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 March 31, 2014

o 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)
 
(8 88) 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 o

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 o

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
o
Accelerated filer
o
Non-accelerated filer
o
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 o 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 May 19, 2014
Common Stock, $0.001
 
103,125,000



 
 

 
NANO LABS CORP.
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2014

INDEX
 
 
 
Page
 
PART I. FINANCIAL INFORMATION
     
 
 
 
 
Item 1.
Financial Statements
    3  
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    16  
Item 3.
Qualitative and Quantitative Disclosures About Market Risk
    23  
Item 4.
Controls and Procedures
    23  
 
       
PART II. OTHER INFORMATION
       
 
       
Item 1.
Legal Proceedings
    25  
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    25  
Item 3.
Defaults Upon Senior Securities
    25  
Item 4.
Mine Safety Disclosure
    25  
Item 5.
Other information
    25  
Item 6.
Exhibits
    28  
 
       
SIGNATURES
    29  

 
2

 
 
PART I

ITEM 1. FINANCIAL STATEMENTS

NANO LABS CORP.
BALANCE SHEETS
 
 
 
March 31,
2014
   
(Restated)
June 30,
2013
 
ASSETS
           
CURRENT ASSETS
           
Cash
  $ 1,651     $ 28,196  
Loan Receivable
    100,233       -  
                 
Total current assets
    101,884       28,196  
                 
Total Assets
  $ 101,884     $ 28,196  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
CURRENT LIABILITIES:
               
Accounts payable
  $ 94,888     $ 7,765  
Related party payables
    -       -  
Notes payable
    -       -  
Convertible notes payable
    1,203,000       766,000  
Derivative Liability
    30,526,537       9,448,441  
Accrued interest payable
    -       -  
      31,824,425       10,222,206  
                 
Total current liabilities
    31,824,425       10,222,206  
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock: $0.001 par value; 10,000,000 shares authorized;
               
none issued or outstanding at March 31, 2014 and June 30, 2013, respectively.
    -       -  
Common stock: $0.001 par value; 500,000,000 shares authorized;
               
103,125,000 shares issued respectively at March 31, 2014 and June 30, 2013 respectively
    103,125       103,125  
Common stock issuable
    -       101,000  
Additional paid-in capital
    482,356       381,356  
Accumulated deficit
    (32,308,022 )     (10,779,491 )
Total stockholders' deficit
    (31,722,541 )     (10,194,010 )
                 
Total liabilities and stockholders' deficit
  $ 101,884     $ 28,196  
 
The accompanying notes are an integral part of these financial statements.
 
 
3

 

NANO LABS CORP.
STATEMENTS OF OPERATIONS
 
   
Three Months Ended
March 31,
   
Nine Months
March 31,
 
   
2014
   
2013
   
2014
   
2013
 
                             
Sales
  $ -     $ -      -      -  
Cost of goods sold
    -       -      -      -  
Gross Margin
    -       -      -      -  
                             
Operating Expenses
                           
Consulting
    25,430       -       162,395      -  
General and administrative
    60,782       251,270       151,512       374,032  
Professional Fees
    27,542       -       72,909       -  
Travel
    11,281       -       33,238       -  
Wages
    7,882       -       30,614       -  
Total operating expenses
    132,917       251,270       450,668       374,032  
                                 
Loss from Operations
    (132,917 )     (251,270 )     (450,668 )     (374,032 )
                                 
Other income (Expense)
                               
Interest expense- derivative
    (3,709,639 )     -       (21,078,096 )     -  
Interest Income
    233       -       233       -  
Other (income) expenses
    (3,709,406 )     -       (21,077,863 )        
                                 
Loss before Income Taxes
    (3,842,323 )     (251,270 )     (21,528,531 )     (374,032 )
                                 
Provision for income tax
    -       -       -       -  
                                 
Net Loss
    (3,842,323 )     (251,270 )     (21,528,531 )     (374,032 )
                                 
Net income (loss) per common share-basic
  $ (0.02 )   $ (0.00 )     (0.13 )     -  
                                 
Weighted average common shares outstanding- basic
    191,780,556       179,125,000      
170,278,284
     
179,125,000
 
 
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
    -       -       -       -       -       -       (21,528,531 )     (21,528,531 )
                                                                 
Balance December 31, 2013
    -     $ -       103,125,000     $ 103,125     $ -     $ 482,356     $ (32,308,022 )   $ (31,722,541 )
 
The accompanying notes are an integral part of these financial statements.
 
