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EX-32 - 10JUN PRIN FIN 906 CERT - NMI Health, Inc.exhibit32_2june2010.htm
EX-31 - 10JUN PRIN FIN 302 CERT - NMI Health, Inc.exhibit31_2june2010.htm
EX-31 - 10JUN PRIN EXEC 302 CERT - NMI Health, Inc.exhibit31_1june2010.htm
EX-32 - 10JUN PRIN EXEC 906 CERT - NMI Health, Inc.exhibit32_1june2010.htm

 U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549


FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended: June 30, 2010


[ ] 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. 000-27421


NANO MASK, INC.

(Exact Name of Small Business Issuer as Specified in its Charter)



NEVADA

87-0561647

(State or other jurisdiction of incorporation or organization)

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



50 West Liberty Street, Suite 880, Reno, NV

89501

(Address of principal executive offices)

(Zip code)


Issuer's telephone number, including area code: (209) 275-9270

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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.  (1) Yes [  ] No [X] (2) Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 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 ¨    No ¨


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

Large accelerated filer  ¨      Accelerated filer ¨         Non-accelerated filer    ¨       Smaller reporting company ý


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  Noý


State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:


At January 4, 2012, there were outstanding 80,753,864 shares of the Registrant's Common Stock, $.001 par value.


THIS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2010 IS BEING FILED SUBSTANTIALLY LATE, ON OR ABOUT JANUARY 5, 2012. SOME OF THE INFORMATION CONTAINED HEREIN REFERS TO HISTORICAL ACTIVITIES OF THE COMPANY FOR THE FISCAL PERIOD. SHAREHOLDER AND INVESTORS ARE ADVISED TO CONSULT THE COMPANY’S MORE RECENT FILINGS OF CURRENT REPORTS ON FORM 8-K AS WELL AS ADDITIONAL PERIODIC REPORTS FOR SUBSEQUENT PERIODS THAT THE COMPANY INTENDS TO FILE AS SOON AS POSSIBLE.




PART I


FINANCIAL INFORMATION


Table of Contents

Page

 

 

Part I Financial Information

 

 

 

Item 1. Financial Statements

 

 

 

Balance Sheets (Unaudited) as of June 30, 2010 and December 31, 2009

3

 

 

Statements of Operations (Unaudited) for the three and six months ended June 30, 2010 and 2009

4

 

 

Statements of Cash Flows (Unaudited) for the six months ended June 30, 2010 and 2009

5

 

 

Notes to the Financial Statements (Unaudited)

6

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

8

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

   11

 

 

Item 4. Controls and Procedures

11

 

 

Part II  Other Information

 

 

 

Item 1. Legal Proceedings

12

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

12

 

 

Item 3. Defaults by the Company on its Senior Securities

12

 

 

Item 4. Submission of Matter to a Vote of Security Holders

12

 

 

Item 5. Other Information

12

 

 

Item 6. Exhibits

12

 

 

Signatures

12





2




NANO MASK, INC.

Balance Sheets

(Unaudited)

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

2010

 

2009

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

 

 $                238

 

 $          136,908

 

Prepaid expenses and other

 

 

                   3,998

 

2,981

 

Inventory

 

 

              94,408

 

               95,040

 

 

              98,644

 

             234,929

FIXED ASSETS

 

 

 

 

 

 

Equipment

 

 

973

 

-

 

Accumulated depreciation

 

 

 

                   (81)

 

                         -

 

 

 

 

 

                    892

 

                         -

 

 

 

 

 

 

 

 

 

 

 

 

 

$            99,536

 

$           234,929

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

 

 $         786,485

 

 $          369,817

 

Accounts payable – related party

 

 

22,737

 

403,973

 

Accrued expenses

 

 

              390,708

 

             103,269

 

Notes payable

 

 

          500,012 

 

             485,107

 

 

 

 

 

       1,699,942 

 

          1,362,166

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $.001 par, 100,000,000 shares authorized; 53,796,536 outstanding (53,696,536 issued and 100,000 issuable) in 2010 and 53,671,536 outstanding (53,571,536 issued and 100,000 issuable) in 2009

 

                  53,797

 

                  53,672

 

Additional paid-in capital

 

 

         20,172,016

 

        20,157,141

 

Accumulated deficit

 

 

   (21,826,219)

 

     (21,338,050)

 

 Stockholders’ deficit

 

 

 

     (1,600,406)

 

       (1,127,237)

 

 

 

 

 

 

 

 

 

 

 

 

 

$          99,536 

 

$           234,929

 

 

 

 

 

 

 

 

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




3





NANO MASK INC.

