U.S. SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

Form 10-Q

 

Mark One

 

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

 

For the quarterly period ended September 30, 2014

 

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

 

For the transition period from _________ to _________

 

Commission File No. 333-141060

 

 NANO LABS CORP.

(Name of small business issuer in its charter)

 

Colorado

 

84-1307164

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

The Ford Building

615Griswold Street

Seventeenth Floor

Suite 1715

Detroit, Michigan 48226

(Address of principal executive offices)

 

(888) 806-2315

(Issuer’s telephone number)

 

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

 

Name of each exchange on which registered:

None

   

 

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

 

Common Stock, $0.001

(Title of Class)

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

 

Class

 

Outstanding as of November 20, 2014

Common Stock, $0.001

 

241,192,385

 

 

NANO LABS CORP. 

FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2014

 

INDEX

 

    Page  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   
   

PART I. FINANCIAL INFORMATION

     
       

Item 1.

Financial Statements

   

3

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    15  

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

    21  

Item 4.

Controls and Procedures

    21  
       

PART II. OTHER INFORMATION

       
       

Item 1.

Legal Proceedings

    24  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

    24  

Item 3.

Defaults Upon Senior Securities

    26  

Item 4.

Mine Safety Disclosure

    26  

Item 5.

Other information

    26  

Item 6.

Exhibits

    27  
       

SIGNATURES

    28  

 

 
2

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

NANO LABS CORP.

BALANCE SHEETS

    September 30,
2014
    June 30,
2014
 
ASSETS        
CURRENT ASSETS        
Cash   $ 1,981    

$

-  
Loan receivable     101,480       101,480  
               
Total Current Assets     103,461       101,480  
               
Investment in joint venture     155,000       -  
               
Total Assets   $ 258,461     $ 101,480  
               
LIABILITIES AND STOCKHOLDERS' DEFICIT                
CURRENT LIABILITIES:                
Accounts payable   $ 161,276     $ 160,204  
Cash overdraft     -       1  
Notes payable     -       -  
Convertible notes payable     950,294       1,230,950  
Derivative liability     46,785,958       56,674,290  
Accrued interest payable     -       -  
    47,897,528       58,065,445  
               
Total Current Liabilities     47,897,528       58,065,445  
               
STOCKHOLDERS' DEFICIT                
               

Preferred stock: $0.001 par value; 10,000,000 shares authorized; none issued or outstanding at September 30, 2014 and June 30, 2014, respectively

    -       -  

Common stock: $0.001 par value; 500,000,000 shares authorized; 241,192,385 and 103,125,000 shares issued and outstanding at September 30, 2014 and June 30, 2014, respectively

    241,192       103,125  
Additional paid-in capital     807,719       482,356  
Accumulated deficit   (48,687,978 )   (58,549,446 )
Total Stockholders' Deficit   (47,639,067 )   (57,963,965 )
               
Total Liabilities and Stockholders' Deficit   $ 258,461     $ 101,480  

 

The accompanying notes are an integral part of these financial statements

 

 
3

 

NANO LABS CORP.
STATEMENTS OF OPERATIONS

 

  Three Months Ended
September 30,
 
    2014     2013  
Sales  

$

-    

$

-  
Cost of Goods Sold     -       -  
Gross Margin     -       -  
               
Operating Expenses                
Consulting     -       103,471  
General and administrative     20,922       38,820  
Professional Fees     5,360       10,960  
Travel     582       7,950  
Wages     -       5,000  
Total Operating Expenses     26,864       166,201  
               
Loss from Operations   (26,864 )   (166,201 )
               
Other Income (Expense)                
Interest expense- derivative     9,888,332     (11,623,033 )
Other (Income) Expense     9,888,332     (11,623,033 )
               
Loss before Income Taxes     9,861,468     (11,789,234 )
               
Provision for income tax     -       -  
               
Net Loss     9,861,468     (11,789,234 )
               
Net loss per common share-basic   $ 0.04     $ (0.11 )
               
Weighted average common shares outstanding     241,192,385       107,081,164  
               
Net loss per commoin share basic and fully diluted   $ 0.03     $ (0.11 )
               
Weighted average common shares outstanding and fully diluted     355,530,385       107,081,164  

 

The accompanying notes are an integral part of these financial statements

 

 
4

 

NANO LABS CORP.
STATEMENTS OF STOCKHOLDERS' DEFICIT

 

                    Common     Additional     (restated)     Total  
    Preferred Stock   Common Stock   Stock   Paid-In   Accumulated    Stockholders'  
    Shares     Amount     Shares     Amount     Issuable     Capital     Deficit     Deficit  
                                 
Balance June 30, 2012   -    

$

-     179,125,000     $ 179,125    

$

-     $ 197,341     $ (585,481 )   $ (209,015 )
                                                               
Debt Frogiveness     -       -       -       -       -       209,015       -       209,015  
                                                               
Shares issuable asset purchase agreement     -       -       -       -       101,000     (101,000 )     -       -  
                                                               
Share repurchases from related party     -       -     (76,000,000 )   (76,000 )     -       76,000       -       -  
                                                               
Net loss     -       -       -       -       -       -     (10,194,010 )   (10,194,010 )
                                                               
Balance June 30, 2013     -    

$

-       103,125,000     $ 103,125     $ 101,000     $ 381,356     $ (10,779,491 )   $ (10,194,010 )
                                                               
Shares issed for purchase agreement     -       -       101,000,000       101,000     (101,000 )     -       -       -  
                                                               
Shares recinded                   (101,000,000 )   (101,000 )             101,000               -  
                                                               
Net loss     -       -       -       -       -       -     (47,769,955 )   (47,769,955 )
                                                               
Balance June 30, 2014     -    

$

-       103,125,000     $ 103,125    

$

-     $ 482,356     $ (58,549,446 )   $ (57,963,965 )
                                                               
Shares issued for joint venture agreement     -       -       100,000,000       100,000               55,000               155,000  
                                                               
