10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 X .  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2011

or

.  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number: 333-48746

CHINA NUVO SOLAR ENERGY, INC.

(Name of small business issuer as specified in its charter)

Nevada	87-0567853
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

319 Clematis Street – Suite 703, West Palm Beach, Florida 33401

(Address of principal executive offices)(Zip Code)

Issuer's telephone number, including area code: (561) 514-9042

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 Days: Yes  X . No .

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	.(Do not check if a smaller reporting company)	Smaller reporting company	X .

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

Number of shares of common stock outstanding at December 20, 2011 is 5,881,427,060

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements	3
Item 2.	ManagementÂ’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4T	Controls and Procedures	20
	PART II
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
SIGNATURES		23

2

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

Assets
					October 31, 2011		July 31, 2011
Current Assets
	Cash			$	9,889	$	49,011
	Accounts receivable				45,272		-
	Notes and interest receivable, other				36,276		-
	Inventory				16,095		-
	Debt issuance costs				4,558		-
	Prepaid assets and deposits				1,152		23,500
			Total current assets		113,242		72,511
Property, plant and equipment, net					1,531		704
			Total assets	$	114,773	$	73,215
Liabilities and ShareholdersÂ’ Deficit
Current liabilities:
	Accounts payable and accrued liabilities, related parties			$	369,178	$	(15,467)
	Accounts payable and accrued expenses				362,353		50,000
	Convertible debentures payable, net				188,588		-
	Derivative liability convertible debentures				269,849		-
	Notes payable				376,259		500
	Notes payable, related parties				38,543		-
			Total current liabilities		1,604,770		35,033
Long-term liabilities:
		Convertible debentures payable, net			—		—
			Total liabilities		1,604,770		35,033
ShareholdersÂ’ deficit:
	Preferred stock, 25,000,000 shares authorized Series A, 1,000,000 shares authorized; stated value $1.00 per share; 160,000 (October) issued and outstanding				160,000		—
	Series B, par value $0.001, 1,000,000 shares authorized; no shares  issued and outstanding				—		—
	Common stock, $.001 par value, 6,475,000,000 shares authorized; 5,623,528,697 (October) shares issued and outstanding				5,623,528		2,156
	Additional paid-in capital				(5,197,992)		310,844
	Retained earnings				(2,075,533)		(274,817)
			Total shareholders' deficit		(1,489,997)		38,182
			Total liabilities and shareholders' deficit	$	114,773	$	73,215

See accompanying notes to financial statements

3

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARY

 Condensed Consolidated Statement of Operations

For the Three Months Ended October 31, 2011

				2011
Revenues:
	Revenues		$	75,272
	Cost of revenues			39,424
		Gross profit		35,848
Operating costs and expenses:
	Selling, general and administrative
	Consulting fees			34,500
	Management and consulting fees, related parties			168,900
	Salaries including stock compensation cost			1,527,022
	Legal and accounting			13,748
	Other			30,584
		Total operating costs and expenses		1,774,754
		Operating loss		(1,738,906)
Other income (expenses)
	Interest expense, related parties			(863)
	Interest expense, other			(76,141)
	Fair value adjustment of derivative liabilities			15,194
		Total other income (expenses)		(61,810)
		Net income (loss)	$	(1,800,716)
Basic and diluted net income (loss)per common share			$	(0.01)
Basic and diluted weighted average common shares outstanding				3,911,524,362

See accompanying notes to financial statements

4

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Changes in Shareholders' Deficit

				Additional paid-in capital		Preferred stock		Accumulated (deficit) equity		Total stockholders' deficit
	Common stock
	Shares	Amount
Balances, July 31, 2011	802,575,609		802,575		10,539,660		224,473		(13,249,585)		(1,682,877)
Shares issued August 1, 2011 thru September 1, 2011	60,531,914		60,532		12,818		(25,000)				48,350
Issuance of shares for reverse merger with SurgLine	4,526,528,828		4,526,529		(15,697,393)		-		12,974,768		1,803,904
Issuance of shares upon conversion of subordinated debentures	124,320,512		124,321		(25,985)		-		-		98,336
Issuance of shares upon conversion of series A Preferred Stock	32,894,167		32,894		6,579		(39,473)		-		-
Issuance of shares pursuant to conversion of accounts payable	76,677,667		76,678		(33,671)		-		-		43,007
Net loss	-		-		-		-		(1,800,716)		(1,800,716)
Balances, October 31, 2011	5,623,528,697	$	5,623,528	$	(5,197,992)	$	160,000	$	(2,075,533)	$	(1,489,997)

See accompanying notes to financial statements

5

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Cash Flows

For the Three Months Ended October 31, 2011

				2011
Cash flows from operating activities:
	Net income (loss)		$	(1,800,716)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
		Increase (decrease) in derivative liability		(15,194)
		Net liabilities assumed in reverse merger		1,614,575
		Reverse merger		(87,553)
		Cash acquired in merger		152
		Amortization of discount on debentures payable		58,911
		Amortization of debt issuance costs		5,861
Change in operating assets and liabilities:
	Increase in accounts receivable			(45,272)
	Increase in inventory			(16,095)
	Decrease in prepaid expenses and other current assets			22,348
	Increase in accounts payable and accrued expenses			167,117
	Decrease in amounts due to related parties			(20,329)
Net cash used in operating activities				(116,195)
Cash flows from investing activities:
	Purchase of property and equipment			(827)
Net cash used in investing activities				(827)
Cash flows from financing activities:
	Proceeds from sale of common stock			-
	Proceeds from issuance of related party notes payable			2,400
	Proceeds from debentures payable			78,000
	Placement fees paid			(2,500)
Net cash provided by financing activities				77,900
Net increase (decrease) in cash and cash equivalents				(39,122)
Cash and cash equivalents, beginning of period				49,011
Cash and cash equivalents, end of period			$	9,889
Supplemental disclosures of cash flow information:
	Cash paid during the year for interest		$	458
	Cash paid during the year for taxes		$	-
Non-cash investing and financial activities:
	Fair value of options and shares issued for services		$	1,527,022
	Fair value of shares of common stock issued for debentures and accrued and unpaid interest		$	98,336
	Fair value of shares of common stock issued for account payable		$	43,007

See accompanying notes to financial statements

6

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

1.

Organization, basis of presentation and summary of significant accounting policies:

Organization

We were originally organized under the laws of the State of Nevada in 1996 as Zacman Enterprises, Inc. and subsequently changed our name to eNutrition, Inc.

On May 17, 2002, our stockholders approved our acquisition of all of the issued and outstanding securities of Torpedo Delaware in exchange for 8,000,000 shares of our common stock issued to the Torpedo USA stockholders.  

On February 1, 2005, we acquired all of the issued and outstanding common stock of Interactive Games, Inc. (“Interactive”).  In conjunction with the Interactive agreement, we changed our name to Interactive Games, Inc.

Pursuant to an Agreement and Plan of Reorganization dated as of April 23, 2007, as amended on July 25, 2007 by and between the Company and Nuvo Solar Energy, Inc., a Colorado corporation (“Nuvo”), we and Nuvo entered into a share exchange whereby all of the issued and outstanding capital stock of Nuvo, on a fully-diluted basis, was exchanged for like securities of the Company, and whereby Nuvo became our wholly owned subsidiary. Contemporaneously, we changed our name to “China Nuvo Solar Energy, Inc.”

Nuvo was formed on April 13, 2006 for the purpose of seeking a business opportunity in the alternate energy or “next-generation energy" sector. This industry sector encompasses non-hydro carbon based energy production and renewable energy technologies that are “net-zero" or emissions free.

SHARE EXCHANGE TRANSACTION WITH SURGLINE, INC.

On September 1, 2011, the Registrant entered into and consummated the First Amendment to the Agreement Concerning that Exchange of Securities (the “Share Exchange Agreement”) with SurgLine, Inc., a Nevada corporation (“SurgLine”) and the shareholders of SurgLine.  Upon consummation of the transactions set forth in the Agreement (the “Closing”), the Registrant adopted the business plan of SurgLine.

Pursuant to the Agreement, the Registrant agreed to acquire all of the outstanding capital stock of SurgLine in exchange (the “Share Exchange”) for the original issuance of an aggregate of 857,143 shares (the “Exchange Shares”) of the RegistrantÂ’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).  The Exchange Shares were issued on a pro rata basis, on the basis of the shares held by such security holders of SurgLine at the time of the Exchange.  Further in accordance with the Agreement, and following an amendment of the RegistrantÂ’s Articles of Incorporation, the Exchange Shares were converted into 3,817,554,433 shares of the RegistrantÂ’s common stock, par value $0.001 per share.  The shares of common stock issued to the SurgLine shareholdersÂ’ were equal to 70% of the issued and outstanding Common Stock of the Registrant, immediately after the Share Exchange.  Additionally, pursuant to the provisions of the Share Exchange Agreement, the Company issued 163,609,476 newly issued shares of Common Stock to the SurgLine shareholders, in satisfaction of the anti dilution provisions in the Share Exchange Agreement.  As a result of the Share Exchange, the Registrant issued a total of 3,981,163,909 shares of its common stock to the SurgLine shareholders and SurgLine became a wholly-owned subsidiary of the Registrant. The parties have taken the actions necessary to provide that the Exchange is treated as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended.  The Agreement contains customary representations, warranties and covenants of the Registrant and SurgLine for like transactions. The Share Exchange was effective upon the completed filing of Articles of Exchange with the Secretary of State of Nevada. The foregoing descriptions of the above referenced agreements do not purport to be complete. For an understanding of their terms and provisions, reference should be made to the Agreement attached as Exhibit 10.1 to the Current Report on Form 8-K/A, filed on December 14, 2011.

Additionally, the Registrant issued 142,857 shares of its Series B Preferred Stock to Abod Partners, LLC. (“Abod”).  Abod has acted as a consultant to the Registrant in facilitating the Agreement by and among the Registrant and SurgLine. Upon the effectiveness of the increase in the authorized shares of capital stock of the Registrant, the 142,857 shares of Series B Preferred Stock were exchanged for 545,364,919 shares of our Common Stock.

