UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-Q





[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended September 30, 2010





OR





[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from  to





Commission file number 000-53723





NOVO ENERGIES CORPORATION


(Exact name of registrant as specified in its charter)





Florida

(State or other jurisdiction of

Identification No.)
65-1102237

(I.R.S. Employer or organization)





Europa Place d'Armes, 750 Côte de Place d'Armes


Suite 64, Montréal Qc H2Y 2X8


Canada


(Address of principal executive offices)  (Zip Code)





(514) 840-3697


(Registrant's telephone number, including area code)








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. Yes      No 





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





Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large Accelerated Filer  Accelerated Filer   Non-Accelerated Filer   Smaller Reporting Company  





Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of November 19, 2010: 49,068,047.





























PART I - FINANCIAL INFORMATION





SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS





We are including the following cautionary statement in this Form 10-Q to make applicable and take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by, or on behalf of ,us.  This 10-Q, press releases issued by us, and certain information provided periodically in writing and orally by our designated officers and agents contain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  The words “expect”, “believe”, “goal”, “plan”, “intend”, “estimate”, and similar expressions and variations thereof used are intended to specifically identify forward-looking statements. Where any such forward-looking statement includes a statement of the assumptions or basis underlying such forward-looking statement, we caution that assumed facts or basis almost always vary from actual results, and the differences between assumed facts or basis and actual results can be material, depending on the circumstances.  Where, in any forward-looking statement, we, or our management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished





1
  NOVO ENERGIES CORPORATION AND SUBSIDIARY(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED BALANCE SHEETSASSETSSeptember 30,


March 31,2010


2010(unaudited)CURRENT ASSETSCash


$
6,465


$
54,806Miscellaneous receivable


-



3,674Total current assets


6,465



58,480EQUIPMENT, net


10,581



9,504LICENSE AGREEMENT, net


213,456



-TOTAL ASSETS

$
230,502


$
67,984LIABILITIES AND STOCKHOLDERS'  DEFICITCURRENT LIABILITIESNote Payable Caete Invest Trade, S.A.

$
157,126


$
163,215Convertible Debenture


295,265



138,169Accounts Payable


203,993



137,578Accrued Interest


59,126



16,454Accrued Professional Fees


174,022



23,170Related party payablesAccrued Rent


78,000



71,500Accrued Consulting


88,311



88,580Accrued Salaries and Taxes


39,262



26,228Accrued Travel and Entertainment


86,010



59,451Due to Chairman and CEO


67,873



15,596Total Related Party Payables


359,456



261,355Total current liabilities

$
1,248,988


$
739,941LONG TERM LIABILITIESNote Payable Chief Executive Officer


99,790



148,782STOCKHOLDERS' DEFICITCommon stock, par value $0.00001; 1,000,000,000 sharesauthorized, 44,306,625 and 34,345,152 issued andoutstanding at September 30, 2010 and March 31, 2010,respectively


420



344Additional paid-in capital


12,027,405



10,986,545Accumulated deficit from prior operations


(8,521,904
)


(8,521,904
)Accumulated deficit during development stage


(4,596,933
)


(3,260,084
)Accumulated other comprehensive loss


(27,264
)


(25,640
)Total Stockholders' Equity (Deficit)


(1,118,276
)


(820,739
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
230,502


$
67,984
  2
  NOVO ENERGIES CORPORATION AND SUBSIDIARY(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OF OPERATIONSPeriod from inceptionof DevelopmentFor the Three Months ended


For the Six Months ended


(October 7, 2008)September 30,





September 30,





to September 30,2010


2009


2010


2009


2010(Unaudited)





(Unaudited)





(Unaudited)OPERATING EXPENSESGeneral and Administrative

$
406,702


$
773,330


$
698,641


$
980,360


$
3,369,574Research and Development


143,221



-



338,619



-



853,898Interest Expense


199,920



-



292,122



-



364,512Depreciation and Amortization Expense


6,829



-



7,467



-



8,949Total Expenses


756,672



773,330



1,336,849



980,360



4,596,933NET LOSS

$
756,672


$
773,330


$
1,336,849


$
980,360


$
4,596,933NET LOSS PER SHARE (BASIC AND DILUTED)Continuing operations

$
(0.02
)

$
(0.04
)

$
(0.04
)

$
(0.06
)

$
(0.21
)WEIGHTED AVERAGE COMMON SHARES OUTSTANDING


36,417,876



18,107,762



34,398,030



17,751,513



22,345,143
  3
  NOVO ENERGIES CORPORATION AND SUBSIDIARY(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OF CASH FLOWSPeriod from Inceptionof DevelopmentFor the Six Months


(October 7, 2008)Ended September 30,2010


2009


2010(Unaudited)


(Unaudited)


(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(1,336,849
)

$
(980,360
)

$
(4,596,933
)Adjustments to reconcile net loss to cash provided by(used in) operating activities:Stock based compensation


326,759



453,961



1,883,820Shares Issued in settlement agreement










114,995Note Payable Discount Amortization


247,840



-



303,745Depreciation


1,368



-



2,850Amortization - license agreement


6,099







6,099Cash used in operating activities










-Decrease (increase) in assetsMiscellaneous Receivable


3,674







-Increase (decrease) in liabilities










-Accounts Payable


66,415



55,049



681,951Accrued Interest


42,672







59,126Accrued Professional Fees


150,852



199,644



163,388Related party payables


98,101



191,556



271,956Cash used in operating activities


(393,069
)


