UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x  QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934


for the
quarterly period ended September 30, 2010





 ̈   TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934


for the
transition period from __________ to __________





Commission
file number:  333-150768





UNIVERSAL
SOLAR TECHNOLOGY, INC.


(Exact
name of registrant as specified in its charter)





Nevada
              
              26-0768064(State
      or other jurisdiction of incorporation or
                organization)
              
              (I.R.S.
      Employer Identification No.)





No. 1
Pingbei Road 2,


Nanping
Science & Technology Industrial Park,


Zhuhai
City, Guangdong Province,


The
People’s Republic of China


(Address
of principal executive offices including zip code)





86-756-8682610


(Registrant's
telephone number, including area code)





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





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 x 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, 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  ̈ (Do
      not check if a smaller reporting company)
              Smaller
      reporting company x





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





The
number of shares of Common Stock outstanding as of November 5, 2010 was
22,599,974 shares.









TABLE OF
CONTENTS





PART
      I - FINANCIAL INFORMATION
              1Item
      1. Financial Statements
              1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              8Item
      3.Quantitative and Qualitative Disclosures About Market
    Risk
              12Item
      4T. Controls and Procedures
              12PART
      II - OTHER INFORMATION
              12Item
      1. Legal Proceedings
              12Item
      1A. Risk Factors
              12Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              13Item
      3. Defaults Upon Senior Securities
              13Item
      4. Removed and Reserved
              13Item
      5. Other Information
              13Item
      6. Exhibits
              13SIGNATURES
              14





Except as
otherwise required by the context, all references in this report to "we", "us”,
"our", “Universal Solar Technology” or "Company" refer to the consolidated
operations of Universal Solar Technology, Inc., and its wholly owned
subsidiaries.









PART
I. FINANCIAL INFORMATION





Item 1. FinancialStatements.





UNIVERSAL
      SOLAR TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS





September30,2010
                          
                          
                          December31,2009(Unaudited)
                          
                          
                          (Audited)ASSETSCURRENT
      ASSETS:Cash
                          
                          $
                          126,125
                          
                          
                          $
                          1,115,047Prepaid
      expenses and other current assets
                          
                          
                          1,394,993
                          
                          
                          
                          319,123Inventories
                          
                          
                          603,813
                          
                          
                          
                          42,956TOTAL
      CURRENT ASSETS
                          
                          
                          2,124,931
                          
                          
                          
                          1,477,126Deposits
      for future deliveries of property and equipment
                          
                          
                          545,269
                          
                          
                          
                          312,362Land
      use right, net of accumulated amortization of $19,741 and $11,452,
      respectively
                          
                          
                          410,981
                          
                          
                          
                          411,391Property
      and equipment, net of accumulated depreciation of $66,225 and $3,446,
      respectively
                          
                          
                          5,397,443
                          
                          
                          
                          3,294,946TOTAL
      ASSETS
                          
                          $
                          8,478,624
                          
                          
                          $
                          5,495,825LIABILITIES
      AND STOCKHOLDERS' DEFICIENCYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                          
                          $
                          872,977
                          
                          
                          $
                          154,813Advance
      from customers
                          
                          
                          314,726Short
      Term loan
                          
                          
                          746,150Due
      to related parties-current portion
                          
                          
                          65,922
                          
                          
                          
                          5,675,528TOTAL
      CURRENT LIABILITIES
                          
                          
                          1,999,775
                          
                          
                          
                          5,830,341Due
      to related parties- non-current portion
                          
                          
                          7,358,022
                          
                          
                          
                          22,485TOTAL
      LIABILITIES
                          
                          
                          9,357,797
                          
                          
                          
                          5,852,826STOCKHOLDERS'
      DEFICIENCY:Preferred
      stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares
      issued and outstanding
                          
                          
                          
                          
                          
                          
                          -Common
      stock, $0.0001 par value, 90,000,000 shares authorized, issued and
      outstanding22,599,974
      shares and 22,599,974 shares, respectively
                          
                          
                          2,260
                          
                          
                          
                          2,260Additional
      paid-in capital
                          
                          
                          598,048
                          
                          
                          
                          553,826Accumulated
      deficit
                          
                          
                          (1,546,599
                          )
                          
                          
                          (925,466
                          )Accumulated
      other comprehensive income (loss)
                          
                          
                          67,118
                          
                          
                          
                          12,379TOTAL
      STOCKHOLDERS' DEFICIENCY
                          
                          
                          (879,173
                          )
                          
                          
                          (357,001
                          )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                          
                          $
                          8,478,624
                          
                          
                          $
                          5,495,825





See notes
to consolidated financial statements.