7

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

On September 1, 2011, as a covenant to the Agreement, holders of a majority of the Registrant’s outstanding Common Stock voted to amend the Registrant’s Articles of Incorporation to increase the number of its authorized shares of capital stock from 1,500,000,000 shares to 6,500,000,000 par value $0.001 shares (the “Amendment”) of which (a) 6,475,000,000 shares were designated as Common Stock and (b) 25,000,000 shares were designated as blank check preferred stock.

At the effective time of the Exchange, our board of directors and officers was reconstituted by the resignation of Henry Fong as President and Chief Executive Officer of the Registrant and the appointment of Thomas G. Toland as a member of the RegistrantÂ’s Board of Directors, President and Chief Executive Officer and Richard Dutch as Secretary and Chief Operating Officer of the Registrant.

On October 18, 2011 the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation to change the name of Registrant to SurLine International, Inc. The amendment was approved by a majority of the CompanyÂ’s shareholders and the CompanyÂ’s Board of Directors.

Going concern and managementÂ’s plans

The Company had a working capital deficit of approximately $1,492,000 at October 31, 2011. Additionally, the Company to date has generated minimal revenues. Accordingly, the Company has no ready source of working capital. These factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. While management believes the Company may be able to raise funds through the issuance of debt or equity instruments, there is no assurance the Company will be able to raise sufficient funds to operate in the future. The debt financing may include loans from our officers and directors.  Although our balance sheet includes current liabilities of approximately $1,605,000, a portion of this amount are in the form of a derivative liability of $269,849 and convertible notes and debentures of $497,347.  These amounts, plus other related party loans of approximately $106,000 and accrued and unpaid interest may be converted to common stock, thereby reducing considerably our debt service obligations.  Nevertheless, we will be required to raise funds in order to fund our operations and costs associated with being a public company.

On September 1, 2011 the Company completed the acquisition of 100% of the common stock of SurgLine. Pursuant to the terms of the Share Exchange Agreement (see above) SurgLine became a wholly owned subsidiary of China Nuvo. We will require additional capital for general corporate working capital to fund our day-to-day operations of SurgLine. We presently believe the source of funds will primarily consist of debt financing, which may include debt instruments that may include loans from our officers or directors, or the sale of our equity securities in private placements or other equity offerings or instruments.

Basis of presentation

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of China Nuvo Solar Energy, Inc. (the “Company”) contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at October 31, 2011, the results of operations for the three months ended October 31, 2011 and cash flows for the three months ended October 31, 2011. The balance sheet as of July 31, 2011 is derived from SurgLine’s financial statements.

For SEC reporting purposes, SurgLine is treated as the continuing reporting entity that acquired China Nuvo (the historic registrant). The reports filed after the transaction have been prepared as if SurgLine (accounting acquirer) were the legal successor to China NuvoÂ’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of SurgLine, for all periods prior to the share exchange and consolidated with China Nuvo from the date of the share Exchange. SurgLine previously had a June 30 fiscal year end, but has now assumed the fiscal year end of China Nuvo, the legal acquirer.  Accordingly, the financial statements presented herein are the unaudited financial statements for the three months ended October 31, 2011 are of SurgLine, Inc., and from September 1, 2011 are consolidated with China Nuvo.  Since SurgLine was formed in March 2011, there are no comparative results for the three months ended October 31, 2010.  All share and per share amounts of SurgLine have been retroactively adjusted to reflect the legal capital structure of China Nuvo pursuant to FASB ASC 805-40-45-1.

8

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

SurgLine, Inc. (“SurgLine”) was incorporated on March 15, 2011 under the laws of the state of Nevada. The Company will focus on providing its customers with the highest quality medical and surgical products at the lowest possible cost by eliminating the “historical brand premium.” The CompanyÂ’s founders saw the need to help reduce costs in the acute care healthcare system, and particularly that of the Operating Rooms. The CompanyÂ’s core business strategy is simply: Source and sell the highest quality medical and surgical products for substantially less, thereby reducing the “historical brand premium” that has historically been  absorbed  by healthcare end users, including hospitals, outpatient surgery centers, medical clinics, self-insured employers, managed care organizations, commercial insurance carriers and state and federal governmental payers.

On certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading.  For further information, refer to the financial statements and the notes thereto included in the CompanyÂ’s Annual Report on Form 10-K for the fiscal year ended July 31, 2011, as filed with the SEC, and the CompanyÂ’s Current Report on Form 8-K/A, filed on December 14, 2011.

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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period.  Actual results could differ from those estimates.

Significant accounting policies:

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results will differ from those estimates.

Intellectual Property

The Company records intangible assets in accordance with Statement of Financial Accounting Standard (SFAS) Number 142, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets deemed to have indefinite lives are not subject to annual amortization. Intangible assets which have finite lives are amortized on a straight line basis over their remaining useful life; they are also subject to annual impairment reviews.

Revenue recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”.  This statement established that revenue can be recognized when persuasive evidence of an arrangement exists, the services have been delivered, all significant contractual obligations have been satisfied, the fee is fixed or determinable and collection is reasonably assured.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Concentration on credit risks

The Company is subject to concentrations of credit risk primarily from cash and assets from discontinued operations.

The Company minimizes its credit risks associated with cash, including cash classified as assets from discontinued operations, by periodically evaluating the credit quality of its primary financial institutions.

9

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

Stock-based compensation

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment (“SFAS No, 123R”).  SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans.  As required by SFAS No. 123R, the Company will recognize the cost resulting from al stock-based payment transactions including shares issued under its stock option plans in the financial statements.

Prior to January 1, 2006, the Company accounted for stock-based employee compensation plans (including shares issued under its stock option plans) in accordance with APB Opinion No. 25 and followed the pro forma net income, pro forma income per share, and stock-based compensation plan disclosure requirements set forth in the Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”).  There are 17,500,000 stock options and warrants outstanding at October 31, 2011.

Fair value of financial instruments

The carrying value of cash, assets of discontinued operations, accounts payable and accrued expenses approximate their fair value due to their short-term maturities. The carrying amount of the note payable and due to related parties approximate their fair value based on the Company's incremental borrowing rate.

Income taxes

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some or, all of the deferred tax asset will not be realized.

Loss per common share

Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period.  Stock options, warrants and common stock underlying convertible promissory notes at October 31, 2011 was 434,407,308 and are not considered in the calculation as the impact of the potential common shares would be to decrease loss per share and therefore no diluted loss per share figures are presented.

Accounting for obligations and instruments potentially settled in the CompanyÂ’s common stock

In connection with any obligations and instruments potentially to be settled in the Company's stock, the Company accounts for the instruments in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a CompanyÂ’s Own Stock.  This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's stock.

Under EITF 00-19, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All contracts are initially measured at fair value and subsequently accounted for based on the then current classification. Contracts initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses these changes in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue to be included in earnings. The classification of a contract is reassessed at each balance sheet date.

10

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

Derivative instruments

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative instruments under the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.

Recent accounting pronouncements

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” The guidance improves the comparability of financial reporting and facilitates the convergence of U.S. GAAP and IFRS be amending the guidance in ASC 220, Comprehensive Income.  Under the amended guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This guidance is effective retrospectively for annual and interim periods beginning after December 15, 2011.  The adoption of the guidance is not expected to have a material impact on the Company's Consolidated Financial Statements or the Notes thereto.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting  pronouncements that have been issued that might have a material impact on its financial position or results of operations.

2.

Accrued liabilities, related parties:

Accrued liabilities, related parties at October 31, 2011 are as follows:

		2011
Management fees	$	359,702
Accrued interest		5,242
Affiliated Companies		4,234
	$	369,178

3.

Convertible debentures payable:

2011 Convertible Notes

On September 13, 2011, the Company entered into a note agreement with an institutional investor for the issuance of a convertible promissory note of $28,000 (the “2011 Convertible Note”).

Among other terms, the 2011 Convertible Note matures on itsÂ’ nine month anniversary (the “Maturity Date”), unless prepayment of the 2011 Convertible Note is required in certain events, as called for in the agreement.  The 2011 Convertible Note is convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest three trading prices per share of the CompanyÂ’s common stock for the ten (10) trading days immediately preceding the date of conversion.  In addition, the 2011 Convertible Note provides for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.

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CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

The Convertible Note bears interest at eight percent (8%) per annum, payable in cash or shares of our common stock at the Conversion Price.  Upon the occurrence of an Event of Default (as defined in the 2011 Convertible Note), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the 2011 Convertible Note, together with all accrued and unpaid interest, to be immediately due and payable.

The Company may at its option prepay the 2011 Convertible Notes in full during the first ninety days following their issuance in an amount equal to 150% of the outstanding principal and interest, and during the 91^st to 180^th days following the Note in an amount equal to 175% of the outstanding principal and interest.  Further terms call for the Company to maintain shares reserved for issuance as stated in the 2011 Convertible Note.

We received net proceeds from the 2011 Convertible Note of $25,500 after debt issuance costs of $2,500 paid for lender legal fees.  These debt issuance costs will be amortized over the term of the 2011 Convertible Note or such shorter period as the 2011 Convertible Note may be outstanding.  Accordingly, as the 2011 Convertible Note is converted to common stock prior to their expiration date, that amount of debt issuance costs attributable to the amounts converted will be accelerated and expensed as of the applicable conversion dates. As of October 31, 2011, $444 of these costs had been expensed as debt issuance costs.

We have determined that the conversion feature of the 2011 Convertible Note represents an embedded derivative since the 2011 Convertible Note is convertible into a variable number of shares upon conversion. Accordingly, the convertible 2011 Convertible Note is not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments have been recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the 2011 Convertible Note. Such discount will be accreted from the date of issuance to the maturity dates of the 2011 Convertible Note. The change in the fair value of the liability for derivative contracts will be credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The $28,000 face amount of the 2011 Convertible Note was stripped of itsÂ’ conversion feature due to the accounting for the conversion feature as a derivative, which was recorded using the residual proceeds to the conversion option attributed to the debt. The beneficial conversion feature (an embedded derivative) included in the 2011 Convertible Note resulted in an initial debt discount of $28,000 and an initial loss on the valuation of derivative liabilities of $18,667 for a derivative liability balance of $46,667 at issuance.