 
5

 
 
NANO LABS CORP.
STATEMENTS OF CASH FLOWS
 
   
Nine Months Ended
March 31,
 
   
2014
   
2013
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (21,528,531 )   $ (374,032 )
Adjustments to reconcile net loss to net cash
               
used by operating activities:
               
Derivative interest
    21,078,096       -  
Debt forgiveness
    -       -  
Changes in operating assets and liabilities:
               
(Increase) in Notes Receivable
    (100,233 )     -  
Related party payables
    -       208,142  
Accounts payable and accrued expenses
    87,123       -  
NET CASH USED IN OPERATING ACTIVITIES
    (463,545 )     (165,890 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Repayment of notes payable
    -       (18,000 )
Proceed from convertible notes payable
    437,000       350,000  
NET CASH PROVIDED BY FINANCING ACTIVITIES
    437,000       332,000  
                 
NET CHANGE IN CASH
    (26,545 )     166,110  
                 
Cash at beginning of the period
    28,196       -  
                 
Cash at end of the period
  $ 1,651     $ 166,110  
                 
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
MARCH 31, 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 March 31, 2014 and June 30, 2013 the Company had no cash equivalents.

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 March 31, 2014 and June 30, 2013.

The Company had no assets and/or liabilities measured at fair value on a recurring basis for the period ended March 31, 2014 and June 30, 2013, respectively, using the market and income approaches.

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 March 31, 2014 and June 30, 2013.

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 90,268,285 potentially dilutive shares outstanding as of March 31, 2014 which were derived from the outstanding convertible promissory notes. There were 17,022, 222 potentially dilutive shares outstanding as of June 30, 2013.

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 March 31, 2014, the Company had an accumulated deficit of $32,308,022, which included a net loss of $21,528,531 reported for the nine months ended March 31, 2014 Also, during the nine months ended March 31,2014 the Company used net cash of $463,545 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 – ASSET PURCHASE AGREEMENT
 
On October 10, 2012, the Company executed an asset purchase agreement with Dr. Victor Castano, a related party, whereby the Compan issued on September 18, 2013 101,000,000 common shares for the assignment and all rights to Dr. Castano’s patent pending nanotechnology.

The Company valued the 101,000,000 shares at par value ($0.001), which resulted in $101,000 of consideration paid for the asset. This deal was recinded in March 2014 the shares returned and the resulting transaction cancelled.
 
 
11

 
 
NOTE 5 – NOTE RECEIVABLE

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

NOTE 6 – COMMITMENTS & CONTIGENCIES

Office Lease

On November 1, 2012, 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. The lease was renewed on November 1, 2013 for another 12 months.

Minimum future rental payments under the agreement are as follows:
 
2013- $2,800

Consulting Agreement

There are no consulting or employment agreements in force.
 
NOTE 7 – CONVERTIBLE NOTES PAYABLE
 
On December 30, 2012, the Company entered into a convertible promissory note with Globe Financial Corp. 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 $7,895,254 at March 31, 2014 using the Black Scholes Model.

On December 31, 2012, the Company entered into a convertible promissory note with Globe Financial Corp. for $90,000 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 $3,779,515 at March 31, 2014 using the Black Scholes Model.

On January 31, 2013 and March 31, 2013 the Company entered into a convertible promissory note with Asus Global Holdings, Inc for $100,000 and $375,000 respectively bearing no interest and convertible at a 50% discount to market. The note is payable on demand. The Company calculated a derivative liability of $17,233,174 at March 31, 2014 using the Black Scholes Model.

From July to September 2013 the Company entered into similar note agreements for $150,000 and the company has recorded a derivative liability of $856,720.

From October to December 31, 2013 the Company entered into similar agreements for $130,000 and the company has recorded a derivative liability of $404,068.

From January to March 31, 2014 the Company entered into similar agreements as above for $32,000 and $125,000. The Company at March 31, 2014 recorded a derivative liability of $73,096 for the former and $284,640 for the latter.

At March 31, 2014, the balance due against these convertible notes was $1,203,000. In connection with the issuance of these convertible notes the Company recorded derivative liability of $30,526,537 at March 31, 2014.
 
 
12

 
 
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 the asset purchase agreement with Dr. Castano, a related party, the Company issued him 101,000,000 common shares at par value ($0.001) during the quarter ended September 30, 2013. This transaction was cancelled and the shares cancelled in March of 2014.
 
