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, 2009o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934for
      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
            
            519060(Address
      of principal executive offices)
            
            (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)





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 xNo o




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 oNo o




Indicate
by check mark whether the registrant is a large accelerate filer, an accelerate
filer, a non-accelerated filer, or a smaller reporting company.  See
the definition of “large accelerated filer,” accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      accelerated filer
            o
            Accelerated
      filer
            oNon-accelerated
      filer
            o
            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 oNo x




Indicate
the number of shares outstanding of each of the issuer's classes of common stock
$0.0001 par value per share, as of November 4, 2009 was
22,574,974 shares.







TABLE
OF CONTENTS





PART I - FINANCIAL
      INFORMATIONItem
      1. Financial Statements
                
                1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                
                11Item
      3.Quantitative and Qualitative Disclosures About Market
    Risk
                
                14Item
      4T. Controls and Procedures
                
                14PART
      II - OTHER INFORMATIONItem
      1. Legal Proceedings
                
                15Item
      1A. Risk Factors
                
                15Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                
                15Item
      3. Defaults Upon Senior Securities
                
                15Item
      4. Submission of Matters to a Vote of Security Holders
                
                15Item
      5. Other Information
                
                15Item
      6. Exhibits
                
                15SIGNATURES
                
                16




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. Financial Statements.





UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS








September
      30, 2009
                            
                            
                            December
      31, 2008(Unaudited)
                            
                            
                            (Audited)ASSETSCURRENT
      ASSETS:Cash
                            
                            $
                            1,477,053
                            
                            
                            $
                            259,025Prepaid
      expenses and other current assets
                            
                            
                            14,016
                            
                            
                            
                            26,666TOTAL
      CURRENT ASSETS
                            
                            
                            1,491,069
                            
                            
                            
                            285,691Deposits
      for future deliveries of equipment
                            
                            
                            791,113
                            
                            
                            
                            -Land
      use right, net of accumulated amortizationof $8,809 and $0,
      respectively
                            
                            
                            414,034
                            
                            
                            
                            423,420Property
      and equipment, net of accumulated depreciation of $1,121 and $0,
      respectively
                            
                            
                            739,105
                            
                            
                            
                            -TOTAL
      ASSETS
                            
                            $
                            3,435,321
                            
                            
                            $
                            709,111LIABILITIES
      AND STOCKHOLDERS' DEFICIENCYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                            
                            $
                            68,390
                            
                            
                            $
                            42,450Due
      to related parties-current portion
                            
                            
                            3,632,302
                            
                            
                            
                            749,298TOTAL
      CURRENT LIABILITIES
                            
                            
                            3,700,692
                            
                            
                            
                            791,748Due
      to related parties- non-current portion
                            
                            
                            22,485
                            
                            
                            
                            22,485TOTAL
      LIABILITIES
                            
                            
                            3,723,177
                            
                            
                            
                            814,233STOCKHOLDERS'
      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,22,574,974
      shares issued and outstanding
                            
                            
                            2,257
                            
                            
                            
                            2,257Additional
      paid-in capital
                            
                            
                            493,092
                            
                            
                            
                            416,273Accumulated
      deficit
                            
                            
                            (792,390
                            )
                            
                            
                            (503,904
                            )Accumulated
      other comprehensive income (loss)
                            
                            
                            9,185
                            
                            
                            
                            (19,748
                            )TOTAL
      STOCKHOLDERS' DEFICIENCY
                            
                            
                            (287,856
                            )
                            
                            
                            (105,122
                            )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                            
                            $
                            3,435,321
                            
                            
                            $
                            709,111





See notes
to  consolidated financial statements.