Shares issued for debt conversion     -       -       38,067,385       38,067               270,363               308,430  
                                                               
Net income     -       -       -       -       -       -       9,861,468       9,861,468  
                                                               
Balance September 30, 2014     -    

$

-       241,192,385     $ 241,192    

$

-     $ 807,719     $ (48,687,978 )   $ (47,639,067 )

 

The accompanying notes are an integral part of these financial statements

 

 
5

 

NANO LABS CORP.
STATEMENTS OF CASH FLOWS

 

  Three Months Ended
September 30,
 
    2014     2013  
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net loss   $ 9,861,468     $ (11,789,234 )
Adjustments to reconcile net loss to net cash used by operating activities:                
Derivative interest    (9,888,332 )     11,623,033  
Changes in operating assets and liabilities:                
(Increase) in Notes Receivable      -       -  
Accounts payable and accrued expenses      1,072     (5,197 )
NET CASH USED IN OPERATING ACTIVITIES   (25,792 )   (171,398 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:                
Repayment of notes payable     -       -  
Proceeds from issuance of convertible notes payable      27,774       150,000  
NET CASH PROVIDED BY FINANCING ACTIVITIES     27,774       150,000  
               
NET CHANGE IN CASH     1,982     (21,398 )
               
Cash at beginning of the period     -       28,196  
               
Cash at end of the period   $ 1,982     $ 6,798  
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:                 
               
Interest paid  

$

-    

$

-  
Income tax paid  

$

-    

$

-  

 

The accompanying notes are an integral part of these financial statements 

 

 
6

  

NANO LABS CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2014

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Nano Labs Corp. (the “Company”), formerly Colorado Ceramic Tile, Inc., was incorporated in the State of Colorado on March 27, 1995. The Company through the end of March 2012 sold and installed stone and tile. On March 28, 2012, the Company disposed of its tile business by forming a subsidiary corporation called CCT, Inc., moving the related assets and transferrable liabilities into CCT, Inc., then selling CCT, Inc. to a former officer for a nominal sum.

 

Respect American Glass (“RAG”) was incorporated on June 1, 2012 under the laws of the state of Florida. On October 4, 2012, the Company acquired all the outstanding shares of RAG for $100 through a mutual stock purchase agreement. In the rescission agreement with Respect Innovations, Inc., the Company agreed to sell Respect American Glass (“RAG), a wholly owned subsidiary of the Company, to an officer of Respect Innovations, Inc.

 

The Company currently intends to acquire for its own use or licensing to others coatings and laminates made from microscopic particles known as “nanotechnology.”

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Such estimates include management’s assessments of the carrying value of certain assets, useful lives of assets, and related depreciation and amortization methods applied.

 

Cash equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At September 30, 2014 and June 30, 2014 the Company had $1,981 and no cash equivalents, respectively.

 

Fair value of financial instruments

 

The Company adopted the provisions of FASB ASC 820 (the “Fair Value Topic”) which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements.

 

The Fair Value Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. It also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.

 

 
7

  

The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

A) Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources;

 

B) Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and

 

C) Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques, and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate.

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. An active market for an asset or liability is a market in which transactions for the asset or liability occur with significant frequency and volume to provide pricing information on an ongoing basis.

 

Level 2: Observable inputs other than Level 1 inputs. Example of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that are market participants would use in pricing the asset or liability.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable, accrued expenses, and deferred revenue approximate their fair value because of the short maturity of those instruments. The Company’s note payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2014 and 2013.

 

The Company had no assets but had liabilities measured at fair value on a recurring basis for the period ended June 30, 2014 and June 30, 2013, respectively, using the black schools module in measuring convertible debt. This calculation resulted in a derivative liability of $56,674,290 which is based on a discount ot market of 50%, interest rate of 20% and a volativity of 652.32%.

 

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life of three (3) years for equipment, (5) years for automobile, and (7) years for furniture and fixtures. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

 

Impairment of long-lived assets

 

The Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, such as intellectual property, are required to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

 
8

  

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

 

The Company determined that there were no impairments of long-lived assets as of September 30, 2014 June 30, 2014.

 

Commitments and contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

 

Revenue recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. In addition, the Company records allowances for accounts receivable that are estimated to not be collected.

 

Income taxes

 

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty in income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its assets and/or liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

 
9

  

Stock-Based Compensation

 

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

 

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

 

Net income (loss) per share

 

The Company computes basic and diluted earnings per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic earnings per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.

 

There were 114,337,740 potentially dilutive shares outstanding as of September 30, 2014 derived from outstanding convertible promissory notes. There were 164,126,667 potentially dilutive shares outstanding as of June 30, 2014.

 

Subsequent events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.

 

Recently issued accounting pronouncements

 

In July 2012, FASB issued ASU No. 2012-02, Intangibles – Goodwill and Other. This update presents an entity with the option to first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles – Goodwill and Other – General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than fifty percent. ASU No. 2012-02 will be effective for annual and impairment tests performed for fiscal years beginning after 15 September 2012, with early adoption permitted. The Company does not expect the adoption of this update will have a material effect on its financial statements.

 

Company management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

 

 
10

  

NOTE 3 - GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As of September 30, 2014, the Company had an accumulated deficit of $48,687,978 and a working capital deficiency of $47,704,951. Also, during the 3 month period ended September 30, 2014 the Company used net cash of $25,792 for operating activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

 

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 4 - RELATED PARTY TRANSACTION – JOINT VENTURE AGREEMENT

 

On June 18, 2014, the Company entered into a Joint Venture Agreement with DB Metals SA (“DB Metals”), a technology based company located in Mexico. DB Metals has developed a novel three phase metallurgical process that significantly reduces the time and raw materials required to recycle lead and other non-ferrous metals for use in the mining industry.