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 – RESTATEMENT OF FINANCIAL STATEMENTS

The Company has restated its Balance Sheet as of June 30, 2013, its Statement of Operations for the year ended June 30, 2013, its Statement of Cash Flows for the year ended June 30, 2013, and it’s Statements of Stockholders’ Equity to account for an additional $100,000 of convertible debt from Asus Global Holdings Inc. The funds were wired directly to an officer of the Company and did not pass through the Company’s bank account. The Company recalculated the derivative liability related to the additional convertible debt outstanding. The terms of the additional convertible debt are the same as other convertible debt from Asus Global Holdings.

The following are previously recorded and restated balances as of June 30, 2013 and for the year ended June 30, 2013.
 
 
13

 
 
NANO LABS CORP.
BALANCE SHEETS
 
   
June 30, 2013
 
   
Originally
Reported
   
Restated
   
Difference
 
ASSETS
                 
CURRENT ASSETS
                 
Cash
  $ 28,196     $ 28,196       -  
                         
Total current assets
    28,196       28,196       -  
                         
Total Assets
  $ 28,196     $ 28,196       -  
                         
LIABILITIES AND STOCKHOLDERS' DEFICIT
                       
CURRENT LIABILITIES:
                       
 Accounts payable
  $ 7,765     $ 7,765       -  
 Related party payables
    -       -       -  
 Notes payable
    -       -       -  
 Convertible notes payable
    666,000       766,000       (100,000 )
 Derivative Liability
    8,223,786       9,448,441       (1,224,655 )
 Accrued interest payable
    -       -       -  
      8,897,551       10,222,206       (1,324,655 )
                         
Total current liabilities
    8,897,551       10,222,206       (1,324,655 )
                         
STOCKHOLDERS' DEFICIT
                       
Preferred stock: $0.001 par value; 10,000,000 shares authorized;
                       
none issued or outstanding at June 30, 2013 and 2012, respectively.
    -       -       -  
Common stock: $0.001 par value; 500,000,000 shares authorized;
                       
103,125,000 and 179,125,000 shares issued and outstanding
                       
at June 30, 2013 and 2012, respectively.
    103,125       103,125       -  
Common stock issuable
    101,000       101,000       -  
Additional paid-in capital
    381,356       381,356       -  
Accumulated deficit
    (9,454,836 )     (10,779,491 )     1,324,655  
Total stockholders' deficit
    (8,869,355 )     (10,194,010 )     1,324,655  
                         
Total liabilities and stockholders' deficit
  $ 28,196     $ 28,196       -  
 
The accompanying notes are an integral part of these financial statements.
 
 
14

 
 
NOTE 11 – SUBSEQUENT EVENTS
 
Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that no other material subsequent events exist.
 
 
15

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

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.

Rescission of Asset Purchase Agreement and Assignment

Previously, on October 10, 2012, we entered into that certain asset purchase agreement (the "Asset Purchase Agreement") with Dr. Victor Castano, our Chief Scientific and Technological Officer and a member of our Board of Directors ("Castano"). In accordance with the terms and provisions of the Asset Purchase Agreement, Castano sold, assigned and transferred to us all rights and assets related to Castano's Nano Coatings Technology (the "Nano Coating Technology") including, but not limited to: (i) all plans, specifications, drawings, concepts, designs, engineering studies and reports, test results, models, manufacturing processes and flowcharts; (ii) all raw materials, supplies, work in progress, finished product and lists of suppliers; (iii) all software programs and software codes relating thereto and all copies and tangible embodiments of the software programs and software code (in source and object code form) together with all documentation related to such programs and code; (iv) all intellectual property rights including all intellectual property, patent applications, patents, trademarks, tradenames, copyrights, and the exclusive right for us to hold ourselves out to be the successor to the Nano Coatings Technology;(v) all licenses to the Nano Coatings Technology and properties of third parties (including licenses with respect to intellectual property rights owned by third parties); (vi) claims, royalty rights, deposits, and rights and claims to refunds; (vii) all Internet domain names and registrations held by Castano that relate to the Nano Coatings Technology; (viii) all franchises, permits, licenses, agreements, waivers and authorizations from, issued or granted by any governmental authority; and (ix) copies of marketing and sales information, including pricing and customer lists. In consideration thereof and in further accordance with the terms and provisions of the Asset Purchase Agreement, we issued an aggregate 101,000,000 shares of our restricted common stock to Dr. Castano.
 