1





UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS


(Unaudited)





Three
      Months
                        
                        
                        Three
      Months
                        
                        
                        Nine
      Months
                        
                        
                        Nine
      Monthsended
                        
                        
                        ended
                        
                        
                        ended
                        
                        
                        endedSeptember
      30,
                          2009
                        
                        
                        September
                          30,
      2008
                        
                        
                        September
                          30,
      2009
                        
                        
                        September
                          30,
      2008SALES
                        
                        $
                        31,609
                        
                        
                        $
                        -
                        
                        
                        $
                        691,660
                        
                        
                        $
                        -COSTS
      AND EXPENSES:Cost
      of goods sold
                        
                        
                        29,989
                        
                        
                        
                        -
                        
                        
                        
                        619,449
                        
                        
                        
                        -Selling,
      general and administrative expenses
                        
                        
                        120,418
                        
                        
                        
                        157,863
                        
                        
                        
                        282,615
                        
                        
                        
                        361,940TOTAL
      COSTS AND EXPENSES
                        
                        
                        150,407
                        
                        
                        
                        157,863
                        
                        
                        
                        902,064
                        
                        
                        
                        361,940LOSS
      FROM OPERATIONS
                        
                        
                        (118,798
                        )
                        
                        
                        (157,863
                        )
                        
                        
                        (210,404
                        )
                        
                        
                        (361,940
                        )Interest
      expense-net
                        
                        
                        (55,869
                        )
                        
                        
                        (7,244
                        )
                        
                        
                        (75,674
                        )
                        
                        
                        (13,244
                        )Gain
      (loss) on foreign currency transactions
                        
                        
                        11
                        
                        
                        
                        -
                        
                        
                        
                        (2,408
                        )
                        
                        
                        -NET
      LOSS
                        
                        
                        (174,656
                        )
                        
                        
                        (165,107
                        )
                        
                        
                        (288,486
                        )
                        
                        
                        (375,184
                        )OTHER
      COMPREHENSIVE INCOME (LOSS):Foreign
      currency translation adjustment
                        
                        
                        45
                        
                        
                        
                        8,221
                        
                        
                        
                        28,934
                        
                        
                        
                        13,923COMPREHENSIVE
      LOSS
                        
                        $
                        (174,611
                        )
                        
                        $
                        (156,886
                        )
                        
                        $
                        (259,552
                        )
                        
                        $
                        (361,261
                        )Loss
      per common share -basic and diluted
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.02
                        )Weighted
      average number of shares outstanding-basic
      and diluted
                        
                        
                        22,574,974
                        
                        
                        
                        20,962,408
                        
                        
                        
                        22,574,974
                        
                        
                        
                        20,659,672





See notes
to consolidated financial statements.


2


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS'  DEFICIENCY


(Unaudited)





COMMON
                    
                    
                    ADDITIONAL
                    
                    
                    
                    
                    
                    OTHERSTOCK
                    
                    
                    PAID-IN
                    
                    
                    ACCUMULATED
                    
                    
                    COMPREHENSIVESHARES
                    
                    
                    AMOUNT
                    
                    
                    CAPITAL
                    
                    
                    DEFICIT
                    
                    
                    INCOME
                    
                    
                    TOTALBALANCE
      - DECEMBER 31, 2008
                    
                    
                    22,574,974
                    
                    
                    $
                    2,257
                    
                    
                    $
                    416,273
                    
                    
                    $
                    (503,904
                    )
                    
                    $
                    (19,748
                    )
                    
                    $
                    (105,122
                    )Imputed
      interest on loans from related parties
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    76,819
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    76,819Foreign
      currency translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    28,933
                    
                    
                    
                    28,933Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (288,486
                    )
                    
                    
                    -
                    
                    
                    
                    (288,486
                    )BALANCE
      - September 30, 2009
                    
                    
                    22,574,974
                    
                    
                    $
                    2,257
                    
                    
                    $
                    493,092
                    
                    
                    $
                    (792,390
                    )
                    
                    $
                    9,185
                    
                    
                    $
                    (287,856
                    )





See notes
to  consolidated financial statements.