(80,150
)


(1,109,003
)CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Equipment


(2,445
)


-



(13,431
)Cash used in investing activities


(2,445
)


-



(13,431
)CASH FLOWS FROM FINANCING ACTIVITIESCash provided by financing activities


-



-



-Proceeds from Note Payable


-



-



242,000Repayment of Note Payable


-



-



(62,428
)Proceeds from Convertible Debenture


-



-



491,667Issuance of Common Stock


348,925



80,150



485,052Cash provided by financing activities


348,925



80,150



1,156,291Foreign Currency Translation Effect


(1,752
)


-



(27,392
)NET INCREASE (DECREASE) IN CASH


(48,341
)


-



6,465CASH,  BEGINNING OF PERIOD


54,806



-



-CASH, END OF PERIOD

$
6,465


$
-


$
6,465
  4
  NOVO ENERGIES CORPORATION AND SUBSIDIARY(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OF CASH FLOWSPeriod from Inceptionof DevelopmentFor the Six Months


(October 7, 2008)Ended September 30,2010


2009


2010(Unaudited)


(Unaudited)


(Unaudited)SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest and Taxes Paid

NONE


NONE


NONENON CASH ITEMSBeneficial Conversion feature of debentures

$
145,825



-


$
226,417Shares issued to settle accounts payable obligations






-


$
294,961Debenture Commitment shares






-


$
368,689Note Payable to Officer in settlement of payables






-


$
172,364Shares issued for  license agreement


219,555



-


$
219,555Note Payable to Officer in settlement of payables






-


$
(172,364
)Common shares issued for accounts payable and debenturecommitment shares






-


$
(75
)Additional Paid in Capital:Shares issued to settle accounts payable






-


$
(294,947
)Beneficial conversion feature of debenture

$
(145,825
)


-


$
(226,417
)Debenture commitment shares






-


$
(368,628
)Shares issued for  license agreement

$
(219,555
)


-


$
(219,555
)


5


NOTE A - NATURE OF BUSINESS, GOING CONCERN, AND PRESENTATION





Basis of Presentation





The accompanying consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included.  Results for the six months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending March 31, 2011.  For further information, refer to the financial statements and footnotes thereto included in the Novo Energies Corporation annual report on Form 10-K for the year ended March 31, 2010.





Nature of Business





Novo Energies Corporation (“Novo”) intends to own and operate recycling plants that will efficiently, economically, environmentally and profitably recycle scrap tires and plastics into energy and other commodities.  The core of Novo’s technology to recycle tires and plastics into energy is a Multi Stage Hybrid Gasification System (“MSHG”), which undertakes the conversion of carbonaceous feedstock to a gaseous end-product with an upgraded heating value in an environmentally friendly manner, which does not involve combustion or any other reagents or other pollutants.  As an interim step of Novo’s process, Novo will transform scrap tires and plastics into Synthesis gas (syngas), which then is used as a fuel for engines and turbines to produce electricity. The syngas may also be converted into transportation fuel or fuel additives using a standard catalyst-based process such as Fischer-Tropsch.





On July 30, 2009, the Company formed its first wholly owned subsidiary - WTL Renewable Energy, Inc. (“WTL”). WTL was established as a Canadian Federal Corporation whose business is to initially research available technologies capable of transforming plastic and tires into useful energy commodities. Simultaneously, WTL also intends to plan, build, own, and operate renewable energy plants throughout Canada now utilizing an MSHG technology and using plastic and tire waste as feedstock.





Going Concern





As indicated in the accompanying financial statements, the Company has incurred cumulative net operating losses of $4,596,933 since inception of the development stage and has negative working capital of $1,242,523.  Management’s plans include the raising of capital through equity markets to fund future operations and the generating of revenue through its business.  Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations.  Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate revenues, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.





Use of Estimates





The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of




Use of Estimates (Continued)





assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.





Net Loss Per Common Share





The Company computes per share amounts in accordance with ASC Topic 260 Earnings per Share (EPS) which requires presentation of basic and diluted EPS.  Basic EPS is computed by dividing the income (loss) available to Common Stockholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted-average number of shares of Common Stock and Common Stock equivalents outstanding during the periods.  A fully diluted calculation was not presented since the results would be anti-dilutive.  During the period ended September 30, 2010, unvested common shares of 4,033,339 issued for future consulting and implement contracts were excluded from EPS calculations as they were not considered issued for accounting purposes.





6


NOTE B - EQUIPMENT





The Company’s equipment is as follows at September 30, 2010:


Estimated Life


Computer and office equipment                                             $13,431                5 years


Less: accumulated depreciation                                            2,850


$ 10,581





NOTE C – LICENSE AGREEMENT





On July 26, 2010, the Company entered into a Technology Collaboration Agreement (the “Agreement”) with Precision Pipe and Vessel, LLC (“Precision”). Precision is currently operating a 2.5 ton daily capacity gasification facility (“Pilot Plant”). Precision will grant to the Company a worldwide exclusive license (the “Exclusive License”) to identify and develop facilities designed to generate synthesis gases and liquid transportation fuels using two feedstock sources, tires and plastics, by employing Precision’s proprietary gasification technology (the “Technology”).