 

The Company issued 100,000,000 shares of its $0.001 par value common stock to the shareholders of DB Metals to acquire a 50% ownership of the Joint Venture; 20,000,000 shares of which were issued to our President who is also a shareholder of DB Metals, and therefore a related party.

 

The Company valued the 100,000,000 shares at par value ($0.001), which resulted in $155,000 of consideration paid for the asset.

 

 
11

  

NOTE 5 - NOTE RECEIVABLE

 

The Company loaned an entity $100,000 in March 2014 bearing interest at 5% per annum. Repayment is due within one year.

 

NOTE 6 - COMMITMENTS & CONTIGENCIES

 

Office Lease

 

On November 1, 2013, the Company signed a one year lease to occupy office space in suite 916 of the Ford Building at 615 Griswold, Detroit, Michigan. The lease requires a $400 deposit and monthly payments of $400.

 

Minimum future rental payments under the agreement are as follows:

 

2014- $1,600

 

Consulting Agreement

 

There are no consulting or employment agreements in force.

 

 
12

 

NOTE 7 - CONVERTIBLE NOTES PAYABLE

 

On December 30, 2012, the Company entered into a convertible promissory note for $201,000 bearing no interest and convertible at a 50% discount to market. The note is payable on demand. Since the conversion rate is discounted to market, the Company calculated a derivative liability of $5,264,235 at September 30, 2014 using the Black Scholes Model. During the three month period ended September 30, 2014, $86,662 of notes payable was converted by the note holder into $0.001 par value common stock of the Company.

 

On December 31, 2012, the Company entered into a convertible promissory note $90,000 bearing no interest and convertible at a 50% discount to market. During the three month period ended September 30, 2014, the entire balance of the note payable was converted by the holder into $0.001 par value common stock of the Company.

 

On March 31, 2013 and September 30, 2013 the Company entered into convertible promissory notes for $350,000 and $275,000 respectively bearing no interest and convertible at a 50% discount to market. The notes are payable on demand. The Company has calculated a derivative liability for these notes of $28,775,688 at September 30, 2014 using the Black Scholes Model. During the three month period ended September 30, 2014, $65,884 of notes payable was converted by the note holder into $0.001 par value common stock of the Company.

 

From October to December 31, 2013 the Company entered into similar agreements for $130,000. At September 30, 2014 the Company has calculated a derivative liability of $2,951,990 using the Black Scholes Model. During the three month period ended September 30, 2014, $65,884 of notes payable was converted by the note holder into $0.001 par value common stock of the Company.

 

From April 2014 to June 2014 the Company executed three additional convertible notes with the same terms as conditions, 50% discount due in 1 year for a total of $184,950. The Company has calculated a derivative liability of $8,515,300 at September 30, 2014 associated with these notes using the Black Scholes model.

 

From July 2014 to September 30, 2014 the Company executed two additional convertible notes with the same terms and conditions, 50% discount due in 1 year for a total of $27,774. The Company has recorded a derivative liability of $1,278,745 at September 30, 2014 associated with these notes using the Black Scholes Model.

 

From July 2014 to September 30, 2014 the Company received conversion notices from various convertible note holders totaling $242,546. As a result the Company issued 38,067,385 shares of its $0.001 par value common stock attributable to the conversions.

 

At September 30, 2014, the Company had a balance of convertible note payable of $1,016,178. In connection with the issuance of these convertible notes the Company has recorded a derivative liability of $46,785,958 at June 30, 2014.

 

NOTE 8 - STOCKHOLDERS’ EQUITY

 

Common and preferred shares authorized

 

The Company is authorized 500,000,000 shares of common stock with $0.001 par value and 10,000,000 shares of preferred stock with $0.001 par value.

 

Common shares issued

 

Pursuant to a Joint Venture Agreement with DB Metals SA (see NOTE 4) the Company issued 100,000,000 shares of its $0.001 par value common stock to the shareholders of DB Metals during the 3 month period ended September 30, 2014 to acquire a 50% ownership of the Joint Venture; 20,000,000 shares of which were issued to our President who is also a shareholder of DB Metals, and therefore a related party.

 

NOTE 9 - STOCK OPTIONS

 

 

1.

On October 1, 2013 the Company board of directors approved a board resolution authorizing the Company to issue a total of 15,000,000 stock options; 2,000,000 of these options were issued to four consultants for services to the Company. The options begin vesting on October 1, 2013 and terminate October 1, 2015. The stock options have an option price of .40

 

NOTE 10 - SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that no material subsequent events exist. 

 

 
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Forward-Looking Information

 

This Quarterly Report of Nano Labs Corp. on Form 10-Q contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Quarterly Report on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

 

 
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The financial statements contained herein have not been reviewed by our auditor. We are currently underway with engagement of a new auditor based on prospective business operations. Upon finalization of the engagement, the newly appointed auditor will review the financial statements, which will be included in a subsequent filing with confirmation of review.

 

GENERAL

 

We were incorporated as Colorado Ceramic Tile Inc. in the State of Colorado on March 27, 1995 primarily to sell and install stone, tile and marble products used in residential and commercial buildings. During April 2012, we were reorganized by transferring all of our assets to CCT, Inc., our wholly-owned subsidiary ("CCT"). We subsequently sold CCT to Sandy Venezia, our former officer and director, for $500.00. On April 11, 2012, we filed an amendment to our articles of incorporation with the Colorado Secretary of State changing our name from "Colorado Ceramic Tile Inc." to "Nano Labs Corp."

 

Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "Nano Labs" refers to Nano Labs Corp.

 

CURRENT BUSINESS OPERATIONS

 

We are a nanotechnology research and development company. We are able to access resources that encompass nearly thirty years of research and development in nanotechnology as well as hundreds of peer-reviewed and published research papers and other scholarly material. Our research and development team of scientists, designers, and engineers is focused on creating a portfolio of advanced products that could provide benefits to a variety of industries as further discussed below including: (i) consumer products, (ii) energy, (iii) materials, and (iv) healthcare. Through the use and integration of proprietary nano compounds, our goal is to evolve common products into new, revolutionary products in order to make the world a better place.