Statements of Operations

(Unaudited)

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

June 30,

 

June 30,

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

  Research and development

  $               2,250

 

  $              32,885

 

$          68,550

 

$          63,158

  Selling, general and administrative

     131,769 

 

     111,684 

 

          409,433

 

           207,589 

 

     134,019 

 

     144,569 

 

           477,983   

 

           270,747   

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

  (134,019)

 

  (144,569)

 

    (477,983)

 

    (270,747)

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

  Gain on settlement of vendor liabilities and other

-

 

181

 

6,644

 

12,437

  Loss on debt extinguishment

-

 

(20,000)

 

-

 

(20,000)

  Interest expense

         (8,525)

 

         (16,477)

 

            (16,830)

 

            (28,783)

 

      (8,525)

 

      (36,296)

 

         (10,186)

 

         (36,346)

 

 

 

 

 

 

 

 

NET LOSS

 $          (142,544)

 

 $          (180,865)

 

$      (488,169)

 

$      (307,093)

BASIC LOSS PER SHARE

 $                (0.01)

 

 $                (0.01)

 

 $            (0.01)

 

 $            (0.01)

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

53,796,536 

 

48,072,725 

 

53,792,392 

 

47,969,702 

 

 

 

 

 

 

 

 

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























4






NANO MASK, INC.

Statements of Cash Flows

For the Six Months Ended June 30, 2010 and June 30, 2009

(Unaudited)

 

 

 

 

 

 

 

 

 

2010

 

2009

 

 

 

     

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$ (488,169)

 

$ (307,093)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation

81

 

-

 

Common stock issued for company expenses incurred

15,000

 

16,930

 

Loss on debt extinguishment

-

 

20,000

 

Gain on settlement of vendor liabilities

(6,644)

 

(12,256)

Changes in operating assets and liabilities:

 

 

 

 

Prepaid expenses

(1,017)

 

(5,000)

 

Inventory

632

 

-

 

Accounts payable

     31,960

 

     41,072

 

Accrued expenses

        310,175

 

       205,398

 

 

Net cash used in operating activities

     (137,982)

 

      (40,949)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Sale (purchase) of equipment

             (973)

 

         28,000

 

 

Cash provided by (used in) investing activities

             (973)

 

         28,000

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Common stock issued for cash

-

 

25,000

 

Proceeds from the issuance of short-term notes payable

6,855

 

-

 

Repayments of short-term notes payable

          (4,570)

 

                   -

 

 

Net cash provided by financing activities

            2,285

 

         25,000

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

      (136,670)

 

         12,051

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

       136,908

 

                  -

 

 

 

 

 

 

CASH AT END OF PERIOD

$            238

 

$      12,051

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

Cash paid for interest

$                 -

 

$                -

Cash paid for income taxes

$                 -

 

$                -

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

Accrued interest added to note payable balance

$        12,620

 

$                -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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




5



NANO MASK, INC.

Notes to the Financial Statements (Unaudited)

For the Six Months Ended June 30, 2010



NOTE 1 - BASIS OF PRESENTATION


The financial information included herein is unaudited and has been prepared consistent with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8, Rule 8.03 of Regulation S-K. Accordingly, these financial statements do not include all information required by generally accepted accounting principles for annual financial statements. These statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2009, from which the balance sheet information as of that date is derived. These interim financial statements contain all adjustments necessary in the opinion of management for a fair statement of results for the interim periods presented.


The results of operations for the six months ended June 30, 2010, are not necessarily indicative of the results to be expected for the full year.


Certain minor reclassifications in prior period amounts have been made to conform to the current period presentation.


NOTE 2 – GOING CONCERN

The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, in addition to a working capital deficiency at June 30, 2010, the Company has incurred negative cash flow from operations and significant losses, which have substantially increased its operating deficit at June 30, 2010.   These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern will be dependent upon economic developments and the success of management's plans as set forth below, which cannot be assured.  The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.  Management and board members are continuing to discuss other alternative financing options, but no definitive proposals or agreements have been reached.