 
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On December 13, 2013, we also entered into that certain universal assignment (the "Assignment") with Castano pertaining to an invention entitled "Nanotechnological Thermal Insulating Coating and Uses Thereof" for which a patent application was filed with the United States Patent, Copyright and Trademark Office on October 31, 2012, Serial Number 61/720,716 (the "Nanotechnology Patent"). In accordance with the terms and provisions of the Assignment, Castano transferred and assigned to us his whole right, title and interest for the United States and Canada and all other countries in and to the said Nanotechnology Patent.

Effective on March 4, 2014, our Board of Directors approved the execution of that certain rescission agreement dated March 4, 2014 (the "Rescission Agreement") with Castano. Our Board of Directors determined that consummation of the Asset Purchase Agreement was not in our best interests or our shareholders in light of certain difficulties pertaining to the testing of the Nano Coating Technology and thus determined that the Asset Purchase Agreement should be rescinded (the “Rescission”) and that all right, title and interest in and to the Nano Coating Technology shall be returned to Castano.

Therefore, in accordance with the terms and provisions of the Rescission Agreement: (i) we agreed with Castano to rescind, cancel and set aside the Asset Purchase Agreement, including the terms and provisions regarding the issuance of the 101,000,000 shares of restricted common stock by us to Castano in exchange for the transfer to Castano of all right, title and interest in and to the Nano Coating Technology; (ii) Castano agreed to return to us the share certificate evidencing the 101,000,000 shares of our restricted common stock issued to Castano; (iii) we agreed that all right, title and interest in and to the Nano Coating Technology shall be transferred to and in the name of Dr. Victor Castano; (iv) Castano agreed to resign as our Chief Scientific and Technological Officer and a member of the Board of Directors effective as of March 4, 2014; (v) both parties agreed to release and discharge each other from any and all claims, manner of actions, whether at law or in equity suits, judgments, debts, liens, liabilities, demands, damages, losses, sums of money, expenses or disputes, known or unknown, fixed or contingent, which they now have or may have hereafter, directly or indirectly, individually or in any capacity against each other by reason of any act, omission, matter, cause, or thing whatsoever, from the beginning of time to, and including the date of the execution of the Rescission Agreement, relating to the aforesaid Asset Purchase Agreement and Rescission; and (vi) from and at all times after the date of the Rescission Agreement, both parties shall, to the fullest extent permitted by law and to the extent provided herein, indemnify and hold harmless each other against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses of any kind or nature whatsoever (including without limitation reasonable attorney’s fees, costs and expenses) incurred by or asserted against either party from and after the date thereof, whether direct, indirect or consequential, as a result of or arising from or in any way relating to any claim, demand, suit, action, or proceeding (including any inquiry or investigation) by any person relating to the Rescission Agreement, whether threatened or initiated, whether or not any such party is a party to any such action or proceeding, suit or the target of any such inquiry or investigation.
 
 
17

 

Termination of Provisional Patent

On October 31, 2012, filed an application for patent protection entitled "Nanotechnological Thermal Insulating Coating and Uses Thereof" with the United States Patent, Copyright and Trademark Office (the "Nanothermal Insulation Coating Patent"). The Nanothermal Insulation Coating Patent related to dispersion which provides paints, namely films. More specifically, the subject matter relates to ceramic and/or carbon nanoparticle dispersions containing ceramic and/or carbon nanoparticle having chemically functionalized surface dispersed in a polymeric matrix. Polymeric resin dispersions have been widely utilized as a starting material for paints or coating of film-forming agents, i.e. a starting material for a paint or a coating agent for coating an outside and inside of an aircraft, automobile, external wall surface, a floor material, furniture, etc. On November 13, 2012, the United States Patent, Copyright and Trademark Office issued to Castano a provisional patent for the Nanothermal Coating Patent, which was assigned to us pursuant to the Asset Purchase Agreement.

A provisional patent is for the duration of twelve months from the date of filing with the United States Patent and Copyright Office. A provisional patent would have allowed us twelve months of protection of our intellectual property during testing, discussions on production formulations and improve and present our technology to potential clients. The provisional patent would further allow us to make improvements before filing its patent application prior to the expiration of the provisional patent. After the twelve month provisional patent term, we could have either proceeded to file the patent application or abandon the application if the product was not deemed commercially feasible.
 
