UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q


(Mark One)





x         QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934





For the quarterly period ended October 31, 2010





OR





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





For the transition period from ______________to _______________.





Commission File Number 000-53590





SUNOVIA ENERGY TECHNOLOGIES, INC.


(Exact name of small business issuer as specified in its charter)





Nevada
98-0550703(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)





106 Cattlemen Road, Sarasota, Fl 34232


(Address of principal executive offices)





941-751-6800


(Issuer’s telephone number)





(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 the 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 o





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 o
Accelerated filer o
Smaller reporting company xNon-accelerated filer o (Do not check if a smaller reporting company)





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


Yes o   No x





The number of shares of the Registrant’s Common Stock outstanding as of December 20, 2010 was 908,010,135.





Transitional Small Business Disclosure Format (Check one): Yes  o   No x








1





FORM 10-Q


INDEX





PagePART I: FINANCIAL INFORMATION
3ITEM 1. FINANCIAL STATEMENTS
3CONSOLIDATED BALANCE SHEETS
3CONSOLIDATED STATEMENTS OF OPERATIONS
4CONSOLIDATED STATEMENTS OF CASH FLOWS
5NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
18ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
26ITEM 4. CONTROLS AND PROCEDURES
26PART II. OTHER INFORMATION
27ITEM 1.  LEGAL PROCEEDINGS
27ITEM 1A. RISK FACTORS
27ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
27ITEM 3 DEFAULTS UPON SENIOR SECURITIES
28ITEM 4. (REMOVED AND RESERVED)
28ITEM 5.  OTHER INFORMATION
28ITEM 6. EXHIBITS
29SIGNATURES
31








2





PART 1: FINANCIAL STATEMENTS


SUNOVIA ENERGY TECHNOLOGIES, INC.












Sunovia Energy Technologies, Inc.Consolidated Balance SheetsOctober 31,


July 31,2010


2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
1,892,817


$
1,058,872Accounts receivable, net


619,312



222,084Accounts receivable, related party


-



20,110Inventory


783,483



944,758Prepaid expenses


14,858



22,676Total current assets


3,310,470



2,268,500Property and equipment, at cost, net ofaccumulated depreciation of $422,842 and $354,869


244,691



304,676Other assets:Patents and other assets


155,918



155,918$
3,711,079


$
2,729,094LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current liabilities:Accounts payable and accruals

$
1,013,509


$
1,453,223Common stock redemption


650,000



650,000Notes payable


598,326



598,326Convertible debenture derivative liability


-



1,200,000Total current liabilities


2,261,835



3,901,549Long term portion of notes payable


230,642



108,000Stockholders' equity (deficit):Common stock, $0.001 par value,1,500,000,000 shares authorized,908,010,135 and 706,940,353 shares issued and outstanding


908,010



706,940Additional paid-in capital


78,265,281



73,829,943Accumulated (deficit)


(77,920,214
)


(75,782,863
)1,253,077



(1,245,980
)Less: Treasury stock, at cost, 313,400 shares


(34,475
)


(34,475
)1,218,602



(1,280,455
)$
3,711,079


$
2,729,094




See the accompanying notes to the consolidated financial statements.






3






Sunovia Energy Technologies, Inc.Consolidated Statements of OperationsFor the Three Months Ended October 31, 2010 and 2009(Unaudited)2010


2009Sales

$
570,359


$
240,871Cost of sales and services


838,423



286,082Gross profit (loss)


(268,064
)


(45,211
)General and administrative -Research and development


-



2,019,034Selling, general and administrative expenses


1,859,076



1,429,7351,859,076



3,448,769Loss from operations


(2,127,139
)


(3,493,980
)Other Income (expense):Derivative loss


-



1,296,078Interest expense (income), net


10,212



(460
)10,212



1,295,618Loss before income taxes


(2,137,351
)


(4,789,598
)Income taxes


-



-Net loss

$
(2,137,351
)

$
(4,789,598
)Per share information basic and diluted:Loss per share

$
(0.00
)

$
(0.01
)Weighted average shares outstanding


861,793,305



572,571,670




See the accompanying notes to the consolidated financial statements.








4






Sunovia Energy Technologies, Inc.Statements of Cash FlowsFor the Three Months Ended October 31, 2010 and 2009(Unaudited)2010


2009Cash flows from operating activities:Net cash (used in) operating activities

$
(864,927
)


(1,795,244
)Cash flows from investing activities:Acquisition of property and equipment


(7,986
)


-Net cash (used in) investing activities


(7,986
)


-Cash flows from financing activities:Common Shares issued for cash


2,593,088



1,405,250Proceeds from notes payable


122,642



-Proceeds from convertible debentures


-



500,000Net cash provided by financing activities


2,715,730



1,905,250Increase (decrease) in cash and cash equivalents


1,842,817



110,006Cash and cash equivalents, beginning


-



308,495Cash and cash equivalents, ending

$
1,842,817


$
418,501Supplemental cash flow information:Cash paid for interest

$
-


$
-Cash paid for income taxes

$
-


$
-Non cash investing and financing activitiesIssuance of common shares in exchange for convertible debentures

$
1,000,000


$
1,000,000


See the accompanying notes to the consolidated financial statements.
    5






SUNOVIA ENERGY TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 OCTOBER 31, 2010
 
 
 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization, Nature, and Continuance of Operations
 
 Sunovia Energy Technologies, Inc. (“the Company”) is a Nevada corporation engaged in the business of providing energy-efficient and sustainable energy solutions by developing and implementing technology in three main areas:  light emitting diode (LED) lighting, solar energy and infrared. Through its wholly-owned subsidiary, EvoLucia Lighting, Inc., the Company is developing and selling environmentally responsible, energy efficient lighting products that are based on the latest and most efficient light emitting diode (LED) technologies. The Company, through its wholly-owned subsidiary Sunovia Solar, Inc., has also developed technologies in the solar energy arena that improve the efficiency of solar energy production and delivery and have the potential for bringing solar power more quickly to grid parity.  The Company has also developed mercury cadmium telluride infrared cells that increase efficiencies in infrared technology and may provide opportunities for commercial applications of that technology.
  Basis of presentation
 
 The accompanying unaudited condensed consolidated balance sheets include the accounts of the Company and its subsidiary. All material inter-company accounts, transactions and profits have been eliminated.   In the opinion of management, these condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for and as of the periods shown.  The accompanying condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles.  However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for such periods are not necessarily indicative of the results expected for 2011 or for any future period. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010, filed with the Securities and Exchange Commission.
 
 Continuance of Operations
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  For the period ended October 31, 2010, the Company has experienced a loss of $2,137,351. To date the Company has funded operations through capital infusions from investors through the sale of its common stock and certain debt instruments, particularly convertible debentures.  The Company anticipates a need for significant funding from capital investment in order to support its operations and continuing as a going concern. The ability of the Company to continue its operations as a going concern is dependent on continuing to raise sufficient new capital to fund its business and development activities and to fund ongoing losses, if needed, and ultimately on generating profitable operations.
 
 The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
 
 U
 Use of Estimates
 
 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, disclosures of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period.  Actual results could differ from those estimates. The Company’s significant estimates include the valuation of stock based charges, the valuation of derivatives and the valuation of investments.
   6
  
 Share-Based Payments
 
 ASC 718,Stock Compensation requires that all stock-based compensation be recognized as an expense in the financial statements and that such cost be measured at the grant date fair value of the award.
 
 We record the grant date fair value of stock-based compensation awards as an expense over the vesting period of the related stock options.  In order to determine the fair value of the stock options on the date of grant, we use the Black-Scholes-Merton option-pricing model.  Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield.  Although the risk-free interest rates and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected stock-price volatility, forfeiture rate and option life assumptions require a greater level of judgment which make them critical accounting estimates.
 
 We use an expected stock-price volatility assumption that is based on historical volatilities of our common stock and we estimate the forfeiture rate and option life based on historical data related to prior option grants.
 
 Inventory
 
 Inventory consists principally of electronic components used in the assembly of LED lights, power film and batteries. Inventory is stated at the lower of cost or market on a first in first out basis.
 
 U
 Loss Per Share
 
 Loss per share is computed using the basic and diluted calculations on the statement of operations.  Basic loss per share is calculated by dividing net loss available to common share stockholders by the weighted average number of shares of common stock outstanding for the period.  Weighted average number of shares has been adjusted for stock splits and reverse stock splits.  Diluted loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, using the treasury stock method.  The total number of shares not included in the calculation at October 31, 2010 and 2009 based on this methodology was 616,923,486.
 
 Reclassifications
 
 Certain amounts for the year ended July 31, 2009 have been reclassified in the comparative financial statements to be comparable to the presentation for the year ended July 31, 2010.  These reclassifications had no effect on net loss as previously reported.
 
