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 OF
      1934





For the
quarterly period ended April 30, 2009





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





6408
Parkland Drive, Suite 104, Sarasota, Fl 34243


(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 x
              Smaller
      reporting company oNon-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 June 12,
2009 was 537,213,451.








1











FORM 10-Q


INDEX





PagePART I: FINANCIAL
      INFORMATION
                    3ITEM 1. FINANCIAL
      STATEMENTS
                    3Consolidated Balance Sheet
      (Unaudited)
                    6Consolidated Statements of
      Operations (Unaudited)
                    7Consolidated Statement of Changes
      in Stockholders’ Equity (Unaudited)
                    8Consolidated Statements of Cash Flows
      (Unaudited)
                    10Notes to Consolidated Financial
      Statements (Unaudited)
                    12ITEM 2. MANAGEMENT’S DISCUSSION
      AND ANALYSIS OR PLAN OF OPERATION
                    34ITEM
      3. QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET
      RISK
                    43ITEM4. CONTROLS AND
      PROCEDURES
                    43PART II. OTHER
      INFORMATION
                    43ITEM
      1. LEGAL PROCEEDINGS
                    43ITEM
      1A. RISK FACTORS
                    43ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
      AND USE OF PROCEEDS
                    43ITEM
      3. - DEFAULTS UPON SENIOR SECURITIES
                    43ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
      SECURITY HOLDERS
                    43ITEM 5. OTHER INFORMATION
                    43ITEM 6. EXHIBITS
                    44SIGNATURES
                    45














2










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 assume no obligation to
revise or update any forward-looking statements for any reason, except as
required by law.






3









Part I FINANCIAL
INFORMATION





Item 1:
Financial Statements





SUNOVIA
ENERGY TECHNOLOGIES, INC.
 
 
 
 
 REPORT
ON REVIEWS OF
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 
 
 FOR
THE THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
     4
       SUNOVIA
ENERGY TECHNOLOGIES, INC.
 U CONTENTS U
 
 UPAGEUFINANCIAL
      STATEMENTSREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED
      BALANCE SHEETS
                      6CONSOLIDATED
      STATEMENTS OF OPERATIONS
                      7CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
                      8-9CONSOLIDATED
      STATEMENTS OF CASH FLOWS
                      10-11NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
                      12-33
 
 
 5
   June 15,
2009
 
 To The
Board of Directors and Stockholders
 Sunovia
Energy Technologies, Inc.
 Sarasota
, Florida
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 We have
reviewed the accompanying consolidated balance sheet of Sunovia Energy
Technologies, Inc., as of April 30, 2009 and the related consolidated statements
of operations for the three and nine months ended April 30, 2009 and 2008 and
the related consolidated statements of cash flows for the nine months ended
April 30, 2009 and 2008 and the related consolidated statement of changes in
stockholders’ equity for the nine months ended April 30, 2009.  These
consolidated financial statements are the responsibility of the Company’s
management.
 
 We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.  Accordingly, we
do not express such an opinion.
 
 Based on
our review, we are not aware of any material modifications that should be made
to the accompanying interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
 
 We have
previously audited, in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
Sunovia Energy Technologies, Inc., as of July 31, 2008 and the related
consolidated statements of operations, stockholders’ equity, and cash flows for
the period from inception (November 9, 2005) through July 31, 2008, and in our
report dated October 31, 2008, we expressed an unqualified opinion on those
consolidated financial statements.  In our opinion, the information
set forth in the accompanying consolidated balance sheet as of July 31, 2008, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note A
to the financial statements, the Company has experienced losses of $12,247,241
and $18,056,820 for the nine months ended April 30, 2009 and 2008, respectively.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management’s plans regarding those matters also are described in
Note A. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
    /s/
Bobbit, Pittenger & Company, P.A
 
 Bobbit,
Pittenger & Company, P.A
 Certified
Public Accountants
 Sarasota,
Florida
      6
    SUNOVIA ENERGY TECHNOLOGIES, INC.CONSOLIDATED
      BALANCE SHEETSApril
      30,
                                      
                                      
                                      July
      31,2009
                                      
                                      
                                      2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                      
                                      $
                                      788,343
                                      
                                      
                                      $
                                      5,982,779Accounts
      receivable
                                      
                                      
                                      300,167
                                      
                                      
                                      
                                      40,299Prepaid
      expenses
                                      
                                      
                                      66,011
                                      
                                      
                                      
                                      28,801Inventory
                                      
                                      
                                      432,232
                                      
                                      
                                      
                                      351,265TOTAL
      CURRENT ASSETS
                                      
                                      
                                      1,586,753
                                      
                                      
                                      
                                      6,403,144Furniture
      and equipment, net
                                      
                                      
                                      193,173
                                      
                                      
                                      
                                      210,615Investment
      in EPIR Technologies, Inc.
                                      
                                      
                                      3,780,385
                                      
                                      
                                      
                                      3,780,385Other
      assets
                                      
                                      
                                      86,028
                                      
                                      
                                      
                                      53,988TOTAL
      ASSETS
                                      
                                      $
                                      5,646,339
                                      
                                      
                                      $
                                      10,448,132LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                                      
                                      $
                                      260,887
                                      
                                      
                                      $
                                      364,801Accrued
      expenses
                                      
                                      
                                      116,082
                                      
                                      
                                      
                                      177,600Noncash
      compensation payable
                                      
                                      
                                      1,104,806
                                      
                                      
                                      
                                      1,503,374Common
      stock redemption
                                      
                                      
                                      650,000
                                      
                                      
                                      
                                      650,000TOTAL
      CURRENT LIABILITIES
                                      
                                      
                                      2,131,775
                                      
                                      
                                      
                                      2,695,775STOCKHOLDERS'
      EQUITYCommon
      stock, $.001 par value; 1,500,000,000 sharesauthorized:
      537,213,451 and 524,543,964 at April 30, 2009 and July 31, 2008,
      respectively, issued and outstanding
                                      
                                      
                                      537,213
                                      
                                      
                                      
                                      524,544Additional
      paid-in capital
                                      
                                      
                                      56,017,546
                                      
                                      
                                      
                                      48,020,767Retained
      deficit
                                      
                                      
                                      (53,040,195
                                      )
                                      
                                      
                                      (40,792,954
                                      )TOTAL
      STOCKHOLDERS' EQUITY
                                      
                                      
                                      3,514,564
                                      
                                      
                                      
                                      7,752,357TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                      
                                      $
                                      5,646,339
                                      
                                      
                                      $
                                      10,448,132
   See
report of independent registered public accounting firm
 and notes
to consolidated financial statements.
  7
  SUNOVIA ENERGY TECHNOLOGIES, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
   For
      the Three
                                  
                                  
                                  For
      the Nine
                                  
                                  
                                  For
      the Three
                                  
                                  
                                  For
      the NineMonths
      Ended
                                  
                                  
                                  Months
      Ended
                                  
                                  
                                  Months
      Ended
                                  
                                  
                                  Months
      EndedApril 30, 2009
                                  
                                  
                                  April 30, 2009
                                  
                                  
                                  April 30, 2008
                                  
                                  
                                  April 30, 2008(Unaudited)
                                  
                                  
                                  (Unaudited)
                                  
                                  
                                  (Unaudited)
                                  
                                  
                                  (Unaudited)Net
      sales
                                  
                                  $
                                  295,223
                                  
                                  
                                  $
                                  886,135
                                  
                                  
                                  $
                                  5,600
                                  
                                  
                                  $
                                  5,600Cost
      of sales
                                  
                                  
                                  205,728
                                  
                                  
                                  
                                  608,595
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Gross
      margin
                                  
                                  
                                  89,495
                                  
                                  
                                  
                                  277,540
                                  
                                  
                                  
                                  5,600
                                  
                                  
                                  
                                  5,600Expenses:Selling,
      general and administrative
                                  
                                  
                                  2,063,325
                                  
                                  
                                  
                                  6,418,681
                                  
                                  
                                  
                                  10,325,796
                                  
                                  
                                  
                                  12,221,905Research
      and development
                                  
                                  
                                  3,885,774
                                  
                                  
                                  
                                  6,139,870
                                  
                                  
                                  
                                  2,033,127
                                  
                                  
                                  
                                  5,904,404Total
      expenses
                                  
                                  
                                  5,949,099
                                  
                                  
                                  
                                  12,558,551
                                  
                                  
                                  
                                  12,358,923
                                  
                                  
                                  
                                  18,126,309Operating
      loss
                                  
                                  
                                  (5,859,604
                                  )
                                  
                                  
                                  (12,281,011
                                  )
                                  
                                  
                                  (12,353,323
                                  )
                                  
                                  
                                  (18,120,709
                                  )Other
      income:Interest
                                  
                                  
                                  7,813
                                  
                                  
                                  
                                  33,770
                                  
                                  
                                  
                                  11,036
                                  
                                  
                                  
                                  63,889Total
      other income
                                  
                                  
                                  7,813
                                  
                                  
                                  
                                  33,770
                                  
                                  
                                  
                                  11,036
                                  
                                  
                                  
                                  63,889Loss
      before income tax benefit
                                  
                                  
                                  (5,851,791
                                  )
                                  
                                  
                                  (12,247,241
                                  )
                                  
                                  
                                  (12,342,287
                                  )
                                  
                                  
                                  (18,056,820
                                  )Income
      tax benefit
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  $
                                  (5,851,791
                                  )
                                  
                                  $
                                  (12,247,241
                                  )
                                  
                                  $
                                  (12,342,287
                                  )
                                  
                                  $
                                  (18,056,820
                                  )Loss
      per share:Basic
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.02
                                  )
                                  
                                  $
                                  (0.03
                                  )
                                  
                                  $
                                  (0.06
                                  )Diluted
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.02
                                  )
                                  
                                  $
                                  (0.03
                                  )
                                  
                                  $
                                  (0.06
                                  )Weighted
      average number of commonshares
      outstanding:Basic
                                  
                                  
                                  537,213,451
                                  
                                  
                                  
                                  533,265,466
                                  
                                  
                                  
                                  435,875,023
                                  
                                  
                                  
                                  324,970,372Diluted
                                  
                                  
                                  537,213,451
                                  
                                  
                                  
                                  533,265,466
                                  
                                  
                                  
                                  435,875,023
                                  
                                  
                                  
                                  324,970,372
 
 See
report of independent registered public accounting firm
 and notes
to consolidated financial statements.
  8
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
   AdditionalCommon Stock
                        
                        
                        Paid-in
                        
                        
                        AccumulatedShares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        TotalBalance,
      August 1, 2007
                        
                        
                        264,913,506
                        
                        
                        $
                        13,241
                        
                        
                        $
                        8,786,946
                        
                        
                        $
                        (5,955,993
                        )
                        
                        $
                        2,844,194Common
      stock redemption($0.10
      per share)
                        
                        
                        (37,523,114
                        )
                        
                        
                        (1,875
                        )
                        
                        
                        (3,750,436
                        )
                        
                        
                        -
                        
                        
                        
                        (3,752,311
                        )Stock
      issued for servicesand
      compensation
                          ($0.10
      per share)
                        
                        
                        18,197,500
                        
                        
                        
                        11,974
                        
                        
                        
                        1,807,776
                        
                        
                        
                        -
                        
                        
                        
                        1,819,750Reverse
      stock split, 1 for 4 sharesand
      change in par value of stock
                        
                        
                        (175,455,294
                        )
                        
                        
                        46,793
                        
                        
                        
                        (46,793
                        )
                        
                        
                        -
                        
                        
                        
                        -Shares
      exchanged forAcadia
      Resources, Inc.
                        
                        
                        7,350,000
                        
                        
                        
                        7,350
                        
                        
                        
                        (7,350
                        )
                        
                        
                        -
                        
                        
                        
                        -Stock
      split, 4.5 for 1 share
                        
                        
                        230,422,843
                        
                        
                        
                        230,423
                        
                        
                        
                        (230,423
                        )
                        
                        
                        -
                        
                        
                        
                        -Shares
      issued in private placement($0.10
      per share)less
      syndication costs)
                        
                        
                        110,625,510
                        
                        
                        
                        110,626
                        
                        
                        
                        10,946,664
                        
                        
                        
                        -
                        
                        
                        
                        11,057,290Stock
      issued for servicesand
      compensation($0.73
      per share)
                        
                        
                        5,256,226
                        
                        
                        
                        5,256
                        
                        
                        
                        3,831,789
                        
                        
                        
                        -
                        
                        
                        
                        3,837,045Shares
      issued for equity investmentin
      EPIR Technologies, Inc.
                        
