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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549


FORM 10-K


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


For the annual period ended December 31, 2011


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


For the transition period from ___________ to _____________


BLACKBOX SEMICONDUCTOR, INC.


Nevada

 

000-52982

 

74-3197968

(State or other jurisdiction

 

Commission File Number:

 

(IRS Employer

of Incorporation)

 

 

 

Identification Number)

 

 

 

 

 

 

 

1462 Erie Boulevard

 

 

 

 

Schenectady, New York 12305

 

 

 

 

(Address of principal executive offices)

 

 

 

 

 

 

 

 

 

(518) 935-2830

 

 

 

 

(Registrant’s Telephone Number)

 

 


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

None.


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

Common Stock, $.001 par value per share   on OTCBB


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  

Yes      . No  X .


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  

Yes      . No  X .


Indicate by check mark whether the registrant (1) 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.

Yes  X . No      .


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  X .


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


Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

Smaller reporting company

  X .


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

Yes      . No  X .


The aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrationt’s most recently completed second quarter:  $370,279.  


APPLICABLE ONLY TO CORPORATE ISSUERS


There were a total of 154,245,929 common shares outstanding, $0.001 par value, as of April 16, 2012





TABLE OF CONTENTS


Part I

 

 

 

Item 1. Business

3

 

Item 2. Properties

22

 

Item 3. Legal Proceedings

22

 

Item 4. (Removed &  Reserved)

22

 

 

 

Part II

 

 

 

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

22

 

Item 6. Selected Financial Data

23

 

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

24

 

Item 8. Financial Statements and Supplementary Data

F-1

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

32

 

Item 9A. Controls and Procedures

32

 

Item 9B.  Other Information

32

 

 

 

Part III

 

 

 

Item 10. Directors, Executive Officers, and Corporate Governance

33

 

Item 11. Executive Compensation

35

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

37

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

38

 

Item 14. Principal Accountant Fees and Services

39

 

 

 

Part IV

 

 

 

Item 15. Exhibits, Financial Statement Schedules

40

 

 

 

Signatures

 

41






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PART I


Item 1.  Business.


FORWARD-LOOKING STATEMENTS


This discussion and analysis in this Annual Report on Form 10-K should be read in conjunction with the accompanying Financial Statements and related notes and the Risk Factors contained herein. This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.  We do not have any material revenues or source of income as we have been focusing on developing and seeking commercial avenues for our core technologies and, without limitation, statements regarding our plans, goals, strategies, intent, beliefs or current expectations with respect to our recently acquired business, as well as our plans to wind down our existing internet-based business.  These statements are expressed in good faith and based upon what we believe are reasonable assumptions.  There can be no assurance that these expectations will be achieved or accomplished.  You can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continues" or the negative of these terms or other comparable terminology.  We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us.  


Some specific factors and statements that are forward looking statements and necessarily subject to uncertainties include, without limitation: the success of our BlackBox business, our need for money and ability to raise capital and ability to monetize consideration received in the transaction; the virtual inability of smaller issuers like us to raise capital in a small offering; items contemplating or making assumptions about the progress of our research and development activities; our ability to raise the necessary capital in order to sustain our operations; our ability to further acquire, hold and defend our intellectual property; changes in the industry and new competing technologies that arise; the development, commercialization and market acceptance of our recently acquired liquid semiconductor technologies and other related technologies; the cost to complete the development and commercialization of these technologies; and the presumed size and growth of our targeted markets, all of which constitute forward-looking statements.  


These risk factors should be considered in addition to our cautionary comments concerning forward-looking statements in this Report. Additional risks not described above, or unknown to us, may also adversely affect the Company or its results.  Readers should reference our “Risk Factors” section below for additional substantial risks relating to our Company and securities.


Although forward-looking statements in this report reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements.  


Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report.  We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Report, other than as may be required by applicable law or regulation.  Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the SEC from time to time which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows.


Forward Split and Use of Terms


Except as otherwise indicated by the context, references in this report to (i) “Parent”  refers to the parent company itself, BlackBox Semiconductor, Inc., a Nevada corporation formerly known as Visitrade, Inc.,  (ii)   the “Company”, “we”, “us”, or “our”, refer to the combined business of  Parent, together with its wholly owned newly acquired subsidiary BlackBox Semiconductor, Inc., a Delaware corporation, (ii) “BlackBox” or “BlackBox Delaware” refers to our newly acquired business of BlackBox Semiconductor, Inc., a Delaware corporation and (iv) “Forward Split” refers to the 20 for 1 forward split of the Parent’s stock effective as of June 10, 2011, (v) “SEC” are to the United States Securities and Exchange Commission, (vi) “Securities Act” are to Securities Act of 1933, as amended, and (vii) “Exchange Act” are to the Securities Exchange Act of 1934, as amended.


All references herein to share amounts and pricing information contained in this Report are as adjusted to give effect to the recent Forward Split unless otherwise specified.


Description of Business


Corporate History


In June of 2011, Parent, BlackBox Semiconductor, Inc., a Nevada corporation, acquired Blackbox and its related intellectual property rights and business and proceeded to liquidate our other assets and businesses.



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We were originally incorporated in the State of Nevada on March 2, 1998.  After operating other businesses, we changed our name to Visitrade, Inc in 2006, as a result of the acquisition of VisiTrade, LLC, which held and operated a software trading platform for financial market participants. Despite continued efforts to market this alternative trading system, we ceased operations in this business in early 2007.


In October of 2007, our predecessor Parent resumed operations in planning and organizing itself as an online retailer of aftermarket Triumph motorcycle parts and accessories.  


In June 2011, we acquired BlackBox from an affiliated company, Shrink Nanotechnologies, Inc., in exchange for 27,030,000 shares of our common stock and $12,500 as more fully described below. As part of the transaction we also acquired 14,000,000 shares of Shrink which we still hold.  We currently still hold and are endeavoring to develop and commercialize or sublicense, this technology.


BlackBox’s business is currently the only financial segment we operate in.  


Corporate restructurings in 2010 and 2011


On August 16, 2010, the Company filed its Definitive Schedule 14C with United States Securities and Exchange Commission (“SEC”).  Pursuant to such document, the Company disclosed the prior shareholder approval of the following corporate actions: (i) an increase of the Company’s authorized stock from 50,000,000 shares to 5,000,000,000 shares, to wit, 4,975,000,000 as common shares and 25,000,000 as preferred shares; (ii) authorization to the Board to designate additional preferred classes of stock; (iii) authorization to the Board, to affect a reverse stock split of the Company’s common stock; (iv) authorization to the Board, at their discretion, to affect a forward stock split of the Company’s common stock; (v) ratification of the prior appointment of Hamilton, PC as the Company’s independent public accountant; (vi) confirmation and ratification of  the prior appointment of Mr. Ford Sinclair as the Company’s Interim Chairman of the Board; (vii) authorization to the Board to designate an Employee Stock Incentive Plan and; (viii) approval of authorization to the Company’s Board of Directors to amend the Company’s Articles of Incorporation to change of the name of the Company.


Forward Split and Name Change

 

On January 15, 2011, the Company’s Board of Directors affected a 1-for-270 reverse stock split and changed its name to BlackBox Semiconductor, Inc.


Thereafter, on March 28, 2011, the company effectuated the increase of its capitalization to 1,000,000,000 shares of common stock, par value   $.001 per share and 25,000,000 shares of blank check preferred stock of which 5,000,000 were already issued and outstanding and designated as Series A Preferred Stock at the time of the capitalization increase (the “Capitalization Increase”).  


Effective as the open of business on June 13, 2011, the Company effectuated the forward split of its common stock on a 20:1 basis, wherein each  share of common stock outstanding was exchanged for one 20 new shares (the “Forward Split”).  As a result, the capitalization of the Company was increased such that 89,415,760 shares outstanding immediately after the Forward Split.  Since such date, substantial additional shares have been issued such that the Company currently has outstanding 154,245,929 shares, most of which are not yet freely tradable.  The Forward Split was effectuated by the filing by the Company of a Certificate of Amendment to the Company’s Articles of Incorporation with the Secretary of State of Nevada as of June 10, 2011, and was approved by the Corporation’s shareholders and board.


BlackBox History and Description


Our BlackBox subsidiary was formed in Delaware on October 28, 2010 by Shrink, an affiliate of ours, for the purposes of acquiring and holding certain licenses, specifically, those related to the University of Chicago.  We acquired BlackBox under the BlackBox Acquisition effective as of June 3, 2011, as described in our Current Report on Form 8-K, dated as of such date.


Our primary asset and business immediately after the BlackBox Acquisition was and continues to be, BlackBox and its intellectual property and licenses.  Specifically, BlackBox’s primary asset is its license from the University of Chicago (“Chicago License”) to commercialize certain technology and intellectual property that increases performance of certain solution-based, inorganic, semiconductor nanomaterials.  These nanomaterials are used to create liquid semiconductor materials that can be deposited (e.g., printed or sprayed) to form certain semiconductor films and other structures for use in a multitude of semiconductor device applications.  This technology and related intellectual property was developed primarily as a result of the research of Dr. Dimitri Talapin at the University of Chicago.



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BlackBox is a technology development and application company dedicated to the commercial adoption of a chemistry platform we call LiquidSemiTM Solutions.  We have licensed methods for chemical manufacturing of high-performing, liquid semiconductors incorporating nanoscale materials.  Nanoscale materials, or nanomaterials or nanostructures, are less than one-billionth of a meter in size.  Nanoscale materials exhibit unique electronic, optical, and magnetic properties that cannot be obtained from the same materials in their traditional size and forms.  Our LiquidSemiTM chemistries improve the electronic properties of solution-processed semiconductors by replacing previously insulating materials with our patent-pending “electronic glue” materials that increase electronic communication between the nanostructures and throughout the manufactured semiconductor material. The primary anticipated applications of these technologies are in the electronics and renewable energy business sectors.  Currently, organic based semiconductors are being used.  We believe, however,  that liquid-processed semiconductor materials such as ours will replace certain traditional semiconductor materials used in current devices.  In addition, our technology has the potential to result in new, revolutionary semiconductor materials.


Applications for BlackBox Technology Generally


What follows are some examples of technological and/or cost benefits of our liquid-based semiconductor and “electronic glue” chemistries versus competing technologies:


Better Material Performance.


Our research indicates, to date, that semiconductor thin-films produced using our proprietary liquid semiconductor chemistries exhibit higher electronic performance versus competing solution-based technologies, including solution-based organic and other inorganic semiconductor nanomaterial chemistries.  We believe our materials are also more stable to oxidation and photo-oxidation processes than previously attempted solution-processed inorganic semiconductor nanomaterial and current organic semiconductor methods.


Less Expensive Capital Equipment and Facilities.


Traditional semiconductor (e.g., non-liquid) fabrication techniques require large scale investments in capital equipment and facilities to produce the quality and volumes necessary for various semiconductor applications.  Because our semiconductor technology is based on the manufacture and deposition of liquid chemistries, we believe that up-front capital outlays and on-going fixed costs would be significantly lower using our methods.


High Yield and Lower Cost Processing.


The use of liquid-processed semiconductors allows for printing and other high-throughput manufacturing techniques.  In addition, we will be able to manufacture over large areas using liquid-processed semiconductors.  We believe that these methods are advantageous versus traditional semiconductor methods (e.g., non-liquid) by improving manufacturing yields and lowering manufacturing costs.


Unique Capabilities Today.


Our LiquidSemiTM chemistry platform  can be used to manufacture materials for existing semiconductor applications.  Our liquid-processed semiconductors can be designed and engineered for specific optical properties, including the absorption or emission of light.  In addition, the same platform and chemistries can produce semiconductor solutions that have specific electronic properties.  Unlike traditional semiconductor materials, our liquid semiconductors can be manufactured on substrates that are flexible and may provide new opportunities for device integration and development.


Revolutionary Capabilities Tomorrow.


Our LiquidSemiTM chemistry solutions include nanoscale materials.  Nanoscale materials can exhibit unique and desirable electronic, optical, magnetic and other properties that cannot be replicated in the same materials on a larger scale.  We have shown the ability to preserve these structures while maintaining the required semiconductor electronic and optoelectronic performance.  The ability to design and integrate nanoscale materials into our liquid-processed semiconductors provides the potential for revolutionary technology in renewable energy and electronics applications.



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Description of Chicago License Terms


The material terms of the Chicago License provide for a sixteen (16) year license to BlackBox for any application excluding thermoelectric devices.  As consideration, we are required to pay a license fee of $25,000 per year and are required to have successfully commercialized the technology by the end of the eighth (8th) year (2018).   Additional specific details relating to the Chicago License is provided in the section below titled “Management’s discussion and analysis of financial condition and results of operations.”


Revenue Model


We expect to derive the majority of our revenue from license fees, recurring royalties, and material supplies associated with this technology.  We intend to continue our development efforts to further strengthen and expand our patent portfolio across out technology platform.  


Our Technology


BlackBox has developed new chemistries that incorporate inorganic semiconductor, metal and other nanostructure materials with proprietary chemical components that we call “electronic glues”.  These semiconductor chemistries are manufactured, maintained and deposited in liquid form to create solid semiconductor layers and structures.  The semiconductor liquids can be deposited using printing and other high-throughput techniques.  Once deposited in liquid form, the semiconductor and electronic glues materials are treated to create a solid semiconductor layer.  These liquid-processed semiconductor materials have application for a wide range of existing and next generation devices in the electronics and renewable energy industries.  


Semiconductor Technology Overview


Semiconductor materials and devices are vital components of the wide and varied renewable energy and electronics industries, including certain transistors, sensors, solar cells, and light-emitting diodes.  Semiconductor materials require certain electronic performance to be effectively used in  electronic devices.  To achieve high performing materials, traditional fabrication of semiconductor materials has involved capital intensive and highly controlled manufacturing techniques.  These methods produce semiconductor crystalline wafers and films that are high performing but are typically limited to non-flexible and smaller area form factors.  


Manufacturing of semiconductor materials from liquids has been previously developed with the expectation of lowering capital investment, lowering manufacturing costs via printing and other high throughput processes, and enabling semiconductor use for larger area and flexible substrate devices.  Liquid-processed semiconductors incorporating nanomaterials have previously resulted in finished semiconductor materials with poor electronic performance that have  prevented them from achieving commercialization and wide scale adoption.


BlackBox Semiconductor Technology


The Chicago License provides us with an exclusive right to further develop and commercialize liquid semiconductor technology invented at the University of Chicago.  Our technology includes the development and manufacture of chemistries for certain inorganic semiconductor, metal, and other nanostructure materials including patent-pending chemistries and techniques that we call “electronic glues”.  These electronic glues increase the electronic communication between nanostructures and throughout the liquid-processed semiconductor.  This result enables the effective and efficient use of liquid-processed and printable semiconductors.  We can manufacture combinations of nanomaterials and electronic glues to create liquid semiconductor chemistries that can be used for numerous applications such as thin film photovoltaics, light emitting diodes, and printed transistors.


We call our liquid semiconductor chemistry platform, including combinations of nanoscale materials and electronic glues, LiquidSemiTM Solutions.  Once deposited, the LiquidSemiTM materials can be treated at low temperature to anneal the nanomaterial and electronic glue components into a solid semiconductor layer.  Previous techniques for making inorganic semiconductor films from liquid-processed nanomaterials have been unsuccessful because of their lack of electronic performance.  Using our liquid semiconductor technology, we have shown electronic performance that is significantly higher than previous methods for manufacturing liquid semiconductors incorporating inorganic nanoscale materials and also versus existing liquid semiconductor technologies based on organic chemistries.  Compared to prior methods for manufacturing liquid-processed semiconductors including nanoscale materials, we believe our technology has additional advantages including  the preservation of nanoscale structures in high performing semiconductor films and improved stability.




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Specific Applications and Markets


Printed Electronics


Our LiquidSemiTM materials can be deposited in liquid form and have the potential to be used for printed circuits, RFID, thin-film transistors and in a variety of applications requiring large areas and flexible substrates. Our technology development to date shows that liquid deposited materials in prototype transistor devices can achieve electronic performance that is significantly greater previously attempted using liquid-processed, inorganic semiconductor nanomaterials and also those using organic materials.  We believe that the electronic performances can be improved by further development of the materials and optimization of the devices.


Sensors and Imaging


Our LiquidSemiTM chemistries can be engineered to absorb a range of specific electromagnetic wavelengths.  These absorbed energies can be transferred to create charge or emit light as confirmation of the detected wavelength.  It is useful in some applications to convert these detected energies to produce digital images.  Traditional semiconductor materials are incorporated into a range of sensor, detection, and resulting imaging devices.  We believe our technology can be used in similar applications to produce lower cost and larger area devices.


Solar Fuel Materials


We believe our LiquidSemiTM chemistry platform can be used to manufacture catalyst materials that can help produce hydrogen fuel from water.  By incorporating nanostructures into our materials design process we believe we can design materials that are both optimized for absorbing sunlight and electronically tuned for splitting water molecules to produce hydrogen.  Once stored, hydrogen can be used as a fuel source for fuel cells to create on-demand energy.  A fuel cell is an electrochemical device that combines hydrogen and oxygen to produce electricity and heat without combustion. By using the sun’s energy, these materials could present a method for producing a renewable, reliable, and clean fuel.


Solid-state Lighting and Display


Next generation solid-state lighting and electronic display applications can benefit from the use of solution-processed, semiconductor nanostructures that can be designed to efficiently emit light.  These materials can be used to optimize color and light qualities.  Devices incorporating these materials have been shown to consume less power versus traditional or organic-based devices.  In addition, these materials can be manufactured using high-throughput deposition processes over large areas and using flexible or rigid substrates.  


Thin-film Photovoltaics


Non-silicon, thin-film solar cells are gaining popularity because of their ability to take advantage of a broader range of the solar spectrum and for their low cost manufacturing techniques.  Applicable technologies undergoing commercialization include CIGS, CdTe, and multi-junction compound semiconductor devices. We believe that our liquid semiconductor chemistry solutions are applicable to these markets to replace existing methods for manufacturing semiconductor layers in photovoltaic devices.  LiquidSemiTM Solutions can be used with rigid or flexible substrate devices and utilize high volume deposition techniques.  In addition, our semiconductor thin-films can retain certain nanostructures and maintain electronic performance. Semiconductor nanostructures have been identified as potential paths for creating next-generation, ultra-efficient solar devices.


Business Model


General


Our goal is to develop our licensed technology for commercialization via licensing and/or sale of materials.  Whenever feasible, we intend to be actively involved in the commercialization of our technology in order to accelerate the process of bringing products to market.  We intend to accomplish this by entering into one or more licenses for, or otherwise develop various technologies that we need and sometimes further developing or combining them for commercialization.