 NOTE B - STOCKHOLDERS' EQUITY
 
 Common Stock
 
 On August 25, 2010, the Debentures issued on July 30, 2010, in the amount of $1,000,000 including the related derivative liability and accrued interest, were settled by conversion into 65,516,127 shares of common stock.
 
 Between August 1 and October 31, 2010 the Company received proceeds of $2,593,000 and issued 129,650,000 shares of common stock pursuant to a private placement at $.02 per share. Of these shares 25,000,000 were issued to an officer.
 
 Between August 1 and October 31, 2010, the Company issued 882,488 shares of common stock pursuant to the exercise of options and received proceeds of $88.
 
 Between August 1 and October 31, 2010, the Company issued 2,870,000 shares of common stock with a fair value of $143,500 as payment of a royalty fee due to an officer.
 
 Between August 1 and October 31, 2010, the Company issued 3,151,167 shares of common stock with a fair value of $136,922 for services.
 
 On October 31, 2010, the Company had an aggregate of 908,010,135 common shares outstanding. In addition, the Company had 614,483,186 stock options outstanding. The total of the outstanding shares and the outstanding options exceeded the Company’s authorized capital of 1,500,000,000 common shares.
    7
 
 
 NOTE C - INVESTMENT IN EPIR TECHNOLOGIES, INC.
 
 The Company has entered into a research, development and supply agreement (“the Agreement”) with EPIR Technologies, Inc. (EPIR) for an exclusive marketing, supply and development venture for advanced solar photovoltaic (PV) and encapsulate technologies to develop advanced light detection devices and II-VI materials.  The II-VI materials are uniquely combined to form the semiconductors that are used in solar PV technologies.  The Agreement also provides for the commercialization of advanced light detection technologies that form a foundation for accelerating advanced PV development that is aimed at reducing the overall cost of energy from a solar PV System.  The Company and EPIR are developing a solar PV encapsulate that eliminates the need for glass encapsulates that are prevalent in today’s market.
 
 Consideration for the Agreement included exchanging 37,803,852 shares of the Company’s common stock for 202,200 (10%) shares of EPIR common stock.  The net profits resulting from the sale of any and all EPIR products, EPIR Independent Products, and related products of the Company, directly or indirectly, to any and all third parties will be split equally between EPIR and the Company.
 
 The investment in EPIR is accounted for under the cost method of accounting because the Company does not exercise significant influence over EPIR’s operations. Under the cost method of accounting, investments are carried at cost and are only adjusted for other-than-temporary declines in fair value and distributions of earnings.
 
 The Company regularly evaluates the recoverability of its investment in EPIR based on the performance and the financial position of EPIR, as well as other evidence of market value.  Such evaluation includes but is not limited to, reviewing EPIR’s financial position, recent financings, projected and historical financial performance, cash flow forecasts and financing needs.
 
 In April, 2009, the Company and EPIR entered into an Amendment to the research, development, and supply agreement. As of March 31, 2010, the Company had made all scheduled payments to EPIR pursuant to the terms and condition of the Agreement in the aggregate amount of approximately $11,700,000 in cash and common stock (see note E).  All payments to EPIR are to be used to cover operating expenses of EPIR towards the research, development and creation of the mass manufacturing processes for solar technologies. The Amendment (i) accelerated the Company’s payment of the June 1, 2009 scheduled payment and (ii) required the Company to issue to EPIR warrants for the purchase of 25,000,000 shares of the Company’s stock at an exercise price of $0.10 per share.(see Note O). The Amendment also permitted the Company to satisfy certain of its payment obligations through the issuances of restricted shares of the Company’s common stock,
 
 Immediately upon the date which EPIR received the accelerated payment, the Company, in its sole discretion, was obligated to, without limitation and subject to the applicability of all of the foregoing provisions of the Agreement, satisfy any or all of the August 1, 2009, October 1, 2009, December 1, 2009 and March 1, 2010 either by (1) payment in cash or (2) the issuance of such number of restricted shares of common stock of the Company equal to the quotient of One Million Dollars ($1,000,000) divided by the Conversion Price (as defined below).  For purposes of the EPIR Amendment, the “Conversion Price” shall be an amount equal to the seventy-five percent (75%) of the average closing price of the Company’s common stock as quoted on the Over-the-Counter Bulletin Board for the twenty (20) trading days prior to the date a scheduled payment is due under the EPIR Agreement.
 
 Payments as shown on the following schedule through March 1, 2010 have been made by the Company in either cash or common stock.
   8
  
 The Agreement calls for the Company to make to EPIR the non-refundable payments set forth below:
 
 Payment Amount

Payment to be received by$
1,700,000

November 30, 20071,000,000

February 1, 20081,000,000

April 1, 20081,000,000

October 1, 20081,000,000

December 1, 20081,000,000

March 1, 20091,000,000

June 1, 20091,000,000

August 1, 20091,000,000

October 1, 20091,000,000

December 1, 20091,000,000

March 1, 20101,000,000

June 1, 20101,000,000

August 1, 20101,000,000

October 1, 20101,000,000

December 1, 2010500,000

April 1, 2011500,000

October 1, 2011500,000

April 1, 2012500,000

October 1, 2012500,000

April 1, 2013500,000

October 1, 2013500,000

April 1, 2014500,000

October 1, 2014500,000

April 1, 2015500,000

October 1, 2015500,000

April 1, 2016500,000

October 1, 2016500,000

April 1, 2017500,000

October 1, 2017500,000

March 1, 2017500,000

October 1, 2017$
23,700,000
 
 
 On June 30, 2008, The Company issued 8,990,000 shares, valued at $10,338,500 or $1.15 per share to employees of EPIR Technologies, Inc. for research. The Company’s Chief Executive Officer and President agreed to cancel 4,495,000 shares each of their outstanding common stock to offset the dilution to the Company’s common stock shares. The Company’s President cancelled 4,495,000 shares during the year ended July 31, 2009.
 
 On April 17, 2009, the Company received 313,410 shares of the Company’s common stock as income from EPIR. The value of this transaction totaled $34,475.
 
 During August 2009 the Company issued 19,900,498 shares of common stock to EPIR in payment of the $1,000,000 research and development fee which was due on August 1, 2009.
 
 During October 2009 the Company issued 20,000,000 shares of common stock to EPIR in payment of the $1,000,000 research and development fee which was due on October 1, 2009.
 
 During March 2010 the Company issued 9,700,000 shares of common stock to affiliates of EPIR in payment of the $1,000,000 research and development fee which was due on March 1, 2010.
 
 The Company ceased making payments to EPIR effective with the June 1, 2010 payment (see Note E. and Part II, Item 1. "Legal Proceedings") and recorded an impairment loss of $3,680,385 related to its investment at July 31, 2010.
   9
  
 NOTE D – SEGMENT INFORMATION
 
 The Company is organized into operating segments based on product groupings. These operating segments have been aggregated into two reportable business segments: Solar Substrate and Lighting Product. The reportable segments were determined in accordance with the way that management of the Company develops and executes the Company’s operations. The accounting policies of the business segments are the same as the policies described in Note A.
 
 In accordance with SFAS No. 131, for purposes of business segment performance measurement, the Company does not allocate to the business segments items that are of a nonoperating nature or corporate organizational and functional expenses of a governance nature. Corporate expenses consist of corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs.
 
 Assets of the Solar segment consist of capitalized patent costs. Assets of the Lighting Product segment consist principally of cash, receivables and inventory. All other assets including prepaid expenses, deposits, and fixed assets are allocated to Corporate and Other.
 
 
 Consolidated Operations by Business SegmentFor the three months ended October 31, 2010Solar


Lighting

Product


Corporate

and OtherNet sales

$
-


$
570,359


$
-Operating loss

$
-


$
(983,576)


$
(1,143,563)Interest and dividends

$
-


$
-


$
10,212Depreciation and amortization

$
-


$
8,663


$
29,665Assets

$
100,000


$
1,729,177


$
1,881,902Capital Expenditures

$
-


$
7,986


$
-
 
 Consolidated Operations by Business SegmentFor the three months ended October 31, 2009Solar


Lighting

Product


Corporate

and OtherNet sales

$
-


$
240,871


$
-Operating loss

$
(2,019,033
)

$
(1,377,384
)

$
(97,563
)Interest and dividends

$
-


$
-


$
460Convertible debenture derivative loss

$
-


$
-


$
(1,296,078
)Depreciation and amortization

$
-


$
-


$
(10,446
)Assets

$
3,780,385


$
569,507


$
484,884
 
 Of the reported sales in 2010 and 2009 approximately $556,386 and $240,017 were made domestically and approximately $13,973 and $854 were made internationally.
 