In consideration for granting the Exclusive License, the Company shall: (a) pay the expenses of augmenting the Pilot Plant; and (b) grant up to 5% of the Company’s common stock on July 26, 2010 to Precision. One-half of such securities shall be immediately transferred to Precision while the remaining one-half shall be held in escrow by the Company’s legal counsel pending completion of Phase III at which time such securities shall either be released to Precision upon a successful completion or to the Company upon an unsuccessful completion.  On August 10, 2010, the Board approved the issuance of  1,688,886 shares to Precision of which 844,443 will be held in escrow.  The shares were valued at $0.13 per share aggregating $219,555.





The Company’s license agreement is as follows at September 30, 2010:


Estimated Life


License fee                                                                               $219,555                  6 years


Less: accumulated amortization                                           6,099


$213,456











NOTE D - NOTE PAYABLE TO CAETE INVEST TRADE, S.A.





On November 1, 2009, the Company issued a $242,000 promissory note to Caete Invest Trade, S.A. maturing on October 31, 2010.  The note bears interest at the rate of 10% per annum and is payable at maturity.  The Company’s Chief executive Officer has a beneficial ownership interest in Caete Invest Trade, S.A. The face amount of the note plus accrued interest originally was convertible into unregistered common stock of the Company at the lesser of 100% of the volume weighted average price (“VWAP”) of common stock as reported by Bloomberg L.P. on the day prior to the conversion date and a 15% discount to the lowest daily closing “VWAP” of common stock during the five days prior to the conversion date.  The Company,  in  accordance  with  EITF 98-5  and  00-27, utilized  the  Market  approach  to  value  the  debt  instrument and concluded that a beneficial conversion feature exists since the effective conversion price of shares was less than the stock price at commitment date.  The 15% discount created a beneficial conversion feature at the commitment date aggregating $36,300 which is being accreted monthly from the issuance date of the promissory note through maturity and is being recorded as additional interest expense.   On February 4, 2010, $62,428 of the loan was repaid. On June 30, 2010, the Company modified the conversion feature to be convertible into common stock at a fixed price of $0.10 per share resulting in an additional beneficial conversion feature of $80,181. Accordingly, at September 30, the loan balance is $157,126 net of the unamortized discount $22,446.





NOTE E - RELATED PARTY PAYABLES





At September 30, 2010, the related party payables of $359,456 consists of: (a) expenses paid by the Chief Executive Officer on behalf of the Company aggregating $67,873; (b) compensation due other consultants deemed to be shareholders aggregating $127,573; (c) expenses advanced by other shareholders in the amount of $86,010, primarily for travel related expenses; and (d) unpaid rent payable to companies owned and controlled by the Chief Executive Officer and his wife aggregating $78,000.





NOTE F - NOTE PAYABLE TO CHIEF EXECUTIVE OFFICER





On January 21, 2010, the Company owed its Chief Executive Officer approximately $376,560 for salary and expenditures paid by him on behalf of the Company.  The Company and its Chief Executive Officer agreed to formalize a portion of the debt and issued a $172,364 promissory note maturing on January 21, 2012.  The note bears interest at the rate of 10% per annum and is payable at maturity.  The face amount of the loan plus accrued interest was convertible into unregistered common stock of the Company at the lesser of 100% of the volume weighted average price (“VWAP”) of common stock as reported by Bloomberg L.P. on the day prior to the conversion date and a 15% discount to the lowest daily closing “VWAP” of common stock during the five days prior to the conversion date.  The Company in accordance with EITF 98-5 and 00-27 utilized the Market approach to value the debt instrument and concluded that a beneficial conversion feature exists since the effective conversion price of shares was less than the stock price at commitment date.  The 15% discount created a beneficial conversion feature at the commitment date aggregating $25,855 which will be accreted monthly from the issuance date of the promissory note through maturity and will be recorded as additional interest expense. On June 30, 2010, the Company modified the conversion feature to be convertible into common stock at a fixed price of $0.10 per share resulting in an additional beneficial conversion feature of $65,644.  Accordingly, at September 30, 2010, the balance of the loan is $99,790 net of the unamortized discount $72,574.







7


NOTE G - CONVERTIBLE DEBENTURE





On January 26, 2010, the Company issued at par, a $500,000 Secured Convertible Debenture maturing on January 26, 2011.  The debenture bears interest at the rate of 10% per annum and is payable monthly.


The Company has granted a security interest in substantially all of the assets of the Company as collateral for the debenture. The face amount of the loan plus accrued interest is convertible into unregistered common stock of the Company at the lesser of 100% of the volume weighted average price (“VWAP”) of common stock as reported by Bloomberg L.P. on the day prior to the conversion date and a 15% discount to the lowest daily closing “VWAP” of common stock during the five days prior to the conversion date.  Additionally, the Company issued commitment shares totaling 6,085,193, equivalent to $1,500,000 at the closing date to obtain the loan. The Company in accordance with APB 14 utilized the Market Approach to value the debt instrument and allocated the net proceeds from the issuance of the debenture based upon the pro rata portion of the face value of the debentures and the undiscounted value of the commitment shares.  Additionally, 15% of the Debenture was allocated to a beneficial conversion feature in accordance with EITF 98-5 and EITF 00-27.  The Company concluded that the 15% discount created a beneficial conversion feature at the commitment date since the effective conversion price of the shares was less than the stock price at the commitment date.  The beneficial conversion feature and the pro rata value of the commitment shares aggregated $395,521 which will be accreted monthly from the issuance date of the Debenture through maturity and will be recorded as additional interest expense.   Accordingly, at September 30, 2010, the loan balance is $295,265 net of the discount $204,735.