 

 
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CURRENT BUSINESS OPERATIONS

 

We are a development stage company with no manufacturing capacity or agreements and have not generated any revenue. Our plan of operation involves nanotechnology and the development of new products using nano compounds. We are also a nanotechnology research and development company. We are able to access resources that encompass nearly thirty years of research and development in nanotechnology as well as hundreds of peer-reviewed and published research papers and other scholarly material. Our research and development team of scientists, designers, and engineers is focused on creating a portfolio of advanced products that could provide benefits to a variety of industries as further discussed below including: (i) consumer products, (ii) energy, (iii) materials, and (iv) healthcare. Through the use and integration of proprietary nano compounds, our goal is to evolve common products into new, revolutionary products in order to make the world a better place.

 

Nanotechnology is the manipulation of matter on an atomic and molecular scale. A generalized description of nanotechnology was established by the National Nanotechnology Initiative, which defines nanotechnology as the manipulation of matter with at least one dimension sized from 1 to 100 nanometers. This definition reflects the fact that quantum mechanical effects are important at this quantum-realm scale, and so the definition pertains to a research category inclusive of all types of research and technologies that deal with the special properties of matter that occur below the given size threshold. It is therefore common to see the plural form "nanotechnologies" as well as "nanoscale technologies" to refer to the broad range of research and applications whose common trait is size. Because of the variety of potential applications (including industrial and military), governments have invested billions of dollars in nanotechnology research. Through its National Nanotechnology Initiative, the USA has invested 3.7 billion dollars. The European Union has invested 1.2 billion and Japan 750 million dollars. See "The Daily Star (Bangladesh April 17, 2012."

 

Nanotechnology as defined by size is naturally very broad, including fields of science as diverse as surface science, organic chemistry, molecular biology, semiconductor physics, microfabrication, etc. The associated research and applications are equally diverse ranging from extensions of conventional device physics to completely new approaches based upon molecular self-assembly, from developing new materials with dimensions on the nanoscale to direct control of matter on the atomic scale.

 

Nanotechnology may be able to create many new materials and devices with a vast range of applications, such as in medicine, electronics, biomaterials and energy production. On the other hand, nanotechnology raises many of the same issues as any new technology, including concerns about the toxicity and environmental impact of nanomaterials, and their potential effects on global economics.

 

Polec Joint Venture Agreement

 

On June 27, 2014, our Board of Directors entered into that certain joint venture collaboration agreement dated June 23, 2014 for a term of twenty years (the "Polec Joint Venture Agreement") with Polec SA de CV ("Polec"), for the manufacture, distribution and marketing of Polec´s technology and products. Polec is a technology based company presently located in Mexico with a strong profile of applied chemistry which has developed a novel technology highly effective as a liquid cement that could be used as soil stabilizer. This is a polymeric water base product able to provide new mechanical high value added properties to practically any soil that could be treated with this product (the "Polec Technology").

 

The general purpose of the Polec Joint Venture Agreement is to: (i) address international market opportunities for products based on the Polect Technology and provide fulfillment funding to manufacture and/or license the Polec Technology to third parties and market the resulting products; (ii) establish a joint venture corporation (the "JVC") for operational and funding requirements and commitment of the Polec Technology to be provided by Polec whereby we will be able to adapt and address market opportunities in the particular territories of the United States and Canada as initial commercialization stage; (iii) have the JVC establish a marketing and sales platform for Polec products and technologies from time to time for the purpose of business development; and (iv) create a corporate entity named Polec International Liquid Cement Technology Corp, USA, a joint venture corporation between Polec and Nano Labs.

 

 
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In accordance with the terms and provisions of the Polec Joint Venture Agreement, the parties agreed that certain contracts in acceptable form would be entered into as follows: (i) a distributorship contract between Jorge Luis Rodriguez Gallardo ("Gallardo") as owner of all right, title and interest in and to the Polec Technology, and the JVC relating to the distribution of the above referenced products; (ii) technology or patent rights transfer agreement between Gallardo and the JVC for the provision of the Polec Technology rights; (iii) manufacturing contract between exclusive manufacturers and the JVC for the exclusive manufacturing of each product; and (iv) trademark licence contract between Gallardo as trademark owner and the JVC for licensing of the use of the Polec products trademarks.

 

In further accordance with the terms and provisions of the Polec Joint Venture Agreement, Polec shall be 50% equity owner and we shall be 50% equity owner of the JVC. We shall be entitled to appoint and maintain in office two directors and Polec shall be entited to appoint and maintain in office two directors. Lastly, the JVC shall reinvest at least during the following two years all dividends and subsequent to this period the JVC shall distribute on an equal basis by way of dividend not less than fifty percent of the audited after tax net profit in relation to each fiscal year.

 

DB METALS JOINT VENTURE AGREEMENT

 

On June 27, 2014, our Board of Directors entered into that certain joint venture agreement dated June 16, 2014 (the "DB Metals Joint Venture Agreement") with DB Metals SA de CV ("DB Metals"), for the manufacture, distribution and marketing of DB Metal's technology and products. DB Metals is a technology based company located in Mexico that has been developing during the last six years a novel technology consisting of a three phase metallurgical process that enables the reduction significantly of time and raw materials required to recycle lead and other non ferrous metals. As a result of 25 years of experience in the metallurgic field, DB Metals has developed this technology with the financial support of the National Council of Science and Technology of Mexico. After obtaining highly satisfactory pilot-test results in the scaling up process financed by the National Council, DB Metals has been able to confirm the benefits of this novel process that enables the reduction of cost, time, fuel consumption, waste and environmental impact of recycling lead scrap, and that could be applied to recuperate, smelt and refine other non ferrous metals (the "DB Metals Technological Process"). We desire to create a joint venture with DB Metals for the purpose of developing, exploiting and marketing the DB Metals Technological Process addressing related market needs.