The fair value of the 2011 Convertible Note was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value	Term	Assumed Conversion Price	Market Price on Issue Date	Volatility Percentage	Interest Rate
9/13/11	$46,667	9 months	$0.0012	$0.0026	187%	1.4%

At October 31, 2011, the Company revalued the derivative liability balance of the 2011 Convertible Note, and there was no change in the derivative liability.

The fair value of the 2011 Convertible Note was calculated at October 31, 2011 utilizing the following assumptions:

Fair Value	Term	Assumed Conversion Price	Volatility Percentage	Interest Rate
$46,667	9 months	$0.0006	186%	1.4%

12

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

Pursuant to the Share Exchange Agreement, the Company assumed a derivative liability of $253,333 related a face value of $123,000 of Convertible Notes (the “Assumed Convertible Notes”). The Assumed Convertible Notes have terms similar to the 2011 Convertible Note.  Subsequent to the Share Exchange Agreement, the Company issued 124,320,512 shares of common stock upon the conversion of $68,000 face value of the Assumed Convertible Notes and $3,120 of accrued and unpaid interest on the Assumed Convertible Notes.  The Company reduced the derivative liability by $148,571 as a result of the redeemed Assumed Convertible Notes.  The Company revalued the remaining face value of $55,000 of the Assumed Convertible Notes as of October 31, 2011 and recorded a credit to expense of $13,095 and reduced the derivative liability balance by $13,095; resulting in a derivative liability balance of $91,667 as of October 31, 2011 related to the Assumed Convertible Notes.

Also pursuant to the Share Exchange Agreement, the Company assumed $128,500 of face value of 2007 Debentures (the “2007 Debentures”) and a derivative liability of $222,456 associated with the 2007 Debentures. The 2007 Debentures are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 75% of the lowest closing bid price per share (as reported by Bloomberg, LP) of the CorporationÂ’s common stock for the twenty (20) trading days immediately preceding the date of conversion.  In addition, the Debentures provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Corporation or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Corporation.

Subsequent to the Share Exchange Agreement, the Company issued 27,913,846 shares of common stock upon the conversion of $20,000 of face value of the 2007 Debentures and $7,216 of accrued and unpaid interest.  The Company reduced the derivative liability of the 2007 Debenture by $70,175 as a result of the redeemed 2007 Debentures. The Company revalued the remaining face value of $108,500 of the 2007 Debentures as of October 31, 2011 and reduced the derivative liability of the 2007 Debentures by $20,766 and recorded a credit to expense of $20,766; resulting in a derivative liability balance of $131,515 as of October 31, 2011 related to the 2007 Debentures.

The following table summarizes the balance sheet amounts as of October 31, 2011, as well as the amounts included in the consolidated statement of operations for the three months ended October 31, 2011.

Balance Sheet

Debentures		Debt issuance costs		Derivative liability		Face value of Debentures		Discount on Debentures
2007 Debenture	$	-	$	131,515	$	108,500	$	-
2011 Conv Note		2,058		46,667		78,000		23,023
Assumed Conv Note		2,500		91,667		55,000		29,889
	$	4,558	$	269,849	$	241,500	$	52,912

Operating Statement
Debentures		Debt issuance costs (interest expense)		Fair value adjustment of derivative liability
2007 Debenture	$	-	$	(20,766)
2011 Conv Note		444		18,667
Assumed Conv Note		5,417		(13,095)
	$	5,861	$	(15,194)

13

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

4.

Convertible and other promissory notes and long-term debt, including related parties:

Convertible and other promissory notes and long-term debt, including related parties at October 31, 2011 consist of the following:

		2011
Notes payable	$	376,259
Notes payable, related parties [A]		38,543
Convertible debentures, net of discount of $52,912		188,588
		603,390
Less current portion		603,390
Long-term debt, net of current portion	$	-

A.

Includes notes of $8,500 due to Mr. Fong, a member of our Board of Directors, as well as $30,043 due to various companies that Mr. Fong is affiliated with.

5.

StockholdersÂ’ deficit:

Preferred Stock

Series A Preferred Stock

As of October 31, 2011 there are 160,000 shares of Series A Preferred stock outstanding. Pursuant to the Certificate of Designation for Series A Preferred Stock, as amended, holders of the Series A Preferred Stock can convert the shares of preferred stock to common stock.  The conversion price is equal to 50% of the average of the three lowest closing bid prices of our common stock in the 10 days immediately preceding the conversion.  Additionally Series A holders are entitled to vote their stock on an as if converted to common stock basis on each matter submitted to vote at a meeting of China NuvoÂ’s stockholders. In the event of the CorporationÂ’s liquidation, the Series A Preferred Stock shall rank senior to any class or series of the CorporationÂ’s capital stock created after the Series A Preferred Stock; pari passu with any class or series of the CorporationÂ’s capital stock created after the series A Preferred Stock that ranks on parity with the Series A Preferred Stock; and junior to any class or series of the CorporationÂ’s capital stock created after the Series A Preferred Stock that ranks senior to the Series A Preferred Stock.  The Series A Preferred Stock shall be senior to the CorporationÂ’s common stock. Stockholders do not have any preemptive rights or other similar rights to acquire additional shares of China NuvoÂ’s common stock or other securities.

Series B Preferred Stock

Pursuant to the Certificate of Designation for Series B Preferred Stock, shares issued and outstanding of the Series B Preferred Stock shall convert immediately to shares of common stock upon the Company filing and completing an increase in their authorized shares of common stock, whereby such increase will allow for the conversion of the Class B Preferred Stock. Each share of preferred stock will convert to an amount of shares of common stock that in their totality will equal eighty percent (80%) of the outstanding common stock, subsequent to its conversion; without exceeding the newly authorized common stock.  Additionally Series B holders are entitled to vote their stock on an as if converted to common stock basis on each matter submitted to vote at a meeting of China NuvoÂ’s stockholders. In the event of the CorporationÂ’s liquidation, the Series B Preferred Stock shall rank senior to any class or series of the CorporationÂ’s capital stock created after the Series B Preferred Stock; pari passu with any class or series of the CorporationÂ’s capital stock created after the series B Preferred Stock that ranks on parity with the Series B Preferred Stock; and junior to any class or series of the CorporationÂ’s capital stock created after the Series B Preferred Stock that ranks senior to the Series B Preferred Stock.  The Series B Preferred Stock shall be senior to the CorporationÂ’s common stock. Stockholders do not have any preemptive rights or other similar rights to acquire additional shares of China NuvoÂ’s common stock or other securities.

Our Board of Directors, without further approval of our stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any additional series of preferred stock that may be created.

14

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

Pursuant to the Agreement, the Registrant agreed to acquire all of the outstanding capital stock of SurgLine in exchange (the “Share Exchange”) for the original issuance of an aggregate of 857,143 shares (the “Exchange Shares”) of the RegistrantÂ’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).  The Exchange Shares were issued on a pro rata basis, on the basis of the shares held by such security holders of SurgLine at the time of the Exchange.  Further in accordance with the Agreement, and following an amendment of the RegistrantÂ’s Articles of Incorporation, the Exchange Shares were converted into 3,817,554,433 shares of the RegistrantÂ’s common stock, par value $0.001 per share (the “Common Stock”) equal to 70% of the issued and outstanding Common Stock of the Registrant.

Additionally, pursuant to the agreement, the Company issued 142,857 shares of its Series B Preferred Stock to Abod Partners, LLC. (“Abod”).  Abod has acted as a consultant to in facilitating the Agreement by and among the Company and SurgLine. Upon the effectiveness of the increase in the authorized shares of capital stock of the Registrant, the 142,857 shares of Series B Preferred Stock were exchanged for 545,364,919 shares of our Common Stock. As of October 31, 2011 there were no shares of Series B Preferred Stock outstanding.

Common Stock

On September 1, 2011, as a covenant to the Agreement, holders of a majority of the Registrant’s outstanding Common Stock voted to amend the Registrant’s Articles of Incorporation to increase the number of its authorized shares of capital stock from 1,500,000,000 shares to 6,500,000,000 par value $0.001 shares (the “Amendment”) of which (a) 6,475,000,000 shares were designated as Common Stock and (b) 25,000,000 shares were designated as blank check preferred stock.

Shares issued for conversion of subordinated debentures and accrued interest

From September 2, 2011 through October 31, 2011 the Company issued 124,320,512 shares of common stock upon the conversion of $88,000 of debentures and $10,336 of unpaid interest on the debentures. The shares were issued at approximately $0.0008 per share.

Shares issued for conversion of Series A Preferred Stock

On September 6, 2011 the Company issued 32,894,167 shares of common stock upon the conversion of $39,473 shares of Series A Preferred Stock.  Pursuant to the Certificate of Designation of the Preferred Stock, as amended, the shares were issued at approximately $0.0012 per share.

Other issuance of shares of common stock

On October 20, 2011, the Company issued 76,677,667 shares of common stock pursuant to Debt Settlement and Release Agreements in exchange for the cancellation of $43,007 of accounts payable.  The shares were issued at approximately $0.0006 per share.

 Stock options and warrants

In March 2002, the Company adopted the 2002 Stock Option Plan, covering up to 1,000,000 shares of the Company's common stock, and in July 2003, the Company adopted the 2003 Stock Option Plan covering up to 2,500,000 shares of the Company's common stock. There are currently no options outstanding under the 2002 stock Option Plan and 300,000 under the 2003 Stock Option Plans. In August 2007, the Company adopted the 2007 Stock Option Plan covering up to 18,000,000 shares of the CompanyÂ’s common stock. There are currently 10,000,000 shares of the CompanyÂ’s common stock under the 2007 Plan. As of October 31, 2011 there were options to purchase 16,500,000 shares of the CompanyÂ’s common stock outstanding under the 2007 Stock Option Plan. Additionally, the Company has warrants outstanding to purchase 1,000,000 shares of common stock

15

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

A summary of the activity of the CompanyÂ’s outstanding options and warrants during the three months ended October 31, 2011 is as follows:

	Options and warrants		Weighted average exercise price
Outstanding August 1, 2011	17,500,000	$	0.04
Granted	-		-
Exercised	-		-
Expired	-		-
Outstanding, October 31, 2011	17,500,000	$	0.04

Range of exercise prices	Warrants outstanding and exercisable	Weighted average remaining contractual life	Weighted average exercise price
$.01	10,000,000	4.44	$0.01
0.07	6,500,000	2.25	0.07
0.12	1,000,000	0.004	0.12

The weighted average remaining contractual life of the terms of the warrants and options is 6.7 years.