 
 
 
 10
 
 
 NOTE E – COMMITMENTS, CONCENTRATIONS AND CONTINGENCIES
 
 Litigation
  In July 2010, EPIR notified the Company that EPIR had terminated the RDS Agreement because of the Company's failure to pay EPIR $1 million that EPIR claims was due June 1, 2010, allegedly in violation of the RDS Agreement. The Company denied to EPIR that EPIR was legally entitled to terminate the RDS Agreement, and asserted that EPIR's own breaches of the RDS Agreement preceded the date when payment of the $1 million specified in the RDS Agreement would otherwise be due, thereby entitling Company to suspend its performance of the RDS Agreement until EPIR complied with the RDS Agreement. During that period EPIR also demanded that the Company allow removal of a restrictive legend from the certificates representing approximately 9,767,838 shares of Company stock which demand the Company, through other counsel, declined unless EPIR furnished certain legal opinions.
  EPIR sued the Company in the United States District Court for the Northern District of Illinois in a case designated Case No. 10-4949 on the docket of said court and captioned EPIR Technologies, Inc., Plaintiff v. Sunovia Energy Technologies, Inc., Defendant and Counterclaim Plaintiff v. EPIR Technologies, Inc., Sivananthan Laboratories, Inc. and Sivalingam Sivananthan, Counterclaim Defendants (the "Case").
  EPIR filed its Complaint in the case on August 6, 2010, demanding, among other things, damages allegedly resulting from the Company's failure to remove restrictive legends from certificates representing 9,767,838 shares of Company stock, as well as damages from the Company of $1 million for the Company's alleged breach of the RDS Agreement plus interest, attorneys' fees and costs of suit. On August 17, 2010, the Company filed its Answer, Affirmative Defenses, and Counterclaims. The Company's Answer and Affirmative Defenses denied that the Company has breached the RDS Agreement and asserts affirmative defenses to and setoffs against EPIR's claim. The Company's Counterclaims seek damages from, and other relief against EPIR, Sivananthan Labs and Dr. Sivananthan.
  The following is a summary of the Case:
  EPIR and the Company's predecessor-in-interest entered into the RDS Agreement in November 2007, which was subsequently amended by EPIR and the Company in January 2008 and April 2009. Pursuant to the terms of the RDS Agreement, EPIR and the Company are to cooperate in the development of new technologies (the "New Technologies") identified by a separate board comprised of representatives from both companies. EPIR is to use commercially reasonable efforts to conduct, and the Company will fund, the research and development of such New Technologies. From August 2007 until his resignation in February 2010, Dr. Sivananthan also served as an advisor on the Company's Scientific Advisory Board pursuant to an Agreement for a Member of the Board of Scientific Advisors dated August 27, 2007 (the "Scientific Advisory Board Agreement").
  In September 2009, EPIR requested that the Company, as shareholder of EPIR, execute a written consent to the spin-off of Sivananthan Labs from EPIR (the "Spin-Off"). The Spin-Off was affected so that EPIR could transfer its research equipment to Sivananthan Labs, which was to conduct certain research and development activities that EPIR previously conducted. The Company refused to execute the consent.
 
 In late 2009 and early 2010, a dispute arose between the Company and EPIR in which each claimed that the other had breached the RDS Agreement. The Company alleged that EPIR failed to perform under the RDS Agreement by, among other things, failing to deliver certain deliverables under the RDS Agreement, refusing to provide proper documentation of costs associated with EPIR products sold by the Company and which costs were to be reimbursed to EPIR, and refusing to provide financial information necessary to determine the propriety of EPIR's use of the Company's payments to EPIR.
  On May 14, 2010, EPIR presented certificates for approximately 9,767,838 shares of Company stock to the Company's transfer agent and requested that the agent remove the restrictive legends on such shares. The Company directed its transfer agent to refuse to remove the restrictive legends, and requested a legal opinion from EPIR's counsel that such removal would not violate any federal or state securities laws. On June 1, 2010, the Company notified EPIR that it would not make the June 1st scheduled payment under the RDS Agreement, due to EPIR's breach of the Agreement. EPIR claimed this was a material breach of the RDS Agreement.
  On July 20, 2010, EPIR purported to terminate the RDS Agreement. On August 6, 2010, EPIR filed a lawsuit against the Company in the U.S. District Court, Northern District of Illinois, ("EPIR's Complaint") alleging: (1) breach of the RDS Agreement ("EPIR's Count I") and (2) violations of Nevada's U.C.C., Nev. Rev. Stat. § 104.8401 ("EPIR's Count II").
  EPIR's Count I alleges that the Company made public statements without EPIR's consent in violation of the RDS Agreement. EPIR's Count I further alleges that the RDS Agreement was breached when the Company (i) failed to make a payment to EPIR in the amount of $156,750.00 following the Company's sale of certain EPIR products to a third party, and (ii) failed to make a scheduled payment to EPIR in the amount of $1 million on or about June 1, 2010.
  EPIR's Count II alleges that the Company violated Nevada law applicable to certificates representing securities when the Company failed to remove restrictive legends from EPIR-owned shares of Company stock that had been issued more than six month prior to EPIR's request for removal.
   11
   EPIR's Complaint seeks damages in an amount not specified for the alleged breach of the RDS Agreement and failure to remove the restrictive legend, with interest, a Court order requiring the Company to direct its transfer agent to remove the restrictive legend on the shares held by EPIR, payment of EPIR's attorneys' fees and costs for the litigation, and any other relief the Court deems just.
  The Company filed an Answer, Affirmative Defenses, as well as Counterclaims against EPIR, Dr. Sivananthan and Sivananthan Labs, on August 17, 2010. The Answer denies EPIR's material allegations, and the Company's Counterclaim alleges twelve counts against EPIR, Dr. Sivananthan and or Sivananthan Labs.
  Counts I and II of the Counterclaim are claims against EPIR for breach of the RDS Agreement, alleging EPIR breached the agreement when it filed patent applications for intellectual property relating to the New Technology and jointly owned by the parties without naming the Company as an inventor or assignee, and failed to inform the Company of such intellectual property in violation of the RDS Agreement. The applications referred to in the Counterclaim are Patent Application Nos. 12/261,827 and 12/331,892. Counts IV and V of the Counterclaim are claims against EPIR and Dr. Sivananthan for fraud, alleging that they misrepresented that they would not file patent applications for the intellectual property covered under Patent Application Nos. 12/261,827 and 12/331,892, respectively.
  Count III of the Counterclaim is a claim against EPIR for breach of the RDS Agreement, alleging EPIR breached the agreement by, among other things, failing to report the existence of joint intellectual property to the Company, failing to make commercially reasonable efforts to conduct the research and development activities it was supposed to conduct, and refusing to perform or otherwise rendering itself unable to perform under the RDS Agreement in connection with the Spin-Off.
  Count VI of the Counterclaim is a claim against Sivananthan Labs for tortuous interference with a business relationship, which alleges that Sivananthan Labs interfered with the Company's agreement inducing EPIR to transfer its research and development business and equipment to Sivananthan Labs, an entity separate from EPIR for the purpose of denying the Company the benefits of the relationship.
  Count VII of the Counterclaim is a claim against Dr. Sivananthan and Sivananthan Labs for constructive trust, alleging each of them are in possession of shares of Company stock which were acquired by EPIR through its fraudulent acts, breaches of fiduciary duty, and other coercive and wrongful acts directed at the Company, and such shares should be held in a constructive trust.Count VIII of the Counterclaim is a claim against EPIR for declaratory judgment, and alleges that a controversy exists between the parties regarding whether the Company has an exclusive right to purchase any products from EPIR for resale, whether EPIR has breached the RDS Agreement, whether further scheduled payments by the Company are due to EPIR given its breach until EPIR resumes performance, and whether EPIR has validly terminated the RDS Agreement.
  
 Counts IX and X of the Counterclaim are claims against EPIR and Sivananthan Labs, respectively, for violations of the Illinois Business Corporations Act, 805 ILCS § 5/7.75. The claims allege that the Company, as a shareholder of each of EPIR and Sivananthan Labs, gave each of those parties a written demand for inspection of corporate books and records and each failed to make its records available for such an inspection in violation of the Act.
 
