as a result a significant increase in inquiries about our
electric vehicle products.





19




Effective
April 15, 2008, we entered into a License Agreement (the “License Agreement”)
with Superlattice providing for our license to Superlattice of our patent
applications and technologies for rechargeable lithium ion batteries for hybrid
vehicles and other applications (“Licensed Products”).  Under the
License Agreement, we have the right to purchase our requirements of lithium ion
batteries from Superlattice, and our requirements of lithium ion batteries shall
be supplied by Superlattice in preference to, and on a priority basis as
compared with, supply and delivery arrangements in effect for other customers of
Superlattice. Our cost for lithium ion batteries purchased from Superlattice
shall be Superlattice’s actual manufacturing costs for such batteries for the
fiscal quarter of Superlattice in which our purchase takes place.




Superlattice
agreed to invest a minimum of $1,500,000 in each of the next two years in
development of the technology for the Licensed Products. In the initial year
under the License Agreement, Superlattice invested approximately $264,043 in the
development of technology, and therefore is not in compliance with its
obligations under this covenant of the license agreement.  We have advised
Superlattice in a letter dated October 1, 2009, that we will not give notice of
default against Superlattice for its failure to comply with this covenant in the
first year of the term of the License Agreement.




Effective
April 16, 2008, Superlattice agreed to lease approximately 5,000 square feet of
space (“Leased Space”) in our North Carolina facility, such Leased Space to be
suitable for, and utilized by Superlattice for, Superlattice’s developmental and
manufacturing operations for Licensed Products pursuant to the License
Agreement.  The Leased Space is leased on a month-to-month basis at a
monthly rental of $2,500, the monthly rental to be escalated five (5%) percent
annually. Effective April 16, 2008, we also sold to Superlattice for the
purchase price of $29,005, specified equipment and supplies related to the
Licensed Field.





Commercial
Initiatives





On March
9, 2009 the State of North Carolina issued a manufacturing license to the
Company, and we now are manufacturing our own original design vehicles with
VIN’s, while we continue to convert other vehicles.




Since
February 2004, the LiVTM series
electric vehicle has been tested and is under review by a number of government
agencies. The testing of the LiVTM series
vehicles by NASA, Arcadis, a contractor to the U.S. Environmental Protection
Administration, NYC Taxi Commission, and US Paratransit is completed. The
LiVTM WISE is
listed in the catalogue of the Unites States General Services Administration,
and these vehicles are available for purchase by multiple government agencies.
The target market for the LiVTM WISE is
federal government offices, utility companies, defense organizations and fleet
operators. EV Innovations is working with Zero Truck- USA for commercialization
of lithium ion powered heavy duty truck. EV Innovations now offers its own,
“WAVE” three and four wheel electric vehicles and the “INIZIO” super cars to the
U.S. market. The WAVE electric vehicle is targeted at the commuter environment,
as the “INIZIO” super sport car targets the high performance car market. The
INIZIO is also featured in the market through Sam’s Club “Once in a Lifetime”
offer. The advanced lithium ion battery powered INIZIO received an outstanding
response from Sam’s Club members. We anticipate that the INIZIO and WAVE will be
the front line vehicles for us. A manufacturing and assembly plant has been
proposed to the DOE under the Advanced Technology Vehicle Manufacturing loan
program in order to achieve scaled up production. This particular plant
design is estimated to produce around 100,000 cars in the first five years, once
it is operational.





20




5.2     Liquidity
and Capital Resources





Since our
incorporation, we have financed our operations almost exclusively through
the sale of our  common  shares to  investors and
borrowings.  We  expect  to  finance
operations  through  the sale of equity in
the  foreseeable  future as we receive minimal revenue from
our current business operations. There is no guarantee that we will be
successful in arranging financing on acceptable terms.





At
October 31, 2009, we had liabilities of $5,699,784, as compared with $5,307,066
at July 31, 2009; and a working capital deficiency of $1,639,777 and a
stockholders deficiency of $3,556,594. As of October 31, 2009, we had $10,874
cash on hand. In fiscal 2009, we also defaulted under our loan agreement with
Wyndom Capital Investments, Inc. which, as its sole recourse under the loan
agreement, took possession of 10,000,000 shares of our common stock held as
collateral, and are in default under our loan agreement with Crystal Capital
Ventures, Inc., pursuant to which we have pledged 7,500,000 shares of our Common
Stock as collateral and which stock is the lender’s sole recourse in the event
of a default. This lender has waived all defaults through December 4, 2009 under
this loan agreement.





Our
property, plant and equipment decreased to $1,973,363 at October 31, 2009, as
compared with $1,989,981 at July 31, 2009.





We used
net cash in operating activities of $626,597 in the three months ended October
31, 2009, as compared with $778,628 in the comparable period in 2008, due to a
lesser amount of cash provided by financing activities, and cash flows provided
by investing activities were ($4,851) in 2009, as compared with ($11,838) in
2008.





During
the three months ended October 31, 2009, we received net proceeds of $103,300
from the issuance of promissory notes for debt, and net proceeds of advances
from related parties of $534,185. Total cash provided by financing activities in
the three months ended October 31, 2009 was $637,485, as compared with $709,443
in 2008.





