Powernova Technologies 20FR12G/A Initial registration of securities (foreign private issuers) (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

Amendment #7

[ X ]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ]

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

[ ]

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

For the transition period from __________ to ________

[ ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-50630

PowerNova Technologies Corporation

(Exact name of Registrant as specified in its charter)

British Columbia, Canada

(Jurisdiction of incorporation or organization)

207 West Hastings, Suite 1010, Vancouver, B.C. Canada V6B 1H7

(Address of principal executive offices)

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 40,965,175

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ___ No xxx

If this report is an annual or a transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes XXX No ___

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes XXX No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer Non-accelerated filer xxx

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 xxx Item 18 ___

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___ No XXX ___

PowerNova Technologies Corporation

FORM 20-F/A REGISTRATION STATEMENT

TABLE OF CONTENTS

	PART I			PAGE

Item 1.		Identity of Directors, Senior Management and Advisors	4
Item 2.		Offer Statistics and Expected Timetable . . . . . . . .	5
Item 3.		Key Information . . . . . . . . . . . . . . . . . . . .	6
Item 4.		Information on the Company. . . . . . . . . . . . . . .	12
Item 5.		Operating and Financial Review and Reports. . . . . . .	23
Item 6.		Directors, Senior Management and Employees. . . . . . .	33
Item 7.		Major Shareholders and Related Party Transactions . . .	37
Item 8.		Financial Information . . . . . . . . . . . . . . . . .	39
Item 9.		The Offer and Listing . . . . . . . . . . . . . . . . .	40
Item 10.		Additional Information. . . . . . . . . . . . . . . . .	42
Item 11.		Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . .	48
Item 12.		Description of Securities Other Than Equity Securities.	49

	PART II

Item 13.		Default, Dividend Arrearages and Delinquencies . . . . .	49
Item 14.		Material Modifications to the Rights of Security Holders and the Use of Proceeds . . . . . . . . . . .	49
Item 15.		Controls and Procedures. . . . . . . . . . . . . . . . .	49
Item 16A.		Audit Committee Financial Experts. . . . . . . . . . . .	50
Item 16B.		Code of Ethics . . . . . . . . . . . . . . . . . . . . .	50
Item 16C.		Principal Accountant Fees and Services	50
Item 16D.		Exemption from Listing Standards for Audit Committees	51
Item 16E.		Purchase of Equity Securities by the Issuer and Affiliated Purchasers	51

	PART III

Item 17.		Financial Statements . . . . . . . . . . . . . . . . . .	51
Item 18.		Financial Statements . . . . . . . . . . . . . . . . . .	52
Item 19.		Exhibits . . . . . . . . . . . . . . . . . . . . . . . .	52

INTRODUCTION

PowerNova Technologies Corporation (“PowerNova”) was incorporated under the Business Corporation Act (British Columbia) by articles of incorporation dated October 6, 1986, under the name of Aqua 1 Beverage Company Inc. (“Aqua”). The Company is a result of an acquisition of the intellectual property rights to a hydrogen production technology (the “Process”) owned by Dr. A. Koridze and Mr. B. Oralbekov. In this Registration Statement, prior to September 11, 2003 (the date of the Change of Name Certificate issued by the Registrar of Companies, Province of British Columbia, Canada certifying that Aqua changed its name to PowerNova on September 11, 2003), the "Company", “Company”, "we", “our" and "us" refers to Aqua (unless the context otherwise requires) and on and after this date refers to PowerNova. We have prepared this Registration Statement on the basis of information that we have or that we have obtained from sources we believe to be reliable. Summary discussions of documents referred to in this Registration Statement may not be complete and we refer you to the actual documents for more complete information. Our principal corporate office is located at 1010 - 207 West Hastings, Vancouver, British Columbia V6B IH7. Our telephone number is 604-734-7488.

FINANCIAL AND OTHER INFORMATION

In this Registration Statement, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars ("CDN$" or "$"). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

FORWARD-LOOKING STATEMENTS

This Registration Statement includes forward-looking statements, principally in ITEM #4, "Information on the Company" and ITEM #5, "Operating and Financial Review and Prospects". We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-lookng statements are subject to risks, uncertainties and assumptions including, among other things, the factors discussed in this Registration Statement under ITEM #3.D. "Risk Factors" and factors described in documents that we may furnish from time to time to the Securities and Exchange Commission.

The words "believe", "may", "estimate", "continue", "anticipate", "intend", "expect", and similar words are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this Registration Statement might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

1.A.1. Directors

Table No. 1 lists, as of October 28, 2009, the names of the Directors of the Company.

Table No. 1

Directors

__________________________________________________________________________________________

Name	Age	Date First Elected/Appointed
Dr. Avtandil Koridze (4)	69	February 2001
Stuart Lew (2)	50	October 1986
Chris Tay (1) (3)	45	November 2008
Hans-Christian Behm (1) (5)	68	November 2008
John Patrick Nicol (1) (6)	39	August 2009

(1) Member of Audit Committee.

(2) 3042 West 12^th Avenue, Vancouver, B.C. CANADA V6K 2R5

(3) 2871 West 16^th Avenue, Vancouver, B.C. CANADA V6K 3C5

(4) Pyliugin Street, 26, Dorp. 2, Apt. 511, Moscow, Russia 117393

(5) 594 Holdings, Bowen Island, B.C. CANADA V0N 1G0

(6) 2147 Braeside Place, Coquitlam, B.C. CANADA V3E 3L3

______________________________________________________________________________

1.A.2. Senior Management

Table No. 2 lists, as of October 28, 2009, the names of the Senior Management of the Company. The Senior Management serves at the pleasure of the Board of Directors.

Table No. 2

Senior Management

______________________________________________________________________________

Name	Age	Date First Elected/Appointed
Stuart Lew, CEO & Co-Chairman	50	October 1986
Dr. Avtandil Koridze, Vice President	69	February 2001
Chris Tay, Chief Financial Officer	45	November 2008

____________________________________________________________________________

Mr. Stuart Lew, the Chief Executive Officer and Co-Chairman of PowerNova, oversees the Company’s operations in the areas of finance, administration and marketing.

Dr. Avtandil Koridze, the Vice President and Chief Technology Officer of PowerNova, is involved in the Company’s operations in the area of research and development.

Mr. Chris Tay, the Chief Financial Officer of PowerNova, is responsible for the completion and dissemination of the Company’s financial statements and for preparing the Company’s financial statements reviewed by the Company’s auditor.

1.B. Advisors

The Company’s banker is the Bank of Montreal located at 595 Burrard Street, Vancouver, B.C. Canada V7X 1L7. The telephone number for the Bank of Montreal is (604) 665-2692 and the contact person is Ms. Penny Braidwood. The Company’s legal counsel is Salley Bowes Harwardt located at Suite 1750, 1185 West Georgia Street, Vancouver, B.C. Canada V6E 4E6. The contact person at Salley Bowes Harwardt is Mr. Victor Harwardt.

1.C. Auditors

The Company’s auditor for its financial statements for the year ended May 31, 2007 is James Stafford, Chartered Accountants. James Stafford is licensed to practice in British Columbia by the Institute of Chartered Accountants, and is registered with the Public Company Accounting Oversight Board of the United States (“PCAOB”).

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

--- No Disclosure Necessary ---

ITEM 3. KEY INFORMATION.

3.A.1. Selected Financial Data

Table No. 3 below, “Selected Financial Data” is derived from the financial statements of the Company, which have been prepared in accordance with generally accepted accounting principles in Canada and the United States. The selected financial data of the Company for Fiscal 2008, Fiscal 2007, Fiscal 2006 and Fiscal 2005, ended May 31^st, was derived from the financial statements of the Company which have been audited by James Stafford, Chartered Accountants, independent auditors. For Fiscal 2004, ended May 31^st, the financial data was derived from the financial statements of the Company which have been audited by Amisano Hanson, Chartered Accountants, Independent Auditors, and for Fiscal 2003 and prior, from financial statements that were audited by De Visser Gray, Chartered Accountants, Independent Auditors.

Table No. 3

Selected Financial Data

(#’s in 000, except per share data, Weighted Avg. # Shares & Period-end # Shares)

	Fiscal Year Ended May 31, 2008	Fiscal Year Ended May 31, 2007	Fiscal Year Ended May 31, 2006	Fiscal Year Ended May 31, 2005	Fiscal Year Ended May 31, 2004	Fiscal Year Ended May 31, 2003	Fiscal Year Ended May 31, 2002
Revenue	Nil	Nil	Nil	Nil	Nil	Nil	Nil
Income (Loss)	($56)	($41)	($211)	($221)	($469)	($264)	($359)
Income (Loss)/Share	($0.01)	($0.01)	($0.01)	($0.01)	($0.02)	($0.01)	($0.02)
Dividends /Share	Nil	Nil	Nil	Nil	Nil	Nil	Nil
Weighted Avg. # Shares	40,965,175	40,965,175	40,965,175	40,965,175	31,362,735	19,239,402	18,653,090
Period-end # Shares	40,965,175	40,965,175	40,965,175	40,965,175	40,965,175	19,239,402	19,239,402
Working Capital Deficiency	($396)	($946)	($929)	($720)	($557)	($364)	($190)
Long-Term Debt	Nil	Nil	Nil	Nil	Nil	Nil	Nil
Capital Stock	$5,591	$5,591	$5,591	$5,591	$5,591	$4,901	$4,901
Shareholders’ Deficit	($395)	($945)	($928)	($718)	($555)	($142)	$23
Total Assets	$3	$2	$2	$4	$9	$236	$214

3.A.2. Exchange Rates

Table No. 4 sets forth the rate of exchange for the Canadian Dollar at the end of the five most recent fiscal years ended May 31^st, the average rates for the period, and the range of high and low rates for the period. Exchange rates are also disclosed for the preceding six months and the most recent interim periods.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian dollars required under that formula to buy one U.S. Dollar. The average rate means the average of the exchange rates on the last day of each month during the period.

Table No. 4

Canadian Dollar/U.S. Dollar

	Average	High	Low	Close
	$	$	$	$
Year Ended May 31, 2008	1.0112	1.0754	0.9168	0.9938
Year Ended May 31, 2007	1.1313	1.1852	1.0701	1.0701
Year Ended May 31, 2006	1.1654	1.2578	1.0989	1.1027
Year Ended May 31, 2005	1.2539	1.3772	1.1775	1.2512
Year Ended May 31, 2004	1.3436	1.4114	1.2690	1.3666

Three Months Ended August 31, 2009	1.1127	1.1650	1.0650	1.0967
Three Months Ended May 31, 2009	1.2157	1.2995	1.0957	1.0957
Three Months Ended February 28, 2009	1.2344	1.2971	1.1822	1.2710
Three Months Ended November 30, 2008	1.1507	1.2942	1.0338	1.2360
Three Months Ended August 31, 2008	1.0275	1.0677	1.0011	1.0631

September 2009	1.0816	1.1060	1.0615	1.0719
August 2009	1.0872	1.1097	1.0650	1.0967
July 2009	1.1229	1.1650	1.0791	1.0791
June 2009	1.1264	1.1626	1.0828	1.1626
May 2009	1.1528	1.1868	1.0957	1.0957
April 2009	1.2242	1.2640	1.1939	1.1939

The Exchange Rate as of October 23, 2009 was $1.0507.

______________________________________________________________________________

3.B. Capitalization and Indebtedness

Table No. 5 sets forth the capitalization and indebtedness of the Company as of 4/21/2008.

Table No. 5

Capitalization and Indebtedness

______________________________________________________________________________

Shareholders’ Equity:

Common Shares, no par value;

50,000,000 common shares authorized

40,965,175 common shares issued and outstanding

Unissued Common Stock Subscribed

Retained Earnings (deficit)

Net Stockholders’ Equity (Deficit)

TOTAL CAPITALIZATION

$5,591,315

$46,670

($6,687,673)

($363,898)

Stock Options Outstanding	Nil
Share Purchase Warrants Outstanding	4,086,832
Capital Leases	Nil
Guaranteed Debt	Nil
Secured Debt	Nil

Note: The Share Purchase Warrants allow the holder to purchase a common share at either C$0.18 or C$1.00 as set forth in Table 15 below. The Share Purchase Warrants expiry dates are also listed in the schedule in Table 15. As of 4/21/2008, there were 4,086,832 Share Purchase Warrants outstanding.

3.C. Reasons For The Offer And Use Of Proceeds

--- No Disclosure Necessary ---

3.D. Risk Factors

There is no Assurance of Successful Development by PowerNova of its hydrogen production technology (“the Process”) and Unsuccessful Development Would Cause the Company to Abandon the Project.

PowerNova’s Process, which is a catalyst used in the generation of hydrogen from hydrocarbons, is currently in the research and development stage which is the riskiest stage for any company involved in research and development. It is not possible to predict whether the Process will prove to be successful. There can be no assurance that the research and development program conducted by the Company will result in a commercially viable Process and in the event that any technology results from the research and development program, it is unlikely that it will be commercially available for a number of years, if ever. To achieve profitable operations, the Company must successfully develop, introduce and market the Process. To obtain regulatory approvals for the Process being developed and to achieve commercial success, trials must demonstrate that the Process is viable. Unsatisfactory trial results could cause the Company to abandon the project.

Control by Principal Stockholders, Officers and Directors Could Adversely Affect PowerNova’s Stockholders.

PowerNova’s Senior Management, Directors and greater-than-five-percent stockholders (and their affiliates), acting together, have the ability to control substantially all matters submitted to the Company’s stockholders for approval (including the election and removal of directors and any merger, consolidation or sale of all or substantially all of the Company’s assets) and to control PowerNova’s management and affairs. Accordingly, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control of the Company, impeding a merger, consolidation, takeover or other business combination involving the Company or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of PowerNova, which in turn could materially adversely affect the market price of the Company’s stock. Senior management, directors and greater than 5% shareholders control 53.1% of the shares o n a fully diluted basis.

Dilution Through Employee/Director/Consultant Options can Adversely Affect the Input of Shareholders of PowerNova.

Because the success of PowerNova is highly dependent upon its respective employees, the Company may in the future grant to some or all of its key employees, Directors and consultants options to purchase common shares as non-cash incentives. To the extent that significant numbers of such options may be granted and exercised, the interests of the other stockholders of the Company may be diluted. The Company currently does not have a stock option plan, but there is no assurance that a stock option plan will not be presented in the future.

Broker-Dealers May Be Discouraged From Effecting Transactions In Our Common Shares Because They Are Considered Penny Stocks And Are Subject To The Penny Stock Rules and this Could Adversely Affect the Ability of Our Shareholders in Their Attempts to Purchase or Sell Stock.

Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended, impose sales practice and disclosure requirements on NASD broker-dealers who make a market in "a penny stock". A penny stock generally includes any non-NASDAQ equity security that has a market price of less than US$5.00 per share. The additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our shares, which could severely limit the market liquidity of the shares and impede the sale of our shares in the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of US$1,000,000 or an annual income exceeding US$200,000, or US$300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.

In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the US Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

U.S. Investors in the Company May Not Be Able to Enforce Their Civil Liabilities Against Our Company or Our Directors, Controlling Persons and Officers.

It may be difficult to bring and enforce suits against PowerNova. The Company is a corporation incorporated in the province of British Columbia under the British Columbia Securities Act. A majority of the Company's directors must be residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada. As a result, it may be difficult for U.S. holders of our common shares to effect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them.

However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions. Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example:

where the U.S. court where the judgment was rendered had no jurisdiction according to applicable Canadian law;

the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;

the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;

a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;

the outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;

the judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or

there has not been compliance with applicable Canadian law dealing with the limitation of actions.

As a "foreign private Company”, PowerNova is exempt from the Section 14 proxy rules and Section 16 of the 1934 Securities Act:

The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K results in shareholders having less complete and timely data. The exemption from Section 16 rules regarding sales of common shares by insiders also results in shareholders having less data.

There is Currently No Trading Market for the Company’s Shares.

There is no market for the Company’s shares as the Company’s shares are not listed on any stock exchange.

PowerNova Has No Positive Cash Flow and No Recent History of Earnings and Is Dependent Upon Public and Private Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing shareholders:

PowerNova has no commercial production and the Company has no history of recent earnings or positive cash flow from operations. The cumulative loss to April 21, 2008, since the Company's inception of the development stage is ($2,241,493). The Company does not know if it will ever generate material revenue from operations or if it will ever achieve self-sustaining commercial operations. Historically, the only source of funds available to the company has been through the sale of its common shares. Any future additional equity financing would cause dilution to current stockholders.

PowerNova is Dependent on Key Personnel and the Absence of Any of These Individuals Could Result in the Company Having to Cease Operations:

The Company strongly depends on the business and technical expertise of its management and key personnel. There is little possibility that this dependence will decrease in the near term. As the Company’s operations expand, additional general management resources may be required, especially since the Company encounters risks that are inherent in doing business in several countries. The Company is dependent, in particular, on its President; Mr. Bakytzhan Oralbekov, its CEO; Mr. Stuart Lew; its Chief Technology Officer; Dr. Avtandil Koridze; and, its CFO; Mr. Phillip Webber. Key person life insurance is not in place on any of these individuals.

Uncertainty as to Development of Mass Market for Hydrogen Energy and If a Market Does Not Develop PowerNova Would Never Achieve Profitability.

A mass market may never develop for hydrogen fuel, or may develop more slowly than the Company anticipates. The development of a mass market for the Process may be affected by many factors, some of which are out of the Company control, including: (i) the emergence of new or more competitive technologies and products; (ii) the future cost of fuel cell systems; (iii) regulatory requirements; and (iv) consumer acceptance. If a mass market fails to develop or develops more slowly than the Company anticipates, the Company may be unable to recover the losses incurred in the development of its processes and the Company may never achieve profitability.

If Oil Companies Do Not Provide the Infrastructure Required by PowerNova’s Process, the Company May Not be Able to Effectively Sell Its Product and This Would Result in the Company Having to Cease Operations.

PowerNova’s proposed Process may require specially formulated gasoline. This gasoline may have to be provided via separate fuel pumps at gas stations. Although this gasoline may cost less per liter (because of the lack of additives required for more efficient combustion), and gives both customers and oil companies an extra incentive to include this fuel in their breadth of products, it may be entirely dependant on oil and gas companies to provide the infrastructure, in terms of equipment and distribution, to dispense this specially formulated gasoline. If this infrastructure is not provided, PowerNova could be forced to cease operations.

Competition from Larger and Better Financed Entities Could Force PowerNova to Cease Operations.

New developments in technology may negatively affect PowerNova’s product development or sale and make it uncompetitive or obsolete. Other companies, many of which have substantially greater resources than PowerNova, are currently engaged in the development of technologies that may be competitive with the Company’s hydrogen production technology. Some of these competitor companies may be potential customers of PowerNova’s technology. There are corporations, national laboratories and universities in the United States, Canada, Europe and Asia that possess hydrogen production technologies and/or are actively engaged in the development and manufacture of them. Each of these competitors has the potential to capture market share in various markets, which would have a material adverse effect on the Company's position and financial resources. Depending on the status of a competitor’s hydrogen production technology in relation to the benefits and drawbacks of Pow erNova’s technology, some potential customers may or may not be interested in purchasing PowerNova’s technology.

The Legal System in Russia and Georgia and the Economic and Political Instability in These Countries Could Adversely Affect the Company’s Ability to Complete the Research and Development Associated with the Process.

The laws and regulations in Russia and Georgia differ greatly from North America and there is an inherent risk of doing business in Russia and Georgia. Changes in Russian and Georgian laws and regulations and the interpretation of those laws and regulations may adversely affect our research and development program. There is also the risk of the retroactive application of new laws.

Russia and Georgia have been undergoing a rapid and uneven transition to a market-oriented economy and in prior years have experienced high inflation and rapid currency devaluation. There is no certainty that economic measures undertaken by these governments will successfully improve economic conditions or that the transition to a market-oriented economy will be accomplished. Adverse economic conditions in Russia and Georgia could have a material effect on the completion of our research and development program.