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We intend to further develop our Chicago License, as well as continue to acquire, license and develop new intellectual property from time to time.  It is our intent to use this intellectual property portfolio to develop recurring revenue streams by licensing our technology to others. For certain high potential products and technologies, we may participate in the commercialization process beyond simply licensing our technology.  In these cases we may manufacture and supply liquid semiconductor or liquid-processed semiconductor materials. We would engage in these efforts where we can gain additional value through more active participation and potentially decrease the time required to bring liquid semiconductor enabled products to market. We may also need to sublicense our technologies to more established semiconductor manufacturers in order to do this.


Much of our intellectual property and technology development will include liquid-processed semiconductors that are intended to replace previous existing technologies.  As such, additional development work is required before end-use products can be manufactured using these technologies.  To aid in the process of commercialization of our liquid semiconductor technologies, we will likely seek additional funding from both government entities and interested corporations. These relationships should allow us to leverage resources, accelerate technology and application development, and to establish relationships with potential customers of our technology.


Our Strategy


Our initial focus will be to foster the commercial adoption of our LiquidSemiTM technology for the low-cost manufacture of high-performing semiconductors in current and next generation device applications within the renewable energy and electronics industries. The key methods for executing this strategy are:


·

Work with commercial partners to optimize  our LiquidSemiTM Solutions for end-use applications,

·

Expand our intellectual property portfolio in conjunction with the continued development of our unique and patent pending chemistries, and

·

Implement technology licensing programs and material supply relationships to further commercialize our intellectual property across our technology platform and for a broad range of applications.


Competitive Strengths


Unique Patented and Platform Technology


Our technology is intended to create high-performing semiconductor solids from liquid-processed semiconductor nanomaterials.  Our portfolio includes pending patents that support our “electronic glue” platform chemistry and we will continue to strengthen our intellectual property position as we further develop and expand our technology. Our chemistries are capable of working with a range of semiconductor, metal, and other nanostructured materials.  The ability to incorporate possible combinations of material properties and capabilities into our liquid semiconductor process strengthens our ability to design and optimize these semiconductor systems for current and next generation applications across a range of markets.  We believe this platform capability will allow us to maximize our relationships with commercial partners for the eventual sale of products and for out-license opportunities.


Improved Electronic Performance


Previous techniques for making inorganic semiconductor films from liquid-processed nanomaterials have been unsuccessful because of their lack of electronic performance.  Using our liquid semiconductor technology, we have shown electronic performance that is significantly higher than previous methods for manufacturing liquid semiconductors incorporating inorganic nanoscale materials and also versus existing liquid semiconductor technologies based on organic chemistries.  Compared to prior methods for manufacturing liquid-processed semiconductors including nanoscale materials, we believe our technology has additional advantages including: the preservation of nanoscale structures in high performing semiconductor films and improved stability.


Competition


There are numerous experienced, well established, and well capitalized competitors in all of the markets we seek to exploit.  Most of the competitive companies and organizations have far greater capital and strategic resources.  Many companies using traditional semiconductor technologies that we seek to displace or improve may already have market penetration and acceptance.  Therefore, even if our technologies are successful, no assurance can be made that we will be able to compete effectively.


We believe that our liquid semiconductor technology will compete primarily against various semiconductor materials manufacturers, certain manufacturers of semiconductor devices, and other liquid-processed semiconductor technology companies.  



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Manufacturers of Traditional Semiconductor Devices


We do not intend to manufacture semiconductor devices.  Rather we intend to focus on developing and commercializing our patent-pending liquid semiconductor technology for out-license and material supply opportunities.  However, our technology is meant to replace traditional semiconductor components in current applications which will require that we compete effectively in existing markets for the original equipment manufacturers in order to succeed.  Examples per application include:


·

Thin-film Photovoltaics:  First Solar, Uni-Solar, Sharp Electronics Corporation, Wurth Solar, Honda Soltec, Ascent Solar

·

Display and Lighting:  Samsung Electronics Co., Ltd., Osram Sylvania, Philips Electronics N.V., and

·

Sensor Applications:  NEC Corporation, Toshiba, Sharp


Traditional Elemental and Materials Supply Companies


We intend to sub-license technology or supply liquid semiconductor materials to manufacturers of semiconductors for use in devices in the electronics and renewable energy industries.  Companies that focus on providing semiconductor materials, compounds, and catalysts to manufacturers in these existing markets can be considered competitive.  Companies supplying materials to these markets include Dow Chemical, Umicore, and 5N Plus among others.


Other Liquid-Based Semiconductor Technologies.


Our proprietary chemistries for producing electronic glue and liquid-processed semiconductors are currently based on inorganic, nanoscale semiconductor materials.  Inorganic and organic, liquid-processed semiconductors have been the subjects of much research, development, and commercial progress in applications that we might seek to develop. Our technology is primarily based on nanoscale structures and electronic glues manufactured via wet chemistry and their deposition and treatment to create solid semiconductor films or structures.  There are competing technologies that are based on introducing larger than nanoscale semiconductor materials into liquids or various semi-liquid forms for processing semiconductor thin film or structures.   In addition, there are likely ongoing efforts to improve electronic performance in historical methods for using liquid-processed semiconductors incorporating nanoscale materials.  Competition in this regard could include companies such as:  Innovalight, Konarka, Kovio, Nanosolar, Nanosys, Plextronics, QD Vision, Solexant, and Universal Display Corporation.  Other newly created companies or larger corporations investigating these methods could present further competition for our efforts.


Academic, Corporate R&D, and Government Labs.  


Our liquid semiconductor chemistries includes nanoscale materials and chemical components (electronic glues) that allow for the deposition (e.g., printing or spraying) and manufacture of high performance semiconductors.  We have licensed this technology from the University of Chicago and believe it is unique.  Other academic centers in the United States including Massachusetts Institute of Technology, University of California, Berkley and University of Pennsylvania are known to be investigating methods to achieve similar performance characteristics from inorganic semiconductor nanomaterials.  In addition to academic centers, corporate research and development groups, and various government labs throughout the world may be working on competing technologies to our electronic glue platform for liquid semiconductors.


Sources and Availability of Raw Materials


Our technologies are dependent on materials and chemicals that we believe are readily available in the market place at cost effective rates.  Chemicals we acquire are sourced from commercially available distributors.


Intellectual Property


University of Chicago Exclusive License Agreement


Pursuant to the exclusive license agreement with the University of Chicago, BlackBox has the exclusive, worldwide right to use and sublicense Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246)  BlackBox also was granted the exclusive worldwide right to use and sublicense  future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License. BlackBox’s license is applicable to all fields of use other than thermoelectric applications.  While the license is exclusive to BlackBox within fields of use other than thermoelectric applications, the University of Chicago has reserved the rights in the underlying technology for all educational and non-commercial research purposes.  



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The Intellectual Property Licensed


The technology being licensed is based on Professor of Chemistry Dmitri Talapin’s “electronic glue” chemistry. This technology, management believes, has various commercial applications where more efficient transfer of charges between nanomaterials is desired, such as printed transistors, printed solar cells and printed sensors.


Term and Termination


The license granted by the University of Chicago is for worldwide usage by BlackBox for period of at least eight years and renewable for an additional eight years based on successful commercialization of the technology by the end of the first eight year term.  The Chicago License requires, among other things, that we commercialize our products by 2018 (8 years from the contract date in November 2010).  The term may be terminated for cause or insolvency.


In addition, the University of Chicago may terminate the license if BlackBox does not raise at least $2,000,000 in capital prior to November 30, 2012 or if BlackBox does not employ and maintain a Suitably Qualified Person (as defined in the Chicago License) in a full-time executive position during the term of the license.  The Company has begun capital raising efforts and, under the terms of the Chicago License, is allowed the use of proceeds from any sale of the Shrink shares to fulfill the capital raising commitment required.


Initial Fee and Future Royalty Payments to University of Chicago


The Chicago License provides for (i) an annual fee to the University of Chicago of $25,000 until the first commercial sale, and (ii) royalty payments to the University of Chicago, for products utilizing the licensed rights, during the royalty term, as more fully detailed in the agreement, of 3% of net sales of products utilizing the University of Chicago’s licensed technologies, subject to reduction (up to 50%) if the product is sold as a combination product with one or more other products that are not covered by the licensed patents. Minimum royalties for any calendar quarter beginning with the calendar quarter of the first commercial sale are $12,500.


Other Limitations and Requirements


We are required by the Chicago License to pay for the costs of filing and maintaining the licensed patents.


The foregoing description of the Chicago License is a summary only, and is qualified in its entirety by the actual agreement which has been filed in our public filings.


Trademarks


The following is a list of trade or service marks utilized by BlackBox.  We have not yet made any trademark applications, but intend to do so:


·

LiquidSemi

·

LiquidSemi Solutions

·

Electronic Glue


Employees


The Company does not have any full time employees.  In February of 2011, the Company hired David Duncan as a consultant, and eventually an executive officer of the Company, in order to meet its obligations to hire a Suitably Qualified Person as required under the Chicago License.  Mr. Duncan subsequently resigned in November of 2011, and was replaced by Mr. Luis Leung. Mr. Ford Sinclair remained as president during this period.  Their biography, and that of all officers and directors during 2011 to date is included below in this Report under the “Management”, “Executive Compensation” and “Certain Relationships and Related Transactions and Director Independence” sections below.  



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Environmental and Governmental Regulation


Our technology might involve the use of a broad range of hazardous chemicals and materials. Environmental laws impose stringent civil and criminal penalties for improper handling, disposal and storage of these materials. In addition, in the event of an improper or unauthorized release of or exposure of employees or others to hazardous materials, we could be subject to civil damages due to personal injury or property damage caused by the release or exposure. A failure to comply with environmental laws could result in fines and the revocation of environmental permits, which could prevent us from conducting our business. Accordingly, any violation of environmental laws, increase in the scope of environmental laws or failure to properly handle, store or dispose of hazardous materials could result in restrictions on our ability to operate our business and could require us to incur potentially significant costs for personal injuries, property damage and environmental cleanup and remediation.





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Item 1A.

Risk Factors.


Set forth below are some of the principal risks and uncertainties that could cause our actual business results to differ materially from any forward-looking statements contained in this report or otherwise have a detrimental affect on the Company, our business, financial condition, results of operations, cash flows and on the market price of our common stock. These risks should be considered in making any investment decisions in BlackBox. Because BlackBox is our main and only material new business, these risks relate to and primarily speak of, BlackBox and its business except and insofar as the context requires or discusses losses relating to the Company parent itself or its operations and losses to date.  


The risks described below may materially impact your investment in our company and our business, financial condition and results of operations.  You should carefully consider these factors with respect to your investment in our securities.


FURTHER, ANY INVESTMENT IN OUR COMPANY WOULD BE EXTREMELY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURSUED UNLESS THE INVESTOR COULD AFFORD TO LOSE THEIR ENTIRE INVESTMENT. BEFORE INVESTING, PLEASE CAREFULLY REVIEW THIS FILING, ALL PAST PUBLIC FILINGS WHICH CAN BE FOUND AT  www.SEC.gov AND CONSULT A REGISTERED BROKER DEALER OR CONTACT THE FINANCIAL INDUSTRY REGULATORY AUTHORITY (“FINRA”) FOR MORE INFORMATION REGARDING LOCATING A QUALIFIED PARTY TO ASSIST IN MAKING AN INVESTMENT DECISION.


Risks Specifically Related to Our Company, Control By Management, Dilution and Technology


We may not be able to continue operations as a going concern and we need substantial additional capital.


Our independent auditors have expressed doubt about our ability to continue as a going concern.  We are, for all material purposes, currently a development-stage company only.  We have no commitments for grants and grant funds cannot, generally, be used towards commercialization and manufacturing efforts.  Accordingly, we will be dependent on obtaining additional external sources of capital in order to fund operations or even continue as a going concern.  


The current market environment makes capital raising a difficult task.  We do not believe that we will be able to monetize the value of the Shrink shares received in the Blackbox Share Exchange for a substantial amount of money.  A future capital raise could involve a private or public sales of equity securities or the incurrence of additional indebtedness. Additional funding may not be available on favorable terms, or at all.  A financing will result in dilution and or result in our obligation to make periodic interest or other debt service payments and may be subject to additional restrictive covenants.  If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our growth strategy by reducing or delaying capital expenditures, selling assets or downsizing or restructuring our operations.  If we raise additional funds through public or private sales of equity securities, the sales may be at prices below the market price of our stock, and our shareholders may suffer significant dilution as a result of such sale.


You will suffer immediate and substantial dilution; and the costs of the securities you purchase will significantly exceed the price paid by current principal shareholders and insiders.


Many of the present owners of our issued and outstanding securities acquired such securities at a cost substantially less than that of the open market.  In addition, the Company currently is indebted to Alpha Finaz, Ltd. for unpaid accrued fees, and loans originally made by Noctua Fund Manager to the Company since 2009 or earlier, as reflected on our convertible promissory notes in the aggregate initial principal amounts totaling $3,600 plus accrued interest of $60 as of October 31, 2011, these notes and accrued interest are convertible into common stock based on conversion prices at the times of the loans (into approximately 8,400,000 shares, in aggregate as of December  31, 2011) all of which are currently in default.  Therefore, the shareholders will bear a substantial portion of the risk of dilution and losses.



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We will need to raise substantial additional capital in the future and if we are unable to secure adequate funds on terms acceptable to us, we may be unable to support our business requirements or build our business.  The terms of any capital raise may require that we issue shares to investors at below quoted market prices, which may result in further dilution.


We currently have no revenues and do not expect to have any revenues or cash flows until we have developed our liquid semiconductor technology.  We expect that we will need at least $2,000,000 in capital over the next eighteen months to further develop and commercialize our technologies.  We are in fact, required to raise this amount before November 30, 2012, in accordance with the Chicago License. This amount may be credited by proceeds of the sale of our Shrink shares, if any, which shares are currently illiquid.  Our current cash, cash equivalents and available-for-sale securities, will be insufficient to meet our anticipated operating and capital requirements for at least the next year.  We will need to raise capital in order to complete our technology development activities.  We may raise additional capital through a variety of sources, including the public equity market, private financings and debt.  If we raise additional capital through the issuance of equity or securities convertible into equity, our stockholders may experience dilution. Those securities may have rights, preferences or privileges senior to those of the holders of the common stock.  Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to successfully support our business requirements or build our business.


Some of our debt is in default and could result in us losing some or all of our assets.


The “default” status with respect to the note owned by Alpha Finanz, Ltd, provides them with the right to take potentially aggressive actions, including levying on some or all of our assets, in order to recover monies owed.  This default could result in an action against us, including, one for enforcement of their rights by levying our assets.  The existence of a default also hinders our ability to raise additional capital or enter into long term contractual commitments.  


Rum Punch Partners, Ltd (“RP Partners”) is our principal stockholder and through its general partner, Mango Bay Management, LLC (“MB Mangement”) and its manager, Manuel Suqilinda,  has the ability to exert significant control in matters requiring stockholder vote and could delay, deter or prevent a change in control of our company.  RP Partners and its principal also controls the Company by virtue of their ownership of the Series A Preferred Stock which votes on a 250 for 1 basis with a common stock.


RP Partners, which in turn is controlled by its general partner Mango Bay Management, LLC (“MB Management”) the manager of which is Manuel Suqilinda has the ability to control the Company and its policy making.   Since our stock ownership and preferred stock ownership is concentrated among a limited number of holders (namely MB Management, Shrink and a few others listed in the ownership disclosure section below), those holders have significant influence over all actions requiring stockholder approval, including the election of our board of directors.  Through their concentration of voting power, they could delay, cause, deter or prevent a change in control of our company or other business combinations that might otherwise be beneficial to our other stockholders.  They may do so without notice to or consent of management, the Company or any shareholder.  In deciding how to vote on such matters, they may be influenced by interests that conflict with other stockholders.  Accordingly, investors should not invest in the Company’s securities without being willing to entrust the Company’s business decisions to such persons.


As a result, the forgoing and of our Series A Preferred Stock, members of management will be able to:


·

control the composition of our board of directors; control our management and policies; veto certain actions;

·

determine the outcome of significant corporate transactions, including changes in control that may be beneficial to stockholders; and

·

act in each of their own interests, which may conflict with, or be different from, the interests of each other or the interests of the other stockholders.


Conflicts of interest between the stockholders and our company or our directors and control persons could arise because we do not comply with the listing standards of any exchange with regard to director independence.


There are a variety of conflicts of interests and related party transactions with RP Partners through its general partner MG Management and its managing member which controls our Company and which control the vast majority of our shares and our board.  While MB Management and its affiliates have funded our operations to date, resulting in its ownership of convertible debt and stock, these persons have the ability to exert total control over the Company.  These persons have no fiduciary or other obligations to minority or other shareholders.  We are not listed on a stock exchange and our Board of Directors does not comply with the independence and committee requirements which would be imposed upon us if we were listed on an exchange.  In the absence of a majority of independent directors, our directors could establish policies and enter into transactions without independent review and approval. This could present the potential for a conflict of interest between the stockholders and our company or our directors.



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We have a significant amount of convertible debt and shares outstanding.  As these holders sell, it will likely reduce our stock price.  In addition, if we issue additional shares or derivative securities to raise capital or to pay consultants from time to time, or if we issue shares to employees and consultants under our 2011 Stock Incentive Plan, you will suffer immediate and substantial dilution to your common stock.


The bylaws allow the board to issue common shares without stockholder approval.  Currently, the board is authorized to issue a total of 1,000,000,000 common shares, par value $0.001 per share, of which 22% have been issued or reserved for issuance as of October 31, 2011.  In addition, the board is authorized to issue up to 25,000,000 preferred shares of which 5,000,000 are already designated and issued as control shares with the remaining  20,000,000 still authorized as “blank check” preferred stock , which may be issued with rights, terms,  privileges and preferences as the board, in its sole discretion may approved.  In addition 154,245,929 shares of outstanding common stock and 5,000,000 shares of outstanding preferred stock, the following additional shares are reserved for issuance or may, at any time, be issued from time to time:


·

8,133,348 shares may be issued upon conversion the remaining $3,660 of principal and interest outstanding under the 5% Secured NFM Note, which converts at $0.00045 per share;

·

3,000,000 shares of common stock underlying common stock purchase warrants exercisable at $.075 per share, and

·

20,000,000 shares of preferred stock may be designated by the Board, with such terms, conversion or issuance prices, rights, preferences, or privileges as is determined by the sole and absolute discretion of the Board and without notice of consent of any other parties,

·

50,000,000 shares of common stock, that may be issued pursuant to our 2011 Stock Incentive Plan, as adopted in June 13, 2011, as Incentive Stock Options, Non-Qualified or Qualified Stock Options, at such rates and for such consideration terms as determined by our Board.


In addition, a 27,030,000 of our shares, are held by and may be sold by, Shrink at any time, which will likely result on an effect on our stock price.  


We are a development-stage company and have not generated any operating revenues and we may never achieve profitability, and we have yet to commercialize any of our technology.  


We have no revenues and our technologies have not been commercialized.  We also do not have any material revenues or significant assets from our prior Visitrade related motorcycle parts businesses.  