                        
                        37,803,852
                        
                        
                        
                        37,804
                        
                        
                        
                        3,742,581
                        
                        
                        
                        -
                        
                        
                        
                        3,780,385Reissuance
      of previously
                          redeemed
      stock
                        
                        
                        28,948,075
                        
                        
                        
                        28,948
                        
                        
                        
                        2,865,859
                        
                        
                        
                        -
                        
                        
                        
                        2,894,807Stock
      options granted for services
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        9,663,284
                        
                        
                        
                        -
                        
                        
                        
                        9,663,284Stock
      options exercised
                        
                        
                        24,922,360
                        
                        
                        
                        24,922
                        
                        
                        
                        (24,922
                        )
                        
                        
                        -
                        
                        
                        
                        -
    See
report of independent registered public accounting firm
 and notes
to consolidated financial statements.
  9
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
 AdditionalCommon Stock
                                    
                                    
                                    Paid-in
                                    
                                    
                                    AccumulatedShares
                                    
                                    
                                    Amount
                                    
                                    
                                    Capital
                                    
                                    
                                    Deficit
                                    
                                    
                                    TotalStock
      issued for servicesand
      compensation($1.15
      per share)
                                    
                                    
                                    9,082,500
                                    
                                    
                                    
                                    9,082
                                    
                                    
                                    
                                    10,435,792
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    10,444,874Net
      loss
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (34,836,961
                                    )
                                    
                                    
                                    (34,836,961
                                    )Balance,
      July 31, 2008
                                    
                                    
                                    524,543,964
                                    
                                    
                                    
                                    524,544
                                    
                                    
                                    
                                    48,020,767
                                    
                                    
                                    
                                    (40,792,954
                                    )
                                    
                                    
                                    7,752,357Shares
      issued in private placement($0.10
      per share)less
      syndication costs)
                                    
                                    
                                    12,305,274
                                    
                                    
                                    
                                    12,305
                                    
                                    
                                    
                                    1,201,723
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,214,028Stock
      options and warrantsgranted
      for services
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    6,408,560
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    6,408,560Stock
      issued for services andcompensation  ($0.62-$1.15
      per
                                    
                                    
                                    364,213
                                    
                                    
                                    
                                    364
                                    
                                    
                                    
                                    386,496
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    386,860share)Net
      loss
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (12,247,241
                                    )
                                    
                                    
                                    (12,247,241
                                    )Balance,
      April 30, 2009
                                    
                                    
                                    537,213,451
                                    
                                    
                                    $
                                    537,213
                                    
                                    
                                    $
                                    56,017,546
                                    
                                    
                                    
                                    (53,040,195
                                    )
                                    
                                    $
                                    3,514,564
   See
report of independent registered public accounting firm
 and notes
to consolidated financial statements.
  10
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
  For
      the Nine
                              
                              
                              For
      the NineMonths
      Ended
                              
                              
                              Months
      EndedApril 30, 2009
                              
                              
                              April 30, 2008(Unaudited)
                              
                              
                              (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                              
                              $
                              (12,247,241
                              )
                              
                              $
                              (18,056,820
                              )Adjustments
      to reconcile net loss tonet
      cash used by operating activitiesDepreciation
                              
                              
                              50,383
                              
                              
                              
                              31,924Stock
      issued and stock options issued for services
                                and
      compensation
                              
                              
                              6,795,420
                              
                              
                              
                              11,580,701Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              (259,868
                              )
                              
                              
                              (5,600
                              )Prepaid
      expenses
                              
                              
                              (37,210
                              )
                              
                              
                              (9,878
                              )Inventory
                              
                              
                              (80,967
                              )
                              
                              
                              (58,793
                              )Other
      assets
                              
                              
                              (32,040
                              )
                              
                              
                              -Accounts
      payable
                              
                              
                              (103,914
                              )
                              
                              
                              (579,765
                              )Accrued
      expenses
                              
                              
                              (61,518
                              )
                              
                              
                              -Noncash
      compensation payable
                              
                              
                              (398,568
                              )
                              
                              
                              -NET
      CASH USED BY OPERATING ACTIVITIES
                              
                              
                              (6,375,523
                              )
                              
                              
                              (7,098,231
                              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of furniture and equipment
                              
                              
                              (32,941
                              )
                              
                              
                              (108,936
                              )NET
      CASH USED BY INVESTING ACTIVITIES
                              
                              
                              (32,941
                              )
                              
                              
                              (108,936
                              )CASH
      FLOWS FROM FINANCING ACTIVITIESEquity
      contributed by private placement
                              
                              
                              1,214,028
                              
                              
                              
                              6,612,129Common
      stock redemption
                              
                              
                              -
                              
                              
                              
                              (222,500
                              )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                              
                              
                              1,214,028
                              
                              
                              
                              6,389,629NET
      DECREASE IN CASH AND CASH EQUIVALENTS
                              
                              
                              (5,194,436
                              )
                              
                              
                              (817,538
                              )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                              
                              
                              5,982,779
                              
                              
                              
                              3,457,729CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                              
                              $
                              788,343
                              
                              
                              $
                              2,640,191Cash
      paid for:Interest
                              
                              $
                              -
                              
                              
                              $
                              -Income
      taxes
                              
                              $
                              -
                              
                              
                              $
                              -NONCASH
      OPERATING AND FINANCING ACTIVITIES:Stock
      and stock options issued for services andcompensation
                              
                              $
                              6,795,420
                              
                              
                              $
                              11,580,701
  See
report of independent registered public accounting firm
 and notes
to consolidated financial statements.
    11
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
  For
      the Nine
                                
                                
                                For
      the NineMonths
      Ended
                                
                                
                                Months
      EndedApril 30, 2009
                                
                                
                                April 30, 2008(Unaudited)
                                
                                
                                (Unaudited)NONCASH
      OPERATING AND FINANCING ACTIVITIES
                                  (CONTINUED):Treasury
      stock redeemed included in payables
                                
                                $
                                -
                                
                                
                                $
                                3,765,816Reissuance
      of previously redeemed stock
                                
                                $
                                -
                                
                                
                                $
                                2,768,307Shares
      issued for equity investment in EPIR Technologies
                                
                                $
                                -
                                
                                
                                $
                                3,780,385
 See
report of independent registered public accounting firm
 and notes
to consolidated financial statements.
    12
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization, Nature, and
Continuance of Operations
 
 Sunovia
Energy Technologies, Inc. (“the Company”) is incorporated in
Nevada.  The Company is developing, designing, and integrating
photovoltaic solar cells into products for incident management, energy efficient
advertising, and low-cost durable solar modules for easy installation and
incremental upgrading of capacity.  The Company is also developing and
selling environmentally responsible, energy efficient lighting products that are
based on the latest and most efficient light emitting diode (LED)
technologies.
 
 On
November 27, 2007, Acadia Resources, Inc. (“Acadia”), Sunovia Solar, Inc., a
wholly owned subsidiary of Acadia (“Sunovia Solar”) and Sun Energy Solar, Inc.
entered into an Agreement and Plan of Merger which closed on November 28,
2007.  Pursuant to the terms of the Merger agreement, Sun Energy Solar
merged with and into Sunovia Solar, which became a wholly-owned subsidiary of
Acadia (the “Merger”). The transaction was accounted for as a purchase. On
December 17, 2007, Acadia changed its name to Sunovia Energy Technologies,
Inc.
 
 In March,
2008, the Company launched a new subsidiary, EvoLucia, which is the solid state
lighting division of the Company. EvoLucia creates, patents, and markets
proprietary LED lighting fixtures through strategic partnerships and energy
solution providers.
 
 Sun
Energy Solar was incorporated under the laws of the State of Delaware on
November 9, 2005.  Sun Energy Solar, Inc. was organized for the
purpose of developing solar related products and technologies.  The
Company was originally named Sologic, Inc.  On April 25, 2006, the
Company completed its name change from Sologic, Inc. to Sun Energy Solar,
Inc.
 
 On
December 21, 2005, the Company acquired the patent rights (patent applied for)
to No. 60/617,263 Titled Substrate with Light Display, applied for on September
2, 2005, from Sparx, Inc., a Florida corporation 100% owned by the Company’s
Chief Executive Officer.  Sparx, Inc. had acquired the patent rights
from company officers who were the original inventors.  As
compensation under this agreement, the Company has granted Sparx, Inc., a
royalty of 4.9% of gross revenues (see Note B).
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  For the nine months ended April 30,
2009 and 2008 the Company has experienced losses of $12,247,241 and
$18,056,820.  To date the Company has funded operations through the
issuance of common stock and common stock options.  Management’s plan
is to continue raising funds through future equity or debt financings as needed
until it achieves profitable operations.  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.
 
  13
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
  
 
 NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 U
 
 Basis of
Consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
subsidiaries.  All significant intercompany balances and transactions
have been eliminated.
 
 Accounting
Method
 
 The
Company recognizes income and expenses on the accrual basis of
accounting.  The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with accounting principles
generally accepted in the United States.
 
 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.
 
 Concentrations
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash and cash equivalents.  The Company maintains cash
and cash equivalents in deposit accounts with one financial institution located
in the United States.  Deposit accounts exceed federally insured
limits.  Management does not believe the Company is exposed to
significant risks on such accounts.  Generally, these deposits may be
redeemed upon demand and, therefore, bear minimal interest rate
risk.  At April 30, 2009, the Company had an uninsured cash balance of
approximately $329,000.
 
 Royalty
Agreements
 
 The
Company has entered into an agreement that requires the payment of royalties to
Sparx, Inc. (See Note B), a company owned by the Chief Executive Officer and
largest stockholder.  The Company expenses royalties as product costs
during the period in which the related revenues are recorded.
 
 Cash and Cash
Equivalents
 
 For
purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
 
 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
 
 
  14
    SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
   NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 management
has used reasonable collection efforts are written off through a charge to the
allowance for uncollectible accounts and a credit to accounts receivable.
Management deems all accounts receivable at April 30, 2009 collectible,
accordingly, no allowance for doubtful accounts is
required.  Management has not charged interest on accounts receivable
as of April 30, 2009.  At April 30, 2009, approximately 72% of
accounts receivable are due from two customers that have a common
ownership.
 
 Furniture and Equipment,
Net
 
 Furniture
and equipment are recorded at cost.  Maintenance, repairs and other
renewals are charged to expense when incurred.  Major additions are
capitalized, while minor additions, which do not extend the useful life of an
asset, are charged to operations when incurred.  When property and
equipment are sold or otherwise disposed of, the related cost and accumulated
depreciation is removed from the accounts, and any gain or loss is included in
operations.  Depreciation is calculated using the straight-line
method, in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated useful lives, which range from three to seven
years.  Leasehold improvements are amortized using the straight-line
method over the lives of the respective leases or the service lives of the
improvements, whichever is shorter.
 
 Accounting for Long-Lived
Assets
 
 In
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”, the Company’s
policy is to evaluate whether there has been a permanent impairment in the value
of long-lived assets, certain intangibles and goodwill.  In evaluating
for possible impairment, the Company uses an estimate of undiscounted cash
flows.  Factors considered in the valuation include current operating
results, trends and anticipated undiscounted future cash flows.  The
Company has not recorded any impairment losses since inception.
 
 Intangible
Assets
 
 In
accordance with SFAS No. 142, “Goodwill
and Other Intangible Assets”, intangible assets with an indefinite useful
life are not amortized. Intangible assets with a finite useful life are
amortized using the straight-line method over the estimated useful
life.  All intangible assets are tested for impairment annually during
the fourth quarter of the fiscal year.  The Company had no intangible
assets as of April 30, 2009 and 2008.
 
 Research and
Development
 
 In
accordance with SFAS No. 2, “Accounting
for Research and Development Costs”, Research and Development ("R&D")
expenses are charged to operations when incurred.  R&D is
performed internally, and the Company does not perform R&D for other
entities.  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.
     15
 
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Revenue
Recognition
 
 In
accordance with SEC Staff Accounting Bulletin 101, “Revenue Recognition”, as
amended by Staff Accounting Bulletin 104, 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.
 
 Shipping and Handling
Costs
 
 Amounts
charged to customers for shipping and handling of the Company’s products is
recorded as product revenue.  The related costs are recorded as cost
of sales.
 
 Advertising
 
 Advertising
costs, including direct response advertising costs, are charged to operations as
incurred. Advertising costs charged to expense for the nine months ended April
30, 2009 and 2008 totaled $13,689 and $21,297, respectively.
 