Changes in the political environment may adversely affect our research and development program. Because of political instability in Russia and Georgia, there is significant potential for social, political, economic, legal, and fiscal instability. These risks include, among other things: local currency devaluation, civil disturbances, terrorism or armed conflict, exchange controls or the availability of hard currency, changes with respect to taxes and royalty rates.

The recent armed conflict between Russia and Georgia raises additional risks to the Company in that even though relations have now been normalized between Russia and Georgia if armed conflict were to break out again between Russia and Georgia the progress of the research and development in one or both countires would be retarded or even halted completely until resolution of the conflict.

Rapid Future Technical Change Could Force the Company to Cease Operations.

PowerNova may potentially be involved in a rapidly changing industry. There can be no assurances that the Company can maintain a technical lead, if any, over the competition or that competitors will not develop a better or more cost effective hydrogen production process than that which may be offered by the Company.

We Are Dependent on Intellectual Property Rights and If We Cannot Protect these Rights We Could Lose the Right to Use the Technology.

On June 25, 2005, patent number 6,909,009 B2 was issued for the Process by the United States Patent and Trademark Office in the name of the inventor, Dr. Avtandil Koridze who then assigned the patent to the Company. Although the Company owns the patent for the Process if the Company should fail in the future to protect the patent it could result in the loss of exclusivity or the right to use the patent. We cannot assure investors that: (i) any of our future patents will not be invalidated, circumvented, challenged, rendered unenforceable, or licensed to others; or (ii) any of our pending or future patent applications will be issued with the breadth of claim coverage sought by us, if issued at all. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain foreign countries. In addition, we could incur substantial costs in defending our intellectual property and filing suits against others for infringement of our intellectual property, in filing suits against others seeking to have our intellectual property declared invalid, and defending ourselves in lawsuits brought against us on claims that our intellectual property infringes upon the existing rights of others. If we become involved in such litigation, it could consume a substantial portion of our resources. If the outcome of any such litigation were to be adverse, our business could be materially affected in a negative way.

We will also seek to protect our proprietary intellectual property that may not be patented or patentable, in part by confidentiality agreements and, if applicable, investors’ rights agreements with our strategic partners and employees.

We cannot assure potential investors that these agreements will not be breached, that we will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships. If necessary or desirable, we may seek further licenses under the patents or other intellectual property rights of others. However, we can give no assurances that we will obtain such licenses or that the terms of any offered licenses will be acceptable. The failure to obtain a license from a third party for intellectual property PowerNova uses at present could cause us to incur substantial liabilities and to suspend the manufacture, shipment of products or our use of processes requiring the use of such intellectual property.

If the Production of Hydrogen is Not Handled in a Manner that Prohibits Combustion, the Company Could Experience Significant Damage to Facilities.

The self-ignition temperature of hydrogen is 550 degrees Celsius. Like any fuel, the safe handling of hydrogen requires that the three necessary conditions for combustion be prevented. The wide flammability ranges of hydrogen imply that a mixture of hydrogen and air might ignite more easily than other fuels. Consequently, the following precautions must be adhered to:

•

Hydrogen should not be mixed with air.

•

Contact of hydrogen with potential ignition sources should be prevented.

•

Purging of hydrogen systems should be performed with an inert gas such as nitrogen.

•

Venting of hydrogen should be done according to standards and regulation.

Because the hydrogen flame is invisible, special flame detectors are required.

ITEM 4. INFORMATION ON THE COMPANY

4.A History and Development of the Company

4.A.1 Introduction

The Company’s executive office is located at:

#1010 – 207 West Hastings Street, Vancouver, B.C. CANADA V6B 1H7

Telephone: (604) 734-7488

Facsimile: (604) 734-7484

E-Mail: stuartlew@powernova.com

Website: www.powernova.com

The contact person is Stuart Lew, Chief Executive Officer.

The Company's fiscal year ends May 31^st.

The Company has 50,000,000 common shares without par value authorized. At May 31, 2008, the end of the Company's most recent fiscal year for which audited financial statements are available; there were 40,965,175 common shares issued and outstanding. As of date of this Form 20-F/A, October 28, 2009, there were 43,754,043 common shares issued and outstanding.

4.A.2 History and Development

October 6, 1986 the Company was incorporated in British Columbia, under the name of Aqua 1 Beverage Company Inc. On October 23, 2001 the shareholders of Aqua 1 approved a special resolution to change the name of the Company to PowerNova Technologies Corporation. On September 11, 2003, the name of the Company was officially changed from Aqua 1 Beverage Company Inc. to PowerNova Technologies Corporation.

From October 6, 1986 until 1999, the Company was engaged in the manufacture and distribution of beverage products. In 1999, management felt that market conditions in the beverage industry limited the potential and the profitability of the Company. As a result, the Company’s management made the decision to evaluate opportunities to diversify or change the Company’s business.

In January/February 2000, it came to the attention of the Company through an advertisement in Sustainablebusiness.com (a website) of an inventor of a hydrogen production technology seeking funding for his research and development program. Dr. Avtandil A. Koridze, the current Vice President and a current Director of PowerNova and Head of the Laboratory of Organometallic Cluster Chemistry at the Institute of Organometallic Compounds of the Russian Academy of Sciences, Moscow had discovered, in 1997, a method of hydrogen production with no emission of carbon dioxide (the “Process”). We responded to the advertisement by email in February 2000 and began negotiations to fund the research and development of the Process.

Prior to February 2000 due to a lack of government funding for the Process, Mr. Bakytzhan Oralbekov, the current President of PowerNova, who was acquainted with Dr. Koridze’s work through previous dealings, had been funding Dr. Koridze’s research and development work on the Process. The funding was carried out through Riaks Ltd. (“Riaks”), a private Russian company beneficially owned by Mr. Oralbekov. Thereafter, Mr. Oralbekov and Dr. Koridze agreed to work together with the goal of completing the necessary research and development work and ultimately commercializing the Process.

The research was performed in two laboratories both under the supervision of Dr. Koridze; one of the laboratories was at the Russian Academy of Sciences, Moscow and the other was at the State University of Tbilisi in Tbilisi, Georgia. The scientists at both laboratories have worked on the development of the Process under the direction of Dr. Koridze based on a new type of catalyst that allows for rapid and selective dehydrogenation of organic liquids such as propane, butane and cycloalkanes. The synthesis of the catalyst formulation is expected to provide the highly active and selective catalyst required for commercial production of hydrogen. Dr. Koridze and his scientists have continued to work on the Process up to the date of this Form 20-F.

March 8, 2001 Dr. Koridze and Mr. Oralbekov made an assignment of all their intellectual property rights in the Process to Hydrogen Production Technologies Corporation (“HPTC”), a newly incorporated British Virgins Island company beneficially owned by Dr. Koridze and Mr. Oralbekov. On this same date, an application was made, in the name of Dr. Koridze as inventor, to the United States Patent and Trademark Office for a patent on the Process. All fees, including patent processing fees and legal fees, were paid for by the Company for the patent application.

October 30, 2003, the Company acquired all of the shares of HPTC. The acquisition is summarized as follows: The Company agreed to acquire all of the shares of HPTC from Dr. Koridze and Mr. Oralbekov. Under an agreement dated November 1, 2002, the original consideration for the acquisition was 17,950,000 common shares of PowerNova. On April 25, 2003, the parties agreed to amend the agreement by increasing the common share consideration to Dr. Koridze and Mr. Oralbekov to an aggregate 20,000,000 common shares of PowerNova. In addition to issuing the common shares, the Company agreed to issue to Dr. Koridze and Mr. Oralbekov a further 9,000,000 common shares upon the Company achieving revenues of $10,000,000 as a direct result of the commercialization of the Process provided such revenues are achieved with ten years of completion of the acquisition. This incentive bonus expires on October 30, 2013. The reason for the increase in the number of common shares was that the parties jointly agreed that the intellectual property rights to the Process were worth 40% of the then issued and outstanding share capital of the Company. The acquisition was effected through a Share Exchange Agreement dated June 25, 2003.

June 25, 2005, patent number 6,909,009 B2 was issued for the Process by the United States Patent and Trademark Office in the name of the inventor, Dr. Avtandil Koridze.

October 21, 2005, Dr. Koridze, in consideration of the sum of One Dollar ($1.00) made a further assignment to the Company of all of his rights to United States patent number 6,909,009 B2.

November 5, 2005 HPTC, in consideration of the sum of One Dollar ($1.00) assigned all of its rights to United States patent number 6,909,009 B2 to the Company.

Management believes that there could be more than one application for the Company’s technology:

Alpha-olefin manufacturing: the Process may be used for a more efficient and cost effective method of manufacturing alpha-olefins. Current technology uses a high temperature, multi-stage chemical reaction to produce alpha-olefins. The Company’s Process, which is in the research and development stage, may be able to produce alpha-olefins in a single stage, low temperature reaction resulting in savings in terms of time and energy input.

Hydrogen production: this application is described in Item 4.B Industry Overview

Aqua 1 Beverage Company, Inc. Common Shares were listed on the TSX Venture Exchange under the symbol “AQB” until June 20, 2003. Aqua 1 Beverage Company, Inc.’s shares were delisted from the TSX Venture Exchange on June 20, 2003 for failure to pay the Exchange’s sustaining fees. The Board of Directors of Aqua 1 Beverage Company, Inc. elected not to pay the sustaining fees, as they preferred to obtain a listing on the NASD OTC:BB.

Capital Expenditures

1998: $2,960.00 (incurred by Aqua 1 Beverage Company, Inc.)

1999: Nil

2000: $6,384.00 (incurred by Aqua 1 Beverage Company, Inc.)

2001: Nil

2002: Nil

2003: Nil

2004: Nil

2005: Nil

2006: Nil

2007: Nil

2008: Nil

4.B Industry Overview

Like the fuels we use today, there are hazards associated with hydrogen's handling and use. For decades though, industry has demonstrated that hydrogen can be used safely in a wide variety of applications and conditions by employing proper safety controls. Safety considerations associated with handling hydrogen include fire, explosion, and asphyxiation.

The self-ignition temperature of hydrogen is 550 degrees Celsius. Like any fuel, the safe handling of hydrogen requires that the three necessary conditions for combustion be prevented. The wide flammability ranges of hydrogen imply that a mixture of hydrogen and air might ignite more easily than other fuels. The risks and precautions associated with the handling of hydrogen are outlined in Item 3.D.

Hydrogen can be used to power fuel cells in motor vehicles, residential and industrial stationary power plants and battery powered consumer products. (Source: Hydrogen Energy Fact Sheet, National Energy Education Development Project, Reston, VA 20195) Abundant in the universe, hydrogen combines with other elements to form compounds and is produced by separating the elements that it is attached to. In industrial applications, high temperature steam (between 700 – 900^o C) separates hydrogen from carbon atoms in natural gas (CH₄). This method of hydrogen production is called steam reforming.

Other than steam reforming, coal gasification and electrolysis of water, there are currently no commercially viable hydrogen production technologies in the consumer or mass market. (Source: Transition to a Hydrogen Based Energy System: The Next Ten Years)

Management believes that hydrogen powered fuel cells could be utilized in the future. However, hydrogen gas is expensive to produce and is not widely available. Hydrogen is also difficult to store and low in energy density thereby commonly requiring large, bulky storage tanks.

PowerNova’s approach to hydrogen production utilizes a unique process that overcomes some of the inherent drawbacks of conventional steam reforming. Steam reforming requires a much higher reaction temperature than the reaction proposed by PowerNova (between 700 – 900^o C versus less than 200^o C). This higher temperature requires more energy to be used and is therefore more expensive than a lower temperature reaction.

Although still in development, management expects that PowerNova’s solution may produce hydrogen in a process significantly less costly than steam reforming while at the same time eliminating carbon dioxide emissions from the vehicle. The Company’s solution is the Process invented by Dr. Koridze and patented under United States issued patent number 6,909,009 B2 titled “Alkane and Alkane Group Dehydrogenation with Organometallic Compounds”. In particular it is the Company’s goal through research, testing and development to prove the commercial viability of our patented process incorporating the following advantages:

hydrogen production in a significantly lower temperature chemical reaction than current industry standards;

hydrogen production from hydrocarbons such as gasoline;

hydrogen production from gasoline eliminating the need for a new infrastructure for the delivery and storage of hydrogen.

Management anticipates that upon completion of the Company’s research and development, the Process may produce hydrogen from fuel in a low temperature reaction (about 200 degrees Celsius). It is management’s belief that PowerNova’s Process, if proven commercially viable, may enable the efficient production of hydrogen by a chemical reaction that has zero carbon dioxide emissions.

Hydrogen (H) does not exist by itself on earth; it is combined with other elements such as oxygen (H₂O or water) or carbon such as methane (CH₄)or petroleum. Hydrogen is classified as a secondary source of energy, or an energy carrier that can be used to store, move and deliver energy in a practical way. It has many applications and can be used for transportation, heating and power generation, making it a versatile form of energy carrier. Moreover, it has the highest energy content per unit of weight (52,000 British Thermal Units per pound) of any known fuel, which makes it an extremely efficient source of energy. (Source: Hydrogen Energy Fact Sheet, National Energy Education Development Project, Reston, VA 20195)

A fuel cell relies on chemistry, not combustion, to produce power. Inside the fuel cell, hydrogen passes over one electrode and oxygen passes over the other; a process that generates electricity, water and heat. Fuel cells can power cars, heat homes, light cities, and provide electricity to laptop computers and cell phones. Source: Hydrogen Energy Fact Sheet, National Energy Education Development Project, Reston, VA 20195)

Currently, in the transportation industry, automakers have two main fuel choice options which utilize hydrogen: either produce the hydrogen on the ground and then store it on board the vehicle (the direct hydrogen option) or produce the hydrogen on the vehicle by means of a tiny on board hydrogen plant (the on board fuel processor option). Each option can produce hydrogen from natural gas, methanol, ethanol, gasoline, or diesel. (Source: Realizing a Hydrogen Energy Future, Hydrogen Technical Advisory Panel, United States Department of Energy, National Renewable Energy Laboratory, Washington D.C.)

In order for hydrogen to be adopted as a power source there are various technical challenges that must be addressed. These challenges include high temperature conversion, emissions, cost and efficiency. There are particular challenges facing its use in transportation applications including safety concerns, size and storage constraints and infrastructure requirements. PowerNova’s Process may be an efficient and high speed chemical reaction which may deliver hydrogen on demand.

In automotive applications, a key issue is storage. Hydrogen is a gas at normal temperatures and can be compressed and stored in cylinders to overcome volume related limitations. It can also be kept as a liquid at temperatures of minus 423.2 degrees Fahrenheit (-423.2^oF or -253^oC). When cooled to a liquid state, this low-weight fuel takes up 1/700 as much space as it does in its gaseous state. This leads to other problems as the size, volume and temperature requirements for the storage of hydrogen are not yet practical in small scale applications such as motor vehicles. The lack of a distribution system for hydrogen as a transportation fuel, further adds to these challenges. Also, safety is a critical issue as hydrogen is highly volatile. “Direct hydrogen”, or refueling with direct hydrogen, is one option that can be used to overcome the safety issues. It should be recalled that storing hydrogen as a liquid is a difficult process because the hydrogen must be cooled to -423.2^o F. Refrigerating hydrogen to this temperature uses the equivalent of 25% to 30% of its energy content, and requires special materials and handling. This makes this option impractical due to efficiency and distribution issues. Additionally, for hydrogen to be competitive to traditional sources of energy, especially on board vehicles, the system must be refueled simply and quickly. Management believes that PowerNova’s Process may produce hydrogen on demand such that refueling is not an issue to the consumer. Because PowerNova’s Process may use gasoline as a source of hydrogen, the existing infrastructure for the storage and delivery of gasoline may be used for PowerNova’s Process. Using the existing infrastructure may result in a lower cost of hydrogen than competitive technologies which may have to build a new infrastructure for the production, storage and delivery of hydrogen.

The direct hydrogen option also has limitations due to safety concerns and volumetric constraints associated with on-board storage systems. Management believes that on-board fuel processing is the practical alternative. A major benefit is that on-board processors utilize the existing fuel infrastructure and are a practical approach.

Hydrogen, however, will need to be produced on demand in a dynamic process which is, currently, not viable. Management believes that the Process may generate hydrogen at a price that may be competitive with existing fuels and therefore commercially viable. A concern is that on-board processing does not usually have the long-term societal benefits of direct hydrogen, as it is not typically a zero emissions process.

The Company’s process is not commercially viable at this time. We intend to continue research and development and our goal is to have the Process include the following benefits:

High temperature conversion: If and when the Process is proven to be commercially viable, the Process’ operating temperature should be between 150^o – 200^o C which is significantly lower than current industry standards.

Emissions: If and when the Process is proven to be commercially viable, the only by-products of the chemical reaction of the Process are hydrogen and alpha-olefins. Therefore, there will be no greenhouse gas emissions using the Process.

Cost: If and when the Process is proven to be commercially viable, the cost savings would include the following:

lower energy input to produce hydrogen;

ii)

use of existing infrastructure for refueling motor vehicles;

iii)

on-board and on-demand hydrogen production would become a more feasible system for motor vehicles.

Efficiency: If and when the Process is proven to be commercially viable, the Process should be efficient enough to be cost competitive with competing fuel sources.

The Market

Marketing efforts will not begin until the technology is ready to be licensed.

It is anticipated by the Company's Management that the Process may be suitable for the production of hydrogen for various applications. These applications include the production of hydrogen to power fuel cells in transportation, stationary and portable, as well as the production of hydrogen and alpha-olefins for industrial and chemical uses.

Vehicles powered by fuel cells are an alternative to those powered by internal combustion engines. Fuel cells are more efficient and less polluting than internal combustion engines in part because they use hydrogen as a fuel. The high efficiency, very low (or zero) emissions, and other favorable characteristics of fuel cells (such as fuel flexibility, low noise and vibration) create significant market opportunities for fuel cells over the entire range of transportation applications.

Transportation Markets:

The transportation market can be divided into Light Duty Vehicles (LDV), Heavy Duty Vehicles (HDV) and buses. According to a report by the Canadian investment dealer Goepel McDermid in August of 2000, there were 37 million LDVs sold globally every year representing an annual market of approximately US$800 billion. Goepel McDermid research also conducted analysis of the DMP (Discounted Market Potential) for various fuel cell adoption scenarios over the 20-year period from 2001-2020. The uncertainty relates to the adoption rate, which can be influenced by a wide number of factors including legislation, oil prices and the development of new technologies, as well as the elimination of constraints.

Target Market

Adoption Scenario (U.S. $ billion)

Slow

Base

Fast

Light duty vehicles

300-350

350-400

400-450

Heavy duty vehicles

100-15

150-200

200-250

Buses

7-9

9-10

10-12

PowerNova’s technology may address the needs of the transportation industry, particularly the needs of fuel cell powered LDVs. The market potential for the Process is closely correlated to the adoption and penetration of fuel cells and their requirement for hydrogen delivery systems.

Stationary Markets

Similar to the transportation markets, the stationary markets have been marked by several trends that have paved the way for the hydrogen economy. These trends include increasing demand, demand for uninterrupted power, deregulation and higher environmental standards.

There is also an increasing demand for clean and uninterrupted “premium” power. This market is ideally served by micropower stations as this virtually eliminates the fluctuations in power that has plagued centralized generating stations. Consumers in this sector include data centers, Internet service providers, chip fabricators, and stock exchanges.

The generation of power supplied by large power plants with capacity greater than 50MW has probably peaked, as there is a worldwide trend toward the smaller micro-generating stations. These stations are increasingly incorporating hydrogen-powered fuel cells to generate power. By 2010, it is estimated that 16 GW of capacity will be from such plants.

Goepel McDermid research has also conducted analysis of the DMP for various adoption scenarios of demand for energy generated from new energy technology products over the 20 year period from 2001 to 2020.

Target Market	Adoption Scenario (U.S.$ billion)
Target Market	Slow	Base	Fast
Residential	50-70	70-90	100-130
Commercial/ Industrial	90-120	135-155	155-190

Industrial Markets

PowerNova’s Process, if proven successful, also may have applications in other industries, including conventional petroleum and natural gas processing. Linear alkanes are byproducts from both these processes, but because of their low value they are simply used as a fuel. However, with the Process, a simple, low temperature conversion of the linear alkanes to alkenes plus hydrogen may be possible. Alkenes are of much higher value since they are the precursors to many chemicals and polymers. In addition, the production of hydrogen from this step would give refiners the ability to process greater quantities of heavy crudes. The supply of hydrogen to refineries is of increasing importance as world stocks of light crudes decline and heavy oil production (e.g. the Canadian oil sands) increases significantly.