Our recently acquired subsidiary, BlackBox, is a development stage company and, to date, has not generated any revenues. BlackBox’s liquid semiconductor technology is still in development stage.  We have not yet and may never fully develop the technology to allow for commercial applications. We cannot assure you that we will generate revenues or that we can achieve or sustain profitability in the future.  Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable.  Revenues and profits, if any, will depend upon various factors, including whether our technology development can be completed, and if we can achieve market acceptance for the targeted applications.  We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.


We have a history of net losses, we expect to continue to incur net losses in the foreseeable future, and may never achieve profitability.


Our losses have resulted principally from administrative expenses associated with our operations.  We have not had any BlackBox related revenues and do not anticipate commercial product sales for the next several years.  We expect our losses to continue for the foreseeable future and depend on capital raises to survive.  We cannot assure you that we will develop our technologies, or, if even if successfully developed, that resulting applications will be commercially viable. We expect to incur substantial additional operating losses as a result of increases in expenses related to technology and product development, manufacturing and selling, general and administrative costs. In addition, we incur substantial expenses to comply with our obligations as a public company. We may never achieve profitability. We may need additional funding for our operations and we cannot assure you that it will be available on commercially reasonable terms, if at all. Our ability to achieve profitability will depend upon many factors, including our ability to:


·

further develop our technology to enable the development of products utilizing the technology,

·

enter into research, development, and commercialization phase agreements with appropriate partners;

·

enable commercially viable products using liquid-processed semiconductors and determining how to manufacture them on a commercial scale;

·

convince customers of the benefits of our technology for their end-use applications;

·

establish, alone or with partners, commercial scale manufacturing capabilities for our various liquid-processed semiconductor applications;



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·

enforce our intellectual property rights against others;

·

successfully defend any allegations of infringing and avoid infringing the intellectual property rights of others;

·

comply with government and environmental regulations;

·

address any legal restrictions due to ethical concerns or export regulations; and

·

hire, train and retain qualified personnel.


We are developing new technology for commercial end-use and, as a result, we may not be able to successfully develop our technology for commercial end-use applications.


Our technology is new and unproven in commercial end-use applications and we are still in the early stages of determining the feasibility of using our technology to develop and integrate our products for end-use applications.  Our potential products require significant and lengthy product development efforts. To date, we have not developed any commercially available products. During our product development process, we may experience technological issues that we may be unable to overcome. If we are not able to successfully develop our liquid semiconductor technology, associated manufacturing processes, and viable products for commercial partners’ end-use applications, then we will be unable to generate product revenue or build a sustainable or profitable business.


We will need to achieve commercial acceptance of our technology and meet commercial specifications from commercial partners for our liquid semiconductor products to obtain product revenue and achieve profitability.


Even if our products are technologically feasible, we may not successfully develop commercially viable products according to our development schedule, if at all. It will be at least several years before our first products are commercially available and during this period, superior competitive technologies may be introduced or customer needs may change resulting in our products being unsuitable for commercialization. Our revenue growth and achievement of profitability will depend substantially on our ability to introduce new products into the marketplace that are widely accepted by customers. If we are unable to cost effectively achieve commercial acceptance of our products, our business will be materially and adversely affected.


We are dependent on few key personnel.  We may suffer the loss of key personnel or may be unable to attract and retain qualified personnel to maintain and expand our business.


Our success is highly dependent on the continued services of our consultants and advisors for the advancement of our business and technology.  The loss of the services of any of our key consultant or advisors would have a material adverse effect on our development plans and prospective operations. The company currently does not have any employees.  Going forward, our success will depend upon, among other factors, our ability to attract, retain and motivate qualified research and development, engineering and operating personnel, generally and during periods of rapid growth, especially in those areas of our businesses focused on new products and advanced manufacturing processes. There can be no assurance that we will be able to attract and retain key employees on acceptable terms to operate our business successfully.


We do not currently have the ability to manufacture liquid semiconductor products in volume and will not be able to commercialize our technology without developing our own volume manufacturing capabilities or partnering with others to develop these capabilities.


The commercial success of our liquid semiconductor technology will require the ability to manufacture in volume and will require long lead times to advance the technology and adequate facilities to achieve this requirement.  Currently, we do not have any internal manufacturing capabilities and we will require additional resources to implement them on our own or with partners.  We may not be able to develop commercial scale manufacturing capabilities or be able to do so cost effectively.  Unless we are ultimately able to economically manufacture or obtain our products in commercial quantities that meet acceptable performance and quality specifications, our business will be harmed.


Even if we develop commercially acceptable products, we cannot determine whether we can manufacture our products in a cost effective manner or achieve profitability.


Even if our technology and products gain commercial acceptance, we may not be able to manufacture our products, or have them manufactured, at a cost that enables us to be competitive for our commercial partners end use and allows us to become and remain profitable. We do not know if we will be able to use commercially available equipment to manufacture our liquid semiconductor products.  Further development and expense for unique or modified equipment might be required.  We do not know the requirements for the equipment necessary for commercial production of our products.  The design and success for any unique or modified equipment may not be technically feasible.  In addition, these unique or modified requirements might not be acceptable to potential commercial partner in terms of cost or acceptable manufacturing and production specifications.  



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To use our liquid semiconductor products, our partners and end users will be required to integrate these products into their final products and they may not do so successfully.


We anticipate that most of our products will be integrated into end user products by our partners and other end users.  Although we intend to develop our products to be integrated with our partners’ existing manufacturing capabilities, our partners might be required to make modifications to or expand their manufacturing capabilities. Potential future partners and end-users may not be willing integrate our products into their end user products or may not devote adequate resources to modifying their manufacturing capabilities so that our products can be successfully incorporated into their end user products.


We are dependent on the services of our strategic advisors for some of our development activities and our business could be harmed if we were unable to utilize their services.


We depend on the services of consultants and advisors to assist us with technical and business activities.  These individuals are not our employees and, may be employed for others, and we do not have access to all of their time or work product and may have difficulty obtaining the amount of time and attention from these strategic advisors that we need. In addition, we do not have any assurance that these strategic advisors will continue to provide services to us or, if not, that they will not provide services to our competitors.  If we were unable to utilize the services of these individuals, our development efforts or our relationships with new or existing partners may be harmed.


We have licensed our core initial technology from an educational institution and may further license from educational institutions.  Our business could be harmed if these institutions develop important intellectual property to which we do not have rights.


We have licensed our core initial technology from the University of Chicago. This license give us the right to use certain technology previously developed by researchers at this licensor. We also have the right to practice improvements on the licensed technology to the extent they are encompassed by the licensed patents and within our field of use.  We may license additional technology from the University of Chicago or other educational institutions in the future.  Our existing licensor or future licensors may own and may in the future obtain additional patents and patent applications that are necessary for the development, manufacture and commercial sale of our anticipated products.  We may be unable to agree with one or more of these licensors that certain intellectual property developed by researchers at these licensors is covered by our existing licenses. In the event that the new intellectual property is not covered by our existing licenses, we would be required to negotiate a new license agreement. We may not be able to reach agreement with the licensors on the terms of the license and the terms may not permit us to sell our products at a profit after payment of royalties or on commercially reasonable terms, if at all, which could harm our business.


If we fail to meet our financial, technical or commercial diligence obligations under the license granting us rights to our core technology, we may lose those rights.


Our license with the University of Chicago requires us to meet certain financial and commercial diligence requirements in order to maintain our rights to our core technology. Our failure to meet those requirements could lead to various adverse consequences, including the loss of exclusive rights or loss of all rights to key aspects of our core technology. We cannot predict whether we will be able to meet all diligence requirements necessary to retain rights to our licensed technology.  If we lose exclusive rights to the core technology our business would be harmed.


We may use hazardous materials in our business, and any claims relating to improper handling, storage or disposal of these materials could subject us to significant liabilities.


Our technology might involve the use of a broad range of hazardous chemicals and materials. Environmental laws impose stringent civil and criminal penalties for improper handling, disposal and storage of these materials. In addition, in the event of an improper or unauthorized release of or exposure of employees or others to hazardous materials, we could be subject to civil damages due to personal injury or property damage caused by the release or exposure. A failure to comply with environmental laws could result in fines and the revocation of environmental permits, which could prevent us from conducting our business. Accordingly, any violation of environmental laws, increase in the scope of environmental laws or failure to properly handle, store or dispose of hazardous materials could result in restrictions on our ability to operate our business and could require us to incur potentially significant costs for personal injuries, property damage and environmental cleanup and remediation.



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We currently do not have insurance coverage for any claims against us.


We face the risk of loss resulting from product liability, securities, fiduciary liability, intellectual property, antitrust, contractual, warranty, environmental, fraud and other lawsuits, whether or not such claims are valid.  In addition, we do not have product liability, fiduciary, directors and officers, property, natural catastrophe and comprehensive general liability insurance.  To the extent we secure insurance it may not be adequate to cover such claims or may not be available to the extent we expect. If we are able to secure insurance our costs could be volatile and, at any time, can increase given changes in market supply and demand. We may not be able to obtain adequate insurance coverage in the future at acceptable costs.  A successful claim that exceeds or is not covered by our policies could require us to pay substantial sums.  


Risks Related to Competition and our Industry


Because or technology is applicable to multiple large markets and multiple end-use applications, we will likely face competition from companies in multiple industries, as well as from the internal efforts of our potential commercial partners and, if we fail to compete effectively, our business could suffer.


We compete in intensely competitive markets for semiconductor and liquid semiconductor-enabled, end user products. The liquid semiconductor technology we are currently developing will compete directly with products incorporating conventional semiconductor materials and methods of manufacturing semiconductors. We believe our potential products will face significant competition from existing manufacturers in our current target markets including:


·

Thin-film Photovoltaics:  First Solar, Uni-Solar, Sharp Electronics Corporation, Wurth Solar, Honda Soltec, Ascent Solar

·

Display and Lighting:  Samsung Electronics Co., Ltd., NEC Corporation, Osram Sylvania, Philips Electronics N.V., and

·

Sensor Applications:  NEC Corporation, Toshiba, Sharp


We may also be subject to competition from existing materials supplies companies who provide traditional base materials for the manufacture of semiconductor, sensor, and thin-film photovoltaic devices.


In addition, we may also face competition from technology companies focused on the development of inorganic and organic liquid semiconductor methods, such as:  Innovalight, Konarka, Kovio, Nanosolar, Nanosys, Plextronics, QD Vision, Solexant, and Universal Display Corporation.  Other newly created companies or larger corporations investigating these methods could be further competition for our efforts.


In the future, we may also face significant competition from potential academic and commercial partners which may be developing or expanding their product and manufacturing capabilities, intellectual property portfolios, and strategic relationships to incorporate liquid semiconductor technology into commercial end user products. If our current and future partners expand their capabilities or product offerings to compete directly with our liquid semiconductor products, our revenue and business results could be harmed.


Our limited resources and size could put us at disadvantage to potential competitors and conducting business with potential partners.


Many of our competitors, as well as potential future academic and commercial partners, may have access to substantially greater financial, technical, operational, intellectual property, legal and other resources than we do, which may enable them to react more effectively to new market opportunities.  Currently, we have no internal technology development, marketing, sales, or manufacturing infrastructure in place.   Many of our competitors and potential future partners have greater name recognition and market presence than we do, which may allow them to market themselves more effectively to new customers and prevent us from achieving commercial progress.  If we do not compete successfully, our ability to develop and sell our products could be harmed and our business could suffer.


Our technology includes nanoscale materials that may be viewed as being harmful to human health or the environment.


We intend to develop and commercialize liquid semiconductor-based products composed of various semiconductor, metal, and/or other materials.  Because of the size of the nanostructures or because they may contain harmful elements, our products could pose a safety risk to human health or the environment.  In addition, some countries have adopted regulations prohibiting or limiting the use of certain products that contain certain chemicals, which may inhibit our ability to engage with potential commercial partners, set-up operations, or sell end user products containing those materials. The regulation and limitation of the kinds of materials used in or to develop or manufacture our products could limit ability to develop commercially viable products and harm our business.



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Government regulations and public perception may limit or discourage the use of nanotechnology, which could reduce our revenue and harm our business.


The subject of nanotechnology has received negative publicity.  Government authorities could, for health, safety, social or other purposes, prohibit or regulate the use of nanotechnology. Ethical and other concerns about nanotechnology could adversely affect acceptance of our potential products or lead to government regulation on the manufacture or use of nanoscale materials.  In addition, our liquid semiconductor products may be subject to export restrictions by the United States or import restrictions by other countries because of the potential use of nanostructured materials.


Risks Related to Our Intellectual Property


Our patents and patent applications may cover technologies that have few or no commercial applications.


The patents and patent applications that we have licensed from the University of Chicago are directed to technologies that were invented in the course of academic or government research activities, and may not have been invented with a view toward commercial applications. As a result, these licensed patents and patent applications may only cover technologies that have few or no commercial applications and may therefore provide limited or no coverage of any potential products we may develop.


Our inability to adequately protect and maintain our intellectual property for our liquid semiconductor technology and enabled products could harm our business.


Our ability to achieve commercial success will depend in part on obtaining and maintaining our liquid semiconductor-related intellectual property as well as successfully defending our intellectual property against any third party challenges.  This will require us to pay the license and other commercialization costs as well as defend against use or initiate claims against third parties.  If we are unable to obtain and maintain patent and trade secret protection for our technology and products, our business could be harmed. In addition, we will only be able to protect our technology and enabled products from unauthorized use by third parties where we obtain and maintain valid and enforceable patents or trade secrets.


We rely, in part, on the University of Chicago to file and secure our patents.  


We have licensed certain patents that have been filed and are scheduled to be filed per our agreement with the University of Chicago. In addition, we have the right to license patentable inventions or discoveries related to the claims for patents included in the Chicago License.  The University of Chicago retains the right and sole responsibility to prepare, file, prosecute and maintain all patents included in the Chicago License or are subsequently included from new patents for related claims.  


We cannot be certain of the final issued patents or claims to the technology we have licensed or for future patent applications, their ability to protect our intellectual property rights, or the degree to which they will provide us competitive advantage.


Our success depends, to a significant degree, upon the protection of our proprietary technologies. While we currently license certain patent applications from the University of Chicago, we may need to pursue additional protections for our intellectual property as we develop new products and enhance existing technologies. We may not be able to obtain appropriate protections for our intellectual property in a timely manner, or at all. Our inability to obtain appropriate protections for our intellectual property may allow competitors to enter our markets and produce or sell the same or similar products.


Our licensed patents are currently pending and have not been issued by the respective domestic and international patent offices and regulators.  We cannot predict the claims or breadth of claims that may be allowed or enforced in our future patent applications or in our licensed patents.  The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep a competitive advantage. For example:


·

we, or our licensors, might not have been the first to make the inventions covered by each of our pending patent applications or any future issued patents;

·

our patent applications, or those we have licensed, might not have been the first to be filed for the inventions;

·

pending patent applications that we file or license may not result in issued patents;

·

pending patents that we have licensed or may file may not provide a basis for commercially viable products, and may not provide us with any competitive advantages;

·

patent applications or patents that we have filed or licensed might fail to issue or the patents deemed invalid, or may be challenged and invalidated by third parties;

·

we may not develop additional proprietary technology that is patentable; or

·

the patents of others may have an adverse effect on our business.



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We also rely on trade secrets to protect our technology and cannot be certain they will remain secret and provide protection or advantage to our efforts.


We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. Trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, partners and other advisors may unintentionally or willfully disclose our information to competitors or use them for their own benefits.  Moreover, not all consultants or service providers or other persons that may have access to our information from time to time, will necessarily be covered by confidentiality agreements.  Enforcing claims that a third party illegally obtained, disclosed or is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know how that be equivalent or preferential to our trade secret practices.


We may become involved in litigation or other proceedings to defend against claims of infringement of intellectual property rights of others and the outcome could have a material adverse impact on our business.


While we are not currently involved in any legal proceedings related to intellectual property, the defense and prosecution of intellectual property suits, interferences, oppositions and related legal and administrative proceedings in the United States and elsewhere are costly, time consuming to pursue and could result in the use of our limited financial, legal, and managerial resources. An adverse ruling, including an adverse decision as to the infringement of any third party intellectual property rights or the enforceability or validity of our intellectual property rights could subject us to significant damages or prevent us from using the intellectual property or selling our products. Even if we prevail, we could incur substantial costs and our intended business plans may be diverted or postponed.


We may need to obtain licenses to patents or other proprietary rights from third parties which could harm our business.


We might be required to obtain licenses to other patents or proprietary rights to operate freely and to maximize our liquid semiconductor technology and enabled products.  We may not be able to obtain licenses for the patents or proprietary rights, or they may not be available on acceptable terms.  If we do not obtain required licenses, our technologies could infringe on the rights of others and, we may encounter delays in product development, our ability to find commercial partners, or find that the development, manufacture or sale of enabled products requiring licenses could be diminished. Ultimately, we could be prevented from commercializing a product, or forced to cease some aspect of our business operations without such licenses or be required to design around the patents which could delay our commercial progress or result in products that may be inferior in quality or performance.  We may, from time to time, support and collaborate in research conducted by universities and governmental research organizations, such as the University of Chicago. We may not be able to acquire exclusive rights to the inventions or technical information derived from these collaborations, and disputes may arise over rights in derivative or related research programs conducted by us or our collaborators.


In order to protect or enforce our patent rights, we may initiate costly patent litigation against third parties which will require financial and legal resources that could jeopardize our business.  The outcome of said causes would be uncertain.


We may initiate patent litigation against third parties, such as infringement suits or interference proceedings, in order to protect or enforce our patent rights. This litigation may be necessary to:


·

assert claims of infringement;

·

enforce our patents;

·

protect our trade secrets or know-how; or

·

determine the enforceability, scope and validity of the proprietary rights of others.


The result of any such litigation would be uncertain.


Any lawsuits that we initiate could be expensive, take significant time and divert management’s attention from other business concerns. Litigation also puts our patents, if any, at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us.  Changes in laws concerning intellectual property would affect our ability to protect our intellectual property, if any.



17




We are required to fund intellectual property costs for our licensed liquid semiconductor technology and enabled products which could harm our business.


We are obligated to fund the application, prosecution and maintenance of the patents we acquired under the Chicago License.  Given our limited financial and legal resources, we may not be able to fund or successfully execute these efforts should we be required.  Excessive financial obligations or ability to maintain viability of our patents in this regard could prove harmful and jeopardize our ability to operate our business.  In addition, in some cases, we have may also be required to agree to indemnify licensors for any actions we take with respect to developing the technology we have licensed that becomes subject to a third party claim. Our obligations to indemnify these licensors may cause us to incur unanticipated expenses and divert our management’s attention from running our business.


Risks Relating to Our Common Stock And Dilution


Our Common Stock is highly illiquid.  A liquid market may not ever develop, which could prevent you from liquidating your investment.