We have made the recent decision to not move forward with filing for further patent application with the United States Patent and Copyright Office. We have been testing the Nano coating produced in a laboratory production over the past seventeen months. This testing has resulted in recent evidence that the Nano coating is inconsistent in production resulting in clumping of the Nano particle during larger scale production and installation. We received a written letter dated February 28, 2014 from the International Searching Authority with regards to their findings (the "Opinion"). We thus have made the recent decision to not proceed with further patent application of Castano's Nano system as it applied to the provisional patent applications. Resolving the issue would result in an increase in production costs from the original estimated cost of $9.00 per gallon to over $36.00 and management has determined that this is cost prohibitive. Management also considered other factors in its analysis regarding termination of the Asset Purchase Agreement including, but not limited to: (i) inconsistency in scaling up production from laboratory production to commercial scale; (ii) inconsistency in performance of the Nano coating product due to clumping of Nano particles; (iii) increase in production costs to compete in the marketplace; and (iii) uncertainty in obtaining patent protection due to the novelty, inventive steps and industrial applicability as outlined in the Opinion of prior patent claims and patents issued on Nano coating technology, which could lead to lawsuits for patent infringement.

Cancellation of Purchase Order for 27,000 Liters

We previously announced receipt of a purchase order for twenty-seven thousand (27,000) liters of its nano coatings (the "Purchase Order"). The Purchase Order was issued to us and Atencio and Atencio by Urban del Golfo S.A. de CV, a supplier of products to Pemex. Atencio and Atencio is a certified maintenance partner of Pemex since 1991 and carried out the installation of the intumescent fire resistant coatings at Pemex’s Francisco I. Madero Refinery. We further disclosed that management deemed the Purchase Order's value at approximately $630,000, had expected to receive the full amount of $630,000 and delivered the first 1,000 liters to Atencio and Atencio to test the production samples.

Subsequently, the buyer deemed the Nano coating to be inconsistent in production resulting in clumping of the nano particle during installation. We attempted to resolve this issue resulting in the increase of production costs from $9.00 per gallon to over $36.00 per gallon. Therefore, as of the date of this Quarterly Report, Urban Del Golfo has not paid for the product delivered and has refused to pay for any additional product until the problem is resolved. We have not been able to resolve this production issue and deliver the order and, therefore, has decided to abandon the Nano coatings market. Hence, the Purchase Order was cancelled.
 
 
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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.

Nine Month Period Ended March 31, 2014 Compared to Nine Month Period Ended March 31, 2013.

Our net loss for the nine month period ended March 31, 2014 was ($21,528,531) compared to a net loss of ($374,032) during the nine month period ended March 31, 2013, an increase of $21,154,499. We generated no revenue for the nine month periods ended March 31, 2014 and March 31, 2013, respectively.

During the nine month period ended March 31, 2014, we incurred operating expenses of $450,668 compared to $374,032 incurred during the nine month period ended March 31, 2013, an increase of $76,636. During the nine month period ended March 31, 2014, operating expenses consisted of: (i) consulting fees of $162,395 (2013: $-0-); (ii) general and administrative of $151,512 (2013: $374,032); (iii) professional fees of $72,909 (2013: $-0-); (iv) travel of $33,238 (2013: $-0-); and (v) wages of $30,614 (2014: $-0-). 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 nine month period ended March 31, 2014 was ($450,668) compared to loss from operations of ($374,032) during the nine month period ended march 31, 2013. Operating expenses increased during the nine month period ended March 31, 2014 generally due to increased consulting and professional fees based upon an increase in scope and scale of business operations.

During the nine month period ended March 31,2014, we incurred other expense of $21,078,096 (2013: $-0-) relating to interest expense - derivative associated with the derivative liability on our outstanding convertible notes, which was offset by $233 in other income.

Therefore, our net loss and loss per share during the nine month period ended March 31, 2014 was ($21,528,531) or ($0.13) per share compared to a net loss and loss per share of ($374,032) or $0.00 per share during the nine month period ended March 31, 2013. Net loss increased substantially during the nine month period ended March 31, 2014 as compared to march 31, 2013 as a result of the derivative interest expense attributable to the outstanding convertible notes payable. The weighted average number of shares outstanding was 170,278,284 and 179,125,000 for the nine month periods ended March 31, 2014 and March 31, 2013, respectively.
 