NOTE H - STOCKHOLDERS’ EQUITY





On May 1, 2009, the Company issued 3,000,000 shares of its common stock to Andre L’Heureux as President of the Company in connection with his employment contract.  The original contract specified that these shares  vest at the rate of 83,333 per month over a three year period. On October 1, 2010, the Board modified the agreement to provide for the immediate vesting of all unearned shares. The shares were valued at $0.10 per share utilizing May 1, 2009 as the measurement date.  Accordingly, stock based compensation in the amount of $50,000 has been recognized in the financial statements. On October 21, 2009, Mr. L’Heureux resigned as President and became Chief Technical Officer.





On May 1, 2009, the Company entered into an agreement with Jeffrey Wolin to provide managerial consulting services. In connection with the agreement, the Company issued 450,000 shares which will vest at the rate of 12,500 shares per month.  The shares were valued at $0.10 per share utilizing May 1, 2009 as the measurement date. On December 1, 2009, this agreement was amended to award 50,000 shares per month effective January 1, 2010.  The additional shares were valued at $0.30 per share utilizing December 1, 2009 as the measurement date.  Mr. Wolin will now receive a total of 1,575,000 shares over the entire 3 year duration of the contract.  Accordingly, stock based compensation in the amount of $75,000 has been recognized which includes $37,500 for the three months ended September 30, 2010.





On May 1, 2009, the Company entered into a three year consulting agreement with ELSO Investment Corporation to assist the Company in developing an acquisition strategy and structure outside North America and other services mutually agreed to by the Company and ELSO Investment Corporation.  In connection with the agreement, the Company issued 900,000 shares of its common stock valued at $0.10 per share utilizing May 1, 2009 as the measurement date.  The shares vest at the rate of 25,000 shares per month.  On December 19, 2009, this agreement was amended with immediate vesting of all issued shares. The Chief Executive Officer of the Company has a beneficial ownership interest in ELSO Investment Corporation.  Stock based compensation in the amount of $90,000 was previously recognized.  On May 1, 2010, this agreement was cancelled and all shares were returned to the Company for cancellation.  Accordingly, the stock based compensation of $90,000 was reversed during the first quarter ended June 30, 2010.





8


NOTE H - STOCKHOLDERS’ EQUITY (CONTINUED)





On June 23, 2009, the Board of Directors approved a 3-for-1 forward stock split.  Accordingly, all share and per share amounts have been retroactively adjusted in the accompanying financial statements.





On July 1, 2009, the Company entered into a consulting agreement with The Group Marcel Tremblay to provide consulting services relating to sales and business strategies. In connection with the agreement, the Company will issue 25,000 shares of its common stock at $1.00 per share utilizing July 1, 2009 as the measurement date which will vest at the rate of 2,083 per month over a 12 month period.  On July 1, 2009, the Company issued 200,000 warrants valued at $0.982 per warrant to be vested over a 12 month period at 16,366 per month. On February 1, 2010, the Company modified the agreement canceling the warrants and issuing 360,000 shares of its common stock to be vested over a 36 month period retroactive to July 1, 2009.  The incremental value between the fair value of the shares at the measurement date of February 1, 2010 and the fair value of the warrants cancelled was $0.16 per share and, accordingly, stock based compensation in the amount of $12,525 has been recorded in the financial statements.  On May 15, 2010, the Company terminated this contract.





On July 15, 2009, the Company entered into a consulting agreement with Faisal Farooq Butt to provide consulting services relating to corporate strategies as well as sales and marketing strategies for an eighteen month period beginning July 15, 2009.  In connection with the agreement, the Company issued 200,000 shares of its common stock valued at $.93 per share utilizing July 15, 2009 as the measurement date. The shares will vest over an 18 month period.  On December 1, 2009, this contract was amended to award 50,000 shares per month effective January 1, 2010 and extended for an additional 30 months.  Mr. Butt will now receive a total of 1,566,666 shares over the term of the contract.  The share differential was valued at $0.30 per share utilizing December 1, 2009 as the measurement date.  Accordingly, stock based compensation in the amount of $132,000 has been recognized which includes $66,000 for the three months ended September 30, 2010.  Also see Note L - Subsequent Events for an additional modification to the consulting agreement.





Effective October 23, 2009, the Company entered into an employment agreement with Hakim Zahar as the President of the Company.  The agreement calls for a base salary of $10,000 per month with payments starting November 15, 2009.  The executive shall receive a minimum of 50,000 shares of the Company’s common stock per month starting on the effective date of this agreement.  This agreement can be terminated by either party at will.  In accordance with the terms of the contract, stock based compensation in the amount of $66,000 has been recognized based on the measurement date of October 23, 2009 at $0.44 per share.  On May 28, 2010, the Company  terminated the contract and  agreed to compensate Mr. Zahar through February 15, 2010.