 Count XI of the Counterclaim is a claim against Dr. Sivananthan for Violation of the Illinois Business Corporations Act, 805 ILCS 5/12.56, alleging that Dr. Sivananthan acted in a manner that is oppressive with respect to the Company in that he, as director, caused EPIR to intentionally dilute the Company's shares of EPIR stock for his own benefit, and caused EPIR's assets to be misapplied and wasted in violation of the Act.
  Count XII of the Counterclaim is a claim against Dr. Sivananthan, for breach of the fiduciary duty he has under the Scientific Advisory Board Agreement by acting in conflict with the Company's interests.
   12
   The Company's Counterclaims seek, among other relief, the following:
  An injunction forbidding EPIR from transferring any of its right, title or interest in or under Patent Application Nos. 12/261,827 and 12/331,892, any foreign counterpart patent application, or any continuation, continuation in part, divisional reissue or other related applications or patents that may issue thereon, or licensing or directly or indirectly assisting or participating in the practice of any of the inventions claimed in any thereof, except in accordance with the provisions of the RDS Agreement, and (2) licensing or directly or indirectly assisting or participating in the practice of any of the inventions claimed in any thereof, except in accordance with the provisions of the RDS Agreement, subject, with respect to Patent Application No. 12/331,892, to any valid claims affecting rights under any license to the United States federal government, except in accordance with the provisions of the RDS Agreement;
 
 An order requiring EPIR to assign to the Company a 50% ownership of any of EPIR's right, title and interest in or under Patent Application Nos. 12/261,827 and 12/331,892, any foreign counterpart patent application, or any continuation, continuation in part, divisional reissue or other related applications or patents that may issue thereon; provided any assignment with respect to Patent Application No. 12/331,892 is subject to any valid claims affecting rights under any license to the United States federal government, except in accordance with the provisions of the RDS Agreement;
 
 An injunction forbidding EPIR from (1) transferring any of EPIR's right, title or interest in or under joint intellectual property as defined in the RDS Agreement, (2) licensing or directly or indirectly assisting or participating in the practice of such joint intellectual property, except in accordance with the provisions of the RDS Agreement;
 
 An order requiring EPIR to return to the Company shares of Company stock issued to or on instruction of EPIR in satisfaction of scheduled payments under the RDS Agreement;
  An order requiring Dr. Sivananthan to return to the Company shares of Company stock issued to him;
  An order requiring Sivananthan Labs to return to the Company shares of Company stock received from it in connection with the Spin-Off;
  An order requiring that all shares of stock of Company possessed by Sivananthan Labs and Dr. Sivananthan that were wrongfully obtained by EPIR and/or Dr. Sivananthan be held in constructive trust for the benefit of the Company;
  An order declaring that EPIR is required to sell its products exclusively to the Company;
  An order declaring that EPIR has breached the RDS Agreement and therefore the Company is not obligated to make further scheduled payments;
  An order declaring that EPIR has not validly terminated the RDS Agreement;
  An order compelling EPIR to allow the Company's examination of books and records requested in its letter that EPIR refused to allow the Company to inspect or claimed not to possess;
 
  An order compelling Sivananthan Labs to allow the Company's examination of books and records requested in its letter that Sivananthan Labs refused to allow the Company to inspect or claimed not to possess;
   13
   Damages not less than $12 million from EPIR, or restitution;
  Damages not less than $12 million from Dr. Sivananthan;
  Damages of more than $75,000 from Dr. Sivananthan, or restitution; Removal of Dr. Sivananthan as a director of EPIR;
  Punitive damages; and
  The Company's reasonable attorneys' fees and costs.
  On October 12, 2010, EPIR and Dr. Sivananthan jointly filed an Answer and Affirmative Defenses to the Company's Counterclaim, and filed a Motion to Dismiss Counts V and VI of the Counterclaim. The Answer denies the Company's material allegations and asserts various affirmative defenses. The Motion to Dismiss alleges that the Company fails to state a claim for fraud against EPIR and Dr. Sivananthan.
  On October 22, 2010, Sivananthan Labs filed a Motion to Dismiss Counts VI, VII and X of the Counterclaim, alleging the Company fails to state a claim for tortious interference with a business relationship, constructive trust and violation of the Illinois Business Corporations Act. As of even date herewith, the Court has not set a deadline for the Company's response to Sivananthan Lab's Motion to Dismiss.
  All pleadings and other documents filed in the case are available to the public for download at a charge of $0.08 per page from the Court's web page at http://www.ilnd.uscourts.gov upon registration online at http://pacer.psc.uscourts.gov. The summary information relating to the claims asserted and allegations made in the case that we provide in this letter is qualified in its entirety by the contents of such pleadings and other files, to which any reader of this letter should refer.
 
 At this time, the Company's management intends to vigorously defend against EPIR's Complaint, and to vigorously pursue the Company's Counterclaims. It is too early in the proceeding to determine the extent, if any, of our possible exposure in the lawsuit.  As such, no effect has been given herein to any loss that may result from the resolution of this matter in the accompanying consolidated financial statements.
 
 As discussed above the Company was unable this year to obtain financial and other data needed to evaluate its investment in EPIR Technologies, Inc. in prior years, EPIR provided timely copies of its financial audits and other information in accordance with our agreement with EPIR. However, since we are unable to obtain the information and also face the uncertainties associated with a lawsuit, management believes that a write-down of its investment in EPIR is appropriate.
 
 Commitments
 
 On August 30, 2010, the Board of Directors approved the appointment of Arthur Buckland as Chief Executive Officer and director of the Company effective September 7, 2010.
 
 As per the terms of the Employment Agreement by and between the Company and Mr. Buckland that the parties executed on August 27, 2010 and is effective September 7, 2010, Mr. Buckland’s term of employment with the Company will be at will.  Either Mr. Buckland or the Company may terminate the employment relationship at any time without notice or cause.  In consideration for Mr. Buckland’s services as CEO and director, the Company shall compensate Mr. Buckland an annual base salary of $300,000.  Mr. Buckland’s Base Salary will be subject to modification during the employment in accordance with the Company’s practices, policies, and procedures but will not be reduced without Mr. Buckland’s mutual agreement.
    14
 
 In addition, Mr. Buckland will be eligible to earn (A) an annual target bonus of up to fifty percent (50%) of his Base Salary measured as of the end of the preceding fiscal year, payable in cash when other Company executives are paid their bonuses, and (B) a stock bonus up to an additional two percent (2%) of the Company’s fully-diluted issued and outstanding.  The calculation of the number of shares issued and outstanding will be based on the actual outstanding shares on a fully diluted basis and will not include the option held by Craca LLC.  Bonus plan objectives shall be determined by the Board and Mr. Buckland by December 7, 2010 and then established annual thereafter.  Any bonus for fiscal 2010 will be prorated for the partial year.  The Company reserves the right to recognize and reward special contributions Mr. Buckland may make to the Company.  The Company may, from time to time and at any time, pay, or cause to be paid, to Mr. Buckland such bonus compensation, if any, as the Board may, in its sole and absolute discretion, determine to be appropriate.
 
 Mr. Buckland shall also have the option to purchase seventy-two million (72,000,000) shares of the Company’s stock.  The exercise price for such option will be equal to the fair market value of the underlying common stock on the date of the grant, with fair market value to be determined with reference to the closing stock price on the OTC-BB on the grant date, or if the common stock is no longer quoted on the OTC-BB, then the fair market value shall be fixed by the Board in accordance with a valuation conducted in compliance with Section 409A of the Internal Revenue Code of 1986, as amended.  Mr. Buckland’s options shall be subject to Company’s standard four (4) year vesting provisions:  twenty-five percent (25%) to vest after the first twelve (12) months of continuous service with the Company, with monthly ratable vesting thereafter for the remaining option shares.
 
 Concentrations
 
 During the fiscal year ended October 31, 2010, sales to a single customer aggregated $311,803, which represented  more than 10% of the Company’s revenue for the quarter. At October 31, 2010, approximately 48% of net accounts receivable is due from this customer.
  NOTE F – STOCK OPTIONS
  On May 1, 2008, the Company adopted the 2008 Incentive Stock Plan (“the plan”) designed to retain directors, employees, executives and consultants and reward them for making major contributions to the success of the Company. The Plan was approved by the Company’s shareholders in November, 2010. The following is a summary of the Plan and does not purport to be a complete description of all of its provisions.
  The Company's Plan is administered by the Board of Directors. The Plan did not have any individual caps other than the limitation of granting incentive stock options to employees, the exercise of more than $100,000 per year in fair market value of stock per year. The Plan permits the grant of restricted stock and nonstatutory options to participants where appropriate. The maximum number of shares issuable under the Plan is 30,000,000. The Plan shall terminate ten years from the date it was adopted. The Board of Directors may, as permitted by law, modify the terms of any grants under the agreement, and also amend, suspend, or extend the plan itself.
 
 During the three months ended October 31, 2010, an aggregate of $557,200 was charged to operations related to options granted during prior periods. On October 31, 2009 there was an aggregate of $3,327,146 of unrecognized charges related to stock options which vest in future periods.
 