 Stock Based
Compensation
 
 For the
period from inception (November 9, 2005) through July 31, 2006, the Company had
adopted SFAS No. 123, “Accounting for Stock Based
Compensation”.  SFAS No. 123 allowed the Company to adopt a
fair value basis of accounting for stock options and other equity instruments or
to continue to apply the existing accounting required by Accounting Principles
Board (APB) Opinion No. 25, “Accounting for Stock Issued to
Employees”.  The Company has also adopted the disclosure
provisions of SFAS No. 148, “Accounting for Stock Based
Compensation - Transition and Disclosure”.  This pronouncement
requires prominent disclosures in both annual and interim financial statements
about the method of accounting for stock based employee compensation and the
effect of the method used on reporting results.  Effective
August 1, 2006, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (“SFAS 123R”) requiring that 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).  The
Company adopted SFAS 123R using the modified prospective method and,
accordingly, did not restate prior periods to reflect the fair value method of
recognizing compensation cost.  Under the modified prospective
approach, SFAS 123R applies to new awards and to awards that were outstanding on
August 1, 2006 that are subsequently modified, repurchased or
cancelled.
 
  16
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Legal Costs Related to Loss
Contingencies
 
 The
Company accrues legal costs expected to be incurred in connection with loss
contingencies as they occur.  As of April 30, 2009 and 2008, there
were no loss contingencies expected.
 
 Income Taxes
(Benefits)
 
 The
Company utilizes the guidance provided by SFAS No. 109, “Accounting for Income
Taxes”.  Deferred tax assets and liabilities are determined
based on the difference between the basis of assets and liabilities for
financial statement and income tax purposes as measured by the enacted tax rates
that are expected to be in effect when these differences
reverse.  Valuation allowances are provided if necessary to reduce
deferred tax assets to the amount expected to be realized.
 
 The
Company has established a valuation allowance against the deferred tax asset due
to uncertainties in its ability to generate sufficient taxable income in future
periods to make realization of such assets more likely than not.  The
Company has not recognized an income tax benefit for the operating losses
generated during the nine months ended April 30, 2009 and 2008.
 
 At April
30, 2009, the Company had a net operating loss carryforward of approximately
$53,040,000 that may be offset against future taxable income through
2026.  The amount of the income tax benefit for the nine months ended
April 30, 2009 and 2008, before the valuation allowance was applied, totaled
approximately $4,594,000 and $6,771,000, respectively.
 
 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 April 30, 2009 and 2008 as the effect is antidilutive was
544,405,974 and 525,100,000.
 
 Inventory
 
 Inventory
consists of various electronic components used in the assembly of LED lights,
power film and batteries.  Inventory is stated at the lower of cost or
market.  Cost is determined by the first-in, first-out (FIFO)
method.
 
 17
 
 SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 
 NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Comprehensive
Income
 
 The
Company has adopted SFAS No. 130, “TReporting
Comprehensive Income”T. The
statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements.  The statement requires all items that are required to be
recognized under accounting standards as components of comprehensive income to
be disclosed in the financial statements.
 
 Comprehensive
income is defined as the change in equity during a period from transactions and
other events from non-owner sources.  The Company has no components of
comprehensive income and, accordingly, net loss is equal to comprehensive loss
for the nine months ended April 30, 2009 and 2008.
 
 Transfer of Financial
Assets
 
 In March
2006, the FASB issued SFAS 156 “Accounting for Servicing of Financial Assets.”
This Statement amends FASB Statement No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,” with respect
to the accounting for separately recognized servicing assets and servicing
liabilities.  Adoption of this statement has not had any material
effect on the Company’s financial position or results of
operations.
 
 Fair Value of Financial
Instruments
 
 The
Company’s financial instruments, including cash and cash equivalents and
receivables, accounts payable and accrued liabilities including noncash
compensation payable and common stock redemption are carried at cost, which
approximates their fair value, due to the relatively short maturity of these
instruments. The fair value of the investment in EPIR Technologies, Inc. is
discussed in Note G.
 
 Patent
Costs
 
 The costs
of internally developing, maintaining, or restoring such intangibles that are
not specifically identifiable, have indeterminate lives, or are inherent in a
continuing business are charged to expense when incurred.  Costs
capitalized in association with patents totaled $47,008 at April 30,
2009.  Patent costs are included in other assets on the balance
sheet.
 
 Reclassifications
 
 Certain
amounts for the periods ended April 30, 2008 have been reclassified in the
comparative financial statements to be comparable to the presentation for the
period ended April 30, 2009.  These reclassifications had no effect on
net loss as previously reported.
 
 
 18
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 NOTE B -
ACQUISITION OF PATENT RIGHTS FROM SPARX, INC.
 
 On
December 21, 2005, the Company acquired certain patent rights (see Note A) from
Sparx, Inc., a Florida corporation 100% owned by the Company’s Chief Executive
Officer and largest stockholder.  As compensation under this
agreement, the Company has granted Sparx, Inc. a royalty of 4.9% of gross
revenues. The Company has not paid or accrued any royalties to date per an
agreement with the Chief Executive Officer.
 
 The
Company entered into a change of control severance agreement with the Chief
Executive Officer and largest stockholder on December 21, 2005.  If
any person, entity, or group acquires beneficial ownership of 20% or more of the
Company, the Chief Executive Officer is granted voting rights on a number of
common shares that would result in his having a voting majority of shares needed
for any stockholder meeting.
 
 If there
is a change of control of the Company, as defined within the agreement, the
Chief Executive Officer will receive a cash payment equal to the value of his
annual bonus for the performance period that includes the date the change in
control occurred, disregarding any applicable vesting requirements; provided
that such amount will be equal to the product of the target award percentage
under the applicable annual incentive plan or program in effect immediately
prior to the change in control times the base pay, but prorated to base payment
only on the portion of the executive’s service that had elapsed during the
applicable performance period through the change in control.  Such
payments are to be made within five business days after the change in
control.
 
 If the
Company fails to comply with any of the terms of the agreement, any related
legal expenses will be paid by the Company, without respect to whether the Chief
Executive Officer prevails.  Reimbursement for relocation expenses on
a basis consistent with the Company’s practices for senior executives, up to
$50,000, shall be provided to the executive, if the executive is relocated at
the request of the Company within five years of the termination
date.  For a period of twelve months following the termination date,
the Company shall provide the executive with benefits substantially similar to
those that the Chief Executive Officer was entitled to receive immediately prior
to the termination date.
 
 NOTE C -
INCOME TAXES
 
 The
Company's net deferred tax asset as of April 30, 2009 and July 31, 2008 is as
follows:
  2009
                            
                            
                            2008Deferred
      tax assetNet
      operating loss carryforward
                            
                            $
                            19,890,000
                            
                            
                            $
                            15,299,000Valuation
      allowance
                            
                            
                            (19,890,000
                            )
                            
                            
                            (15,299,000
                            )Net
      deferred tax asset
                            
                            $
                            -
                            
                            
                            $
                            -
 
  19
 
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 NOTE C -
INCOME TAXES (CONTINUED)
 
 A
reconciliation of (provision) benefit for income taxes to income taxes at
statutory rate is as follows:
  For
      the Nine
                      
                      
                      For
      the NineMonths
      Ended
                      
                      
                      Months
      EndedApril 30, 2009
                      
                      
                      April 30, 2008Federal
      income (tax) benefitat
      statutory rate
                      
                      $
                      3,920,000
                      
                      
                      $
                      5,778,000State
      (taxes) benefit
                      
                      
                      674,000
                      
                      
                      
                      993,000Valuation
      allowance
                      
                      
                      (4,594,000
                      )
                      
                      
                      (6,771,000
                      )(Provision)
      benefit for income taxes
                      
                      $
                      -
                      
                      
                      $
                      -
 NOTE D -
FURNITURE AND EQUIPMENT, NET
 
 At April
30, 2009 and July 31, 2008 furniture and equipment consisted of the
following:
  April 30, 2009
                    
                    
                    July 31, 2008Computer
      equipment
                    
                    $
                    249,524
                    
                    
                    $
                    221,540Furniture
      and fixtures
                    
                    
                    34,307
                    
                    
                    
                    29,350Leasehold
      improvements
                    
                    
                    36,730
                    
                    
                    
                    36,730320,561
                    
                    
                    
                    287,620Less:
      accumulated depreciation
                    
                    
                    (127,388
                    )
                    
                    
                    (77,005
                    )Furniture
      and equipment
                    
                    $
                    193,173
                    
                    
                    $
                    210,615
 Total
depreciation expense for the nine months ended April 30, 2009 and 2008 was
$50,383 and $31,924, respectively.
  NOTE E -
STOCKHOLDERS' EQUITY
 
 Common
Stock
 
 Effective
November 27, 2007 the Company declared a 1 for 4 reverse stock split of the
Company’s common stock.  The reverse stock split resulted in a
decrease of shares outstanding of 175,455,294 shares.  The par value
of the shares was changed on the same date to $.001 per share.
 
 In
November 2007, the Company exchanged 7,350,000 shares of Acadia Resources, Inc.
common stock (See Note A) for the same number of shares in the
Company.
 
 On
December 4, 2007, the Company declared a 4.5 for 1 forward stock split of the
Company’s common stock, effective to stockholders of record on December 11,
2007.  The stock split resulted in an additional 230,422,843 shares of
the Company’s common stock being issued.
 20
    SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
  NOTE E -
STOCKHOLDERS' EQUITY (CONTINUED)
 
 As of
January 31, 2008, the Company redeemed 37,523,114 shares of Sun Energy Solar,
Inc. common stock at the issuance price of $.10.  Subsequent to
January 31, 2008, the Company issued 28,948,975 shares of Sunovia Energy
Technologies, Inc. common stock to shareholders who chose not to receive cash
for their shares.  Cash payments totaling $207,385 were made to
shareholders of Sun Energy Solar, Inc.  There are 6,500,000 shares of
Sunovia Energy Technologies, Inc. common stock still to be issued.
 
 NOTE F -
RENTAL AND LEASE INFORMATION
 
 Operating
Leases
 
 The
Company leases office space/warehouse facilities in Sarasota, Florida under an
operating lease.  The lease term is for a period of three years and
commenced on October 1, 2006.  The base rent over the term is
approximately $134,000.  The company is responsible for all taxes,
insurance and utility expenses associated with the leased
property.  Rental expense for the nine months ended April 30, 2009 and
2008 totaled $51,908 and $49,876, respectively.  Future minimum rental
payments are as follows:
  Through
      July 31, 2009
                        
                        $
                        11,220Through
      October 31, 2009
                        
                        
                        11,220$
                        22,440
 
 
 NOTE G -
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 partnership 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
partnership 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
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.  The
Company has not recognized any loss in the value of its investment in
EPIR.
   21
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 NOTE G -
INVESTMENT IN EPIR TECHNOLOGIES, INC. (CONTINUED)
 
 The
carrying value of the investment in EPIR is $3,780,385. The fair value is
believed to approximate $4,000,000 as of April 30, 2009. The fair value is based
on estimates using pricing models that take into account the earning capacity of
EPIR as of the balance sheet date. The computation of the fair value was
performed by the Company.
 
 Payments
as shown on the following schedule through June 1, 2009 have been made by the
Company.
 
 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, 2018500,000
                                
                                
                                October
      1, 2018$     23,700,000
  22
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
  
 NOTE G -
INVESTMENT IN EPIR TECHNOLOGIES, INC. (CONTINUED)
 
 In April,
2009, the Company and EPIR entered into an Amendment to the research,
development, and supply agreement. As of April 15, 2009, the Company has made
all scheduled payments to EPIR pursuant to the terms and condition of the
Agreement in the aggregate amount of approximately $6,700,000.  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) accelerates the Company’s payment of the June 1,
2009 scheduled payment and (ii) allows the Company to issue and deliver to EPIR
warrants for the purchase of the Company’s stock (see Note O). Therefore in
consideration of the mutual covenants and other valuable consideration, the
Company and EPIR (“the Parties”) agree as follows:
 
 The
Company’s Obligations: In exchange for, and as an integral part of, EPIR’s
entering into the Amendment, the Company shall deliver, or cause to be
delivered, to EPIR, for no cash or other consideration (except as set forth
herein):
 
 a.
              The
      June 1, 2009 scheduled payment of $1,000,000 within 72 hours of the
      Parties’ execution of the Amendment by wire transfer of immediately
      available funds to a bank designated by EPIR
and
 
 b.
              Issuance
      to EPIR of a warrant (the “Warrant”) to purchase 25,000,000 shares of the
      Company’s common stock at an exercise price equal to $0.10 per
      share
 
 Immediately
upon the date in which EPIR receives the accelerated payment, the Company, in
its sole discretion, shall, 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.
 