On November 1, 2009, the Company entered into a consulting agreement with Philippe Germaine to provide investor relations and consulting services. In connection with the agreement, the Company will pay a monthly retainer of $3,000 per month, and issue 15,000 shares of its common stock per month.  In addition, Mr. Germaine received a cash signing bonus of $9,000.  In connection with the agreement, stock based compensation in the amount of $12,300 was recorded utilizing the measurement date of November 1, 2009.  Mr. Germaine’s contract was terminated on June 15, 2010.





On June 7, 2010, the Company entered into a six month consulting agreement with Olga Finkelshteyn to assist the Company in developing a public relations strategy, new investor awareness strategies and communications.  The consulting contract calls for a monthly cash payment of $2,000 and 5,000 shares per month.  On November 15, 2010, the consulting contract was extended for an additional 12 months and the consultant will receive 25,000 shares of common stock per month and cash payments of $4,000 per month.








NOTE H - STOCKHOLDERS’ EQUITY (CONTINUED)





On June 18, 2010, the Company, through a private placement offering, sold 1,100,000 units of its common stock at $0.10 per unit for a total of $110,000.  Each unit consists of one share of the Company’s common stock.





On July 15, 2010, the Company, through a private placement offering, sold 250,000 units of its common stock at $0.10 per unit for a total of $25,000.  Each unit consists of one share of the Company’s common stock.





On July 26, 2010, in accordance with the Technology Collaboration Agreement (the “Agreement”) with Precision Pipe and Vessel, LLC (“Precision”), the Company issued 1,688,886 units of its common stock at $0.13 per unit  for a total consideration of $219,555. Each unit consists of one share of the Company’s common stock.





On August 1, 2010, the Company entered into a consulting agreement with Seth Shaw to assist the Company in developing a business strategy, an acquisition strategy and other services.  The term of agreement is one year commencing July 15, 2010.  Mr. Shaw received 1,500,000 shares at $0.11 per share aggregating $165,000.  The compensation is being recorded on a monthly basis.  Accordingly, $34,375 has been included in the financial statements as of September 30, 2010.





On August 3, 2010, the Company, through a private placement offering, sold 200,000 units of its common stock at $0.10 per unit for a total of $20,000.  Each unit consists of one share of the Company’s common stock.





On August 5, 2010, the Company, through a private placement offering, sold 2,180,000 units of its common stock at $0.10 per unit for a total of $109,000.  Each unit consists of one share of the Company’s common stock.





On August 10, 2010, the Board approved the issuance of 1,200,000 shares of its common stock to its Chief Executive in accordance with his amended employment contract.  The shares vest at the rate of 50,000 shares per month over a 24 month period commencing June 18, 2010.  Accordingly, $28,000 of stock based compensation has been recorded in the financial statements.





On September 6, 2010, the Company, through a private placement offering, sold 600,000 units of its common stock at $0.10 per unit for a total of $60,000.  Each unit consists of one share of the Company’s common stock.





On September 10, 2010, the Company, through a private placement offering, sold 234,600 units of its common stock at $0.05 per unit for a total of $11,730.  Each unit consists of one share of the Company’s common stock.





On September 23, 2010, the Company, through a private placement offering, sold 263,900 units of its common stock at $0.05 per unit for a total of $13,195. Each unit consists of one share of the Company’s common stock.





At September 30, 2010, 4,341,005, common shares are included in outstanding shares which have not yet been issued by the Company.




9


NOTE I - FAIR VALUE MEASUREMENTS





On January 1, 2008, the Company adopted ASC 820 which defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements.  ASC 820’s valuation techniques are based on observable and unobservable inputs.  Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.





ASC 820 classifies these inputs into the following hierarchy:





Level 1 inputs: Quoted prices for identical instruments in active markets.


Level 2 inputs:
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.


Level 3 inputs:  Instruments with primarily unobservable value drivers.





The fair value of the Company’s cash, miscellaneous receivable, accounts payable, notes payable and accrued expenses approximate the carrying amounts of such investments due to their short maturity.





NOTE J - WARRANTS





The following table summarizes the activity of the warrants issued by the Company:




Number of


Exercise


ExpirationWarrants


Price


DateBalance March 31, 2009IssuedPrivate placements


194,465


$
0.75


7/2012 to 11/2012Consulting contracts


400,000


$
0.35 to $0.40



8/2014Cancelled-consulting contract


(200,000
)

$
0.35Exercised


-Balance June 30, 2010 andSeptember 30, 2010


394,465


Under the private placements agreements, each warrant entitles the holder to purchase one share of the Company’s common stock for $0.75 per share and the warrants expire three years from the date of issuance.





The warrants were valued utilizing the following assumption employing the Black-Scholes Pricing Model:




Consulting
PrivateAgreements
PlacementsVolatility
84.23% to 190.65%
94.99% to 195.52%Risk-free rate
2.51% to 2.68%
1.42% to 1.52%Dividend
0
0Expected life of warrants
5
3




NOTE K - COMMITMENTS AND CONTINGENCIES





On May, 15, 2010, the Company entered into a consulting agreement with Pierre Paffenhoff to assist the Company in developing a business strategy, an acquisition, strategy, developing sales and marketing strategies and other services.  The consultant will be paid $1,500 per month.  The agreement can be terminated on a 15 day notice by either party.  The consultant will also be paid in cash 10% of proceeds from an equity or debt financing whereby he introduced the arrangement to the Company and 3% of the shares to be issued in any equity financing.