We have very few shareholders and almost no trading volume.  In addition, there are fewer and fewer broker dealers willing to make markets in bulletin board securities, especially startups or, to even accept securities such as ours for deposit.  There is only a limited public market for the Company’s common stock, and no assurance can be given that a market will continue or that a stockholder ever will be able to liquidate his investment without considerable delay, if at all.  In addition, most of our stock is owned by a few people, including MB Management and Shrink which is an affiliate of certain control persons of the Company.  If a market should continue, the price may be highly volatile. Factors such as those discussed in this “Risk Factors” section may have a significant impact upon the market price of our common stock. Due to the low price of the securities, many brokerage firms may not be willing to effect transactions in our common stock. Even if a purchaser finds a broker willing to effect a transaction in our common stock, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of our common stock as collateral for any loans.


Even with a more developed market, it could become difficult to deposit and liquidate our securities.  


There are fewer and fewer broker dealers willing to accept for deposit, hold and sell securities of bulletin board companies, especially those such as ours with limited operating history and infrastructure and limited trading.  Accordingly, even if some liquidity develops, you may have difficulty liquidating your securities.


RP Partners, which is managed by MB Management, its general partner and controlled by Manuel Suqilinda it managing member is our largest shareholder and control person with over 64% ownership control of the Company, and controls Shrink as well. Shrink is also, separately and on its own, a holder of a liquid control block of over 27 million shares (approximately 19% of the Company).  


RP Partners by MB Management is a successor in interest to Noctua Fund Manager, LLC and James Panter, beneficially owns over 60% of our common stock, and owns notes convertible into greater than an additional 8,000,000 shares of our common stock.  RP Partners by its general partner MB Management also owns and controls all of our Series A Preferred Stock which votes on a 250 for 1 basis with our common stock and contains veto powers enabling them to change our board or change control of the Company, without notice to or consent of the Company or its shareholders or board.   


In turn, Shrink acquired approximately 19.9% of our common stock pursuant to the terms of the BlackBox Acquisition.  Shrink is also controlled by NFM and its management.  These shares will also be liquid and salable within 6 months without restriction if they are not an affiliate.  


There is no lock-up provision on these shares other than resale restrictions under the Securities Act.  NFM therefore, has the ability, to exert control over our management decisions and, will have the ability to sell large volumes of stock over the course of the next few years.  


Our need for additional financing and the conversion of our existing convertible notes and warrants will result in immediate and substantial dilution to your investment and may adversely affect the market price of our common stock.


Additional funding will be required in order for the company to survive as a going concern, to finance growth, and to achieve our strategic objectives. Management is actively pursuing additional sources of funding. If we do not raise sufficient funds in the future, we may not be able to fund expansion, take advantage of future opportunities, meet our existing debt obligations or respond to unanticipated requirements. Financing transactions in the future may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.



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The amount and timing of our future capital requirements will depend upon many factors, including the level of funding received from possible future private placements of our common stock and the level of funding obtained through other financing sources, and the timing of such funding.  We intend to retain any future earnings to retire any existing debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes.


Sales of a substantial number of shares of our common stock in the public market could dilute your existing investment, depress the market price of our common stock, and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock.


In addition, your investment could be diluted and the price of our common stock could be affected by possible conversion by holders of our convertible notes into shares of common stock.  The price of our common stock could be further effected by sales of our common stock by holders of our convertible notes and by hedging or arbitrage trading activity that may develop involving our common stock.  As of December 31, 2011 we had convertible notes outstanding with a principle balance of $3,600 and interest of $180 convertible into 8,400,000 shares of our common stock.


Holders of our common stock, convertible notes, and common stock warrants hold a substantial number of shares or rights to acquire shares, which they may be able to sell in the public market in the near future. If our existing security holders convert, or sell, or are perceived to be prepared to sell, a substantial number of shares of our common stock in the public market, the market price of our common stock could fall. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional shares of stock.


The existence of our “super-voting” preferred stock may adversely affect our ability to raise capital.

 

Currently, 5 million shares of Series A Preferred Stock are issued and outstanding by NFM.   These shares vote on a 250 for one basis with our common stock and also contain certain veto-rights and powers.  Accordingly, the holder of these shares has full control over the company’s board and activities at all times.  There are no restrictions on assignment of all or any portion of these shares to one or more persons, which could result in an immediate change of control without notice to or consent of, the Company, its shareholders or management.  These shares contain strict voting and veto rights, and other restrictive covenants.  As a result, 100% of our voting control is vested in two beneficial owners.


The existence of our outstanding preferred stock held by RP Partners, which is indirectly controlled by Manuel Suqilinda,its manager, may hinder our ability to raise capital at favorable prices if and as needed, or to make acquisitions.


As a result, these beneficial owners will be able to:


·

control the composition of our board of directors; control our management and policies;

·

determine the outcome of significant corporate transactions, including changes in control that may be beneficial to stockholders;

·

and act in each of their own interests, which may conflict with, or be different from, the interests of each other or the interests of the other stockholders.


There is limited historical information available for investors to evaluate our performance or a potential investment in our shares.


There is limited historical information available to help prospective investors evaluate our performance or an investment in our shares, and our historical financial statements are not necessarily a meaningful guide for evaluating our future performance because we have not begun to develop and market our technology and related products.



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Our registered public accounting firm to conclude that our internal control over financial reporting is not effective.


As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm that both addresses management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404. Testing and maintaining internal controls can divert our attention from other matters that are important to our business. We also expect the regulations to increase our legal and financial compliance cost, make it more difficult to attract and retain qualified officers and members of our Board of Directors (particularly to serve on an audit committee) and make some activities more difficult, time consuming and costly. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Our independent registered public accounting firm may not be able or willing to issue an unqualified report on the effectiveness of our internal control over financial reporting. If we conclude that our internal control over financial reporting is not effective, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations since there is presently no precedent available by which to measure compliance adequacy. If we are unable to conclude that we have effective internal control over financial reporting or our independent auditors are unable to provide us with an unqualified report as required by Section 404, then we may be unable to continue to have our common stock traded on the Over-the-Counter Bulletin Board and investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.


The Company’s shareholders may face significant restrictions on their stock from both regulators and the securities industry.


The Company’s stock differs from many stocks in that it is a “penny stock.” Penny stocks are subject to significant regulation that limits their liquidity.  In addition, broker dealers have increasingly been unwilling to make markets in penny stocks or to accept the same for deposit.   The Commission has adopted a number of rules to regulate “penny stocks” including, but not limited to, those rules from the Securities Act as follows:


·

3a51-1  which defines penny stock as, generally speaking, those securities which are not listed on either NASDAQ or a national securities exchange and are priced under $5, excluding securities of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years, greater than $5 million if in operation less than three years, or average revenue of at least $6 million for the last three years;

·

15g-1  which outlines transactions by broker/dealers which are exempt from 15g-2 through 15g-6 as those whose commissions from traders are lower than 5% total commissions;

·

15g-2  which details that brokers must disclose risks of penny stock on Schedule 15G;

·

15g-3  which details that broker/dealers must disclose quotes and other information relating to the penny stock market;

·

15g-4  which explains that compensation of broker/dealers must be disclosed;

·

15g-5  which explains that compensation of persons associated in connection with penny stock sales must be disclosed;

·

15g-6  which outlines that broker/dealers must send out monthly account statements; and

·

15g-9  which defines sales practice requirements.

 

Since the Company’s securities constitute a “penny stock” within the meaning of the rules, the rules would apply to us and our securities. Because these rules provide regulatory burdens upon broker-dealers, they may affect the ability of shareholders to sell their securities in any market that may develop; the rules themselves may limit the market for penny stocks. Additionally, the market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. Shareholders should be aware that, according to Commission Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered from patterns of fraud and abuse. These patterns include:


·

control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

·

manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

·

“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

·

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

·

the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.




20




The market for our stock is limited and our stock price may be volatile.


The market for our common stock has been limited due to low trading volume and the small number of brokerage firms acting as market makers. Because of the limitations of our market and volatility of the market price of our stock, investors may face difficulties in selling shares at attractive prices when they want to. The average daily trading volume for our stock has varied significantly from week to week and from month to month, and the trading volume often varies widely from day to day.


In addition, there will be few objective metrics by which our business progress will be measured which may also cause the market price of our common stock to fluctuate significantly. We do not expect to generate substantial revenue from the sale of our liquid semiconductor products for several years, if at all. In the absence of product revenue as a measure of our operating performance, we anticipate that investors and market analysts will assess our performance by considering factors such as:


·

our ability to enter into or technology development, commercialization, and other agreements with new and existing partners;

·

announcements regarding the status of any or all of our collaborations or technology applications;

·

general and industry specific economic conditions, which may affect our and potential partners’ development expenditures and commercialization resources;

·

the success or failure of our competitors’ efforts to develop competitive technologies;

·

announcements regarding developments in the semiconductor field in general;

·

the issuance of competitive patents or disallowance or loss of our patent rights; and

·

announcements regarding government funding and initiatives related to the development of our technology.


We will not have control over many of these factors but expect that our stock price may be influenced by them. As a result, our stock price may be volatile and you may lose all or part of your investment.


We do not anticipate paying any cash dividends, which could reduce the value of your stock.


We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.


We may be the subject of securities class action litigation and/or regulatory trading halts due to future stock price volatility.


In the past, when the market price of a stock has been volatile, holders of that stock have often initiated securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention to our business plan.


In addition, the SEC has halted trading in the past of companies with suspicious trading activity.  



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Item 2.

Properties.


The Company currently leases 64 Sq. Ft. of office space at 1462 Erie Boulevard, Schenectady, New York, 12305.  The lease for this space is $95.50 per month plus telecommunications costs and certain office expenses and terminates on January 4, 2012, at which time it turns to month to month lease.  The Company’s phone number is (518) 935-2830.    


Item 3.

Legal Proceedings.


The Company is not a party to any legal proceedings.  


Item 4.

Mine Safety Disclosure.


Not Applicable.  


PART II


Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


Market Information


On January 15, 2011, the Company’s Board of Directors affected a 1-for-270 reverse stock split and changed its name to BlackBox Semiconductor, Inc.  Thereafter, in June of 2011, the Company completed a 20:1 Forward Split of its Common Stock whereupon 20 new shares of Common Stock were exchange for each outstanding share.  


As a result, the Company’s stock symbol was temporarily modified to “VTDID” through July 12, 2011 at which time it resumed trading under the symbol  “VTDI.”   The common stock of the Company, is currently traded over the counter and is listed on the pink sheets.  The availability of historical trading prices of our common stock is limited, with periods of little or no trading activity. The following table sets forth the available approximate range of high and low bid prices for the common stock of the Company during the periods indicated. The quotations presented are adjusted to reflect splits in our common stock and reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not necessarily represent actual transactions in the common stock.


As of April 23, 2012, the Company had 154,245,929 shares of common stock issued and outstanding.  


2011(1)

Low

High

First Quarter

$0.2703

10.81

Second Quarter

0.011

101.00

Third Quarter

0.04

1.00

Fourth Quarter

0.0401

0.40

2010(1)

Low

High

First Quarter

0.027

1.4324

Second Quarter

.027

0.7297

Third Quarter

0.2162

3.2432

Fourth Quarter

0.2432

0.5676


(1)Adjusted to reflect both the reverse and forward splits in 2011.


As of April 13, 2012, the closing quotation for our common stock was $0.023 per share.


As reflected by the high and low prices on the foregoing table, the trading price of the common stock of the Company can be volatile with dramatic changes over short periods. The trading price may reflect imbalances in the supply and demand for shares of the Company, market reaction to perceived changes in the industry in which the Company sells products and services, general economic conditions, and other factors. Investors are cautioned that the trading price of the common stock can change dramatically based on changing market perceptions that may be unrelated to the Company and its activities.


Approximate number of equity security holders


The approximate number of record holders of the Company's common stock as of  July 31, 2011, was 57which does not include shareholders whose stock is in street name or held through securities position listings, such as CEDE & Co.



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Dividends


The Company did not declare or pay any cash dividends on its common stock during the past two fiscal years.  The Company does not foresee a capital surplus and, if any is earned, the Company intends to invest all capital towards growth, research and development of the Company’s technologies and does not intend on declaring a dividend or other distribution in the foreseeable near future.


Securities authorized for issuance under equity compensation plans


Effective as of June 13, 2011, the Company’s Board of Directors adopted the BlackBox Semiconductor, Inc., 2011 Stock Incentive Plan (the “Plan”). The Plan provides for the award of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock or Stock Purchase Rights (all as defined in the Plan), and 50,000,000 shares have been reserved for issuance under the Plan. If an option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered for exchange, the unpurchased shares that were subject to those awards will become available for future grant or sale under the Plan. The Company intends to submit the adoption of the Plan for stockholder approval at its next annual meeting of stockholders. The foregoing is a summary only of the material terms of the Plan, a full copy of which is filed as a copy to this Report. To date, no shares or options to acquire shares under the Plan have been issued.  


Purchases of equity securities by the small business issuer and affiliated purchasers


During the year ended December 31, 2010, neither the Company nor any of its affiliates purchased any equity securities of the Company or on behalf of the Company.


Recent Sales of Unregistered Securities


In October, the Company issued 19,022,609 common shares for payment of convertible notes with principal balances totaling $72,148 and accrued interest of $601.


Item 6. Selected Financial Data.


Not Applicable.



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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.


This discussion and analysis in this Annual Report on Form 10-K (the “Report” or “Annual Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.  The Report should be read in conjunction with the accompanying Financial Statements and related notes and the Risk Factors contained herein as well as business section. You can reference additional specific risks relating to the Company and disclosure set forth in this report as provided in the “Forward Looking Statements” section in the forepart to this Report and in the “Risk Factors” section above.


OVERVIEW AND PLAN OF OPERATION


On June 3, 2011 (the “Closing Date”), we completed the closing of its acquisition of BlackBox Semiconductor, Inc., a Delaware corporation (“BlackBox” or sometimes “BlackBox Subsidiary” or “BlackBox Delaware”) from Shrink (Symbol “INKN”)  (“Shrink” or the “Seller”), pursuant to a Share Exchange Agreement  (the “Share Exchange”)  with Shrink (the “BlackBox Acquisition”).  Prior to such time we were a retailer of aftermarket Triumph motorcycle parts and accessories.  We no longer operate in this segment and do not have material liabilities relating to it.  As a result of the BlackBox Acquisition, we succeeded to the Business of BlackBox on June 3, 2011. Shrink was an entity affiliated with the Company prior to the BlackBox Acquisition as well as currently.


Terms of the BlackBox Share Exchange


As consideration for the acquisition of BlackBox, we (i) originally agreed to pay $75,000 in cash within 60 days of the Closing Date, which payment due date was subsequently extended to December 31, 2011, and (ii) issued an aggregate of 27,030,000 shares of our common stock, par value $0.001 per share to Shrink (the “Exchange Shares”), or, approximately 19% of our outstanding stock as of the date immediately after the Closing Date.  In exchange therefore, we received (i) all of the shares of BlackBox resulting in BlackBox becoming our wholly owned subsidiary, and (ii) 14,000,000 shares of the common stock, par value $0.001 per share, of Shrink (the “Shrink Consideration Shares”).   The $75,000 payment due in December has since been reduced to $12,500 and paid in full and discharged in October 2011.  


Related Parties


At the time of the Shrink Acquisition, Shrink and the Company were both controlled by Mark L. Baum and Mr. Panther, by virtue of their ownership and control of Noctua Fund Manager, LLC and the Noctua Fund, LP (NFM).  Accordingly, as a result of the inherent conflicts of interest, the BlackBox Acquisition was approved by independent and disinterested directors of Shrink and of the Company.  Subsequently, in April of 2012, interests held by NFM and Noctua Fund were acquired for value by an entity indirectly controlled by James Panther  All equity interests in the Company  were subsequently sold and transferred by Mr. Panther to Rum Punch Partners, Ltd., a Texas limited liability company which is managed by Mango Bay Managment, LLC (MB Partners), which is in turn indirectly controlled by an investor group managed by Manuel Suqilindo., its manager.  The 2010 Secured Note and Unsecured Note were sold and assigned by Mr. Panther acquiring entity to a separate purchaser, Alpha Finance, Ltd.  Based on information provided to the Company by such persons, Alpha Finanze, Ltd. and Manuel Suqilinda are unaffiliated with Shrink, Messers Panther and Baum.  As a result of the completion of the BlackBox Acquisition, the assets, operations and business of BlackBox has become our primary and only material business, operations and assets.    


The Company intends to wind down or liquidate its current operations as an online retailer of aftermarket Triumph motorcycle parts and accessories.   The Company does not have any material liabilities from this business segment.


Accounting Treatment


As a result of our BlackBox Acquisition, we have succeeded to the business and technology development operations of BlackBox, which now constitute our primary asset and operations.  Accordingly, BlackBox is deemed the financial acquirer for accounting related purposes, and in this Management Discussion and Analysis of Financial Condition and Results of Operations, are those of BlackBox, unless the context requires otherwise. At this time, we were in the process of disposing of our Sportbike-customs.com related business.


Description of Business


BlackBox was formed in Delaware on October 28, 2010 by Shrink for the purposes of acquiring and holding certain licenses, specifically, those related to the University of Chicago.  We acquired BlackBox under the BlackBox Acquisition effective as of June 3, 2011.




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Our primary asset and business immediately after the BlackBox Acquisition is BlackBox and its intellectual property and licenses.  Specifically, BlackBox’s primary asset is its license from the University of Chicago (“Chicago License”) to commercialize certain technology and intellectual property that increases performance of certain solution-based, inorganic, semiconductor nanomaterials.  These nanomaterials are used to create liquid semiconductor materials that can be deposited (e.g., printed or sprayed) to form certain semiconductor films and other structures for use in a multitude of semiconductor device applications.  This technology and related intellectual property was developed primarily as a result of the research of Dr. Dmitri Talapin at the University of Chicago.


BlackBox is a technology development and application company dedicated to the commercial adoption of a chemistry platform we call LiquidSemiTM Solutions.  We have licensed methods for chemical manufacturing of high-performing, liquid semiconductors incorporating nanoscale materials.  Nanoscale materials, or nanomaterials or nanostructures, where a nanometer is equal to one-billionth of a meter in size.  Nanoscale materials exhibit unique electronic, optical, and magnetic properties that cannot be obtained from the same materials in their traditional size and forms.  Our LiquidSemiTM chemistries improve the electronic properties of solution-processed semiconductors by replacing previously insulating materials with our patent-pending “electronic glue” materials that increase electronic communication between the nanostructures and throughout the manufactured semiconductor material. The primary anticipated applications of these technologies are in the electronics and renewable energy business sectors.  Currently, organic based semiconductors are being used.  We believe, however, that liquid-processed semiconductor materials such as ours will outperform organic semiconductors and replace certain traditional semiconductor materials used in current devices.  In addition, our technology has the potential to result in new, revolutionary semiconductor materials.


Additional specific information relating to the Business of the Company, relating to BlackBox, the BlackBox Acquisition and the Chicago License are all contained in the Current Report on Form 8-K, Date Of Event June 3, 2011, as amended and its exhibits, and other periodic reports that may be filed from time to time.