1





UNIVERSAL SOLAR TECHNOLOGY, INC. AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


(Unaudited)





ThreeMonthsEnded
                    
                    
                    ThreeMonthsEnded
                    
                    
                    NineMonthsEnded
                    
                    
                    NineMonthsEndedSep
      30, 2010
                    
                    
                    Sep
      30, 2009
                    
                    
                    Sep
      30, 2010
                    
                    
                    Sep
      30, 2009SALES
                    
                    $
                    609,500
                    
                    
                    $
                    31,609
                    
                    
                    $
                    609,500
                    
                    
                    $
                    691,660Cost
      of goods sold
                    
                    
                    598,721
                    
                    
                    
                    29,989
                    
                    
                    
                    598,721
                    
                    
                    
                    619,449Gross
      Profit
                    
                    
                    10,779
                    
                    
                    
                    1,620
                    
                    
                    
                    10,779
                    
                    
                    
                    72,211ExpensesSelling
      Expenses
                    
                    
                    57,266
                    
                    
                    
                    
                    
                    
                    
                    57,266General
      and administrative expenses
                    
                    
                    90,259
                    
                    
                    
                    120,418
                    
                    
                    
                    441,074
                    
                    
                    
                    282,615TOTAL
      OPERATING EXPENSES
                    
                    
                    147,525
                    
                    
                    
                    120,418
                    
                    
                    
                    498,340
                    
                    
                    
                    282,615LOSS
      FROM OPERATIONS
                    
                    
                    (136,746
                    )
                    
                    
                    (118,798
                    )
                    
                    
                    (487,561
                    )
                    
                    
                    (210,404
                    )Interest
      expense
                    
                    
                    (28,082
                    )
                    
                    
                    (55,869
                    )
                    
                    
                    (130,749
                    )
                    
                    
                    (75,674
                    )Dividend
      and interest income
                    
                    
                    0
                    
                    
                    
                    
                    
                    
                    
                    686Gain
      (loss) on foreign currency transactions
                    
                    
                    (49
                    )
                    
                    
                    11
                    
                    
                    
                    (3,509
                    )
                    
                    
                    (2,408
                    )Other
      income
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    -NET
      LOSS
                    
                    
                    (164,877
                    )
                    
                    
                    (174,656
                    )
                    
                    
                    (621,133
                    )
                    
                    
                    (288,486
                    )OTHER
      COMPREHENSIVE INCOME (LOSS):Foreign
      currency translation adjustment
                    
                    
                    22,063
                    
                    
                    
                    45
                    
                    
                    
                    54,739
                    
                    
                    
                    28,934COMPREHENSIVE
      LOSS
                    
                    $
                    (142,814
                    )
                    
                    $
                    (174,611
                    )
                    
                    $
                    (566,394
                    )
                    
                    $
                    (259,552
                    )Loss
      per common share -basic and diluted
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.03
                    )
                    
                    $
                    (0.01
                    )Weighted
      average number of shares outstanding -basic and
    diluted
                    
                    
                    22,599,974
                    
                    
                    
                    22,574,974
                    
                    
                    
                    22,599,974
                    
                    
                    
                    22,574,974





See notes
to consolidated financial statements.




2




UNIVERSAL SOLAR TECHNOLOGY INC. AND
      SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(Unaudited)





Ninemonthended
                                              
                                              
                                              Ninemonthended9/30/2010
                                              
                                              
                                              9/30/2009OPERATING
      ACTIVITIES:Net
      loss
                                              
                                              $
                                              (621,133
                                              )
                                              
                                              $
                                              (288,486
                                              )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Imputed
      interest on loans from related parties
                                              
                                              
                                              44,899
                                              
                                              
                                              
                                              76,819Increase
      in long term interest payable to affiliated parties
                                              
                                              
                                              76,253Depreciation
      of property and equipment
                                              
                                              
                                              61,409
                                              
                                              
                                              
                                              1,121Amortization
      of land use right and intangible assets
                                              
                                              
                                              8,459
                                              
                                              
                                              
                                              8,809Changes
      in operating assets and liabilities:
                                              
                                              
                                              -Prepaid
      expenses and other current assets
                                              
                                              
                                              (1,094,077
                                              )
                                              
                                              
                                              12,650Inventory
                                              
                                              
                                              (552,750
                                              )Accounts
      payable and accrued expenses
                                              
                                              
                                              721,912
                                              
                                              
                                              
                                              25,940Advance
      from customers
                                              
                                              
                                              310,621NET
      CASH USED IN OPERATING ACTIVITIES
                                              
                                              
                                              (1,044,407
                                              )
                                              
                                              
                                              (163,147
                                              )INVESTING
      ACTIVITIES:Deposits
      for future deliveries of equipment
                                              