On June 7, 2010, the Company entered into a consulting agreement with Olga Finkelshteyn to assist the Company in developing public relations strategies, new investor awareness strategies and communications, future sales and marketing strategies, and other services.  The consultant will be paid $2,000 per month.  The agreement can be terminated on a 15 day notice by either party.  The consultant will also be awarded 5,000 common shares per month.





On May 28, 2010, the Company entered into a Technology Co-operation Agreement with Novo Energies International, Ltd. (NEI) that permits NEI to utilize the Company’s technology and know-how for the sole purpose of building and operating facilities at NEI’s expense that incorporate all or any portion of the Company’s technology throughout the entire world except for all of the countries within North America, Central America and South America for a term of 10 years which may be renewed for an additional 10 year term.  As consideration for the know-how and other technical information, the Company will receive 12.5% of NEI’s issued and outstanding shares with anti-dilution rights.  Such anti-dilution rights shall expire when NEI raises a minimum of 3,000,000 British pounds.  In connection with the agreement, the Company’s Chief Executive Officer and the Company’s Interim President, Faisal Farooq Butt were appointed as Directors to NEI’s Board of Directors and each received 4% and 2%, respectively, of NEI’s common stock.  At September 30, 2010, NEI has not raised any investment capital and has had no operating activity.





10
 
 
 NOTE K - COMMITMENTS AND CONTINGENCIES (CONTINUED)
 
 On June 18, 2010, the Company amended the Chief Executive’s employment contract whereby he will receive 1,200,000 shares of Company common stock and vest at the rate of 50,000 shares per month over a 24 month period commencing June 18, 2010.





On June 30, 2010, the Company amended its promissory note to Caete Invest Trade S.A. issued on November 1, 2009.  Under the terms of the modification, the note is now convertible into common stock of the Company at a fixed price of $0.10 per share.





On June 30, 2010, the Company amended its promissory note payable to the Chief Executive Officer issued on January 21, 2010.  Under the terms of the modification, the note is now convertible into common stock of the Company at a fixed price of $0.10 per share.  On October 22, 2010, the Company indirectly modified the agreement to allow the Chief Executive Officer to convert his note at $0.045 per share.





Precision has demonstrated that the Pilot Plant has the capacity to convert at least 2.5 tons of shredded tire feedstock per day into electrical energy (“Phase I”). It was agreed that the Company will invest $500,000 to increase the Pilot Plant capacity from 2.5 tons to 10 tons.  The Company, to date, has advanced $100,000.





The Company shall also pay Precision a royalty of 8% of the certain net profits derived from projects developed by the Company that employ the Technology, provided, however, that such royalty shall be no less than $200,000 per year.





All improvements made to the Technology by either party shall be owned by Precision.




On August 10, 2010, the Board approved the issuance of 1,200,000 shares of its common stock to its Chief Executive in accordance with his amended contract.  The shares vest at the rate of 50,000 per month over a 24 month period commencing June 18, 2010.





NOTE L – SUBSEQUENT EVENTS





Effective October 1, 2010, the Board approved the immediate vesting of all unearned shares to André L’Heureux.




Effective November 15, 2010, the Board approved an extension to Olga Finkelshteyn’s consulting agreement. The agreement provides for the issuance of 25,000 shares of its common stock per month and the cash payment of $4,000 per month.





Effective November 15, 2010, the Board approved an increase in issuance of the Company’s common stock to Faisal Butt to 100,000 shares per month, extended the term of his agreement for an additional 12 months and increased his retainer to $6,000 per month.








11


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





Novo Energies Corporation (“Novo”) intends to own and operate recycling plants that will efficiently, economically, environmentally and profitably recycle scrap tires and plastics into energy and other commodities.  The core of Novo’s technology to recycle tires and plastics into energy is a Multi Stage Hybrid Gasification System (“MSHG”), which undertakes the conversion of carbonaceous feedstock to a gaseous end-product with an upgraded heating value in an environmentally friendly manner, which does not involve combustion or any other reagents or other pollutants.  As an interim step of Novo’s process, Novo will transform scrap tires and plastics into Synthesis gas (syngas), which then is used as a fuel for engines and turbines to produce electricity. The syngas may also be converted into transportation fuel or fuel additives using a standard catalyst-based process such as Fischer-Tropsch.
 
 On July 30, 2009, the Company formed its first wholly owned subsidiary - WTL Renewable Energy, Inc. (“WTL”). WTL was established as a Canadian Federal Corporation whose business is to initially research available technologies capable of transforming plastic and tires into useful energy commodities. Simultaneously, WTL also intends to plan, build, own, and operate renewable energy plants throughout Canada now utilizing an MSHG technology and using plastic and tire waste as feedstock.
 
 Novo formerly known as Atlantic Wine Agencies, Inc. (“Atlantic”) is organized under the laws of the State of Florida.  Atlantic had vineyards and a winery in South Africa.  The operations of Atlantic were spun-out to the stockholders in September 2008, and a change of control occurred on October 7, 2008 at which time the Company considered itself a Development Stage Company.  The Company changed its name to Novo Energies Corporation on June 8, 2009.  The 2008 Financial Statements have been reclassified to give effect to the discontinued operations.
 