The foregoing notwithstanding, management does not believe the Company currently has sufficient capital to sustain its planned business activities for the next twelve months following the issuance of these financial statements. Accordingly, while management has historically been successful generating sufficient funds to sustain operations, there is no assurance that they will continue to do so. Nevertheless, the Company will seek additional capital to sustain its operations, either through additional private placements of common stock or loans, possibly unsecured, until such time as its operations are self-sustaining.  These funds will be required to continue the Company’s efforts to generate sales of its products and to provide sufficient working capital to meet the expected sales demand.


NOTE 3 –SIGNIFICANT TRANSACTIONS


During the six months ended June 30, 2010, the Company issued 125,000 common shares for $15,000 in unrelated party expenses.


In 2010, the Company issued a short-term note payable of $6,855 with an annual interest rate of 7.5%. $4,570 of the note was repaid as of June 30, 2010. In addition, a Nevada judgment caused the face amount of a note payable to increase by $12,620, but the interest rate declined from 12% per annum to prime rate, plus 2%.


Gains from settlement of vendor liabilities and other largely represent $6,644 and $12,256 for the years 2010 and 2009, respectively, from reductions by vendors of their receivables from the Company.




6



NANO MASK, INC.

Notes to the Financial Statements (Unaudited)

For the Six Months Ended June 30, 2010



NOTE 4 – SUBSEQUENT EVENTS


In July 2010 an executive officer accepted 196,078 common shares as repayment of the Company’s note payable to him of $10,000. In addition, a significant shareholder loaned the Company $25,000 with interest at prime, plus 2%, payable in six months from February 22, 2011. During 2011, the Company received cash advances from one executive officer of $117,500. Moreover, during 2011 the Board of Directors has authorized the repayment of $93,500 in loans from one of its executives with 2,866,477 common shares at an average price of $.033 per share. Finally, during 2011, 1,400,000 shares of common stock were issued in a private placement to four individual investors in the amount of $35,000.


Subsequent to June 30, 2010, the Company negotiated settlements with vendors which has resulted in reductions of approximately $391,000 in trade payables and accrued expenses.


The following table summarizes the common shares issued subsequent to December 31, 2010 and their related amounts for cash proceeds from private placements offerings, stock-based compensation and expense reimbursements as well as settlement of loans payable:



Cash Proceeds from Offerings

Stock-Based Compensation and Expense Reimbursements


Settlement of

Loans Payable

Common Shares

Amount

Common Shares


Amount

Common Shares


Amount

1,400,000

$35,000

18,508,036

$603,353

2,866,477

$ 93,500










NOTE 5 – CONTINGENCIES


On December 29, 2010, the Company received a complaint from Applied Nanoscience, Inc. seeking collection of the as yet unpaid notes payable to Applied in the amount of $453,500, plus interest and litigation expenses. On February 1, 2011, the Company countersued for breach of contract and related claims. The Company maintains a right of offset against Applied’s notes in the amount of $41,360 and is reflected on the balance sheet in the net amount of $412,140.



7





ITEM 2

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


THIS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2010 IS BEING FILED SUBSTANTIALLY LATE, ON OR ABOUT JANUARY 5, 2012. SOME OF THE INFORMATION CONTAINED HEREIN REFERS TO HISTORICAL ACTIVITIES OF THE COMPANY FOR THE FISCAL PERIOD. SHAREHOLDER AND INVESTORS ARE ADVISED TO CONSULT THE COMPANY’S MORE RECENT FILINGS OF CURRENT REPORTS ON FORM 8-K AS WELL AS ADDITIONAL PERIODIC REPORTS FOR SUBSEQUENT PERIODS THAT THE COMPANY INTENDS TO FILE AS SOON AS POSSIBLE.


Cautionary Statement Regarding Forward-looking Statements


This report may contain "forward-looking" statements.  Examples of forward-looking statements include, but are not limited to: (a) projections of revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of plans and objectives of our management or Board of Directors; (c) statements of our future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "anticipate," "expect," "may," "project," "intend" or similar expressions.


Overview


The Company is in the business of producing environmental masks and filters for medical devices that are designed to reduce the possibility of transmission of contagious diseases.  


Since its inception, the Company has been involved in the development of its technology.  Through June 30, 2010, revenues have not been adequate to cover operating expenses and thus, the Company has reported a loss in each of its years of existence.  Through June 30, 2010, the Company has funded itself by way of a series of private equity placements and had offset its accumulated deficit in this manner.


