The following information should be read in conjunction with the consolidated financial statements and the notes thereto contained elsewhere in this report. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Information in this Item 6, "Management's Discussion and Analysis or Plan of Operation," and elsewhere in this 10-K that does not consist of historical facts, are "forward-looking statements." Statements accompanied or qualified by, or containing words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements, and as such, are not a guarantee of future performance. The statements involve factors, risks and uncertainties including those discussed in the "Risk Factors" section contained elsewhere in this report, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others, fluctuations in general business cycles and changing economic conditions; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company's products, as well as other factors, many or all of which may be beyond the Company's control. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. The Company disclaims any obligation to update the forward-looking statements in this report.

Our activities to date have centered in these areas: Product Development, Research, Marketing, and General and Administrative.

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 not begun substantial operations but have incurred costs in the areas above, for the year ending July 31, 2009, the Company has had a net loss as measured by generally accepted accounting principles of $14,471,361 as compared to $34,836,961 for the year ended July 31, 2008.

Many of the costs we have incurred for the year ending July 31, 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.

Overview

For the year ended July 31, 2009, we have accomplished the following:

ˇ We have shipped and installed the complete 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. The project was awarded inclusion in the CreeŽ "LED City" program, a program designed to highlight the economic and environmental advantages of LED lighting. It was also the subject of a feature article in LD+A Magazine, the official magazine of the Illuminating Engineering Society of North America. The Fairview Collection of luminaires optimizes the LEDs by directing the light and creating the desired light pattern to meet IES street-lighting compliance standards, while simultaneously reducing energy and maintenance costs. These LED lights were 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 includes many styles of decorative post-top lights), we have built a product line that gives us an opportunity to be a leader in the decorative street lighting market.

ˇ We designed two LED cobra head streetlights and a cobra head LED retrofit kit. The EvoLucia LED cobra head is the first LED streetlight to meet a pole spacing of 6 mounting heights, which allows LED to meet the existing standards of light with out having to change the existing pole arrangement. The cobra heads will be retrofit-ready for fixtures that are currently installed throughout the country. Camp Lejeune, N.C. ordered 1100 of these fixtures and we have delivered the fist part of this order. Cobra heads are America's most common street light, and currently use high-pressure sodium or metal halide technology. This project was delayed because the aiming and placement of the LEDs is more challenging in this product due to the height of the fixture and the light spread that is required on the ground. 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.

ˇ We have completed design and prototyping for the LED parking garage light.

ˇ 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.

ˇ 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.

ˇ We have obtained contracts for our infrared products and signed an agreement with a South Korean company during the calendar year 2009, and we received an export permit fro m the U.S. State Department to sell Mercury Cadmium Telluride (HgCdTe) undoped infrared wafers to that customer.

ˇ We partnered with a major international energy service company (ESCO) for an energy savings proposal for the City of Sarasota, Florida. Together with Beacon Products, EvoLucia is 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.

ˇ We have partnered with a major international manufacturer of solar products to create a solar-powered LED light. The solar-powered LED light is entirely self-sufficient, and therefore greatly expands our market reach to areas that do not have power (such as parts of South America). Sales of this product have begun and are expected to increase rapidly through next year.

ˇ Our Researchers at EPIR have set a new world record Open Circuit Voltage for Cadmium Telluride (CdTe) thin-film solar cells.

We continue to face challenges, particularly as follows:

ˇ In spite of advantages in life cycle cost and sustainability, we have had difficulty persuading many local governments to accept LED technology over lower-priced but outdated technologies in our industry. 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. We believe that through education and time the market will transition to LED, but the exact timing of this transition is subject to debate among industry experts.

ˇ 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 in place, though the quantity ordered to date is far less than originally projected. For one of our product families, we spent more on product upgrades than we sold.

ˇ Our first 16.8-Watt power supply was approved by UL. 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.

ˇ 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.

ˇ 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 a combination of original equipment manufacturers and system integration providers who demand reliable LED lighting solutions, as well as end users. 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.