6.

Income taxes:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred taxes, as of October 31, 2011, are as follows:

Deferred tax assets:
Net operating loss carryforward	$	290,000
Less valuation allowance		(290,000)
Total net deferred tax assets		-

The Company may have had a change of ownership as defined by the Internal Revenue Code Section 382. As a result, a substantial annual limitation may be imposed upon the future utilization of its net operating loss carryforwards. At this point, the Company has not completed a change in ownership study and the exact impact of such limitations is unknown. The company has no accrued tax liability, as the income was derived from the sale of a subsidiary and the liabilities were alleviated through formal bankruptcy proceedings.

The federal statutory tax rate reconciled to the effective tax rate during the three months ended October 31, 2011, is as follows:

	2011
Tax at U.S. Statutory Rate	35.0%
State tax rate, net of federal benefits	5.0%
Change in valuation allowance	(40.0)
	0.0%

16

CHINA NUVO SOLAR ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED OCTOBER 31, 2011

7.

Subsequent events

Common Stock Issuances

In November 2011, the Company issued $100,000 in convertible notes to seven investors. The notes convert at a discount equal to 50% of the average of the lowest three trading prices per share of the CompanyÂ’s common stock for the ten (10) trading days immediately preceding the date of conversion. Accordingly, in November 2011, upon the Company receiving Conversion Notices on the $100,000 convertible notes from the noteholders, the Company issued 146,853,147 shares of restricted common stock.

In November 2011, the Company issued 31,044,776 shares of common stock upon the conversion of $20,000 of the 2011 Convertible Notes and $800 of accrued and unpaid interest.

On November 15, 2011 the Company issued 40,000,000 shares of common stock upon the conversion of $30,000 of the 2007 Debentures.  The shares were issued at an average conversion price of $0.00075 per share.

Management performed an evaluation of the CompanyÂ’s activity through the date these financials were issued to determine if they must be reported.  The Management of the Company determined that there were no other reportable subsequent events to be disclosed

17

ITEM TWO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS REPORT MAY CONTAIN CERTAIN "FORWARD-LOOKING" STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS, FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS "MAY", "WILL", "EXPECT", "BELIEVE", "ANTICIPATE", "INTENT", "COULD", "ESTIMATE", "MIGHT", OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON THE VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO THE COMPANY'S OPERATIONS, MERGERS OR ACQUISITIONS, GOVERNMENTAL REGULATION, THE VALUE OF THE COMPANY'S ASSETS AND ANY OTHER FACTORS DISCUSSED IN THIS AND OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

GENERAL

China Nuvo Solar Energy, Inc. (the “Company”) was originally organized under the laws of the State of Nevada in 1996 as Zacman Enterprises, Inc. and subsequently changed our name to eNutrition, Inc.

On May 17, 2002, our stockholders approved our acquisition of all of the issued and outstanding securities of Torpedo Delaware in exchange for 8,000,000 shares of our common stock issued to the Torpedo USA stockholders.

On February 1, 2005, we acquired all of the issued and outstanding common stock of Interactive Games, Inc. (“Interactive”).  In conjunction with the Interactive agreement, we changed our name to Interactive Games, Inc.

Pursuant to an Agreement and Plan of Reorganization dated as of April 23, 2007, as amended on July 25, 2007 by and between the Company and Nuvo Solar Energy, Inc., a Colorado corporation (“Nuvo”), we and Nuvo entered into a share exchange whereby all of the issued and outstanding capital stock of Nuvo, on a fully-diluted basis, was exchanged for like securities of the Company, and whereby Nuvo became our wholly owned subsidiary. Contemporaneously, we changed our name to “China Nuvo Solar Energy, Inc.”

On September 1, 2011, the Registrant entered into and consummated the First Amendment to the Agreement Concerning that Exchange of Securities (the “Share Exchange Agreement”) with SurgLine, Inc., a Nevada corporation (“SurgLine”) and the shareholders of SurgLine.  Upon consummation of the transactions set forth in the Agreement (the “Closing”), the Registrant adopted the business plan of SurgLine.

On September 1, 2011, as a covenant to the Agreement, holders of a majority of the Registrant’s outstanding Common Stock voted to amend the Registrant’s Articles of Incorporation to increase the number of its authorized shares of capital stock from 1,500,000,000 shares to 6,500,000,000 par value $0.001 shares (the “Amendment”) of which (a) 6,475,000,000 shares were designated as Common Stock and (b) 25,000,000 shares were designated as blank check preferred stock.

For SEC reporting purposes, SurgLine is treated as the continuing reporting entity that acquired China Nuvo (the historic registrant). The reports filed after the transaction have been prepared as if SurgLine (accounting acquirer) were the legal successor to China NuvoÂ’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of SurgLine, for all periods prior to the share exchange and consolidated with China Nuvo from the date of the share Exchange. SurgLine previously had a June 30 fiscal year end, but has now assumed the fiscal year end of China Nuvo, the legal acquirer.  Accordingly, the financial statements presented herein are the unaudited financial statements for the three months ended October 31, 2011 are of SurgLine, Inc., and from September 1, 2011 are consolidated with China Nuvo.   Since SurgLine was not formed until March 2011, there are no comparative results for the period ending October 31, 2010.  All share and per share amounts of SurgLine have been retroactively adjusted to reflect the legal capital structure of China Nuvo pursuant to FASB ASC 805-40-45-1.

18

SurgLine was incorporated on March 15, 2011 under the laws of the state of Nevada. The Company will focus on providing its customers with the highest quality medical and surgical products at the lowest possible cost by eliminating the “historical brand premium.” The CompanyÂ’s founders saw the need to help reduce costs in the acute care healthcare system, and particularly that of the Operating Rooms. The CompanyÂ’s core business strategy is simply: Source and sell the highest quality medical and surgical products for substantially less, thereby reducing the “historical brand premium” that has historically been  absorbed  by healthcare end users, including hospitals, outpatient surgery centers, medical clinics, self-insured employers, managed care organizations, commercial insurance carriers and state and federal governmental payers.

OVERVIEW

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto for the years ended July 31, 2011 and 2010, as well as the CompanyÂ’s Current report on Form 8-K/A, filed with the SEC on December 14, 2011.  The financial statements presented for the three months ended October 31, 2011 include the SurgLine and effective September 1, 2011 consolidated with China Nuvo Solary Energy, Inc.

In light of the foregoing, the historical data presented below is not indicative of future results. You should read this information in conjunction with the audited consolidated financial statements of the Company, including the notes to those statements and the following “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.

The CompanyÂ’s financial statements for the three months ended October 31, 2011 and 2010 have been prepared on a going concern basis, which contemplates the realization of its remaining assets and the settlement of liabilities and commitments in the normal course of business.  The Company has incurred losses since its inception and has a working capital deficit of approximately $1,491,000, and an accumulated shareholdersÂ’ deficit of approximately $2,075,000 as of October 31, 2011.

These factors raise substantial doubt about the CompanyÂ’s ability to continue as a going concern.  There can be no assurance that the Company will have adequate resources to fund future operations or that funds will be available to the Company when needed, or if available, will be available on favorable terms or in amounts required by the Company.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended October 31, 2011, net cash used in operating activities was $116,195.  Net loss was $1,800,716 for the three months ended October 31, 2011. The loss included $1,527,022 of stock compensation cost related to the Share Exchange Agreement for 545,364,919 shares of common stock issued to a consultant who facilitated the transaction. The shares were valued at $0.0028, the market value of the common stock on the date of their issuance. Also included in the current period loss were non-cash expenses of $64,772 for amortization.  

Net cash provided by financing activities for the three months ended October 31, 2011 was $77,900. For the three months ended October 31, 2011, the Company received $78,000 on the issuance of convertible notes and $2,400 on the issuance of related notes payable. During the three months ended October 31, 2011 the Company paid $2,500 closing costs on newly issued convertible notes.  

For the three months ended October 31, 2011, cash and cash equivalents decreased by $39,122. .  Ending cash and cash equivalents at October 31, 2011 was $9,889 as of October 31, 2011.

We will require substantial additional financing in order to execute our business plans and we may require add itional financing in order to sustain substantial future business operations for an extended period of time. We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.

Pursuant to the Share Exchange Agreement we have assumed certain liabilities of the Registrant of approximately $1,659,000, as of September 1, 2011. As of October 31, 2011 our liabilities are approximately $1,605,000.  Included in this amount is a derivative liability of $269,849 related to convertible notes and debentures that is subject to the change in market price of our common stock and ultimately will be satisfied upon the final conversion of the associated debt.  Additionally we have convertible notes and debentures of approximately $541,500.  These amounts, plus other notes payable of $376,259 and related party loans of $38,543 and accrued and unpaid interest may be converted to common stock, thereby reducing considerably our debt service obligations.  Nevertheless, we will be required to raise funds in order to fund our operations and costs associated with being a public company. We estimate that amount to be $100,000.

19

REVENUES

For the three months ended October 31, 2011 the Company had revenues of $75,272 consisting of sales to one customer of the CompanyÂ’s surgical implant products.

OPERATING EXPENSES

Operating expenses for the three months ended October 31, 2011 were $1,774,754. The current year expenses include management and consulting fees of $168,900 are comprised of management fees to our executive staff of $148,900 and $20,000 to our non- executive director. Additional operating costs include $30,000 for our FDA consultant and $3,000 to our Government Services consultant. Legal and accounting costs were $13,748 and $30,584 for general and administrative costs.