                                              
                                              (224,124
                                              )
                                              
                                              
                                              (791,113
                                              )Acquisition
      of property and equipment
                                              
                                              
                                              (2,076,393
                                              )
                                              
                                              
                                              (740,226
                                              )NET
      CASH USED IN INVESTING ACTIVITIES
                                              
                                              
                                              (2,300,517
                                              )
                                              
                                              
                                              (1,531,339
                                              )FINANCING
      ACTIVITIES:Proceeds
      from short-term loan
                                              
                                              
                                              736,416Loans
      from related parties
                                              
                                              
                                              1,607,340
                                              
                                              
                                              
                                              2,883,004NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                                              
                                              $
                                              2,343,756
                                              
                                              
                                              $
                                              2,883,004EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                                              
                                              
                                              12,246
                                              
                                              
                                              
                                              29,510INCREASE
      IN CASH
                                              
                                              
                                              (988,922
                                              )
                                              
                                              
                                              1,218,028CASH
      - BEGINNING OF PERIOD
                                              
                                              
                                              1,115,047
                                              
                                              
                                              
                                              259,025CASH
      - END OF PERIOD
                                              
                                              $
                                              126,125
                                              
                                              
                                              $
                                              1,477,053Supplemental
      disclosures of cash flow information:Interest
      paid
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Income
      taxes paid
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              
                                              -





See notes
to consolidated  financial statements.




3




UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2010


(Unaudited)


1.  INTERIM FINANCIAL
STATEMENTS




The
unaudited financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and with instructions to Form 10-Q.  In the opinion of
management, the unaudited financial statements have been prepared on the same
basis as the annual financial statements and reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
financial position as of September 30, 2010 and the results of operations and
cash flows for the periods ended September 30, 2010 and 2009. The financial data
and other information disclosed in these notes to the interim financial
statements related to these periods are unaudited.  The results for
the nine months ended September 30, 2010 is not necessarily indicative of the
results to be expected for any subsequent periods of the entire year ending
December 31, 2010.  The balance sheet at December 31, 2009 has been
derived from the audited financial statements at that date.




Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the Securities and
Exchange Commission’s rules and regulations.  These unaudited
financial statements should be read in conjunction with our audited financial
statements and notes thereto for the year ended December 31, 2009 as included in
our report on Form 10-K.




2.
BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES





Universal
Solar Technology, Inc. (the “Company”) was incorporated in the State of Nevada
on July 24, 2007.  The Company operates through its wholly-owned
subsidiaries, Kuong U Science & Technology (Group) Ltd. (“Kuong U”), a
company incorporated in Macau, Peoples Republic of China (“PRC”) on May 10,
2007, and Nanyang Universal Solar Technology Co., Ltd. (“NUST”), a company
incorporated in Nanyang, PRC on September 8, 2008.  The Company sells
solar photovoltaic (“PV”) modules.




Basis of
presentation




The
consolidated financial statements include the accounts of the Company and all of
its subsidiaries.  All significant inter-company accounts and
transactions have been eliminated. These financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America.




Currency
translation




The
reporting currency of the Company is the United States dollar. The functional
currency of Kuong U is the Hong Kong dollar. The functional currency of NUST is
the Chinese Yuan (”RMB”).  Revenue and expense accounts of our two
subsidiaries are translated into United States dollars at the average rates
during the period, and balance sheet items are translated at year-end rates,
except for equity accounts which are translated at historical
rates.  Translation adjustments arising from the use of differing
exchange rates from period to period are included as a separate component of
shareholders’ equity.  Gains and losses from foreign currency
transactions are recognized in current operations.




The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into USD at
the rates used in translation.




Uses of estimates in the
preparation of financial statements




The
preparation of financial statements in conformity with generally accepted
accounting principles 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 and
the reported amounts of net revenue and expenses during each reporting
period.  Actual results could differ from those
estimates.




4




Revenue
recognition




Revenue
from solar products is recognized when there is evidence of an arrangement,
delivery has occurred or services have been rendered, the arrangement fee is
fixed or determinable, and collectability of the arrangement fee is reasonably
assured.





Comprehensive income
(loss)




Comprehensive
income (loss) is defined to include all changes in equity except those resulting
from investments by shareholders and distributions to
shareholders.  Among other disclosures, all items that are required to
be recognized under current accounting standards as components of comprehensive
income (loss) are required to be reported in a financial statement that is
presented with the same prominence as other financial
statements.  Comprehensive income includes net income (loss) and the
foreign currency translation adjustment, net of tax.