Marketing Plans and Strategies

The Company plans to generate revenues from licensing, and through royalties from manufacturers and energy companies utilizing the Process. The Company has no current plans to manufacture products or equipment that can utilize the Process. The Company intends to focus on its core competencies in the research and development of hydrogen production technology. However, the Company will continue to monitor and assess all opportunities to maximize the value of its technology. These paths may include alliances, strategic partnerships, merger or acquisition of or with established energy companies, catalyst manufacturers or automobile/transportation companies. Due to management’s strategy to license the PowerNova Process, funding to engage in this strategy are minimal.

Given the nature of the Company’s technical advancements and the potential applications, it may be necessary to enter into licensing arrangements, strategic alliances and joint ventures that may strengthen its position and allow it to influence the adoption of the production process in order to maximize long-term profitability.

The market for the Process can be divided into stationary, transportation, portable and the chemical industry. The immediate market may be the stationary, chemical and the transportation sectors. In the stationary industry, the focus will be on, first, distributed generation, then centralized power plants as well as appliances. Remote and premium power users will be targeted first. Potential alliances may include various utility companies, power plants and appliance companies.

In the transportation industry, auto manufacturers with fuel cell programs require hydrogen for fuel. Fuel cell companies also need an economical source or hydrogen. PowerNova’s Process may be marketed to these companies as well as oil and gas companies because the Process may use hydrocarbons as a source of hydrogen.

In the chemical industry, the production of a number of fundamental chemicals such as alpha-olefins and hydrogen may be areas of the Process’ potential implementation. Alpha-olefins are used in the manufacture of polymers, paints, adhesives and detergents. Two major factors may lead to the adoption of the technology in the chemical sector: economic effectiveness of the Process and its nonpolluting nature.

The Company plans to use a variety of marketing strategies to promote awareness of its hydrogen production process. Marketing and promotional efforts will focus on furthering understanding of the Process and its potential applications.

Marketing efforts will include:

Branding and positioning: developing corporate identity, visual identity, positioning and developing necessary marketing tools.

Increasing awareness of the Company and its production process by:

•

participating in trade shows;

•

participating and presenting at related conferences;

•

publication in peer reviewed chemistry, science, technology, transportation, stationary, fuel cell, energy, new energy, hydrogen energy, and environment sources in print and new media;

•

disseminating news releases;

•

joining related groups and communities such as Fuel Cell 2000, California Fuel Cell Partnership, California Hydrogen Business Council, US Fuel Cell Council, and the Hydrogen and Fuel Cell Investor;

•

participating in and contributing to community and environmental causes;

•

maintaining a strong government relations strategy to recruit government support and influencing related government regulations in support of PowerNova’s Process;

•

integrating a sophisticated e-Strategy to maximize outreach and efficiency. This will include: web presence with an interactive website registered with all major international search engines; and linking with related websites, news groups, and online information providers in hundreds of various related sources.

Demonstrating the process by operating and testing first at trade shows.

Developing alliances with industry leaders in the oil industry, auto manufacturing, home appliance and power generation manufacturers and fuel cell companies to aggressively market the production process upon completion of development.

Direct recruiting and negotiations with potential customer

Building strong customer relations.

Competition:

Overview

The Company believes that it may have competition from other alternative energy sources, conventional energy sources and other hydrogen production technologies.

There are corporations, national laboratories and universities in North America, Europe and Asia that possess hydrogen production technologies and/or are actively engaged in the development and manufacture of such technologies. Many of these organizations have significant resources, including market power and financial strength that give them considerable competitive advantages.

Competitive Developments

•

Highlights of recent key competitive developments in hydrogen production industry are outlined below:

•

Northwest Polar Systems (NPS) has demonstrated a new fuel processor technology that converts diesel into high-purity hydrogen.

•

Shell hydrogen and dbb fuel cell engines (Xcellsis) have successfully developed and tested a prototype gasoline reformer based on Shell’s catalytic partial oxidation (CPO) to produce hydrogen for fuel cell applications in cars. Because of its high costs, further research will focus on a methanol reformer as its first priority.

•

Epyx Corp. developed and tested a compact, on-board processor that converts gasoline or alternative fuels into hydrogen-rich fuel.

•

Royal Dutch/Shell and United Technologies formed a joint venture to develop, manufacture and sell fuel processors. They are pursuing different aspects of fuel processor development and are targeting applications in road transport, power generation and retail outlets.

•

Ford and Mobil formed a joint venture to develop an on board fuel processor.

Plan of Operations

Research and Development Work

The Company’s goal is to complete its research and development work by December 31, 2009. This work involves the development of a new type of catalyst which may allow the rapid and selective dehydrogenation of organic liquids such as propane, butane and cycloalkanes. Management believes that if this catalyst is discovered the resulting formulation may make available the catalyst required for the commercial production of hydrogen. The goal of the catalyst is create a chemical reaction to break the bond between hydrogen and carbon in hydrocarbons so that the by-products of the reaction may be used in commercial applications. Establishing a firm completion date for the research and development is currently unrealistic due to the nature of the work involved. The inventor of PowerNova’s Process is doing pioneering work in these chemical processes and thus cannot determine when he will finish.

This work is being conducted in Russia at the Russian Academy of Sciences in Moscow and at the State University of Tbilisi under the direction of Dr. Avtandil Koridze, a Vice President of the Company. The technical challenge of achieving a commercially viable chemical catalyst to produce hydrogen and alpha-olefins is being addressed by the research and development program lead by Dr. Koridze, PowerNova’s Chief Technology Officer, Vice President of Research and Development, and the inventor of PowerNova’s Process. Dr. Koridze is an expert in the field of organo-metallic chemistry and has published over 150 peer reviewed articles in international chemical journals.

Tests on the Process

After successful completion of the research and development work, our goal would be to complete the tests on the Process in a period of three to six months

Prototype

After successful testing of the Process, our goal would be to establish a prototype of the Process in a period of four to six months.

Issuing License for Commercial Production

After the successful establishment of the prototype, our goal would be to commence issuing licenses to industrial customers within three months.

General

Management of PowerNova believes that Dr. Koridze’s expertise, and the expertise of his lab team, may result in a commercial viable technology.

If the research and development is successful, and there is no guarantee that it will be successful, the Company plans to have the results evaluated by an independent source to determine the commercial feasibility of the process. Management has already contacted Nexant Chemsystem, a consulting firm that specializes in working with clients engaged in the energy market and described their work to them. Based on these discussions, representatives of Nexant Chemsystems have expressed an interest in examining the Company’s results.

Stuart Lew, Chief Executive Officer of the Company, has not received any salary from the Company for Fiscal years 2004, 2005, 2006, and 2007, and has agreed to waive payment of his salary for Fiscal years 2004, 2005, 2006 and 2007. Stuart Lew has also advanced $151,412 in loans to the Company. These loans are unsecured, non-interest bearing and have no specific terms of repayment.

Bakytzhan Oralbekov, the former President of the Company, has not received any salary from the Company for Fiscal years 2004, 2005, 2006, and 2007, and agreed to waive payment of his salary for Fiscal years 2004, 2005, 2006, 2007 and Fiscal year 2008 ended May 31, 2008.

Dr. Avtandil Koridze Director, Chief Technology Officer, VP R&D, has not received any salary from the Company for Fiscal years 2004, 2005, 2006, and 2007, and has agreed to waive payment of his salary for Fiscal years 2004, 2005, 2006, 2007 and Fiscal year 2008 ended May 31, 2008.

As a result of the above waivers of salaries, the Company has been able to carry on business with very little expense to the Company over the past several years. Furthermore, as Bakytzhan Oralbekov and Dr. Avtandil Koridze have agreed to waive salaries up to the end of Fiscal year 2008, there will be no expense to the Company for their services to the Company during Fiscal year 2008 ended May 31, 2008.

No expenses were incurred for laboratory work in Russia during fiscal years 2008 and 2009.

During the year ended May 31, 2008, shareholders and/or officers and directors made contributions to capital by agreeing to forgive a balance owed to them at May 31, 2007 of $581,615.

Under U.S. GAAP, the Company would have received a going concern opinion because there is substantial doubt as to the Company’s ability to continue as a going concern. The Company has no revenues. Management plans to finance the future research and development work by way of private placement financings to residents of Canada.

Source of Funds for Fiscal 2007/2008

The Company currently has no current source of revenue from operations. Any additional funding may come from either the issuance of share capital or loans to the Company by management. The Company cannot provide any assurances that it will be successful in raising funds to continue its operations in the future.

To date, the following members of management have participated in private placements of the Company during the past five years:

Name of Member of Management & Position	Units of Private Placement Purchased	Total Purchase Price (Canadian dollars)
Stuart Lew, C.E.O.	442,450	$176,980
Bakytzhan Oralbekov, former President	125,000	$50,000
Phillip Webber, former C.F.O.	25,000	$10,000

________________________________________________________________

The amount of funds incurred to complete the Company’s operations for the 2008 fiscal year are as stated in the 2008 audited financial statements for fiscal 2008 and estimated for fiscal year 2009 to be $68,864.

However, in due course, the Company intends to retain a market maker to make an application with FINRA to list our securities on the OTC:BB and/or to the CNSX in Canada. If either of these applications are made in fiscal 2010, the Company would incur further additional expenses of approximately $115,000. The required funds will be raised through loans from Company principals and private placements or the need for these funds reduced by deferrals of salaries by company principals. Also, in due course, $1.5 million will be sought by the Company to move its lab and scientists to Canada. This $1.5 million would fund our Canadian laboratory for one fiscal year. No commitments have been received for these loans from Company principals or for private placements.

Anticipated Changes to Facilities/Employees

Management does not anticipate any changes to the current facilities and employees as the Company remains in the research and development stage. All of the research and development continues to be done at the Russian Academy of Sciences and the State University of Tbilsi.

United States vs. Foreign Sales/Assets

The Company has generated no sales revenue in the United States.

For the past three years all of the Company’s assets were located in Canada and Russia.

Seasonality

Seasonality has no impact upon the operations of the Company.

Dependency upon Patents/Licenses/Contracts/Processes

The Company is the owner of a patent for the Process from the United States Patent and Trademark Office as set forth in Item 4.A.2. The Company’s hydrogen production technology is proprietary and its value depends on patent protection. The patent claims a method of using a polynuclear organometallic compound to cyclically store and release hydrogen that is novel and unobvious over the prior art of record. The development of the invention is not yet completed.

Sources/Availability of Raw Materials

The Company’s technology is a chemical catalyst and its raw materials are supplied by Sigma Aldrich and other chemical companies. The chemicals are regularly stocked items, are not difficult to obtain and the chemical prices are not volatile. Sigma Aldrich supplies the Company with chemicals such as chloro di-isopropylphosphine, cyclohexadiene, cyclohexyl chloride, ruthenium chloride hydrate, cyclooctene, di-tert-butylphosphine. The Company has an account with Sigma Aldrich.

Material Effects of Government Regulations

4.C. Organization Structure

4.D. Property, Plant and Equipment

The Company’s administrative and executive offices are located at 207 West Hastings, Suite 1010, Vancouver, B.C. Canada V6B 1H7. Prior to that the Company was located at 680 - 1285 West Broadway, Vancouver, B.C. Canada V6H 3X8.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal years ended 5/31/2008, 5/31/2007, 5/31/2006, and 5/31/2005 should be read in conjunction with the financial statements of the Company and the notes thereto.

Financing Time Line

---No Disclosure Necessary---

Recent Events

---No Disclosure Necessary---

Results of Operations

Fiscal 2008 Ended May 31, 2008 vs. Fiscal 2007 Ended May 31, 2007

PowerNova Technologies Corporation reported a net loss of $56,066 for the fiscal year ended May 31, 2008 compared to a net loss of $41,053 for the fiscal year ended May 31, 2007. General and administrative expenses for the fiscal year ended May 31, 2008 were $56,066 compared to $48,809 during the prior fiscal year, an increase of $7,257. The increase was due to higher Legal and Accounting fees. The largest changes occurred in the following expense categories:

Amortization: Down $82

Bank Charges and Interest: Down $83

Filing and Transfer Agent Fees: Down $3,229

Legal and Accounting Fees: Up $10,959

Telephone: Down $308

During the fiscal year ended May 31, 2008, the Company had no revenues and during the fiscal year ended May 31, 2007, the Company also had no revenues.

During the year ended May 31, 2008, shareholders and/or officers and directors of the Company made contributions to capital by agreeing to forgive a balance owed to them by the Company as of May 31, 2007 of $581,615.

Fiscal 2007 Ended May 31, 2007 vs. Fiscal 2006 Ended May 31, 2006

PowerNova Technologies Corporation reported a net loss of $41,053 for the fiscal year ended May 31, 2007 compared to a net loss of $210,848 for the fiscal year ended May 31, 2006. General and administrative expenses for the fiscal year ended May 31, 2007 were $48,809 compared to $213,827 during the prior fiscal year, a decrease of $165,018. The decrease was primarily due to small cost reductions in several expense categories, including Consulting Fees, and no expenses were incurred for Research and Development as Dr. Kordize worked on the process in Moscow at no expense to the Company. The largest changes occurred in the following expense categories:

Amortization: Down $111

Consulting Fees: Down $188,000

Filing and Transfer Agent Fees: Up $3,229

Legal and Accounting Fees: Down $4,005

Management Fees: Up $18,000

Rent: Up $6,000

Telephone: Down $105

During the fiscal year ended May 31, 2007, the Company had no revenues and during the fiscal year ended May 31, 2006, the Company also had no revenues.

Fiscal 2006 Ended May 31, 2006 vs. Fiscal 2005 Ended May 31, 2005

PowerNova Technologies Corporation reported a net loss of $210,848 for the fiscal year ended May 31, 2006 compared to a net loss of $221,534 for the fiscal year ended May 31, 2005. General and administrative expenses for the fiscal year ended May 31, 2006 were $213,827 compared to $221,534 during the prior fiscal year, a decrease of $7,707. The decrease was primarily due to small cost reductions in several expense categories, including Consulting Fees, and no expenses were incurred for Research and Development as Dr. Kordize worked on the process in Moscow at no expense to the Company. The largest changes occurred in the following expense categories:

Amortization: Down $152

Consulting Fees: No change

Filing and Transfer Agent Fees: Down $4,483

Legal and Accounting Fees: Up $10,614

Rent: Down $9,252

Telephone: Down $1,808

During the fiscal year ended May 31, 2006, the Company had no revenues and during the fiscal year ended May 31, 2005, the Company also had no revenues.

Fiscal 2005 Ended May 31, 2005 vs. Fiscal 2004 Ended May 31, 2004

PowerNova Technologies Corporation reported a net loss of $221,534 for the fiscal year ended May 31, 2005 compared to a net loss of $469,395 for the fiscal year ended May 31, 2004. General and administrative expenses for the fiscal year ended May 31, 2005 were $221,534 compared to $496,207 during the prior fiscal year, a decrease of $274,673. The decrease was primarily due to small cost reductions in several expense categories, including Consulting Fees, and no expenses were incurred for Research and Development as Dr. Kordize worked on the process in Moscow at no expense to the Company. The largest changes occurred in the following expense categories:

Amortization: Down $2,706

Consulting Fees: Down $21,514

Filing and Transfer Agent Fees: Down $3,404.

Legal and Accounting Fees: Down $28,013

Rent: Down $5,182

Research and Development: Down $216,230

Telephone: Up $2,212

During the fiscal year ended May 31, 2005, the Company had no revenues and during the fiscal year ended May 31, 2004, the Company also had no revenues.

Fiscal 2004 Ended May 31, 2004 vs. Fiscal 2003 Ended May 31, 2003

PowerNova Technologies Corporation reported a net loss of $469,395 for the fiscal year ended May 31, 2004 compared to a net loss of $263,588 for the fiscal year ended May 31, 2003. General administration expenses for the fiscal year ended May 31, 2004 were $496,207 compared to $323,962 during the prior fiscal year, a increase of $172,245. The increase was primarily due to increases in Research and Development and Consulting Fees related to the acquisition of Hydrogen Production Technologies Corporation, which were partially offset by cost reductions in most expense categories. The largest changes occurred in the following expense categories:

Amortization: Down $3,404

Bank Charges and Interest: Down $962

Rent: Down $10,449

Telephone expenses: Down $4,304

Consulting fees to related parties: Up $14,000

Salaries and Benefits: Down $88,294

Consulting fees: Up $21,514

Research and Development: Up $216,230

Filing and Transfer Agent fees: Up $1,222

Legal, accounting, and audit fees: Up $26,312

During the fiscal year ended May 31, 2004, the Company had no revenues and during the fiscal year ended May 31, 2003, the Company also had no revenues. All of management’s efforts during these fiscal periods were concentrated on the acquisition of all the issued and outstanding share capital of Hydrogen Production Technologies Corporation, as described earlier in this document.

Fiscal 2003 Ended May 31, 2003 vs. the Fiscal 2002 Ended May 31, 2002

The Company reported a net loss of ($263,588) for the fiscal year ended May 31, 2003 compared to a net loss of ($358,654) for the fiscal year ended May 31, 2002. The lesser net loss, which occurred during Fiscal 2003, was the direct result of expenses being either reduced substantially or eliminated entirely during Fiscal 2003. This occurred because the funding of the research and development of the Process were turned over substantially to PowerNova Technologies Corporation in anticipation of the impending acquisition.

Fiscal 2002 Ended May 31, 2002 vs. the Fiscal 2001 Ended May 31, 2001

The Company reported a net loss of ($358,654) for the fiscal year ended May 31, 2002 compared to a net loss of ($590,531) for the fiscal year ended May 31, 2001. Since the Company was formed during Fiscal 2001 (September 6, 2000) the expenses in each category varied during the two periods. The recovery of accounts payable of $61,542 contributed to the lower net loss. Also, a reduction in legal and accounting expenses of $45,236 occurred. Wages; however, increased by $70,449 because of the higher level of activity in research and development. Consulting fees increased by $97,915 due to additional management personnel.

Fiscal 2001 Ended May 31, 2001 vs. the Fiscal 2000 Ended May 31, 2000

The net loss for the fiscal year ended May 31, 2001 was $590,531 as compared to net income for the fiscal year ended May 31, 2000 of $74,160. General and administrative expenses for the fiscal year ended May 31, 2001 were $596,006 compared to $167,815 during the prior fiscal year, an increase of $428,191.

The difference between the two fiscal periods in questions was attributable primarily to the following three factors:

During Fiscal 2000 the Company realized net income from discontinued operations in the amount of $141,975 as compared to only $5,475 during Fiscal 2001 when the Company’s beverage related operations were essentially wound down;

During Fiscal 2001, the Company wrote off an advance to Riaks in the amount of $149,624. (Under this initial agreement, the Company had advanced US$100,000 to Riaks. However, by agreement of the parties the transaction was not completed. The agreement was then restructured in a manner whereby Riaks assigned all of the intellectual property rights to Koridze and Oralbekov. The Company subsequently entered into an agreement with Koridze and Oralbekov whereby the Company would issue 17,950,000 shares (at a deemed value of $0.50 per share) to the owners of the Process in order to acquire 100% of the Process. Concurrent with entering into the agreement with the owners of the Process, the Company wrote off the prior advance which it had given to Riaks.)

The Company also paid consulting fees during Fiscal 2001 in the amount of $218,669 as compared to only $10,787 during Fiscal 2000. The consulting fees were paid to C.E.O. Stuart Lew ($96,000), former President Bakytzhan Oralbekov ($28,067) and C.T.O. Avtandil Koridze ($41,445). The balance of $53,157 was paid to employees who were not officers or directors.

Liquidity and Capital Resources

A payment of US$5,000 will become due to the Russian Academy of Sciences when the research and development program has been completed. In the opinion of management, successful completion of the research and development program may result in PowerNova’s Process having marketable industrial value. This value can be used to raise debt or equity capital to further the Company’s goals of maximizing this value through licensing and sales.