3





UNIVERSAL
SOLAR TECHNOLOGY INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Nine
      Months
                        
                        
                        Nine
      MonthsEnded
                        
                        
                        EndedSeptember 30, 2009
                        
                        
                        September 30, 2008OPERATING
      ACTIVITIES:Net
      loss
                        
                        $
                        (288,486
                        )
                        
                        $
                        (375,184
                        )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Imputed
      interest on loans from related parties
                        
                        
                        76,819
                        
                        
                        
                        13,244Stock
      issued for services
                        
                        
                        -
                        
                        
                        
                        9,424Depreciation
      of property and equipment
                        
                        
                        1,121
                        
                        
                        
                        -Amortization
      of land use right
                        
                        
                        8,809
                        
                        
                        
                        -Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
                        
                        
                        12,650
                        
                        
                        
                        (4,998
                        )Accounts
      payable and accrued expenses
                        
                        
                        25,940
                        
                        
                        
                        (11,594
                        )NET
      CASH USED IN OPERATING ACTIVITIES
                        
                        
                        (163,147
                        )
                        
                        
                        (369,108
                        )INVESTING
      ACTIVITIES:Deposits
      for future deliveries of equipment
                        
                        
                        (791,113
                        )
                        
                        
                        -Property
      and equipment additions
                        
                        
                        (740,226
                        )
                        
                        
                        -NET
      CASH USED IN INVESTING ACTIVITIES
                        
                        
                        (1,531,339
                        )
                        
                        
                        -FINANCING
      ACTIVITIES:Sale
      of common stock
                        
                        
                        -
                        
                        
                        
                        3,000Loans
      from related parties
                        
                        
                        2,883,004
                        
                        
                        
                        416,818NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                        
                        
                        2,883,004
                        
                        
                        
                        419,818EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                        
                        
                        29,510
                        
                        
                        
                        13,923INCREASE
      IN CASH
                        
                        
                        1,218,028
                        
                        
                        
                        64,633CASH
      - BEGINNING OF PERIOD
                        
                        
                        259,025
                        
                        
                        
                        91,184CASH
      - END OF PERIOD
                        
                        $
                        1,477,053
                        
                        
                        $
                        155,817Supplemental
      disclosures of cash flow information:Interest
      paid
                        
                        $
                        -
                        
                        
                        $
                        -Income
      taxes paid
                        
                        $
                        -
                        
                        
                        $
                        -





See
notes to consolidated  financial statements.


4





UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)





1. INTERIM FINANCIAL
STATEMENTS





The
unaudited financial statements as of September 30, 2009 and for the three and
nine months ended September 30, 2009 and 2008 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, 2009 and the results of operations and
cash flows for the periods ended September 30, 2009 and 2008. 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 three and nine months ended September 30, 2009 is not necessarily indicative
of the results to be expected for any subsequent quarter or the entire year
ending December 31, 2009.  The balance sheet at December 31, 2008 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, 2008 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.  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.


5


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)





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.




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, 2009, the Company had negative
working capital of $2,209,623 and a stockholders’ deficiency of $287,856.
Further, the Company has incurred net losses of $792,390 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.





New accounting
pronouncements


In
June 2009, FASB established Accounting Standards Codification TM (“ASC”) as
the single source of authoritative accounting principles recognized by the FASB
in the preparation of financial statements in conformity with the GAAP. The
Codification will supersede all then-existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification will become non-authoritative. The Codification is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. We adopted the new guidance for the quarter ended
September 30, 2009, which changed the way we reference accounting standards
in our disclosures. Adoption of the Codification is not expected to have a
material impact on the Company’s results of operations or financial
position.




In
May 2009, FASB issued new guidance establishing general standards of
accounting for disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued, or
subsequent events. An entity should apply the requirements to interim or annual
financial periods ending after June 15, 2009. Adoption of this standard
does not have a material impact on the Company’s results of operations or
financial position.


6


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)





3.
LAND USE RIGHT





On
December 1, 2008, 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.  The cost of RMB 2,886,300 ($422,843 translated at the September
30, 2009 exchange rate) is being amortized using the straight line method over
the 40 year term of the contract.