Going
concern




The
financial statements have been prepared on a "going concern" basis, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. At September 30, 2010, the Company had a
stockholders’ deficiency of $879,173. Further, the Company has incurred net
losses of $1,546,599 since inception. These factors raise substantial doubt as
to the Company’s ability to continue as a going concern. The Company plans to
improve its financial condition by raising capital in a private placement of its
securities. However, there is no assurance that the Company will be successful
in accomplishing this objective. The financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.





3.SHORT TERM LOAN





On July
2, 2010, NUST signed a short term loan agreement for RMB 5 million with
Fangcheng County Hong Yu Industrial Development and Investment Company. By
September 30, 2010, NUST has received the total cash amount of RMB 5 million.
According to the loan agreement, NUST agrees to pay interest at the interest
rate of 4.425% per month. The maturity date of the loan is
12/31/2010.





4.
DUE TO/DUE FROM RELATED PARTIES





On May 5,
2010, NUST amended the previous oral loan agreement with Yuemao Technology and
formed a Line of Credit Agreement. By September 30, 2010, NUST has received the
total cash amount of RMB 26,470,000. According to the Line of Credit Agreement,
NUST may continue to borrow from Yuemao Technology at the interest rate of 1
percent per annum, NUST promises to pay the principal and the interest
balance by 12/1/2013.





On May 5,
2010, KUST amended the previous oral loan agreement with Yuemao Laser Technology
and formed a Line of Credit Agreement. By September 30, 2010, KUST has received
the total cash amount of HKD 1,925,353.  According to the Line of
Credit Agreement, KUST may continue to borrow from Yuemao Technology at the
interest rate of 1 percent per annum, KUST promises to pay the principal
and the interest balance by 12/1/2013.





On May 5,
2010, KUST amended the previous oral loan agreement with Mr. Wenshen Cheng and
formed a Line of Credit Agreement. By September 30, 2010, KUST has received the
total cash amount of HKD 23, 681,566. According to the Line of Credit Agreement,
KUST may continue to borrow from Mr. Wenshen Chen at the interest rate of 1
percent per annum, KUST promises to pay the principal and the interest
balance by 12/1/2013.





On May 5,
2010, the Company amended the previous oral loan agreement with Mr. Wenshen
Cheng and formed a Line of Credit Agreement. By September 30, 2010, Universal
Solar Technology has received the total cash amount of USD 22,485. According to
the Line of Credit Agreement, Universal Solar Technology may continue to borrow
from Mr. Wenshen Chen at the interest rate of 1 percent per annum,
Universal Solar Technology promises to pay the principal and the interest
balance by 12/1/2013.




5




Both
Yuemao Laser and Yuemao Technology are PRC companies and controlled by the
Company’s chairman and chief executive officer.





Due to related
parties


Due to related parties consists of
following:





September 30,
                                    
                                    
                                    December 31,2010
                                    
                                    
                                    2009Due
      to President Ms. Lin Chen
                                    
                                    $
                                    104,536
                                    
                                    
                                    $
                                    0Due
      to Mr. Wenshen Chen, Company’s chairman and chief executive officer, due
      12/1/2013, at 1% per annum
                                    
                                    $
                                    3,067,934
                                    
                                    
                                    $
                                    2,207,704Due
      to Zhuhai Yuemao Laser Facility Engineering Co., Ltd.  (“Yuemao
      Laser”) due 12/1/2013, at 1% per annum
                                    
                                    $
                                    247,600
                                    
                                    
                                    $
                                    238,009Due
      from Zhuhai Yuemao Laser Facility Engineering Co.,
      Ltd.  (“Yuemao Laser”)
                                    
                                    $
                                    (38,614
                                    )
                                    
                                    
                                    0Due
      to Yuemao Technology Ltd. (“Yuemao Technology”), due 12/1/2013, at 1% per
      annum
                                    
                                    $
                                    3,950,118
                                    
                                    
                                    $
                                    3,252,300Interest
      Payable, due 12/1/2013with the principals, not interest
      bearing
                                    
                                    $
                                    92,370
                                    
                                    
                                    $
                                    0Total
                                    
                                    $
                                    7,423,944
                                    
                                    
                                    $
                                    5,698,013Current
      portion
                                    
                                    $
                                    (65,922
                                    )
                                    
                                    
                                    (5,675,528
                                    )Non-current
      portion
                                    
                                    $
                                    7,358,022
                                    
                                    
                                    $
                                    22,
      485




5.
INCOME TAXES





The
Company has not recorded a provision for United States federal income tax for
the periods presented since it incurred net losses in such periods.





The
Company’s Chinese subsidiaries are governed by the Income Tax Law of the
People’s Republic of China concerning private enterprises, which are generally
subject to tax at a statutory rate of 25% on taxable income.