    15
 
 A summary of stock options is as follows:
  July 31, 2010Outstanding




Weighted-AverageWeighted-Average


Aggregate

RemainingShares


Exercise Price


Intrinsic Value

Contractual LifeOptions outstanding atbeginning of year


545,805,974


$
0.104Options granted


72,000,000



0.050Options cancelled/exercised


(3,222,788
)


0.001Outstanding at October 31, 2010


614,483,186


$
0.100


$
0.00

9.3 yearsExercisable at October 31, 2010


614,483,186


$
0.100


$
0.00

9.3 years
 
  Aggregate intrinsic value in the tables above represents the total pre-tax intrinsic value (difference between the Company’s closing stock price on July 31, 2010 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the option holders exercised their options on July 31, 2010. This amount changes based on the fair market value of the Company’s stock.
 
 NOTE G – NOTES PAYABLE AND CONVERTIBLE DEBENTURES
 
 Notes Payable
 
 From August 1, 2010 through October 31, 2010, the Company borrowed an aggregate of $122,642 from an individual. The borrowings are evidenced by a note which bears interest at 10% per annum and are due 24 months from the date of issuance.
 
 The balance of notes payable is due as follows: Year ended July 31, 2011: $598,326 – Year ended July 31, 2012: $230,642





16











Introductory Note





Caution Concerning Forward-Looking Statements





This Report and our other communications and statements may contain “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 including statements about our beliefs, plans, objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements, including when used in the negative. All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Forward-looking statements include, but are not limited to, statements about:





·
our expectations regarding our expenses and revenue;·
our anticipated cash needs and our estimates regarding our capital requirements and our needs for additional financing;


·
plans for future products, for enhancements of existing products and for development of new technologies;·
our anticipated growth strategies;


·
existing and new customer relationships;·
our technology strengths;


·
our intellectual property, third-party intellectual property and claims related to infringement thereof;·
anticipated trends and challenges in our business and the markets in which we operate; and


·
sources of new revenue, if any.








Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that the expectations reflected in these forward-looking statements will prove to be correct. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Current shareholders and prospective investors are cautioned that any forward-looking statements are not guarantees of future performance. Such forward-looking statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results for future periods could differ materially from those discussed in this report, depending on a variety of important factors, among which are our ability to implement our business strategy, our ability to compete with major established companies, the acceptance of our products in our target markets, the outcome of litigation, our ability to attract and retain qualified personnel, our ability to obtain financing, our ability to continue as a going concern, and other risks described from time to time in our filings with the Securities and Exchange Commission. Forward-looking statements contained in this report speak only as of the date of this report. Future events and actual results could differ materially from the forward-looking statements. You should read this report completely and with the understanding that actual future results may be materially different from what management expects. We will not update forward-looking statements even though its situation may change in the future.








17





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





The following discussion and analysis summarizes the significant factors affecting: (i) our results of operations for the three months ended October 31, 2010; and (ii) financial liquidity and capital resources. This discussion and analysis should be read in conjunction with our financial statements and notes included in this Form 10-Q.





MANAGEMENT’S DISCUSSION AND ANALYSIS





To familiarize themselves with our operations, readers are encouraged to review our securities filings on the SEC’s Edgar database, including the Annual Report on Form 10-K for the year ended July 31, 2010. This quarterly report provides an update of that information.





Results of Operations





The following table sets forth the percentage relationship to total revenues of principal items contained in the statement of operations of the consolidated financial statements included herewith for the quarters ended October 31, 2010 and October 31, 2009. It should be noted that percentages discussed throughout this analysis are stated on an approximate basis.





2010


2009Amount


AmountSales

$
570,359


$
240,871Cost of Sales

$
838,422


$
286,082Gross Profit

$
(268,064
)

$
(45,211
)Research and Development Expenses

$
-


$
2,019,034Selling, General & Administrative Expenses

$
1,859,076


$
1,429,735Operating Loss

$
(2,127,139
)

$
(3,493,980
)Convertible Debenture Derivative Loss

$
-


$
(1,296,078
)Net Loss

$
(2,137,351
)

$
(4,789,598
)








Two major factors comprised the difference between the quarter ending October 31, 2010 and the quarter ending October 31, 2009. The first was that for the quarter ending October 31, 2010, there was no research and development cost, and the second was that for the quarter ending October 31, 2010, there was no derivative loss. Each of these is discussed below in further detail.





Revenues





Revenues for the fiscal quarter ended October 31, 2010 were $570,359, which represented an increase of approximately 137% from the quarter ended October 31, 2009 sales of $240,871. All of the Company’s sales originated from its LED lighting division, and all of the increase in revenue was a result of sales of LED lighting fixtures.





A number of initiatives were begun in 2010 or continued from the prior year that contributed to the increases in sales for the quarter, in particular:






18







1. The Company developed relationships with energy service contractors, an emerging business model of companies that sell expertise in energy savings over a life cycle. The Company’s LED lighting fixtures are designed to provide energy savings over a life cycle, making this an attractive area for future growth. During the quarter ended October 31, 2010, the Company generated approximately $320,000 in sales from these relationships. This sector only contributed $12,000 to revenues for the quarter ended October 31, 2009. Our largest job in this area and for the quarter ended October 31, 2010 was the VA Hospital in West Palm Beach, FL, where we replaced over 500 metal halide lights using 200-300W in its parking garage with 60 and 90-watt EvoLucia® LED. This project earned the Company approximately $312,000, which represented 55% of the total revenues for the quarter. The new lights use less than half the energy of the lights  they replaced , and will save the hospital thousands of dollars per year in energy and maintenance costs while providing more uniform light on the ground and increased visibility and safety.  This was Sunovia’s second major government order under their General Services Administration (GSA) contract, which was awarded earlier this year.




2. The Company continued its relationship with Hubbell Lighting, a large OEM, through sales of light engines. Cost of sales, in this case, were favorable in 2010 as the significant engineering expense was incurred prior periods. Sales from this relationship were $25,529, or approximately 4% of total sales for the fiscal quarter ended October 31, 2010, compared to $134,198 (55%) of sales for the fiscal quarter ended October 31, 2009. The decline in sales from 2010 was due to the loss of a large customer by Hubbell. Continued success in this area could result from growth with the existing customer and establishing similar relationships with other DEMs. The Company doubled sales to other OEMs from $8,000 for the fiscal quarter ended October 31, 2009 to $16,000 for the fiscal quarter ended October 31, 2010, and is considering expansion in this area as one of its goals in the upcoming year.





3. The Company actively bids on lighting projects for municipalities, a significant market  for our LED lighting products. In the quarter ended October 31, 2010, projects for municipalities resulted in sales of approximately $150,000, which represented 26% of total sales, as compared to $35,000 (15%) for the quarter ended October 31, 2009. This segment did not generate profit for the Company in 2010, due largely to highly competitive pricing and specialized requirements that increase our costs of sale. Major customers for the quarter ended October 31, 2010 were the city of Corunna, Michigan which has retrofitted a number of downtown 175W metal halide streetlights with 48W EvoLucia LEDs, a project that earned the company $63,000 of the sales in this segment; Manassas, Virginia (with revenue of $46,000 for the quarter ended October 31, 2010 with none in the quarter ended October 31, 2009); and Fairview, Texas, that had approximately $27,000 of sales for the quarter ended October 31, 2010, and $23,000 of sales for the quarter ended October 31, 2009.





In the most successful of these installations, Corona, Michigan the city installed the EvoLucia PTR Retrofit Kit, a “plug-and-play” LED retrofit product that allows for simple, one-for-one direct replacement using existing poles. The Department of Public Works removed the existing globes, replaced the HID lamps with the EvoLucia LED kits, and replaced the globes. Corunna’s downtown LED retrofit project was made possible by two grants from the Michigan Department of Energy, Labor and Economic Growth (DELEG) totaling $100,000.  The fact that they were able to use their existing poles meant that they could stretch their grant money further and retrofit twice the number of lights they originally thought they could.





Gross Profit





The Company had a gross loss of 47% for the quarter ended October 31, 2010, as compared to a gross profit of 19% for the quarter ended October 31, 2009.  A number of factors contributed to this circumstance in both years, particularly:





·
The additional costs associated with making technological upgrades to existing products negatively affected profitability in 2010. We are striving to improve profitability by  standardizing our product line. However,  in order to increase sales overall, during the quarter ended  October 31, 2010, we accepted work that required additional engineering beyond our existing product line.





·
Several of our distribution channels represent market sectors in which sales are driven almost entirely by low price and immediate cost savings realized. Our products provide additional functionality not available in other products but they are consequently more expensive than other lighting products and therefore do not compare favorably in market sectors that are driven entirely or substantially by cost.