 

The general purpose of the DB Metals Joint Venture Agreement is to: (i) address market opportunities for metallurgic processes based on the DB Metals Technological Process and provide fulfillment funding to operate and/or to license the DB Metals Technological Process to third parties and to market the metal products addressing business opportunities; (ii) create a joint venture for operational and funding requirements and commitment of the corresponding DB Metals Technological Process whereby we will be able to address market opportunities; and (iii) have us establish a marketing and sales platform for DB Metals´s products and the DB Metals Technological Process from time to time for the purpose of business development.

 

In further accordance with the terms and provisions of the DB Metals Joint Venture Agreement, prior to June 30, 2014, we shall provide financial resources to DB Metals in Mexico in the necessary amount as specified to commence operations (the "Funding"). Such Funding shall be according to the costs described in Attachment A of the DB Metals Joint Venture Agreement. DB Metals shall issue, assign, transfer, and deliver to us and we shall receive and accept at closing fifty percent (50%) of DB Metals shares issued and outstanding (the “Share Transfer”). Closing shall be on June 30, 2014 after the fulfilment of all the conditions precedent. The Company shall issue to DB Metal´s shareholders 100,000,000 shares of its restricted common stock at a $0.001 per share price, which will be issued to the shareholders of DB Metals at closing.

 

The business and affairs shall be managed by our Board of Directors. The Board of Directors shall consist of four (4) persons of which at closing, DB Metals shall be entitled to appoint and maintain in office two (2) directors (the “DB Metals Directors”) and we shall be entitled to appoint and maintain in office two (2) directors (“Nano Labs Directors”). At Closing, our Board of Directors shall approve and ratify the appointment of Eng. Jose Armando Camargo Del Bianco as a director and Chief Technological and Scientific Officer of the Company.

 

 
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RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report. Our reviewed financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

We are a development stage company and have not generated any revenue. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

Three Month Period Ended September 30, 2014 Compared to Three Month Period Ended September 30, 2013.

 

Our net income for the three month period ended September 30, 2014 was $9,861,468 compared to a net loss of ($11,789,234) during the three month period ended September 30, 2013. We generated no revenue for the three month periods ended September 30, 2014 and September 30, 2013, respectively.

 

During the three month period ended September 30, 2014, we incurred operating expenses of $26,864 compared to $166,201 incurred during the three month period ended September 30, 2013, a decrease of $139,337. During the three month period ended September 30, 2014, operating expenses consisted of: (i) consulting fees of $-0- (2013: $103,471); (ii) general and administrative of $20,922 (2013: $38,820); (iii) professional fees of $5,360 (2013: $10,960); (iv) travel of $582 (2013: $7,950); and (v) wages of $-0- (2014: $5,000). General and administrative expenses also generally include corporate overhead, financial and administrative contracted services, marketing, legal, auditor, edgarizing and transfer agent fees.

 

Loss from operations for the three month period ended September 30, 2014 was ($26,864) compared to loss from operations of ($166,201) during the three month period ended September 30, 2013. Operating expenses increased during the three month period ended September 30, 2014 generally due to decreased consulting and professional fees based upon an increase in scope and scale of business operations.

 

During the three month period ended September 30, 2014, we incurred other income (expense) of ($9,888,332) (2013: $11,623,033) relating to interest expense - derivative associated with the derivative liability on our outstanding convertible notes, which was offset by $9,888,332 (2013: $11,623,033) in other income. This resulted in income before taxes of $9,861,468 during the three month period ended September 30, 2014 compared to loss before taxes of ($11,789,234) during the three month period ended September 30, 2014.

 

Therefore, our net income and income per share during the three month period ended September 30, 2014 was $9,861,468 or $0.04 per share compared to a net loss and loss per share of ($11,789,234) or ($0.11) per share during the three month period ended September 30, 2013. Net profit increased substantially during the three month period ended September 30, 2014 as compared to September 30, 2013 as a result of the other income attributable to the outstanding convertible notes payable. The weighted average number of shares outstanding was 355m530m385 and 107,081,164 for the three month periods ended September 30, 2014 and September 30, 2013, respectively.

 

 
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LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2014, our current assets were $103,461 and our current liabilities were $47,963,412, which resulted in a working capital deficit of $47,859,951. As of September 30, 2014, current assets were comprised of $1,981 in cash and $101,480 in loan receivable. As of September 30, 2014, current liabilities were comprised of: (i) $161,276 in accounts payable; (ii) $1,016,178 in convertible notes payable; and (iii) $46,785,958 in derivative liability. See " -- Material Commitments".

 

As of September 30, 2014, our total assets were $101,884 comprised of current assets. The slight decrease in total assets during the three month period ended September 30, 2014 from fiscal year ended June 30, 2014 was primarily due to the decrease in cash of $1,981.

 

As of September 30, 2014, our total liabilities were $47,963,412 comprised entirely of current liabilities. The decrease in liabilities during the three month period ended September 30, 2014 from fiscal year ended June 30, 2014 was primarily due to the decrease in the derivative liability of $9,888,332.

 

Stockholders’ deficit decreased from ($47,963,965) as of June 30, 2014 to ($47,704,951) as of September 30, 2014.

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the three month period ended September 30, 2014, net cash flows used in operating activities was ($25,792) compared to ($171,398) for the three month period ended September 30, 2013. Net cash flows used in operating activities consisted primarily of net income of $9,861,468 (2013: ($11,789,234), which was adjusted by ($9,888,332) (2013: $11,623,033) of derivative interest calculated from the outstanding convertible notes. Net cash flows used in operating activities was further changed by an increase of $1,072 (2013: $5,197) of accounts payable and accrued expenses.

 

Cash Flows from Investing Activities

 

For the three month period ended September 30, 2014 and September 30, 2013, net cash flows used in investing activities was $0.