As of
September 30, 2010, the Company had approximately $1,546,599 of net operating
loss carry forwards for income tax purposes.





Based on
management's present assessment, the Company has not determined it to be more
likely than not that a deferred tax asset attributable to the future utilization
of the net operating loss carry forward as of September 30, 2010 will be
realized. Accordingly, the Company has provided a 100% allowance against the
deferred tax asset in the financial statements at September 30, 2010. The
Company will continue to review this valuation allowance and make adjustments as
appropriate.




6




6. PROPERTY,PLANT AND
EQUIPMENT





As of
September 30, 2010, the company had $410, 981 of net land use right. NUST
acquired the right to use a parcel of land approximating 71,280 square
meters for forty (40) years for its office and production facilities from the
local government in the PRC on the December 1, 2008 for a cost of RMB 2,886,300.
The land use right is being amortized using the straight line method over the 40
year term of the contract.





As of
September 30, 2010 and December 31, 2009, property, plant and equipment
consisted of the following:




September 30,
                          2010
                        
                        
                        December 31,
                          2009Construction
      in progress
                        
                        $
                        715,045
                        
                        
                        $
                        1,019,760Office
      equipment and furniture
                        
                        
                        20,093
                        
                        
                        
                        11,123Equipment
                        
                        
                        4,121,710
                        
                        
                        
                        2,219,913Automobile
                        
                        
                        65,369
                        
                        
                        
                        47,596Building
                        
                        
                        535,513Software
                        
                        
                        5,939Less
      accumulated depreciation and amortization
                        
                        
                        (66,226
                        )
                        
                        
                        (3,446
                        )Property,
      plant and equipment, net
                        
                        $
                        5,397,443
                        
                        
                        $
                        3,294,946




7.
COMMITMENTS AND CONTINGENCIES





On August
23, 2010, Universal Solar Technology, Inc. (the "Company") provided notice to
C.T.O., spol. s.r.o. to terminate the Sales Contract entered into on June 18,
2010 for the sale of 20MW of monocrystalline solar modules for an aggregate
sales price of $32,600,000. The Company terminated the Sales Contract as a
result of CTO's failure to make required payment under the Sales
Contract.





8.
SUBSEQUENT EVENT





In
accordance with ASC 855, “Subsequent Events”, the Company has evaluated
subsequent events that have occurred through the date of issuance of these
financial statements and has determined that there were no material events that
occurred after the date of the balance sheets included in this
report.




7




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





The
following discussion should be read in conjunction with the Financial Statements
and Notes thereto appearing elsewhere in this Form 10-Q.





DISCLAIMER
REGARDING FORWARD-LOOKING STATEMENTS





This
document contains certain forward-looking statements, which are made under the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Terms such as “anticipate”, “may”, “will”, “should”, “believe”, “estimate”,
“expect”, “intend”, “plan”, predict”, “project”, “target”, “will likely result”,
“will continue” and similar expressions are intended to identify forward-looking
statement and based upon our expectations at the time they made. The
forward-looking statements are not guarantee for future performance and actual
results may differ from those indicated or implied in the forward-looking
statements due to a various factors including, but not limited to changes to our
assumptions, risks and uncertainties involved, many of which are beyond our
control. We discuss risks and uncertainties in great details under item 1A “Risk
Factors” below.





The
company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. However, your attention is directed to any further
disclosures made on related subjects in our subsequent annual and periodic
reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q
and 8-K.





The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and
accompanying notes and the other financial information appearing in Part I, Item
1 and elsewhere in this report. The Company’s fiscal year end is December
31.





OVERVIEW
OF OUR BUSINESS





We are a
development stage enterprise that manufactures silicon ingots, wafers, high
efficiency solar photovoltaic (“PV”) modules and other PV application products
in the EU, North America, Asia and Africa.  The Company was
incorporated under the laws of the State of Nevada on July 24, 2007. It operates
through its wholly-owned subsidiaries, including Kuong U Science &
Technology (Group) Ltd. (“KUST”), a company incorporated in Macau, Peoples
Republic of China (“PRC”) on May 10, 2007, and Nanyang Universal Solar
Technology Co., Ltd. (“NUST”), a company incorporated in Nanyang, PRC on
September 8, 2008. On May 9th, 2008, the Company filed a registration statement
on Form S-1 with the Securities and Exchange Commission (SEC), and raised
capital of $300,000 from a self-underwritten offering of 2,000,000 shares of our
common stock.