In addition, we are a distributor of CreeŽ indoor lighting products, including LED bulbs, lamps and lay-ins. 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.

Results of Operations

The following table sets forth the percentage relationship to total revenues of principal items contained in the statement of operations of the consolidated financial statements included herewith for the years ending July 31, 2009 and July 31, 2008. It should be noted that percentages discussed throughout this analysis are stated on an approximate basis.

                                                 2009              2008
                                                Amount            Amount
Sales                                        $     996,080            59,864
Cost of Sales                                      677,724            48,822
Selling, General & Administrative Expenses       8,380,170        19,682,954
Research and Development Expenses                6,294,626        15,251,761
Total Operating Costs and Expenses              14,674,796        34,934,715
Operating Loss                                 (14,356,440 )     (34,923,673 )

Interest Income                                     68,437            86,712
Derivative Liability                              183,358
Net Loss                                     $  14,471,361       (34,836,961 )

Year ended July 31, 2009 compared to Year ending July 31, 2008

Revenues

For the years ending July 31, 2008 and 2009, our revenues increased 1,663%, reflecting the completion of marketable products in late fiscal year 2008. Although we had a contract for larger quantities than were actually sold, 61.8% of our revenues were with Hubbell Lighting, a large OEM, for light engines, our original core product (light engines). In fiscal year 2009, we began to diversify the product line by adding fixtures, the first of which, a decorative streetlight called the "Fairview" after Fairview, Texas, where we completed the installation represented 30.4% of our revenues for the year ending July 31, 2009. We believe the diversification of our product line will result in a broader concentration of sales as we develop new products.

Cost of Sales

For the years ending July 31, 2008 and 2009, our cost of sales increased 1388% ($48,822 for the year ended July 31, 2008 as compared to $677,724 for the year ended July 31, 2008), commensurate with the completion of marketable products in late fiscal year 2008. Our gross profit margin increased from 19% to 32%. We expect continued volatility in our gross profit margins over the next few years; our target margin is 30% to 40%, but the necessity of reducing prices to establish markets with new products may affect our margins in the future.

Expenses

Please see "Overview" for a discussion of the nature of the work performed and the accomplishments of the expenses we have occurred.

Selling, General and Administrative Expenses

For the year ended July 31, 2009, our selling, general and administrative ("SG&A") expenses decreased. For the Year period ending July 31, 2009, SG&A expenses decreased $11,302,784 to $8,380, 170 when compared to $19,682,954 for the year ended July 31, 2009. This decrease was primarily the result of non-cash share-based compensation of $15,320,079, for the year ended July 31, 2008 and compared to $5,238,914 for the year ended July 31, 2009 respectively, related to the hiring of management, marketing and other personnel that were necessary to initiate the company's product development and operations.

Product Development

While we continue research and development efforts in the solar area, we are also working to create products that can be resold at a profit. This began with our first product, Solartizements (solar-powered substrates). For the year ended July 31, 2008, we spent $227,255 on Solartizements, as opposed to $-0- spent for the year ended July 31, 2009. This reduction reflects the completion of the initial design, but we were unable to develop a customer base for the product due to the cost to the consumer, but it provided insight into both lighting and solar thin film which are businesses we are pursuing vigorously that we believe show promise.

However, during the development of the engineering plan for Solartizements, we became aware of the market potential for low-energy lighting such as LED-based lighting (we use the term Solid-State lighting because one advantage of this type of lighting is its ability to turn on instantaneously as opposed to compact fluorescent lights that need time to warm up, particularly as they age).

The principle type of low-energy lighting currently in the market place is compact fluorescents (CFLs). Solid-State Lighting is a newer technology than CFL technology and lasts significantly longer, does not contain mercury, uses somewhat less energy and we believe it is showing continued improvement each year in performance. We began testing to see if we could develop a light that properly manages heat, as issues in thermal management has prevented LED lighting from enjoying market acceptance. Our engineers did successfully build prototypes that significantly reduce the heat generated by the LEDs and then we began the process of identifying product families that we felt had the most opportunities and began our work on product families in these areas. That process included, where possible, working to obtain orders from customers for specialized lights, which we can design for a particular customer but also sell to other customers as well, such as street lights. Our engineers will then modify our existing core designs to the different specifications of new orders that we received. We have identified several customers and types of lights which we plan to pursue to add to the street lights and loading dock lights we have already built from our initial technology design. Based on order flow and information we obtain from the marketplace regarding overall customer demand, we believe there will be several common lights we can carry in stock, and we plan to consider carrying inventory and supplying customers from inventory as well.