 On July 30, 2009, the Company formed its first wholly owned subsidiary - WTL Renewable Energy, Inc. (“WTL”). WTL was established as a Canadian Federal Corporation whose business plan is to plan, build, own, and operate renewable energy plants throughout North America.
 
 On May 1, 2010, the ELSO  Agreement was cancelled and all shares were returned to the Company for cancellation.  Accordingly, the stock based compensation of $90,000 was reversed during the quarter.
 
 On May 15, 2010, the Company terminated the Tremblay Agreement.
 
 On May, 15, 2010, the Company entered into a consulting agreement with Pierre Paffenhoff to assist the company in developing a business strategy, an acquisition, strategy, developing sales and marketing strategies and other services.  The consultant will be paid $1,500 per month.  The agreement can be terminated on a 15 day notice by either party.  The consultant will also be paid in cash 10% of proceeds from an equity or debt financing whereby he introduced the arrangement to the Company and 3% of the shares to be issued in any equity financing.
 
 On May 28, 2010, the Company terminated the Zahar Agreement and agreed to compensate Mr. Zahar through February 15, 2010.
 
 On May 28, 2010, the Company entered into a Technology Co-operation Agreement with Novo Energies International, Ltd. (NEI) that permits NEI to utilize the Company’s technology and know-how for the sole purpose of building and operating facilities at NEI’s expense that incorporate all or any portion of the Company’s technology throughout the entire world except for all of the countries within North America, Central America and South America for a term of 10 years which may be renewed for an additional 10 year term.  As consideration for the know-how and other technical information, the Company will receive 12.5% of NEI’s issued and outstanding shares with anti-dilution rights.  Such anti-dilution rights shall expire when NEI raises a minimum of 3,000,000 British pounds.  In connection with the agreement, the Company’s Chief Executive Officer, Antonio Treminio, and the Company’s Interim President, Faisal Farooq Butt were appointed as Directors to NEI’s Board of Directors and each received 4% and 2%, respectively, of NEI’s common stock.  At September 30, 2010, NEI has had minimal operating activity and therefore no value has been assigned to Novo’s ownership interest.
 
 On June 1, 2010, Faisal Farooq Butt was appointed interim President of the Company.
 
 On June 7, 2010, the Company entered into a consulting agreement with Olga Finkelshteyn to assist the company in developing a public relations strategies, new investor awareness strategies and communications, future sales and marketing strategies, and other services.  The consultant will be paid $2,000 per month.  The agreement can be terminated on a 15 day notice by either party.  The consultant will also be paid in stock based compensation of 5,000 common shares per month.
 
 The Germaine Agreement was terminated on June 15, 2010.
 
 On June 18, 2010, the Company, through a private placement offering, sold 1,100,000 shares of its common stock at $0.10 per unit for a total of $110,000.
 
 On June 18, 2010, the Company amended the Chief Executive’s employment contract whereby he will receive 1,200,000 shares of Company common stock and vest at the rate of 50,000 shares per month over a 24 month period commencing June 18, 2010.
 
 At September 30, 2010, [1,059,039] common shares are included in outstanding shares which have not yet been issued by the Company.
 
 On June 30, 2010, the Company amended its promissory note to Caete Invest Trade S.A. issued on November 1, 2009.  Under the terms of the modification, the note is now convertible into common stock of the Company at a fixed price of $0.10 per share.
 
 On June 30, 2010, the Company amended its promissory note payable to the Chief Executive Officer issued on January 21, 2010.  Under the terms of the modification, the note is now convertible into common stock of the Company at a fixed price of $0.10 per share.
 
 At September 30, 2010, the related party payables of $359,456 consists of: (a) expenses paid by the Chief Executive Officer on behalf of the Company aggregating $67,873; (b) compensation due other consultants deemed to be shareholders aggregating $127,573; (c) expenses advanced by other shareholders in the amount of $86,010, primarily for travel related expenses; and (d) unpaid rent payable to companies owned and controlled by the Chief Executive Officer and his wife aggregating $78,000.
 
 12
 Subsequent Events
 
 Effective October 1, 2010, the Board approved the immediate vesting of all unearned shares to André L’Heureux.
 
 Effective November 15, 2010, the Board approved an extension to Olga Finkelshteyn’s consulting agreement. The agreement provides for the issuance of 25,000 shares of its common stock per month and the cash payment of $4,000 per month.
 
 Effective November 15, 2010, the Board approved an increase in issuance of the Company’s common stock to Faisal Butt to 100,000 shares per month, extended the term of his agreement for an additional 12 months and increased his retainer to $6,000 per month.
 
 13
 RESULTS OF OPERATIONS
 
 As indicated in the accompanying financial statements, the Company has incurred cumulative net operating losses of $4,596,933 since inception of the development stage and has negative working capital of $1,242,523.  Management’s plans include the raising of capital through equity markets to fund future operations and the generating of revenue through its business.  Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations.  Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
 
 Results of Operation - Three Months Ended September 30, 2010
 
 The Company is currently developing its business, and as a result has no products or services to offer and no revenues.  In developing its business, the Company has undertaken expenses that have resulted in a loss from operations of $756,672 in the three months ended September 30, 2010, as compared to a loss from operations of $773,330 in the corresponding period in 2009.  Loss from operations consists of general and administrative expenses, which decreased from $773,330 to $406,702 in the three month periods ended September 30, 2009 and 2010, research and development, which increased from $0 to $143,221 in the three month periods ended June 30, 2009 and 2010, and interest expense, which increased from $0 to $199,920 in the three month periods ended September 30, 2009 and 2010.  Each of these increases is attributable to the development of the Company’s technological processes.
 