The Company continues to rely on private placements and loans by Company management to fund its operations. If the completion of the research and development program does not result in a technology or process that has marketable industrial value, Company management may consider a financial reorganization of the Company in order to position itself for other business opportunities.

The Company has used Share Purchase Warrants private placements to raise capital. Each Share Purchase Warrant was comprised of one common share and one Share Purchase Warrant. The Share Purchase Warrant allowed the holder to purchase a common share at C$1.00. The Share Purchase Warrant expiry dates are listed in the schedule in Table 15 below. As of 4/21/2008, there were 4,086,832 Share Purchase Warrants outstanding.

The Company has a contractual obligation to pay US$5,000 to the Russian Academy of Sciences upon completion of the research and development of the technology. There are no other contractual obligations or off balance sheet arrangements.

Fiscal 2008 Ended May 31, 2008

As at May 31, 2008 the Company has an accumulated deficit of ($6,731,139) and a working capital deficit of ($396,095).

No common shares were issued during Fiscal 2008 Ended May 31, 2008.

Cash provided by Operating Activities was $210, including the Net Loss for the period of ($56,066). The amounts include Contributions to capital by related parties of $605,615 and the related Decrease in Due to Related Parties of ($559,122), as Shareholders and/or officers and directors forgave a balance owed to them by the Company of $581,615.

Investing Activities provided cash of $Nil while Financing Activities provided cash of $Nil.

Fiscal 2007 Ended May 31, 2007

As at May 31, 2007 the Company has an accumulated deficit of ($6,675,073) and a working capital deficit of ($945,879).

Bank indebtedness was $1 at May 31, 2007.

No common shares were issued during Fiscal 2007 Ended May 31, 2007.

Cash used by Operating Activities was ($301), including the Net Loss for the period of ($41,053). Investing Activities provided cash of $Nil while Financing Activities provided cash of $Nil.

Fiscal 2006 Ended May 31, 2006

As at May 31, 2006 the Company had an accumulated deficit of ($6,634,020) and a working capital deficit of ($929,143).

Cash and cash equivalents were $300 at May 31, 2006.

No common shares were issued during Fiscal 2006 Ended May 31, 2006.

Cash used by Operating Activities was ($2,666), including the Net Loss for the period of ($210,848). Investing Activities provided cash of $0 while Financing Activities provided cash of $1,241.

Fiscal 2005 Ended May 31, 2005

As at May 31, 2005, the Company had an accumulated deficit of ($6,423,172) and a working capital deficit of ($719,964).

The Company had a cash and cash equivalent position at May 31, 2005 of $1,725.

No common shares were issued in Fiscal 2005; However, the Company did grant 143,335 Share Purchase Warrants at $0.40 per Share Purchase Warrant for cash proceeds of $57,334, with each Share Purchase Warrant convertible into one common share and one common Share Purchase Warrant exercisable at $1.00 per share. The Company also received $1,310 for share subscriptions received in advance related to the exercise of 7,278 common Share Purchase Warrants exercisable at $0.18 per Share Purchase Warrant.

Cash used for Operating Activities was ($61,125), including the Net Loss of ($221,534) which was partially offset by the increase in Due to Related Parties of $168,658, decrease in prepaid expenses of $900, and increase in amounts receivable of $256. Decrease in Accounts Payable used cash of ($9,985).

No cash was provided or used by investing activities during the fiscal year. Financing Activities provided cash of $58,644, with Share Subscriptions received in advance for cash providing cash of $1,310, and Share Purchase Warrants granted providing cash of $57,334.

Fiscal 2004 Ended May 31, 2004

As at May 31, 2004, the Company had an accumulated deficit of ($6,201,638) and a working capital deficit of ($557,654). The Company had a cash and cash equivalent position at May 31, 2004 was $4,206.

The Company issued 21,725,773 shares during Fiscal 2004 pursuant to the acquisition of the Process technical rights as to 20,000,000 shares and conversion of Share Purchase Warrants as to 1,725,773.

Cash Used for Operating Activities by the Company during Fiscal 2004 was ($64,045) including the net loss for the fiscal year of ($469,395). The adjustments for the fiscal year were: write-off of the intangible asset relating to the acquisition of the patent rights in the amount of $216,320; amortization of the purchase of the powernova.com website domain; computer equipment and office equipment in the amount $3,286. Changes in non-cash working capital were $185,834 due to a net increase in related and unrelated amounts payable of $185,387, an increase in prepaid expenses of $25 and a decrease in goods and services tax receivable in the amount of $472.

Cash Used for Investing Activities by the Company during Fiscal 2004 totaled $Nil.

Cash Provided by Financing Activities to the Company during Fiscal 2004 was $56,340 and consisted entirely of the issuance of 27,000 Share Purchase Warrants and the receipt of share subscriptions of $45,360 for exercise of 251,998 Share Purchase Warrants.

The Share Purchase Warrant holders have consented to the advance of their funds by the Company to the owners of the Process and this advance will be assigned to the Share Purchase Warrant holders should the Company not file a prospectus or, should the business combination not be effected, the Share Purchase Warrants shall be deemed to be terminated and the Company shall have no further liability to the Share Purchase Warrant holders for the funds advanced to the owners of the Process or for the conversion of the Share Purchase Warrants to common shares. In such event, the Share Purchase Warrant holders sole recourse for repayment of such advances shall be the owners of the Process. Each Share Purchase Warrant is convertible into a unit consisting of one common share and one Share Purchase Warrant of the Company upon the issuance of a final receipt for a prospectus to be filed by the Company. Each Share Purchase Warrant entitles the holder to purchase one additi onal common share of the Company at a price of $1.00 per share.

Fiscal 2003 Ended May 31, 2003

As at May 31, 2003, the Company had an accumulated deficit of ($5,732,243) and a working capital deficit of ($364,115).

The Company had cash and cash equivalent position at May 31, 2003 was $11,911. No common shares were issued during Fiscal 2003.

Cash Used for Operating Activities by the Company during Fiscal 2003 was ($32,268) including the net loss for the fiscal year of ($263,588). The adjustments for the fiscal year were: amortization of the purchase of the powernova.com website domain; computer equipment and office equipment in the amount $6,690 and a management extinguishment of accounts payable in the amount of ($57,379). This recovery resulted from the extinguishment by current management of certain accounts payable balances related primarily to its prior business, which had remained unpaid for several years without any claims being made by these creditors against The Company. (There is no assurance that formal claims will not be made against the Company for some or all of these balances in the future.) Changes in non-cash working capital were $278,009 and consisted of increase in related and unrelated amounts payable and goods and services tax receivable in the amount of ($1,384).

Cash Used for Investing Activities by The Company during Fiscal 2003 totaled ($15,973) which consisted entirely of advances to Hydrogen Production Technologies Corporation.

Cash Provided by Financing Activities to The Company during Fiscal 2003 was $59,829 and consisted entirely of the issuance of 149,573 Share Purchase Warrants for cash.

The Share Purchase Warrant holders have consented to the advance of their funds by the Company to the owners of the Process and this advance will be assigned to the Share Purchase Warrant holders should the Company not file a prospectus or, should the business combination not be effected, the Share Purchase Warrants shall be deemed to be terminated and the Company shall have no further liability to the Share Purchase Warrant holders for the funds advanced to the owners of the Process or for the conversion of the Share Purchase Warrants to common shares. In such event, the Share Purchase Warrant holders’ sole recourse for repayment of such advances shall be the owners of the Process. Each Share Purchase Warrant is convertible into a unit consisting of one common share and one Share Purchase Warrant of the Company upon the issuance of a final receipt for a prospectus to be filed by the Company. Each Share Purchase Warrant entitles the holder to purchase one additional common share of the Company at a price of $1.00 per share.

Recent Accounting Pronouncements Applicable to Us

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140”, to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 14, 2006, with earlier application allowed. This standard is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. S FAS No. 156 is effective for an entity’s first fiscal year beginning after September 15, 2006. This adoption of this statement is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company would be the first fiscal year beginning January 1, 2008. The Company is currently evaluating the impact of SFAS No. 157 but does not expect that it will have a material impact on its financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company does not expect that the implementation of SFAS No. 158 will have any material impact on its financial position and results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatement in current year financial statements. SAB No. 108 requires companies to quantify misstatement using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The Company is currently evaluating the impact of adopting SAB No. 108 but does not expect that it will have a material effect on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin No. 51 (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after 15 December 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 160 on its consolidated results of operation and financial condition.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for fiscal years beginning after 15 December 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 141(R) on its consolidated results of operation and financial condition.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivate instruments within the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under SFAS No. 133. SFAS No. 161 is effective prospectively for financial statements issued for fiscal years beginning after 15 November 2008, with early application encouraged. The Company is currently evaluating the new disclosure requirements of SFAS 161 and the potential impact on the Company’s financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for nongovernmental entities. Prior to the issuance of SFAS No. 162, GAAP hierarchy was defined in the American Institute of Certified Public Accountants (“AICPA”) Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles (“SAS No. 69”). SAS No. 69 has been criticized because it is directed to the auditor rather than the entity. SFAS No. 162 addresses these issues by establishing that the GAAP hierarchy should be directed to entities because it is the entity, not its auditor, that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect SFAS 162 to have a material effect on its consolidated financial statements.

In May 2008, the Financial Accounting Standards Board (the “FASB”) issued Statements of Financial Accounting Standards (“SFAS”) No. 163, Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60 (“SFAS No. 163”). SFAS No. 163 provides enhanced guidance on the recognition and measurement to be used to account for premium revenue and claim liabilities and related disclosures and is limited to financial guarantee insurance (and reinsurance) contracts, issued by enterprises included within the scope of FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. SFAS No. 163 also requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS No. 163 is effective for financial statements issued for fiscal years and interim periods beginnin g after 15 December 2008, with early application not permitted. The Company does not expect SFAS No. 163 to have an impact on its consolidated financial statements.

Trend Information

The Company is unaware of any trends which would have a material effect on its operations or financial position.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations

Table No. 6

Contractual Obligations

As of May 31, 2008

	Payments Due by Period
Contractual Obligations as of May 31, 2008	Total	Less than 1 year	1- 3 years	3 -5 years	More than 5 years

Long Term Debt Obligations	-	-	-	-	-
Capital Lease Obligations	-	-	-	-	-
Operating Lease Obligations	-	-	-	-	-
Purchase Obligations	-	-	-	-	-
Other-Long Term Liabilities Reflected on the Balance Sheet	-	-	-	-	-
Total	-	-	-	-	-
There are no obligations or liabilities as of May 31, 2008.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6.A. Directors and Senior Management

Table No. 7

Directors and Senior Management

October 28, 2009

Name and Position	Age	Date of First Election or Appointment
Avtandil Koridze, Director and Vice President	68	February 2001
Stuart C. Lew, CEO/Director/Co-Chairman	49	October 1986
Chris Tay, CFO/Director (1) (2)	45	November 2008
Hans-Christian Behm, Director (1)	68	November 2008
John Patrick Nicol, Director (1)	39	August 2009

______________________________________________________________________________________

(1)

Member of the audit committee. The Audit Committee is composed of three Directors, one of whom is a non-officer of the Company. The Audit Committee meets at once a year to review the annual audited financial statements and make appropriate recommendations to the Board of Directors based upon their review.

(2)

Not an independent member of the Audit Committee.

Stuart Lew was Chief Operating Officer of Aqua 1 Beverage Company, Inc, from 1986 to 1999 and President of Aqua 1 Beverage Company, Inc. up until September 10, 2003. Aqua 1 Beverage Company, Inc. changed its name to PowerNova Technologies Corporation on September 11, 2003 and from that date forward, Mr. Lew has been Co-Chairman and Chief Executive Officer of PowerNova Technologies Corporation. He graduated with a Bachelors Degree from the University of Western Ontario. He also received a diploma in Financial Management from the British Columbia Institute of Technology.

Avtandil Koridze has been a Vice President and Director of the Company since February 2001. He is a 1962 graduate of the Moscow Institute of Petrochemical and Gas Industry. In 1969 he received a PhD. Degree in organometallic chemistry from the Moscow Institute of Petrochemical and Gas Industry. In 1988 he became a Doctor of Sciences at the A.N. Nesmeyanov Institute of Organo-Element Compounds of the Russian academy of Sciences, Moscow where he is currently Head of the Laboratory of Organometallic Cluster Chemistry. He is a specialist in organometallic chemistry of transition metals, having approximately 150 publications in chemical journals, including the Russian Chemical Bulletin, the Journal of Chemical Communications, Organometallic, and the Journal of Organometallic Chemistry. His fields of specialty include transition metal clusters, activation of hydrocarbons by transition metal complexes, and intermolecular rearrangements in organometallic complexes.

Chris Tay was appointed Chief Financial Officer and a Director in November 2008. Mr. Tay is a Certified General Accountant (“CGA”) since 1993. Since 2000, he has been a principal of CMNR Holdings Limited in Vancouver, British Columbia. He also served as CFO of Watersave Logic Corporation, a public company traded on the TSX Venture Exchange, from August 2005 to August 2006. From December 1999 to April 2001, he was associate director and controller of the Legal Services of British Columbia.

Hans Christian Behm has been a director since 2008. He has been President of Gulf Timber Frame Ltd. since 1994; President of Land’s End Holdings Ltd. since 2003; President of Canadian PowerPlus Corporation since 2008; and President of PowerPlus Pilot 1 Inc. since 2009.

John Patrick Nicol has been a director since August 2009. Mr. Nicol was director and/or officer of a number of TSX Venture issuers including Abacus Mining & Exploration Corp. (from June 1999 through September 2009), Redstar Gold Corp. (June 2002 to September 2009), Niblack Mining (from April 2005 through October 2008), BMB Capital Corp. (from March 2008 through September 2009) and Skygold Ventures Ltd. (from June 2006 through September 2009).

The Executive Officers serve at the pleasure of the Board of Directors.

No Director and/or Executive Officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Executive Officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony/misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no family relationships between any two or more Directors or Executive Officers.

There are no arrangements or understandings between any two or more Directors or Executive Officers, pursuant to which he was selected as a Director or Executive Officer.

6.B. Compensation

Cash Compensation. Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Executive Officers of PowerNova Technologies Corporation during Fiscal 2008 ended 5/31/2008, and fiscal 2007 ended 5/31/2007 was $Nil.

Table No. 8 details compensation paid/accrued for Fiscal 2008/2007/2006/2005/2004 ended May 31st for the Senior Management.

Table No. 8

Summary Compensation Table

Senior Management

_______________________________________________________________________________

Annual Compensation

Long-Term Compensation

Name and Principal Position

Fiscal Year

Salary and fees

Bonus

Other Annual Comp.

Stock Award

Restricted Options/ SARs

LTIP Payouts

All Other Comp.

Stuart C. Lew,

Co-Chairman and CEO

2008

2007

2006

2005

2004

Nil

Bakytzhan Oralbekov,

Former President

2008

2007

2006

2005

2004

Nil

Avtandil Koridze, Director,

Chief Technology Officer,

VP R&D

2008

2007

2006

2005

2004

Nil

Phillip Webber, former Director

and former Chief Financial Officer

2008

2007

2006

2005

2004

Nil

William Kaska, former Director

2008

2007

2006

2005

2004

Nil

Options/SARs Granted/Exercised During The Most Recently Completed Fiscal Year

During the most recently completed fiscal year, the following incentive stock options were granted to Senior Management, Directors and employees. No SARs (stock appreciation rights) were granted during this period.

Table No. 9

Stock Option Grants in Fiscal 2008 Ended 5/31/2008

______________________________________________________________________________________

Name

Number of Options Granted

Percentage of Total Options Granted

Exercise Price Per Share

Grant Date

Market Value of Securities Underlying Options on Date of Grant Per Share

No stock options were granted during Fiscal 2008

______________________________________________________________________________________

The following table gives certain information concerning stock option exercises during Fiscal 2008 by our Senior Management and Directors. It also gives information concerning stock option values.

Table No. 10

Aggregated Stock Options Exercises in Fiscal 2008

Fiscal Yearend Unexercised Stock Options

Fiscal Yearend Stock Option Values

Senior Management/Directors

______________________________________________________________________________________

Name

Number of Shares Acquired on Exercise

Aggregate Value Realized

Value of Unexercised Number of Unexercised Options at Fiscal Year-end Exercisable and or Unexercisable

In-the-Money Options at Fiscal Year-end Exercisable and/or Unexercisable

No stock options were exercised during Fiscal 2008

Director Compensation. The Company has no formal plan for compensating its Directors for their service in their capacity as Directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.

Stock Options. The Company grants stock options to Directors, Senior Management and employees; refer to ITEM #6.E., "Share Ownership".

Pension/Retirement Benefits. No funds were set aside or accrued by the Company during Fiscal 2008 to provide pension, retirement or similar benefits for Directors or Executive Officers.

Change of Control Remuneration.

There are no agreements in place to compensate any of the Directors or Senior Officers in the case of a change of control of the Company.

Other Compensation. No Executive Officer/Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Executive Officers/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation. Except for the stock option program discussed in ITEM #6.E., the Company has no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Executive Officers.

Written Management/Consulting Agreements

There are no management or consulting agreements in place.

6.C. Board Practices

6.C.1. Terms of Office. Refer to ITEM 6.A.1.

6.C.2. Directors’ Service Contracts. --- Not Applicable ---

6.C.3. Board of Director Committees.

The Company has an Audit Committee, which recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The Audit Committee was formed in November of 2002 4. The current members of the Audit Committee are: Chris Tay, Hans-Christian Behm and John Patrick Nicol. Chris Tay is Chief Financial Officer of the Company and Hans-Christian Behm and John Patrick Nicol are independent directors.

6.D. Employees

As of 4/21/2008, the Company had no employees.

6.E. Share Ownership

Table No. 11 lists, as of October 28, 2009, Directors and Executive Officers who beneficially own the Company's voting securities and the amount of the Company's voting securities owned by the Directors and Executive Officers as a group.

Table No. 11

Shareholdings of Directors and Executive Officers

Shareholdings of 5% Shareholders

______________________________________________________________________________________

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class

Common	Stuart Lew	1,090,974	2.43%
Common	Chris Tay	6,250	<1%
Common	Avtandil Koridze	10,000,000	22.26%
Common	Hans-Christian Behm	110,000	<1%
Common	John Patrick Nicol	Nil	N/A
Common	Hector Frith (1)	12,764,836	28.40%

Common	Total Directors/Officers / 5% Shareholders	23,972,060	53.35%

______________________________________________________________________________________

# Based on 43,754,073 shares outstanding as of October 28, 2009 and warrants held by each beneficial holder exercisable within sixty days.

(1)

Of these shares, 1,179,000 represent currently exercisable Share Purchase Warrants;

As of October 28, 2009, the Company had no stock options outstanding.

______________________________________________________________________________________

Stock Options

The Company currently has no stock option plan; however, a new stock option plan may be presented to shareholders at the next annual general meeting.

The names and titles of the Directors/Executive Officers of the Company to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in Table No. 11 as of October 28, 2009, as well as the number of options granted to Directors and all employees as a group.

Table No. 12

Stock Options Outstanding

______________________________________________________________________________________

Name

Number of Shares of Common Stock

Cdn$ Exercise Price

Date of Grant

Expiration Date

There are no stock options outstanding as of October 28, 2009.

______________________________________________________________________________________

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders.

7.A.1.a. Holdings By Major Shareholders.

Refer to Item 6.E. and Table No. 11.

7.A.1.b. Significant Changes in Major Shareholders’ Holdings.

The participation in private placements of equity by the Company and exercise of stock options/Share Purchase Warrants has lead over the last several year to some significant changes in the holdings of major shareholders; table reflects direct holdings of common shares, refer to Table No. 10 for additional information.