 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 have agreed to cancel 4,495,000 shares
each of their outstanding common stock to offset the dilution to the Company’s
common stock shares.
 
 NOTE H –
SEGMENT INFORMATION
 
 During
the year ended July 31, 2007, the Company was organized into operating segments
based on product groupings. Prior to this date, the Company did not have
lighting product. 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.
   23
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 NOTE H –
SEGMENT INFORMATION (CONTINUED)
 
 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 Substrate segment consist of cash, capitalized patent costs, and
inventory. Assets of the Lighting Product segment consist of inventory. All
other assets including prepaid expenses, deposits, and fixed assets are
allocated to Corporate and Other.
 
 Consolidated Operations by Business
      Segment

                                                For the nine months ended April 30,
      2009Solar
                                              Substrate
                                            
                                            
                                            Lighting
                                              Product
                                            
                                            
                                            Corporate
                                              and
      OtherNet
      sales
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            886,135
                                            
                                            
                                            $
                                            -Operating
      loss
                                            
                                            $
                                            (6,029,171
                                            )
                                            
                                            $
                                            (5,824,394
                                            )
                                            
                                            $
                                            (427,446
                                            )Interest
      income
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            33,770Depreciation
      and amortization
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            50,383Assets
                                            
                                            $
                                            3,780,385
                                            
                                            
                                            $
                                            989,651
                                            
                                            
                                            $
                                            876,303
  For the nine months ended April 30,
2008
 Solar
                              Substrate
                            
                            
                            Lighting
                              Product
                            
                            
                            Corporate
                              and
      OtherNet
      sales
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Operating
      loss
                            
                            $
                            (11,290,231
                            )
                            
                            $
                            (5,565,563
                            )
                            
                            $
                            (1,264,915
                            )Interest
      income
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            63,889Depreciation
      and amortization
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            (31,924
                            )Assets
                            
                            $
                            2,732,537
                            
                            
                            $
                            15,104
                            
                            
                            $
                            4,115,660
 
 NOTE I -
RETIREMENT PLAN
 
 Effective
January 1, 2007, the Company implemented a 401(k) plan, which allows all
eligible employees to contribute a percentage of their salary and receive a safe
harbor matching contribution from the Company which cannot exceed certain
maximum defined limitations.  The retirement expense for the nine
months ended April 30, 2009 and 2008 was approximately $15,900 and $12,500,
respectively.
 
    24
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
   NOTE J -
COMMITMENTS AND CONTINGENCIES
 
 In the
normal course of business, the Company is subject to litigation.  The
Company believes that any adverse outcome from potential litigation would not
have a material effect on its financial position or results of
operations.
 
 NOTE K -
RELATED PARTY TRANSACTIONS
 
 Transactions
with related parties during the nine months ended April 30, 2009 and 2008,
include the consulting agreements discussed in Note M and the stock options
discussed in Note O.
 
 NOTE L -
RISKS AND UNCERTAINTIES
 
 Operating
results may be affected by a number of factors.  The Company is
dependent upon a number of major inventory and intellectual property
suppliers.  Presently, the Company does not have formal arrangements
with any supplier, and shortages of key solar components exist in the
industry.  In the future, if the Company is unable to obtain
satisfactory supplier relationships, or a critical supplier had operational
problems, or ceased making material available, operations could be adversely
affected.
 
 NOTE M -
EMPLOYMENTCONTRACTS AND CONSULTING
AGREEMENTS
 
 The
Company has signed a series of contracts with stockholders, directors, and
consultants as listed below:
 
 In June
2006, the Company entered into a one-year employment agreement with its Chief
Executive Officer.  Under the employment agreement, the Chief
Executive Officer received a base salary of two million shares of common stock
per year.  The employment agreement further provided up to two million
shares of common stock for each year of service beginning June,
2007.  In May 2008, the Company entered into a new contract with its
Chief Executive Officer that reduces compensation to employee benefits
only.
 
 In June
2006, the Company entered into an employment agreement with its Co-founder and
current Business Development Representative.  Under the employment
agreement, the Co-founder and current Business Development Representative
received a base salary of two million shares of common stock per
year.  The employment agreement further provided up to two million
shares of common stock for each year of service beginning June,
2007.  In May, 2008, the Company entered into a new contract with its
Co-founder and Business Development Representative that reduces compensation to
employee benefits only.
 
 In July
2006, the Company entered into a one-year employment agreement with the
President.  Under a revised employment agreement dated January 25,
2007, the Company granted the President two million three hundred fifty thousand
shares of common stock initially and five hundred thousand shares for each
quarter of service.  The employment agreement granted the President
cash remuneration of $150,000 per year and a one-time payment of $60,000. In May
2008, the Company entered into a new contract with its President that eliminated
all equity compensation but retained all other terms.
 
 
 25
 
 SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
   NOTE M -
EMPLOYMENTCONTRACTS AND CONSULTING
AGREEMENTS (CONTINUED)
 
 In May
2006, the Company entered into a one-year employment agreement with its current
Chief Financial Officer.  Under the employment agreement, the Company
granted the current Chief Financial Officer one million shares of common stock
for each year of service after his initial year of employment in addition to his
two million founding shares.  The employment agreement was
automatically renewable each year and was subject to conditional vesting based
on the completion of each year of service.  The employment agreement
grants the Chief Financial Officer an annual salary of $100,000 per year. In May
2008, the Company entered into a new contract with its Chief Financial Officer
with the same terms with an additional provision to receive 488,060 stock
options to purchase common stock at $0.62 per share (see Note O).
 
 Effective
May 1, 2008, the Company entered into new employment agreements with its
employees. These agreements supersede all employment agreements between the
Company and the employees. Under the new agreements, 4,880,600 stock options
were granted to ten employees (see Note O).
 
 In May
2006, the Company entered into a consulting agreement with an individual who had
worked with the Company in its initial stage whereby the individual would
develop relationships with customers that the Company considers crucial to its
development and long term success. On March 17, 2008, the Company and the
individual entered into an amended and restated consulting agreement whereby the
individual would provide the Company with services related to the introduction
of the Company to nationally recognized entities for product distribution
opportunities, introduction to potential sales leads and acting as a liaison to
various corporations.  The term of the agreement began on May 22, 2006 and
is effective through May 2009. As compensation for providing such services, the
Company issued to the individual (i) an option to purchase an aggregate of
25,000,000 shares of common stock of the Company at an exercise price of $0.005
on a cashless basis for a term of seven years (see Note O) and (ii) an option to
purchase an aggregate of 5,000,000 shares of common stock of the Company at an
exercise price of $0.005 on a cashless basis for a term of seven years, which
were issued in January 2009. In May 2008, 25,000,000 options were exercised on a
cashless basis.
 
 In July
2007, the Company entered into a two-year agreement with a strategic business
advisor.  The business advisor will scrutinize Company products and
opportunities, and will make recommendations that he feels will be important to
realizing value and furthering efficiencies within the Company.  The
agreement was revised in October, 2008. Under the revised agreement, the advisor
received a fee of 1,000,000 shares of common stock.  In October 2008,
the Chief Executive Officer agreed to effectively cancel options covering
3,000,000 shares of common stock (see Note O). The equivalent options will be
issued to the strategic business advisor under the revised agreement with 1/3
vesting as of the effective date of the contract, 1/3 vesting on July 16, 2009,
and the remainder on July 16, 2010.
 
 In August
2007, the Company entered into a ten year agreement with an individual to serve
as a scientific advisor to the Company.  Under the agreement the
Company granted the principal 6,000,000 shares of common stock initially and
1,666,666 shares for each year of service commencing with the completion of the
second year of services and terminating at the completion of the tenth year of
services.
 
  26
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
  NOTE M -
EMPLOYMENTCONTRACTS AND CONSULTING
AGREEMENTS (CONTINUED)
 
 In August
2007, the Company entered into a six month consulting agreement with an
individual. The consultant will render engineering services in accordance with
generally accepted and currently recognized engineering practices, procedures,
and principles. In consideration for services rendered, the Company has accrued
a fee of 500,000 shares of common stock.
 
 In
December, 2007, the Company entered into a one year consulting agreement with an
individual.  The consultant renders research, product development, and
strategic partnership development advice.  In consideration for
services rendered, the Company pays the consultant a fee equal to 125,000 shares
of common stock every three months.  In addition, the Company provided
an option to purchase up to 100,000 shares of the Company’s common stock at an
exercise price of $0.10 per share and an expiration date of December 31, 2009
(see Note O).
 
 In
February, 2008, an entity which the Company has agreed to finance, entered into
a research and development agreement with an educational institution in exchange
for certain patent rights. The educational institution will perform research and
development services and assign intellectual property created during the course
of those services to the entity, who in turn will assign such rights to the
Company.  During the nine months ended April 30, 2009, the Company
paid $200,000 to the educational institution. The Company paid $625,000 to the
educational institution during the year ended July 31, 2008.  If an
agreement is made to extend the agreement to the second year, the Company will
pay an additional $2,000,000. If a decision is made to extend the agreement to
the third year, the Company will make a final payment of
$1,000,000.
 
 In June,
2008, the Company entered into a one year strategic sales, marketing, sourcing,
consulting and representation agreement with a professional organization. The
organization will act as the Company’s non-exclusive sales
representative.  The Company will also pay a 2% sales commission. The
Company has also agreed to pay the organization $100,000 per year payable
monthly as well as 500,000 shares annually of common stock paid quarterly
beginning October 1, 2008 during the term of the agreement.
 
 In June,
2008, the Company entered into a three year consulting agreement with an
individual. The individual will provide advice and recommendations and introduce
the Company to nationally recognized entities. In consideration for services
rendered, the Company has issued the consultant a fee of 265,000 shares of
common stock.
 
 In June,
2008, the Company entered into a three month consulting agreement with a
company. The consultant will provide advice to the Company in corporate
development and strategic planning. In consideration for services rendered, the
Company pays the consultant a fee equal to $2,500 and 15,000 shares of common
stock per month.
 
 In June,
2008, the Company entered into an agreement with a company. The consultant will
serve as the Company’s principle engineering consultant for strategic product
development and marketing support efforts. In consideration for services
rendered, the Company will pay the consultant on an hourly basis. In addition,
the Company will also provide an option to purchase up to 3,000,000 shares of
the Company’s common stock at an exercise price of $0.10 per share. The options
vest according to a schedule over a period of three years.  500,000
options vested during the year ended July 31, 2008 (see Note O).
 
  27
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
  NOTE M -
EMPLOYMENTCONTRACTS AND CONSULTING
AGREEMENTS (CONTINUED)
 
 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. as compensation. The Company’s
Chief Executive Officer and Business Development Representative have agreed to
cancel 4,495,000 shares of their common stock each to offset the dilution to the
Company’s common stock (see Note G).
 
 In
October 2008, the Company entered into a two year consulting agreement with an
organization. The organization will provide assistance with (i) expansion and
growth, (ii) brand building, (iii) public relations, marketing and business
development, (iv) strategic advice and assistance in Washington and key states,
and (v) assistance with the advisory board and other personnel matters. In
consideration for services rendered, the Company will pay the organization a
monthly retainer amount of $10,000. Upon closing of additional financing which
is expected to be during the first quarter of 2009, the monthly retainer will be
increased to $25,000. The agreement requires the Company to issue the
organization 100,000 shares of common stock on the first day of each quarter
beginning in the first quarter of 2009 and ending in the fourth quarter of 2010.
The Company issued the organization an option to purchase 200,000 shares of the
Company’s common stock with an expiration period of five years and an exercise
price of 75% of the market bid price as of the date of the
grant.   In October 2008, the Chief Executive Officer agreed to
effectively cancel options covering 500,000 shares of common stock. The
equivalent options were then issued to the organization. The 700,000 options
vested during the nine months ended April 30, 2009. (see Note O)
 
 In
October 2008, the Company entered into a one year consulting agreement with a
consulting company. This agreement was revised in November 2008. The consulting
company will (i) assist with the development of advertising and marketing
programs and materials, (ii) review and make any necessary modifications to the
Company press releases, collaterals, presentations, and other sales, and
marketing and promotional materials, (iii) assist with key executive searches
and offer executive qualification evaluations,  (iv) consult biweekly
with the President and/or CEO of the Company, (v) attend select meetings with
the President and/or CEO of the Company, and (vi) assist with due diligence of
potential acquisitions and partnerships. In consideration for services rendered,
the Company will pay the consulting company a fee of $15,000 per month. These
payments have been suspended subsequent to April 30, 2009. During the nine
months ended April 30, 2009, the consulting company received stock options
consisting of 1,900,000 shares of common stock of the Company. The consulting
company received an option for an additional 1,900,000 shares of common stock of
the Company in March 2009.
 