The
Company’s focus during 2010 has been on completing the development of its
Nanyang factory. The new factory covers an area of 71,337 square meters in
Nanyang City, Henan province. Our new factory is one of the largest in its kind
in China. We produce silicon ingots, silicon wafers, PV modules, on-grid and
off-grid generating systems. We also have the ability to produce the equipment
such as ingots puller, and downstream products such as solar lamps for road and
highway infrastructures. Our production capacity is 15 MW in September and we
target to reach to 50 MW by the end of the year. As of today, we have
completed testing of 9 ingot growers and continue to acquire more equipment
to expand the production volume. During the third quarter of 2010 we have
accepted delivery of water cooling system, multi-wire saw and framing machine.
We have hired a total of 158 employees as of September 30, 2010.





We have
built an assorted product portfolio to serve the diverse needs of global
customers. Products currently being marketed, and/or developed include: silicon
ingots, silicon wafers, PV modules, on-grid generating systems, off-grid power,
solar lamps for road and highway infrastructure, solar LED home accessories, and
solar handheld device chargers (iPods, cameras, etc.) Our products have passed
multiple standard tests and achieved the certificates of VDE, TUV, IEC61215, IEC
61730, CE and ISO 9001:2000.





The VDE
Testing and Certification Institute is accredited on national and international
levels for the area of testing and certification of electro-technical equipment,
components, and systems. Testing of electro-technical products is conducted for
safety, electromagnetic compatibility, and other characteristics. The results of
testing are evaluated scientifically and contribute to the development of
electro-technical standards. VDE is a professional organization of electrical
engineers; they address issues in collaboration with German Institute for
Standardization (DIN) standards for the field of electrical engineering. It also
conducts testing and certification much likes UL in the United States. We
contacted VDE directly and completed an IEC 61730 evaluation. We also passed the
construction evaluation requirements of IEC 61730-1, additional IEC 61730-2
module or materials tests, and factory inspection requirements. By satisfying
these tests, we are able to market and sell our Solar products to EU
countries.




8





RESULTS
OF OPERATIONS





Three
Months Ended September 30, 2010 Compared to Three Months Ended September 30,
2009





Revenue





We
generated $609,500 in sales for the quarter ended September 30, 2010 compared to
$31,609for the
quarter ended September 30, 2009. The increase in sales was because we have
begun production at our newly completed factory in Nanyang. During the three
months ended September 30, 2010, we produced and sold more than 300,000 silicon
wafers to seven new customers by the end of September 2010. These customers were
Jingneng Inc., and Zhongde Inc. from Jiangsu Province; Dingli Inc., Zhonghong
Inc., Jingnuo Inc., Sangni Inc, and Jinhong, Inc. from Zhengjiang Province.
These companies will continue to buy silicon wafers to manufacture their
products.





Cost
of Sales





Our cost
of sales was $598,721 for the quarter ended September 30, 2010 compared to
$29,989 for the quarter ended September 30, 2009. The increase in cost of sale
was due to the increased sales volume during the third quarter of
2010.





Gross
Profit





Gross
profit is affected by numerous factors, including our average selling prices,
foreign exchange rates, our manufacturing costs and the effective utilization of
our production facilities. Our gross profit was $10,779 for the quarter ended
September 30, 2010 compared to $1,620 for the quarter ended September 30, 2009,
an increase of 565% compared to $1,620 for the quarter ended September 30, 2009.
The increase was due to increased sales volume. Our profit margin is about the
industry average.





Selling,
General and Administrative





Selling,
general and administrative expense consists primarily of salaries and other
personnel-related costs, professional fees, advertisement, and other selling
expenses. It was $147,525 for the three months ended September 30, 2010,
compared to $120,418for the three
months ended September 30, 2009, an increase of $27,107or 22.5%. The increase
was mainly associated with the increase in personnel at the Nanyang
factory. We currently have 158 employees compared to 4 employees as of September
30, 2009. We expect these expenses to increase further in the near future, both
in absolute dollars and as a percentage of net sales, in order to support the
completion of manufacturing construction, installation of equipment, improvement
of our information processes and systems, compliance and other infrastructure
required for a public company.





Interest
Expense





Net
interest expense was $28,082 for the three months ended September 30, 2010,
compared to $55,869  for the three months ended September 30, 2009, a
decrease of $ 27,787  or 49.7%. The decrease of interest expense was
attributable to lower interest rate from related parties, offsetting the impact
of increase of borrowing from to related parties.





Net
Loss





Net loss
for the three months ended September 30, 2010 was $164,877 compared to
$174,656for the third
quarter of 2009 as a result of the combination of increase of revenue, selling
and general administration and personal expenses and decrease of interest
expenses. The number of employees has increased from 4 to 158 at the end of the
third quarter of 2010 compared to the same period in 2009. Most workers are
still in training period and therefore the increase in personnel has not
translated to increase in productivity. We expect the selected workers to finish
their training and to start producing PV modules as we finish testing the
equipment at our new facility.





