NMI Health, Inc. - FORM 10-K

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EXCEL - IDEA: XBRL DOCUMENT - NMI Health, Inc.	Financial_Report.xls

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: December 31, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ________ to_________

Commission File No. 000-27421

NANO MASK, INC.

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

NEVADA		87-0561647
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

50 West Liberty Street, Suite 880, Reno, Nevada		89501
(Address of principal executive offices)		(Zip code)

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

Title of each class		Name of each exchange on which registered
None		N/A

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

Common Stock, par value $0.001 per share

(Title of class)

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes þ No o (2) Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

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 the 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. þ

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

At March 26, 2013, there were outstanding 98,695,444 shares of the Registrant's Common Stock, $.001 par value.

State the Registrant's revenues for the December 31, 2012 fiscal year: $454,513.

State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days:

The aggregate market value of shares of Common Stock held by non-affiliates of the Registrant is $1,590,137, based on the average bid and ask price of the Registrant's stock on March 26, 2013 of $0.028 per share and shares held by non-affiliates. The Registrant's common stock is quoted on the OTC Markets Group website under the symbol "NANM.QB".

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., part I, part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or other information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933:

NONE

TABLE OF CONTENTS

		PAGE

Item 1.	Business		3

Item 1A.	Risk Factors		6

Item 1B.	Unresolved Staff Comments		12

Item 2.	Properties		12

Item 3.	Legal Proceedings		12

Item 5.	Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities		12

Item 6.	Selected Financial Data		13

Item 7.	Management's Discussion and Analysis or Plan of Operation		13

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		17

Item 8.	Financial Statements and Supplementary Data		17

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		17

Item 9A.	Controls and Procedures		17

Item 10.	Directors, Executive Officers and Corporate Governance		19

Item 11.	Executive Compensation		21

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		24

Item 13.	Certain Relationships and Related Transactions, and Director Independence		25

Item 14.	Principal Accountants’ Fees and Services		26

Item 15.	Exhibits, Financial Statement Schedules		27

Signatures			28

PART I.

ITEM 1. BUSINESS

General

Unless the context requires otherwise, all references to the “Company”, “we”, “us” and “our” refer to Nano Mask, Inc.

The financial and disclosure information contained in this report reflect our efforts to accurately and completely disclose the status of our business operations and financial condition giving full effect to the results of management’s determinations.

We are a healthcare product development and distribution company providing emergency and critical care and infection control products to a variety of market segments within the health care industry. The Company has evolved from a specialty filter products Company that developed a state-of-the-art air filtration technology for removing infectious bacteria and viruses in air flow systems into a Company providing innovative infection prevention products and solutions. Such products now include a proprietary line of enzymatic detergents under the trademark “Nano-Zyme™,” which offer a bacteria free, non-hazardous alternative for safely pre-soaking and cleaning medical instruments during instrument reprocessing. While our other innovative line offers antimicrobial performance based Hospital Fabrics and Textiles designed to inhibit the growth of virus, fungi and bacteria causing hospital acquired infections (HAIs) on both healthcare apparel and textiles. These products have been developed by partnering with innovative technology companies. Largely, the evolution to this broader spectrum of products only began in 2010.

Current Products

Product development remains an important part of our business. We are currently devoting most of our resources towards expanding our new line of antimicrobial Hospital Fabric and Textiles along with our Medical Instrument Reprocessing products.

Antimicrobial Hospital Fabrics and Textiles

Hospitals are meant to be places to get well, but many are becoming places where just the opposite occurs. There has been the fear of hospital acquired infections (HAIs), for many years, and based on emerging reports, that fear has not only become a reality but is now an ongoing concern for all health care facilities not just domestically, but globally as well. According to the Centers for Disease Control and Prevention, an estimated two million Americans contract HAIs and more than 100,000 patients die due to complications from infection, causing an estimated $28 to $33 billion in excess health care costs each year. With news of insurers withdrawing compensation for HAIs in the United States, never has it been more important to look at all areas of nosocomial infection control