Liquidity and Debt Restructurings in 2011


Settlement of Outstanding Debt Owed to Noctua Fund Manager; Issuance of Unsecured Note


As of  March 15, 2011, the Company entered into a Letter Agreement with Noctua Fund Manager, LLC, (“NFM”) a creditor and affiliate of a principal shareholder of the Company and of Shrink at the time of the transaction, (the “NFM Letter Agreement”), pursuant to which the Company issued to NFM an unsecured convertible note in the principal amount of $274,000 and accruing interest at 2% per year, in order to settle and accrue $274,000 (the “Unsecured Note”). The Unsecured Note reflected amounts owed to NFM for past due account payables owed to NFM in connection with operational expenses, including working capital, and administrative services rendered. The remaining unconverted amount of the $274,000 2% note was, on April 5, 2012, acquired by an entity indirectly controlled by Mr. Mr. Panter, and, subsequently sold for value to Alpha Finanz, Ltd..    Upon issuance, the Unsecured  Note were due March 14, 2012, accrues interest at 2% per year with a default rate of 3%, and principal and interest on the Unsecured Note is convertible at a fixed price of $0.017125  per share into 16,000,000 shares as of the effective date.  The Unsecured Note automatically converts by its terms in the event and to the extent that the note is assigned to anyone absent consent of the Company.  In October 2011, the Company issued 16,000,000 common shares upon conversion of the Unsecured Note (which, at that time was owned by NFM) and also issued 77,013 shares in exchange for $1,319 of interest thereon. The remaining balance of $3,780 of the Unsecured Note, the 2010 Secured Note (see below) were acquired by an entity indirectly controlled by Mr. Panther, and subsequently sold to our current debt holder Alpha Finanz, Ltd. (the “AF Fund”) in April of 2012.


There no amounts due under this agreement since December of 2011.


Modification of Existing 2010 Secured Note


Effective as of January 31, 2011, the Company entered into a Loan Modification Letter (the “Loan Modification”) with NFM.  Pursuant to the Loan Modification, the Company amended and replaced the previously existing 5% Secured Convertible Promissory Note Series 04012010-A1 (the “Original Secured Note”) issued to NFM on April 1, 2010, in the principal amount of $38,168.38, with a new note, in the principal amount of $45,881.00 due on March 31, 2011 (as amended. This amended secured note was subsequently acquired by an entity indirectly controlled by Mr. Panther, in April of 2012 (the “2010 Secured Note”) which subsequently acquired by the AF Fund.  The Loan Modification reflects additional principal and certain other accommodations of the note holder so as to reflect, specifically:

 

·

an additional $7,000 loan disbursement made on January 11, 2011 and interest since April 1, 2010 as capitalized onto principal on the Amended Secured NFM Note,

·

an extended due date of March 31, 2011 for the entire amount due under the Amended Secured NFM Note, and

·

a fixed conversion price of $0.00045 per share for all outstanding principal and interest, which price only adjusts for corporate events such as stock splits, combinations or similar events.

 



25




As of the issuance date, the Secured NFM Note was convertible into 101,957,760 shares of the Company’s Common Stock. No other material changes have been made to the Amended Secured NFM Note.  On March 22, 2011, and as part of an agreement to reduce the Company’s debt, NFM agreed to convert $36,000 of principal and interest under the Secured NFM Note, into 80,000,000 shares of the Company’s restricted common stock, and in October, the Company issued 15,173,156 common shares for payment of principal balance totaling $6,602 and accrued interest of $226,  leaving approximately $3,780 of principal and interest outstanding as of December 31, 2011 which are convertible into 8,400,000 shares.


Certificate of Designation – Series A Preferred Stock


As previously disclosed, the Company issued 5,000,000 shares of preferred stock for consideration on July 6, 2007.   The Series A Preferred Stock does not have specific liquidation or mandatory dividend rights, but does grant the holder thereof voting rights, to vote together with common stock holders as a single class, on a 250 for one basis with the common stock (i.e. each share of Series A Preferred Stock gets 250 votes for each share of common stock outstanding and voting in such action), granting the Series A Preferred Stock holder effective control of the Company.  In addition, the Series A Preferred Stock contains protective provisions that require affirmative consent of all of the Series A Preferred Stock holders for any action to:


·

Amend, alter or repeal any provision of the Articles of Incorporation or bylaws in a manner that adversely affects the powers of the Series A Preferred Stock,

·

Declare or pay any dividend or make any distributions to stockholders or to acquire for value, any common stock or other equity securities of the Company, 

·

Create or authorize or obligate itself to issue shares of any class of capital stock unless it ranks junior to the Series A Preferred Stock with respect to dividends, distribution of assets on liquidation, or accrual of payment of dividends and redemption rights etc.,

·

Reclassify, alter or amend any existing security of the Company that is pari pasu with the Series A Preferred Stock in respect of distributions and liquidations that would make such other class senior to the Series A Preferred Stock, or reclassify any junior securities to become on parity with the series A Preferred Stock,

·

The making of dividends or redemptions of securities of the Company,

·

Create or authorize or issue debt security (or permit a subsidiary to take such action) which would result in aggregate indebtedness of the Company after such debt issuance to exceed $500,000 other than equipment leases or bank warehouse lines of credit without approval of the Board of Directors (but the Company can issue up to $3,000,000 of non-equity linked non-convertible debt),

·

Create or hold capital stock in any subsidiary that is not wholly owned by the Company or dispose of any capital stock of a subsidiary,

·

Initiate any action to abrogate or diminish the rights of the Series A Preferred Stock.


Consulting Agreement With David Duncan


Effective as of February 15, 2011, the Company entered into a Consulting Agreement with David Duncan (the “Duncan Consulting Agreement”).  The Duncan Consulting Agreement retained Mr. David Duncan as a consultant through May 19, 2011, with compensation of $6,000 for the first month ended March 17, 2011, and $13,000 for each month ended April 17 and May 18, 2011, respectively.  Between May 2011 and his resignation on November 19, 2011, Mr. Duncan was compensated in accordance with a modification to his compensation agreement and paid $60,000 and is due $45,720.


Change in Management


On April 4, 2011, Mr. Ford Sinclair resigned from his position as Chief Executive Officer of the Company. Mr. Sinclair’s resignation was not because of any disagreement with the Company relating to the Company’s operations, policies or practices.  Mr. Sinclair remained as a Director of the Company.


Immediately following his resignation, on April 4, 2011 the Company’s Board of Directors appointed Mr. David Duncan as the Company’s Chief Executive Officer and Secretary. Mr. Duncan is an operational officer with business and new market development, operations, and finance for a variety of companies.  Mr. Duncan is party to a month to month consulting agreement with the Company (See “Management” section and biographies below).  



26




Critical Accounting Policies and Estimates


Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The significant accounting policies that are believed to be the most critical to fully understanding and evaluating the reported financial results include recoverability of intangible assets, the recovery of deferred income tax assets and share-based compensation.


Our intangible assets consist principally of intellectual properties such as licensing rights and patents. We are currently amortizing certain intangible assets using the straight line method based on an estimated legal life, of eight years.  We (our BlackBox subsidiary prior to the BlackBox Acquisition) began amortization of the electric glue related intangibles in December 2010 since the license agreement finalized and patent filings were first being filed.  The Company will re-evaluate its amortization practice once products related to these patents are put into full production.  When our products are placed in full production we can better evaluate market demand for our technology.


We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or indicate that impairment exists. Once our intellectual property is placed into productive service, we expect to utilize a net present value of future cash flows analysis to calculate carrying value after an impairment determination. 

 

The Company strives to save liquid capital by paying for services or satisfying liabilities, whenever able, by issuance of stock and stock options to consultants and services providers.  We also may grant stock options, restricted stock units and restricted stock to directors and consultants.


We measure compensation cost for all stock-based awards at fair value on date of grant and recognize compensation over the requisite service period for awards expected to vest. The fair value of restricted stock and restricted stock units is determined based on the number of shares granted and the quoted price of our common stock on the date of grant. The determination of grant-date fair value for stock option awards is estimated using a Black-Scholes model, which includes variables such as the expected volatility of our share price, the anticipated exercise behavior of our employees, interest rates, and dividend yields. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material adjustments to the expense recognized for share-based payments.


Such value is recognized as an expense over the requisite service period, net of estimated forfeitures, using the straight-line attribution method. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.


As part of the process of preparing our financial statements, we must estimate our actual current tax liabilities together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance must be established. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, the impact will be included in the tax provision in the statement of operations.


Results of Operations for the year ended December 31, 2011 and the period of October 28, 2010 (date of inception) through December 31, 2010


Revenue


The Company, including its subsidiaries, has not had any revenues in 2011 or 2010, as it is a development stage company.


Operating Expenses


BlackBox had total operating expenses of $195,996 for the year ended December 31, 2011 as compared to $403 from October 28, 2010, date of inception, through December 31, 2010.   The increase in total operating expenses is attributed to a general overall increase of business activities in particular those following the Share Exchange and that of becoming a publicly listed company.  We expect operating expenses to continue to increase as we expand our operations and invest into research and development activities.



27




General and Administrative Expenses.  Our general and administration expenses increased to $119,176 for the year ended December 31, 2011as compared to $1 from October 28, 2010, date of inception, through December 31, 2010.   This increase was mainly due to an increase in consulting contracts the Company has engaged in during 2011 and a spike in business operations related to becoming a publicly listed company.  


Professional Fees.  Professional fees are generally related to public company reporting and governance expenses as well as costs related to our acquisition.  Our costs for professional fees increased to $71,550 for the year ended December 31, 2011, as compared to $0 from October 28, 2010, date of inception, through December 31, 2010.   The change was due to an increase in legal costs and accounting fees as a result of our entry into the BlackBox Acquisition.


Amortization. Our amortization expenses increased to $5,270 for the year ended December  31, 2011, as compared to $402 from October 28, 2010, date of inception, through December 31, 2010.  The increase in amortization expenses was due to the costs related to Chicago License being amortized over, its 8 year life.


Interest Expense. Interest expense increased to $217,552for the year ended December 31, 2011 as compared to $0 from October 28, 2010, date of inception, through December 31, 2010.  The increase in interest expenses is related to interest and debt discount accretion of assumed convertible notes acquired during the Share Exchange.  


Gain on Debt Settlement. In October, the Company agreed to settle the payable of $75,000 due in December 2011 to Shrink Nanotechnologies, Inc. as related to the Share Exchange for immediate payment of $12,500.  This amount was paid on October 25, 2011, and there are no other amounts are due as related to this agreement and the Company recorded a gain of $62,500 related to debt settlement.  


We expect operating expenses to continue as we invest further in business development activities and invest into research and development of our core technologies.  We do not have capital commitments yet to cover any of our operating expenses and to date. To date, our capital needs for BlackBox have been funded by our principals, and private convertible debt financing.


We have limited cash on hand, and to the extent we are able to negotiate with parties with whom we enter into business agreements with to accept stock in lieu of cash, these issuances could dilute the ownership of our shareholders.   


Plans for Preexisting Operations, Sportbike-customs.com


Prior to our acquisition of BlackBox Delaware, our business was based exclusively on the development of our website, www.sportbike-customs.com.  Through the website, our proposed business operations were composed initially of online retail sales of aftermarket Triumph parts and accessories. The website would provide Triumph consumers a more convenient and cost effective way to purchase Triumph parts and accessories.  


Management is in the process of winding down this aspect of our business.  Any revenues, expenses, and remaining assets or liabilities of the sportbike-customs.com business presented in our financial statements, currently, will be disclosed as discontinued operations.


With BlackBox Delaware as the surviving accounting acquirer, a comparison for our pre-BlackBox Acquisition business operations with those of BlackBox Delaware would not necessarily be appropriate or meaningful in this Report.  Moreover, as BlackBox Delaware on its own has limited operations or history, there is little historic information upon which shareholders may assess our business prospects.


Net Loss


For the year ended December 31, 2011, we had a net loss of $351,048, as compared to $403 from October 28, 2010, date of inception, through December 31, 2010.  Management attributes the increase in net loss to general market conditions, to the cessation of our website operations, an increase in operational and research activities and, more recently to our acquisition and funding efforts for BlackBox.


We anticipate continued losses relating to investment into our development activities relating to BlackBox, and to our capital raising activities.  We intend to fund our technology development activities, through potential government grants, partnerships and arrangements with universities  and equity and debt financings.




28




Liquidity and Capital Resources


Our cash on hand at December 31, 2011, and December 31, 2010, was $40,392 and $1,000, respectively.  The increase in cash is primarily attributable to financing commitments made during the year ended December 31, 2011.


Given our current commitments and working capital, we cannot support our operations for the next 12 months without additional capital (See “Need for Additional Capital” below).


The following table provides detailed information about our net cash flow for all financial statement periods presented in this Report.


Cash Flow (All amounts in U.S. dollars)

 

The Year

Ended

December 31,

2011

 

From October 28,

2010 (date of

inception) through

December 31,

2010

 

 

 

 

 

Net cash provided (used) in operating activities

$

(114,453)

$

41,997

Net cash provided (used ) by investing activities

 

3,225

 

(41,997)

Net cash provided by financing activities

 

150,619

 

1,000

 

 

 

 

 

Net Increase in Cash and Cash Equivalents

 

39,392

 

1,000

Cash and Cash Equivalent at Beginning of the Year

 

1,000

 

-

Cash and Cash Equivalent at End of the Year

$

40,392

$

1,000


Operating Activities  


Net cash used in operating activities was $114,453 for the year ended December 31, 2011, as compared to $41,997 provided in operating activities during the period of October 28, 2010 (date of inception) through December 31, 2010. The change in net cash used in operating activities was mainly due to management increasing general business activities, and paying down outstanding trade payables.


Investing Activities


Net cash provided in investing activities for the year ended December 31, 2011 was $3,225 as compared to $41,997 net cash used in investing activities during the period of October 28, 2010 (date of inception) through December 31, 2010.  The change in net cash used in investing activities was mainly due to the acquisition of the Chicago License in 2010, and cash obtained through the Share Exchange during the year ended December 31, 2011.


Financing Activities


Net cash provided by financing activities for the year ended December 31, 2011 was $150,619 as compared to $1,000 net cash provided by financing activities during the period of October 28, 2010 (date of inception) through December 31, 2010. The increase of net cash provided by financing activities was mainly attributable to capital commitments made during the third quarter of 2011.  Management will look toward raising further capital through financing activities during the fiscal year ended 2012.  


The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  Because of the Company has not yet generated revenues and the excess of current liabilities over current assets at the period ended, there is substantial doubt about the Company’s ability to continue as a going concern.  The Company’s continuation as a going concern is dependent on obtaining additional outside financing.  The Company has funded losses from operations primarily from the issuance of debt.  The Company believes that the issuance of debt will continue to fund operating losses in the short-term until the Company can generate revenues sufficient to fund its operations.


We intend to retain any future earnings to retire any existing debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes.




29




Our expectations are based on certain assumptions concerning the anticipated costs associated with any new projects.  These assumptions concern future events and circumstances that our officers believe to be significant to our operations and upon which our working capital requirements will depend.  Some assumptions will invariably not materialize and some unanticipated events and circumstances occurring subsequent to the date of this Report.   We will continue to seek to fund our capital requirements over the next 12 to 24 months from the additional sale of our securities and possibly through the sale of Shrink stock; however, it is possible that we will be unable to obtain sufficient additional capital through the sale of our and Shrink’s securities as needed.  


The amount and timing of our future capital requirements will depend upon many factors, including the level of cash needed to continue our research program, fulfill our obligations under license agreements, or fund initial production efforts.


We intend to retain future earnings, if any, to retire any existing debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes.


The Company estimates that it will need at least $2,000,000 in capital over the next eighteen months to further develop and commercialize our technologies and that substantial additional costs will be incurred in order to commercialize its BlackBox related technologies.  The Company is not aware as to how much, if any, of these funds will be obtainable from private parties, government grants and/or offset by joint venturing development of our products.


License Agreement with University of Chicago


The primary asset of BlackBox includes the exclusive Chicago License entered into as of November 30, 2010, with the University of Chicago, granting to BlackBox Delaware the exclusive, worldwide right to use and sublicense Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License.


The technology being licensed is based on Professor of Chemistry Dmitri Talapin’s “electronic glue” chemistry. This technology, management believes, has various commercial applications where more efficient transfer of charges between nanocrystals is desired, such as printed transistors, printed solar cells and printed sensors.


The license granted by the University of Chicago is for worldwide usage by the BlackBox for a period of at least eight years.  


The term may be terminated for cause or insolvency.


While the license is exclusive to BlackBox within fields of use other than thermoelectric applications, the University of Chicago licensed the patents to a third party for use in thermoelectric applications and reserved the rights in the underlying technology for all educational and non-commercial research purposes.  In addition, the University of Chicago may terminate the license if BlackBox does not raise at least $2,000,000 capital prior to November 30, 2012 or if BlackBox does not employ and maintain a Suitably Qualified Person (as defined in the Chicago License) in a full-time executive position during the term of the license.   The Company has hired David Duncan as CEO and has begun capital raising efforts and, under the terms of the Chicago License, is allowed the use of proceeds from any sale of the Shrink shares to fulfill the capital raising commitment required


The Chicago License provides for (i) an annual fee to the University of Chicago of $25,000 until the first commercial sale, and (ii) royalty payments to the University of Chicago, for products utilizing the licensed rights, during the royalty term, as more fully detailed in the agreement, of 3% of net sales of products utilizing the University of Chicago’s licensed technologies, subject to reduction (up to 50%) if the product is sold as a combination product with one or more other products that are not covered by the licensed patents. Minimum royalties for any calendar quarter beginning with the calendar quarter of the first commercial sale are $12,500.


Properties


The Company currently leases 64 Sq. Ft. of office space at 1462 Erie Boulevard, Schenectady, New York, 12305.  The lease for this space is $95.50 per month plus telecommunications costs and certain office expenses and terminates on January 4, 2012, at which time it turns to month to month lease.  The Company’s phone number is (518) 935-2830.   



30




Need for Additional Financing


The Company does not have capital to continue operations as a going concern and, has been dependant to date upon funding provided by NFM or its affiliated entities. Additional funding will be required in order for the company to survive as a going concern and to finance growth and to achieve our strategic objectives. Management is actively pursuing additional sources of funding. If we do not raise sufficient funds in the future, we may not be able to fund expansion, take advantage of future opportunities, meet our existing debt obligations or respond to unanticipated requirements. Financing transactions in the future may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.


The market for private equity finance in public companies, who need small capital raises is extremely limited, and, the Company does not currently have any commitments for capital raising.


We intend to retain any future earnings, if any, to retire any existing debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes.


Going Concern


The accompanying financial statements have been prepared assuming we will continue as a going concern.  We have had substantial operating losses for the past years and are dependent upon outside financing to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s plan to raise necessary funds from shareholders to satisfy the expense requirements of the Company.


Off Balance Sheet Financings


The Company does not have any off balance sheet arrangements or financings.