OTHER INCOME (EXPENSE)

Other expenses for the three months ended October 31, 2011 was $61,810 and consisted primarily of interest expense of $77,004, including $863 to related parties. Include in the interest expense was $58,911 related to the amortization of the discount initially recorded on convertible debt, as well as $5,861 related to the amortization of deferred financing costs. These expenses were offset by the fair value adjustment to derivative liabilities of $15,194. Interest expense for the three and nine months ended April 30, 2011 and 2010 is summarized as:

CONTRACTUAL OBLIGATIONS

No material changes outside the ordinary course of business during the quarter ended October 31, 2011.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company we are not required to provide the information required by this item.

ITEM 4T. DISCLOSURE CONTROLS AND PROCEDURES

A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that review and evaluation, the CEO and CFO have concluded that as of October 31, 2011 disclosure controls and procedures, were not effective to ensure that information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company first intends to focus itsÂ’ efforts on stabilizing the business as a going concern, and secondly, designing and installing effective controls as soon as cash flow, and funding to do so become available.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a companyÂ’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

·

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

·

Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.

20

Our management, including our CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may still occur.

There have been no changes in the CompanyÂ’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the CompanyÂ’s internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A. RISK FACTORS

As a smaller reporting company we are not required to provide the information required by this item.

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

Pursuant to the Agreement, the Registrant agreed to acquire all of the outstanding capital stock of SurgLine in exchange (the “Share Exchange”) for the original issuance of an aggregate of 857,143 shares (the “Exchange Shares”) of the RegistrantÂ’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).  The Exchange Shares were issued on a pro rata basis, on the basis of the shares held by such security holders of SurgLine at the time of the Exchange.  Further in accordance with the Agreement, and following an amendment of the RegistrantÂ’s Articles of Incorporation, the Exchange Shares were converted into 3,817,554,433 shares of the RegistrantÂ’s common stock, par value $0.001 per share. Additionally, pursuant to the provisions of the Share Exchange Agreement, the Company issued 163,609,476 newly issued shares of Common Stock to the SurgLine shareholders, in satisfaction of the anti dilution provisions in the Share Exchange Agreement.  As a result of the Share Exchange, the Registrant issued a total of 3,981,163,909 shares of its common stock to the SurgLine shareholders.

Additionally, the Registrant has agreed to issue 142,857 shares of its Series B Preferred Stock to Abod Partners, LLC. (“Abod”). Abod has acted as a consultant to the Registrant in facilitating the Agreement by and among the Registrant and SurgLine. Upon the effectiveness of the increase in the authorized shares of capital stock of the Registrant, the 142,857 shares of Series B Preferred Stock were exchanged for 545,364,919 shares of our Common Stock.

From September 2, 2011 through October 31, 2011 the Company issued 124,320,512 shares of common stock upon the conversion of $88,000 of debentures and $10,336 of unpaid interest on the debentures. The shares were issued at approximately $0.0008 per share.

On September 6, 2011 the Company issued 32,894,167 shares of common stock upon the conversion of $39,473 shares of Series A Preferred Stock.  Pursuant to the Certificate of Designation of the Preferred Stock, as amended, the shares were issued at approximately $0.0012 per share.

On October 20, 2011, the Company issued 76,677,667 shares of common stock pursuant to Debt Settlement and Release Agreements in exchange for the cancellation of $43,007 of accounts payable.  The shares were issued at approximately $0.0006 per share.

21

The sales of the securities identified above were made pursuant to privately negotiated transactions that did not involve a public offering of securities and, accordingly, we believe that these transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D. The agreements executed in connection with this sale contain representations to support the Company’s reasonable belief that the Investor had access to information concerning the Company’s operations and financial condition, the Investor acquired the securities for their own account and not with a view to the distribution thereof in the absence of an effective registration statement or an applicable exemption from registration, and that the Investor are sophisticated within the meaning of Section 4(2) of the Securities Act and are “accredited investors” (as defined by Rule 501 under the Securities Act). In addition, the issuances did not involve any public offering; the Company made no solicitation in connection with the sale other than communications with the Investor; the Company obtained representations from the Investor regarding their investment intent, experience and sophistication; and the Investor either received or had access to adequate information about the Company in order to make an informed investment decision. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit index

Exhibit
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K.  During the fiscal quarter ended October 31, 2011, the Company filed the following reports:

Current Report on Form 8-K, on August 1, 2011

Current Report on Form 8-K, on September 8, 2011

Current Report on Form 8-K/A on September 22, 2011

Current Report on Form 8-K/A on October 7, 2011

Current Report on Form 8-K/A on October 21, 2011

22

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: December 20, 2011

CHINA NUVO SOLAR ENERGY, INC.

By:

/s/ Thomas G. Toland                    

Thomas G. Toland

President, Chief Executive Officer, Director

(Principal Executive Officer)

By:

/s/ Barry S. Hollander                  

Barry S. Hollander

Chief Financial Officer

(Principal Financial Officer)

23

EX-31

Exhibit 31.1

CERTIFICATION PURSUANT TO 

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas G. Toland, certify that:

1.   

I have reviewed this quarterly report on Form 10-Q of China Nuvo Solar Energy, Inc.;

2.    

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  

The registrantÂ’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) 

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5   

The registrantÂ’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) 

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) 

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrantÂ’s internal control over financial reporting.

Date: December 20, 2011

/s/ Thomas G. Toland                           

Name: Thomas G. Toland

Title: President, Chief Executive Officer

         and Director

         (Principal Executive Officer)

EX-31

Exhibit 31.2

CERTIFICATION PURSUANT TO 

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry Hollander, certify that:

1.    

I have reviewed this quarterly report on Form 10-Q of China Nuvo Solar Energy, Inc.;

2.    

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    

The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant we have:

(a)  

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5   

The registrantÂ’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) 

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrantÂ’s internal control over financial reporting.

Date: December 20, 2011

/s/ Barry Hollander                         

Name: Barry Hollander

Title: Chief Financial Officer

         (Principal Financial Officer)

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Thomas G. Toland, President, Chief Executive Officer and Director of China Nuvo, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Quarterly Report on Form 10-Q of China Nuvo Solar Energy, Inc. for the period ended October 31, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of China Nuvo Solar Energy, Inc.

Dated: December20, 2011

/s/ G. Thomas G. Toland                         

Name: Thomas G. Toland

Title: President, Chief Executive Officer

         and Director

         (Principal Executive Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to China Nuvo Solar Energy, Inc. and will be retained by China Nuvo Solar Energy, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

 Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Barry Hollander, Chief Financial Officer of China Nuvo Solar Energy, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Quarterly Report on Form 10-Q of China Nuvo Solar Energy, Inc. for the period ended October 31, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of China Nuvo Solar Energy, Inc.

Dated: December 20, 2011

/s/ Barry Hollander                         

Name: Barry Hollander

Title: Chief Financial Officer

          (Principal Financial Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided China Nuvo Solar Energy, Inc. and will be retained by China Nuvo Solar Energy, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Convertible Debentures Payable

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Convertible Debentures Payable

3.

Convertible debentures payable:

2011 Convertible Notes

On September 13, 2011, the Company entered into a note agreement with an institutional investor for the issuance of a convertible promissory note of $28,000 (the “2011 Convertible Note”).

Among other terms, the 2011 Convertible Note matures on itsÂ’ nine month anniversary (the “Maturity Date”), unless prepayment of the 2011 Convertible Note is required in certain events, as called for in the agreement.  The 2011 Convertible Note is convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest three trading prices per share of the CompanyÂ’s common stock for the ten (10) trading days immediately preceding the date of conversion.  In addition, the 2011 Convertible Note provides for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.

The Convertible Note bears interest at eight percent (8%) per annum, payable in cash or shares of our common stock at the Conversion Price.  Upon the occurrence of an Event of Default (as defined in the 2011 Convertible Note), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the 2011 Convertible Note, together with all accrued and unpaid interest, to be immediately due and payable.

The Company may at its option prepay the 2011 Convertible Notes in full during the first ninety days following their issuance in an amount equal to 150% of the outstanding principal and interest, and during the 91^st to 180^th days following the Note in an amount equal to 175% of the outstanding principal and interest.  Further terms call for the Company to maintain shares reserved for issuance as stated in the 2011 Convertible Note.

We received net proceeds from the 2011 Convertible Note of $25,500 after debt issuance costs of $2,500 paid for lender legal fees.  These debt issuance costs will be amortized over the term of the 2011 Convertible Note or such shorter period as the 2011 Convertible Note may be outstanding.  Accordingly, as the 2011 Convertible Note is converted to common stock prior to their expiration date, that amount of debt issuance costs attributable to the amounts converted will be accelerated and expensed as of the applicable conversion dates. As of October 31, 2011, $444 of these costs had been expensed as debt issuance costs.

We have determined that the conversion feature of the 2011 Convertible Note represents an embedded derivative since the 2011 Convertible Note is convertible into a variable number of shares upon conversion. Accordingly, the convertible 2011 Convertible Note is not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments have been recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the 2011 Convertible Note. Such discount will be accreted from the date of issuance to the maturity dates of the 2011 Convertible Note. The change in the fair value of the liability for derivative contracts will be credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The $28,000 face amount of the 2011 Convertible Note was stripped of itsÂ’ conversion feature due to the accounting for the conversion feature as a derivative, which was recorded using the residual proceeds to the conversion option attributed to the debt. The beneficial conversion feature (an embedded derivative) included in the 2011 Convertible Note resulted in an initial debt discount of $28,000 and an initial loss on the valuation of derivative liabilities of $18,667 for a derivative liability balance of $46,667 at issuance.

The fair value of the 2011 Convertible Note was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value	Term	Assumed Conversion Price	Market Price on Issue Date	Volatility Percentage	Interest Rate
9/13/11	$46,667	9 months	$0.0012	$0.0026	187%	1.4%

At October 31, 2011, the Company revalued the derivative liability balance of the 2011 Convertible Note, and there was no change in the derivative liability.