·
In order to more effectively negotiate prices with suppliers, the Company needs higher sales volumes than it is currently experiencing.





Expenses





Overall expenses for the quarter ended October 31, 2010 were $1,859,076, or a reduction of 54% or $1,589,693 as compared to $3,448,769 the quarter ended October 31, 2009. The largest component of this decrease was the elimination of the expense for research and development, which had been $2,019,034 for the quarter ended October 31, 2009, related to research and development performed by EPIR. See Notes C and E to Financial Statements and Part II, Item 1- "Legal Proceeding" elsewhere in this repot for more information concerning the litigation with EPIR.





The major categories of expense for the Company are discussed individually as below:






19







Research and Development





Research and development expenses are primarily associated with our solar and infrared technology efforts. The vast majority of R&D expenses of the Company have been paid to EPIR Technologies, Inc. to develop the solar and infrared technologies. R&D expenses totaled $  -0- for the quarter ended October 31, 2010, compared to $2,019,034 for the quarter ended October 31, 2009, or a decrease of 100%.





As discussed in Notes C and E to Financial Statements and Part II, ITEM 1, “Legal Proceedings”, and in the Company’s annual report for the year ended July 31, 2010, the Company is currently in litigation with EPIR. The events giving rise to the litigation and uncertainties associated with this lawsuit limit our ability to accurately assess the status, results and value of our research arrangement and investment in EPIR.





Based on the current climate and the status of the litigation with EPIR, the Company does not anticipate expending significant funds on research and development in the solar or infrared technologies in the foreseeable future.





Selling, General and Administrative Expenses





Selling, general and administrative expenses increased by $429,341 or 30% to $1,429,735 for the quarter ended October 31, 2009 and $1,859,076 for the quarter ended October 31, 2010. The major components are discussed below.





Product Development





Product development costs were $535,924 for the quarter ended October 31, 2010, compared to $482,590 for the quarter ended October 31, 2009, an increase of $53,334 or 11%. The product development schedule in both quarters was providing updates to the product line we anticipate the need to further invest in the future by developing the next generation of our products in order to compete effectively in our markets.





General and Administrative





General and administrative expenses are the supporting services needed to maximize the efforts of the other departments in performing their duties. For the quarter ended October 31, 2010 we spent $1,165,147 in this area, compared to $362,155 in the quarter ended October 31, 2009 an increase of $802,992or 69%. The major component of this increase results from non-cash stock compensation of $837,622.





Sales and Marketing Costs





Sales and marketing costs, included noncash expenses, totaled $158,005 in fiscal quarter ended October 31, 2010, as compared to $584,990 in fiscal quarter ended October 31, 2009, representing a decrease of $426,985 or 73%. This decrease resulted from the elimination of non-cash expenses; which had been $550,763 for the quarter ending October 31, 2010, offset by increased salaries, commissions and marketing costs.




Other Income and Expenses





Other income and expense reflects interests costs (net of interest income), and derivatives, as discussed below:





Interest expense for the quarter ended October 31, 2010 was $10,212 compared to $460 of interest income for the quarter ended October 31, 2009. The increased expense resulted from the use of promissory notes to finance working capital, which required periodic  payments of interest.





Derivative losses - We had interest expense and derivative expense of $1,296,078 on the sale of $500,000 of convertible debentures for the quarter ended October 31, 2009 compared to $-0- for the quarter ended October 31, 2010, when we sold no similar convertible debentures. The $500,000 of debentures sold at July 31, 2009, along with $500,000 of debentures sold in August of  2009 were settled for 30,992,493 shares on September 28, 2009. The $1,000,000 in debentures sold on July 30, 2010 was settled for 64,516,127 shares in September, 2010.






20







Liquidity and Capital Resources





The Company’s cash flow from operations is insufficient to meet its current obligations. In the fiscal quarter ended October 31, 2010, the Company relied upon additional investment through sales of common stock and debentures in order to fund its operations. The Company anticipates the need to raise significant amounts of capital in order to fund its operations in the next fiscal year.





Cash Flows and Working Capital





As a result of losses we have incurred to date, we have financed our operations primarily through equity and debentures. As of October 31, 2010, we had $1,892,817 in cash and cash equivalents. We had receivables, net of allowances, of $619,312 and inventory of $783,483 and our current liabilities were $2,261,835, although $650,000 of the liabilities are convertible into common stock.





Our business cycle is working capital intensive, in that the sales cycle can be several months or longer, with some costs incurred upfront. Also, because we build our products based upon a specific order, it can take up to 90 days to fulfill an order, followed by a period of time in which to collect our receivables. We do not have a credit line, and until we are profitable, credit is uncertain for the Company. The Company does not anticipate a profitability level that would resolve its cash flow issues in the foreseeable future and expects to rely upon capital contributed by investors to fund its operations.





The Company outsources its manufacturing; consequently, we do not have significant capital expenditures other than working capital.





We raised $2,715,730 from investors for the quarter ended October 31, 2010, compared to $ 1,905,250 raised for the quarter ended October 31, 2009.





Operating Activities





Net cash used in operating activities for the quarter ended October 31, 2010 totaled $864,927 as compared to $1,795,244 for the quarter ended October 31, 2009. The primary differences between the comparable periods were the amounts expended for research and development discussed above.





Investing Activities





Net cash used in investing for the quarter ended October 31, 2010 was $7,986 as compared to $ -0- for the quarter ended October 31, 2009. The amounts incurred in 2010 were due primarily to our purchase of tooling and software for product development.





Financing Activities





Our net cash raised in financing activities for the quarter ended October 31, 2010 was $2,715,730, of which $2,593,088 resulted from private placement of common stock and $122,642 resulted from the sale of notes and convertible debentures. Net cash raised in financing activities was $1,905,250 for the quarter ended October 31, 2009, of which $1,405,250 was attributable to private placements of common stock and $500,000 was attributable to convertible debentures.





Cash Requirements





As of November 30, 2010, we had $1,845,252 in cash and cash equivalents. As discussed below, this is not adequate to maintain the Company’s current level of operations through July 31, 2011.









21






Commitments





The scheduled contributions under the EPIR contract which remain unfunded are listed in the following table: (see discussion below in Part II, Item 1, Legal Proceedings)





1,000,000
June 1, 20101,000,000
August 1, 20101,000,000
October 1, 20101,000,000
December 1, 2010500,000
April 1, 2011500,000
October 1, 2011500,000
April 1, 2012500,000
October 1, 2012500,000
April 1, 2013500,000
October 1, 2013500,000
April 1, 2014500,000
October 1, 2014500,000
April 1, 2015500,000
October 1, 2015500,000
April 1, 2016500,000
October 1, 2016500,000
April 1, 2017500,000
October 1, 2017500,000
March 1, 1017500,000
October 1, 2017





It is unclear whether the Company will be required to fund any portion of these commitments in the future and it is unlikely that the issue will be resolved except through a settlement of the litigation or an order of the court.





Assessment of Company Strategies; Change in Management





In September, 2010, the Company hired Arthur Buckland as its Chief Executive Officer. Mr. Buckland has a wealth of general management experience in the energy and semiconductor sectors, having served as a senior executive in numerous companies in those industries. Mr. Buckland replaced Carl Smith, as Chief Executive Officer, though Mr. Smith remains Chairman of the Board. As part of the transition, the management team is reviewing the Company’s processes and strategies and determining the most appropriate course going forward. See the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2010 for a discussion od managment's evaluation of the Company's solar, infrared and LED businesses.






Going Concern





The Company has suffered recurring losses from operations and will require additional equity or debt to fund its operations.





With our present cash and cash equivalents management expects to be able to continue some of our operations for at least the next twelve months. However, we have suffered losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through the equity offerings noted above. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. We may seek to sell additional equity securities, debt securities or borrow from lending institutions. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The issuance of additional equity securities, including convertible debt securities, by us could result in a significant dilution in the equity interests of our current stockholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer. In such event, we will be forced to scale down or perhaps even cease our operations.








22







We have undertaken steps as part of a plan to improve operating results with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) increasing our revenues and gross profits; and (c) controlling overhead and expenses.





There can be no assurance that we will successfully accomplish these steps and it is uncertain whether we will achieve a profitable level of operations and/or obtain additional financing. There can be no assurance that any additional financings will be available to us on satisfactory terms and conditions, if at all. In the event we are unable to continue as a going concern, we may elect or be required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy.





These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize the maximum value of  its assets and discharge its liabilities in other than the normal course.