Table No. 13

Changes in Holdings of Major Shareholders

Name	Shares Owned 5/31/2007	Shares Owned 5/31/2006	Shares Owned 5/31/2005	Shares Owned 5/31/2004	Shares Owned 5/31/2003	Shares Owned 5/31/2002	Shares Owned 5/31/2001

Stuart Lew	4,884,442	4,884,442	4,884,442	1,745,692	2,466,496	1,699,569	1,274,800
Bakytzhan Oralbekov	8,500,000	8,500,000	8,500,000	Nil	Nil	Nil	Nil
Avtandil Koridze	8,375,000	8,375,000	8,375,000	Nil	Nil	Nil	Nil

______________________________________________________________________________________

7.A.1.c. Different Voting Rights. The Company’s major shareholders do not have different voting rights.

7.A.2. Canadian Share Ownership. On 4/21/2008, the shareholders' list for the Company's common shares showed 439 registered shareholders and 40,965,175 shares issued and outstanding. Of these shareholders, 94 were resident in Canada holding 15,394,031 shares; 338 were resident in the United States holding 8,387,394 shares; 2 were resident in Russia holding 16,875,000 shares; 4 were resident in Europe and Asia holding 308,750 shares.

Based on this research and other research into the indirect holdings of other financial institutions, the Company believes that it has in excess of 500 beneficial owners of its common shares.

7.A.3. Control of Company. The Company is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents; Canadian residents; residents of Russia; and, other foreign residents. The Company is not controlled by any foreign government or other person(s) except as described in Item 4.A., “History and Development of the Company”, and Item 6.E., “Share Ownership”.

7.A.4. Change of Control of Company Arrangements.

--– No Disclosure Necessary –--

7.B. Related Party Transactions

Transactions with related parties have occurred in the normal course of operations and are measured at their fair value as determined by management. The year end balances, as at May 31, 2008, referred to below are non-interest bearing, unsecured and receivable or payable on demand, and have arisen from the provision of services and expense reimbursements or advances described.

During the year ended May 31, 2008, the Company paid or accrued consulting fees of $Nil (FY 2007 - $Nil; FY 2006 - $188,000) to directors of the Company.

Stuart Lew, a director, made contributions to capital for management fees in the amount of $18,000 (FY 2007 - $18,000; FY 2006 - $Nil) and rent in the amount of $6,000 (FY2007 - $6,000; FY 2006 - $Nil). Shareholders and/or officers and directors also agreed to forgive balances owed to them by the Company in the amount of $581,615 relating to unpaid loans and/or management fees, as follows:

Stuart Lew

$204,000

Bakytzhan Oralbekov

$214,728

Avtandil Koridze

$162,887.

As a result of the share exchange agreement, Bakytzhan Oralbekov and Avtandil Koridze agreed to transfer to Stuart Lew 3,250,000 common shares of the total of 20,000,000 common shares issued to them. Consequently the balance of common shares held by Bakytzhan Oralbekov including prior shareholdings is 8,500,000 and the balance of common shares held by Avtandil Koridze including prior shareholdings is 8,375,000. The total common shareholdings of Stuart Lew, including previous shareholdings prior to this transaction is 4,884,442.

Except as stated in the attached financial statements of the company for the fiscal years of the company ended May 31, 2005 and May 31, 2006 management services performed for the company by officers and directors of the company were performed without charge to the company.

Other than as disclosed above, there have been no transactions or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. As stated above, management believes the transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.

Trust Agreements

---No Disclosure Necessary---

Shares for Compensation to Shareholders Who Exercised Warrants

---No Disclosure Necessary---

Legal Services

--- No Disclosure Necessary ---

7.C. Interests of Experts and Counsel

--- No Disclosure Necessary ---

ITEM 8. FINANCIAL INFORMATION

8.A. Statements and Other Financial Information

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with generally accepted auditing standards in Canada and the United States.

The financial statements as required under Item 17 are attached hereto and found immediately following the text of this Annual Report. The audit reports of James Stafford, Chartered Accountants, and Amisano Hanson Chartered Accountants, are included herein immediately preceding the financial statements and schedules.

8.A.1. Legal/Arbitration Proceedings

The Directors and the management of the Company know of no material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

The Directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

8.B. Significant Changes

On October 30, 2003 the Company announced that the acquisition of the Process rights by the Company had been completed. All of the technology rights to the Process were exchanged for 20,000,000 common shares of the Company. An incentive bonus will be provided to Dr. Koridze and Mr. Oralbekov of a further 9,000,000 common shares upon the Company achieving revenues of $10,000,000 as a direct result of the commercialization of the Process provided such revenues are achieved within ten years of completion of the acquisition.

ITEM 9. THE OFFER AND LISTING

9.A.4. Common Share Trading Information

As of 5/31/2008, the authorized capital of the Company was 50,000,000 common shares without par value. As of 5/31/2008, there were 40,965,175 common shares issued and outstanding. As of October 28, 2009, there were 43,754,043 common shares issued and outstanding.

The Company's common shares began trading on the Vancouver Stock Exchange (subsequently the Canadian Venture Exchange and currently called the TSX Venture Exchange) in August of 1988 under the stock symbol “AQB”. The CUSIP number is 739329. In June, 2000, the Company voluntarily halted the trading of its shares on the TSX Venture Exchange pending the completion of the acquisition of the Process. The Company’s shares were delisted from the TSX Venture Exchange on June 20, 2003. As of October 28, 2009, the Company’s shares do not trade on any stock exchange.

Table No. 14 lists the high and low sale prices on the TSX Venture Exchange for the Company's common shares for the last five fiscal years, the last two years by quarter, and the last six months.

Table No. 14

TSX Venture Exchange (formerly the Canadian Venture Exchange)

Common shares Trading Activity

- Sales -

Canadian Dollars

Period	High	Low
Month Ended 9/30/08	No	Trades
Month Ended 8/31/08	No	Trades
Month Ended 7/31/08	No	Trades
Month Ended 6/30/08	No	Trades
Month Ended 5/31/08	No	Trades
Month Ended 4/30/08	No	Trades
Fiscal Year Ended 5/31/2008	No	Trades
Fiscal Year Ended 5/31/2007	No	Trades
Fiscal Year Ended 5/31/2006	No	Trades
Fiscal Year Ended 5/31/2005	No	Trades
Fiscal Year Ended 5/31/2004 Fiscal Year Ended 5/31/2003	No No	Trades Trades
Fiscal Year Ended 5/31/2002	No	Trades
Fiscal Year Ended 5/31/2001	$0.64	$0.38

______________________________________________________________________________________

9.A.5. Common Share Description

Registrar/Common Shares Outstanding/Shareholders

The Company's common shares are issued in registered form and the following information is taken from the records of the Company’s transfer agent, Computershare Trust Company of Canada, located in Vancouver, B.C. Canada. (510 Burrard Street, Vancouver, British Columbia V6C 3B9)

Common Share Description

All of the authorized common shares of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders. Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.

Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, if any, remaining after payments of all debts and liabilities. No shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.

Provisions as to the modification, amendment or variation of such shareholder rights or provisions are contained in the New Brunswick Business Corporations Act (“Act”). Unless the Act or the Company's Articles or Memorandum otherwise provide, any action to be taken by a resolution of the members may be taken by an ordinary resolution or by a vote of a majority or more of the shares represented at the shareholders' meeting.

The Company's Articles and the B.C. Securities Commission’s Corporations Act contain provisions that require a "special resolution" for effecting certain corporate actions. Such a "special resolution" requires a two-thirds vote of shareholders rather than a simple majority for passage. The principle corporate actions that require a "special resolution" include:

Changing the Company name;

Adding/changing/removing any restriction on the business or businesses that the Company may carry on;

Changing the maximum number of shares that the Company is authorized to issue;

Creating a new class of shares;

Changing the designation of all or any of its shares, and adding/changing/removing any rights/privileges/restrictions and conditions, including rights to accrued dividends, in respect of all or any of its shares, whether issued/unissued;

Changing the number of any class or series, whether issued or unissued, into a different number of shares of the same class or series or into the same or a different number of shares or other classes or series.

Dividing a class of shares, whether issued/unissued, into series and fixing the number of shares in each series and the rights/privileges/restrictions/conditions of that series;

Authorizing the Directors to divide any class of unissued shares into series and fixing the number of shares in each series and the rights/privileges/restrictions/conditions of that series;

Authorizing the Directors to change the rights/privileges/restrictions/conditions attached to unissued shares of any series;

Revoking/diminishing/enlarging any authority conferred under (h) and (i);

Increasing/decreasing the number of Directors or the minimum or maximum number of Directors, subject to other rules;

Subject to section 45(8), adding/changing/removing any other provision that is permitted by the Alberta Business Corporations Act to be set out in the Articles;

Amending the Articles of Incorporation;

Shareholder approval of an amalgamation agreement;

Continuance of the Company into another jurisdiction;

Disposing of all or substantially all of the Company's assets and liabilities; and

Dissolution of the Company.

There are no restrictions on the repurchase or redemption of common shares of the Company while there is any arrearage in the payment of dividends or sinking fund installments.

Share Purchase Warrants

Table No. 15 lists, as of 4/21/2008 Share Purchase Warrants outstanding, the dates the Share Purchase Warrants were issued, the exercise price, and the expiration dates of the Share Purchase Warrants.

Table No. 15

Share Purchase Warrants Outstanding

Effective Date of Issuance	Number of Share Purchase Warrants Originally Granted	Number of Share Purchase Warrants Still Outstanding		Expiration Date of Share Purchase Warrants
Effective Date of Issuance	Number of Share Purchase Warrants Originally Granted	Number of Share Purchase Warrants Still Outstanding	Exercise Price	Expiration Date of Share Purchase Warrants

May 31, 2001	2,450,000	2,190,724	$0.18	10/09/10
May 31, 2002	284,000	284,000	$1.00	10/09/10
May 31, 2003	246,273	246,273	$1.00	10/09/10
May 31, 2003	12,527	12,527	$1.00	10/09/10
October 9, 2003	1,182,973	1,182,973	$1.00	10/09/10
May 31, 2004	27,000	24,000	$1.00	08/15/10
May 31, 2005	143,335	143,335	$1.00	08/15/10
August 10, 2005	3,000	3,000	$1.00	08/15/10

9.A.6. Differing Rights

9.A.7.a. Subscription Warrants/Right

9.A.7.b. Convertible Securities/Warrants

--- No Disclosure Necessary ---

9.C. Stock Exchanges Identified

The common shares currently do not trade on any stock exchange.

Refer to Item 9.A.4.

ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

10.A.1. Authorized/Issued Capital. As of 4/21/2008, the authorized capital of the Company was 50,000,000 common shares without par value. As of 4/21/2008, there were 40,965,175 common shares issued and outstanding.

10.A.2. Shares Not Representing Capital.

10.A.3. Shares Held By Company.

--- Not Disclosure Necessary ---

10.A.4. Stock Options/Share Purchase Warrants

10.A.5. Stock Options/Share Purchase Warrants

--- Refer to Item 6.E. and Table No. 15. ---

10.A.6. History of Share Capital

During Fiscal 2007, ended May 31, 2007, the Company amended the expiry dates of 1,725,773 Share Purchase Warrants which can be converted into one common share of the Company at $1.00 per common share to 9 October 2010 from 9 October 2006. The Company amended the expiry dates of 2,190,724 Share Purchase Warrants which can be converted into one common share of the Company at $0.18 per share to 9 October 2010 from 9 October 2006. The Company also amended the expiry date of 170,335 Share Purchase Warrants which can be converted into one common share of the Company and one Share Purchase Warrant which entitles the holder to acquire an additional common share of the Company at a price of $1.00 per common share to 15 August 2010 from 15 August 2007.

During Fiscal 2006, ended May 31, 2006, the Company granted a total of 3,000 Share Purchase Warrants for cash proceeds of $1,241. Each Share Purchase Warrant entitles the holder to acquire an additional common share of the Company at a price of $1.00 per common share.

During Fiscal 2005, ended May 31, 2005, the Company granted 143,335 Share Purchase Warrants for cash proceeds of $57,334. Each Share Purchase Warrant entitles the holder to acquire an additional common share of the Company at a price of $1.00 per common share. These Share Purchase Warrants were sold pursuant to a private placement in Canada. During the year ended May 31, 2005, the Company also received cash in the amount of $1,310 as share subscriptions received in advance related to the exercise of 7,278 Share Purchase Warrants.

During Fiscal 2004, ended May 31, 2004, the Company granted 27,000 Share Purchase Warrants for cash proceeds of $10,980. These Share Purchase Warrants were sold pursuant to a private placement in Canada. Any U.S. investors who purchased these Share Purchase Warrants did so under an exemption pursuant to Rule 506. During Fiscal 2004, the Company also received $45,360 related to the exercise of 251,998 Share Purchase Warrants for which the Company had not issued the corresponding 251,998 common shares at May 31, 2004. On October 30, 2003, the Company announced the completion of the acquisition of the Process. By the terms of the acquisition, the Company issued 20,000,000 common shares to the owners of the Process for 100% ownership of the Process.

During Fiscal 2003, ended May 31, 2003, the Company granted 246,273 Share Purchase Warrants for cash proceeds $98,509. 96,700 of the 246,273 Share Purchase Warrants were issued in settlement of related party debt in the amount of $38,680. These Share Purchase Warrants were sold pursuant to a private placement in Canada. Any U.S. investors who purchased these units did so under an exemption pursuant to Rule 506.

During Fiscal 2002, ended May 31, 2002, the Company granted 284,000 Share Purchase Warrants for cash proceeds of $113,600. The Share Purchase Warrants were issued pursuant to a private placement in Canada, which took place during calendar year 2000. There were no U.S. residents who took part in this financing. During Fiscal 2002, the Company also received $24,900 related to the exercise of 249,000 stock options and $162,302 related to the exercise of 1,346,125 Share Purchase Warrants.

During Fiscal 2001, ended May 31, 2001, the Company granted 1,192,500 Share Purchase Warrants for cash proceeds of $477,000. These Share Purchase Warrants were issued pursuant to a private placement, which took place in Canada during calendar year 2000. No U.S. residents took part in this financing. During Fiscal 2001, the Company also received $8,000 related to the exercise of 50,000 Share Purchase Warrants.

During Fiscal 2000, ended May 31, 2000, the Company completed two private placement financings. The first consisted of 1,000,000 units. Each unit consisted of one common share and one Share Purchase Warrant entitling the holder to purchase an additional share at a price of $0.10. The second consisted of 2,500,000 units. Each unit consisted of one common share and one Share Purchase Warrant entitling the holder to purchase an additional share at a price of $0.12. These units were sold pursuant to a private placement in Canada. Any U.S. investors who purchased these units did so under an exemption pursuant to Rule 506.

10.A.7. Resolutions/Authorizations/Approvals

--- Not Disclosure Necessary ---

10.B. Memorandum and Articles of Association

According to the Company’s Articles of Continuance (Section), “There are no restrictions on the business of the Company.”

According to Part 15 – DISCLOSURE OF INTEREST OF DIRECTORS – of the Articles of the Company, Sections 15.1 and 15.2:

A Director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with the Company or who holds any office or possesses any property, directly or indirectly, where a duty or interest might be created to conflict with his duty or interest as a Director, shall declare the nature and extent of his interest in the contract or transaction or of the conflict or potential conflict with his duty and interest as a Director in accordance with the provisions of The Act.

A Director shall not vote in respect of the approval of any contract or transaction with the Company in which he is interested and if he shall do so his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which the vote is taken. This Article and Article 15.1 shall not apply in circumstances where a Director is, under the provisions of The Act, deemed not to be interested in a proposed contract or transaction.

The common Shares of the Company carry and are subject to the following rights, privileges, restrictions and conditions:

The holders of Common Shares are entitled to receive notice of any meeting of the shareholders of the Company and to attend and vote thereat except those meetings where only holders of a specified class or particular series of shares are entitled to vote and each holder thereof shall be entitled to one vote per share in person or by proxy.

Subject to the rights, privileges, restrictions and conditions attaching to any other shares of the Company, the holders of the Common Shares are entitled to receive any dividends declared and paid by the Company.

Subject to the rights, privileges, restrictions and conditions attaching to any other shares of the Company, in the event of the liquidation, dissolution or winding-up of the Company, the holders of the Common Shares are entitled to receive the remaining property of the Company after payment of all of the Company’s liabilities.

There are no restrictions on the repurchase or redemption of common shares of the Company while there is any arrearage in the payment of dividends or sinking fund installments.

There is no liability to further capital calls by the Company.

There are no provisions discriminating against any existing or prospective holder of securities as a result of such shareholder owning a substantial number of shares.

The rights of holders of the Company’s stock can only be altered by a Special Shareholders’ meeting.

Subject to Article 9.1 and to The Act, the first annual general meeting shall be held within 15 months from the date of incorporation and the following annual general meetings shall be held once in every calendar year at a time, not being more than 13 months after the holding of the last preceding annual general meeting, and at a place as the Directors shall appoint. In default of the meeting being held, the meeting shall be called by any two members in the same manner as nearly as possible as that in which meetings are to be called by the Directors.

The Directors may, whenever they think fit, convene a general meeting. A general meeting, if requisitioned in accordance with The Act, shall be convened by the Directors or, if not convened by the Directors, may be convened by the requisitionists as provided in The Act.

Not less than 21 days’ notice of any general meeting specifying the time and place of meeting and in case of special business, the general nature of that business shall be given in the manner mentioned in Article 22, or in such other manner, if any, as may be prescribed by ordinary resolution whether previous notice has been given or not, to any person as may by law or under these Articles or other regulations of the Company entitled to receive the notice from the Company. But the accidental omission to give notice of any meeting to, or the non-receipt of any notice, by any person shall not invalidate any proceedings at that meeting.

Persons entitled to notice of a general meeting may waive or reduce the period of notice convening the meeting, by unanimous consent in writing, and may give such waiver before, during or after the meeting.

There are no limitations on the rights to own securities.

There is no provision of the Company’s articles of association, charter or bylaws that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries).

Shareholder ownership must be disclosed to the British Columbia Securities Commission by any shareholder who owns more than 10% of the Company’s common stock.

10.C. Material Contracts

There are no material contracts other than those entered into through the normal course of business.

10.D. Exchange Controls

Except as discussed in ITEM #10.E., the Company is not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of the common shares. There are no limitations on the right of non-Canadian owners to hold or vote the common shares imposed by Canadian federal or provincial law or by the charter or other constituent documents of the Company.

The Investment Canada Act (the "IC Act") governs acquisitions of Canadian business by a non-Canadian person or entity. The IC Act requires a non-Canadian (as defined in the IC Act) making an investment to acquire control of a Canadian business, the gross assets of which exceed certain defined threshold levels, to file an application for review with the Investment Review Division of Industry Canada. The IC Act provides, among other things, for a review of an investment in the event of acquisition of "control" in certain Canadian businesses in the following circumstances:

If the investor is a non-Canadian and is a national of a country belonging to the North American Free Trade Agreement ("NAFTA") and/or the World Trade Organization ("WTO") ("NAFTA or WTO National"), any direct acquisition having an asset value exceeding $179,000,000 is review-able . This amount is subject to an annual adjustment on the basis of a prescribed formula in the IC Act to reflect inflation and real growth within Canada. This threshold level does not apply in certain sections of Canadian industry, such as uranium, financial services (except insurance), transportation services and cultural services (i.e. the publication, distribution or sale of books, magazines, periodicals (other than printing or typesetting businesses), music in print or machine readable form, radio, television, cable and satellite services; the publication, distribution, sale or exhibition of film or video recordings on audio or video music recordings), to which lower thresholds as prescribed in the IC Act are applicable.

If the investor is a non-Canadian and is not a NAFTA or WTO National, any direct acquisition having an asset value exceeding $5,000,000 and any indirect acquisition having an asset value exceeding $50,000,000 is reviewable .

If the investor is a non-Canadian and is NAFTA or WTO National, an indirect acquisition of control is review-able if the value of the assets of the business located in Canada represents more than 50% of the asset value of the transaction or the business is involved in uranium, financial services, transportation services or cultural services.

Finally, certain transactions prescribed in the IC Act are exempted from review altogether.

In the context of the Company, in essence, three methods of acquiring control of a Canadian business are regulated by the IC Act: (i) the acquisition of all or substantially all of the assets used in carrying on business in Canada; (ii) the acquisition, directly or indirectly, of voting shares of a Canadian corporation carrying on business in Canada; or (iii) the acquisition of voting shares of an entity which controls, directly or indirectly, another entity carrying on business in Canada.