With HAIs being directly associated with high morbidity and mortality rates, representing a significant burden on healthcare resources, the need for hospitals to effectively address HAIs is of critical importance. Infection control experts agree that cleaner hospitals are safer hospitals. But while standard infection-control procedures of hand washing and disinfecting hard surfaces like countertops, floors, bed rails, instruments and equipment have helped reduce infection rates, their effectiveness in controlling bacterial contamination of soft surfaces has been extremely limited. Multiple studies have shown that soft surfaces in hospitals can harbor deadly bacteria, causing recontamination during frequent contact. However, proper and thorough bacterial management of soft surfaces are often ignored by infection prevention protocols. Moreover, laundering alone isn't effective at addressing this challenge, because fabrics begin to re-contaminate immediately after being put in use.

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Effective HAI reduction means incorporating soft surface management into an overall bacteria-reduction strategy. And one of the most effective approaches towards managing soft surface contamination is through a synergistic approach. This approach relies on harnessing an antimicrobial technology platform that can not only be universally applied to soft surfaces in both form and function, but one that can simultaneously provide safe, reliable and continuous antimicrobial performance. This is why Nano Mask, Inc. has recently partnered with Noble Biomaterials, global leaders in antimicrobial yarn and fiber technology, to develop an innovative and exclusive suite of antimicrobial fabrics designed to effectively meet the challenges of antimicrobial management of soft surfaces within the hospital environment. This technology enables Nano Mask Inc. to incorporate Noble Biomaterials X-Static™ silver fiber technology into all their pre-selected fabric mixes, thereby providing extended antimicrobial protection for the life of each product Nano Mask fabricates. Consequently, Nano Mask has developed one of the most comprehensive antimicrobial soft surface product lines available in the health care market today, all made exclusively with X-Static™ Silver yarn. Nano Mask’s suite of antimicrobial performance enhanced apparel and textiles have a natural look and the feel of traditional hospital fabrics and textiles.

With the rising incidence of hospital acquired infections there has been an unparalleled surge in demand for infection prevention products over the last decade. With global sales of HAI-related infection control devices and products reaching $10.3 billion with approximately US $4.3 Billion of that revenue in the US, it is expected that by 2016 sales of HAI related infection control products will reach in excess of $18.3 Billion globally with $8.4 Billion being reached in the US. Moreover, of all the infection control items expected to be sold annually by 2016, infection prevention products will witness the highest rate of growth, in particular medical fabrics and textiles which are expected to draw in revenues in excess of $2.1 Billion within the US and $4.5 Billion globally. With soft surfaces representing 90 percent of the patient healthcare environment: privacy curtains, lab coats, scrubs, gowns, bed linens, blankets and additional barrier products, Nano Mask’s suite of antimicrobial apparel and textiles are well positioned to become a vital component in any hospital; bacteria-reduction strategy both domestically and globally.

Products for which marketing is currently suspended

As stated above, we have marketed and sold the following products in the past, but due to a decline in demand, we have elected to postpone any further significant marketing of these products until adequate resources are available.

RespAide™ CPR Isolation Mask

Due to positive pre-market responses and growing product inquiries for our 2H filter technology, NMI has recently decided to re-establish the manufacturing and distribution of its CPR filtration products by first commencing with the pre-production of both RespAide™ and the Vapor Isolation Valve replacement filters. RespAide™ CPR Isolation Mask is designed to minimize the potential for transmission of contagious diseases during the administration of CPR. Integral to our RespAide™ CPR Isolation Mask is the highly efficient (99.99% at .027 micron) filtered Vapor Isolation Valve (VIV) designed to protect emergency response personnel against infectious diseases during mouth to mouth resuscitation, and which needs to be replaced after each use. Although once fully commercialized, we will be focusing our marketing efforts on emergency ambulance services, police departments, firefighters, hospitals, doctors and major CPR training organizations, management is currently fulfilling product and information requests from both the US Military and our Middle East Distribution partners. The Company already has FDA approval for RespAide™ CPR Isolation Mask and is in the process of applying for medical device Class II approval in Canada and CE mark approval in Europe.