For the year ending July 31, 2009 we spent $1,316,772 on product design for product design for solid-state lighting, as opposed to $3,882,696 for the year ended July 31, 2008, which was due to the effect of equity compensation granted as inducements to our engineering staff . We were able to successfully develop our initial product offerings into the concept of aimed optics and for the development of the lights below in 2009. 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 year ending July 31, 2009, including salaries, are as follows:

                         Power Supply            133,490
                         Fairview                167,086
                         Canopy Light            140,285
                         Decorative Street Light 109,422
                         Cobra Head              243,143
                         Garage Lights           141,450
                         Switch Plate Light      280,064
                         Utility & Other         101,832

For a detailed discussion of the status of these projects, please refer to the introduction of Management's Discussion and Analysis.

For the year ended July 31, 2008, we expended our entire product development effort on the development of light engines used in decorative streetlights and utility lights.

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 year ending July 31, 2009, we spent $ 512,281, a reduction in spending in this area by 503% compared to the year ending July 31, 2008, we spent $2,580,422. This was due to a reduction in equity compensation in the year ending July 31, 2009 as compared to July 31, 2008

Research

Research and development expenses in the past primarily consist of labor costs, material costs and facilities. We had maintained an in-house research department that principally has surveyed the current research field for designing an overall program and made optical improvements for the lens of our Solid-State Lighting and Solar programs. However, during the year period ending July 31, 2008, the Company entered into research contracts with EPIR Technologies, Inc. and Dongguk University which most of research will be predominately outsourced for the next couple of years. We expense our research and development costs as incurred. Research and Development expenses decreased from $15,251,761 for the year ending July 31, 2008 (see "Item1 - Products of the Company" for a more complete description of the Company's plans in this area) to $6,294,626 for the year ended July 31, 2008. Research and development expenses primarily consist of labor costs, material costs and facilities. We expense our research and development costs as incurred. . For the year ended July 31, 2009, Research and Development included $2,546,944 of share-based compensation, $3,500,000 expended with EPIR and $200,000 expended with Dongguk University, whereas for the year ended July 31, 2008, Research and Development included $10,338,500 of share-based compensation and $4,200,000 expended with EPIR and $625,000 expended with Dongguk University.

We believe that our research and development will be critical to our strategic objectives of developing our technologies, and ultimately reducing manufacturing costs and meeting the requirements of our customers as well as adding new customers and markets. One long-term objective of research and development is to develop solar technologies that may be used to ensure that we have adequate (both in terms of quantity and quality) thin-film in the future to power our products. As a result, we expect that our total research and development expenses will increase in absolute terms in the future - specifically we have budgeted $3,500,000 for the next twelve months in this area. Research and development expenses primarily consist of labor costs, material costs and facilities. We expect that our total research and development expenses will increase in absolute terms in the future.

On January 24, 2008, the Company and EPIR entered into an Amended and Restated Research, Development and Supply Agreement (the "EPIR Agreement") pursuant to which the Company has become the exclusive supplier of certain (i) EPIR products that are to be funded by the Company and developed by EPIR including one or more versions of photovoltaic solar cells or solar cell encapsulate technologies (the "EPIR Products") and (ii) certain other products including infrared sensors and biosensors (the "EPIR Independent Products"), which right is contingent upon certain annual sales goals.