4.
PROPERTY AND EQUIPMENT





As
September 30, 2009, property and equipment, net, consist of:





Building
      construction in progress
                  
                  $
                  439,330Production
      equipment
                  
                  
                  263,700Office
      equipment
                  
                  
                  6,060Automobile
                  
                  
                  31,136Total
                  
                  
                  740,226Less
      accumulated depreciation
                  
                  
                  1,121Property
      and equipment- net
                  
                  $
                  739,105





5. DUE TO RELATED
PARTIES





Due to
related parties consists of:


September
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008Due
      to Company’s chairman and chief executive  officer, non-interest
      bearing, due on demand  (interest imputed at 5%)
                  
                  $
                  1,635,059
                  
                  
                  $
                  698,836Due
      to Zhuhai Yuemao Laser Facility Engineering Co., Ltd.  (“ Yuemao
      Laser”) , a PRC company controlled by the Company’s chairman and chief
      executive officer, non-interest bearing, due on demand(interest
      imputed at 5%)
                  
                  
                  1,997,243
                  
                  
                  
                  50,462Due
      to Company’s chairman and chief executive officer pursuant to loan
      agreement dated November 2, 2008, interest at 5%, due November 1,
      2013
                  
                  
                  22,485
                  
                  
                  
                  22,485Total
                  
                  
                  3,654,787
                  
                  
                  
                  771,783Current
      portion
                  
                  
                  (3,632,302
                  )
                  
                  
                  (749,298
                  )Non-current
      portion
                  
                  $
                  22,485
                  
                  
                  $
                  22,485


7


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)





6.
RELATED PARTY TRANSACTIONS





In the
nine months ended September 30, 2009, Kuong U purchased solar PV modules from
Yuemao Laser at a total cost of $619,449 and sold the modules to two customers
for total sales of $691,660 ($638,961 to one customer, $52,699 to the other
customer.)




Kuong U
rents its executive office space from the Company’s chairman and chief executive
officer under a four-year contract, from May 1, 2007 to April 30, 2011. In the
first two years, May 1, 2007 to April 30, 2009, monthly rent is HKD 10,000
(approximately $1,290 translated at the September 30, 2009 exchange rate). In
the second two years, May 1, 2009 to April 30, 2011, monthly rent is HKD 12,000
(approximately $1,548 translated at the September 30, 2009 exchange rate). Rent
expense for the nine months ended September 30, 2009 and 2008 was $12,900 and
$11,610, respectively.





7.
MAJOR CUSTOMER





In the
nine months ended September 30, 2009, one customer located in India accounted
for approximately 92% of sales. Under the terms of these sales, the Company is
obligated to replace nonworking modules for a period of one year from the date
of deliveries.





8.
INCOME TAXES





The
Company has not recorded a provision for United States federal income tax for
the period 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, 2009, the Company had approximately $105,000 and $575,000 of net
operating loss carryforward  for income tax purposes in the United
States and China, respectively.





Based on
management's present assessment, the Company has not yet determined it to be
more likely than not that a deferred tax asset attributable to the future
utilization of  the net operating loss carryforward as
of  September 30, 2009 will be realized. Accordingly, the Company has
provided a 100% allowance against the deferred tax asset in the financial
statements at September 30, 2009. The Company will continue to review this
valuation allowance and make adjustments as appropriate.





9.
COMMITMENTS AND CONTINGENCIES





Prototype Product
Development Agreement





On April
29, 2008, Kuong U entered into an agreement with Yuemao Laser whereby Yuemao
Laser is to develop certain prototype solar energy products for Kuong U. Under
the agreement, Kuong U is obligated to pay a royalty fee quarterly  to
Yuemao Laser equal to 1% of Kuong U’s sales from the prototype
products.