In July 2007, the Company entered into a letter of intent with Applied Nanoscience Inc. (“Applied”), a related company due to some common ownership, directors and employees.  On July 14, 2008, the Company and Applied entered into a definitive merger agreement. The final merger agreement required the approval of the Company’s shareholders as well as the shareholders of Applied.  The merger would likely have produced a number of significant recurring cost savings and made it easier to access capital markets, and to commercialize and get the Company’s products to market more quickly. However, on February 25, 2009, the merger agreement was unilaterally terminated by Applied.


Results of Operations for the Three Months Ended June 30, 2010 compared with 2009


Revenues:  During the three months ended June 30, 2010 and 2009, there were no revenues, due to three reasons: 1) The Company’s election late in 2006 to suspend sales of the NanoMask and related filters until FDA clearance could be obtained which was anticipated as late as July, 2008; 2) The Companys efforts thereafter until March 1, 2010 to develop a new anti-viral and anti-bacterial mask; and 3) The Companys marketing efforts after March 1, 2010  to sell its new Nano Zyme and Nano Silver Hospital Products.

.

Cost of Sales:  Since there were no sales during the three months ended June 30, 2010, there was no cost of sales.


Operating Expenses: During the three months ended June 30, 2010 the Company increased its general and administrative expenses by approximately $20,000 or 18%, compared to the three months ended June 30, 2009, largely attributable to additional officer compensation. The significant components of our operating expenses include salaries and wages, consulting and other professional services, accounting, audit and legal fees, product and liability insurance, travel and office rent.


Research and development: Research and development relates to a new anti-viral and anti-bacterial mask,



8





and includes related FDA testing. Approximately $2,000 was incurred in the three months ended June 30, 2010 on this new mask. If resources are available in the future, the Company intends to bring additional products to market, assuming those products are still viable at the time the resources are available. The significant components of the Company’s research and development costs ordinarily include prototype development and materials, governmental filings and laboratory testing.


Results of Operations for the Six Months Ended June 30, 2010 compared with 2009


Revenues: During the six months ended June 30, 2010 and 2009, there were no revenues, due to three reasons: 1) the Company’s election late in 2006 to suspend sales of the NanoMask and related filters until FDA clearance could be obtained which was anticipated as late as July, 2008; 2) the Companys efforts thereafter until March 1, 2010 to develop a new anti-viral and anti-bacterial mask; and 3) the Companys marketing efforts after March 1, 2010  to sell its new Nano Zyme and Nano Silver Hospital Products


Cost of Sales:  Since there were no sales during the six months ended June 30, 2010 and 2009, there was no cost of sales.


Operating Expenses: During the six months ended June 30, 2010, the Company experienced a substantial increase in general and administrative expenses of approximately $202,000 or approximately 97% compared to the six months ended June 30, 2009, primarily attributable to increases in officer compensation.


Research and development: Research and development relates to a new anti-viral and anti-bacterial mask, and includes related FDA testing. Approximately $69,000 was incurred in the six months ended June 30, 2010 on this new mask.


Liquidity and Capital Resources


             The Company has not been able to generate sufficient net cash inflows from operations to sustain its business efforts and accommodate its growth plans. The Company authorized issuance of 2,395,000 units of common shares and warrants (to purchase common shares at $.50 per share, exercisable for two years) for total proceeds of $479,000. During 2010, the Company received cash advances from an executive officer for $77,500.

Management and board members are continuing to discuss other alternative financing options, but no definitive proposals or agreements have been reached.


Beginning in the third quarter of 2008, the United States has been experiencing a severe and widespread recession accompanied by, among other things, instability in the financial markets and reduced credit availability, and is also engaged in war, all of which are likely to continue to have far reaching effects on economic activity in the country for an indeterminate period. The effects and probable duration of these conditions and related risks and uncertainties on the Company's ability to obtain financing, success in its marketing efforts and ultimately, profitable operations and positive cash flows, cannot be estimated at this time.


             The Company does not believe, however, that it currently has sufficient capital to sustain its business efforts for the next twelve months.  Accordingly, the Company will need to raise additional capital in the near future to sustain operations.