 

Cash Flows from Financing Activities

 

We have financed our operations primarily from debt or the issuance of equity instruments. For the three month period ended September 30, 2014, net cash flows provided from financing activities was $27,774 compared to $150,000 for the three month period ended September 30, 2013. Cash flows from financing activities for the three month period ended September 30, 2014 consisted of $27,774 in proceeds from convertible notes payable compared to $150,000 in proceeds from convertible notes for the three month period ended September 30, 2013.

 

PLAN OF OPERATION AND FUNDING

 

We expect that future working capital requirements will to be funded through a combination of our existing funds, debt and equity, and potential generation of revenues. Our working capital requirements are expected to increase in line with the growth of our business.

 

Our principal demands for liquidity are to increase research and development, capacity for developing products, inventory purchase, potential sales distribution, and general corporate purposes. We intend to meet our liquidity requirements, including capital expenditures related to the purchase of equipment and/or inventory, and the expansion of our business, through cash flow provided by funds raised through proceeds from the issuance of debt or equity.

 

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements. We may finance expenses with further issuances of securities and debt issuances. Any additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all.

 

 
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MATERIAL COMMITMENTS

 

Convertible Notes

 

On December 30, 2012, we entered into a convertible promissory note for $201,000 bearing no interest and convertible at a 50% discount to market. The note is payable on demand. Since the conversion rate is discounted to market, we calculated a derivative liability of $5,264,235 at September 30, 2014 using the Black Scholes Model. During the three month period ended September 30, 2014, $86,662 of notes payable was converted by the note holder into shares of common stock.

 

On December 31, 2012, we entered into a convertible promissory note $90,000 bearing no interest and convertible at a 50% discount to market. During the three month period ended September 30, 2014, the entire balance of the note payable was converted by the holder into shares of our common stock.

 

On March 31, 2013 and September 30, 2013, we entered into convertible promissory notes for $350,000 and $275,000 respectively bearing no interest and convertible at a 50% discount to market. The notes are payable on demand. We calculated a derivative liability for these notes of $28,775,688 at September 30, 2014 using the Black Scholes Model. During the three month period ended September 30, 2014, $65,884 of notes payable was converted by the note holder into shares of our common stock.

 

From October to December 31, 2013, we entered into similar agreements for $130,000. At September 30, 2014, we calculated a derivative liability of $2,951,990 using the Black Scholes Model. During the three month period ended September 30, 2014, $65,884 of notes payable was converted by the note holder into shares of common stock.

 

From April 2014 to June 2014, we executed three additional convertible notes with the same terms as conditions, 50% discount due in 1 year for a total of $184,950. We calculated a derivative liability of $8,515,300 at September 30, 2014 associated with these notes using the Black Scholes model.

 

From July 2014 to September 30, 2014, we executed two additional convertible notes with the same terms and conditions, 50% discount due in 1 year for a total of $27,774. We recorded a derivative liability of $1,278,745 at September 30, 2014 associated with these notes using the Black Scholes Model.

 

At September 30, 2014, we had a balance of convertible note payable of $1,016,178. In connection with the issuance of these convertible notes, we have recorded a derivative liability of $46,785,958 at June 30, 2014.

 

Certain of these notes have been converted into shares of common stock subsequent to fiscal year ended June 30, 2014. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities."

 

PURCHASE OF SIGNIFICANT EQUIPMENT

 

We do not intend to purchase any significant equipment during the next twelve months.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

 
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GOING CONCERN

 

The independent auditors' report accompanying our June 30, 2014 and June 30, 2013 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. We have suffered recurring losses from operations, have a working capital deficit and are currently in default of the payment terms of certain note agreements. These factors raise substantial doubt about our ability to continue as a going concern.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse change in foreign currency and interest rates.

 

Exchange Rate

 

Our reporting currency is United States Dollars (“USD”). In the event we acquire any properties outside of the United States, the fluctuation of exchange rates may have positive or negative impacts on our results of operations.

 

Interest Rate

 

Interest rates in the United States are generally stable. Any potential future loans will relate mainly to acquisition of properties and will be mainly short-term. However, our debt may be likely to rise in connection with expansion and if interest rates were to rise at the same time, this could have a significant impact on our operating and financing activities. We have not entered into derivative contracts either to hedge existing risks for speculative purposes.

 

ITEM 4. CONTROLS AND PROCEDURES

 

DISCLOSURE CONTROLS AND PROCEDURES

 

Evaluation of disclosure controls and procedures.

 

We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective.

 

 
21

  

Management’s report on internal control over financial reporting.

 

Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

·

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

·

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

·

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

 

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.

 

Our chief executive officer and our chief financial officer assessed the effectiveness of our internal control over financial reporting as of September 30, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework.

 

Based on our assessment, our chief executive officer and our chief financial officer believe that, as of September 30, 2014, our internal control over financial reporting is not effective based on those criteria, due to the following:

 

·

Deficiencies in Segregation of Duties. Lack of proper segregation of functions, duties and responsibilities with respect to our cash and control over the disbursements related thereto due to our very limited staff, including our accounting personnel.

·

Deficiencies in the staffing of our financial accounting department. The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is limited. This weakness does not enable us to maintain adequate controls over our financial accounting and reporting processes regarding the accounting for non-routine and non-systematic transactions. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.

 

 
22

 

In light of this conclusion and as part of the preparation of this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the years and periods then ended.

 

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this report.

 

Changes in internal control over financial reporting.

 

There were no significant changes in our internal control over financial reporting during the three month period ended September 30, 2014, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

AUDIT COMMITTEE

 

Our board of directors has not established an audit committee. The respective role of an audit committee has been conducted by our board of directors. We intend to establish an audit committee during the fiscal year 2014/2015. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our board of directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.