Employees


We currently do not have any full time employees.   Mr. Duncan was our sole salaried consultant, other than professional service providers.  We intend to hire full time employees and additional independent contract labor on an as needed basis.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.


Not Applicable.






31



Item 8.

Financial Statements and Supplementary Data.




CONTENTS




Report of Independent Registered Public Accounting Firm – 2011

F-2

 

 

Balance Sheet

F-3

 

 

Statements of Operations

F-4

 

 

Statements of Stockholders' Equity (Deficit)

F-5

 

 

Statements of Cash Flows

F-6

 

 

Notes to Financial Statements

F-7






F-1




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders

Blackbox Semiconductor, Inc.

(f/n/a Visitrade, Inc)



We have audited the accompanying balance sheets of Blackbox Semiconductor, Inc., as of December 31, 2011 and 2010, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the two years in the period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Blackbox Semiconductor, Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the two years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.  


The accompanying financial statements have been prepared assuming that Blackbox Semiconductor, Inc. will continue as a going concern. As discussed in Note 2 to the financial statements, Blackbox Semiconductor, Inc. suffered recurring losses from operations which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Hamilton, PC


/s/ Hamilton, PC


Denver, Colorado

April 13, 2012





F-2




BLACKBOX SEMICONDUCTOR, INC.

(A Development Stage Company)

BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

ASSETS

 

2011

 

2010

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

40,392

$

1,000

 

Deposits and prepaid expenses

 

1,250

 

-

Total Current Assets

 

41,642

 

1,000

 

 

 

 

 

 

Securities available for sale

 

36,400

 

-

Intangible assets, net

 

44,853

 

41,595

 

TOTAL ASSETS

$

122,895

$

42,595

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

$

87,744

$

-

 

Due to Shrink Nanotechnologies, Inc.

 

-

 

41,998

 

Due to related parties - related party

 

56,000

 

-

 

Other payables

 

190,000

 

-

 

Accrued interest

 

180

 

-

 

Convertible notes payable, default - related party

 

3,600

 

-

Total Current Liabilities

 

337,524

 

41,998

 

 

 

 

 

 

 

   TOTAL LIABILITIES

 

337,524

 

41,998

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

Preferred stock, $.001 par value; 25,000,000 shares authorized; 5,000,000 and 0 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively

 

5,000

 

-

 

Common stock, $.001 par value; 1,000,000,000 shares authorized; 154,245,929 and 27,030,000 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively

 

154,246

 

27,030

 

Additional paid-in capital

 

671,136

 

(26,030)

 

Other comprehensive loss

 

(693,560)

 

-

 

Accumulated deficit

 

(351,451)

 

(403)

   Total stockholders' equity

 

(214,629)

 

597

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

122,895

$

42,595

 

 

 

 

 

 

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



F-3




BLACKBOX SEMICONDUCTOR, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

 

 

 

For the

Year ended

December 31,

2011

 

From October 28,

2010

(date of inception)

through

December 31,

2010

 

From October 28,

2010

(date of inception)

through

December 31,

2011

Revenue

$

-

$

-

$

-

 

 

 

 

 

 

 

Professional fees

 

71,550

 

-

 

71,550

General and administrative

 

119,176

 

1

 

119,177

Amortization

 

5,270

 

402

 

5,672

  Total operating expenses

 

(195,996)

 

(403)

 

(196,399)

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

Gain on debt settlement

 

62,500

 

-

 

62,500

Interest  expense

 

(217,552)

 

-

 

(217,552)

  Total other income (expense)

 

(155,052)

 

-

 

(155,052)

 

 

 

 

 

 

 

  Loss from continuing operations

 

(351,048)

 

(403)

 

(351,451)

Provision for income taxes

 

-

 

-

 

-

 

 

 

 

 

 

 

Net loss

$

(351,048)

$

(403)

$

(351,451)

 

 

 

 

 

 

 

Net loss per common share-basic and diluted

$

(0.00)

$

(0.00)

$

(0.00)

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

141,685,795

 

27,030,000

 

82,715,954

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

Securities available for sale fair value adjustment

 

(693,560)

 

-

 

(693,560)

Comprehensive loss

$

(1,044,608)

$

(403)

$

(1,045,011)

 

 

 

 

 

 

 

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





F-4



BLACKBOX SEMICONDUCTOR, INC.

(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY

From October 28, 2010, date of inception, through December 31, 2011


 

 

 

 

 

Additional

 

Other

Total

 

Preferred Stock

Common Stock

Paid -In

Accumulated

Comprehensive

Stockholders'

 

Shares

Amount

Shares

Amount

Capital

Deficit

Income

Equity

Issuance of founder shares

-

$          -

27,030,000

$27,030

$  (26,030)

$                   -

$                       -

$            1,000

 

 

 

 

 

 

 

 

 

Net loss for the year ended December 31, 2010

-

-

-

-

-

(403)

-

(403)

Balance at December 31, 2010

-

-

27,030,000

27,030

(26,030)

(403)

-

597

 

 

 

 

 

 

 

 

 

Reverse acquisition of Blackbox Semiconductor, Inc.

5,000,000

5,000

88,965,760

88,966

421,074

-

-

515,039

 

 

 

 

 

 

 

-

 

Issuance of shares founder shares exchange of $20,000

-

-

6,750,000

6,750

13,250

-

-

20,000

 

 

 

 

 

 

 

 

 

Issuance of shares for services at $0.049

-

-

250,000

250

12,000

-

-

12,250

 

 

 

 

 

 

 

 

 

Partial conversion of

convertible note and

interest at $0.017 per share

-

-

12,227,560

12,228

197,169

-

-

209,397

 

 

 

 

 

 

 

 

 

Shares to be issued for

conversion of notes at $0.0038 per share

-

-

19,022,609

19,023

53,673

-

-

72,696

 

 

 

 

 

 

 

 

 

Securities available for sale fair value adjustment

-

-

-

-

-

-

(693,560)

(693,560)

Net loss for the period ended December 31, 2011

-

-

-

-

-

(351,048)

-

(351,048)

Balance at December 31, 2011

5,000,000

$   5,000

154,245,929

$154,246

$   671,136

$     (351,451)

$         (693,560)

$     (214,629)


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




F-5






BLACKBOX SEMICONDUCTOR, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From

October 28, 2010

 

From

October 28, 2010

 

 

 

For the

 

(date of inception)

 

(date of inception)

 

 

 

Year ended

 

through

 

through

 

 

 

December 31,

2011

 

December 31,

2010

 

December 31,

2011

NET CASH FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

$

(351,048)

$

(403)

$

(351,451)

 

Adjustments to reconcile net loss to net cash

  provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Gain on debt settlement

 

(62,500)

 

-

 

(62,500)

 

     Debt discount accretion

 

216,917

 

-

 

216,917

 

     Non-cash share based payments

 

12,250

 

-

 

12,250

 

     Amortization

 

5,270

 

402

 

5,672

 

Changes in assets and liabilities, net of effects from acquisitions

 

 

 

 

 

 

 

     Increase in deposits and prepaid expenses

 

(1,250)

 

-

 

(1,250)

 

     Increase in accounts payable and accrued expenses

 

65,676

 

-

 

65,676

 

     Increase in due to Shrink Nanotechnologies, Inc.

 

233

 

41,998

 

42,231

Net cash provided (used) by operating activities

 

(114,453)

 

41,997

 

(72,456)

NET CASH FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

     Cash paid for share exchange

 

(12,500)

 

-

 

(12,500)

 

     Cash purchased at acquisition

 

24,252

 

-

 

24,252

 

     Purchase of intangible assets

 

(8,527)

 

(41,997)

 

(50,524)

Net cash provided (used) by investing  activities

 

3,225

 

(41,997)

 

(38,772)

 

 

 

 

 

 

 

 

NET CASH FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

    Cash advances PPM

 

150,000

 

-

 

150,000

 

    Proceeds from subsidiary prior to merger

 

619

 

-

 

619

 

    Proceeds from issuance of common stock

 

-

 

1,000

 

1,000

Net cash provided by financing  activities

 

150,619

 

1,000

 

151,619

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

39,392

 

1,000

 

40,392

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

 

1,000

 

-

 

-

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

40,392

$

1,000

$

40,392

 

Interest expense

$

-

$

-

$

-

 

Income taxes

$

-

$

-

$

-

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

  Settlement of debt

$

62,500

$

-

$

62,500

 

  Stock to be issued for conversion of debt

$

72,696

$

-

$

72,696

 

  Stock issued for conversion of debt

$

209,397

$

-

$

209,397

 

  Liabilities assumed through share exchange

$

483,940

$

-

$

423,940

 

  Non-cash assets assumed through share exchange

$

729,960

$

-

$

729,960

 

  Issuance of stock for payment of debt acquired

$

20,000

$

-

$

20,000


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



F-6




BLACKBOX SEMICONDUCTOR, INC.

Notes to the Financial Statements

For the years ended December 31, 2011 and 2010


Note 1.   Organization


BlackBox Semiconductor, Inc. (“the Company,” “we,” or “us”) was incorporated in the state of Delaware on October 28, 2010.  We were a wholly owned subsidiary of Shrink Nanotechnologies, Inc.  On June 3, 2011, Shrink Nanotechnologies, Inc. finalized an agreement to spin off its ownership of the Company.  


We license an exclusive, worldwide right to use and sublicense the University of Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites and future patent applications filed by the University of Chicago based on certain other patentable technologies. Our license is restricted to fields of use other than thermoelectric applications.


The technology being licensed is based on Dr. Dmitri Talapin’s “electronic glue” chemistry. This technology improves the electronic properties of solution-processed, inorganic semiconductors by replacing previously insulating materials with our patent-pending materials that increase electronic communication between nanostructures and throughout the manufactured semiconductor material. Management believes the technology has various commercial applications in the electronics and renewable energy business sectors.


Note 2.   Going Concern


The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  Because of the recurring operating losses, no revenues and the excess of current liabilities over current assets, there is substantial doubt about the Company’s ability to continue as a going concern.   


As a result of the aforementioned conditions the Company may be unable to meet certain obligations to fund future technology and business development activities.  The Company’s continuation as a going concern is dependent on obtaining additional outside financing, as it is not anticipated that the Company will have profitable operations from its current operations during the near term. The Company believes that the issuance of equity and debt will be needed to fund operating losses in the short-term until the Company can generate revenues sufficient to fund its operations.  If management can’t achieve its plans there is a possibility that operations will discontinue.


Note 3.   Significant Accounting Policies


Development Stage Enterprise


The Company is a development stage company as defined by the Financial Accounting Standards Board (the “FASB”). The Company is devoting substantially all of its present efforts to establish a new business, and its planned principal operations have not yet commenced. All losses accumulated since inceptions have been considered as part of the Company’s development stage activities.


Use of Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the

United States of America (“U.S. GAAP”) 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. Actual results could differ from those estimates. Estimates and assumptions principally relate to the fair value and forfeiture rates of stock based transactions, and long-lived asset depreciation and amortization, and potential impairment.


Income Taxes


We account for income taxes under the provision of Accounting Standards Codification 740, “Income Taxes”, or ASC 740. As of December 31, 2011 and 2010, there were no unrecognized tax benefits included in the consolidated balance sheets that would, if recognized, affect the effective tax rate. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest or penalties on our consolidated balance sheets at December 31, 2011 and 2010, respectively and have not recognized interest and/or penalties in the consolidated statement of operations for the years ended December 31, 2011 and 2010. We are subject to taxation in the United States and California.




F-7




Cash and Cash Equivalents


Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.


Concentrations of Credit Risk


A financial instrument which potentially subjects the Company to concentrations of credit risk is cash.  The Company places its cash with financial institutions deemed by management to be of high credit quality.  The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits to $250,000 per owner.  In addition to the basic insurance deposit coverage, the FDIC is providing temporary unlimited coverage for noninterest-bearing transaction accounts from December 31, 2010 to December 31, 2012.  At December 31, 2011, there were no uninsured deposits.


Securities Available for Sale and Other Comprehensive Income


Our accounting policy is to book all restricted and publicly tradable securities under Securities Available for Sale and, as such, are carried at fair value based on quoted market prices.  The Company owns restricted common stock representing approximately a 5.8% interest in Shrink Nanotechnologies, Inc., its former parent and a publicly traded company.   These shares are valued at their quoted market price.  Unrealized holding gains and losses for securities available for sale are excluded from earnings and reported as a separate component of stockholder’s equity as other comprehensive income, until the securities are disposed of. Upon disposal, the changes accumulated in other comprehensive income are to be recognized in income.  Under this method, the Company’s share of the earnings or losses of the investments are not included in the Consolidated Balance Sheet or Statement of Operations.


The balance of $36,400 in securities available for sale on the Balance Sheet reflects a $693,560 mark to market decrease adjustment. Without such adjustment, the ending balance in Securities Available for Sale would have been $729,960.


Fair Value Measurements


Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.  US GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used in valuation methodologies into the following three levels:


·

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.


·

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


·

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.


Basic Net Loss per Share of Common Stock


Basic net loss per common share is based on the weighted average number of shares outstanding during the periods presented.  Diluted earnings per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period.  Common stock equivalents resulting from the issuance of stock warrants and convertible notes have been considered, but have not been included in the per share calculations because such inclusion would be anti-dilutive due to the Company’s net loss. Common stock issuable is considered outstanding as of the original approval date for purposes of earnings per share computations.


 

 

for the year ended

 

for the year ended

 

December 31,

 

December 31,

 

 

2011

 

2010

Numerator – (loss)

$

(351,048)

$

(403)

Denominator – weighted avg.

   number of shares outstanding

 

141,685,795

 

27,030,000

Loss per share – basic and diluted

$

(0.00)

$

(0.00)



F-8




Note 4.   Recent Accounting Pronouncements


In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The update contains the results of the work of the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this update are effective for periods beginning after December 15, 2011 and as a result are not yet applicable to the Company. The Company is evaluating the impact of the update on its consolidated financial statements.


Note 5.   Income Taxes


The Company is subject to taxation in the United States and California. The Company does not have any income tax provision for the years ended December 31, 2011 and 2010 due to current and historical losses.


The provision for income taxes using the statutory federal income tax rate of 34% as compared to the company’s effective tax rate is summarized as follows: 


 

 

for the year ended

 

for the year ended

 

 

December 31,

 

December 31,

 

 

2011

 

2010

Federal taxes

$

(41,153)

$

(125)

State taxes

 

(11,606)

 

(35)

Adjustments, note discount amortization

 

(86,279)

 

 

Taxes

 

-

 

-

Change in Valuation Allowance

 

139,037

 

160

Income Tax Expense

$

-

$

-

 

At December 31, 2011 and 2010, the Company had deferred tax assets of $139,197 and $160, respectively. Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset the net deferred tax asset.  Additionally, the future utilization of the Company’s net operating loss to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Section 382, as a result of ownership changes that may have occurred previously or that could occur in the future.  The Company has not performed a Section 382 analysis to determine the limitation of the net operating loss and research and development credit carry forwards.


Significant components of the company’s deferred tax assets are as follows:


 

 

December 31,

 

December 31,

 

 

2011

 

2010

NOL Carryforward

$

52,918

$

160

Adjustments, note discount amortization

 

86,279

 

-

Valuation Allowance

 

(139,197)

 

(160)

Net deferred tax assets

$

-

$

-


Realization of the deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are uncertain.  Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $139,037 and $160 in 2011 and 2010, respectively.

 

As of December 31, 2011, the Company had federal and California net operating loss carryforwards of approximately $332,000 and $403, respectively. The federal and California tax loss carry forwards will begin to expire in 2025 and 2020, respectively, unless previously utilized.  


The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has 50% or less likelihood of being sustained upon examination. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.



F-9




The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  The Company had no accrual for interest or penalties at December 31, 2011 and 2010, and has not recognized interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2011 and 2010. The Company’s tax years for 2010 and forward are subject to examination by the United States and state tax authorities due to the carry forward of unutilized net operating losses

 

Note 6.  Reverse Acquisition, Principles of Consolidation – Related Party


On June 3, 2011, the Company entered into and completed a reverse acquisition following a share exchange agreement (the “Share Exchange”) in which BlackBox Semiconductor, Inc., a Nevada corporation (the accounting acquiree, “BlackBox Parent”) acquired 100% ownership of BlackBox Semiconductor Inc., a Delaware corporation (the accounting acquirer, “BlackBox Subsidiary”) and 14,000,000 shares of the of restricted common stock of Shrink Nanotechnologies, Inc. at a fair value of $729,960, which included a Discount Factor of 35% taken from the quoted market price at the effective date.  In exchange, BlackBox Parent issued to Shrink Nanotechnologies, Inc. 27,030,000 shares of common stock representing approximately 19.9% ownership in the Company and $75,000 to be paid by December 31, 2011.


The primary asset of the BlackBox Subsidiary includes an exclusive License Agreement (the “Chicago License”) with the University of Chicago, granting to BlackBox Subsidiary the exclusive, worldwide right to use and sublicense Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License (see Note 4 for more detail regarding the Chicago License).


In October, the Company agreed to settle the payable of $75,000 due in December 2011 to Shrink Nanotechnologies, Inc. as related to the Share Exchange for immediate payment of $12,500.  This amount was paid on October 25, 2011, and there are no other amounts are due as related to this agreement and the Company recorded a gain of $62,500 related to debt settlement.  


The Share Exchange was an interested party transaction as, both the Company and Shrink Nanotechnologies, Inc. are and were indirectly controlled by and affiliated with, Mark L. Baum, a former president and CEO and control person of both companies (“Baum”) and James B. Panther, II, a former director and control person of both companies (“Panther”).  These are the same principals that control Shrink Nanotechnologies, Inc.  Luis Leung, our current CEO and Director, is also a director for Shrink Nanotechnologies, Inc.  Given the percentage of ownership of Shrink Nanotechnologies, Inc. and our operating plan to liquidate the shares to raise additional funds, the investment should be accounted for as Available for sale.  


The Company did not record a gain or loss related to the Share Exchange.  This transaction was accounted for as a reverse acquisition. As a result, all financial information prior to June 3, 2011 is that of BlackBox Subsidiary.  Following the merger, a reverse merger adjustment was made to reflect BlackBox Parent’s capital structure.  All of the assets and liabilities acquired in the reverse acquisition were recorded at cost.


The consolidated balance sheets include the accounts of BlackBox Subsidiary and its wholly owned subsidiary, BlackBox Parent thereby reflecting the transactions related to the June 3, 2011 effective date of the Share Exchange. The consolidated statements of operations include the operations (which consisted mostly of research and development) of the predecessor entity, BlackBox Subsidiary from inception on October 28, 2010  and the Company from June 3, 2011, the effective date of the acquisition of the BlackBox Parent business.  All significant intercompany accounts and transactions have been eliminated in consolidation.


The following is a condensed balance sheet disclosing the fair values of the BlackBox Business assets and liabilities acquired.