  

              Accordingly, for these and other reasons, there is significant uncertainty regarding the Company’s future, and the Company’s auditors expressed substantial doubt as to the Company’s ability to continue as a going concern in their report on the Company’s 2010 audited financial statements.

                            

Impact of Inflation


At this time, the Company does not anticipate that inflation will have a material impact on its current or future operations.




9





Critical Accounting Policies and Estimates


Except with regard to the estimated useful lives of patents and acquired technology, the net realizable value of the Company’s inventory due to shelf-life issues and design, the allowance for bad debts on accounts receivable, and the effective provision of a 100% deferred income tax asset valuation allowance, (discussed below), the Company does not employ any critical accounting policies or estimates that are either selected from among available alternatives or require the exercise of significant management judgment to apply or that if changed are likely to materially affect future periods.  


Management reviews the carrying value of the technology assets annually based on its current marketing activities, plans and expectations, and the perceived effects of competitive factors and possible obsolescence, whether any write-downs should be taken or whether the estimated useful lives should be shortened.  


Management also reviews the carrying value of its inventory periodically for evidence of declines in estimated fair value and considers, based on its current marketing activities, plans and expectations, and the perceived effects of competitive factors and possible obsolescence due to shelf-life issues on the environmental filters, whether any write-downs should be taken.


Management also reviews the collectability of outstanding receivables based upon historical collection history from each customer, the age of the receivables, and the customers wherewithal to pay the outstanding balance, and records an estimated allowance for bad debts sufficient to cover any potential losses to be incurred for non-collections.


The carrying values of prepaid expenses, accounts payable, accrued expenses and short term notes payable generally approximate the respective fair values of these instruments due to their current nature. The Company values its warrants and non cash common stock transactions under FASB ASC 820 which defines fair value and the criteria for its determination.


The three levels of the fair value hierarchy defined by ASC 820 are as follows:


Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.


Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.


Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.


The Company uses Level 3 inputs to value warrants issued, and Level 1 inputs to value its common stock transactions.





10





Recent Accounting Pronouncements


While there have been Financial Accounting Standards Board (FASB) pronouncements made effective subsequent to the issuance of these financial statements, none would have required restatement of the financial statements herein nor have they had any significant effect on future financial statements of the Company.


ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Smaller reporting companies are not required to provide the information required by this item.


ITEM 4

CONTROLS AND PROCEDURES


We maintain a system of disclosure controls and procedures that are designed for the purpose of ensuring that information required to be disclosed in our SEC reports 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 the Company’s management, including the Chief Executive Officer and the Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosures.


For the period ended June 30, 2010, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. In the course of this evaluation, our management considered the material weakness in our internal control over financial reporting as discussed in our Annual Report on Form 10-K for the period ended December 31, 2010. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the registrant’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.


Changes in Internal Control over Financial Reporting


We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financing reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.


There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2010 that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.




11





PART II

OTHER INFORMATION


ITEM 1 - LEGAL PROCEEDINGS


On December 29, 2010, the Company received a complaint from Applied, filed in the District Court of Clark County in Nevada (Case No. A-10-631192-C) and which seeks collection of notes payable by Applied in the amount of $453,500, including accrued interest. On February 1, 2011, we countersued for breach of contract and claims related thereto. Our management believes that the value of its counterclaim will exceed the value of the claims asserted against the Company but cannot fully assess the outcome of the action at this time. Accordingly, management believes adequate provision has been made in the accompanying financial statements related to this complaint.


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


In June 2009, the Company authorized issuance of  2,594,597 units of common shares and warrants (to purchase common shares at $.50 per share, exercisable for two years) for total proceeds of $479,000, settlement of $16,930 in expenses incurred by three key officers and conversion of a $22,989 loan made by a key officer, including interest of $2,989. These shares were issued in reliance on the exemption from registration and prospectus delivery requirements of the Act set forth in Section 3(b) and/or Section 4(2) of the Securities Act and the regulations promulgated hereunder.


ITEM 3 - DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES

None.


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

None.


ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS


Exhibit 31.1 - Certification of principal executive officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002


Exhibit 31.2 - Certification of principal financial officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002


Exhibit 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


Exhibit 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


SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


NANO MASK, INC.


January 5, 2012

By /s/ Edward Suydam

Edward Suydam, Chief Executive Officer


January 5, 2012

By /s/ Michael J. Marx

Michael J. Marx, Chief Financial Officer



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