 

 
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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

 

ITEM 1A. RISK FACTORS

 

No report required

 

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

 

In September of 2013, we issued an aggregate of 101,000,000 shares of unregistered common stock to Dr. Castano pursuant to the Asset Purchase Agreement. These shares were returned to treasury. During the three month period ended September 30, 2014 and to current date, we issued an aggregate 103,125,000 shares of our common stock as follows:

 

Conversion of Debt

 

On August 1, 2014, our Board of Directors authorized the settlement of debt in the amount of $65,883,59 by the issuance of 10,135,937 shares of common stock to Asus Global Holding Inc. (“Asus”). We had previously issued to Asus a convertible promissory note dated September 17, 2013, as amended, in the principal amount of $275,000.00 (the "Convertible Note"), which was issued to Asus evidencing those sums advanced by Asus to us during quarter ended September 30, 2013 for working capital purposes. The terms and provisions of Section 3.2 of the Convertible Note provide that the number of whole shares of common stock into which the Convertible Note may be voluntarily converted shall be determined by dividing the aggregate principal amount borrowed by that price equal to a 50% discount of the then trading price of our shares on the OTC Markets at the date of conversion and precludes Asus from any conversion resulting in Asus holding in excess of 9.99% equity interest of the total issued and outstanding shares of our common stock (collectively, the "Asus Amendments"). Subsequently, we received that certain conversion notice dated August 1, 2014 from Asus (the “Conversion Notice”), which provided for conversion of $65,883.59 into 10,135,937 shares of our common stock at a per share price of $0.0065. The Board of Directors determined that the average trading price of our shares of common stock for the prior five business days was $0.0130 per share resulting in a 50% discounted conversion rate of $0.0065 per share, which the Board of Directors approved and authorized (the "Conversion Term"). Therefore, effective August 1, 2014, the Board of Directors authorized the issuance of 10,135,937 shares of common stock at a per share price of $0.0065 to Asus.

 

 
24

  

On August 12, 2014, the Board of Directors authorized the further settlement of debt in the amount of $86,662.26 by the issuance of 10,135,937 shares of common stock to Najo International Corp. ("Najo") . We had previously issued to Globe Financial Corp. ("Globe") a convertible promissory note dated December 30, 2012 in the principal amount of $201,000. Globe entered into that certain assignmentof the convertible note dated August 11, 2014 with Najo. We received that certain conversion notice dated August 11, 2014 from Najo (the “Conversion Notice”), which provided for conversion of $86,662.26 into 10,135,937 shares of our common stock at a per share price of $0.00855. The Board of Directors determined that the average trading price of our shares of common stock for the prior five business days was $0.0171 per share resulting in a 50% discounted conversion rate of $0.00855 per share, which the Board of Directors approved and authorized (the "Conversion Term"). Therefore, effective August `12, 2014, the Board of Directors authorized the issuance of a further 10,135,937 shares of common stock at a per share price of $0.00855 to Najo.

 

On September 1, 2014, the Board of Directors authorized the further settlement of debt in the amount of $90,000.00 by the issuance of 7,659,574 shares of common stock to Setzy Group Inc. ("Setzy") . We had previously issued to Globe a convertible promissory note dated December 30, 2012 in the principal amount of $201,000. Globe entered into that certain assignmentof the convertible note dated August 11, 2014 with Setzy. We received that certain conversion notice dated August 19, 2014 from Setzy (the “Conversion Notice”), which provided for conversion of $90,000.00 into 7,659,574 shares of our common stock at a per share price of $0.01175. The Board of Directors determined that the average trading price of our shares of common stock for the prior five business days was $0.0235 per share resulting in a 50% discounted conversion rate of $0.01175 per share, which the Board of Directors approved and authorized (the "Conversion Term"). Therefore, effective September 1, 2014, the Board of Directors authorized the issuance of a further 7,659,574 shares of common stock at a per share price of $0.01175 to Setzy.

 

On September 1, 2014, the Board of Directors authorized the further settlement of debt in the amount of $65,883.59 by the issuance of 10,135,937 shares of common stock to Mex Investments Corporation ("Mex") . We had previously issued to Mex a convertible promissory note dated October 1, 2013 in the principal amount of $70,000.00. We received that certain conversion notice dated August 5, 2014 from Mex (the “Conversion Notice”), which provided for conversion of $65,883.59 into 10,135,937 shares of our common stock at a per share price of $0.0065. The Board of Directors determined that the average trading price of our shares of common stock for the prior five business days was $0.0130 per share resulting in a 50% discounted conversion rate of $0.0065 per share, which the Board of Directors approved and authorized (the "Conversion Term"). Therefore, effective September 1, 2014, the Board of Directors authorized the issuance of a further 10,135,937 shares of common stock at a per share price of $0.0065 to Mex.

 

The shares of common stock were issued to the above creditors in reliance on Regulation S promulgated under the United States Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The creditors acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they t had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

 

 
25

  

DB Metals Joint Venture Agreement

 

On June 27, 2014, our Board of Directors authorized the execution of the DB Metals Joint Venture Agreement with DB Metals for the manufacture, distribution and marketing of DB Metal's technology and products. Effective on July 30, 2014, the Board of Directors authorized the issuance of 100,000,000 shares of restricted common stock at a per share price of $0.001 to DM Metal's shareholders as follows: (i) 20,000,000 shares to Bernardo Camacho Chararria (who is our President/Chief Executive Officer, Treasurer/Chief Financial Officer and sole member of the Board of Directors); and (ii) 80,000,000 shares to Jose Armando Camargo Del Bianco. The shares of common stock were issued to the two non-United States residents in reliance on Regulation S promulgated under the United States Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. Each individual acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

No report required.

 

ITEM 4. MINE SATEFY DISCLOSURES

 

No report required.

 

ITEM 5. OTHER INFORMATION

 

No report required.

 

 
26

  

ITEM 6. EXHIBITS

 

The following exhibits are filed as part of this Quarterly Report.

 

Exhibit No.