Total assets

$

39,677

Total liabilities

$

1,641

Total stockholders equity

 

38,036

Total liabilities and stockholders deficit

$

39,677




F-10




The following represents the approximate pro-forma effect assuming the acquisition with the companies had occurred on January 1, 2011 and 2010, the beginning of the Company’s current fiscal year, including proforma adjustments for depreciation and interest expense.


 

 

For the year ended

 

For the year ended

 

 

December 31, 2011

 

December 31, 2010

 

 

 

 

 

Net Loss

$

(336,665)

$

(153,508)

Earnings per share

$

(0.00)

$

(0.00)


Note 7.  License Agreement – University of Chicago  


Effective as of November 30, 2010, we, entered into an exclusive License Agreement with the University of Chicago, wherein we licensed the exclusive, worldwide right to use and sublicense Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License. Our license is restricted to fields of use other than thermoelectric applications.


The license granted by the University of Chicago is for worldwide usage by the Company for a period of at least eight years and renewable for an additional eight years based on commercialization of the technology by the end of the first eight year term.  The term may be terminated for cause or insolvency.


While the license is exclusive to the Company within fields of use other than thermoelectric applications, the University of Chicago licensed the patents to a third party for use in thermoelectric applications and reserved the rights in the underlying technology for all educational and non-commercial research purposes.  In addition, the University of Chicago may terminate the license if we do not raise at least $2,000,000 capital prior to November 30, 2012 and maintain a Suitably Qualified Person in a full-time executive position during the term of the license.  The Company has hired David Duncan in order to meet its obligations to hire a Suitably Qualified Person (pursuant to the Chicago License).


The Chicago License provides for (i) an annual fee to the University of Chicago of $25,000 until the first commercial sale (with the next annual fee due on November 30, 2011), and (ii) royalty payments to the University of Chicago, for products utilizing the licensed rights, during the royalty term, as more fully detailed in the agreement, of 3% of net sales of products utilizing the University of Chicago’s licensed technologies, subject to reduction (up to 50%) if the product is sold as a combination product with one or more other products that are not covered by the licensed patents. Minimum royalties for any calendar quarter beginning with the calendar quarter of the first commercial sale are $12,500.


The Chicago License allows the Company, during the term, to determine the appropriate course of action to enforce licensed patent rights, and if it does not do so, Chicago reserves the rights to do the same.  The Company is required to reimburse Chicago for certain patent prosecution efforts they incur and, Chicago may abandon prosecution of any patent rights in any jurisdiction provided that it provides us the opportunity to continue prosecution of the same.  The Company’s obligation to reimburse prosecution efforts of Chicago terminates during any period that the patent rights become non-exclusive, if ever.


Note 8.  Intangible Assets


Intangible assets consist of intellectual property rights of an exclusive license to several patent pending inventions surrounding our core technologies.  Intangible assets are tested on an annual basis for impairment or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value.  Intangible assets with estimable useful lives and those assets with defined lives due to the legal nature of the asset are amortized over their estimated useful lives, 8 years, using the straight-line method.


Intangible assets consisted of the following at December 31, 2011 and December 31, 2010:


 

 

December 31,

 

December 31,

 

 

2011

 

2010

Intangible Assets, net:

 

 

 

 

License

$

50,525

$

41,997

  Less: Amortization

 

(5,672)

 

(402)

Total

$

44,853

$

41,595




F-11




To date, the Company has not utilized its current intellectual properties to manufacture products/parts for sale, testing and evaluation. When/if we do begin to mass produce products, we will re-evaluate our amortization practice related to these intellectual properties. During the year ended December 31, 2011 and 2010 the Company recorded $5,270 and $402, respectively, in amortization expense. At this time, estimated future amortization for the following fiscal years ended on December 31 amortization expense is expected to be as follows:


For the year ending

 

Amount

2012

$

6,316

2013

 

6,316

2014

 

6,316

2015

 

6,316

2016

 

6,316

Thereafter

 

13,275


Note 9.   Due to Related Party


BlackBox Parent previously subleased space from Business Consulting Group Unlimited, Inc. (“BCGU”), an entity co-owned by Baum and Panther pursuant to which the Company leased approximately 3,000 square feet of office and administrative space, as well as use of, among other things, internet, postage, copy machines, electricity, furniture, fixtures etc. at a rate of $2,000 per month.  The lease term with BCGU expired October 1, 2009, and continued based on a month to month term thereafter.  This agreement was terminated on January 31, 2011.


At December 31, 2011, there was $56,000 owed to BCGU, and no payments have been made to the BCGU.


Note 10.   Other Payables – Related Party


In anticipation of the closing of the Share Exchange, BlackBox Parent began capital raising efforts to meet the $75,000 cash obligation due at closing and other capital funding needs.  At the date of the Share Exchange, BlackBox Parent had raised $40,000 and following the Share Exchange the Company raised an additional $150,000 in exchange for a bridge promissory note and/or future share issuances of which the terms have not been finalized.  


The Company received the cash advances from entities  that are indirectly controlled by and affiliated with, Mark L. Baum, a former president and CEO and control person of both companies (“Baum”) and James B. Panther, a former director and control person of both companies (“Panther”).  These are the same principals that control Shrink Nanotechnologies, Inc.  Baum and Panther are also members of the Noctua Fund Manager, LLC.  Noctua Fund Manager, LLC is also a controlling shareholder.  


Note 11.   Convertible Notes, Warrants, Commitments – Related Party Transactions


We recognize the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert his debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to the Company. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of debentures.  This feature is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the interest method.


A.

Convertible Note Payable– Related Party Transactions – Partial Conversion


On April 1, 2010 BlackBox Parent issued a 5% convertible note with a principal amount of $36,168 to Noctua Fund Manager, LLC.  The note matured on October 1, 2010.  The note was issued in exchange for cash advances totaling $36,618.  The note held a conversion option, whereby the principal and interest on the note was convertible into shares of our common stock at the conversion price of $.027 (the market price of our stock at the issuance of the note) per share if both: (i) the Company’s authorized common stock has been increased to not less than 1,000,000,000 shares and (ii) the Principal Amount and all interest and penalties accrued have not been paid in full.  On January 31, 2011, the Company and Noctua Fund Manager, LLC agreed to amend certain terms found in its 5% Convertible Note agreement. All the previous terms remained unchanged with the exception of the following: the Note became convertible into common stock at a conversion rate of $.00045, the conversion provisions with respect to our authorized share amount and payments were eliminated, the Note’s default provision was cured, the principal amount of the Note was increased to $45,881 to reflect previous accrued interest and in exchange for $7,000 in  cash advances owed to Noctua Fund Manager, LLC, and a new maturity date of June 30, 2011.  



F-12




BlackBox Parent evaluated these modifications to the Note and they have been considered significant in particular the terms of an embedded conversion option.  The change in fair value of the embedded conversion option is over the 10 percent of the carrying amount of the original debt instrument immediately before the modification. As result on January 31, 2011, prior to the merger, the Company applied debt extinguishment accounting to record a loss on extinguishment of debt of $45,881. This was recorded as an increase in additional paid in capital and expensed at the time of the note modification.  


On March 21, 2011, BlackBox Parent issued 80,000,000 shares of common stock to Noctua Fund Manager, LLC, as conversion of $36,000 of principal balance and accrued interest of this convertible note.  On August 30, 2011 the Company received conversion demands for the $6,602 principal balance and accrued interest of $226, the total common share equivalent is 15,173,156.  


Baum and Panther are members of the Noctua Fund Manager, LLC.  Noctua Fund Manager, LLC is also a controlling shareholder.  


B.

Convertible Note Payable, Warrants – Related Party Transactions – Converted


BlackBox Parent obtained certain administrative, bookkeeping and management services from Noctua Fund Manager, LLC for a fee of $10,000 per month.  On January 31, 2011, BlackBox Parent terminated this operating agreement with Noctua Fund Manager, LLC.  On March 15, 2011, the Company issued a $274,000 principal balance convertible note to Noctua Fund Manager, LLC, in exchange for all outstanding debt related to these fees totaling $274,000.  The note accrues interest at 2% and matures on March 14, 2012.  The note can convert into common stock at a conversion rate of $.017 per share.  Noctua Fund Manager, LLC also received 3,000,000 detachable, callable common stock purchase warrants, exercisable at $.075 a share, these warrants have a maturity date of March 15, 2014. The warrants are exercisable in cash at any time, and, shall be exercisable via cashless exercise commencing nine months after the issuance date.


The warrants are valued at $274,000 and were recorded as discount on the issuance.  The discount is being accreted over the 12 month life of the note.  The warrants were valued using a Black-Scholes valuation model.  The variables used in this option-pricing model included: (1) discount rates of 1.08% (2) expected warrant life was 3 years, (3) expected volatility of 300% and (4) zero expected dividends.


On June 15, 2011, the Company issued 12,227,560 shares of common stock to Noctua Fund Manager, LLC, as conversion of $209,397 of principal balance and accrued interest of this convertible note.  As a result of the early conversion request and subsequent decrease in the principal balance of the note, the discount accretion was accelerated and the Company recognized an expense of $147,654 at the date of share issuance.  On August 30, 2011 the Company received conversion demands for the balance due and accrued interest of $375, the total common share equivalent is 3,849,453, at that time the Company recorded the remaining discount accretion of $41,270.  


The following summarizes stock purchase warrants at December 31, 2011:


 

 

 

Weighted Average

 

Amount

 

Exercise Price

Outstanding December 31, 2009

-

$

-

Expired/Retired

-

 

-

Exercised

-

 

-

Issued

-

 

-

Outstanding December 31, 2010

-

$

-

Expired/Retired

-

 

-

Exercised

-

 

-

Issued

3,000,000

 

.075

Outstanding December 31, 2011

3,000,000

$

.075




F-13




The following summarizes the changes in warrants outstanding for the year ended December 31, 2011:


 

Warrants Outstanding

 

Warrants Exercisable

 

 

 

Number

 

Weighted

 

Remaining

 

 

 

Weighted

 

 

 

of

 

Average

 

Exercise Life

 

Number

 

Average

 

Expiration

 

Shares

 

Exercise Price

 

in Years

 

Exercisable

 

Exercise Price

 

Date

Date of Grant

 

 

 

 

 

 

 

 

 

 

 

First quarter fiscal 2011

3,000,000

$

.075

 

2.71

 

3,000,000

$

.075

 

3/15/2014

Total at December 31, 2011

3,000,000

$

.075

 

-

 

3,000,000

$

.075

 

 


Notes Payable for the periods ended, consists of the following:


 

 

December 31,

2011

 

December 31,

2010

5% Note payable due June 30, 2011

$

45,881

$

36,168

2% Note payable due March 14, 2012

 

274,000

 

-

Less: discounts

 

-

 

 

Less: payments

 

(316,281)

 

-

Total notes payable

 

3,600

 

-

Less: current portion

 

(3,600)

 

-

Long term portion

$

-

$

-


As of December 31, 2011, the Company had a note payable due to a related party with a remaining principal balance due of $3,600, this note is currently in default due to non-payment is classified as current liabilities on the balance sheet.


Note 12.  Leases


On January 5, 2011, BlackBox Parent entered into a sublease agreement with a third party.  And pursuant to the Share Exchange the Company acquired this lease agreement and leases approximately 64 square foot executive office space at a rate of $96 per month, which includes additional variable charges for telephone and internet usage.  The lease term expires on January 5, 2012 and shall create a month to month tenancy thereafter.


The Company’s rent expense for the year ended December 31, 2011 and 2010 was $831 and $0, respectively.


Note 13.   Common Stock


All share amounts have been restated to reflect a 1 for 270 reverse stock split affected on January 15, 2011 and, the subsequent 20 for 1 Forward Split, effected on June 13, 2011.


Pursuant to the reverse merger the Company issued 27,030,000 shares of common stock to Shrink Nanotechnologies, Inc. Reverse merger accounting requires these shares to be shown retroactively as though a stock split had occurred.  Therefore this issuance adjusted the initial issuance to the founders at inception.


Pursuant to this same reverse acquisition, the statement of stockholders equity is then adjusted to reflect the shareholders of the public entity (89,415,760 common shares) while establishing the equity of the parent Company.  The retained deficit of the parent Company is removed and reorganized to reflect only the history of the subsidiary.  


In June 2011, the Company issued 12,227,560 shares of common stock to Noctua Fund Manager, LLC, as conversion of $209,397 of principal balance and accrued interest of a convertible note.


In June 2011, the Company issued 6,750,000 shares of common stock to Dan Landry, in exchange for $20,000 of cash paid to the Company prior to the Share Exchange and as founder shares in the new operations of BlackBox Semiconductor, Inc., a Delaware corporation.


In June 2011, the Company issued 250,000 shares of common stock valued at $12,250 to Ford Sinclair, our president and a member of our board of directors, as payment for services rendered.  



F-14




In August 2011, the Company received conversion notices related to convertible debt with principal balances totaling $72,148 and accrued interest of $601. The common share equivalent for the conversion demands is equal to 19,022,609 common shares.  The shares were issued in October 2011.  


At December 31, 2011, 154,245,929 shares of common stock were issued and outstanding.


Note 14.   Preferred Stock


Pursuant to the reverse acquisition, the statement of stockholders equity is adjusted to reflect the preferred shareholders of the public entity (5,000,000 preferred shares) while establishing the equity of the parent Company.  The retained deficit of the parent Company is removed and reorganized to reflect only the history of the subsidiary.  


At December 31, 2011, the Company was authorized to issue 25,000,000 shares of Preferred Stock, par value $.001, of which 5,000,000 shares have been issued and are currently outstanding.


The Series A Preferred shares are non-convertible and maintain a 250 for one voting preference such that a holder of the Series A Preferred shall be entitled to vote 250 shares for every one share of Series A Preferred held by such shareholder.




F-15



Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.


Not Applicable.


Item 9A.  Controls and Procedures.


(A) Evaluation of disclosure controls and procedures.


We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report on Form 10-K is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In our original filing of this Form 10-K, our management did not include a firm conclusion regarding their belief that the disclosure controls and procedures were effective. At such time, management was of the belief that such disclosure controls and procedures were effective, however, considering such conclusion was not included in the original filing of this Form 10-K, for that reason and that reason alone, management believes that, as of December 31, 2011, the Company’s disclosure controls and procedures were ineffective. The Company plans to remedy this issue by completing their assessment of internal controls over financial reporting in a timely manner in their next 10-K for the year ending December 31, 2011 and including a firm conclusion as to such assessment.


(B) Management’s report on internal controls over financial reporting.


The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act). Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, management believes that, as of December 31, 2011, the Company’s internal control over financial reporting was ineffective based on the COSO criteria, due to the following material weakness listed below.


Insufficient segregation of duties in our finance and accounting functions due to limited personnel.  During the year ended December 31, 2011, the company internally performed all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements.  Due to the fact these duties were performed oftentimes by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.  These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.


Insufficient corporate governance policies.  Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented.  Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management.


We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies and we intend to consider the results of our remediation efforts and related testing as part of our next year-end assessment of the effectiveness of our internal control over financial reporting.


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


(C) Changes in internal controls over financial reporting.


During the period covered by this report, there were no changes in the Company's internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.

Other Information.


Not Applicable.  


[Remainder of Page Intentionally Left Blank]



32




PART III


Item 10.  Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.


Directors and Executive Officers.


The following table sets forth, as of the date of this report, name, age and other information of our current director and executive officers, as well as persons that were executive officers or directors at any time in 2011.


Officers and Directors


Name

Age

Position

 

 

 

Luis Leung

43

Principal Executive Officer, Principal Financial Officer, and  Secretary

David Duncan

(Resigned November 19, 2011)

41

Former Principal Executive Officer, Principal Financial Officer, and  Secretary

Ford Sinclair

44

President


The backgrounds of our directors, executive officers and significant employees are as follows:


Luis Leung, Chief Executive Officer, Principal Financial Officer, Secretary, Director


Mr. Leung, 43, currently maintains an international software development company and Microsoft Partner, Advent Corporation, which he co-founded in 2001 and which has since become one of the largest Microsoft Great Plains implementation practices in Texas. Mr. Leung is and has been the CFO and Systems Architect of Alba Spectrum Corporation since March of 2004. Mr. Leung previously served in various executive officer and director capacities of Shrink Nanotechnologies, Inc., an entity affiliated with the Company and its control persons, between December 16, 2006 and March 29, 2009, at which time he resigned as director and from all other positions.  Mr. Leung also served as a director of PNG Ventures, Inc., a Delaware corporation, between May 2008 and December 7, 2008.  Between 1997 and 2001 Mr. Leung was a consultant to companies such as Hein & Associates, LLP, Houston, TX (Project Manager), and Grant Thronton, LLP as Consulting Manager where he facilitated various multi- country technology system implementations.  Prior to such time and between 1988 and 1997, Mr. Leung worked in various capacities, and ultimately as CIO and Comptroller, for Smar Enterprizes, a Brazilian based company, for which he helped establish US, European and Singapore operating divisions. Mr. Leung received a B.S. degree in Science from instituto Tecnologico Aerospacial, Brazil in 1987.


Prior to joining the Company, Mr. Leung provided IT and related services to the Company, specifically, installation and configuration of server infrastructure, implementation of Accounting Systems, transfer of accounting information to new servers and hosting services.  


David Duncan, Former Chief Executive Officer, Principal Financial Officer, and Secretary


On April 4, 2011 the Company’s Board of Directors appointed Mr. David Duncan as the Company’s Chief Executive Officer and Secretary.  Mr. Duncan has experience with various companies over the years in business and new market development, operations, and finance for a variety of companies.  Specifically, Mr. Duncan was previously Executive Vice President Finance and Administration for Vivaro Corporation between May 2009 through July of  2010.  Between February of 2006 and May 2009, Mr. Duncan served in executive roles, including Chief Operating Officer, for Evident Technologies, Inc., a nanotechnology company specializing in the commercialization of quantum dot semiconductor nanocrystals.   Mr. Duncan does not currently beneficially own any Company securities. Mr. Duncan receives compensation only as a consultant to the Company pursuant to a month-to month consulting agreement with the Company, as discussed below and above.


Mr. Duncan resigned as Chief Operating Officer of Evident Technologies in May 2009.  Evident Technologies filed for bankruptcy in July 2009 pursuant to a pre-packaged plan and financing and re-emerged in December 2010.



33




Ford Sinclair, President


Mr. Sinclair is our President and has been since April of 2010. Mr. Sinclair is not a full time employee and has other outside commitments. Mr. Sinclair brings an impressive background of success to the Company, specializing in business development, mergers and acquisitions, and new market development for a variety of companies.  In 2000 through to 2004, Mr. Sinclair has been directly responsible for completing successful acquisitions of Global Golf Holdings. Since 2004, Mr. Sinclair has been the President and CEO for Banis Business Development Group, a management and consulting firm. Mr. Sinclair currently also serves as Director for Ice House Data Centers, Inc. Mr. Sinclair does not beneficially own any Company securities. Mr. Sinclair devotes approximately 10-20 hours per week to the Company’s business and management.


Audit Committee.


We do not have an audit committee. We do not have a financial expert serving on our board of directors.