Foreign
Currency Gain (Loss)





Foreign
currency gain (loss) consists of gains and losses resulting from holding assets
and liabilities and conducting transactions denominated in currencies other than
our functional currencies. During the three months ended September 30, 2010, we
recognized a foreign currency translation gain of $22,063, compared to $45 for
the three months ended September 30, 2009 an increase of $22,018. The increase
in foreign currency translation gain was mainly due to the fluctuation between
US Dollar and Chinese Yuan during the reporting period.




9





Nine
Months Ended September 30, 2010 Compared to Nine Months Ended September 30,
2009





Revenue





Our
revenue for the nine months ended September 30, 2010 was $609,500 compared to
$691,660 for the nine months ended September 30, 2009, a decrease of $82,160 or
12%. Last year our revenue was mainly generated from our export of PV modules to
our customers in India; while this year we sold our wafers to seven Chinese
companies. The decrease in revenue was mainly due to the lower gross margin for
silicon wafers as compared to PV modules.





Cost
of Sales





The cost
of sales for the nine months ended September 30, 2010 was $598,721, compared to
$619,449 for the nine months ended September 30, 2009 which constituted a 3.3%
decrease.





Gross
Profit





Gross
profit is affected by numerous factors, including our average selling prices,
foreign exchange rates, our manufacturing costs and the effective utilization of
our production facilities. Our gross profit for the nine months ended September
30, 2010 was $ 10,779, compared to $72,211 for the nine months of 2009 for
reasons discussed above.





Selling,
General and Administrative





Selling,
general and administrative expense consists primarily of salaries and other
personnel-related costs, professional fees, advertisement, and other selling
expenses. It was $498,340 for the nine months ended September 30, 2010, compared
to $282,615for the same period in 2009, an increase of $215,725 or 76.3 %. The
increase was mainly associated with the expenses related to the increase in
personnel from 4 to 158 related to the new manufacturing facilities in Nanyang.
We expect these expenses to increase further in the near future, both in
absolute dollars and as a percentage of net sales, in order to support the
completion of manufacturing construction, installation of equipment, improvement
of our information processes and systems, compliance and other infrastructure
required for a public company.





Interest
Expense





Net
interest expense was $130,749 for the nine months ended September 30, 2010,
compared to $75,674 for the nine months ended September 30, 2009, an increase of
$55,075 or 72.8%. The majority of the interest expense was attributable to
the interest expense on the loans from related parties and the increase was due
to increased borrowing from related parties, offsetting by lower interest rate
on such borrowings starting from May 5, 2010





Net
Loss





Net loss
for the nine months ended September 30, 2010 was $621,133 compared to
$288,486 for the same period in 2009, an increase of $332,647 or 115%. The
increase was due to the increase in payroll expenses as a result of the
large hiring to staff our new manufacturing facilities in Nanyang. The number of
employees has increase from 4 to 158 at the end of the second quarter of 2010
compared to the same period a year ago. As discussed above, the newly hired
employees are still in training and we expect as the new employees complete
their training and begin production, our productivity and sales
would increase.





Foreign
Currency Gain (Loss)





Foreign
currency gain (loss) consists of gains and losses resulting from holding assets
and liabilities and conducting transactions denominated in currencies other than
our functional currencies. During the nine months ended September 30, 2010, we
recognized a foreign currency translation gain of $54,739, compared to
$28,934  for the three months ended September 30, 2009, an increase of
$25,805  or 89.2%. This increase was mainly due to the fluctuation
between US Dollar and Chinese Yuan during the reporting period.




10




LIQUIDITY
AND CAPITAL RESOURCES





Our
operation is primarily funded through paid-in capital and short term and long
term loans from the related parties. As of September 30, 2010, we had $126,125
in cash, cash equivalents and marketable securities, compared with $1,115,047
ended December 31, 2009. We do not have any off balance sheet arrangements that
are reasonably likely to have a current or future effect on our financial
condition, operating results and cash flows.





Operating
Activities





For the
nine months ended September 30, 2010, cash used in operating activities was $
1,044,407 compared with $163,147 used during the nine months ended September 30,
2009. This was primarily attributable to cash used in prepaid expenses, other
current assets and inventory. Offset to the increase was an increase in imputed
interest on advances from related parties and interest payable on long term
loans from related parties of $ 44,899 and $ 76,253 respectively and net
increase in accounts payable, advances from customers and accrued expenses of
$1,032,533.