 In
January 2009, the Company entered into a three year consulting agreement with an
individual. The individual will provide advice and recommendations to the
Company and introduce the Company to nationally recognized entities. In
consideration for services rendered, the consultant will receive options
consisting of 1,900,000 shares of common stock of the Company. The Company
entered into two additional consulting agreements with two individuals who are
employed by the above consultant. The term of the agreements is three years.
These individuals will provide advice and recommendations to the Company and
introduce the Company to nationally recognized entities. In consideration for
services rendered, the consultants will each receive options consisting of
50,000 shares of common stock of the Company.
 
 
 28
    SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 NOTE M -
EMPLOYMENTCONTRACTS AND CONSULTING
AGREEMENTS (CONTINUED)
 
 In March
2009, the Company entered into a three year consulting agreement with an
individual. The individual will render engineering services in accordance with
generally accepted and currently recognized engineering practices, procedures,
and principles. In consideration for services rendered, the individual will
receive $100,000 per year as well as a bonus of 5% of any governmental grants or
investment capital that is procured through the direct efforts of the
individual.
 
 NOTE N -
STOCK COMPENSATION
 
 The
Company has recorded expenses, paid or accrued in common stock or common stock
options, of $6,396,852 and $4,775,121 for the nine months ended April 30, 2009
and 2008, respectively. For the nine months ended April 30, 2009 consulting
expenses paid or accrued for payment in common stock or common stock options,
totaled $6,396,852.  For the nine months ended April 30, 2008, salary,
consulting and research and development expenses paid or accrued for payment in
common stock, totaled $2,215,204, $1,959,917, and $600,000,
respectively.
 
 NOTE O –
STOCK OPTION PLANS
 
 The
Company granted stock options to its Chief Executive Officer under a stock
option agreement dated December 20, 2005.  The 2005 stock option
agreement provides for the granting of non-qualified and incentive stock options
to purchase up to 500,000,000 shares of common stock for a period not to exceed
15 years.  The options are vested.  Under the agreement, the
option exercise price equals $.10, which was the stock's market price on the
date of grant.  In December, 2007, the Chief Executive Officer then
transferred the options to Craca Properties, LLC, which he had become 100% owner
of. In October, 2008, the CEO agreed to cancel the equivalent of .7% of his
common stock options covering 3,500,000 shares. The equivalent options were then
issued to two consultants of the Company (See Note M). 1,500,000 vested in
October 2008, 1,000,000 will vest on July 16, 2009, and the remaining 1,000,000
will vest on July 16, 2010.
 
 The
Company measured compensation for 500,000,000 common stock options under APB
Opinion No. 25. No compensation cost has been recognized as the purchase price
for the options was at or above the fair market value of the underlying stock at
the date of grant.
 
 On
December 6, 2007, options for 100,000 shares were issued to a consultant to the
Company for services, exercisable at a price of $.10. The total consulting
expense related to these options totaled $20,080.
 
 On March
17, 2008, options for 25,000,000 shares were issued to another consultant to the
Company for services, exercisable at a price of $.005. The total consulting
expense related to these options totaled $6,215,000. These options were
exercised on a cashless basis in May 2008.
 
 The fair
values of the December 6, 2007 and the March 17, 2008 options are estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions used: risk-free interest rates of 6%, expected volatility
of 130% and expected lives of 2-7 years.  No dividends were assumed in
the calculations.
    29
  SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 NOTE O –
STOCK OPTION PLANS (CONTINUED)
 
 In April
2008, the Company’s Board of Directors approved the 2008 Incentive Stock Plan
which authorizes, up to a maximum of 30,000,000 shares, the granting of awards
to key employees, directors, and consultants in the form of options to purchase
the Company’s common stock or restricted stock. The Company’s Board of Directors
determines the number of shares, the term, the frequency and date, the type, the
exercise periods, any performance criteria pursuant to which awards may be
granted and the restrictions and other terms and conditions of each grant of
restricted shares in accordance with the terms of the plan. The Company measures
compensation for these options under SFAS 123R.  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).
 
 On May 1,
2008, options for 4,880,600 shares were issued to ten employees for services,
exercisable at a price of $.62. The options terminate five years from the date
of the option agreement.  The total salary expense related to these
options totaled $2,787,009 (see Note M).  There is no unrecognized
compensation cost related to unvested options at April 30, 2009.
 
 On June
6, 2008, options for 3,000,000 shares were granted to a consultant, exercisable
at a price of $.10.  The options vest over a period of three years,
with 500,000 options vesting during the year ended July 31,
2008.  500,000 additional options vested during the nine months ended
April 30, 2009. The consulting expense related to these vested options totaled
$690,644.  Unrecognized consulting costs of $3,150,551 related to
unvested options will be recognized over the vesting period.
 
 The fair
values of the May 1, 2008 and June 6, 2008 options are estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions used: risk-free interest rates of 6%, expected volatility of 130%
and expected life of 3 years.  No dividends were assumed in the
calculations.
 
 On
October 1, 2008, the Chief Executive Officer effectively cancelled 500,000 of
his 500,000,000 outstanding options. The equivalent options were then issued to
a consultant under an agreement dated October 1, 2008 (see Note M). The
consulting expense related to these options totaled $324,150. The Company also
granted an option for an additional 200,000 shares of common stock to the
consultant on October 1, 2008, exercisable at $.4875. The consulting expense
related to these options totaled $116,020.
 
 On
October 28, 2008, the Chief Executive Officer agreed to effectively cancel
options covering 3,000,000 shares (see Note O). The equivalent options will be
issued to the strategic business advisor under the revised agreement. 1,000,000
shares vested retroactively as of the original date of the contract of July
2007. 1,000,000 shares will vest on July 16, 2009 with the remainder vesting on
July 16, 2010. The consulting expense related to these options totaled
$1,400,000. The unrecognized compensation cost associated with these options is
$1,000,000.
 
 On
November 13, 2008, options for 3,800,000 shares, exercisable at $.10, were
granted to a consultant. The options vested during the nine months ended April
30, 2009. The consulting expense related to these options totaled
$1,919,054.
 
 
 30
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 The fair
values of the October 1, 2008 options for 200,000 shares and the November 13,
2008 options for 1,900,000 shares are estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used:
risk-free interest rates of 6%, expected volatility of 130% and expected life of
5 years.  No dividends were assumed in the calculations.
 
 The fair
values of the October 1, 2008 and October 28, 2008 options for 500,000 and
1,000,000 shares are estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions used: risk-free interest
rates of 6%, expected volatility of 130% and expected life of 15
years.  No dividends were assumed in the calculations.
 
 On
December 31, 2008, options for 100,000 shares were issued to a consultant to the
Company for services, exercisable at a price of $.10. The consulting expense
related to these options totaled $20,674.
 
 On
January 1, 2009, options for 5,000,000 shares were issued to a consultant to the
Company for services, exercisable at a price of $.005. The consulting expense
related to these options totaled $843,582.
 
 On
January 1, 2009, options for 162,687 shares were each issued to two employees of
the Company for services, exercisable at $.62. The consulting expense related to
these options totaled $15,928.
 
 On
January 27, 2009, options for 1,900,000 shares were granted to a consultant to
the Company for services, exercisable at a price of $.10. The options vest over
a period of three years, with 8.33% vesting each quarter. Options for 100,000
shares were also issued to two individuals that work for this consultant,
exercisable at a price of $.10. The consulting expense related to these options
totaled $14,572.  The unrecognized compensation expense associated
with these options is $160,365.
 
 The fair
value of the December 31, 2008 options for 100,000 shares is estimated on the
date of grant using the Black-Scholes option pricing model with the following
assumptions used: risk-free interest rates of 6%, expected volatility of 130%
and expected life of 1 year.  No dividends were assumed in the
calculations.
 
 The fair
value of the January 1, 2009 options for 5,000,000 shares is estimated on the
date of grant using the Black-Scholes option pricing model with the following
assumptions used: risk-free interest rates of 6%, expected volatility of 130%
and expected life of 7 years.  No dividends were assumed in the
calculations.
 
 The fair
value of the January 1, 2009 options for 162,687 shares is estimated on the date
of grant using the Black-Scholes option pricing model with the following
assumptions used: risk-free interest rates of 6%, expected volatility of 130%
and expected life of 3 years.  No dividends were assumed in the
calculations.
 
 The fair
value of the January 27, 2009 options for a total of 2,000,000 shares is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions used: risk-free interest rates of 6%, expected
volatility of 130% and expected life of 1 year.  No dividends were
assumed in the calculations.
    31
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 NOTE O –
STOCK OPTION PLANS (CONTINUED)
 
 On April
15, 2009, warrants for 25,000,000 shares were granted to EPIR for research,
exercisable at a price of $.10 (see Note G). The research expense related to
these warrants totaled $2,305,131.
 
 The fair
value of the April 15, 2009 warrants for 25,000,000 shares is estimated on the
date of grant using the Black-Scholes option pricing model with the following
assumptions used: risk-free interest rates of 2.82%, expected volatility of 130%
and expected life of 7 years.  No dividends were assumed in the
calculations.
 
 A summary
of the Company’s stock option activity is as follows for the nine months ended
April 30, 2009 and for the year ended July 31, 2008.
 
 April 30, 2009
                    
                    
                    July 31, 2008Weighted
      average
                    
                    
                    
                    
                    
                    Weighted
      averageOptions
                    
                    
                    exercise
      price
                    
                    
                    Options
                    
                    
                    exercise
      priceOptions
      outstanding atbeginning
      of year
                    
                    
                    507,980,600
                    
                    
                    $
                    0.100
                    
                    
                    
                    500,000,000
                    
                    
                    $
                    0.100Options
      granted
                    
                    
                    39,925,374
                    
                    
                    
                    0.081
                    
                    
                    
                    32,980,600
                    
                    
                    
                    0.100Options
      cancelled
                    
                    
                    (3,500,000
                    )
                    
                    
                    0.100Options
      exercised
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (25,000,000
                    )
                    
                    
                    0.005544,405,974
                    
                    
                    $
                    0.108
                    
                    
                    
                    507,980,600
                    
                    
                    $
                    0.105
 
 The
information with respect to stock options outstanding at April 30, 2009 is as
follows:
  Options OutstandingWeighted
      averageNumber
                      
                      
                      Remaining
                      
                      
                      Weighted
      average
                      
                      
                      Aggregate
      IntrinsicOutstanding
                      
                      
                      Contractual
      Term
                      
                      
                      exercise
      price
                      
                      
                      Value528,900,000
                      
                      
                      
                      12.60
                      
                      
                      $
                      0.100
                      
                      
                      $3,000,000
                      
                      
                      
                      15.00
                      
                      
                      
                      0.800200,000
                      
                      
                      
                      5.00
                      
                      
                      
                      0.4884,880,600
                      
                      
                      
                      3.00
                      
                      
                      
                      0.6205,000,000
                      
                      
                      
                      7.00
                      
                      
                      
                      0.005
                      
                      
                      
                      375,0002,000,000
                      
                      
                      
                      5.00
                      
                      
                      
                      0.100100,000
                      
                      
                      
                      1.00
                      
                      
                      
                      0.100325,374
                      
                      
                      
                      3.00
                      
                      
                      
                      0.100544,405,974
                      
                      
                      
                      12.80
                      
                      
                      $
                      0.108
                      
                      
                      $
                      375,000
 
  32
 SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 NOTE O –
STOCK OPTION PLANS (CONTINUED)
 
 Aggregate
intrinsic value in the table above represents the total pre-tax intrinsic value
(difference between the Company’s closing stock price on April 30, 2009 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 April 30, 2009.  This amount changes based on the
fair market value of the Company’s stock.
 