Recent Accounting Pronouncements





In January 2010, the FASB issued authoritative guidance that requires new disclosures and clarifies certain existing disclosure requirements about fair value measurements. The new guidance requires a reporting entity to disclose significant transfers in and out of Level 1 and Level 2 fair value measurements, to describe the reasons for the transfers and to present separately information about purchases, sales, issuances and settlements for fair value measurements using significant unobservable inputs. We adopted the guidance in the three month period ended April 30, 2010 (the “Third Quarter”), except for disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements, which is effective for interim and annual reporting periods beginning after December 20, 2010 (our fiscal quarter ended April 30, 2011). The adoption of the guidance did not have a material impact on our consolidated financial statements, and we do not currently expect the adoption of this guidance to have a material impact on our consolidated financial statements for future periods.





In February 2010, the FASB issued updated authoritative guidance regarding the reporting of subsequent events, removing the requirement for an issuer to disclose a date through which subsequent events have been evaluated. The guidance was effective upon issuance in February 2010, and was adopted as of our Quarterly Report on Form 10-Q for the three months ended January 31, 2010 as filed with the SEC on March 11, 2010. The adoption of this guidance did not have a material impact on our consolidated financial statements.





In April 2010, the FASB issued guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010 (our fiscal quarter ended October 31, 2010). We will assess the impact, if any, of the adoption of the guidance on our consolidated financial statements when this guidance becomes effective for us; however we do not currently believe that the adoption of this guidance will have a material impact on our consolidated financial statements.





Critical Accounting Policies and Estimates





Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain. We have identified our critical accounting estimates which are discussed below.








23







Use of Estimates





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, disclosures of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates.





Accounts Receivable





Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to bad debt expense and a credit to an allowance for uncollectible accounts based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for uncollectible accounts and a credit to accounts receivable.





Accounting for Derivative Instruments





Derivatives are required to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.





Research and Development





Research and Development ("R&D") expenses are charged to expense when incurred. The Company has consulting arrangements which are typically based upon a fee paid monthly or quarterly. Samples are purchased that are used in testing, and are expensed when purchased. R&D costs also include salaries and related personnel expenses, direct materials, laboratory supplies, equipment expenses and administrative expenses that are allocated to R&D based upon personnel costs.





Revenue Recognition





The Company recognizes revenue when the following conditions have been met: there is persuasive evidence an arrangement exists which includes a fixed price, there is reasonable assurance of collection, the services or products have been provided and delivered to the customer, no additional performance is required, and title and risk of loss has passed to the customer. Products may be placed on consignment to a limited number of resellers. Revenue for these consignment transactions will also be recognized as noted above.





Share-Based Payments





Compensation cost relating to share based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).





Going Concern Considerations





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the quarter ended October 31, 2010 the Company has experienced losses of $2,137,351. As of October 31, 2010, the Company also had working capital of $1,048,635, which is not adequate to sustain our current level of losses. To date the Company has funded operations through capital infusions from investors through the sale of its common stock and certain debt instruments, particularly convertible debentures. The Company anticipates a need for significant funding from capital investment in order to support its operations and continuing as a going concern. The ability of the Company to continue its operations as a going concern is dependent on continuing to raise sufficient new capital to fund its business and development activities and to fund ongoing losses, if needed, and ultimately on generating profitable operations.






24







The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.





Off-Balance Sheet Arrangements





We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.





Our arrangement with EPIR may require working capital in the future, but at this time we cannot predict what effect that will be.





Except as discussed below, our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have:





·
An obligation under a guarantee contract, although we do have obligations under certain sales arrangements including purchase obligations to vendors,


·
A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets,


·
Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument or,


·
Any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.





In December 2005, we acquired all of the patent rights owned by Sparx, Inc. from Carl Smith; our Chairman owns all of the capital stock of Sparx. In connection with the acquisition of the patent rights, we issued 500,000,000 stock options to Mr. Smith and have agreed to pay a royalty of 4.9% of revenues to Sparx, Inc.





Quantitative and Qualitative Disclosures About Market Risk





We have no material exposure to interest rate changes. We are subject to changes in the prices of energy, which are out of our control.





Effect of Changes in Prices.





Changes in prices in the past few years have been a significant factor in the solar and lighting industries. In the solar industry particularly, 2010 saw dramatic increases in supply and a collapse in the price of solar energy as a result of technological advances as well as the excess supply. The Company believes it will be several years before conditions in that market are favorable again. In the lighting industry, prices of competitors’ lighting products are often significantly lower than the Company’s prices – reducing the cost of our products is a primary strategy in the near future and will be necessary in order for our LED lighting products to be competitive in the marketplace.






25







ITEM 3. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK





We have no material exposure to interest rate changes or credit risk.  We are subject to changes in the price of energy, which are out of our control.








ITEM 4T. CONTROLS AND PROCEDURES





As of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer (the “Officers”) conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based upon this evaluation, the Officers concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and our disclosure controls and procedures are also not effective for the purpose of ensuring that material information required to be in this report is made known to management and others, as appropriate, to allow timely decisions regarding required disclosures. The ineffectiveness of our disclosure controls and procedures is the result of certain deficiencies in internal controls constituted material weaknesses as discussed below. The material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company's financial statements for the current reporting period. We lack segregation of duties in the period-end financial reporting process. The Company has historically had limited accounting and minimal operating revenue and, as such, all accounting and financial reporting operations have been and are currently performed by one individual. The party that performs the accounting and financial reporting operations is the only individual with any significant knowledge of generally accepted accounting principles. The person is also in charge of the general ledger (including the preparation of routine and non-routine journal entries and journal entries involving accounting estimates), the preparation of accounting reconciliations, the selection of accounting principles, and the preparation of interim and annual financial statements (including report combinations, consolidation entries and footnote disclosures) in accordance with generally accepted accounting principles. In addition, the lack of additional staff with significant knowledge of generally accepted accounting principles has resulted in ineffective oversight and monitoring.





In addition, no change in our internal control over financial reporting occurred during the fiscal quarter ended October 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.











26






PART II: OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





LEGAL PROCEEDINGS.





From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.





We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results, other than as described below:





The Company is a party to a lawsuit arising out of its Research, Development and Supply Agreement with EPIR Technologies, Inc. (“EPIR”). The suit was brought by EPIR in August, 2010, and seeks an unspecified amount of damages and other unspecified equitable relief. The Company filed certain counterclaims against EPIR and certain other parties, including Sivananthan Labs, Inc., an affiliate of EPIR and its principal, Dr. Sivananthan. Each of the parties to the litigation has brought numerous claims and counterclaims against each other, and several motions to dismiss certain claims have been filed and are pended.





The litigation is in the early stages of motions, and discovery has not yet begun. The outcome of the litigation is uncertain, and the potential damages that may be awarded to any of the parties cannot be estimated with any accuracy at this time.





The Company has been billed a total of $471,047 and has paid $195,365 in legal fees in this case as of December 1, 2010. The total cost of the litigation cannot be estimated at this time.





ITEM 1A. RISK FACTORS





n/a





ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS








On August 25, 2010, a convertible debenture in the face amount of $1,000,000 dated July 31, 2010, was converted for 64,516,127 shares of common stock which settled the obligation in full.





Also, on August 30, 2010, the Company sold an aggregate of 60,125,000 shares of common stock at $0.02 per share for an aggregate purchase price of $1,202,500.





On August 31, 2010, the Company issued 1,000,000 common shares to a consultant of the Company in payment for services.





On September 1, 2010, the Company issued 882,488 shares of its Common Stock to employees and consultants of the Company upon the exercise of stock options previously granted.





On September 1, 2010, the Company issued 2,870,000 common shares to an entity controlled by its chairman in settlement of an obligation under a royalty agreement.








27







On September 27, 2010, the Company sold an aggregate of 500,000 shares of common stock at $.02 per share for an aggregate purchase price of $10,000.





On September 28, 2010, the Company sold an aggregate of 16,500,000 shares of common stock at $.02 per share for an aggregate purchase price of $330,000





On September 28, 2010, the Company issued 87,500 common shares in payment for services.





On October 5, 2010, the Company sold an aggregate of 16,025,000 shares of common stock at $.02 per share for an aggregate purchase price of $320,500.





On October 13, 2010, the Company sold an aggregate of 4,500,000 shares of common stock at $.02 per share for an aggregate purchase price of $90,000.





On October 14, 2010, the Company issued 2,063,667 shares of common stock as payment for services.





On October 15, 2010, the Company sold an aggregate of 7,000,000 shares of common stock at $.02 per share for an aggregate purchase price of $140,000.





On October 29, 2010, the Company sold an aggregate of 25,000,000 shares of common stock at $.02 per share for an aggregate purchase price of $500,000.