8


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)





Property andEquipment
Agreements





As of
September 30, 2009, NUST has contracted to acquire certain undelivered
production equipment costing a total of approximately 18,191,300 RMB ($2,665,025
translated at the September 30, 2009 exchange rate). The agreements provide for
NUST’s payment of certain deposits prior to the delivery of the equipment. As of
September 30, 2009, a total of 5,400,090 RMB ($791,113 translated at the
September 30, 2009 exchange rate) has been paid to the vendors as
deposits.





On May
21, 2009, NUST executed an agreement with a contractor to construct a building
for its planned production facilities. The agreement provides for a total
contract price of 5,300,000 RMB ($776,450 translated as the September 30, 2009
exchange rate). As of September 30, 2009, 1,698,000 RMB ($ 248,757) of the
contract has been paid by NUST.





Vulnerability due to
Operations in PRC





The
Company’s operations may be adversely affected by significant political,
economic and social uncertainties in the PRC.  Although the PRC
government has been pursuing economic reform policies for more than 20 years,
there is no guarantee that the PRC government’s pursuit of economic reforms will
be consistent or effective.





The PRC
has adopted currency and capital transfer regulations.  These
regulations require that the Company comply with complex regulations for the
movement of capital. Because most of the Company’s future revenues will be in
RMB, any inability to obtain the requisite approvals, or any future restrictions
on currency exchanges, will limit the Company’s ability to fund its business
activities outside China or to pay dividends to its shareholders.





The
Company’s assets will be predominantly located inside China.  Under
the laws governing foreign invested enterprises in China, dividend distribution
and liquidation are allowed, but subject to special procedures under the
relevant laws and rules. Any dividend payment will be subject to the decision of
the board of directors and subject to foreign exchange rules governing such
repatriation.  Any liquidation is subject to both the relevant
government agency’s approval and supervision, as well as the foreign exchange
control.





In
addition, the results of business and prospects are subject, to a significant
extent, to the economic, political and legal developments in China.





While
China’s economy has experienced significant growth in the past twenty years,
growth has been irregular, both geographically and among various sectors of the
economy.  The Chinese government has implemented various measures to
encourage economic growth and guide the allocation of resources.  Some
of these measures benefit the overall economy of China, but may also have a
negative effect on the Company.  The Company’s sales and financial
condition may be adversely affected by the government control over capital
investments or changes in tax regulations.


9


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)





Foreign
companies conducting operations in the PRC face significant political, economic
and legal risks.  The Communist regime in the PRC includes a stifling
bureaucracy which may hinder Western investment. Any new government regulations
or utility policies pertaining to the Company’s PV products may result in
significant additional expenses to the Company, Company distributors and end
users and, as a result, could cause a significant reduction in demand for the
Company’s PV products.





10.
SUBSEQUENT EVENTS





The
Company has evaluated subsequent events through  the filing date of
this Form 10-Q and has determined that there were no subsequent events to
recognize or disclose in these financial statements.


10





Information  Regarding
Forward-Looking Statements




The
following discussion contains 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 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
report. Although management believes that the assumptions made and expectations
reflected in the forward-looking statements are reasonable, there is no
assurance that the underlying assumptions will, in fact, prove to be correct or
that actual results will not be different from expectations expressed in this
report.





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.




Overview





Universal
Solar Technology, Inc. was incorporated in the State of Nevada on July 24, 2007.
It operates through its wholly owned subsidiary, Kuong U Science &
Technology (Group) Ltd. (“Kuong U”), a company incorporated in
Macau, Special Administrative Region of the People's Republic of China
(Macau SARC) on May 10, 2007.