Disposable Filters for Bag Valve Masks (BVMs)

The same filter used in the RespAide™ product described above is ideal for reducing the risk of exposure to viruses and bacteria and equipment contamination during use of bag valve mask (BVM) resuscitation devices. The disposable filter keeps the equipment contaminant-free, thereby reducing risk of exposure to virus and bacteria to emergency response personnel. The filter is placed between the bag valve and the mask and is single use. We have received FDA 510(k) approval for the filter as a Class II medical device. The filter was introduced in 1997 as a component of the RespAide™ device.

Other potential future products

The following product has been in development, production and market entry for future sale and has not produced any revenue for us to date. Further development and production of this product has currently been postponed, as described above, until adequate resources are available.

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ELVIS™ BVM

We have designed another configuration of our technology called ELVIS™ (Emergency Life Support Ventilation and Intubation System) for the BVM market. The product is a self-contained device that delivers medicine in aerosol form and a bag with built-in CO(2) monitoring capabilities. Patents have been submitted for this product and we have executed an agreement whereby we acquired the rights for commercial exploitation of the patents.

RespAide™ products and filters

We contracted in December 1997 with Westmed, an FDA manufacturing facility in Tucson, Arizona, for the manufacture and production of our RespAide ™ proprietary filter products. An FDA manufacturing facility is an establishment that has applied for and received acceptance by the FDA and passed its FDA inspections to maintain compliance as an FDA manufacturing facility. We supplied all materials for the manufacturing and packaging. We believe that the agreement with Westmed will remain in effect until terminated by either party. However, marketing and development of this product is currently suspended.

Competition

The medical device industry is a highly competitive sector of the health care industry and there are a large number of established and well financed entities with significantly greater financial resources, technical expertise and in-depth managerial capabilities than we have.

Competitors include two major manufacturers of CPR devices, Laerdal Medical Corporation and Ecolab, Inc, both internationally-based companies, Johnson & Johnson and MedChem Products, Inc. and three major manufacturers of enzymatic solutions are Metrex Research Corporation, Ecolab, Inc. and Steris Corporation. A major competitor in the personal protection mask market is 3M Corporation and a major competitor in the breathing circuit filter market is PALL Corporation.

Sources and availability of raw materials and the names of principal suppliers

The raw materials utilized in the production of our proprietary products are proprietary in nature and cannot be released into the public domain.

Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts

Our United States patents are as follows:

PATENT NO. /APP. NO.	DESCRIPTION	EXPIRATION OR ABANDONMENT DATE
6375854	Combined Hydrophobic-hydrophilic Filter for Fluids (Smaller to Larger)	4/23/2023
6689278	Combined Hydrophobic-hydrophilic Filter for Fluids (Larger to Smaller)	4/23/2022
6276363	Portable Emergency Safety Resuscitator	8/21/2021

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Need for any government approval of principal products or services

The Company does not intend to submit a FDA 510(k) application in the near future.

Since we use third-party manufacturers to produce our products, we are not required to register as a manufacturer on an annual basis with the FDA. On the other hand, were we to use a domestic third-party manufacturer, such manufacturers would be subject to FDA inspections.

Research and Development

Our research and development expenditures for the last two years were as follows:

- 2012 $ 3,379

- 2011 $ 3,500

These costs are prototype development costs associated with the new products such as materials, supplies, consulting fees, filing fees, etc.

Costs and effects of compliance with environmental laws

We are not aware of any cost or effect of compliance with environmental laws.

Employees

As of March 26, 2013, we are employing three full-time and two part-time employees.

ITEM 1A. RISK FACTORS

Because we have a limited operating history, one cannot evaluate our future potential based on our past performance.

We have had limited operations since our organization. While the company has experienced a series of product failures during its relatively short history of operations, there is no extensive operating history to demonstrate our ability to conduct business. Therefore, the investment risk in our company is greater than with an established company. Accordingly, one should not invest in our company if one cannot afford the loss of the entire investment.

We are dependent on proprietary know-how.