 The
information with respect to stock options vested at April 30, 2009 is as
follows:
  Options VestedWeighted
      averageNumber
                      
                      
                      Remaining
                      
                      
                      Weighted
      average
                      
                      
                      Aggregate
      IntrinsicOutstanding
                      
                      
                      Contractual
      Term
                      
                      
                      exercise
      price
                      
                      
                      Value527,066,600
                      
                      
                      
                      12.64
                      
                      
                      $
                      0.1001,000,000
                      
                      
                      
                      15.00
                      
                      
                      
                      0.800200,000
                      
                      
                      
                      5.00
                      
                      
                      
                      0.4884,880,600
                      
                      
                      
                      3.00
                      
                      
                      
                      0.6205,000,000
                      
                      
                      
                      7.00
                      
                      
                      
                      0.005
                      
                      
                      
                      375,000100,000
                      
                      
                      
                      1.00
                      
                      
                      
                      0.100325,374
                      
                      
                      
                      3.00
                      
                      
                      
                      0.620538,572,574
                      
                      
                      
                      12.49
                      
                      
                      $
                      0.106
                      
                      
                      $
                      375,000
 
 NOTE P -
RECENT ACCOUNTING PRONOUNCEMENTS
 
 In March
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”)
No. 161, “Disclosures about Derivative Instruments and Hedging Activities,
an amendment of FASB Statement No. 133”, which requires additional
disclosures about (a)
how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. The Company has not yet determined what effect, if any, adoption of
this Statement will have on the Company’s financial position or results of
operations.
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”).  SFAS 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
accounting principles generally accepted in the United States of America
(GAAP).  SFAS 162 directs the GAAP hierarchy to the entity, not the
independent auditors, as the entity is responsible for selecting accounting
principles for financial statements that are presented in conformity with
GAAP.  SFAS 162 is effective 60 days following the Securities and
Exchange Commission’s approval of the Public Company Accounting Oversight Board
amendments to remove the GAAP hierarchy from the auditing
standards.  The Company does not expect SFAS 162 to have a material
impact on its consolidated financial statements.
   33
   SUNOVIA
ENERGY TECHNOLOGIES, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE
THREE AND NINE MONTHS ENDED APRIL 30, 2009 AND 2008
 
 
 NOTE P –
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
 
 In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts” (“SFAS 163”). SFAS 163 requires that an insurance
enterprise recognize a claim liability prior to an event of default when there
is evidence that credit deterioration has occurred in an insured financial
obligation. This Statement also clarifies how Statement 60 applies to financial
guarantee insurance contracts, including the recognition and measurement to be
used to account for premium revenue and claim liabilities. The Company does not
expect SFAS 163 to have a material impact on its consolidated financial
statements.
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Specifically, SFAS 165 provides (1) the period after
the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, (2) the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and (3) the disclosures that an entity should
make about events or transactions that occurred after the balance sheet date.
The Company has not yet determined what effect, if any, adoption of this
Statement will have on the Company’s financial position or results of
operations.






34






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 nine months and three months ended April
30, 2009; 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.




Available
Information




The
Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a)
and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)
are filed with the Securities and Exchange Commission (“SEC”). Such reports and
other information filed by the Company with the SEC are available on the
Company’s website at sunoviaenergy. com when such reports are available on the
SEC website. The public may read and copy any materials filed by the Company
with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580,
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy, and information statements and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov. The contents of these websites are not incorporated into
this filing. Further, the Company’s references to the URLs for these websites
are intended to be inactive textual references only.






RECENT
DEVELOPMENTS





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 ending July 31, 2008 and the Quarterly Report on Form
10-Q for the period ending January  31, 2009. For the quarter ended
April 30, 2009, we have accomplished the following:





·
            We
      have shipped the majority of our first order of our new roadway and
      walkway lights for the Town of Fairview Texas, which we believe will open
      a significant market for the Company.  In addition, we have we
      have a second order for Fairview Fire House that will be completed and
      shipped in March or early April. This order is significantly smaller, but
      resulted from the excitement over our lights being purchased by the Town
      of Fairview. These designs optimize the LEDs by directing the light and
      creating the desired light pattern to meet IES street-lighting compliance
      standards, while simultaneously reduce the cost of
      energy.  These LED lights will be demonstrated, as a case study,
      to a group of engineers attending the IES Street Lighting Conference on
      March 19, 2009.  With the addition of these lights to our
      portfolio (which also includes the Beacon decorative post top lights), we
      should soon be a leader in the decorative street lighting
      market.





·
            We
      are completing the design work on LED Cobra Head streetlights, including a
      retrofit; we have issued preliminary cut sheets and pricing to begin
      pre-sales. They will be retrofit-ready for fixtures that are currently
      installed throughout the country. Cobra heads are America’s most common
      street light, and currently use a sodium halide technology. This project
      was delayed because the aiming and placement of the LEDs is more difficult
      in this product due to the height of the light and the light spread that
      is required in this application. We believe our LED technology will
      represent a technological breakthrough resulting in energy and cost
      savings in comparison to products currently available on the
      market.





·
            The
      LED parking garage light has begun the prototyping and design for
      manufacturing process and should be ready for testing and
      distribution.





·
            We
      have applied to have our products included in the U.S. Government’s
      General Services Administration (GSA) catalog. Once this is completed and
      our price list is finalized and accepted by GSA, this price list becomes
      our federal price list and can be used to sell our products to government
      entities, opening a new distribution channel previously unavailable to
      us.





·
            Our
      Canopy light design has been completed and we have initiated the prototype
      process. With a few months, we should be in production.  We are
      striving for a low-cost product that meets less stringent outdoor
      requirements. We adopted a streamlined process for this project and plan
      to apply this technique to at least some other projects to build off the
      work that we have done on LED lights to
date.





·
            We
      have completed the design for a garden light for a customer and are
      obtaining pricing on a prototype.  The projected sales through
      this one customer are 2000 units per month, but there are various other
      sales channels for this product that we will begin to pursue as
      well.  It is intended to be a low-cost, LED landscape
      light.








35







·
            We
      have executed a letter of agreement with the Department of Energy of the
      government of the Dominican Republic to construct a 20 megawatt solar
      concentrator photovoltaic facility in Santo Domingo, Dominican Republic,
      subject to various terms and conditions.  A comprehensive formal
      agreement is currently being created that sets forth the obligations,
      terms and conditions specific to any and all aspects of the solar
      concentrator photovoltaic facility.  The company expects to sign the
      formal agreement during on or before the end of 2009, but until said
      formal agreement is executed by the Company and the Department of Energy
      of the Dominican Republic, the Company cannot guarantee any aspects of the
      transaction.





·
            We
      have obtained a distribution contract with Rayovac, for our emergency
      lighting product, ImpulseTM, which is a patented, simple to install, LED
      switch plate that detects when the power goes out and activates an
      emergency battery-powered LED light.  Rayovac has exclusive
      global rights to market the product provided they generate sufficient
      volume to warrant exclusivity.





·
            We
      are beginning to develop retrofit products that convert traditional
      lighting to LED Lighting.  The retrofit kit approach makes it
      much easier to convert to LEDs. We have submitted patents on our retrofit
      kit concept.





·
            We
      have obtained contracts for our infrared products research division and
      signed an agreement with a South Korea company during the calendar year
      2009.





·
            We
      partnered with a major international lighting firm for an energy savings
      proposal for the City of Sarasota, Florida. Our partner will act as the
      ESCO (Energy Savings Company) Provider, with EvoLucia in partnership with
      Beacon Products providing the lighting component of the energy savings
      proposal. ESCO Providers offer an arrangement to the customer whereby they
      certify the cost savings, provide upfront financing, and are paid from the
      savings. We plan to use this technique to help sell more products to the
      current markets.





·
            The
      Company now has its first interior light available for sale – a track
      light it has private-labeled from a Chinese supplier. The light features
      energy savings and long life, which we have installed in our company’s
      lobby.








We
continue to face challenges, particularly as follows:





·
            We
      find that the initial orders have delays and issues requiring further
      attention. Also, our business has rapidly changing prices due to
      technology changes that effect pricing decisions.  While our new
      LED products could be very profitable in the long run, the development and
      tooling cost need to be recovered through the initial
    sales.





·
            Like
      all companies, we face challenges related to economic issues worldwide.
      These affect quantities bought, upfront prices customers are willing to
      pay, and general attitudes regarding risk, as well as ability to raise
      capital, which is still crucial to implementation of our overall business
      plan.  Presently, we have several Volume Purchase Orders where
      the quantity ordered is far less to date than originally projected. For
      one of our product families we spent more on product upgrades than we
      sold. While many of our lights are upgrades of existing lights on the
      market, where customers can more clearly evaluate long-term benefits when
      making decisions regarding purchases, completely new products such as
      Impulse have even greater risks.





·
            Our
      first 16.8-Watt power supply has been approved by UL and is in production.
      However, the cost of development has proven to be greater than we could
      economically justify, and we have decided to use the products of other
      vendors. We may in the future resume this program, although presently we
      plan to outsource all activity in this
area.





·
            Our
      infrared research products are associated with the military, and with the
      change in administration, military spending and underlying needs may be
      revised, and contract profit margins may not ultimately be as high with
      this type of work as we originally planned. In time we look to develop
      more profitable product lines arising from this work in addition to the
      solar applications of infrared, but this is currently in the planning
      stage.





·
            We
      entered into an agreement with Rayovac for exclusive global marketing
      rights for our LED Switchplate product, but they have recently filed for
      protection under Chapter 11 of the U.S. Bankruptcy Code. This, combined
      with other difficulties in the project, particularly with respect to
      adequacy of the Intellectual property underlying the project and problems
      in the relationship with Direct One Source, our partner in the project,
      have resulted in its cancellation.





Our
lighting customers at this point have been original equipment manufacturers and
system integration providers who demand reliable LED lighting solutions, but we
are selling more and more directly to the customer. Since the inception of the
LED Lighting Division, EvoLucia, the emphasis for our engineers has been to
design the LED System rather than parts of the system that do not necessarily
perform optimally as a whole.  As we emerge from the development
stage, we are aligning ourselves with partners in the solid-state lighting
division who can be instrumental in the development of significant sales
channels for the products we will be releasing in2009. In the near future, we hope to
developmore of our own sales and marketing group, but at this stage of
the lighting division, it is most cost effective to use already established
sales channels to promote our solid state lighting products.








36





In
addition, we have sought out LED Lighting products that we can private label and
sell to our customers.  These products are LED Bulbs, LED Track
Lighting and an LED Utility Light. We are in the process of completing an
application through the federal GSA program to become a vendor in the government
system. While we have started with a few basic products, as we add products
to our line, we believe the sales should increase proportionately and a new
revenue stream should be developed for the company.





Several
presentations have made to utility companies as we have partnered strategically
with contractors and other lighting companies to win renewable energy contracts
through local municipalities.  While these sales are long-term
projects, they can yield significant revenue at some point.  As we
become more skilled in making presentations to this type of customer, the
likelihood that we will be successful in our response to such requests for
proposals increases dramatically.





History





On
November 27, 2007, Acadia Resources, Inc., now known as Sunovia Energy
Technologies, Inc. (the “Company”), Sunovia Solar, Inc., a wholly-owned
subsidiary of the Company (“Sunovia Solar”), Sun Energy Solar, Inc. (“Sun
Energy”), and Carl L. Smith, III, Richard Craig Hall and Rick St. George,
(collectively the “Sun Energy Majority Shareholders”), entered into an Agreement
and Plan of Merger (the “Merger Agreement”), which closed on November 28,
2007.  Pursuant to the terms of the Merger Agreement, Sun Energy
merged with and into Sunovia Solar, which became a wholly-owned subsidiary of
the Company (the “Merger”).  In consideration for the merger, the
Company issued an aggregate of 263,182,941 shares of common stock to the Sun
Energy Majority Shareholders and the other shareholders of Sun Energy at the
closing of the merger.  As a result of the Merger, we ceased being a
shell company as that term is defined in Rule 12b-2 and, through our
newly-acquired subsidiary Sunovia Solar, entered into the business of
engineering, developing, marketing and distributing solar powered substrate
technology. The information presented hereon is entirely from Sun Energy Solar,
Inc., which is the accounting successor in the merger.




Sun
Energy was incorporated on November 9, 2005 under the laws of the State of
Delaware for the purpose of commercializing solar products. Sun Energy was
originally named Sologic, Inc. On April 25, 2006, the name was changed to Sun
Energy Solar, Inc. On December 21, 2005, Sun Energy acquired the patent nights
(patent applied for) to No. 60/6 17,263 Titled Substrate “with Light
Display”  applied for on September 2, 2005 (provisional was applied in
September 2004), from Sparx, Inc., a Florida corporation,  100% owned
by Carl L. Smith III, its Chief Executive Officer.





As a
result of the Merger, the Company ceased to be a shell company and became a
holding company for Sunovia.    Pursuant to the terms of the
Merger Agreement, Sun Energy merged with and into Sunovia Solar, which became a
wholly-owned subsidiary of the Company (the “Merger”). Because Sun Energy’s
operations are the only significant operations of the Company, this discussion
and analysis focuses on the business results of Sun Energy.