We are
focusing on becoming a vertically integrated designer, manufacturer, and
distributor of silicon ingots, wafers and high efficiency solar PV products.
Currently we market high efficiency solar PV modules and sloar lighting systems
while outsourcing the current production of these products to a related third
party. We are developing our own vertically integrated manufacturing center
based in Nanyang which is located in Henan Province in China. The manufacturing
center is being built to allow for rapid integration and scalability across each
production phase. The production departments will consist of silicon ingot
production lines, silicon wafer production lines, PV modules and system
production lines, and solar lighting assembly lines. The production departments
are scheduled to be completed in phases. We expect all of the departments to be
completed and operational by April 2010. As each production area completes
testing and the initial launch of production, additional manufacturing lines,
equipment and staffing will be added over time. We believe this vertically
integrated manufacturing center, when completed, will enable us to compete
aggressively with our competitors while avoiding potential disruptions to
business and operations due to supply issues.





Limited
Operating History; Need For Additional Capital





There is
no historical financial information about us upon which to base an evaluation of
our performance. We cannot guarantee that we will be successful in our business
operations. Our business is subject to risks inherent in the establishment of a
new business enterprise, including limited capital resources and possible cost
overruns due to price and cost increases in services and products.





To become
profitable, we have to sell our products and generate revenue. In addition,
because our new WFOE manufacturing setup in China will require additional
investment, we are seeking both equity and debt financing to provide the capital
required to implement our business plan in China.




We have
no assurance that future financing will be available to us on acceptable terms.
If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations into China. Equity financing could
result in additional dilution to existing shareholders.




RESULTS
OF OPERATIONS





Comparison
of Three Months Ended September 30, 2009 to September 30, 2008





Revenue.We generated a $31,609
sales during the three months ended September 30, 2009.We did not generate any
revenue for the three months ended September 30, 2008. Because our Nanyang
manufacturing facilities have not been completed yet, we have minimized
marketing efforts. We made outsource sales to two customers in the first quarter
2009, but none in the second quarter. In the third quarter of 2009, we made
outsource sales to one of the first quarter’s two customers.


11





Cost of Sales. Our cost
of sales were $29,989 for the quarter ended September 30, 2009 compared to $0
for the quarter ended September 30, 2008.





Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased by
$37,445 or 23.7% to $120,418 for the quarter ended September 30, 2009 from
$157,863 for the same period in 2008. The decrease was mainly due to lower
professional fees in 2009. The higher professional fees in 2008 were associated
with our registration statement on From S-1 filed on May 9, 2008 which was
declared effective on June 30, 2008.





Net Loss. Net loss
increased by $9,549 or 5.8% from $165,107 for the quarter ended September 30,
2008 to $174,656 for the same period in 2009. The increase in net loss is
mainly due to-the increase in imputed interest expenses resulting from higher
loan balances.-





Comparison
of Nine Months Ended September 30, 2009 to September 30, 2008





Revenue. Our revenue for
the nine months ended September 30, 2009 was $691,660 compared to $0 for the
nine months ended September 30, 2008. The increase was due to limited sales of
products manufactured by a related party during the first and the third quarter
in 2009.





Cost of Sales. Our cost
of sales increased from $0 for the nine months ended September 30, 2008 to
$619,449 for the nine months ended September 30, 2009. The increase was mainly
due to expenses associated with the limited sales of products manufactured by a
related party during the first quarter and  the third quarter in
2009.





Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased by
$79,325 or 21.9% from $361,940 for the nine months period ended September 30,
2008 to $282,615. This decrease was mainly due to the decrease of
professional fees discussed above.





Net Loss.  Net loss
decreased by $86,698 or 23.1% from $375,184 for the nine months ended September
30, 2008 as compared to $288,486 for the nine months ended September 30, 2009.
This decrease was mainly due to the decrease of selling, general and
administrative expenses during the nine months ended September 30, 2009 and the
limited revenue generated form the sales of products manufactured by a related
party during the nine months ended September 30, 2009.





LIQUIDITY
AND CAPITAL RESOURCES





As of
September 30, 2009, we had total assets of $3,435,321 and total liabilities of
$3,723,177 and we had cash of $1,477,053.





Net cash
used in operating activities for the nine months ended September 30, 2009 was
$163,147 which is a decrease of $205,961 from net cash used in operating
activities of $369,108 for the same period in 2008.  The reason for
the $205,961 improvement was primarily to the $86,698 reduced net loss and
certain adjustments to reconcile net loss to net cash used.