 Results of Operation – Six Months Ended September 30, 2010
 
 The Company is currently developing its business, and as a result has no products or services to offer and no revenues.  In developing its business, the Company has undertaken expenses that have resulted in a loss from operations of $1,336,849 in the six months ended September 30, 2010, as compared to a loss from operations of $980,360 in the corresponding period in 2009.  Loss from operations consists of general and administrative expenses, which decreased from $980,360 to $698,641 in the six month periods ended September 30, 2009 and 2010, research and development, which increased from $0 to $338,619 in the six month periods ended September 30, 2009 and 2010, and interest expense, which increased from $0 to $292,122 in the six month periods ended September 30, 2009 and 2010.  Each of these increases is attributable to the development of the Company’s technological processes.
 
 LIQUIDITY AND CAPITAL RESOURCES
 
 In connection with our current liabilities of $1,248,988 as at September 30, 2010, we had the note payable to Caete Invest Trade, S.A. of $157,126, a convertible debenture of $295,265 and accounts payable of $203,.
 
 At September 30, 2010, the related party payables of $359,456 consists of: (a) expenses paid by the Chief Executive Officer on behalf of the Company aggregating $67,873; (b) compensation due other consultants deemed to be shareholders aggregating $127,573; (c) expenses advanced by other shareholders in the amount of $86,010, primarily for travel related expenses; and (d) unpaid rent payable to companies owned and controlled by the Chief Executive Officer and his wife aggregating $78,000.
 
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES





Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, income taxes and contingencies and litigation. We base our estimates on historical experience and on various other 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.





RECENT ACCOUNTING PRONOUNCEMENTS





In April 2010, the Financial Accounting Board issued Accounting Standards Update No. 2010-17, Milestone Method of Revenue Recognition,  a Consensus of the FASB Emerging Issues Task Force.  This standard provides guidance on defining a milestone and when it is appropriate to apply this standard in recognizing revenue from research and development transactions.  In general, this standard permits recognition of revenue from research and development that is contingent upon achievement of one or more specified milestones defined in the research and development arrangements which meet specified criteria for such revenue recognition.  This standard becomes effective for fiscal periods beginning after June 15, 2010 and early adoption is permitted.  Management does not believe that adoption of this standard will have a material effect on the Company’s financial statements.





14


Item 3. Quantitative and Qualitative Disclosure About Market Risk.





Not applicable.





Item 4. Controls and Procedures





Responsibility For Financial Information —Management isresponsible for the preparation, accuracy, integrity and objectivity of the Consolidated Financial Statements and the other financial information included in this report.  Such information has been prepared in conformity with accounting principles generally accepted in the United States of America and accordingly, includes certain amounts that represent management’s best estimates and judgments. Actual amounts could differ from those estimates.





Responsibility for Internal Controls — Management isalso responsible for establishing and maintaining adequate internal controls over financial reporting. These internal controls consist of policies and procedures that are designed to assess and monitor the effectiveness of the control environment including: risk identification, governance structure, delegations of authority, information flow, communications and control activities.  While no system of internal controls can ensure elimination of all errors and irregularities, Novo Energies Corporation’s internal controls, which are reviewed and modified in response to changing conditions, have been designed to provide reasonable assurance that assets are safeguarded, policies and procedures are followed, transactions are properly executed and reported, and appropriate disclosures are made. The concept of reasonable assurance is based on the recognition that there are limitations in all systems of internal control and that the costs of such systems should be balanced with their benefits.





Report On Internal Control Over Financial Reporting — Management hasevaluated the Company’ internal control over financial reporting as of September 30, 2010. This evaluation was based on criteria for effective internal control over financial reporting set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting is limited as of September 30, 2010 because we have a single director, we do not have an audit committee, there is no segregation of duties in connection with our accounting and the Company is striving to improve on timely replies and financial controls. This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.





Report On Disclosure Controls And Procedures — As of September 30, 2010, management carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, it concluded that the Company’s disclosure controls and procedures are not effective in ensuring that information required to be disclosed in its periodic filings under the Exchange Act is accumulated and communicated to us to allow timely decisions regarding required disclosures, and such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.





PART II - OTHER INFORMATION





Item 1.  Legal Proceedings.





None.


Item 1A. Risk Factors.





Not applicable.





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


None.


Item 3.  Defaults Upon Senior Securities.





None.





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





None.





Item 5.  Other Information.





None.





Item 6. Exhibits.





Exhibit 31.1 Certification of Chief Executive Officer and Acting Principal Accounting Officer


Exhibit 32.1 Certification of Chief Executive Officer and Acting Principal Accounting Officer








15





SIGNATURES





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





NOVO ENERGIES CORPORATION


(Registrant)








Date: November 19, 2010





/s/ Antonio Treminio


Antonio Treminio


Chief Financial Officer and Chief Executive Officer