 
19

 

Three Month Period Ended March 31, 2014 Compared to Three Month Period Ended March 31, 2013.

Our net loss for the three month period ended March 31, 2014 was ($3,842,323) compared to a net loss of ($251,270) during the three month period ended March 31, 2013, an increase of $3,591,053. We generated no revenue for the three month periods ended March 31, 2014 and March 31, 2013, respectively.

During the three month period ended March 31, 2014 we incurred operating expenses of $132,917 compared to $251,270 incurred during the three month period ended March 31, 2013, a decrease of $118,353. During the three month period ended March 31, 2014, operating expenses consisted of: (i) consulting fees of $25,430 (2013: $-0-); (ii) general and administrative of $60,782 (2013: $251,270); (iii) professional fees of $27,542 (2013: $-0-); (iv) travel of $11,281 (2013: $-0-); and (v) wages of $7,882 (2013: $-0-). 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 March 31, 2014 was ($132,917) compared to loss from operations of ($251,270) during the three month period ended March 31, 2013. Operating expenses decreased during the three month period ended March 31, 2014 generally due to decreased general and administrative expenses based upon the cessation of operations concerning Castano's nano technology.

During the three month period ended March 31, 2014, we incurred other expense of $3,709,639 relating to interest expense - derivative associated with the derivative liability on our outstanding convertible notes, which was offset by interest income of $233.

Therefore, our net loss and loss per share during the three month period ended March 31, 2014 was ($3,842,323) or ($0.02) per share compared to a net loss and loss per share of ($251,270) or $0.00 per share during the three month period ended March 31, 2013. Net loss increased substantially during the three month period ended March 31, 2014 as compared to March 31, 2013 as a result of the derivative interest expense attributable to the outstanding convertible notes payable. The weighted average number of shares outstanding was 191,780,556 and 179,125,000 for the three month periods ended March 31, 2014 and March 31, 2013, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2014, our current assets were $101,884 and our current liabilities were $31,824,425, which resulted in a working capital deficit of $31,722,541. As of March 31, 2014, current assets were comprised of $1,651 in cash and $100,233 in loan receivable. As of march 31, 2014, current liabilities were comprised of: (i) $94,888 in accounts payable; (ii) $1,203,000 in convertible notes payable; and (iii) $30,526,537 in derivative liability. See " -- Material Commitments".

As of March 31, 2014, our total assets were $101,884 comprised of current assets. The increase in total assets during the nine month period ended March 31, 2014 from fiscal year ended June 30, 2013 was primarily due to the recording of the loan receivable of $100,233.

As of March 31, 2014, our total liabilities were $31,824,425 comprised entirely of current liabilities. The increase in liabilities during the nine month period ended March 31, 2014 from fiscal year ended June 30, 2013 was primarily due to the increase in the derivative liability of $30,526,537.

Stockholders’ deficit increased from ($10,194,010) as of June 30, 2013 to ($31,722,541) as of March 31, 2014.
 
 
20

 

Cash Flows from Operating Activities

We have not generated positive cash flows from operating activities. For the nine month period ended March 31, 2014, net cash flows used in operating activities was ($463,545) compared to ($165,800) for the nine month period ended March 31, 2013. Net cash flows used in operating activities consisted primarily of a net loss of $21,528,531 (2013: ($374,032), which was adjusted by $21,078,096 (2012: $-0-) of derivative interest calculated from the outstanding convertible notes. Net cash flows used in operating activities was further changed by an increase of $87,123 (2013: $-0-) of accounts payable and accrued expenses, an increase of $100,233 (2013: $-0-) in notes receivable, and $-0- (2013: $208,142) in related party payables.

Cash Flows from Investing Activities

For the nine month period ended March 31, 2014 and March 31, 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 nine month period ended March 31, 2014, net cash flows provided from financing activities was $437,000 compared to $332,000 for the nine month period ended March 31, 2013. Cash flows from financing activities for the nine month period ended March 31, 2014 consisted of $437,000 in proceeds from convertible notes payable compared to $350,000 in proceeds from convertible notes payable offset by $18,000 in repayment of notes payable for the nine month period ended March 31, 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.

MATERIAL COMMITMENTS

Convertible Note Payable

On December 30, 2012, we entered into a convertible promissory note with Globe Financial Corp. 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 $7,895,254 at March 31, 2014 using the Black Scholes Model.