In accordance with the EPIR Agreement, EPIR is required to:

ˇ Use commercially reasonable efforts to develop the EPIR Products using all available new technology that will be identified and defined by a technology development board;
ˇ Use commercially reasonable efforts to supply EPIR Products and EPIR Independent Products in quantities that are consistent with the Company's forecasted demand under this Agreement;

ˇ support the Company's efforts in the marketing and promotion of the Company's products;
ˇ refer any and all inquires for purchase of the EPIR Products or other products sold by the Company that incorporate the EPIR Products (the "Sunovia-EPIR Products") received from third parties to the Company; and

ˇ Inform the Company of any inquiries received by EPIR from third parties who or are interested in engaging EPIR to develop photovoltaic solar cells and related technologies.

In accordance with the EPIR Agreement, the Company is required to:

ˇ develop distribution channels for the Sunovia-EPIR Products;

ˇ integrate, promote, market and sell the EPIR Products, EPIR Independent Products and the Sunovia-EPIR Products; and
ˇ Inform EPIR of any inquiries received by the Company from third parties who or are interested in engaging the Company and EPIR in connection with the development or use of photovoltaic solar cells and related technologies.

Unless terminated sooner, the term of the EPIR Agreement is through January 2018.

In addition to the above transaction, EPIR and the Company entered into a Stock Purchase Agreement pursuant to which EPIR purchased 37,803,852 shares of common stock of the Company (the "January 2008 Shares") representing 10% of the issued and outstanding of the Company in consideration for the Company purchasing 202,200 shares of common stock of EPIR representing 10% of the issued and outstanding of EPIR. We spent $3,500,000 on this contract during the year ended July 31, 2009 and $4,200,000 on this contract during the year ended July 31, 2008 which was our first year under this arrangement. In addition during the year ended July 31, 2008, we also incurred $11,608,500 in equity compensation towards these goals, which included an additional 8,990,000 shares issued to employees of EPIR on June 30, 2008 for research, of which our President has reimbursed the Company with shares from his holdings.

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 volume purchase agreement with a South Korea for the infrared technology EPIR has developed, for which we recently obtained an export permit from the United States Secretary of State.

Other Income and Expenses

Interest income for the year ended July 31, 2008 was $86,712 compared to $68,437 for the year ended July 31, 2009. This was due to the accumulation of cash from private placements; more cash on hand was maintained during the year ending July 31, 2008 as compared to the year ending July 31, 2009. We had interest expense and derivative expense of $183,358 for the year ended July 31, 2009 compared to July 31, 2008, when we did not have any convertible debentures.

Plan of Operation

We continue to evolve, and we are a very different company in comparison to the year ended July 31, 2008. This is because of new sales and new products and new product families, which will require a different infrastructure featuring increased activity in sales and marketing, increasing efforts to convert research activities into product development activities, and greater focus on product development in development of new products within product families as opposed to searching for new product lines. We presently have 13 employees and approximately 100 people working on our behalf as consultants, sales representatives, and advisors. We believe that the additional sales and marketing people will be necessary to communicate with potential customers of our solid-state lighting and provide the necessary support in terms of customer service, credit and billing and accounting. While we will have other roles such as fulfillment, manufacturing and shipping, we outsource these functions some of the time. None of our employees are covered by a collective bargaining agreement. We consider our relations with our employees to be good.

Cash Flows and Working Capital

To date, we have financed our operations primarily through equity contributions by our shareholders. As of July 31, 2009, we had $308,495 in cash and cash equivalents. We had receivables, net of allowances, of $138,196 and inventory of $234,551 and our current liabilities were $2,457,542, although more than 80% of the liabilities are convertible into common stock.

On June 12, 2009, the Company issued convertible debentures in the amount of $500,000 ("Holder"). The Company has promised to pay the Holder or their successors and assigns the principal amount together with accrued unpaid interest on or before December 12, 2010. Interest will accrue on the outstanding principal balance at an annual rate equal to 12%. The Company at its option shall have the right, with three business days advance written notice, to redeem a portion or all amounts outstanding under this debenture prior to the maturity date provided that the closing bid price of the of the Company's common stock is less than the fixed price ($.10) at the time of the redemption. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the principal amount being redeemed and . . .