An acquisition of a majority of the voting shares of a Canadian entity, including a corporation, is deemed to be an acquisition of control under the IC Act. However, under the IC Act, there is a re-butt-able presumption that control is acquired if one-third of the voting shares of a Canadian corporation or an equivalent undivided interest in the voting shares of such corporation are held by a non-Canadian person or entity.

An acquisition of less than one-third of the voting shares of a Canadian corporation is deemed not to be an acquisition of control. An acquisition of less than a majority, but one-third or more, of the voting shares of a Canadian corporation is presumed to be an acquisition of control unless it can be established that, on the acquisition, the Canadian corporation is not, in fact, controlled by the acquirer through the ownership of voting shares. For partnerships, trusts, joint ventures or other unincorporated Canadian entities, an acquisition of less than a majority of the voting interests is deemed not to be an acquisition of control.

In addition, if a Canadian corporation is controlled by a non-Canadian, the acquisition of control of any other Canadian corporation by such corporation may be subject to the prior approval of the Investment Review Division, unless it can be established that the Canadian corporation is not in fact controlled by the acquirer through the ownership of voting shares.

Where an investment is review-able under the IC Act, the investment may not be implemented unless it is likely to be of net benefit to Canada. If an applicant is unable to satisfy the Minister responsible for Industry Canada that the investment is likely to be of net benefit to Canada, the applicant may not proceed with the investment. Alternatively, an acquirer may be required to divest control of the Canadian business that is the subject of the investment.

In addition to the foregoing, the IC Act provides for formal notification under the IC Act of all other acquisitions of control by Canadian businesses by non-Canadian investors. The notification process consists of filing a notification within 30 days following the implementation of an investment, which notification is for information, as opposed to review, purposes.

10.E. Taxation

Canadian Federal Income Tax Considerations

The following summary discusses only the Canadian federal income tax considerations generally applicable to a holder (a "Holder") of one or more common shares of the Company who, for the purposes of the Income Tax Act (Canada) (the "Tax Act") is a non-resident of Canada who holds common shares as capital property. The summary deals with the provisions of the Tax Act in force on 12/31/1999. It does not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules. Holders and prospective holders should consult their own tax advisers with respect to their particular circumstances.

Dividends

A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the acco unt of the Holder.

Disposition of Common Shares

A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company.

The Company is not listed on a prescribed stock exchange under the Tax Act, and will not be on a prescribed stock exchange if the Company obtains a listing on the Pink Sheets in the United States. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.

United States Taxation

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Company's common shares is a capital asset in the hands of the U.S. Taxpayer.

For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company's common shares. A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares.

Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return.

Holders and prospective holders should therefore consult their own tax advisers with respect to their particular circumstances.

10.F. Dividends and Paying Agents

The Company has not declared any dividends on its common shares for the last five years and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.

Notwithstanding the aforementioned: the Company is unaware of any dividend restrictions; has no specific procedure for the setting of the date of dividend entitlement; but might expect to set a record date for stock ownership to determine entitlement; has no specific procedures for non-resident holders to claim dividends, but might expect to mail their dividends in the same manner as resident holders. The Company has not nominated any financial institutions to be the potential paying agents for dividends in the United States.

10.G. Statement by Experts

The Company’s auditors for its financial statements for the preceding year was James Stafford, Chartered Accountants, located at Suite 350 – 1111 Melville Street, Vancouver, British Columbia, Canada V6E 3V6. The Company’ previous auditor was Amisano Hanson, Chartered Accountants, located at Suite 604, 750 West Pender Street, Vancouver, B.C. Canada V6C 2T7. The audit reports for the related years are included with the related financial statements in this Registration Statement with their each auditor’s consent.

10.H. Document on Display

All of the documents referred to in this Registration Statement may be inspected at the head office of the Company, the address of which is indicated on the Cover Sheet of this Registration Statement.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--- No Disclosure Necessary ---

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A. Debt Securities --- No Disclosure Necessary ---

12.B. Warrants and Rights --- No Disclosure Necessary ---

12.C. Other Securities --- No Disclosure Necessary ---

12.D. American Depository Shares -- No Disclosure Necessary ---

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

--- No Disclosure Necessary ---

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

HOLDERS AND USE OF PROCEEDS

--- No Disclosure Necessary ---

ITEM 15. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report ("Date of Evaluation"), an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the CEO and the CFO have concluded that the Company's disclosure controls and procedures contained material weaknesses. Management determined that the weaknesses in internal control related to the preparation and filing of its financial statements and information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. These weaknesses have resulted in such filings being filed a fter the required deadlines.

Notwithstanding the foregoing, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Company’s disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective of ensuring that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is communicated to management to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s management has employed a framework consistent with Exchange Act Rule 13a-15(c), to evaluate the Company’s internal control over financial reporting described below. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2008, based on the control criteria established in a report entitled Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). That framework defines a material weakness as a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The Company did not maintain an effective control environment based on the criteria established in the COSO framework. Controls were not effective primarily due to a lack of procedures and controls related to the timely preparation and filing of regulatory filings.

Remediation of the Material Weaknesses in Internal Control over Financial Reporting

The Company is addressing its material weaknesses in its internal controls over financial reporting by:

Hiring a new Chief Financial Officer in August 2008; and

Developing and implementing formal procedures and controls related to the timely preparation and filing of its required regulatory filings.

Management is in the process of implementing these procedures and internal controls and expects these to be in place and functioning by October 15, 2009.

Attestation Report of the Registered Accounting Firm.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this Form 20-F Annual Report.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTS

Mr. Chris Tay serves as the Audit Committee Financial Expert. Mr. Tay is a Certified General Accountant with financial management experience with both public and private companies. He is not considered to be “independent” from management as he currently serves as Chief Financial Officer of the Company.

ITEM 16B. CODE OF ETHICS

The Company does not currently have a code of ethics. However, management is studying the adaptation of such a code in the future.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table discloses the fees billed to the Company by its independent auditors, James Stafford, Chartered Accountants, for fiscal 2008 ended May 31, 2008, fiscal 2007 ended May 31, 2007, and for fiscal 2008 ended May 31, 2006.

	Fiscal Year Ended May 31, 2008	Fiscal Year Ended May 31, 2007	Fiscal Year Ended May 31, 2008

Audit Fees	$ 11,562	$9,603	$ 13,298
Audit Related Fees	-	-	-
Tax Fees	-	-	-
All Other Fees	$ 4,564	-	-
TOTAL	$ 16,126	$ 9,603	$ 13,298

Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable

Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not Applicable

PART III

ITEM 17. FINANCIAL STATEMENTS

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with generally accepted auditing standards in Canada and the United States.

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Registration Statement. The audit report of James Stafford, Chartered Accountants, is included herein immediately preceding the financial statements and schedules.

Audited Financial Statements

PowerNova Technologies Corporation - 2008

Auditor’s Report dated August 26, 2008.

Balance Sheets as at May 31, 2008 and 2007.

Statements of Operations and Deficit for the Years Ended May 31, 2008, 2007 and 2006.

Statements of Cash Flows for the Years Ended May 31, 2008, 2007 and 2006.

Notes to the Financial Statements

PowerNova Technologies Corporation - 2007

Auditor’s Report dated February 15, 2008.

Balance Sheets as at May 31, 2007 and 2006.

Statements of Operations and Deficit for the Years Ended May 31, 2007, 2006 and 2005.

Statements of Cash Flows for the Years Ended May 31, 2007, 2006 and 2005.

Notes to the Financial Statements

Unaudited Interim Financial Statements

Not Applicable

ITEM 18. FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to Item 17.

ITEM 19. EXHIBITS

1.1

Certificate of Incorporation dated 10/06/86 ⁽¹⁾

1.2

Memorandum dated 9/29/86 ⁽¹⁾

1.3

Special Resolution dated 7/22/87 ⁽¹⁾

1.4

Articles of The Company ⁽¹⁾

1.5

Special Resolution dated 10/23/02 ⁽¹⁾

1.6

Schedule “A” to Special Resolution ⁽¹⁾

1.7

Certificate of Change of Name dated 9/11/03 ⁽¹⁾

4.1

Copy of Tblisi Agreement dated April 21, 2000 ⁽²⁾

4.2

Copy of Share Transfer Agreement dated June 21, 2001 (previously filed) ⁽²⁾

PowerNova Technologies Corporation

(A Development Stage Company)

Financial Statements

(Expressed in Canadian dollars)

31 May 2008

JAMES STAFFORD

James Stafford

Chartered Accountants*

Suite 350 – 1111 Melville Street

Vancouver, British Columbia

Canada V6E 3V6

Telephone +1 604 669 0711

Facsimile +1 604 669 0754

*Incorporated professional

Independent Auditors’ Report

To the Shareholders of

PowerNova Technologies Corporation

(A Development Stage Company)

We have audited the balance sheets of PowerNova Technologies Corporation (the “Company”) as at 31 May 2008 and 2007, and the related statements of operations and deficit, cash flows and changes in shareholders’ deficiency for the years ended 31 May 2008, 2007 and 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at 31 May 2008 and 2007, and the results of its operations, cash flows and changes in shareholders’ deficiency for the years ended 31 May 2008, 2007 and 2006 in accordance with Canadian generally accepted accounting principles.

/s/ James Stafford

Vancouver, British Columbia, Canada

Chartered Accountants

26 August 2008

Comments by Independent Registered Chartered Accountants for United States of America Readers on Canada – United States of America Reporting Differences

The standards of the Public Company Accounting Oversight Board (United States of America) requires the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America), our report to the shareholders dated 26 August 2008 is expressed in accordance with Canadian reporting standards, which do not permit a reference to such conditions and events in the report when these are adequately disclosed in the financial statements.

/s/ James Stafford

Vancouver, British Columbia, Canada

Chartered Accountants

26 August 2008

PowerNova Technologies Corporation

(A Development Stage Company)

Balance Sheets

(Expressed in Canadian Dollars)

As at 31 May

	2008	2007
	$	$

Assets

Current
Cash and cash equivalents	209	-
Amounts receivable	1,632	569

	1,841	569

Property, plant and equipment (Note 5)	731	966

	2,572	1,535

Liabilities

Current
Bank indebtedness	-	1
Accounts payable and accrued liabilities (Notes 6 and 12)	208,754	198,143
Due to related parties (Note 7)	189,182	748,304

	397,936	946,448
Shareholders’ deficiency
Capital stock (Note 9)
Authorized
50,000,000 of common shares without par value
Issued and outstanding
2008 – 40,965,175 common shares
2007 – 40,965,175 common shares	5,591,315	5,591,315
Contributed surplus (Note 9)	629,615	24,000
Warrants (Note 9)	68,175	68,175
Share subscriptions received in advance (Note 9)	46,670	46,670
Deficit, accumulated prior to the development stage	(4,446,180)	(4,446,180)
Deficit, accumulated during the development stage	(2,284,959)	(2,228,893)

	(395,364)	(944,913)

	2,572	1,535

Nature and Continuance of Operations (Note ), Commitments (Note 13) and

Reconciliation of Canadian and United States Generally Accepted Accounting Principles (Note 15)

On behalf of the Board:

Stuart Lew_______________________ Director

Chris Tay____________________ Diirector

Stuart Lew

Chris Tay

PowerNova Technologies Corporation

(A Development Stage Company)

Statements of Operations and Deficit

(Expressed in Canadian Dollars)

	Cumulative amounts from the date of inception on 6 October 1986 to 31 May 2008 (Unaudited)		For the year ended 31 May 2008		For the year ended 31 May 2007		For the year ended 31 May 2006
		$		$		$		$

Expenses
General and administrative (Schedule 1)		2,293,931		56,066		48,809		213,827

Net loss before other item		(2,293,931)		(56,066)		(48,809)		(213,827)

Other item
Foreign exchange loss		(489)		-		-		-
Write-off of accounts payable (Notes 6 and 12)		159,085		-		7,756		2,979
Write-off of accounts receivable		(149,624)		-		-		-

Net loss for the year		(2,284,959)		(56,066)		(41,053)		(210,848)

Deficit, accumulated during the development stage, beginning of year		-		(2,228,893)		(2,187,840)		(1,976,992)

Deficit, accumulated during the development stage, end of year		(2,284,959)		(2,284,959)		(2,228,893)		(2,187,840)

Basic and diluted loss per share (Note 10)				(0.001)		(0.001)		(0.005)

Weighted average number of common shares outstanding (Note 10)				40,965,175		40,965,175		40,965,175

PowerNova Technologies Corporation

(A Development Stage Company)

Statements of Cash Flows

(Expressed in Canadian Dollars)

	Cumulative amounts from the date of inception on 6 October 1986 to 31 May 2008 (Unaudited)		For the year ended 31 May 2008		For the year ended 31 May 2007		For the year ended 31 May 2006
		$		$		$		$

Cash flows from operating activities
Net loss for the year		(6,731,139)		(56,066)		(41,053)		(210,848)
Adjustments to reconcile loss to net cash used by operating activities
Amortization		38,506		235		317		428
Contributions to capital by related parties (Notes 7, 8, 9 and 12)		629,615		605,615		24,000		-
Research and development		216,230		-		-		-
Write-off of accounts receivable		149,624		-		-		-
Write-off of accounts payable (Notes 6 and 12)		(159,085)		-		(7,756)		(2,979)
Changes in operating assets and liabilities
(Increase) decrease in amounts receivable		(151,256)		(1,063)		(569)		1,191
Increase in accounts payable		367,839		10,611		10,700		21,651
Increase (decrease) in due to related parties (Notes 7, 8, 9 and 12)		189,182		(559,122)		14,060		187,891

		(5,450,484)		210		(301)		(2,666)

Cash flows used in investing activities
Increase in advances		(216,230)		-		-		-
Purchase of property, plant and equipment		(39,237)		-		-		-

		(255,467)		-		-		-

Cash flows from financing activities
Share subscriptions received in advance for cash		46,670		-		-		-
Issuance of common shares for cash		5,591,315		-		-		-
Share purchase warrants granted		68,175		-		-		1,241

		5,706,160		-		-		1,241

Increase (decrease) in cash and cash equivalents		209		210		(301)		(1,425)

Cash and cash equivalents (bank indebtedness), beginning of year		-		(1)		300		1,725

Cash and cash equivalents (bank indebtedness), end of year		209		209		(1)		300

Supplemental Disclosures with Respect to Cash Flows (Note 12)

PowerNova Technologies Corporation

(A Development Stage Company)

Statements of Changes in Shareholders’ Deficiency

(Expressed in Canadian Dollars)

	Number of shares issued		Share capital		Contributed surplus and share subscription received in advance		Share purchase warrants		Deficit accumulated prior to the development stage		Deficit accumulated during the development stage		Total Shareholders’ deficiency
				$		$		$		$		$		$

Balance at 31 May 1999		14,060,777		4,285,524		-		-		(4,593,630)		-		(308,106)
Shares issued for cash ($0.10 per share)		1,000,000		100,000		-		-		-		-		100,000
Shares issued for cash ($0.12 per share)		2,500,000		275,000		-		-		-		-		275,000
Stock options exercised ($0.10 per share)		451,000		45,100		-		-		-		-		45,100
Net income (loss) for the year		-		-		-		-		141,975		(67,815)		74,160

Balance at 31 May 2000		18,011,777		4,705,624		-		-		(4,451,655)		(67,815)		186,154
Share purchase warrants granted		-		-		-		477,000		-		-		477,000
Share purchase warrants exercised ($0.16 per share)		50,000		8,000		-		-		-		-		8,000
Net loss for the year		-		-		-		-		5,475		(596,006)		(590,531)

Balance at 31 May 2001		18,061,777		4,713,624				477,000		(4,446,180)		(663,821)		80,623
Cancellation of common shares		(417,500)		-		-		-		-		-		-
Share purchase warrants granted		-		-		-		113,600		-		-		113,600
Stock options exercised ($0.10 per share)		249,000		24,900		-		-		-		-		24,900
Share purchase warrants exercised ($0.10 per share)		1,000,000		100,000		-		-		-		-		100,000
Share purchase warrants exercised ($0.18 per share)		346,125		62,302		-		-		-		-		62,302
Net loss for the year		-		-		-		-		-		(358,654)		(358,654)

Balance at 31 May 2002		19,239,402		4,900,826		-		590,600		(4,446,180)		(1,022,475)		22,771
Share purchase warrants granted		-		-		-		59,829		-		-		59,829
Share purchase warrants granted		-		-		-		38,680		-		-		38,680
Net loss for the year		-		-		-		-		-		(263,588)		(263,588)

Balance at 31 May 2003		19,239,402		4,900,826		-		689,109		(4,446,180)		(1,286,063)		(142,308)
Share purchase warrants granted		-		-		-		10,980		-		-		10,980
Share subscription received in advance		-		-		45,360		-		-		-		45,360
Shares issued for intellectual property (Note 11)		20,000,000		-		-		-		-		-		-
Share purchase warrants exercised ($0.40 per share)		1,725,773		690,489		-		(690,489)		-		-		-
Net loss for the year		-		-		-		-		-		(469,395)		(469,395)

Balance at 31 May 2004		40,965,175		5,591,315		45,360		9,600		(4,446,180)		(1,755,458)		(555,363)
Share purchase warrants granted (Note )		-		-		-		57,334		-		-		57,334
Share subscription received in advance (Note 7)		-		-		1,310		-		-		-		1,310
Net loss for the year		-		-		-		-		-		(221,534)		(221,534)

Balance at 31 May 2005		40,965,175		5,591,315		46,670		66,934		(4,446,180)		(1,976,992)		(718,253)
Share purchase warrants granted (Note 7)		-		-		-		1,241		-		-		1,241
Share subscription received in advance (Note 7)		-		-		-		-		-		-		-
Net loss for the year		-		-		-		-		-		(210,848)		(210,848)

Balance at 31 May 2006		40,965,175		5,591,315		46,670		68,175		(4,446,180)		(2,187,840)		(927,860)
Contributed services by related party (Notes 6, 7 and 10)		-		-		24,000		-		-		-		24,000
Net loss for the year		-		-		-		-		-		(41,053)		(41,053)

Balance at 31 May 2007		40,965,175		5,591,315		70,670		68,175		(4,446,180)		(2,228,893)		(944,913)
Contributed services by related party (Notes 8, 9 and 12)		-		-		605,615		-		-		-		605,615
Net loss for the year		-		-		-		-		-		(56,066)		(56,066)

Balance at 31 May 2008		40,965,175		5,591,315		676,285		68,175		(4,446,180)		(2,284,959)		(395,364)

PowerNova Technologies Corporation

(A Development Stage Company)

Schedule 1 – General and Administrative Expenses

(Expressed in Canadian Dollars)

	Cumulative amounts from the date of inception on 6 October 1986 to 31 May 2008 (Unaudited)		For the year ended 31 May 2008		For the year ended 31 May 2007		For the year ended 31 May 2006
		$		$		$		$

Advertising and promotion		10,766		-		-		-
Amortization		38,506		235		317		428
Bank charges and interest		4,387		133		216		242
Consulting fees		21,514		-		-		-
Consulting fees to related parties (Note 8)		1,212,210		-		-		188,000
Filing and transfer agent fees		67,684		-		3,229		-
Legal and accounting fees		305,897		31,384		20,425		24,430
Management fees (Notes 8, 9 and 12)		36,000		18,000		18,000		-
Office and administration		38,735		-		-		-
Rent (Notes 8, 9 and 12)		106,087		6,000		6,000		-
Research and development		216,230		-		-		-
Salaries and benefits		195,747		-		-		-
Telephone		29,329		314		622		727
Travel and automobile		10,839		-		-		-

		2,293,931		56,066		48,809		213,827

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Nature and Continuance of Operations

PowerNova Technologies Corporation (the “Company”) was incorporated on 6 October 1986 in British Columbia, Canada. The Company’s shares were listed on the TSX Venture Exchange and the Company was suspended from trading on 20 June 2003.

The Company is in the development stage and commenced its current development stage during the year ended 31 May 2000. The Company is in the business of acquiring and developing hydrogen production technology.