Our competitors may develop or market technologies that are more effective or more commercially attractive than ours. Our manufacturing know-how as to mixing, coating and cross-linking may be able to be duplicated, even if it is difficult to do so. There is no assurance that, should we apply for intellectual property protection for our intellectual property, we would be able to obtain such protection.

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We also rely on trade secret protection to protect our interests in proprietary know-how and for processes for which patents are difficult to obtain or enforce. We may not be able to protect our trade secrets adequately. In addition, we rely on non-disclosure and confidentiality agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary technology. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge. Any disclosure of confidential data into the public domain or to third parties could allow competitors to learn our trade secrets and use the information in competition against us.

Despite our efforts to protect our proprietary rights, there is no assurance that such protections will preclude our competitors from developing and/or marketing similar products. While we are not aware of any third party intellectual property that would materially affect our business, our failure or inability to obtain patents and protect our proprietary information could result in our business being adversely affected.

Our products risk exposure to product liability claims.

If successful in developing, testing and commercializing our products, we will be exposed to potential product liability risks, which are inherent in the testing, manufacturing and marketing of such products. It is likely we will be contractually obligated, under any distribution agreements that we enter into to indemnify the individuals and/or entities that distribute our products against claims relating to the manufacture and sale of products distributed by such distribution partners. This indemnification liability, as well as direct liability to consumers for any defects in the products sold, could expose us to substantial risks and losses. There can be no assurance that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate coverage against potential liabilities. As we begin to sell and distribute our new line of proprietary products, we intend to increase the limits of our product liability insurance. A successful product liability claim or series of claims brought against us could result in judgments, fines, damages and liabilities that could have a material adverse effect on our business, financial condition and results of operations. We may incur significant expense investigating and defending these claims, even if they do not result in liability. Moreover, even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer, which could have a material adverse effect on our business, financial condition and results of operations.

We depend on key personnel.

We believe that our success will depend, in part, upon our ability to attract and retain additional skilled personnel, which will require substantial additional funds. There can be no assurance that we will be able to find and attract additional qualified employees or retain any such personnel. Our inability to hire qualified personnel, the loss of services of our key personnel, or the loss of services of executive officers or key employees that that may be hired in the future may have a material and adverse effect on our business.

We do not know if we will become profitable in the near future.

Since the date of inception we have incurred substantial losses. To address these losses, we have re-directed all sales efforts to our new Class 1 medical products that are “green,” and anti-microbial in nature to address specifically the hospital and clinic markets. To succeed as a company, we must continue to develop commercially viable products and sell adequate quantities at a high enough price to generate a profit. We may not accomplish these objectives. Even if we are successful in increasing our revenue base, a number of factors may affect future sales of our product. These factors include:

- Whether there is a perceived need for and acceptance of our products in the marketplace

- Whether competitors produce superior products

- Whether the cost of our product continues to be competitive in the marketplace.

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We believe that by assuring low cost and profitable margins with high quality standards that we can generate a viable, growing company, but if we cannot generate adequate, profitable sales of our products, we will not be successful.

Because we have limited experience, we may be unable to ascertain or reliably assess risks relating to the industry and therefore, we may not be able to successfully market and distribute our products.

We have limited experience in the marketing of medical products and may not be aware of all the customs, practices and competitors in that industry. We do not know if we have properly ascertained or assessed any and all risks inherent in this industry. In addition, our success depends, in part, on our ability to continue marketing and distributing our products effectively. We have limited experience in the sale or marketing of medical products. We have limited marketing or distribution capabilities and we will need to retain consultants that have contacts in and understand the medical products marketplace. We may not be successful in entering into new marketing arrangements, whether engaging independent distributors or recruiting, training and retaining a larger internal marketing staff and sales force.

We face intense competition, and many of our competitors have substantially greater resources than we do.

We operate in a highly competitive environment. In addition, the competition in the market for hospital and clinical products may intensify in the future as greater efficiencies are demanded by and legislated for these hospitals and clinics. Further, there are numerous well-established companies and smaller entrepreneurial companies with significant resources who are developing and marketing products that will compete with our products. In short, many of our current and potential competitors have greater financial, operational and marketing resources. These resources may make it difficult for us to compete with them and therefore harm our business.