Having
only recently emerged from the development stage, we have had a limited
operating history that can serve as the basis to evaluate our business. There
are many factors that could have a material adverse effect on our business and
operating results once operations begin. You should read the following
information in conjunction with our financial statements and related notes
contained elsewhere in this report. You should consider the risks and
difficulties frequently encountered by early-stage companies, in new and rapidly
evolving markets, such as the solar market. Our limited operating history
provides only a limited historical basis to assess the impact that critical
accounting policies may have on our business and our financial
performance.




Because
we have only recently begun substantial operations but have incurred costs in
the areas above, for the quarter ending and nine months April 30, 2009, the
Company has had a net loss as measured by generally accepted accounting
principles of $(5,851,791) and $(12,247,241).





Many of
the costs we have incurred in both the quarter ending April 30, 2009 and 2008
were initial costs such as upfront inducements through stock to secure services
we believe we will need, market studies, core design work and other similar
costs.





Results of Operations





Quarter ended April 30, 2009
compared to Quarters ended April 30, 2008





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
ending April 30, 2009 and April 30, 2008.





April
      30, 2009
                  
                  
                  April
      30, 2008Amount
                  
                  
                  AmountSales
                  
                  $
                  295,223
                  
                  
                  $5,600Cost
      of Sales
                  
                  $
                  205,728Gross
      Profit
                  
                  $
                  89,495
                  
                  
                  $5,600Selling,
      General & Administrative Expenses
                  
                  $
                  2,063,325
                  
                  
                  $
                  10,325,796Research
      and Development Expenses
                  
                  $
                  3,885,774
                  
                  
                  $
                  2,033,127Total
      Operating Costs and Expenses
                  
                  $
                  (5,949,099
                  )
                  
                  $
                  12,358,923Operating
      Loss
                  
                  $
                  (5,859,604
                  )
                  
                  $
                  (12,353,323
                  )Interest
      Income
                  
                  $
                  7,813
                  
                  
                  $
                  11,036Net
      Loss
                  
                  $
                  (5,851,791
                  )
                  
                  $
                  (12,342,287
                  )







Revenues
and Cost of Sales





For the
quarter ending April 30, 2009, we sold 225 lights - 115 canopy lights, 7
retrofit kits for decorative street lights, 8 roadway lights, 16 utility lights,
and 61 impulse lights and 18 poles at an average price of $1312.10 with an
average cost of $914.35.





Our two
largest customers, Beacon Products, LLC and Precision-Lighting, Inc. (who are
owned by the same parent company) represented 33% and 12% of our sales,
respectively. We did not have any sales of product in the quarter ending
April 30, 2008 (our only revenue was $5,600 which was service revenue for
consulting).








37









Expenses





Selling,
General and Administrative Expenses





The
components of this category for the quarters ended April 30 in each of the
respective years are discussed in the table and notes below:








Increase(Decrease)2009
                  
                  
                  2008
                  
                  
                  %Selling,
      General and Administrative
                  
                  
                  2,063,325
                  
                  
                  
                  10,325,796
                  
                  
                  
                  -80
                  %Depreciation
      and Administration
                  
                  
                  17,152
                  
                  
                  
                  10,962
                  
                  
                  
                  56%Product
      Development – including engineering salaries
                  
                  
                  343,332
                  
                  
                  
                  67,860
                  
                  
                  
                  406
                  %General
      & Administrative
                  
                  
                  102,550
                  
                  
                  
                  476,718
                  
                  
                  
                  -78
                  %Noncash
      Salaries and Consulting
                  
                  
                  1,478,217
                  
                  
                  
                  9,659,618
                  
                  
                  
                  -85%Sales
      & Marketing
                  
                  
                  122,074
                  
                  
                  
                  110,638
                  
                  
                  
                  10%Headcount:Employees
                  
                  
                  15
                  
                  
                  
                  10
                  
                  
                  
                  50
                  %Consultants
                  
                  
                  15
                  
                  
                  
                  14
                  
                  
                  
                  7
                  %






Product
Development




Product
development consists of engineering, design, purchasing of components and
assembly of prototypes and testing, and currently represents among the most
crucial expenditures of the company. Product development costs by product
family for the quarter ending April 30, 2009, including salaries, are as
follows:


·  Power
Supplies                       $  66,956


·  Fairview                                 $  18,462


·  Canopy                                   $  54,315


·  Decorative
Streetlight              $  29,682


·  Cobra
head                             $  35,678


·  Garage
Light                           $  45,627


·  Switch
plate                            $  69,610


·  Utility
Light                             $  23,002




For the
quarter ending April 30, 2009 we expanded our entire product development effort
on decorative streetlights. We are expanding our product offerings in each of
the product families listed above and can, in many instances, now add new types
of products quickly using the development we have done so far. We (along with
our entire industry) are do have some limitations in product development for
larger size lights, but there exists a number of opportunities for the products
we have or are building, particularly with respect to Governmental entities who
have either by law, incentive, stimulus, energy savings and maintenance or for
stand-alone economically justifiable reasons have begun the process of acquiring
LED lighting for multiple uses.




Marketing
and Non-cash Salaries and Costs





The
completion of new products has necessitated marketing expenses. For the quarter
ending April 30, 2009, we spent $122,074, an increase of 10% over the same
period one year ago on sales and marketing which went to employees
and  consultants to sell the Company’s products, purchase of lists of
business Leads, develop professional marketing materials, represent the
company’s products, salaries, art design, and Web site. The nature of the equity
compensation payment was generally upfront compensation. Payment in the form of
equity compensation, when made by startups, does encourage further service to
create value in the stock. We incurred approximately $900,000 of cost in stock
options with Akaoni Management for the second and final option in our
arrangement, the principal services of which was lists of leads of potential
customers which we are pursuing, $200,000 with Ken Juster as amortization of the
amounts paid to him in the prior year for assistance with our exporting process
and $50,000 of cost with Rick Kaufman for the completion of the Fairview Job (a
condition of his contract with the Company.)








38






General
and Administrative




As in all
companies, general and administrative expenses are the supporting services
needed to maximize the efforts of the other departments in performing their
duties. For the quarter ending April 30, 2009, we spent 80% less for the quarter
ending April 30, 2008, principally due to reductions in personnel
cost.




Research
and Development Expenses




The
Company has entered into research contracts with EPIR Technologies, Inc. and
Dongguk University which most of our research will be predominately
outsourced for the next couple of years. We expense our research and development
costs as incurred. Research and Development expenses were $3,885,774 and
$2,033,127 for the quarters ending April 30, 2009 and 2008, respectively. We
expense our research and development costs as incurred. Research and Development
included $1,500,000 and $1,500,000 expended with EPIR and $200,000 and $-0-
expended with Dongguk University for the quarters ending ended April 30, 2009
and 2008, respectively. For the quarters ending April 30, 2009, we incurred
$2,305,131 in non-cash costs related to a modification of our agreement with
EPIR Technologies. The modification allows us, in exchange for the issuance of
25,000,000 options, allows us to elect to pay future payments in the next two
years due to EPIR Technologies in common stock (at 75% of the average bid price
for the prior 20 days) instead of cash.





Other
Income and Expenses




Interest
income for the quarter reduced from $7,813 to $11,036  the during the
quarter ending April 30, 2009, as compared to April 30, 2008 due to a reduction
interest rates we were able to obtain from savings as part of the general
economic slowdown in effect during the quarter and a reduction in cash
balances.





Results of operations for
the Nine months Ending April 30, 2009 and 2008




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
 nine
months ending April 30, 2009 and April 30, 2008.


April
      30, 2009
                      
                      
                      April
      30, 2008Amount
                      
                      
                      AmountSales
                      
                      $
                      886,135
                      
                      
                      $
                      5,600Cost
      of Sales
                      
                      $
                      608,595Gross
      Profit
                      
                      $
                      277,540
                      
                      
                      $
                      5,600Selling,
      General & Administrative Expenses
                      
                      $
                      6,418,681
                      
                      
                      $
                      12,221,905Research
      and Development Expenses
                      
                      $
                      6,139,870
                      
                      
                      $
                      5,904,404Total
      Operating Costs and Expenses
                      
                      $
                      12,558,551
                      
                      
                      $
                      18,126,309Operating
      Loss
                      
                      $
                      (12,281,011
                      )
                      
                      $
                      (18,120,709
                      )Interest
      Income
                      
                      $
                      33,770
                      
                      
                      $
                      63,889Net
      Loss
                      
                      $
                      (12,247,241
                      )
                      
                      $
                      (18,056,820
                      )




Revenues
and Cost of Sales





For the
nine months ended April 30, 2009, we sold 4,302 utility lights, 150 canopy
lights, 540 decorative street lights, 2,648 power supplies, 69 miscellaneous
lights and 82 light poles, at an average price of $113.49 with an average cost
of $77.95. Our two largest customers, Beacon Products, LLC and Precision
Lighting, Inc. (who are owned by the same parent company), represented 29% and
42.5% of our sales, respectively. We did not have any sales of lights in the
quarter ended April 30, 2008.








39







Expenses





Selling,
General and Administrative Expenses





The
components of this category for the nine months ended April 30 in each of the
respective years are discussed in the table and notes below:





2009
                      
                      
                      2008Selling,
      General &  Administrative
                      
                      $
                      6,418,681
                      
                      
                      $
                      12,221,905Depreciation
      & Amortization
                      
                      
                      50,383
                      
                      
                      
                      31,924Product
      Development
                      
                      
                      1,124,207
                      
                      
                      
                      222,001General
      & Administration
                      
                      
                      427,546
                      
                      
                      
                      1,264,915Non-cash
      Salaries & Consulting
                      
                      
                      4,451,504
                      
                      
                      
                      10,410,201Sales
      & Marketing
                      
                      
                      365,041
                      
                      
                      
                      292,864




Product
Development




Product
development consists of engineering, design, purchasing of components and
assembly of prototypes and testing, and currently represents among the most
crucial expenditures of the company. Product development costs by product
family for the nine months ending April 30, 2009, including salaries, are as
follows:





·Power
      Supplies
              
              
              133,490·Fairview
              
              
              167,086·Canopy
      light
              
              
              130,272·Decorative
      Streetlight
              
              
              100,809·Cobra
      head
              
              
              101,092·Garage
      light
              
              
              128,137·Switch
      plate
              
              
              280,064·Utilities
              
              
              83,258





For a
discussion of the status of these projects, please refer to the introduction of
Management’s discussion and analysis.





For the
nine months ended April 30, 2008, we expended our entire product development
effort on the development of decorative streetlights.





Marketing
and Noncash salaries and Consulting





For the
nine months ending April 30, 2009 we spent $365,041 on marketing and
approximately $4,000,000 on noncash consulting in the form of equity payments
to: $1,800,000 with Akaoni Management, LLC, $400,000 The Abraham Group, $850,000
Fernando Cuza, and $800,000 Ken Juster, all of which were in the marketing area
and $50,000 with Rick Kaufmann for lighting design. For the nine months ending
April 30, 2008, we spent $292,864 on marketing and approximately $10,400,000 on
noncash salaries and consulting, of which $6,200,000 went to Fernando Cuza for
his sales efforts on our solar projects in the Dominican Republic and elsewhere
and the reminder went to 25 employees and consultants as part of our initial
contracts with significant equity inducements to attract qualified
help.





General
and Administrative





For the
nine months ending April 30, 2009, we reduced spending in this area by 66% for
the nine months ending April 30, 2008. This difference was due in substance to
equity payments paid to administrative personnel for the nine months ended April
30, 2009.





Research
and Development Expenses





Research
and Development Expenses were $6,139,870 for the nine months ended April 30,
2009 as opposed to $5,904,404 for the nine months ended April 30, 2008. These
amounts included $3,500,000 and $4,200,000 paid to EPIR Technologies, Inc. and
$200,000 and $325,000 spent with Dongguk University on South Korea along with
equity payments to researchers, for the nine months ended April 30, 2009 and
2008, respectively. Although the research Dongguk University has not proceeded
to a product that can be commercialized, we have signed a letter of intent for a
20 megawatt solar facility in the Dominican Republic and have signed a $33
million, ten year contract with a South Korea for the infrared technology EPIR
has developed, which is waiting for an export permit from the United States
Secretary of State.





Other
Income and Expenses





Interest
income has reduced from $33,770 for the nine months ended April 30, 2009, to
$63,839 for the nine months ended April 30, 2008, both as a result of lower
interest rates and lower cash balances being maintained.






40







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 over and above
our research commitment, but at this time we cannot predict what effect that
will be.




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 arrangementsincluding purchase obligations to vendors


·  a
retained or contingent interest in assets transferred to the unconsolidated
entity or similar arrangement that servesas 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 aderivative instrument, or


·  any
obligation, including a contingent obligation, arising out of a variable
interest in an unconsolidated entity that isheld 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 Chief Executive officer 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., a Company owned by Mr. Smith. Mr. Smith has waived
royalties for this quarter as part of attempts to conserve the Company’s
resources.