Wyndom
Capital Loan Agreement





In
October 2007, the Company entered into a loan agreement with Wyndom Capital
Investments, Inc. (“Wyndom”). During the year ended July 31, 2008 the Company
issued 3,333,335 shares of outstanding stock as collateral for the notes under
the loan agreement. In February 2009 the Company had a 1:3 reverse stock split
and issued 6,666,665 shares of common stock to Wyndom to make their shares held
as collateral total 10,000,000.  The agreement provided for loans of
up to $4,000,000 with interest payable monthly at a rate of 10% per annum and
due in full in October of 2010. Loans under the agreement were secured by the
Company’s shares of common stock at a rate of two and one half shares to each
dollar of principal. The Company paid interest to Wyndom of approximately
$342,000 for the year ended July 31, 2009 and $154,000 for the year ended July
31, 2008, respectively. The Company defaulted on the loan in February 2008, but
Wyndom had waived the default until June 2009 when they took possession of the
10,000,000 shares they held as collateral. As a result, our liability of
$4,000,000 for principal and accrued unpaid interest was extinguished as of June
16, 2009, the date on which Wyndom took possession of the final portion of the
share collateral.





Crystal
Capital Ventures Loan Agreement





On May 5,
2008, the Company entered into a loan agreement with Crystal Capital Ventures
Inc. (“Crystal”). The loan agreement provides for loans to the Company of up to
$3,000,000, with a minimum initial loan of $500,000 on May 19, 2008. The notes
bear interest payable monthly in arrears at the rate of 10% per annum and mature
and are due and payable May 4, 2011. The loans under the loan agreement are
secured by shares of the Company’s common stock held by Crystal. The Company is
required to issue shares as collateral at the rate of two and one half shares of
the Company’s common stock for each dollar principal amount of the loan advanced
to the Company.  Following disbursement of the first $1,000,000 of
funds pursuant to the loan agreement, on May 27, 2008, the Company issued
2,500,000 shares of common stock as collateral to Crystal. After the 1:3 reverse
stock split in February 2009 the Company issued Crystal an additional 5,000,000
shares to make their shares held as collateral total 7,500,000.





21




As of
October 31, 2009, the Company had borrowed the full $3,000,000 from
Crystal.  The Company paid interest to Crystal of approximately
$173,000 for the year ended July 31, 2009 and $-0- for the three months ended
October 31, 2009. The Company went into default on the loan agreement in August
2008 for failure to make required interest payments but, as of December 7,
2009 the Company had not received notice of default from Crystal.





Our
current operating funds are less than necessary for commercialization of our
planned products, and therefore we will need to obtain additional financing in
order to complete our business
plan.  We  anticipate  that up to $5,000,000 of
additional working capital will be  required  over the next
12  months  for  market introduction  of
these products through joint venture partners or otherwise.  We do not
have sufficient cash on hand to meet these anticipated obligations.





We do not
currently have any other arrangements for financing, although one loan agreement
with a former lender is under negotiation, and we may not be able to find such
financing if required. Obtaining additional financing would be subject to a
number of factors, including investor sentiment.  Market factors may
make the  timing,  amount,  terms
or  conditions  of  additional  financing
unavailable to us.





Our
auditors  are of
the  opinion  that  our  continuation  as
a going concern
is in doubt.  Our continuation  as a
going  concern is  dependent  upon continued
financial support from our shareholders and other related parties.





CRITICAL
ACCOUNTING ISSUES





The
Company's discussion and analysis of its financial condition and results of operations
are based upon the Company's financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America. The preparation of the financial statements requires the
Company to make estimates and judgments that affect the reported amount of assets,
liabilities, and expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates, including
those related to intangible assets, income taxes and contingencies and litigation.
The Company bases its estimates on historical experience and on various
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.





Other
Matters





New
Financial Accounting Standards





During
the first quarter of 2009, the Company implemented additional interim
disclosures about fair value of financial instruments, as required by FASB ASC
Paragraph 825-10-65-1.  Prior to implementation, disclosures about
fair values of financial instruments were only required to be disclosed
annually.  As the required modifications only related to additional
disclosures of fair values of financial instruments in interim financial
statements, the adoption did not affect the Company’s financial position or
results of operations.





Beginning
in the first quarter of 2009, the Company must disclose the date through which
subsequent events have been evaluated, in accordance with the requirements in
FASB ASC Paragraph 855-10-50-1.  With regards to the condensed
consolidated financial statements and notes to those financial statements
contained in this Form 10-Q, the Company has evaluated all subsequent events
through December 9, 2009 (the date the Company’s financial statement are
issued).




22




In
September 2009, the FASB implemented certain modifications to FASB ASC Topic
860, Transfers and Servicing, as a means to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets, the effects of a transfer on its financial position, financial
performance, and cash flows, and a transferor’s continuing involvement, if any,
in transferred financial assets. These modifications must be applied as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009. The Company does not expect the adoption of this
standard to have an impact on the Company’s results of operations, financial
condition or cash flows.