Since there may be competing products in the future, we may experience price declines.

Some of our competitors are larger and better financed with more resources to devote to development and technological innovation. If such competitors develop products that can be produced less expensively than our products, we could suffer the adverse effects of a price decline which may affect our profitability.

Our business will depend on the protection of our patents and other intellectual property and may suffer if we are unable to adequately protect such intellectual property.

Our success and ability to compete are substantially dependent upon our intellectual property. We rely on patent, trademark and copyright laws, trade secret protection and confidentiality or license agreements with our employees, customers, strategic partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. There are events that are outside of our control that pose a threat to our intellectual property rights as well as to our products and services. For example, effective intellectual property protection may not be available in every country in which we license our technology or our products are distributed. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any impairment of our intellectual property rights could harm our business and our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. In addition, other parties may independently develop similar or competing technologies designed around any patents that may be issued to us.

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Third parties may invalidate our patents.

Third parties may seek to challenge, invalidate, circumvent or render unenforceable any patents or proprietary rights owned by or licensed to us based on, among other things:

- Subsequently discovered prior technology;

- Lack of entitlement to the priority of an earlier, related application; or

- Failure to comply with the written description, best mode, enablement or other applicable requirements.

If a third party is successful in challenging the validity of our patents, our inability to enforce our intellectual property rights could seriously harm our business.

We may be liable for infringing the intellectual property rights of others.

Our products and technologies may be the subject of claims of intellectual property infringement in the future. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle, could divert resources and attention and could require us to obtain a license to use the intellectual property of third parties. We may be unable to obtain licenses from these third parties on favorable terms, if at all. Even if a license is available, we may have to pay substantial royalties to obtain it. If we cannot defend such claims or obtain necessary licenses on reasonable terms, we may be precluded from offering most or all of our products or services and our business and results of operations will be adversely affected.

Because of our reliance on trade secrets, we may be at risk for potential claims or litigation related to our technology.

In certain cases, where the disclosure of information required to obtain a patent would divulge proprietary data, we may choose not to patent parts of the proprietary technology and processes which we have developed or may develop in the future and rely on trade secrets to protect the proprietary technology and processes. The protection of proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. We may also be subject to claims by other parties with regard to the use of technology information and data which may be deemed proprietary to others.

Because there is significant uncertainty as to our ability to continue as a going concern, our ability to obtain additional financing could be adversely affected.

Nano Mask, Inc. has incurred significant losses, which have resulted in an accumulated deficit of $23,579,651 at December 31, 2012. In addition, current economic factors may have an adverse effect for the foreseeable future on the Company’s ability to raise additional capital and conduct its operations profitably. Because of these continued losses and our accumulated deficit under current economic conditions, we have included disclosure about uncertainty as to our ability to continue as a going concern in Note 2 to our financial statements included in this report. This going concern uncertainty could adversely affect our ability to obtain favorable financing terms in the future or to obtain any additional financing if needed. Management cannot be certain of its ability to create additional revenues, obtain additional equity financing, or execute its long-term business plan.

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A continuing recession in the U.S. and general downturn in the global economy may generate an adverse impact on our business, operating results or financial position.

The U.S. economy has been in recession and there has been a general downturn in the global economy. A continuation or worsening of these conditions, including credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial position in a number of ways. We may experience difficulties in generating revenues and cash flows as a result of reduced orders, payment delays or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and customers. We may incur increased costs or experience difficulty with the ability to borrow in the future or otherwise with financing our operating, investing or financing activities. Any of these potential problems could hinder our efforts to increase our sales and might, if severe and extensive enough, jeopardize our ability to operate.

There is a limited public trading market for our common stock.

Our common stock presently trades Over-The-Counter with the symbol “NANM.QB”. We cannot assure you, however, that such market will continue or that you will be able to liquidate your shares acquired at the price you paid or otherwise. We cannot assure you that any other market will be established in the future. The price of our common stock may be highly volatile and your liquidity may be adversely affected in the future.