All of the offers and sales of securities listed above were made to accredited investors, affiliates or executive officers of the Company, and the Company relied upon the exemptions contained in Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder with regard to those sales. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, each of whom was an accredited investor, or executive officers of the Company, and transfer of the common stock issued was restricted by the Company in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above referenced persons, we have made independent determinations that each of the investors were accredited investors and that each investor was capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.





ITEM 3.DEFAULTS UPON SENIOR SECURITIES





None





ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None





ITEM 5.OTHER INFORMATION





None.






28







ITEM 6. EXHIBITS








Exhibit No.

Description of Exhibit3.1

Certificate of Change (2)3.2

Agreement and Plan of Merger between Acadia Resources, Inc.  and Sunovia Solar, Inc. (3)3.3

Certificate of Merger between Sun Energy Solar, Inc. and Sunovia Solar, Inc. (3)3.4

Certificate of Merger between Acadia Resources, Inc. And Sunovia Energy Technologies, Inc. (3)3.5

Articles of Incorporation (6)3.6

Bylaws (6)4.1

Form of Subscription Agreement (5)10.1

Royalty Agreement between Sun Energy Solar, assigned to the Registrant and Sparx, Inc., dated December 20, 2005 (3)10.2

Stock Option Agreement between Sun Energy Solar, assigned to the Registrant and Carl Smith, dated December 20, 2005 (3)10.3

Change of Control Severance Agreement between Sun Energy Solar, assigned to the Registrant and Carl Smith, dated December 21, 2005 (3)10.4

Modification to Stock Option Agreement between Sun Energy Solar, assigned to the Registrant and Carl Smith relating to Charitable Pledge by Executive, dated June 29, 2006 (3)10.5

Employment Contract between Sun Energy Solar, Inc. (now known as Sunovia Solar, Inc.) and Bob Fugerer, dated July 10, 2006, and addendum (3)10.6

Executive Employment Contract between Sun Energy Solar, Inc. (now known as Sunovia Solar, Inc.) and Matthew Veal, dated May 29, 2006 and addendum (3)10.7

Consulting Agreement between Sun Energy Solar, Inc. (to be assigned to Sunovia Energy Technologies, Inc.) and Ken Juster dated July 16, 2007 (3)10.8

Consulting Agreement between Sun Energy Solar, Inc. (now known as Sunovia Solar, Inc.) and Don Sipes dated July 18, 2007 (3)10.9

Consulting Agreement between Sun Energy Solar, Inc. (now known as Sunovia Solar, Inc.) and Don Sipes dated July 18, 2007 (3)10.10

Agreement between Sun Energy Solar, Inc. (now known as Sunovia Solar, Inc.) and EPIR Technologies dated November 1, 2007 (3)10.11

Addendum to employment contract between the Company and Bob Fugerer, dated January 25, 2007 (4)10.12

Amended and Restated  Research, Development and Supply Agreement, dated January 24, 2008, between EPIR Technologies, Inc. Sunovia Energy Technologies, Inc, dated January 24, 2008 (1)10.13

Stock Purchase Agreement between EPIR Technologies, Inc. and Sunovia Energy Technologies, Inc., dated January 24, 2008 (1)10.14

Amended and Restated Consulting Agreement between Sunovia Energy Technologies, Inc. and Fernando Cuza dated March 17, 2008 (4)10.15

Consulting Agreement between the Company and Pacific Coast Capital Advisors, Inc. dated June 10, 2008 (4)10.16

Employment Agreement between the Company  and Robert Fugerer, dated May 1, 2008 (4)10.17

Employment Agreement between the Company  and Carl Smith, dated May 1, 2008 (4)10.18

Employment Agreement between the Company  and Matthew Veal, dated May 1, 2008 (4)10.19

Sunovia Energy Technologies, Inc. 2008 Incentive Stock Plan date May 1, 2008 (4)10.20

Employment Agreement between the Company  and Donna Webb, dated May 1, 2008 (7)10.21

Consulting Agreement between the Company and Rick Kauffman, dated June 6, 2008 (7)10.22

Purchase Agreement between the Company and Precision Lighting dated May 16, 2008 (7)10.23

Purchase Agreement between the Company and Beacon Products dated May 16, 2008 (7)10.24

Consulting Agreement between the Company and The Abraham Group, dated October 1, 2008 (7)10.25

Assignment Agreement Between the Company and Novakor dated August 31, 2008 (7)10.26

Amendment to Consulting Agreement between the Company and Kenneth I. Juster dated October 28, 2008 (7)10.27

Consulting Agreement between the Company and Akaoni Management dated October 10, 2008 (7)10.28

Consulting Agreement between the Company and Bay Hill Partners, LLC, dated November 4, 2008 (8)10.29

Distribution agreement between the Company and Spectrum Brands, Inc. effective November 18,2008 (8)10.30

Common Stock Purchase warrant between the Company and EPIR Technologies, Inc. dated April 15, 2009 (10)10.31

Amendment No. 1 to the Amended and Restated Research, Development, and Supply Agreement dated April 15, 2009 (10)10.32

Form of Secured Convertible Debentures dated June 15, 2009(11)    29
    10.33

Form of Security Agreement dated June 15, 2009(11)10.34

Form of Subsidiary Guarantee dated June 15, 2009 (11)10.35

Form of  Securities Purchase Agreement dated June 15, 2009(11)10.36

Agreement of Principal Terms and Conditions between the Company and Parque Cibernertica de Santo Domingo SA dated July 7, 2009(11)10.37

Form of Subscription Agreement dated October 13, 2009 ($.05 per share) (11)10.38

Form of Subscription Agreement dated October 15, 2009 ($.06 per share) (11)10.39

Form of Subscription Agreement dated November 9, 2009 ($.042 per share) (11)10.40

Form of Subscription Agreement dated November 9, 2009 ($.05 per share) (11)10.41

Form of Subscription Agreement dated November 9, 2009 ($.06 per share) (11)10.42

Form of Subscription Agreement dated November 12, 2009 ($.05 per share) (11)10.43

Employment Contract between the Company and Carl Smith, dated November 10, 2009 (12)10.44

Consulting Agreement between the Company and R. Craig Hall dated November 10, 2009 (12)10.45

Consulting Agreement between the Company and Oak Ridge Strategies Group, Inc. dated February 1, 2010 (13)10.46

Form of Subscription Agreement dated  ($.09 per share)  dated February 1, 2010 (13)10.47

Form of Promissory note used in December, 2009 and January, 2010 (13)10.48

10.49

Form of Promissory note used in February, 2010 (13)

Assignment Agreement by and between Carl L. Smith and Craca Properties LLC, dated December 9, 2007(14)10.50

Form of Subscription Agreement dated August 24, 2010 ($.02 per share)10.51

Executive Employment Agreement by and between Arthur Buckland and Sunovia Energy Technologies, Inc. effective September 7, 2010. (15_31.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)31.2

Certification of  Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 193432.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S. C. Section 1350





(1)
Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on January 30, 2008.





(2)
Incorporated by reference to the Form 8-K filed with the Securities and Exchange Commission on December 14, 2007.





(3)
Incorporated by reference to the Form 10QSB filed with the Securities Exchange Commission on December 21, 2007





(4)
Incorporated by reference to the Form 10QSB filed with the Securities Exchange Commission on March 17, 2008





(5)
Incorporated by reference to the Form 8K Current Report filed with the Securities and Exchange Commission on January 16, 2008.





(6)
Incorporated by reference to the Form SB-2 Registration Statement filed with the Securities and Exchange Commission on January 1, 2007





(7)
Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on November 14, 2008.





(8)
Incorporated by reference to the form 10-Q filed with the Securities and Exchange Commission on December 20, 2008.





(9)
Incorporated by reference to the Form 8-K filed with the Securities Exchange Commission on April 16, 2009





(10)
Incorporated by reference to the form 10-Q filed with the Securities and Exchange Commission on March 16, 2009.(11)
Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on November 13, 2009(12)
Incorporated by reference to the Form 10-Q filed with the Securities and Exchange Commission on December 21, 2009.(13)
Incorporated by reference to the Form 10-Q filed with the Securities Exchange Commission on March 22, 2010.(14)
Incorporated by reference to the Form 10-Q filed with the Securities Exchange Commission on June 21, 2010.(15)
Incorporated by reference to the Form 8-k filed with the Securities Exchange Commission on August 24, 2010.(16)
Incorporated by reference to the Form 8-k filed with the Securities Exchange Commission on August 27, 2010









30








SIGNATURES





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





SUNOVIA ENERGY TECHNOLOGIES, INC.





Signature
Title
Date/s/ Arthur Buckland



Arthur Buckland
Chief Executive Officer
December 20, 2010/s/ Matthew Veal

Matthew Veal
Chief Financial Officer, Treasurer, and Principal Accounting Officer
December 20, 2010