The fair value of the 2011 Convertible Note was calculated at October 31, 2011 utilizing the following assumptions:

Fair Value	Term	Assumed Conversion Price	Volatility Percentage	Interest Rate
$46,667	9 months	$0.0006	186%	1.4%

Pursuant to the Share Exchange Agreement, the Company assumed a derivative liability of $253,333 related a face value of $123,000 of Convertible Notes (the “Assumed Convertible Notes”). The Assumed Convertible Notes have terms similar to the 2011 Convertible Note.  Subsequent to the Share Exchange Agreement, the Company issued 124,320,512 shares of common stock upon the conversion of $68,000 face value of the Assumed Convertible Notes and $3,120 of accrued and unpaid interest on the Assumed Convertible Notes.  The Company reduced the derivative liability by $148,571 as a result of the redeemed Assumed Convertible Notes.  The Company revalued the remaining face value of $55,000 of the Assumed Convertible Notes as of October 31, 2011 and recorded a credit to expense of $13,095 and reduced the derivative liability balance by $13,095; resulting in a derivative liability balance of $91,667 as of October 31, 2011 related to the Assumed Convertible Notes.

Also pursuant to the Share Exchange Agreement, the Company assumed $128,500 of face value of 2007 Debentures (the “2007 Debentures”) and a derivative liability of $222,456 associated with the 2007 Debentures. The 2007 Debentures are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 75% of the lowest closing bid price per share (as reported by Bloomberg, LP) of the CorporationÂ’s common stock for the twenty (20) trading days immediately preceding the date of conversion.  In addition, the Debentures provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Corporation or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Corporation.

Subsequent to the Share Exchange Agreement, the Company issued 27,913,846 shares of common stock upon the conversion of $20,000 of face value of the 2007 Debentures and $7,216 of accrued and unpaid interest.  The Company reduced the derivative liability of the 2007 Debenture by $70,175 as a result of the redeemed 2007 Debentures. The Company revalued the remaining face value of $108,500 of the 2007 Debentures as of October 31, 2011 and reduced the derivative liability of the 2007 Debentures by $20,766 and recorded a credit to expense of $20,766; resulting in a derivative liability balance of $131,515 as of October 31, 2011 related to the 2007 Debentures.

The following table summarizes the balance sheet amounts as of October 31, 2011, as well as the amounts included in the consolidated statement of operations for the three months ended October 31, 2011.

Balance Sheet

Debentures		Debt issuance costs		Derivative liability		Face value of Debentures		Discount on Debentures
2007 Debenture	$	-	$	131,515	$	108,500	$	-
2011 Conv Note		2,058		46,667		78,000		23,023
Assumed Conv Note		2,500		91,667		55,000		29,889
	$	4,558	$	269,849	$	241,500	$	52,912

Operating Statement
Debentures		Debt issuance costs (interest expense)		Fair value adjustment of derivative liability
2007 Debenture	$	-	$	(20,766)
2011 Conv Note		444		18,667
Assumed Conv Note		5,417		(13,095)
	$	5,861	$	(15,194)

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Accrued Liabilities Related Parties

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Accrued Liabilities Related Parties

2.

Accrued liabilities, related parties:

Accrued liabilities, related parties at October 31, 2011 are as follows:

		2011
Management fees	$	359,702
Accrued interest		5,242
Affiliated Companies		4,234
	$	369,178

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Balance Sheets (USD $)	Oct. 31, 2011	Jul. 31, 2011
Current Assets
Cash	$ 9,889	$ 49,011
Accounts receivable	45,272
Notes and interest receivable, other	36,276
Inventory	16,095
Debt issuance costs	4,558
Prepaid assets and deposits	1,152	23,500
Total current assets	113,242	72,511
Property, plant and equipment, net	1,531	704
Total assets	114,773	73,215
Current liabilities:
Accounts payable and accrued liabilities, related parties	369,178	(15,467)
Accounts payable and accrued expenses	362,353	50,000
Convertible debentures payable, net	188,588
Derivative liability convertible debentures	269,849
Notes payable	376,259	500
Notes payable, related parties	38,543
Total current liabilities	1,604,770	35,033
Long-term liabilities:
Convertible debentures payable, net
Total liabilities	1,604,770	35,033
ShareholdersÂ’ deficit:
Preferred stock, 25,000,000 shares authorized Series A, 1,000,000 shares authorized; stated value $1.00 per share; 160,000 (October) issued and outstanding	160,000
Preferred stock, 25,000,000 shares authorized Series B, par value $0.001, 1,000,000 shares authorized; no shares issued and outstanding
Common stock, $.001 par value, 6,475,000,000 shares authorized; 5,623,528,697 (October) shares issued and outstanding	5,623,528	2,156
Additional paid-in capital	(5,197,992)	310,844
Retained earnings	(2,075,533)	(274,817)
Total shareholders' deficit	(1,489,997)	38,182
Total liabilities and shareholders' deficit	$ 114,773	$ 73,215

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Statements of Cash Flows (USD $)	3 Months Ended
	Oct. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ (1,800,716)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Increase (decrease) in derivative liability	(15,194)
Net liabilities assumed in reverse merger	1,614,575
Reverse merger	(87,553)
Cash acquired in merger	152
Amortization of discount on debentures payable	58,911
Amortization of debt issuance costs	5,861
Change in operating assets and liabilities:
Increase in accounts receivable	(45,272)
Increase in inventory	(16,095)
Decrease in prepaid expenses and other current assets	22,348
Increase in accounts payable and accrued expenses	167,117
Decrease in amounts due to related parties	(20,329)
Net cash used in operating activities	(116,195)
Cash flows from investing activities:
Purchase of property and equipment	(827)
Net cash used in investing activities	(827)
Cash flows from financing activities:
Proceeds from sale of common stock
Proceeds from issuance of related party notes payable	2,400
Proceeds from debentures payable	78,000
Placement fees paid	(2,500)
Net cash provided by financing activities	77,900
Net increase (decrease) in cash and cash equivalents	(39,122)
Cash and cash equivalents, beginning of period	49,011
Cash and cash equivalents, end of period	9,889
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	9,889
Cash paid during the year for taxes
Non-cash investing and financial activities:
Fair value of options and shares issued for services	1,527,022
Fair value of shares of common stock issued for debentures and accrued and unpaid interest	$ 98,336
Fair value of shares of common stock issued for account payable	43,007

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Organization

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Organization

1.

Organization, basis of presentation and summary of significant accounting policies:

Organization

We were originally organized under the laws of the State of Nevada in 1996 as Zacman Enterprises, Inc. and subsequently changed our name to eNutrition, Inc.

On May 17, 2002, our stockholders approved our acquisition of all of the issued and outstanding securities of Torpedo Delaware in exchange for 8,000,000 shares of our common stock issued to the Torpedo USA stockholders.  

On February 1, 2005, we acquired all of the issued and outstanding common stock of Interactive Games, Inc. (“Interactive”).  In conjunction with the Interactive agreement, we changed our name to Interactive Games, Inc.

Pursuant to an Agreement and Plan of Reorganization dated as of April 23, 2007, as amended on July 25, 2007 by and between the Company and Nuvo Solar Energy, Inc., a Colorado corporation (“Nuvo”), we and Nuvo entered into a share exchange whereby all of the issued and outstanding capital stock of Nuvo, on a fully-diluted basis, was exchanged for like securities of the Company, and whereby Nuvo became our wholly owned subsidiary. Contemporaneously, we changed our name to “China Nuvo Solar Energy, Inc.”

Nuvo was formed on April 13, 2006 for the purpose of seeking a business opportunity in the alternate energy or “next-generation energy" sector. This industry sector encompasses non-hydro carbon based energy production and renewable energy technologies that are “net-zero" or emissions free.

SHARE EXCHANGE TRANSACTION WITH SURGLINE, INC.

On September 1, 2011, the Registrant entered into and consummated the First Amendment to the Agreement Concerning that Exchange of Securities (the “Share Exchange Agreement”) with SurgLine, Inc., a Nevada corporation (“SurgLine”) and the shareholders of SurgLine.  Upon consummation of the transactions set forth in the Agreement (the “Closing”), the Registrant adopted the business plan of SurgLine.

Pursuant to the Agreement, the Registrant agreed to acquire all of the outstanding capital stock of SurgLine in exchange (the “Share Exchange”) for the original issuance of an aggregate of 857,143 shares (the “Exchange Shares”) of the RegistrantÂ’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).  The Exchange Shares were issued on a pro rata basis, on the basis of the shares held by such security holders of SurgLine at the time of the Exchange.  Further in accordance with the Agreement, and following an amendment of the RegistrantÂ’s Articles of Incorporation, the Exchange Shares were converted into 3,817,554,433 shares of the RegistrantÂ’s common stock, par value $0.001 per share.  The shares of common stock issued to the SurgLine shareholdersÂ’ were equal to 70% of the issued and outstanding Common Stock of the Registrant, immediately after the Share Exchange.  Additionally, pursuant to the provisions of the Share Exchange Agreement, the Company issued 163,609,476 newly issued shares of Common Stock to the SurgLine shareholders, in satisfaction of the anti dilution provisions in the Share Exchange Agreement.  As a result of the Share Exchange, the Registrant issued a total of 3,981,163,909 shares of its common stock to the SurgLine shareholders and SurgLine became a wholly-owned subsidiary of the Registrant. The parties have taken the actions necessary to provide that the Exchange is treated as a “tax free exchange” under Section 368 of the Internal Revenue Code of 1986, as amended.  The Agreement contains customary representations, warranties and covenants of the Registrant and SurgLine for like transactions. The Share Exchange was effective upon the completed filing of Articles of Exchange with the Secretary of State of Nevada. The foregoing descriptions of the above referenced agreements do not purport to be complete. For an understanding of their terms and provisions, reference should be made to the Agreement attached as Exhibit 10.1 to the Current Report on Form 8-K/A, filed on December 14, 2011.

Additionally, the Registrant issued 142,857 shares of its Series B Preferred Stock to Abod Partners, LLC. (“Abod”).  Abod has acted as a consultant to the Registrant in facilitating the Agreement by and among the Registrant and SurgLine. Upon the effectiveness of the increase in the authorized shares of capital stock of the Registrant, the 142,857 shares of Series B Preferred Stock were exchanged for 545,364,919 shares of our Common Stock.