Risks Related to the Common Stock

Our stock price may be volatile, which could result in substantial losses for investors.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

-	technological innovations or new products and services by us to our competitors;

-	additions or departures of key personnel;

-	sales of our common stock, particularly under any registration statement for the purposes of selling any other securities, including management shares;

-	our ability to execute our business plan;

-	operating results that fall below expectations;

-	loss of any strategic relationship;

-	industry developments;

-	economic and other external factors; and

-	period to period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock.

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We are subject to penny stock rules which will make the shares of our common stock more difficult to sell.

We are subject to the Securities and Exchange Commission’s “penny stock” rules since our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a per share price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.

In addition, the penny stock rules require that prior to a transaction the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.

There is, at present, only a limited market for our common stock and we cannot ensure investors that an active market for our common stock will ever develop or be sustained.

Our shares of common stock are thinly traded. Due to the illiquidity, the market price may not accurately reflect our relative value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Because our common stock is so thinly traded, a large block of shares traded can lead to a dramatic fluctuation in the share price and investors may not be able to liquidate their investment in us at all or at a price that reflects the value of the business. In addition, our common stock currently trades on the OTCQB Markets Group, which generally lacks the liquidity, research coverage and institutional investor following of a national securities exchange like the NYSE Amex, the New York Stock Exchange or the Nasdaq Stock Market. While we intend to list our common stock on a national securities exchange once we satisfy the initial listing standards for such an exchange, we currently do not, and may not ever, satisfy such initial listing standards.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock. As additional shares of our common stock become available for resale in the public market, the supply of our common stock will increase, which could decrease the price of our common stock.

In addition, if our shareholders sell substantial amounts of our common stock in the public market, upon the expiration of any statutory holding period under Rule 144, upon the expiration of lock-up periods applicable to outstanding shares, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, could also make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

We do not expect to pay dividends in the future. As a result, any return on investment may be limited to the value of our common stock.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors 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 an investment in our common stock will only occur if our stock price appreciates.

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We have historically not paid dividends and do not intend to pay dividends.

We have historically not paid dividends to our stockholders and management does not anticipate paying any cash dividends to our stockholders for the foreseeable future. The Company intends to retain future earnings, if any, for use in the operation and expansion of our business.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We do not expect to enter into a corporate office lease until such time as we start to generate sales sufficient to cover a significant portion of our selling, general and administrative expenses. The Company currently maintains mailbox services through a Reno, Nevada location. Business is conducted largely with emails, telephone calls and web services.

ITEM 3. LEGAL PROCEEDINGS

On December 29, 2010, the Company received a complaint from Applied Nanoscience, Inc., a Nevada corporation, filed in the District Court of Clark County in Nevada (Case NoA-10-631192-C) which seeks collection of notes payable to Applied in the amount of $453,500, including accrued interest). On February 1, 2011, we countersued for breach of contract and claims related thereto. Our management believes that the value of its counterclaim will exceed the value of the claims asserted against the Company but cannot fully assess the outcome of the action at this time.

On March 5 2012, the Company received a complaint from a certain attorney seeking collection of his invoices, plus interest and litigation expenses of $167,167.25. The Company does not believe the claim has any merit and will respond to the complaint within the appointed time. The claim, Case No. 110907934 DC, was filed in the Second District Court of Weber County in the State of Utah.

On or about May 8, 2012, the Company received a complaint from a certain former employee seeking collection of his charges as a distributor and as an employee in the amount of $409,525, plus interest and litigation expenses. The Company believes the likelihood of loss in this case is remote and intends to offset for certain expenditures made by the Company caused by this employee. The Company has already recognized $37,500 as a liability at March 19, 2013.

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of March 26, 2013, we had approximately 2,000 shareholders. We have not paid cash dividends on our common stock. We anticipate that for the foreseeable future, any earnings will be retained for use in our business, and no cash dividends will be paid on the common stock. Declaration of common stock dividends will remain within the discretion of our Board of Directors and will depend upon our growth, profitability, financial condition and other relevant factors.