Net cash
used in investing activities for the nine months ended September 30, 2009 was
$1,531,339, an increase from $0 for the same period in 2008. This increase was
due to deposits for future deliveries of equipment and acquisition of property
and equipment.





Net cash
provided by financing activities for the nine months ended September 30, 2009
was $2,883,004, compared to $419,818 from the same period in 2008. This increase
was due to an increase in loans from related parties.




We are
actively seeking additional external funding, but to date we have not
consummated any financing transactions other than our public offering and
transactions with related parties.





Without
additional funding, the Company will not be able to pursue its business model.
If adequate funds are not available or are not available on acceptable terms
when required, we would be required to significantly curtail our operations and
would not be able to fund the development of the business envisioned by our
business model.  These circumstances could have a material adverse
effect on our business and result in our inability to continue to operate as a
going concern.


12





CRITICAL
ACCOUNTING POLICIES





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.





Certain
amounts included in the 2008 financial statement have been reclassified to
conform to the 2009 financial statement presentation.





Property
and equipment




Property
and equipment are recorded at cost.  Depreciation is provided in
amounts sufficient to amortize the cost of the related assets over their useful
lives using the straight line method for financial reporting
purposes.




Nanyang
UST obtained the right to use a parcel of land for its office and production
facilities.  Pursuant to the contract from the local government of the
PRC, the contract expires in 2048.  This land use right was recorded
at cost and is being amortized over the life of the lease.




Maintenance,
repairs and minor renewals are charged to expense when
incurred.  Replacements and major renewals are
capitalized.





Impairment
of long-lived assets


The
Company accounts for the impairment of long-lived assets in accordance with SFAS
No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.  Long-lived
assets are reviewed for impairment when circumstances indicate the carrying
value of an asset may not be recoverable.  For assets that are to be
held and used, an impairment is recognized when the estimated undiscounted cash
flows associated with the asset or group of assets is less than their carrying
value.  If impairment exists, an adjustment is made to write the asset
down to its fair value, and a loss is recorded as the difference between the
carrying value and fair value.  Fair values are determined based on
quoted market values, discounted cash flows or internal and external appraisals,
as applicable.  Assets to be disposed of are carried at the lower of
carrying value or estimated net realizable value.





Research
and development costs





Research
and development costs are charged to expenses as incurred.





Deferred
income taxes





The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (ASFAS 109") which requires that deferred tax
assets and liabilities be recognized for future tax consequences attributable to
differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.  In addition, SFAS 109
requires recognition of future tax benefits, such as carryforwards, to the
extent that realization of such benefits is more likely than not and that a
valuation allowance be provided when it is more likely than not that some
portion of the deferred tax asset will not be realized.




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.  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.


13





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.




Item
3.  Quantitative and Qualitative Disclosures About Market Risk





Not
required.




Item 4T. Evaluation of Disclosure Controls and
Procedures





a) 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.




(b) 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.


14


PART
II - OTHER INFORMATION


Item
1.    Legal Proceedings.




None.





Item
1A.    Risk Factors.





As of the
date of this filing, there have been no material changes from the risk factors
disclosed in the Company’s Annual Report on Form 10-K filed on April 10,
2009. We operate in a changing environment that involves numerous known and
unknown risks and uncertainties that could materially affect our operations. The
risks, uncertainties and other factors set forth in our Annual Report on
Form 10-K may cause our actual results, performances and achievements to be
materially different from those expressed or implied by our forward-looking
statements. If any of these risks or events occurs, our business, financial
condition or results of operations may be adversely affected.





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 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)


15


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 13, 2009
                By:
                /s/
      Wensheng ChenWensheng
      ChenChief
      Executive OfficerBy:
                /s/
      Ling ChenLing
      Chen
                  Chief
      Financial Officer
                  (Principal
      Financial and Accounting
Officer)


16