On September 1, 2011, as a covenant to the Agreement, holders of a majority of the Registrant’s outstanding Common Stock voted to amend the Registrant’s Articles of Incorporation to increase the number of its authorized shares of capital stock from 1,500,000,000 shares to 6,500,000,000 par value $0.001 shares (the “Amendment”) of which (a) 6,475,000,000 shares were designated as Common Stock and (b) 25,000,000 shares were designated as blank check preferred stock.

At the effective time of the Exchange, our board of directors and officers was reconstituted by the resignation of Henry Fong as President and Chief Executive Officer of the Registrant and the appointment of Thomas G. Toland as a member of the RegistrantÂ’s Board of Directors, President and Chief Executive Officer and Richard Dutch as Secretary and Chief Operating Officer of the Registrant.

On October 18, 2011 the Company filed with the Secretary of State of Nevada Amended and Restated Articles of Incorporation to change the name of Registrant to SurLine International, Inc. The amendment was approved by a majority of the CompanyÂ’s shareholders and the CompanyÂ’s Board of Directors.

Going concern and managementÂ’s plans

The Company had a working capital deficit of approximately $1,492,000 at October 31, 2011. Additionally, the Company to date has generated minimal revenues. Accordingly, the Company has no ready source of working capital. These factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. While management believes the Company may be able to raise funds through the issuance of debt or equity instruments, there is no assurance the Company will be able to raise sufficient funds to operate in the future. The debt financing may include loans from our officers and directors.  Although our balance sheet includes current liabilities of approximately $1,605,000, a portion of this amount are in the form of a derivative liability of $269,849 and convertible notes and debentures of $497,347.  These amounts, plus other related party loans of approximately $106,000 and accrued and unpaid interest may be converted to common stock, thereby reducing considerably our debt service obligations.  Nevertheless, we will be required to raise funds in order to fund our operations and costs associated with being a public company.

On September 1, 2011 the Company completed the acquisition of 100% of the common stock of SurgLine. Pursuant to the terms of the Share Exchange Agreement (see above) SurgLine became a wholly owned subsidiary of China Nuvo. We will require additional capital for general corporate working capital to fund our day-to-day operations of SurgLine. We presently believe the source of funds will primarily consist of debt financing, which may include debt instruments that may include loans from our officers or directors, or the sale of our equity securities in private placements or other equity offerings or instruments.

Basis of presentation

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of China Nuvo Solar Energy, Inc. (the “Company”) contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at October 31, 2011, the results of operations for the three months ended October 31, 2011 and cash flows for the three months ended October 31, 2011. The balance sheet as of July 31, 2011 is derived from SurgLine’s financial statements.

For SEC reporting purposes, SurgLine is treated as the continuing reporting entity that acquired China Nuvo (the historic registrant). The reports filed after the transaction have been prepared as if SurgLine (accounting acquirer) were the legal successor to China NuvoÂ’s reporting obligation as of the date of the acquisition. Therefore, all financial statements filed subsequent to the transaction reflect the historical financial condition, results of operations and cash flows of SurgLine, for all periods prior to the share exchange and consolidated with China Nuvo from the date of the share Exchange. SurgLine previously had a June 30 fiscal year end, but has now assumed the fiscal year end of China Nuvo, the legal acquirer.  Accordingly, the financial statements presented herein are the unaudited financial statements for the three months ended October 31, 2011 are of SurgLine, Inc., and from September 1, 2011 are consolidated with China Nuvo.  Since SurgLine was formed in March 2011, there are no comparative results for the three months ended October 31, 2010.  All share and per share amounts of SurgLine have been retroactively adjusted to reflect the legal capital structure of China Nuvo pursuant to FASB ASC 805-40-45-1.

SurgLine, Inc. (“SurgLine”) was incorporated on March 15, 2011 under the laws of the state of Nevada. The Company will focus on providing its customers with the highest quality medical and surgical products at the lowest possible cost by eliminating the “historical brand premium.” The CompanyÂ’s founders saw the need to help reduce costs in the acute care healthcare system, and particularly that of the Operating Rooms. The CompanyÂ’s core business strategy is simply: Source and sell the highest quality medical and surgical products for substantially less, thereby reducing the “historical brand premium” that has historically been  absorbed  by healthcare end users, including hospitals, outpatient surgery centers, medical clinics, self-insured employers, managed care organizations, commercial insurance carriers and state and federal governmental payers.

On certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading.  For further information, refer to the financial statements and the notes thereto included in the CompanyÂ’s Annual Report on Form 10-K for the fiscal year ended July 31, 2011, as filed with the SEC, and the CompanyÂ’s Current Report on Form 8-K/A, filed on December 14, 2011.

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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period.  Actual results could differ from those estimates.

Significant accounting policies:

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results will differ from those estimates.

Intellectual Property

The Company records intangible assets in accordance with Statement of Financial Accounting Standard (SFAS) Number 142, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets deemed to have indefinite lives are not subject to annual amortization. Intangible assets which have finite lives are amortized on a straight line basis over their remaining useful life; they are also subject to annual impairment reviews.

Revenue recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”.  This statement established that revenue can be recognized when persuasive evidence of an arrangement exists, the services have been delivered, all significant contractual obligations have been satisfied, the fee is fixed or determinable and collection is reasonably assured.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Concentration on credit risks

The Company is subject to concentrations of credit risk primarily from cash and assets from discontinued operations.

The Company minimizes its credit risks associated with cash, including cash classified as assets from discontinued operations, by periodically evaluating the credit quality of its primary financial institutions.

Stock-based compensation

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment (“SFAS No, 123R”).  SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans.  As required by SFAS No. 123R, the Company will recognize the cost resulting from al stock-based payment transactions including shares issued under its stock option plans in the financial statements.

Prior to January 1, 2006, the Company accounted for stock-based employee compensation plans (including shares issued under its stock option plans) in accordance with APB Opinion No. 25 and followed the pro forma net income, pro forma income per share, and stock-based compensation plan disclosure requirements set forth in the Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”).  There are 17,500,000 stock options and warrants outstanding at October 31, 2011.

Fair value of financial instruments

The carrying value of cash, assets of discontinued operations, accounts payable and accrued expenses approximate their fair value due to their short-term maturities. The carrying amount of the note payable and due to related parties approximate their fair value based on the Company's incremental borrowing rate.

Income taxes

Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some or, all of the deferred tax asset will not be realized.

Loss per common share

Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period.  Stock options, warrants and common stock underlying convertible promissory notes at October 31, 2011 was 434,407,308 and are not considered in the calculation as the impact of the potential common shares would be to decrease loss per share and therefore no diluted loss per share figures are presented.

Accounting for obligations and instruments potentially settled in the CompanyÂ’s common stock

In connection with any obligations and instruments potentially to be settled in the Company's stock, the Company accounts for the instruments in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a CompanyÂ’s Own Stock.  This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's stock.

Under EITF 00-19, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All contracts are initially measured at fair value and subsequently accounted for based on the then current classification. Contracts initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses these changes in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue to be included in earnings. The classification of a contract is reassessed at each balance sheet date.

Derivative instruments

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative instruments under the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.

Recent accounting pronouncements

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” The guidance improves the comparability of financial reporting and facilitates the convergence of U.S. GAAP and IFRS be amending the guidance in ASC 220, Comprehensive Income.  Under the amended guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This guidance is effective retrospectively for annual and interim periods beginning after December 15, 2011.  The adoption of the guidance is not expected to have a material impact on the Company's Consolidated Financial Statements or the Notes thereto.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting  pronouncements that have been issued that might have a material impact on its financial position or results of operations.

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Balance Sheets (Parenthetical) (USD $)	Oct. 31, 2011	Jul. 31, 2011
Statement of Financial Position [Abstract]
Preferred stock, Series A, shares authorized	1,000,000	1,000,000
Preferred stock, Series A, par value	$ 1.00	$ 1.00
Preferred stock, Series A, issued	160,000	160,000
Preferred stock, Series A, outstanding	160,000	160,000
Preferred stock, Series B, par value	$ 0.001	$ 0.001
Preferred stock, Series B, shares authorized	1,000,000	1,000,000
Preferred stock, Series B, shares issued	0	0
Preferred stock, Series B, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	6,475,000,000	6,475,000,000
Common stock, shares issued	5,623,528,697	5,623,528,697
Common stock, shares outstanding	5,623,528,697	5,623,528,697

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Document and Entity Information	3 Months Ended
	Oct. 31, 2011	Dec. 20, 2011
Document And Entity Information
Entity Registrant Name	CHINA NUVO SOLAR ENERGY INC
Entity Central Index Key	0001126411
Document Type	10-Q
Document Period End Date	Oct. 31, 2011
Amendment Flag	true
Amendment Description	Addition of XBRL information for the current quarter.
Current Fiscal Year End Date	--07-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,881,427,060
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2012

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Statements of Operations (USD $)	3 Months Ended
	Oct. 31, 2011
Revenues:
Revenues	$ 75,272
Cost of revenues	39,424
Gross profit	35,848
Selling, general and administrative
Consulting fees	34,500
Management and consulting fees, related parties	168,900
Salaries including stock compensation cost	1,527,022
Legal and accounting	13,748
Other	30,584
Total operating costs and expenses	1,774,754
Operating loss	(1,738,906)
Other income (expenses)
Interest expense, related parties	(863)
Interest expense, other	(76,141)
Fair value adjustment of derivative liabilities	15,194
Total other income (expenses)	(61,810)
Net income (loss)	(1,800,716)
Basic and diluted net income (loss)per common share	$ (0.01)
Basic and diluted weighted average common shares outstanding	3,911,524,362

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Income Taxes

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Income Taxes

Income taxes:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the net deferred taxes, as of October 31, 2011, are as follows:

Deferred tax assets:
Net operating loss carryforward	$	290,000
Less valuation allowance		(290,000)
Total net deferred tax assets		-

The Company may have had a change of ownership as defined by the Internal Revenue Code Section 382. As a result, a substantial annual limitation may be imposed upon the future utilization of its net operating loss carryforwards. At this point, the Company has not completed a change in ownership study and the exact impact of such limitations is unknown. The company has no accrued tax liability, as the income was derived from the sale of a subsidiary and the liabilities were alleviated through formal bankruptcy proceedings.