In
February, 2008, the Company informally agreed to finance an entity that entered
into a research and development agreement with an educational institution in
consideration of the assignment of certain patent rights held by the educational
institution to the Company. The educational institution will perform research
and development services and assign intellectual property created during the
course of those services to the entity, who in turn assigned such rights to the
Company. The Company has agreed to pay on behalf of the entity, $2,000,000 to
the educational institution in the first year. If an agreement is made to extend
the agreement to the second year, the Company will pay an additional $2,000,000.
If a decision is made to extend the agreement to the third year, the Company
will make a final payment of $1,000,000. In August, 2008, the entity, Novakor,
Inc., transferred all patent rights under this agreement to Sunovia,
Inc.





Plan
of Operation




For
      the Nine Month Period Ending April 30, 20092009
                  
                  
                  2008Cash
      flows used in Operations
                  
                  $
                  6,375,523
                  
                  
                  $
                  7,098,231Capital
      Expenditures
                  
                  $
                  32,941
                  
                  
                  $
                  108,936Equity
      Raised
                  
                  $
                  1,214,028
                  
                  
                  $
                  6,389,629Cash
      at end of period
                  
                  $
                  788,343
                  
                  
                  $
                  2,640,191




We
currently lease an operating facility at 6408 Parkland Drive, Sarasota, Florida
34243. This facility is under a three year and one month term through
October 31, 2009. The lease requires monthly rent of approximately
$3,738.90 plus annual increases of 3% that go into effect on November 1 of
each subsequent year. The building consists of approximately 5,316 square feet
of laboratory, warehouse and office space. The facilities are in good condition
and are adequate for small-scale commercialization of our products. However, we
do not believe our facility would be adequate to handle more than 25
employees.




While our
staffing needs have risen such that we now have 15 employees and 14 consultants;
we are beginning to seek other professionals in the lighting industry to join
our company.  We will continue to work with the consultant model whenever
possible in order to minimize the office space that is needed and the cost for
ancillary benefits for full-time employees of the company.





Cash
Flows and Working Capital





To date,
we have financed our operations primarily through equity contributions by our
shareholders. As of April 30, 2009, we had $788,343 in cash and cash
equivalents. We had receivables of $300,167 and inventory of $432,232 and our
current liabilities were $2,251,094, although almost 80% of the liabilities are
convertible into common stock. At present levels we incur overhead of $300,000
per month in cash before our research commitments.




Since we
outsource our manufacturing, we are not a capital intensive
operation.





We raised
$1,214,028 for the nine months ending April 30, 2009 and raised $6,389,629 for
the nine months ending April 30, 2008. We believe this decline reflects the
downturn in the economy.






41







Cash
Requirements





Over the
next twelve months, we presently anticipate spending approximately $3.6 million
on operations, $3.2 million on research and development and $100,000 on capital
equipment. To date, we have unfulfilled purchase orders from customers totaling
$3.6 million – although we are now uncertain if the terms and conditions of $3.0
million of those purchase orders will be met by our customers In turn, we have
open purchase orders to suppliers for $2.4 million to fulfill the orders we have
received (we expect to issue additional orders for additional parts and labor
that are estimated to $600,000). Payment from customers and to vendors is
typically on a 90-day basis, however there is a production time lag of usually
30 days. To finance these operations and to take advantage of these
opportunities the Company will need to raise capital and/or incur debt. There is
no assurance that such capital can be raised or if such capital can be raised on
terms that are not highly dilutive to our current shareholders, or that the new
agreements (see below) we have now entered into will not make further capital
raising more difficult even if we obtain concessions from the lender. If we are
not successful in raising capital we will have to limit our plans accordingly,
and we may not be able to take full advantage of opportunities we believe
exist.  Further, there is no assurance that we be successful in
collecting amounts owed in connection with these purchase orders.





In April,
2009, the Company and EPIR entered into an Amendment to the research,
development, and supply agreement. As of April 15, 2009, the Company has made
all scheduled payments to EPIR pursuant to the terms and condition of the
Agreement in the aggregate amount of approximately $6,700,000. 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) accelerates the Company’s payment of the June 1,
2009 scheduled payment and (ii) allows the Company to issue and deliver to EPIR
warrants for the purchase of the Company’s stock. Therefore in consideration of
the mutual covenants and other valuable consideration, the Company and EPIR
(“the Parties”) agree as follows:





The
Company’s Obligations: In exchange for, and as an integral part of, EPIR’s
entering into the Amendment, the Company shall deliver, or cause to be
delivered, to EPIR, for no cash or other consideration (except as set forth
herein):





a.
            The
      June 1, 2009 scheduled payment of $1,000,000 within 72 hours of the
      Parties’ execution of the Amendment by wire transfer of immediately
      available funds to a bank designated by EPIR
and





b.
            Issuance
      to EPIR of a warrant (the “Warrant”) to purchase 25,000,000 shares of the
      Company’s common stock at an exercise price equal to $0.10 per
      share





Immediately
upon the date in which EPIR receives the accelerated payment, the Company, in
its sole discretion, shall, 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.




Going
Concern





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. If our existing cash is
insufficient to meet our requirements, we may seek to sell additional equity
securities, debt securities or borrow from lending institutions. We cannot
ensure 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.





We have
undertaken steps as part of a plan to improve operations with the goal of
sustaining our operations for the next twelve months and beyond. These steps
include





·           raising additional capital and/or
obtaining financing;


·           increasing our revenues and gross
profits and


·           controlling overhead and
expenses.





There can
be no assurance that we will successfully accomplish these steps and it is
uncertain 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 its assets and discharge its liabilities in
other than the normal course of business and at amounts different from those
reflected in the accompanying consolidated financial statements.









42







Effect
of Changes in Prices





Changes
in prices during the past few years have been a significant factor in the solar
and lighting industries. Although the price of solar and lighting has been
declining gradually over recent years and part of a decreasing overall trend,
the cost of commodities used including silicon has created challenges for our
industry. Ultimately, success in research towards finding more cost effective
materials is the Company’s strategy for maximizing profit within these
constraints.





Critical
Accounting Policies and Estimates





“Management's
Discussion and Analysis of Financial Condition and Results of Operations”
discusses our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates our estimates and judgments, including those related to
revenue recognition, financing operations, and contingencies and
litigation.




We
utilize certain accounting policies and procedures to manage changes that occur
in our business environment that may affect accounting estimates made in
preparation of our financial statements. These estimates relate primarily to our
allowance for doubtful accounts receivable and the recognition and measurement
of potential impairment on long-lived and intangible assets. Our strategy for
managing doubtful accounts includes stringent, centralized credit policies and
collection procedures for all customer accounts. We utilize a credit risk rating
system in order to measure the quality of individual credit transactions. We
strive to identify potential problem receivables early, take appropriate
collection actions, and maintain adequate reserve levels. Management reviews its
long-lived and intangible assets for impairment whenever changes in
circumstances or other events indicate potential impairment. Management has
determined that the allowance for doubtful accounts and impairment losses are
adequate at April 30, 2008.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  This standard establishes a standard definition for
fair value, establishes a framework under generally accepted accounting
principles for measuring fair value and expands disclosure requirements for fair
value measurements.  This standard is effective for financial
statements issued for fiscal years beginning after November 15,
2007.  Adoption of this statement has not had a material effect on the
Company’s financial position or results of operations.





In
February 2007, the FASB issued Financial Accounting Standard No. 159 “The Fair
Value Option for Financial Assets and Financial Liabilities”—including an
amendment of FASB Statement No. 115 or FAS 159.  This Statement
permits entities to choose to measure many financial instruments and certain
other items at fair value.  Most of the provisions of this Statement
apply only to entities that elect the fair value option.  The
Statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007.  Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of FASB Statement No. 157, “Fair
Value Measurements”.  Adoption of this Statement has not had
a material effect on the Company’s financial position or results of
operations.





In
September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108),
“Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements”.  SAB 108 provides
guidance on the consideration of the effects of prior year unadjusted errors in
quantifying current year misstatements for the purpose of a materiality
assessment.  Adoption of this statement has not had any material
effect on the Company’s financial position or results of
operations.





In June
2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes”, an interpretation of SFAS No. 109. FIN 48
prescribes a comprehensive model for how companies should recognize, measure,
present and disclose uncertain tax positions taken or expected to be taken on a
tax return. Under FIN 48, the Company shall initially recognize tax positions in
the financial statements when it is more likely than not the position will be
sustained upon examination by the tax authorities. The Company shall initially
and subsequently measure such tax positions as the largest amount of tax benefit
that is greater than 50% likely of being realized upon ultimate settlement with
the tax authority assuming full knowledge of the position and all relevant
facts. FIN 48 also revises disclosure requirements to include an annual tabular
roll-forward of unrecognized tax benefits.  Adoption of this statement
has not had any material effect on the Company’s financial position or results
of operations.





In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51, which
changes the accounting and reporting for minority interests. Minority interests
will be re-characterized as non-controlling interests and will be reported as a
component of equity separate from the parent’s equity, and purchases or sales of
equity interests that do not result in a change in control will be accounted for
as equity transactions. In addition, net income attributable to the
non-controlling interest will be included in consolidated net income on the face
of the income statement and, upon a loss of control, the interest sold, as well
as any interest retained, will be recorded at fair value with any gain or loss
recognized in earnings. The Company has not yet determined what effect, if any,
adoption of this Statement will have on the Company’s financial position or
results of operations.





In March
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”)
No. 161, Disclosures about Derivative Instruments and Hedging Activities,
an amendment of FASB Statement No. 133, which requires additional
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. The Company has not yet determined what
effect, if any, adoption of this Statement will have on the Company’s financial
position or results of operations.






43






In July
2008, the FASB ratified the consensus in EITF Issue No. 07-1, “Accounting
for Collaborative Arrangements” (EITF 07-1). EITF 07-1 defines
collaborative arrangements and requires collaborators to present the result of
activities for which they act as the principal on a gross basis and report any
payments received from (made to) the other collaborators based on other
applicable authoritative accounting literature, and in the absence of other
applicable authoritative literature, on a reasonable, rational and consistent
accounting policy is to be elected. EITF 07-1 also provides for disclosures
regarding the nature and purpose of the arrangement, the entity’s rights and
obligations, the accounting policy for the arrangement and the income statement
classification and amounts arising from the agreement. EITF 07-1 will be
effective for fiscal years beginning after July 15, 2008, and will be
applied as a change in accounting principle retrospectively for all
collaborative arrangements existing as of the effective date. The Company has
not yet evaluated the potential impact of adopting EITF 07-1 on our
financial position, results of operations or cash flows.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
consolidated financial statements, including SFAS 162, “The Hierarchy of
Generally Accepted Accounting Principles”.







ITEM 3.
QUA NTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET
RISK




As a
smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are
not required to provide the information required by this Item.




ITEM 4.
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 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. [The
company has added accounting staff in the last quarter to assist in reducing its
risk in these areas and plans to add additional personnel in accounting and
internal auditing in the near future.


No change
in our internal control over financial reporting occurred during the fiscal
quarter ended April 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.




PART II: OTHER
INFORMATION




ITEM 1. LEGAL
PROCEEDINGS





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. However, 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. 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.




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.





ITEM 1A. RISK FACTORS





As a
smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are
not required to provide the information required by this Item.





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








In April,
2009, in connection with the Amendment to the research, development, and supply
agreement, available the Company issued to EPIR of a warrant (the “Warrant”) to
purchase 25,000,000 shares of the Company’s common stock at an exercise price
equal to $0.10 per share.  The securities were issued pursuant to an
exemption under Section 4(2) of the Securities Act of 1933, as
amended.








ITEM
3.DEFAULTS
UPON SENIOR SECURITIES





None





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





None




ITEM
5.OTHER
INFORMATION





None.








44







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 (a)10.31
                          
                          Amendment
      No. 1 to the Amended and Restated Research, Development, and Supply
      Agreement dated April 15, 2009 (a)31.1
                          
                          Certification
      of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
                          
                          Certification
      of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232
                          
                          Certifications
      of Chief Executive Officer and Chief Financial Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002




(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 15, 2008.


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










45
















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/
      Carl L. Smith, III
              
              Carl
      L. Smith, III
            Chief
      Executive Officer and Chairman of Board of Directors
            June
      15, 2009/s/
      Matthew Veal
              
              Matthew
      Veal
            Secretary,
      Chief Financial Officer, Treasurer, and Principal Accounting
      Officer
            June
      15, 2009