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CTLE > SEC Filings for CTLE > Form 10-K on 15-Oct-2013All Recent SEC Filings

Show all filings for NANO LABS CORP. | Request a Trial to NEW EDGAR Online Pro

Form 10-K for NANO LABS CORP.


15-Oct-2013

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements for the years ended June 30, 2013 and June 30, 2012, together with notes thereto as included in this Annual Report on Form 10-K. 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 Annual Report, particularly in the section entitled "Risk Factors." Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

We are a developmental stage company and have not generated any revenue to date. 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.

RESULTS OF OPERATION

Fiscal Year Ended June 30, 2013 Compared to Fiscal Year Ended June 30, 2012

Our net loss for fiscal year ended June 30, 2013 was $8,869,355 compared to a net loss of $53,009 during fiscal year ended June 30, 2012, a substantial increase of $8,816,346. The majority of the loss is attributable to non-cash expenses of derivative interest expense and loss on sale of subsidiary which total $8,256,047. These non-cash expenses are described in detail below. During fiscal years ended June 30, 2013 and June 30, 2012, we did not generate any revenue.

During fiscal year ended June 30, 2013, we incurred operating expenses of $613,308 compared to $76,815 incurred during fiscal year ended June 30, 2012, an increase of $536,493. During fiscal year ended June 30, 2013, our operating expenses consisted of: (i) $264,116 (2012: $-0-) in consulting; (ii) $122,010 (2012: $76,815) in general and administrative; (iii) $46,833 in professional fees (2012: $-0-); (iv) $93,831 in travel (2012: $-0-); and (v) $86,518 in wages (2012: $-0-). The increase in operating expenses was primarily attributable to the increases in consulting fees, professional fees, travel and wages. General and administrative expenses also generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.


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We incurred management fees is the amount of $204,092 and $-0- to our officers and directors during fiscal years ended June 30, 2013 and June 12, 2012. See "Item 11. Executive Compensation."

During fiscal year ended June 30, 2013, we incurred other expense in the form of: (i) interest expense associated with the derivative liability on our outstanding convertible notes payable of $8,223,786 (2012: $-0-) and (ii) $32,261 in loss on sale of subsidiary (2012: $-0-).

Therefore, our net loss and loss per share during fiscal year ended June 30, 2013 was $8,869,355 or $0.08 per share compared to a net loss and loss per share of $53,009 or $0.00 per share during fiscal year ended June 30, 2012. Net loss increased substantially during fiscal year ended June 30, 2013, as compared to June 30, 2012, as a result of the derivative interest expense attributable to the outstanding convertible notes payable. The weighted average number of shares outstanding was 107,081,164 and 201,125,000 for fiscal years ended June 30, 2013 and June 30, 2012.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal Year Ended June 30, 2013

As of June 30, 2013, our current assets were $28,196 and our current liabilities were $8,897,551, which resulted in a working capital deficit of $8,869,355. As of June 30, 2013, current assets were comprised of $28,196 in cash. As of June 30, 2013, current liabilities were comprised of: (i) $7,765 in accounts payable;
(ii) $666,000 in convertible note payable; and (iii) $8,223,786 in derivative liability.

As of June 30, 2013, our total assets were $28,196 comprised entirely of current assets. The increase in total assets during fiscal year ended June 30, 2013 from fiscal year ended June 30, 2012 was due to the increase in cash of $28,196.

As of June 30, 2013, our total liabilities were $8,897,551 comprised entirely of current liabilities. The increase in liabilities during fiscal year ended June 30, 2013 from fiscal year ended June 30, 2012 was primarily due to the recording of $8,223,786 in derivative liability and $666,000 in convertible note payable. The derivative liability was related to the outstanding convertible notes payable issued in the fiscal year end June 30, 2013.

Stockholders' deficit increased from $209,015 for fiscal year ended June 30, 2012 to $8,869,355 for fiscal year ended June 30, 2013

Cash Flows from Operating Activities

We have not generated positive cash flows from operating activities. For fiscal year ended June 30, 2013, net cash flows used in operating activities was ($590,781) compared to ($-0-) for fiscal year ended June 30, 2012. Net cash flows used in operating activities consisted primarily of a net loss of $8,869,355 (2012: ($53,009), which was adjusted by $8,223,786 (2012: $-0-) of derivative interest calculated from the outstanding convertible notes, $209,015 (2012: $-0-) of debt forgiveness from past debt related to Colorado Ceramic Tile, Inc., $200 (2012: $-0-) of related party payables, and $154,027 (2012:
$76,815) of accounts payable.

Cash Flows from Investing Activities

For fiscal years ended June 30, 2013 and June 30, 2012, 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 fiscal year ended June 30, 2013, net cash flows provided from financing activities was $618,977 compared to $-0- for fiscal year ended June 30, 2012. Cash flows from financing activities for fiscal year ended June 30, 2013 consisted of $666,000 in proceeds from convertible notes payable which was offset by $47,023 from repayment of notes payable.


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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

Revolving Loan

The Company carried a revolving, due on demand, variable interest rate line of credit with a bank, providing for a credit line up to $50,000, secured by all Company assets. When the Company's tile business was disposed of in March 2012 to a former officer, the line had a principal balance of $47,023 plus accrued interest of $226. At June 30, 2013 and 2012 the balance due against the line of credit was $-0- and $47,023, respectively.

Accrued interest payable under all notes payable at June 30, 2013 and 2012 was $0 and $226, respectively.

Convertible Note 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. As the conversion rate is discounted to market, the Company calculated a derivative liability of $2,455,751 at June 30, 2013 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. As the conversion rate is discounted to market, the Company calculated a derivative liability of $1,223,786 at June 30, 2013 using the Black Scholes Model.

On March 31, 2013, the Company entered into a convertible promissory note with Asus Global Holdings Inc. for $375,000, bearing no interest and convertible at a 50% discount to market. The note is payable on demand. As the conversion rate is discounted to market, the Company calculated a derivative liability of $4,592,457 at June 30, 2013 using the Black Scholes Model.

At June 30, 2013 and 2012 the the balance due against these three convertible notes was $666,000 and $-0-, respectively.


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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 Annual 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

The following describes the recently issued accounting standards used in reporting our financial condition and results of operations. In some cases, accounting standards allow more than one alternative accounting method for reporting. Such is the case with accounting for oil and gas activities described below. In those cases, our reported results of operations would be different should we employ an alternative accounting method.

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.

Our 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.

OFF-BALANCE SHEET ARRANGMENTS.

We have no off-balance sheet arrangements.

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