 

Description

   

3.1 

 

Articles of Incorporation, as amended (1)

3.3 

 

Bylaws (1)

10.1

 

Convertible Promissory Note dated March 31, 2013 between Nano Labs Corp. and Asus Global Holding Inc. (2)

10.2

Convertible Promissory Note dated September 17, 2013 between Nano Labs Corp. and Asus Global Holding Inc. (2)

10.3

Convertible Promissory Note dated December 30, 2012 between Nano Labs Corp. and Globe Financial Corp. (2)

10.4

Convertible Promissory Note dated December 31, 2012 between Nano Labs Corp. and Globe Financial Corp. (2)

10.5

Collaboration Agreement dated September 25, 2013 between Nano Labs Corp. and Soluciones Nanotechnolgicas S.L. (2)

10.6

Mutual Confidentiality Agreement dated April 7, 2013 between Saint-Gobain Ceramics & Plastics Inc. and Nano Labs Corp. (2)

10.7

Confidential Disclosure Agreement dated May 6, 2013 between Dentsply International Inc. and Nano Labs Corp. (2)

10.8

 

2013 Stock Option Plan of Nano Labs Corp. (3)

10.9

 

Rescission Agreement dated March 4, 2014 between Nano Labs Corp. and Dr. Victor Castano. (4)

16.1

 

Letter from KBL LLP dated May 24, 2013 incorporated by reference to Exhibit 16.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 2013.

31.1

 

Certification of Principal Executive Officer Required By Rule 13a-14(A) of the Securities Exchange Act of 1934, As Amended, As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002*

31.2

 

Certification of Principal Financial Officer Required By Rule 13a-14(A) of the Securities Exchange Act of 1934, As Amended, As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002*

32.1

 

Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2

 

Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.ins

 

XBRL Instance Document**

101.sch 

 

XBRL Taxonomy Schema**

101.cal 

 

XBRL Taxonomy Calculation Linkbase**

101.def

 

XBRL Taxonomy Definition Linkbase**

101.lab

 

XBRL Taxonomy Label Linkbase**

101.pre

 

XBRL Taxonomy Presentation Linkbase**

 

(1)

 

Incorporated by reference to the same exhibit filed with the Company’s registration statement on Form S-1 with the Securities and Exchange Commission on January 12, 2011 .

 

 

 

(2)

 

Incorporated by reference to the exhibit filed with the Company's Current Report on Form 8-K with the Securities and Exchange Commission on October 10, 2013

 

 

 

 

 

Incorporated by reference to the exhibit filed with the Company's Current Report on Form 8-K with the Securities and Exchange Commission on May 23, 2013.

 

 

 

Incorporated by reference to the exhibit filed with the Company's Current Report on Form 8-K with the Securities and Exchange Commission on May 29, 2013.

 

 

 

Incorporated by reference to the exhibit filed with the Company's Current Report on Form 8-K with the Securities and Exchange Commission on July 24, 2013 and August 6, 2013.

 

(3)

 

Incorporated by reference to the exhibit filed with the Company's Quarterly Report on form 10-Q with the Securities and Exchange Commission on November 10, 2013.

 

 

 

(4)

 

Incorporated by reference to the exhibit filed with the Company's Current Report on Form 8-K with the Securities and Exchange Commission on March 4, 2014.

 

* Filed herewith.

 

 
27

  

 SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Nano Labs Inc.
a Colorado corporation

 
       
November 20, 2014 By: /s/ Bernardo Camacho Chavarria  
   

Bernardo Camacho Chavarria

 
 

Its:

Chief Executive Officer
Director
 
       

November 20, 2014

By:

/s/ Bernardo Camacho Chavarria

Bernardo Camacho Chavarria

Its:

 

Chief Financial Officer/Principal Accounting Officer

Director

 

 

 

28


 



EXHIBIT 31.1

 

CERTIFICATION

 

I, Bernardo Camacho Chavarria, certify that;

 

1.

I have reviewed this quarterly report on Form 10-Q of Nano Labs Corp.;

 

2.

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

 

3.

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

 

4.

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

 

 

a)

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

 

 

b)

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

 

 

c)

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

 

 

d)

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

 

5.

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

 

 

a)

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

 

 

b)

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

 

 

November 20, 2014

By:

/s/ Bernardo Camacho Chavarria

 
   

Bernardo Camacho Chavarria

 
   

Chief Executive Officer

Director

 

 

 



EXHIBIT 31.2

 

CERTIFICATION

 

I, Bernardo Camacho Chavarria, certify that;

 

1.

I have reviewed this quarterly report on Form 10-Q of Nano Labs Corp.;

 

2.

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

 

3.

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

 

4.

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

 

 

a)

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

 

 

b)

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

 

 

c)

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

 

 

d)

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

 

5.

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

 

 

a)

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

 

 

b)

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

 

 

November 20, 2014

By:

/s/ Bernardo Camacho Chavarria

 
   

Bernardo Camacho Chavarria,

 
   

Chief Financial Officer/Principal Accounting Officer

Director

 

 



EXHIBIT 32.1

 

In connection with the Quarterly Report of Nano Labs Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2014 as filed with the Securities and Exchange Commission (the “Report”), Bernardo Camacho Chavarria, the Chief Executive Officer and Director of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

   

(2)

The information contained in the Report fairly presents, in all material respects the financial condition and results of the Company.

 

 

November 20, 2014

By:

/s/ Bernardo Camacho Chavarria

 
   

Bernardo Camacho Chavarria,

 
   

Chief Executive Officer

Director

 

 



EXHIBIT 32.2

 

In connection with the Quarterly Report of Nano Labs Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2014 as filed with the Securities and Exchange Commission (the “Report”), Bernardo Camacho Chavarria, the Chief Financial Officer/Principal Accounting Officer and Director of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

   

(2)

The information contained in the Report fairly presents, in all material respects the financial condition and results of the Company.

 

 

November 20, 2014

By:

/s/ Bernardo Camacho Chavarria

 
   

Bernardo Camacho Chavarria

 
   

Chief Financial Officer/Principal Accounting Officer

Director