During
the first quarter of 2009, the Company adopted the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles in
accordance with FASB ASC Topic 105, “Generally Accepted Accounting Principles”
(the “Codification”).  The Codification has become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. Effective with the Company’s adoption on July 1, 2009, the
Codification has superseded all prior non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification has become non-authoritative. As the adoption of
the Codification only affected how specific references to GAAP literature have
been disclosed in the notes to the Company’s condensed consolidated financial
statements, it did not result in any impact on the Company’s results of
operations, financial condition or cash flows.





Updates to the FASB
Codification Applicable to the Company





The FASB
has published FASB Accounting Standards Update No. 2009-12, Fair Value Measurements and
Disclosures (Topic 820)—Investments in Certain Entities That Calculate Net Asset
Value per Share (or Its Equivalent). This Update amends Subtopic 820-10,
Fair Value Measurements and
Disclosures—Overall, to permit a reporting entity to measure the fair
value of certain investments on the basis of the net asset value per share of
the investment (or its equivalent). This Update also requires new disclosures,
by major category of investments, about the attributes of investments included
within the scope of this amendment to the Codification. The guidance in this
Update is effective for interim and annual periods ending after December 15,
2009. The Company does not expect the adoption of this standard to have an
impact on the Company’s results of operations, financial condition or cash
flows.





Item 3.
Quantitative and Qualitative Disclosures About Market Risk





Interest Rate Risk - Interest rate
risk refers to fluctuations in the value of a security resulting from changes in
the general level of interest rates. Investments that are classified as cash and
cash equivalents have original maturities of three months or less. Our interest
income is sensitive to changes in the general level of U.S. interest
rates.  We do not have significant short-term investments, and due to
the short-term nature of our investments, we believe that there is not a
material risk exposure.  Our debt is at fixed interest
rates.





Credit
Risk - Our accounts receivables are subject, in the normal course of business,
to collection risks. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of
collection risks. As a result we do not anticipate any material losses in this
area.





23




Item
4(T). Controls and Procedures.





As of the
end of the fiscal quarter covered by this Form 10-Q, the Company carried out an
evaluation, under the supervision and with the participation of the Company’s
management, including the Company’s Chief Executive Officer and Principal
Financial and Accounting Officer, of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures as defined in Rule
13a-14 of the Securities Exchange Act of 1934. Based upon that evaluation, the
Chief Executive Officer and Principal Financial and Accounting Officer concluded
that the Company’s disclosure controls and procedures are effective in timely
alerting her to material information relating to the Company (including its
consolidated subsidiaries) required to be included in this Quarterly Report on
Form 10-Q. There have been no changes in the Company’s internal controls or in
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.





PART II-
OTHER INFORMATION





Item 1.
Legal Proceedings.





Other
than as described below, we are not a party to any material legal proceedings
and to our knowledge, no such proceedings are threatened or
contemplated.





Hybrid
Technologies, Inc. v. Keith Boucher


An
arbitration award in the amount of $70,803.00 was awarded to Keith
Boucheragainst the
Company for attorneys fees and costs incurred in arbitration. The Companyhas filed a motion to vacate theaward, which motion is
scheduled for hearing in December, 2009 in the District Court of Nevada inClark County.




Barrett
Lyon v. EV Innovations, Inc.


Barrett
Lyon, an individual, has filed suit against the Company in the Superior Court of
California, San Mateo County, for alleged breach of warranty for a vehicle he
purchased from the Company, seeking $68,220.00 in damages, plus attorneys fees
estimated in the range of $10,000 to $30,000. We have entered into a settlement
agreement with Mr. Lyon.




F&C
Promptly, Inc. v. EV Innovations, Inc.


F&C Promptly, Inc., a collection
agency, filed in February 2009 a lawsuit against us in the District Court,
Clark County, Nevada, for approximately $32,000 for collection of the
account of the Law Offices of Richard McKnight assigned to F&C Promptly,
Inc. for collection.  The Company is separately suing Richard McKnight
and brought a third party complaint against McKnight and his law office,
alleging negligence and professional
malpractice.




Caudle
& Spears v. EV Innovations, Inc.


Caudle
& Spears has obtained in Meckenberg County, North Carolina, General
Court,  a default judgment against us in the amount of $17,686. This
law firm represented the Company in our litigation against Martin Koebler, a
former employee, whom we successfully sued for return of Company property and
other damages. We are in settlement negotiations with Caudle & Spears, since
our judgment against Martin Koebler is still in the collection
process.





Item 6.
Exhibits





Ex
      31
            
            Certification
      of Chief Executive Officer and Principal Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002, filed
    herewith.Ex
      32
            
            Certification
      of Chief Executive Officer and Principal Financial Officer Pursuant to 18
      U.S.C. Section 1350, as  Adopted Pursuant to  Section
      906  of the Sarbanes-Oxley Act of 2002,filed
      herewith.





24




SIGNATURES





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





EV
      Innovations, Inc./s/Stacey FlingStacey
      FlingChief
      Executive Officer and Director(Chief
      Executive Officer andPrincipal
      Financial Officer)Dated:
      December 8, 2009


25