Code of Ethics


We have adopted a Code of Ethics and Business Conduct on December 31, 2007 authorizing the establishment of a committee to ensure that our disclosure controls and procedures remain effective. Our Code also defines the standard of conduct expected by our officers, directors and employees.


Section 16(a) Beneficial Ownership Reporting Compliance


Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our common stock. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on review of the copies of such reports furnished to us for the year ended December 31, 2011, the following Section 16 Reports were not filed timely:  a Form 3 with respect to Mr. Duncan was filed late, disclosing no share ownership or transactions, and a Form 3 relating to Mr. Leung has been filed late as well, disclosing ________ shares beneficially owned by him, and acquired prior to appointment.  Neither person engaged in any securities transactions.  




[Remainder of Page Intentionally Left Blank]





34



Item 11.  Executive Compensation


The following table summarizes all of the annual compensation paid to all of the company’s named executive officers for the years ended December 31, 2011, 2010, 2009 and 2008:


Name and Position

Year

Salary ($)

Bonus ($)

Stock Awards

$

Option Awards

Non-Equity Incentive Plan Compensation

Nonqualified Deferred Compensation Earnings

All Other Compensation

Total (Shares)

 

 

 

 

 

 

 

 

 

 

Luis Leung(1)

2011

-0-(1)

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Principal Executive Officer (commencing November 19, 2011)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David Duncan(2)

2011

60,000(2)

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Former Principal Financial and Executive

 

 

 

 

 

 

 

 

 

Officer (April 2011 and Resigning November 19, 2011)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ford Sinclair.(3)

2011

-0-

-0-

12,250

-0-

-0-

-0-

$12,250

250,000

President

2010

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

 

2009

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

 

 

 

 

 

 

 

 

 

 

 

2008

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

 

 

 

 

 

 

 

 

 

 

Mark L. Baum, Esq.(4)

2010

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Former Chief Executive

 

 

 

 

 

 

 

 

 

Officer, Principal Financial

2009

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Officer and Secretary

 

 

 

 

 

 

 

 

 

 

2008

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

 

 

 

 

 

 

 

 

 

 


(1)

Mr. Luis Leung was appointed November 19, 2011, after the resignation of Mr. Duncan.  Mr. Leung does not yet have an ongoing compensation arrangement with the Company, but accrues $2,000 per month.

 

 

(2)

Mr. Duncan was appointed February 2011, and received month to month compensation of $13,000 through May 13, and thereafter, received payment of compensation of $60,000 and is due a total of $45,720.  

 

 

(3)

On April 1, 2010, Mr. Ford Sinclair was appointed as our Chief Executive Officer, Secretary, Treasurer and sole Director, and, at such time, was principal financial and principal executive officer of the Company. Mr. Sinclair received 250,000 shares in June 2011 as compensation for services from April 1, 2011 through June 2011. The presumed value of these shares was $12,250.  Mr. Sinclair was the only board member at the time of this issuance.


(4)

Mr. Mark L. Baum, Esq. held the positions of Chief Executive Officer, Secretary, Treasurer and sole Director from July 7, 2007 until his resignation on April 1, 2010.


(5)

Mr. Michael West held the positions of President and Chief Executive Officer January 1, 2006 until his resignation on October 2, 2006.


Option Exercise In Last Fiscal Year And Fiscal Year End Option Values


Our executive officers were not issued any options which could have been exercised during the fiscal years ended December 31, 2011 or 2010.




35




Duncan Consulting Agreement


On February 15, 2011, the Company entered into a Consulting Agreement with David Duncan. The Duncan Consulting Agreement retains Mr. David Duncan as a consultant through May 19, 2011, with compensation of $6,000 for the first month ended March 17, 2011, and $13,000 for each month ended April 17 and May 18, 2011, respectively.  Mr. Duncan’s services to be completed during the term of the engagement include, among other things, completion of a website, preparation and refinement of the Company’s solar and semiconductor business plan and investor presentations, and assistance in retention of executive management and strategic investors.  


Luis Leung Compensation Agreement


Mr. Luis Leung was appointed November 19, 2011, after the resignation of Mr. Duncan.  Mr. Leung does not yet have an ongoing compensation arrangement with the Company, but accrues $2,000 per month.


Directors' Compensation


Our directors have not received any compensation for the year ended December 31, 2011.  All Directors during the fiscal year ended December 31, 2010 have been listed in the Executive Compensation table above. All directors may receive reimbursement for reasonable out-of-pocket expenses in attending board of directors meetings.


Compensation Committee


We have not formed an independent compensation committee.


[Remainder of Page Intentionally Left Blank]



36




Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The following table sets forth certain information regarding the beneficial ownership of common stock of the Company as of April 13, 2012 by: (i) each person who, to the Company’s knowledge, owns more than 5% of its common stock; (ii) each of the Company’s named executive officers and directors; and (iii) all of the Company’s named executive officers and directors as a group.  Beneficial ownership is determined in accordance with the rules and regulations of the Commission.  If a stockholder holds options or other securities that are exercisable or otherwise convertible into our common stock within 60 days of April 13, 2012, we treat the common stock underlying those securities as owned by that stockholder, and as outstanding shares when we calculate that stockholder’s percentage ownership of our common stock. However, we do not consider that common stock to be outstanding when we calculate the percentage ownership of any other stockholder.  Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power with respect to shares of common stock and the address is c/o BlackBox Semiconductor, Inc. 1462 Erie Blvd, Schenectady, New York, 12305. As of April 24, 2012, the Company had a total of 154.245.929 shares of Common Stock issued and outstanding.  


Name and Address of Owner

Shares

%

Directors and Officers

Luis Leung

-

0.00%

Ford Sinclair

250,000

*

David Duncan (resigned Nov. 19, 2011)

-

*

Total of Directors and Officers as a Group

250,000

*

5% Security Holders

Income Opportunity Capital, LLC (3)

12,227,560

7.93%

Manuel Suqilindo (4)

80,000,000 (5)

51.86%

Shrink Nanotechnologies, Inc. (6)

27,030,000

17.52%

Total (includes 5% holders)

138,530,169

89.81%


*Under 1%


(1)

In computing the outstanding shares of common stock, the Company has excluded all shares of Common Stock subject to options, warrants or other securities that are not currently exercisable or convertible within 60 days and are therefore not deemed to be outstanding and beneficially owned by the person holding the options, warrants or other securities for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person.  For each beneficial owner above, any options, warrants or other derivative securities, exercisable or convertible within 60 days have been included in the number of shares above and in the numerator denominator for such person.

(2)

The address for Luis Leung and Ford Sinclair is, c/o the Company at 1462 Erie Boulevard Schenectady, New York 12305.

(3)

The address for Income Opportunity Capital LLC is 1250 Prospect St. #101, La Jolla, CA 92037, and the managing member of this entity is William Malloy. Mr. William Malloy is deemed the beneficial owner of all shares held by Income Opportunity Capital, LLC.

(4)

Indicates shares held by Rum Punch Partners, Ltd., a Texas corporation, which is a fund controlled by its general partner Mango Bay Management, LLC and managed by Mr. Manuel Suqilindo its manager, and a beneficial onwer of Mango Bay Management, LLC.  Mr. Suqilanda is a limited partner of RP Partners and disclaims the majority of its beneficial and economic ownership of RP Fund. The address for Mr. Suqilinda, MB Management and RP Partners is: c/o Mango Bay Management, LLC, Avenida Republica Del Salvador, N35-82, Portugal, EDF Twin Towers Pico 8.,

(5)

Includes 80,000,000 shares of common stock.  Does not include (i) 5,000,000 shares of non-convertible Series A Preferred Stock which controls the Company and its board as a result of the ability to vote on a 250 for 1 basis with the common stock holders of the Company and to veto certain actions of the Board.  Manuel Suqilinda and MB Management disclaims all beneficial ownership of shares of the Company held by Shrink.

(6)

Includes 27,030,000 Exchange Shares issued to Shrink pursuant to the BlackBox Acquisition on June 3, 2011.  The address for Shrink is 4100 Calit2 Building, Irvine, California 92697-2800. MB Management disclaims beneficial ownership of shares held by Shrink. Noctua Fund is managed by NFM.

(7)

Currently, only 154,245,929 shares are outstanding.  The above listed amount presumes conversion of all notes owned by 5% security holders and others in the totals.




37




Changes of Control and Certain Conflicts of Interest


As a result of the ownership and control by MB Partners and its control persons of over 68% of the voting stock of the Company, in addition to the 5,000,000 shares of Series A Preferred Stock which votes on a 250 – for- 1 basis with the common stock and caries veto and consent rights, such persons have the ability to control all aspects of our business and operations, as well as the right to veto actions taken by the board or other shareholders.  As a result, and among other things, MB Partners may add or remove officers unilaterally, amend our certificate of incorporation from time to time, change our capitalization, cause the Company to purchase, acquire, or encumber assets from time to time, or to make and receive loans or equity investments and, to take any and all other actions that are in their best interest without regard for other shareholders, and without any notice to, or consent of, members of the board of directors, the Company itself, or any other shareholders.


MB Partners may also cause the Company to make loans or accept loans from time to time, and, as a result of indebtedness owed to them, may foreclose on assets of the Company or its business. See “Item 13. Certain Relationships and Related Transactions and Director Independence.” below for additional information relating to conflicts of interest.


MB Partners may also sell, transfer or assign any of their shares, their “super voting” Series A Preferred Stock, or dilutive NFM Note or Secured NFM Note, without any consent of the Company, its board or any other shareholders.  Any of the foregoing actions could cause immediate and substantial dilution, and/or a change of control of the Company.   


MB Partners and its management are also affiliates of Shrink, as well as other entities that we may do business with from time to time.  We do not have any form of shareholder voting agreement or voting trust with respect to any securities owned by RP Partners by its general partner MB Partners or its management which has absolute control over securities held by it.  Accordingly, such persons can also effect a change of control without notice to or consent from the Company, its shareholders and management.


As a result of the foregoing control, MB Partners has inherent conflicts of interest in that it has acquired its securities at a low price and can exert control the Company. Persons should not consider an investment in the Company unless they are willing to entrust full control of our operations over to NFM and its management.  


Item 13.  

Certain Relationships and Related Transactions and Director Independence.


Transactions with Related Persons, Promoters and Certain Control Persons


Shrink was, at all relevant times through April 5, 2012, an entity that is indirectly controlled by and affiliated with, Messrs. Mark L. Baum and James Panther.  After such time, beneficial interests in securities or convertible debt of the Company and Shrink where acquired from NFM and its affiliates by an entity indirectly controlled by Mr. Panther and unaffiliated with Mr. Baum.  All notes and securities were subsequently sold and assigned to AF Fund and MB Management, respectively.


In addition, Mr. Leung has worked for other entities affiliated with, or controlled by such persons.  NFM owns 68% of our common stock, in addition to all 5,000,000 shares of series A Preferred Stock that vote on a 250 for 1 basis with our common stock.  NFM therefore has full control over the Company and its management (See Certificate of Designation- Series A Preferred Stock” and preceding sub sections relating to indebtedness to NFM above commencing page 20, “Risk Factors”, above, Security Ownership of Certain beneficial Owners and Management” and “Changes of Control” below.   Accordingly, all consents and approvals on the part of Shrink and the Company were approved by, and negotiated by, disinterested members of the board of directors of Shrink.  


The Company has entered into a number of transactions with NFM and its affiliates with respect to its debt restructuring, as well as the BlackBox Acquisition, all of which have a value that exceeds $120,000.  See also, the subsection titled “Related Parties” in “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.”, above.  The following is a brief list and description of transactions with related persons:


BlackBox Related Party Transaction


As consideration for the acquisition of BlackBox, we (i) originally agreed to pay $75,000 in cash within 60 days of the Closing Date, which payment due date was subsequently extended to December 31, 2011, and (ii) issued an aggregate of 27,030,000 shares of our common stock, par value $0.001 per share to Shrink (the “Exchange Shares”), or, approximately 19% of our outstanding stock as of the date immediately after the Closing Date.  In exchange therefore, we received (i) all of the shares of BlackBox resulting in BlackBox becoming our wholly owned subsidiary, and (ii) 14,000,000 shares of the common stock, par value $0.001 per share, of Shrink (the “Shrink Consideration Shares”).   The $75,000 payment due in December has since been reduced to $12,500 and paid in full and discharged in October 2011.




38




Modification of Existing 2010 Secured Note


Effective as of January 31, 2011, the Company entered into a Loan Modification with NFM, a predecessor to Alpha Finanz, Ltd.  Pursuant to the Loan Modification, the Company amended and replaced the previously existing 5% Secured Convertible Promissory Note Series 04012010-A1 (the “Original Secured NFM Note”) issued to NFM on April 1, 2010, in the principal amount of $38,168.38, with a new note, in the principal amount of $45,881.00 due on March 31, 2011 (as amended, the “2010 Secured Note”).  The Loan Modification reflects additional principal and certain other accommodations of NFM so as to reflect, specifically:

 

·

an additional $7,000 loan disbursement made on January 11, 2011 and interest since April 1, 2010 as capitalized onto principal on the  2010 Secured Note,

·

an extended due date of March 31, 2011 for the entire amount due under the 2010 Secured Note, and

·

a fixed conversion price of $0.00045 per share for all outstanding principal and interest, which price only adjusts for corporate events such as stock splits, combinations or similar events.

 

As of the issuance date, the 2010 Secured Note was originally convertible into 101,957,760 shares of the Company’s Common Stock. No other material changes have been made to the 2010 Secured Note.  On March 22, 2011, and as part of an agreement to reduce the Company’s debt, NFM agreed to convert $36,000 of principal and interest under the Secured NFM Note, into 80,000,000 shares of the Company’s restricted common stock, and in October, the Company issued 15,173,156 common shares for payment of principal balance totaling $6,602 and accrued interest of $226,  leaving approximately $3,780 of principal and interest outstanding as of December 31, 2011 that are convertible into 8,400,000 shares. See the “Liquidity and Debt Restructurings in 2011” subsection of  “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.”, above for more information on this transaction.


The 2010 Secured Note and Unsecured Note were subsequently acquired in April of 2012, by an entity indirectly controlled by Mr. panther, which subsequently sold the same to AF Finanz, which, based on information provided to the Company and otherwise than as related to the shares underlying the note, is not an affiliate of the Company, Shrink, Mr. Baum or Mr. Panter.


Settlement of Outstanding Debt; Issuance of Unsecured NFM Note


As of March 15, 2011, the Company settled outstanding debt with NFM and issued to NFM, an unsecured convertible note in the principal amount of $274,000 and accruing interest at 2% per year, in order to settle and accrue $274,000 of past due account payables owed to NFM. The Unsecured NFM Note was to become due in March of 2012, but was converted early in accordance with its terms, in exchange for 16,000,000 common shares upon conversion of the Unsecured NFM Note and also issued 77,013 shares in exchange for $1,319 of interest thereon. See the “Liquidity and Debt Restructurings in 2011” subsection of  “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.”, above for more information on this transaction.


Item 14.

Principal Accounting Fees and Services.


Audit Fee


The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal account for the audit of our annual financial statement and review of financial statements included in our 10-Q reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were $12,500 for fiscal year ended 2011 and $8,000 for fiscal year ended 2010.


Audit-Related Fees


The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements that are not reported above were $-0- for fiscal years ended 2011 and 2010.


Tax Fees


The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were approximately $-0- for fiscal year ended 2011 and consisted of tax compliance services and $-0- for fiscal year ended 2010 and consisted of tax compliance services.



39




All Other Fees


There were no other aggregate fees billed in either of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above.


Our audit committee which consists of our board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.  We do not rely on pre-approval policies and procedures.


Item 15.   

Exhibits.  


Exhibit #

Title

3.1(i)

Articles of Incorporation. (Attached as an exhibit to our Form 10-SB filed with the SEC on December 17, 2007 and incorporated herein by reference).

3.1(ii)

Certificate of Amendment to Articles of Incorporation dated July 7, 2003 (Attached as an exhibit to our Form 10-SB filed with the SEC on December 17, 2007 and incorporated herein by reference).

3.1(iii)

Certificate of Amendment, filed June 9, 2011, relating to Forward Split (Incorporated by reference from Exhibit 3.1 to Current Report on Form 8-K, Date of Event June 3, 2011)

3.2

Bylaws (Attached as an exhibit to our Form 10-SB filed with the SEC on December 17, 2007 and incorporated herein by reference).

10.1

Letter of Intent, dated February 23, 2011, among the Registrant, Shrink Nanotechnologies, Inc. and BlackBox Semiconductor, Inc. (Delaware) (Attached as an exhibit to our Form 8-K filed with the SEC on March 28, 2011and incorporated herein by reference).

10.2

Loan Modification Letter, dated January 31, 2011, between the Registrant and Noctua Fund Manager, LLC (Attached as an exhibit to our Form 8-K filed with the SEC on March 28, 2011and incorporated herein by reference).

10.3

Amended Secured Convertible Promissory Note issued to Noctua Fund Manager, LLC on January 31, 2011 (Attached as an exhibit to our Form 8-K filed with the SEC on March 28, 2011and incorporated herein by reference).

10.4

Letter Agreement, dated March 15, 2011, between the Registrant and Noctua Fund Manager, LLC (Attached as an exhibit to our Form 8-K filed with the SEC on March 28, 2011and incorporated herein by reference).

10.5

Unsecured Convertible Promissory Note issued to Noctua Fund Manager, LLC on March 15, 2011 (Attached as an exhibit to our Form 8-K filed with the SEC on March 28, 2011and incorporated herein by reference).

10.6

Consulting Agreement, dated February 15, 2011, between the Registrant and David Duncan (Attached as an exhibit to our Form 8-K filed with the SEC on March 28, 2011and incorporated herein by reference).

10.7

Share Exchange Agreement between the Company, BlackBox Semiconductor, Inc., and Shrink Nanotechnologies, Inc, as seller, dated as of June 3, 2011. (Incorporated by reference from Exhibit 10.1 to Current Report on Form 8-K, Date of Event June 3, 2011)

10.8

BlackBox Semiconductor, Inc. 2011 Stock Incentive Plan, adopted June 13, 2011. (Incorporated by reference from Exhibit 10.2 to Current Report on Form 8-K, Date of Event June 3, 2011).

10.9

License Agreement between Shrink Nanotechnologies, Inc., BlackBox Semiconductor, Inc., and the University of Chicago, dated as of November 30, 2011. (Incorporated by reference from Exhibit 10.3 to Current Report on Form 8-K, Date of Event June 3, 2011).

14.1

Code of Ethics. (Attached as an exhibit to our Form 10-KSB filed with the SEC on October 14, 2008 and incorporated herein by reference).

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Subsidiaries

31.1

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

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

32.2

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




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Signatures


In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf on April 18, 2012, by the undersigned, thereunto duly authorized.



BLACKBOX SEMICONDUCTOR, INC.




/s/ Luis Leung                              

By:  Luis Leung

Its: Chief Executive Officer

and Principal Accounting Officer




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