The Company’s financial statements as at 31 May 2008 and for the year then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $56,066 for the year ended 31 May 2008 (31 May 2007 – loss of $41,053, 31 May 2006 – loss of $210,840) and has working capital deficiency of $396,095 at 31 May 2008 (31 May 2007 – $945,879).

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year ended 31 May 2009. However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related 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.

Significant Accounting Policies

The accounting policies of the Company are in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). These policies conform, in all material respects, with accounting principles generally accepted in the United States of America (“United States GAAP”), except as described in Note 15. Outlined below are those policies considered particularly significant.

Basis of presentation

The financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles applicable to development stage enterprises, and are expressed in Canadian dollars. The Company’s fiscal year end is 31 May.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Property, plant and equipment

Property, plant and equipment are recorded at cost and are amortized using the declining balance method at the following annual rate, with half the rate being applied in the year of acquisition:

Computer equipment	30%	declining balance
Equipment	20%	declining balance

Income taxes

Future income tax assets and liabilities are determined based on temporary differences between the accounting and the tax bases of the assets and liabilities and for loss carry forwards, and are measured using the tax rates expected to apply when these differences reverse. A valuation allowance is recorded against any future income tax asset if it is not more likely than not that the asset will be realized. As at 31 May 2008, the Company’s net future income tax assets are fully offset by a valuation allowance.

Loss per share

Basic loss per share is calculated based on the weighted average number of shares outstanding during the period. The treasury stock method is used for determining the dilutive effect of options and warrants issued in calculating diluted earnings per share. Under this method, the dilutive effect on loss per share is recognized on the use of the proceeds that could be obtained upon the exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. For the years presented, this calculation proved to be anti-dilutive.

Foreign currency translation

The Company’s functional and reporting currency is in Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange in effect at the balance sheet date. Non-monetary assets and liabilities are translated into Canadian dollars at their applicable historical rates. Revenues and expenses are translated at rates prevailing at the date of the transaction except for amortization, which is translated at historical rates. Exchange gains and losses from the translation of foreign currencies are recognized in the period in which they occur.

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Recent Accounting Pronouncements

In June 2007, the Canadian Institute of Chartered Accountants (“CICA”) issued changes to Section 1400, “General Standards of Financial Statement Presentation”. Section 1400 has been amended to include requirements to assess and disclose an entity’s ability to continue as a going concern. Management shall make an assessment of an entity’s ability to continue as a going concern. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast doubt upon the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. When financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern. Sectio n 1400 is effective for interim and annual financial statements relating to fiscal years beginning on or after 1 January 2008. Earlier adoption is encouraged. The adoption of this standard will have no impact on the Company’s operating results or financial position and management expects that there will not be a material impact on the Company’s financial statement disclosure.

Comparative figures

Certain comparative figures have been adjusted to conform to the current period’s presentation.

Changes in Accounting Policies and Presentation

Financial Instrument Standards

Effective 1 June 2006, the Company adopted the new CICA Handbook Section 3855, “Financial Instruments – Recognition and Measurement”; Section 3865, “Hedges”; Section 1530, “Comprehensive Income”; and Section 3861, “Financial Instruments – Disclosure and Presentation” (the “Financial Instrument Standards”). Effective 1 June 2007, the Company adopted the new CICA Handbook Section 3862, “Financial Instruments – Disclosures” and Section 3863, “Financial Instruments – Presentation” which replace existing Section 3861, “Financial Instruments – Disclosure and Presentation”, revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosu res about the nature and extent of risks arising from financial instruments and how the entity manages those risks. These new standards have been adopted on a prospective basis with no restatement to prior period financial statements.

The Financial Instrument Standards require that adjustments to the carrying value of financial assets and liabilities be recorded within retained earnings or, in the case of available-for-sale assets, accumulated other comprehensive income on transition.

The principal changes resulting from the adoption of the Financial Instrument Standards are as follows:

Financial Assets and Financial Liabilities

Under the new standards, financial assets and liabilities are initially recognized at fair value and are subsequently measured based on their classification as held-to-maturity, loans and receivables, available-for-sale or held-for-trading, as described below. The classification is not changed subsequent to initial recognition.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Held-to-Maturity and Loans and Receivables

Financial instruments that have a fixed maturity date, where the Company intends and has the ability to hold to maturity, are classified as held-to-maturity and measured at amortized cost using the effective interest rate method. Loans and receivables are measured at amortized cost using the effective interest method.

Available-for-Sale

Financial assets classified as available-for-sale are carried at fair value (where determinable based on market prices of actively traded securities) with changes in fair value recorded in other comprehensive income. Available-for-sale investments are written down to fair value through earnings whenever it is necessary to reflect an other-than-temporary impairment. Transaction costs that are directly attributable to the acquisition or issue of a financial asset or financial liability are added to its fair value.

Held-for-Trading

Financial assets and financial liabilities that are purchased and incurred with the intention of generating profits in the near term are classified as held-for-trading. These instruments are measured at fair value with the change in the fair value recognized in income.

Derivatives and Hedge Accounting

The Company does not hold or have any exposure to derivate instruments and accordingly is not impacted by CICA Handbook Section 3865, “Hedges”.

Comprehensive Income

Comprehensive income is composed of the Company’s earnings and other comprehensive income. Other comprehensive income includes unrealized gains and losses on available-for-sale investments, foreign currency translation gains and losses on the net investment in self-sustaining operations and changes in the fair market value of derivate instruments designated as cash flow hedges, all net of income taxes. Cumulative changes in other comprehensive income are included in accumulated other comprehensive income which is presented (if applicable) as a new category in shareholders’ equity.

Capital Disclosures

Effective 1 June 2007, the Company adopted the new CICA Handbook Section 1535, “Capital Disclosures” which requires the disclosure of both qualitative and quantitative information that provides users of financial statements with information to evaluate the Company’s objectives, policies and procedures for managing capital.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and due to related parties. The carrying value of the financial instruments is approximate fair value due to their short term to maturity. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not utilize derivative instruments in the management of foreign exchange, commodity price or interest rate market risks.

Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risk arising from these financial instruments.

The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Property, Plant and Equipment

		Accumulated	Net book value
	Cost	amortization	2008	2007
	$	$	$	$

Computer equipment	5,366	(5,072)	294	420
Equipment	2,548	(2,111)	437	546

	7,914	(7,183)	731	966

During the year ended 31 May 2008, total additions to property, plant and equipment were $Nil (31 May 2007 - $Nil).

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year.

During the year ended 31 May 2008, the Company wrote off accounts payable balances in the amount of $Nil (31 May 2007 - $7,756, 31 May 2006 - $2,979) related primarily to its prior business that had remained unpaid for several years without any claims being made by these creditors against the Company. Management does not consider that these amounts are payable although there is no assurance that a formal claim will not be made against the Company for some or all of these balances in the future (Note 12).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Due to Related Parties

Amounts due to related parties are non-interest bearing, unsecured and have no fixed terms of repayment.

As at 31 May 2008, the amounts due to related parties include $189,182 (31 May 2007 - $748,304, 31 May 2006 - $734,244) due to shareholders of the Company and/or officers-directors of the Company.

During the year ended 31 May 2008, shareholders and/or director-officers of the Company made contributions to capital by agreeing to forgive a balance owed to them by the Company at 31 May 2007 of $581,615 (Notes 8, 9 and 12).

Related Parties Transactions

During the year ended 31 May 2008, the Company entered into the following transactions with related parties:

Paid or accrued consulting fees of $Nil (31 May 2007 - $Nil, 31 May 2006 - $52,000) to a director of the Company.

ii.

Paid or accrued consulting fees of $Nil (31 May 2007 - $Nil, 31 May 2006 - $68,000) to a director of the Company.

iii.

Paid or accrued consulting fees of $Nil (31 May 2007 - $Nil, 31 May 2006 - $68,000) to a director of the Company.

The amounts charged to the Company for the services provided have been determined by negotiation among the Company and the related parties, and in certain cases, are covered by signed agreements. It is the position of the management of the Company that these transactions were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the related parties.

During the year ended 31 May 2008, officers and directors of the Company made contributions to capital for management fees in the amount of $18,000 (31 May 2007 - $18,000, 31 May 2006 - $Nil) and rent in the amount of $6,000 (31 May 2007 - $6,000, 31 May 2006 - $Nil) (Notes 9 and 12).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

Capital Stock

Authorized

The total authorized capital is 50,000,000 common shares without par value.

ii.

Issued and outstanding

The total issued and outstanding capital stock is 40,965,175 common shares without par value.

iii.

Share subscriptions received in advance

As at 31 May 2008 and 2007, the Company had received $46,670 related to the exercise of 259,276 share purchase warrants for which the Company had not issued the corresponding 259,276 common shares at 31 May 2008 (Notes 9.v, 10 and 13).

iv.

Stock options

There are no stock options issued and outstanding as at 31 May 2008.

Share purchase warrants

The following share purchase warrants were outstanding at 31 May 2008:

	Exercise price	Number of warrants	Expiry Date
	$

Warrants	1.00	170,335	15 August 2010
Warrants	1.00	1,725,773	9 October 2010
Warrants	0.18	2,190,724	9 October 2010

		4,086,832

The 1,725,773 share purchase warrants expiring on 9 October 2010 can be converted into one common share of the Company at $1.00 per share. The 2,190,724 share purchase warrants expiring on 9 October 2010 can be converted into one common share of the Company at $0.18 per share. During the year ended 31 May 2007, the Company amended the expiry dates of these share purchase warrants to 9 October 2010 from 9 October 2006.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

The 170,335 share purchase warrants expiring on 15 August 2010 can be converted into one common share of the Company and one share purchase warrant which entitles the holder to acquire an additional common share of the Company at a price of $1.00 per common share. During the year ended 31 May 2007, the Company amended the expiry date of these share purchase warrants outstanding to 15 August 2010 from 15 August 2007.

The 1,725,773 and 2,190,724 share purchase warrants outstanding at 31 May 2008 excludes share purchase warrants which were exercised prior to 31 May 2008 but the corresponding common shares were not issued by the Company at 31 May 2008. The funds received by the Company related to the exercise of these 259,276 share purchase warrants have been recorded as share subscriptions received in advance (Notes 9.iii and 10).

A summary of outstanding share purchase warrants is as follows:

	Number of share purchase warrants	Weighted average exercise price
		$

Outstanding and exercisable at 31 May 2005	4,083,832	0.56

Granted	3,000	1.00
Exercised	-	-
Expired	-	-

Outstanding and exercisable at 31 May 2006	4,086,832	0.56

Granted	-	-
Exercised	-	-
Expired	-	-

Outstanding and exercisable at 31 May 2007	4,086,832	0.56

Granted	-	-
Exercised	-	-
Expired	-	-

Outstanding and exercisable at 31 May 2008	4,086,832	0.56

During the year ended 31 May 2008, the Company granted a total of Nil share purchase warrants for cash proceeds of $Nil (31 May 2007, the Company granted a total of Nil share purchase warrants for cash proceeds of $Nil, 31 May 2006, the Company granted a total of 3,000 share purchase warrants for cash proceeds of $1,241).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

vi.

vii.

10.

Loss Per Share

	For the year ended 31 May 2006
		Loss (Numerator)	Shares (Denominator)		Per Share Amount

Net loss for the year		(210,848)

Basic Loss per Share
Loss allocated to common shareholders		(210,848)		40,965,175	(0.005)

Effect of Dilutive Securities
Warrants		-		-

Diluted Loss per Share
Loss allocated to common shareholders with assumed conversions		(210,848)		40,965,175	(0.005)

	For the year ended 31 May 2007
		Loss (Numerator)	Shares (Denominator)		Per Share Amount

Net loss for the year		(41,053)

Basic Loss per Share
Loss allocated to common shareholders		(41,053)		40,965,175	(0.001)

Effect of Dilutive Securities
Warrants		-		-

Diluted Loss per Share
Loss allocated to common shareholders with assumed conversions		(41,053)		40,965,175	(0.001)

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

	For the year ended 31 May 2008
		Loss (Numerator)	Shares (Denominator)		Per Share Amount

Net loss for the year		(56,066)

Basic Loss per Share
Loss allocated to common shareholders		(56,066)		40,965,175	(0.001)

Effect of Dilutive Securities
Warrants		-		-

Diluted Loss per Share
Loss allocated to common shareholders with assumed conversions		(56,066)		40,965,175	(0.001)

Share purchase warrants which were exercised by the share purchase warrant holders but the related common shares were not issued at 31 May 2008, 2007 and 2006 have not been included in the computation of diluted loss per share because, due to the loss position of the Company, the effect of issuing these common shares would be antidilutive (Note 9.iii).

All share purchase warrants outstanding at 31 May 2008 were not included in the computation of diluted loss per share because, due to the loss position of the Company, the effect of exercising of all the share purchase warrants would be antidilutive. These share purchase warrants were still outstanding as at 31 May 2008 (Note 9.v).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

11.

Income Taxes

Provision for income taxes

The provision for (recovery of) income taxes differs from the amount that would have resulted by applying Canadian federal and provincial statutory tax rates of 31.50% (31 May 2007 – 32.49%, 31 May 2006 – 32.49%).

	For the year ended 31 May 2008	For the year ended 31 May 2007	For the year ended 31 May 2006
	$	$	$

Net loss before income taxes	(56,066)	(41,053)	(210,848)

Income tax recovery at statutory rates	17,661	13,338	68,505
Adjustments to benefits resulting from:
Amortization	(74)	(103)	(139)
Contributed services by related parties	(190,768)	(7,798)	-
(Unrecognized) benefits of non-capital losses	173,181	(5,437)	(68,366)

Future income tax recovery	-	-	-

Future tax balances

The tax effects of temporary differences that give rise to future income tax assets and liabilities are as follows:

	For the year ended 31 May 2008	For the year ended 31 May 2007	For the year ended 31 May 2006
	$	$	$

Future tax assets:
Non-capital loss carryforwards	345,376	534,493	528,557
Plant, property and equipment	760	1,070	2,154

	346,136	535,563	530,711

Less: valuation allowance	(346,136)	(535,563)	(530,711)

Actual income taxes	-	-	-

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

As at 31 May 2008, the Company had available for deduction against future taxable income, non-capital losses of approximately $1,096,433. The potential income tax benefit of these losses has been offset by a full valuation allowance. The losses expire as follows:

Year		Amount
		$

2008		-
2009		138,480
2010		256,309
2014		249,879
2015		220,954
2016		212,540
2017		18,271

12.

Supplemental Disclosures with Respect to Cash Flows

	For the year ended 31 May 2008	For the year ended 31 May 2007	For the year ended 31 May 2006
	$	$	$

Cash paid during the year for interest	-	-	-
Cash paid during the year for income taxes	-	-	-

During the year ended 31 May 2008, the Company wrote off certain accounts payable balances in the amount of $Nil (31 May 2007 - $7,756, 31 May 2006 - $2,979) related primarily to its prior business that had remained unpaid for several years without any claims being made by these creditors against the Company. Management does not consider that these amounts are payable although there is no assurance that a formal claim will not be made against the Company for some or all of these balances in the future (Note 6).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

13.

Commitments

Pursuant to an agreement effective June 2003 and amending agreements to March 2005, the Company acquired the patents pending and exclusive rights to the title of the Alkane and Alkane Group Dehydrogenation with Organometallic Catalysts from two individuals who became directors of the Company. As consideration, the Company issued 20,000,000 common shares and reserved for issuance to these two directors an aggregate of 9,000,000 common shares upon the Company achieving revenues of US$10,000,000 as direct result of the commercialization of the technology rights.

The Company is committed to issuing 259,276 common shares of the Company related to share subscriptions received in advance of $46,670 (Note 9.iii).

On 14 July 2005, the Company issued 3,000 special warrants for total proceeds of $1,241 while a cease trade order was issued against the Company on 26 October 2004. The Company is currently in the process of having these special warrants rescinded on the basis that these special warrants should not be granted.

14.

Capital Disclosure

The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued capital and deficit. The Company’s objectives when managing capital are to: (i) preserve capital, (ii) obtain the best available net return, and (iii) maintain liquidity.

The Company manages the capital structure and makes adjustments to it in light of changes in economic condition and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents and investments.

The Company’s policy is to invest its excess cash in highly liquid, fully guaranteed, bank sponsored instruments.

15.

Reconciliation of Canadian and United States Generally Accepted Accounting Principles

These financial statements have been prepared in accordance with Canadian GAAP. Except as set out below, these financial statements also comply, in all material respects, with United States GAAP.

Comprehensive income

SFAS No. 130, “Reporting Comprehensive Income”, establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses). SFAS No. 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the financial statements for the Company. There are no differences between net loss and comprehensive loss for each of the years ended 31 May 2008, 2007 and 2006.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

ii.

Accounting for impairment of long-lived assets and for long-lived assets to be disposed of

For United States reporting purposes, the Company has adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable and an estimate of future and undiscounted cash flows is less than the carrying amount of the asset, an impairment loss will be recognized. Application of SFAS No. 144 would not have a material effect on these financial statements.

iii.

Income taxes

Under United States GAAP, deferred income tax assets and liabilities are revalued for all enacted changes in tax rates. Under Canadian GAAP, deferred income tax assets and liabilities are revalued for all enacted or substantially enacted changes in tax rates. The difference between Canadian GAAP and United States GAAP would have not have a material effect on these financial statements.

iv.

Recent pronouncements

In May 2008, the Financial Accounting Standards Board (the “FASB”) issued Statements of Financial Accounting Standards (“SFAS”) No. 163, Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60 (“SFAS No. 163”). SFAS No. 163 provides enhanced guidance on the recognition and measurement to be used to account for premium revenue and claim liabilities and related disclosures and is limited to financial guarantee insurance (and reinsurance) contracts, issued by enterprises included within the scope of FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. SFAS No. 163 also requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS No. 163 is effective for financial statements issued for fiscal years and interim periods beginning after 15 December 2008, with early application not permitted. The Company does not expect SFAS No. 163 to have an impact on its consolidated financial statements.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivate instruments within the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under SFAS No. 133. SFAS No. 161 is effective prospectively for financial statements issued for fiscal years beginning after 15 November 2008, with early application encourag ed. The Company is currently evaluating the new disclosure requirements of SFAS 161 and the potential impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin No. 51 (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after 15 December 2008. The Company is currently evaluating the potential impact, if any, of the adoption of S FAS No. 160 on its consolidated results of operation and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows the company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the requirements of SFAS 159 and the potential impact on the Company’s financial statements.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2008

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to (a) recognize the overfunded or underfunded status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS 87, “Employers’ Accounting for Pensions”, or SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end, and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. SFAS 158 is effective for the Company’s fiscal year ending April 30, 2007. The adoption of SFAS No. 158 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"). The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS 157 is effective for the Company for fair value measurements and disclosures made by the Company in its fiscal year beginning on May 1, 2008. The Company is currently reviewing the impact of this statement.

PowerNova Technologies Corporation

(A Development Stage Company)

Financial Statements

(Expressed in Canadian dollars)

31 May 2007

JAMES STAFFORD

James Stafford

Chartered Accountants*

Suite 350 – 1111 Melville Street

Vancouver, British Columbia

Canada V6E 3V6

Telephone +1 604 669 0711

Facsimile +1 604 669 0754

*Incorporated professional

Independent Auditors’ Report

To the Board of Directors and Shareholders of

PowerNova Technologies Corporation

(A Development Stage Company)

We have audited the balance sheets of PowerNova Technologies Corporation (the “Company”) as at 31 May 2007 and 2006, and the related statements of operations and deficit, cash flows and changes in shareholders’ deficiency for the years ended 31 May 2007, 2006 and 2005. We have also audited the statements of operations, cash flows and changes in shareholders’ deficiency for the period from the date of inception on 6 October 1986 to 31 May 2007 except that we did not audit the financial statements from the period from the date of inception on 6 October 1986 to 31 May 2004; those statements were audited by other auditors whose report dated 10 January 2005 expressed an unqualified opinion on those financial statements. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at 31 May 2007 and 2006, and the results of its operations, cash flows and changes in shareholders’ deficiency for each of the years ended 31 May 2007, 2006 and 2005 and for the period from the date of inception on 6 October 1986 to 31 May 2007 in accordance with Canadian generally accepted accounting principles.