Investment
Activities





For the
nine months ended September, 2010, cash used in investment activities was
$2,300,517 compared to $1,531,339 for the nine months ended September 30, 2009.
The increase was primarily related to cash paid as deposits for future
deliveries of equipment and acquisition of property and equipment as a result of
a series equipment purchases for supporting business establishment and future
growth.





Financing
Activities





Financial
activities provided net cash inflow of $2,343,756 during first nine months of
2010 as compared to $2,883,004 for the same period in 2009.





Short
Term Loans





On July
2, 2010, NUST signed a short term loan agreement for RMB 5 million with
Fangcheng County Hong Yu Industrial Development and Investment Company. By
September 30, 2010, NUST has received the total cash amount of RMB 5 million.
According to the loan agreement, NUST agrees to pay interest at the interest
rate of 4.425% per month. The maturity date of the loan is
12/31/2010.





Long
Term Loans





As of
September 30, 2010, we had long term liability in the total amount of
$7,358,022, which were loans from related parties. Since the management
controls 95% of the shares, our short term goal for financing activity is to
identify credible financial partners who has strong interest in the Chinese
solar industry. As of today, the company is in the negotiation process with a
few Private Equity groups. The majority of our debt is due to the related
parties, which are also controlled by our CEO.  Our CEO is willing to
convert most of our debt (the outstanding balance due to the related parties)
into equity any time when the company meets its financing goal to expand the
production capacity to 200 MW per year. Under the current letter of credits with
the related parties, the annual interest rate is 1%, which is much lower than
the prevailing interest rate. The motivation of lending to the company at such a
low interest rate is not to collect the financing profit from interest payments,
but to invest in the growth of the Company. The same model may be applied
for the future investors as well. The company has no doubt that it will meet its
interest payment obligations.





Off-Balance
Sheet Arrangements





As of
September 30, 2010, we had not entered into any financial guarantees or other
commitments to guarantee the payment obligations of any other parties. We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, operating results and cash
flows.





The
recent and unprecedented disruption in the credit markets has had a significant
impact on a number of financing activities. Additional financing is desirable
within the next 9 months in order to meet our current and projected cash flow
deficits from business operations and future development. We will continue to
seek financing from related parties and other sources.




11




As of
June 30, 2010, our liquidity and capital resources have not been materially
adversely impacted and we believe that they will not be materially adversely
impacted in the near future.





Item
3. Quantitative and Qualitative Disclosures about Market Risk





Not
required.





Item
4T. Evaluation of Disclosure Controls and Procedures





Evaluation
Of Disclosure Controls And Procedures





Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, as of the end of the period covered by this
Quarterly Report on Form 10-Q (the “Evaluation Date”). The purpose of this
evaluation is to determine if, as of the Evaluation Date, our disclosure
controls and procedures were operating effectively such that the information,
required to be disclosed in our Securities and Exchange Commission (“SEC”)
reports (i) was recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms, and (ii) was accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.





Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of the Evaluation Date, our disclosure controls and
procedures were operating effectively.





Changes
In Internal Control Over Financial Reporting





The
Company’s management, with the participation of the Chief Executive Officer and
Chief Financial Officer, has evaluated the Company’s internal control over
financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934, as amended, during the fiscal quarter covered by this report, and
they have concluded that there was no change to the Company’s internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.





Limitation
On The Effectiveness Of Controls





The
inherent limitations of the control systems, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives are being met. These inherent limitations include the
realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Control systems can also be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.





PART
II - OTHER INFORMATION


Item
1.   Legal Proceedings





As of
this quarter reported ended September 30, 2010, there is no pending litigation
made against Universal Solar Technology, Inc. In the ordinary conduct of our
business, we are subject to periodic lawsuits, investigations and claims,
including, but not limited to, routine employment matters.





Item
1A.   Risk Factors





There has
been no material change in the Company’s risk factors as previously disclosed in
the Company’s Annual Report on Form 10-K filed with the SEC on March 31,
2010.




12




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





None





Item
3. Defaults on Senior Securities




None.




Item
4. (Removed and Reserved)




None




Item
5. Other Information




None




Item
6. Exhibits




(a)
Exhibits





Exhibit
      No.
            
            Title
      of Document31.1
            
            Certification
      of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended31.2
            
            Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended32.1
            
            Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive
      Officer)32.2
            
            Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial
      Officer)




13




SIGNATURES





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





Universal
      Solar Technology, Inc.Date:
      November 15, 2010
            By:
            /s/
      Wensheng ChenWensheng
      ChenChief
      Executive OfficerBy:
            /s/
      Lijie ZhuLijie
      Zhu
              Chief
      Financial Officer
              (Principal
      Financial and Accounting Officer)




14