The federal statutory tax rate reconciled to the effective tax rate during the three months ended October 31, 2011, is as follows:

	2011
Tax at U.S. Statutory Rate	35.0%
State tax rate, net of federal benefits	5.0%
Change in valuation allowance	(40.0)
	0.0%

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Stockholder's Deficit

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Stockholder's Deficit

5.

StockholdersÂ’ deficit:

Preferred Stock

Series A Preferred Stock

As of October 31, 2011 there are 160,000 shares of Series A Preferred stock outstanding. Pursuant to the Certificate of Designation for Series A Preferred Stock, as amended, holders of the Series A Preferred Stock can convert the shares of preferred stock to common stock.  The conversion price is equal to 50% of the average of the three lowest closing bid prices of our common stock in the 10 days immediately preceding the conversion.  Additionally Series A holders are entitled to vote their stock on an as if converted to common stock basis on each matter submitted to vote at a meeting of China NuvoÂ’s stockholders. In the event of the CorporationÂ’s liquidation, the Series A Preferred Stock shall rank senior to any class or series of the CorporationÂ’s capital stock created after the Series A Preferred Stock; pari passu with any class or series of the CorporationÂ’s capital stock created after the series A Preferred Stock that ranks on parity with the Series A Preferred Stock; and junior to any class or series of the CorporationÂ’s capital stock created after the Series A Preferred Stock that ranks senior to the Series A Preferred Stock.  The Series A Preferred Stock shall be senior to the CorporationÂ’s common stock. Stockholders do not have any preemptive rights or other similar rights to acquire additional shares of China NuvoÂ’s common stock or other securities.

Series B Preferred Stock

Pursuant to the Certificate of Designation for Series B Preferred Stock, shares issued and outstanding of the Series B Preferred Stock shall convert immediately to shares of common stock upon the Company filing and completing an increase in their authorized shares of common stock, whereby such increase will allow for the conversion of the Class B Preferred Stock. Each share of preferred stock will convert to an amount of shares of common stock that in their totality will equal eighty percent (80%) of the outstanding common stock, subsequent to its conversion; without exceeding the newly authorized common stock.  Additionally Series B holders are entitled to vote their stock on an as if converted to common stock basis on each matter submitted to vote at a meeting of China NuvoÂ’s stockholders. In the event of the CorporationÂ’s liquidation, the Series B Preferred Stock shall rank senior to any class or series of the CorporationÂ’s capital stock created after the Series B Preferred Stock; pari passu with any class or series of the CorporationÂ’s capital stock created after the series B Preferred Stock that ranks on parity with the Series B Preferred Stock; and junior to any class or series of the CorporationÂ’s capital stock created after the Series B Preferred Stock that ranks senior to the Series B Preferred Stock.  The Series B Preferred Stock shall be senior to the CorporationÂ’s common stock. Stockholders do not have any preemptive rights or other similar rights to acquire additional shares of China NuvoÂ’s common stock or other securities.

Our Board of Directors, without further approval of our stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any additional series of preferred stock that may be created.

Pursuant to the Agreement, the Registrant agreed to acquire all of the outstanding capital stock of SurgLine in exchange (the “Share Exchange”) for the original issuance of an aggregate of 857,143 shares (the “Exchange Shares”) of the RegistrantÂ’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).  The Exchange Shares were issued on a pro rata basis, on the basis of the shares held by such security holders of SurgLine at the time of the Exchange.  Further in accordance with the Agreement, and following an amendment of the RegistrantÂ’s Articles of Incorporation, the Exchange Shares were converted into 3,817,554,433 shares of the RegistrantÂ’s common stock, par value $0.001 per share (the “Common Stock”) equal to 70% of the issued and outstanding Common Stock of the Registrant.

Additionally, pursuant to the agreement, the Company issued 142,857 shares of its Series B Preferred Stock to Abod Partners, LLC. (“Abod”).  Abod has acted as a consultant to in facilitating the Agreement by and among the Company and SurgLine. Upon the effectiveness of the increase in the authorized shares of capital stock of the Registrant, the 142,857 shares of Series B Preferred Stock were exchanged for 545,364,919 shares of our Common Stock. As of October 31, 2011 there were no shares of Series B Preferred Stock outstanding.

Common Stock

On September 1, 2011, as a covenant to the Agreement, holders of a majority of the Registrant’s outstanding Common Stock voted to amend the Registrant’s Articles of Incorporation to increase the number of its authorized shares of capital stock from 1,500,000,000 shares to 6,500,000,000 par value $0.001 shares (the “Amendment”) of which (a) 6,475,000,000 shares were designated as Common Stock and (b) 25,000,000 shares were designated as blank check preferred stock.

Shares issued for conversion of subordinated debentures and accrued interest

From September 2, 2011 through October 31, 2011 the Company issued 124,320,512 shares of common stock upon the conversion of $88,000 of debentures and $10,336 of unpaid interest on the debentures. The shares were issued at approximately $0.0008 per share.

Shares issued for conversion of Series A Preferred Stock

On September 6, 2011 the Company issued 32,894,167 shares of common stock upon the conversion of $39,473 shares of Series A Preferred Stock.  Pursuant to the Certificate of Designation of the Preferred Stock, as amended, the shares were issued at approximately $0.0012 per share.

Other issuance of shares of common stock

On October 20, 2011, the Company issued 76,677,667 shares of common stock pursuant to Debt Settlement and Release Agreements in exchange for the cancellation of $43,007 of accounts payable.  The shares were issued at approximately $0.0006 per share.

 Stock options and warrants

In March 2002, the Company adopted the 2002 Stock Option Plan, covering up to 1,000,000 shares of the Company's common stock, and in July 2003, the Company adopted the 2003 Stock Option Plan covering up to 2,500,000 shares of the Company's common stock. There are currently no options outstanding under the 2002 stock Option Plan and 300,000 under the 2003 Stock Option Plans. In August 2007, the Company adopted the 2007 Stock Option Plan covering up to 18,000,000 shares of the CompanyÂ’s common stock. There are currently 10,000,000 shares of the CompanyÂ’s common stock under the 2007 Plan. As of October 31, 2011 there were options to purchase 16,500,000 shares of the CompanyÂ’s common stock outstanding under the 2007 Stock Option Plan. Additionally, the Company has warrants outstanding to purchase 1,000,000 shares of common stock

A summary of the activity of the CompanyÂ’s outstanding options and warrants during the three months ended October 31, 2011 is as follows:

	Options and warrants		Weighted average exercise price
Outstanding August 1, 2011	17,500,000	$	0.04
Granted	-		-
Exercised	-		-
Expired	-		-
Outstanding, October 31, 2011	17,500,000	$	0.04

Range of exercise prices	Warrants outstanding and exercisable	Weighted average remaining contractual life	Weighted average exercise price
$.01	10,000,000	4.44	$0.01
0.07	6,500,000	2.25	0.07
0.12	1,000,000	0.004	0.12

The weighted average remaining contractual life of the terms of the warrants and options is 6.7 years.

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Subsequent Events

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Subsequent Events

7.

Subsequent events

Common Stock Issuances

In November 2011, the Company issued $100,000 in convertible notes to seven investors. The notes convert at a discount equal to 50% of the average of the lowest three trading prices per share of the CompanyÂ’s common stock for the ten (10) trading days immediately preceding the date of conversion. Accordingly, in November 2011, upon the Company receiving Conversion Notices on the $100,000 convertible notes from the noteholders, the Company issued 146,853,147 shares of restricted common stock.

In November 2011, the Company issued 31,044,776 shares of common stock upon the conversion of $20,000 of the 2011 Convertible Notes and $800 of accrued and unpaid interest.

On November 15, 2011 the Company issued 40,000,000 shares of common stock upon the conversion of $30,000 of the 2007 Debentures.  The shares were issued at an average conversion price of $0.00075 per share.

Management performed an evaluation of the CompanyÂ’s activity through the date these financials were issued to determine if they must be reported.  The Management of the Company determined that there were no other reportable subsequent events to be disclosed

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Shareholders Equity (USD $)	Common Stock Share	Common Stock Amount	Additional Paid-In Capital	Preferred Stock	Accumulated Deficit	Total
Beginning Balance, amount at Jul. 31, 2011		$ 802,575	$ 10,539,660	$ 224,473	$ (13,249,585)	$ (1,682,877)
Beginning Balance, shares at Jul. 31, 2011	802,575,609
Shares issued August 1, 2011 thru September 1, 2011	60,531,914	60,532	12,818	(25,000)		48,350
Issuance of shares for reverse merger with SurgLine	4,526,528,828	4,526,529	(15,697,393)		12,974,768	1,803,904
Issuance of shares upon conversion of subordinated debentures	124,320,512	124,321	(25,985)			98,336
Issuance of shares upon conversion of series A Preferred Stock	32,894,167	32,894	6,579	(39,473)
Issuance of shares pursuant to conversion of accounts payable	76,677,667	76,678	(33,671)			43,007
Net loss					(1,800,716)	(1,800,716)
Ending Balance, amount at Oct. 31, 2011		$ 5,623,528	$ (5,197,992)	$ 160,000	$ (2,075,533)	$ (1,489,997)
Ending Balance, shares at Oct. 31, 2011	5,623,528,697

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Convertible Promissory Notes

3 Months Ended

Oct. 31, 2011

Notes to Financial Statements

Convertible Promissory Notes

4.

Convertible and other promissory notes and long-term debt, including related parties:

Convertible and other promissory notes and long-term debt, including related parties at October 31, 2011 consist of the following:

		2011
Notes payable	$	376,259
Notes payable, related parties [A]		38,543
Convertible debentures, net of discount of $52,912		188,588
		603,390
Less current portion		603,390
Long-term debt, net of current portion	$	-

A.

Includes notes of $8,500 due to Mr. Fong, a member of our Board of Directors, as well as $30,043 due to various companies that Mr. Fong is affiliated with.