/s/ James Stafford

Vancouver, British Columbia, Canada

Chartered Accountants

15 February 2008

Comments by Independent Registered Chartered Accountants for United States of America Readers on Canada – United States of America Reporting Differences

The standards of the Public Company Accounting Oversight Board (United States of America) requires the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America), our report to the Shareholders and Board of Directors dated 15 February 2008 is expressed in accordance with Canadian reporting standards, which do not permit a reference to such conditions and events in the report when these are adequately disclosed in the financial statements.

/s/ James Stafford

Vancouver, British Columbia, Canada

Chartered Accountants

15 February 2008

PowerNova Technologies Corporation

(A Development Stage Company)

Balance Sheets

(Expressed in Canadian Dollars)

As at 31 May

	2007	2006
	$	$

Assets

Current
Cash and cash equivalents	-	300
Goods and Services Tax receivable	569	-

	569	300

Property, plant and equipment (Note 3)	966	1,283

	1,535	1,583

Liabilities

Current
Bank indebtedness	1	-
Accounts payable and accrued liabilities (Notes 4 and 10)	198,143	195,199
Due to related parties (Note 5)	748,304	734,244

	946,448	929,443
Shareholders’ deficiency
Capital stock (Note 7)
Authorized
50,000,000 of common shares without par value
Issued and outstanding
2007 – 40,965,175 common shares
2006 – 40,965,175 common shares	5,591,315	5,591,315
Contributed surplus (Note 7)	24,000	-
Warrants (Note 7)	68,175	68,175
Share subscriptions received in advance (Note 7)	46,670	46,670
Deficit, accumulated prior to the development stage	(4,446,180)	(4,446,180)
Deficit, accumulated during the development stage	(2,228,893)	(2,187,840)

	(944,913)	(927,860)

	1,535	1,583

Nature and Continuance of Operations (Note ), Commitments (Note 11) and Subsequent Events (Note 12)

Reconciliation of Canadian and United States Generally Accepted Accounting Principles (Note 13)

On behalf of the Board:

/s/ Stuart Lew

Director

/s/ Chris Tay

Director

Stuart Lew

Chris Tay

The accompanying notes are an integral part of these financial statements.

PowerNova Technologies Corporation

(A Development Stage Company)

Statements of Operations and Deficit

(Expressed in Canadian Dollars)

	For the year ended 31 May 2007		For the year ended 31 May 2006		For the year ended 31 May 2005
		$		$		$

Expenses
General and administrative (Schedule 1)		48,809		213,827		221,534

Net loss before other items		(48,809)		(213,827)		(221,534)

Other items
Write-off of accounts payable (Notes 4 and 10)		7,756		2,979		-
Write-off of accounts receivable		-		-		-

Net loss for the year		(41,053)		(210,848)		(221,534)

Deficit, accumulated during the development stage, beginning of year		(2,187,840)		(1,976,992)		(1,755,458)

Deficit, accumulated during the development stage, end of year		(2,228,893)		(2,187,840)		(1,976,992)

Basic and diluted loss per share (Note 8)		(0.01)		(0.01)		(0.01)

Weighted average number of common shares outstanding (Note 8)		40,965,175		40,965,175		40,965,175

PowerNova Technologies Corporation

(A Development Stage Company)

Statements of Cash Flows

(Expressed in Canadian Dollars)

	For the year ended 31 May 2007		For the year ended 31 May 2006		For the year ended 31 May 2005
		$		$		$

Cash flows from operating activities
Net loss for the year		(41,053)		(210,848)		(221,534)
Adjustments to reconcile loss to net cash used by operating activities
Amortization		317		428		580
Contributions to capital by related parties (Notes 6, 7 and 10)		24,000
Write-off of accounts payable (Notes 4 and 10)		(7,756)		(2,979)		-
Changes in operating assets and liabilities
(Increase) decrease in amounts receivable		(569)		1,191		256
(Increase) decrease in prepaid expenses		-		-		900
Increase (decrease) in accounts payable		10,700		21,651		(9,985)
Increase in due to related parties		14,060		187,891		168,658

		(301)		(2,666)		(61,125)

Cash flows used in investing activities
Increase in advances		-		-		-
Purchase of property, plant and equipment		-		-		-

		-		-		-

Cash flows from financing activities
Share subscriptions received in advance for cash		-		-		1,310
Issuance of common shares for cash		-		-		-
Share purchase warrants granted		-		1,241		57,334

		-		1,241		58,644

Increase (decrease) in cash and cash equivalents		(301)		(1,425)		(2,481)

Cash and cash equivalents, beginning of year		300		1,725		4,206

Cash and cash equivalents, end of year		(1)		300		1,725

Supplemental Disclosures with Respect to Cash Flows (Note 10)

PowerNova Technologies Corporation

(A Development Stage Company)

Statements of Changes in Shareholders’ Deficiency

(Expressed in Canadian Dollars)

	Number of shares issued		Share capital		Contributed surplus and share subscription received in advance		Share purchase warrants		Deficit accumulated prior to the development stage		Deficit accumulated during the development stage		Total Shareholders’ deficiency
				$		$		$		$		$		$

Balance at 31 May 2004		40,965,175		5,591,315		45,360		9,600		(4,446,180)		(1,755,458)		(555,363)
Share purchase warrants granted (Note )		-		-		-		57,334		-		-		57,334
Share subscription received in advance (Note 7)		-		-		1,310		-		-		-		1,310
Net loss for the year		-		-		-		-		-		(221,534)		(221,534)

Balance at 31 May 2005		40,965,175		5,591,315		46,670		66,934		(4,446,180)		(1,976,992)		(718,253)
Share purchase warrants granted (Note 7)		-		-		-		1,241		-		-		1,241
Share subscription received in advance (Note 7)		-		-		-		-		-		-		-
Net loss for the year		-		-		-		-		-		(210,848)		(210,848)

Balance at 31 May 2006		40,965,175		5,591,315		46,670		68,175		(4,446,180)		(2,187,840)		(927,860)
Contributed services by related party (Notes 6, 7 and 10)		-		-		24,000		-		-		-		24,000
Net loss for the year		-		-		-		-		-		(41,053)		(41,053)

Balance at 31 May 2007		40,965,175		5,591,315		70,670		68,175		(4,446,180)		(2,228,893)		(944,913)

PowerNova Technologies Corporation

(A Development Stage Company)

Schedule 1 – General and Administrative Expenses

(Expressed in Canadian Dollars)

	For the year ended 31 May 2007		For the year ended 31 May 2006		For the year ended 31 May 2005
		$		$		$

Advertising and promotion		-		-		-
Amortization		317		428		580
Bank charges and interest		216		242		347
Consulting fees to related parties (Note 6)		-		188,000		188,000
Filing and transfer agent fees		3,229		-		4,483
Legal and accounting fees		20,425		24,430		13,816
Management fees (Notes 6, 7 and 10)		18,000		-		-
Office and administration		-		-		2,521
Rent (Notes 6, 7 and 10)		6,000		-		9,252
Telephone		622		727		2,535

		48,809		213,827		221,534

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

Nature and Continuance of Operations

The Company’s financial statements as at 31 May 2007 and for the year then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a loss of $41,053 for the year ended 31 May 2007 (31 May 2006 - $210,848, 31 May 2005 - $221,534) and has working capital deficiency of $945,879 at 31 May 2007 (31 May 2006 – $929,143).

Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy during the fiscal year ended 31 May 2007. However, if the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related 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.

Significant Accounting Policies

The accounting policies of the Company are in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). These policies conform, in all material respects, with accounting principles generally accepted in the United States of America (“United States GAAP”), except as described in Note 13. Outlined below are those policies considered particularly significant.

Basis of presentation

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Property, plant and equipment

Property, plant and equipment are recorded at cost and are amortized using the declining balance method at the following annual rate, with half the rate being applied in the year of acquisition:

Computer equipment	30%	declining balance
Equipment	20%	declining balance

Financial instruments

The carrying value of cash, accounts payable and accrued liabilities, and due to related parties approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risk arising from these financial instruments.

Derivative financial instruments

The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Income taxes

Future income tax assets and liabilities are determined based on temporary differences between the accounting and the tax bases of the assets and liabilities and for loss carry forwards, and are measured using the tax rates expected to apply when these differences reverse. A valuation allowance is recorded against any future income tax asset if it is not more likely than not that the asset will be realized. As at 31 May 2007, the Company’s net future income tax assets are fully offset by a valuation allowance.

Loss per share

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

Foreign currency translation

Use of estimates

Comparative figures

Certain comparative figures have been adjusted to conform to the current period’s presentation.

Property, Plant and Equipment

		Accumulated	Net book value
	Cost	amortization	2007	2006
	$	$	$	$

Computer equipment	5,366	(4,946)	420	600
Equipment	2,548	(2,002)	546	683

	7,914	(6,948)	966	1,283

During the year ended 31 May 2007, total additions to property, plant and equipment were $Nil (31 May 2006 - $Nil).

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are non-interest bearing, unsecured and have settlement dates within one year.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

During the year ended 31 May 2007, the Company wrote off certain accounts payable balances in the amount of $7,756 (31 May 2006 - $2,979, 31 May 2005 - $Nil) related primarily to its prior business that had remained unpaid for several years without any claims being made by these creditors against the Company. Management does not consider that these amounts are payable although there is no assurance that a formal claim will not be made against the Company for some or all of these balances in the future (Note 10).

Due to Related Parties

Amounts due to related parties are non-interest bearing, unsecured and have no fixed terms of repayment.

As at 31 May 2007, the amounts due to related parties include $748,304 (31 May 2006 - $734,244, 31 May 2005 - $546,353) due to shareholders of the Company and/or officers-directors of the Company.

Related Parties Transactions

During the year ended 31 May 2007, the Company entered into the following transactions with related parties:

Paid or accrued consulting fees of $Nil (31 May 2006 - $52,000, 31 May 2005 - $52,000) to a director of the Company.

ii.

Paid or accrued consulting fees of $Nil (31 May 2006 - $68,000, 31 May 2005 - $68,000) to a director of the Company.

iii.

Paid or accrued consulting fees of $Nil (31 May 2006 - $68,000, 31 May 2005 - $68,000) to a director of the Company.

During the year ended 31 May 2007, officers and directors of the Company made contributions to capital for management fees in the amount of $18,000 (31 May 2006 - $Nil, 31 May 2005 - $Nil) and rent in the amount of $6,000 (31 May 2006 - $Nil, 31 May 2005 - $Nil) (Notes 7 and 10).

Capital Stock

Authorized

The total authorized capital is 50,000,000 common shares without par value.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

ii.

Issued and outstanding

The total issued and outstanding capital stock is 40,965,175 common shares without par value.

iii.

Share subscriptions received in advance

As at 31 May 2007, the Company had received $46,670 related to the exercise of 259,276 share purchase warrants for which the Company had not issued the corresponding 259,276 common shares at 31 May 2007 (As at 31 May 2006, the Company had received $46,670 related to the exercise of 259,276 share purchase warrants for which the Company had not issued the corresponding 259,276 common shares at 31 May 2006) (Note 11).

iv.

Stock options

There are no stock options issued and outstanding as at 31 May 2007.

Share purchase warrants

The following share purchase warrants were outstanding at 31 May 2007:

	Exercise price	Number of warrants	Expiry Date
	$

Warrants	1.00	1,725,773	9 October 2010
Warrants	0.18	2,190,724	9 October 2010
Warrants	1.00	170,335	15 August 2010

		4,086,832

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

The 1,725,773 and 2,190,724 share purchase warrants outstanding at 31 May 2007 excludes share purchase warrants which were exercised prior to 31 May 2007 but the corresponding common shares were not issued by the Company at 31 May 2007. The funds received by the Company related to the exercise of these 259,276 share purchase warrants have been recorded as share subscriptions received in advance (Note 7.iii).

A summary of outstanding share purchase warrants is as follows:

	Number of share purchase warrants	Weighted average exercise price
		$

Outstanding and exercisable at 31 May 2004	3,947,775	0.54

Granted	143,335	1.00
Exercised, but related common shares not issued at 31 May 2005	(7,278)	0.18
Expired	-	-

Outstanding and exercisable at 31 May 2005	4,083,832	0.56

Granted	3,000	1.00
Exercised	-	-
Expired	-	-

Outstanding and exercisable at 31 May 2006	4,086,832	0.56

Granted	-	-
Exercised	-	-
Expired	-	-

Outstanding and exercisable at 31 May 2007	4,086,832	0.56

During the year ended 31 May 2007, the Company issued Nil share purchase warrants for cash proceeds of $Nil (31 May 2006, the Company granted a total of 3,000 share purchase warrants for cash proceeds of $1,241, 31 May 2005, the Company granted a total of 143,335 share purchase warrants for cash proceeds of $57,334).

vi.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

Loss Per Share

	For the year ended 31 May 2005
		Loss (Numerator)	Shares (Denominator)		Per Share Amount

Net loss for the year		(221,534)

Basic Loss per Share
Loss allocated to common shareholders		(221,534)		40,965,175	(0.01)

Effect of Dilutive Securities
Warrants		-		-

Diluted Loss per Share
Loss allocated to common shareholders with assumed conversions		(221,534)		40,965,175	(0.01)

	For the year ended 31 May 2006
		Loss (Numerator)	Shares (Denominator)		Per Share Amount

Net loss for the year		(210,848)

Basic Loss per Share
Loss allocated to common shareholders		(210,848)		40,965,175	(0.01)

Effect of Dilutive Securities
Warrants		-		-

Diluted Loss per Share
Loss allocated to common shareholders with assumed conversions		(210,848)		40,965,175	(0.01)

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

	For the year ended 31 May 2007
		Loss (Numerator)	Shares (Denominator)		Per Share Amount

Net loss for the year		(41,053)

Basic Loss per Share
Loss allocated to common shareholders		(41,053)		40,965,175	(0.01)

Effect of Dilutive Securities
Warrants		-		-

Diluted Loss per Share
Loss allocated to common shareholders with assumed conversions		(41,053)		40,965,175	(0.01)

Share purchase warrants which were exercised by the share purchase warrant holders but the related common shares were not issued at 31 May 2007, 2006 and 2005 have not been included in the computation of diluted loss per share because, due to the loss position of the Company, the effect of issuing these common shares would be antidilutive (Note 7.iii).

All share purchase warrants outstanding at 31 May 2007 were not included in the computation of diluted loss per share because, due to the loss position of the Company, the effect of exercising of all the share purchase warrants would be antidilutive. These share purchase warrants were still outstanding as at 31 May 2007 (Note 7.v).

Income Taxes

Provision for income taxes

The provision for (recovery of) income taxes differs from the amount that would have resulted by applying Canadian federal and provincial statutory tax rates of 32.49% (31 May 2006 – 32.49%, 31 May 2005 – 33.6%).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

	2007	2006	2005
	$	$	$

Net loss before income taxes	(41,053)	(210,848)	(221,534)

Income tax recovery at statutory rates	13,338	68,505	74,435
Adjustments to benefits resulting from:
Amortization	(103)	(139)	(214)
Contributed services by related parties	(7,798)	-	-
(Unrecognized) benefits of non-capital losses	(5,437)	(68,366)	(74,221)

Future income tax recovery	-	-	-

Future tax balances

The tax effects of temporary differences that give rise to future income tax assets and liabilities are as follows:

	2007	2006	2005
	$	$	$

Future tax assets:
Non-capital loss carryforwards	534,493	528,557	642,342
Plant, property and equipment	1,070	2,154	2,084

	535,563	530,711	644,426

Less: valuation allowance	(535,563)	(530,711)	(644,426)

Actual income taxes	-	-	-

As at 31 May 2007, the Company had available for deduction against future taxable income, non-capital losses of approximately $1,645,101. The potential income tax benefit of these losses has been offset by a full valuation allowance. The losses expire as follows:

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

Year		Amount
		$

2008		429,928
2009		257,220
2010		256,309
2014		249,879
2015		220,954
2016		212,540
2017		18,271

10.

Supplemental Disclosures with Respect to Cash Flows

	Cumulative amounts from the date of Inception on 6 October 1986 to 31 May 2007	2007	2006	2005
	$	$	$	$

Cash paid during the year for interest	-	-	-	-
Cash paid during the year for income taxes	-	-	-	-

During the year ended 31 May 2007, the Company wrote off certain accounts payable balances in the amount of $7,756 (31 May 2006 - $2,979, 31 May 2005 - $Nil) related primarily to its prior business that had remained unpaid for several years without any claims being made by these creditors against the Company. Management does not consider that these amounts are payable although there is no assurance that formal claim will not be made against the Company for some or all of these balances in the future (Note 4).

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

11.

Commitments

Pursuant to an agreement effective June 2003 and amending agreements to March 2005, the Company acquired the patents pending and exclusive rights to the title of the Alkane and Alkane Group Dehydrogenation with Organometallic Catalysts from two individuals who became directors of the Company. As consideration the Company issued 20,000,000 common shares and reserved for issuance to these two directors an aggregate of 9,000,000 common shares upon the Company achieving revenues of US$10,000,000 as direct result of the commercialization of the technology rights.

The Company is committed to issuing 259,276 common shares of the Company related to share subscriptions received in advance of $46,670 (Note 7iii).

During the year ended 31 May 2004, the Company entered into a contract for management services with three directors and officer of the Company requiring a payment of $188,000 per year up to the fiscal year ended 31 May 2006.

12.

Subsequent Events

Subsequent to 31 May 2007, shareholders and/or director-officers of the Company agreed to forgive a balance owed to them by the Company at 31 May 2007 of $581,615.

13.

Reconciliation of Canadian and United States Generally Accepted Accounting Principles

These financial statements have been prepared in accordance with Canadian GAAP. Except as set out below, these financial statements also comply, in all material respects, with United States GAAP.

Statement of cash flow difference

Comprehensive income

SFAS No. 130, “Reporting Comprehensive Income”, establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses). SFAS No. 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the financial statements for the Company. There are no differences between net loss and comprehensive loss for each of the years ended 31 May 2007, 2006 and 2005.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

ii.

Accounting for impairment of long-lived assets and for long-lived assets to be disposed of.

iii.

Income taxes

iv.

Recent pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140”, to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquir ed or issued after the beginning of an entity’s first fiscal year that begins after September 14, 2006, with earlier application allowed. This standard is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fai r value as impairments or direct write-downs. SFAS No. 156 is effective for an entity’s first fiscal year beginning after September 15, 2006. This adoption of this statement is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

PowerNova Technologies Corporation

(A Development Stage Company)

Notes to Financial Statements

(Expressed in Canadian Dollars)

31 May 2007

PowerNova Technologies Corporation

Corporate History

October 6, 1986		Aqua 1 Incorporated

1999		Aqua 1 Divests its beverage business

			Dr. Koridze and Mr. Oralbekov Assign IP rights to Process to HPTC	March 8, 2001

			HPTC Receives IP rights to Process from Dr. Koridze and Mr. Oralbekov	March 8, 2001

Sept. 11, 2003		Aqua 1 Changes name to Powernova

		PowerNova	HPTC
October 30, 2003		Acquires 100% of HPTC	Becomes wholly owned subsidiary of PowerNova	October 30, 2003

June 25, 2005	Dr. Koridze Issued patent 6,909,009 B2 by the USPTO

	Dr. Koridze	PowerNova
October 21, 2005	Further assigns patent 6,909,009 B2 to PowerNova	Receives from Dr. Koridze further assignment of patent 6,909,009 B2

		PowerNova	HPTC
November 5, 2005		Receives patent 6,909,009 B2 from HPTC	Assigns patent 6,909,009 B2 to PowerNova	November 5, 2005

February 2008		PowerNova Owns patent 6,909,009 B2 and 100% of HPTC

Signature Page

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A Amendment #7 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

POWERNOVA TECHNOLOGIES CORPORATION

Registrant

Dated: October 28, 2009

Signed: /s/ Stuart Lew

Mr. Stuart Lew

CEO and Director

Powernova Technologies Inactive 20FR12G/AInitial registration of securities (foreign private issuers) (amended)