On December 31, 2012, we entered into a convertible promissory note with Globe Financial Corp. for $90,000 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 $3,779,515 at March 31, 2014 using the Black Scholes Model.

On January 31, 2013 and March 31, 2013, we entered into a convertible promissory note with Asus Global Holdings Inc. for $100,000 and $375,000, respectively, bearing no interest and convertible at a 50% discount to market. The note are payable on demand. Since the conversion rate is discounted to market, we calculated a derivative liability of $17,233,174 at March 31, 2014 using the Black Scholes Model.
 
 
21

 

In the three months ended September 30, 2013, we entered into a new convertible note agreement with Asus Global Holdings for $150,000 with the same terms as previously noted. We recorded a derivative liability of $856,720 at March 31, 2014 using the Black Scholes Model.

During the three month period ended December 31, 2013, we further entered into similar convertible note agreements for $130,000 with the same terms as previously noted. We recorded a derivative liability of $404,068 at March 31, 2014 using the Black Scholes Model.

During the three month period ended March 31, 2014, we entered into similar convertible notes in the principal amount of $32,000 and $125,000, respectively, with the same terms as previously noted. We recorded a derivative liability of $73,096 and $284,640 at March 31, 2014, respectively.

At March 31,. 2014, the balance due against these convertible notes was $1,203,000. In connection with the issuance of these convertible notes we recorded a derivative liability of $30,526,537 as of March 31, 2014.

Consulting Agreements

On October 10,2012, we executed a three year consulting agreement with Castano (the "Castano Agreement"). In accordance with the terms and provisions of the Castano Agreement, we were to pay Castano a monthly fee of $15,000 plus reimbursement for travel related expenses. As of the date of this Quarterly Report, we have terminated the Castano Agreement.

On January 1, 2013, we executed a three year consulting agreement with Felipe Estevan Samario Nino (the "Nino Agreement"). In accordance with the terms and provisions of the Nino Agreement, we shall pay Mr. Nino a monthly fee of $5,000 plus reimbursement for travel related expenses.
 
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.

GOING CONCERN

The independent auditors' report accompanying our June 30, 2013 and June 30, 2012 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.
 
 
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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

I nterest 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.

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.
 
 
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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 March 31, 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 March 31, 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 .
 
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 March 31, 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. 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

No report required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No report required.

ITEM 4. MINE SATEFY DISCLOSURES

No report required.

ITEM 5. OTHER INFORMATION

DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS

The Board of Directors accepted the resignation of Dr. Victor Castano as our Chief Scientific and Technological and Officer and Chairman and member of the Board of Directors effective as of March 4, 2014. The resignation of Mr. Castano is not the result of any disagreement with us on any matter relating to its operation, policies (including accounting or financial policies) or practices.

Effective March 4, 2014, the Board of Directors appointed Bernardo Camacho Chararria as our Chairman of the Board of Directors. Mr. Chararria is also our President/Chief Executive Officer, Secretary and Treasurer/Chief Financial Officer.
 
 
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CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
 
We reported in a Current Report on Form 8-K a change in our certifying accountants. Effective January 20, 2014, we dismissed Patrick Rodgers, CPA, P.A. ("Rodgers") as our independent registered public accounting firm. We dismissed Rodgers as its independent registered public account firm because the PCAOB revoked the registration of Rodgers. We engaged Terry L. Johnson, CPA ("Johnson") as our principal independent registered public accounting firm effective January 20, 2014. The decision to change its principal independent registered public accounting firm was approved by our Board of Directors.
 
The reports of Rodgers on our financial statements for fiscal year ended June 30, 2012 (which included the balance sheet as of June 30, 2012 and the statement of operations, cash flows and stockholders' equity as of June 30, 2012, for the past fiscal year, did not contain an adverse opinion or a disclaimer of opinion, nor qualified or modified as to uncertainty, audit scope or accounting principles, other than to state that there is substantial doubt as to our ability to continue as a going concern. During our fiscal year ended June 30, 2013 and during the subsequent period through to the date of Rodgers' resignation, there were no disagreements between us and Rodgers, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Rodgers, would have caused Rodger to make reference thereto in its report on our audited financial statements.
 
We provided Rodgers with a copy of the Current Report on Form 8-K and requested that Rodgers furnish us with a letter addressed to the Securities and Exchange Commission stating whether or not Rodgers agrees with the statements made in this Current Report on Form 8-K with respect to Rodgers and, if not, stating the aspects with which they do not agree. We were unable to obtain this letter from Rodgers.

In connection with our appointment of Johnson as our principal registered accounting firm at this time, we have not consulted Johnson on any matter relating to the application of accounting principles to a specific transaction, either completed or contemplated, or the type of audit opinion that might be rendered on our financial statements during the two most recent fiscal years (June 30, 2013 and 2012) and subsequent interim period through the date of engagement.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

We have one equity compensation plan, the Nano Labs Corp. 2013 Stock Option Plan (the “2013 Plan”). On October 1, 2013, our Board of Directors authorized and approved the adoption of the 2013 Plan under which an aggregate of 15,000,000 of our shares may be issued.

During the three month period ended September 30, 2013, we granted an aggregate 2,000,000 Stock Options to our consultants. The Stock Options granted had an exercise price of $0.40 per share and vested immediately with an exercise period of two years.

The purpose of the 2013 Plan is to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service.

The 2013 Plan is to be administered by our Board of Directors or a committee appointed by and consisting of one or more members of the Board of Directors, which shall determine (i) the persons to be granted Stock Options under the 2013 Plan; (ii) the number of shares subject to each option, the exercise price of each Stock Option; and (iii) whether the Stock Option shall be exercisable at any time during the option period up to ten (10) years or whether the Stock Option shall be exercisable in installments or by vesting only. The 2013 Plan provides authorization to the Board of Directors to grant Stock Options to purchase a total number of shares of Common Stock of the Company, not to exceed 15,000,000 shares as at the date of adoption by the Board of Directors of the 2009 Plan. At the time a Stock Option is granted under the 2013 Plan, the Board of Directors shall fix and determine the exercise price at which shares of our common stock may be acquired.
 
 
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In the event an optionee ceases to be employed by or to provide services to us for reasons other than cause, retirement, disability or death, any Stock Option that is vested and held by such optionee generally may be exercisable within up to ninety (90) calendar days after the effective date that his position ceases, and after such 90-day period any unexercised Stock Option shall expire. In the event an optionee ceases to be employed by or to provide services to us for reasons of retirement, disability or death, any Stock Option that is vested and held by such optionee generally may be exercisable within up to one-year after the effective date that his position ceases, and after such one-year period, any unexercised Stock Option shall expire.

No Stock Options granted under the Stock Option Plan will be transferable by the optionee, and each Stock Option will be exercisable during the lifetime of the optionee subject to the option period up to ten (10) years or the limitations described above. Any Stock Option held by an optionee at the time of his death may be exercised by his estate within one (1) year of his death or such longer period as the Board of Directors may determine.

The exercise price of a Stock Option granted pursuant to the 2013 Plan shall be paid in full to us by delivery of consideration equal to the product of the Stock Option in accordance with the requirements of the Nevada Revised Statutes. Any Stock Option settlement, including payment deferrals or payments deemed made by way of settlement of pre-existing indebtedness, may be subject to such conditions, restrictions and contingencies as may be determined.

Incentive Stock Options

The 2013 Plan further provides that, subject to the provisions of the Stock Option Plan and prior shareholder approval, the Board of Directors may grant to any key individuals who are our employees eligible to receive options, one or more incentive stock options to purchase the number of shares of common stock allotted by the Board of Directors (the "Incentive Stock Options"). The option price per share of common stock deliverable upon the exercise of an Incentive Stock Option shall be at least 100% of the fair market value of our common shares, and in the case of an Incentive Stock Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of our stock, shall not be less than 100% of the fair market value of our common shares. The option term of each Incentive Stock Option shall be determined by the Board of Directors, which shall not commence sooner than from the date of grant and shall terminate no later than ten (10) years from the date of grant of the Incentive Stock Option, subject to possible early termination as described above.

As of the date of this Quarterly Report, no Stock Options have been exercised.
 
 
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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
   
(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 May 23, 2013.
   
(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 May 29, 2013.
   
(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 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.
 
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
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  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
 
       
May 19, 2014
By:
/s/ Bernardo Camacho Chavarria
 
 
 
Bernardo Camacho Chavarria
 
 
Its:
Chief Executive Officer
Director
 
 
 
 
May 19, 2014
By:
/s/ Bernardo Camacho Chavarria
 
 
 
Bernardo Camacho Chavarria
 
 
Its:
Chief Financial Officer/Principal Accounting Officer
Director
 
 
 
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