Our common stock is now quoted on the OTC Markets Group website under the symbol “NANM.QB”. The following table sets forth, for the respective periods indicated, the prices of our common stock in the over the counter market as reported by the OTCQB for the periods for which this report is being filed. Such over the counter market quotations are based on inter-dealer bid prices, without markup, markdown or commission, and may not necessarily represent actual transactions.

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Fiscal Year 2012	High Bid		Low Bid

Quarter ended 12/31/12	$	0.03	$	0.003
Quarter ended 9/30/12	$	0.04	$	0.025
Quarter ended 6/30/12	$	0.052	$	0.021
Quarter ended 3/31/12	$	0.063	$	0.025

Fiscal Year 2011	High Bid		Low Bid

Quarter ended 12/31/11	$	0.065	$	0.025
Quarter ended 9/30/11	$	0.06	$	0.021
Quarter ended 6/30/11	$	0.034	$	0.017
Quarter ended 3/31/11	$	0.06	$	0.0255

During fiscal 2012, we sold 3,600,000 shares for $51,000 cash in private placements to four individual investors. The shares were sold pursuant to subscription documents between the Company and each investor. We believe the offer and sale of the securities described above were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), for the private placement of these securities pursuant to Section 4(2) of the Act because the securities were sold to accredited investors in a transaction not involving a public offering.

ITEM 6. SELECTED FINANCIAL DATA

We are a “Smaller Reporting Company,” as defined under §229.10(f) (1) of Regulation S-K, and are not required to provide the information required by this Item.

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

Cautionary Statement Regarding Forward-Looking Statements

This report may contain "forward-looking" statements. Examples of forward-looking statements include, but are not limited to: (a) projections of revenues, capital expenditures, growth, prospects, dividends, capital structure and other financial matters; (b) statements of plans and objectives of our management or Board of Directors; (c) statements of future economic performance; (d) statements of assumptions underlying other statements and statements about us and our business relating to the future; and (e) any statements using the words "anticipate," "expect," "may," "project," "intend" or similar expressions. Such statements are only predictions and the actual events or results may differ materially from the results discussed in or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” below as well as those discussed elsewhere in this report.

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Overview

We are a healthcare product development and distribution company providing emergency and critical care and infection control products to a variety of market segments within the healthcare industry. We also have been a distributor of a blood clotting device for surgery, trauma and burn wound management. In addition, since we have limited financial resources, we have elected to postpone any further development or significant marketing of our products, except for the SilverCare Plus™ products and Nano Zyme™ products until adequate resources are available.

Since inception, we have been involved primarily in the development of our technologies, and most recently, the marketing of the various technologies to a limited extent. During this time, revenues have not been adequate to cover operating expenses. Accordingly, we have reported a loss in each of our years of existence. To date, we have funded our operations primarily by way of a series of private equity placements and through loan proceeds granted to the Company. We have begun sales of our SilverCare Plus™ and Nano Zyme™ products. These efforts are being realized by virtue of such sales tripling in 2012 over those in all of 2011.

Results of Operations for the year ended December 31, 2012 compared to December 31, 2011

Revenues: We generated total revenues of $454,513 during fiscal 2012 compared with $97,997 in 2011. Sales were largely comprised of anti-bacterial and anti-viral SilverCare Plus™ products (97.1%) and Nano Zyme™ products (2.9%). The Company was a product development company until 2011, when sales of new products were begun. We anticipate a significant increase in sales during fiscal 2013 based on contracts and commitments to date.

Cost of Sales: Our cost of sales in fiscal 2012 was $328,032 to yield a gross profit margin of approximately 28%. Our cost of sales in 2011 was $80,330 to yield a gross profit margin of 18%. Successful cost reductions in our purchasing the raw material and in the production process have improved our gross margins by approximately 10%.

Selling, General and Administrative (SG&A) Expenses: SG&A expenses for 2012 as compared to 2011 decreased by approximately $9,000 or 1%, primarily due to an unusually high $300,000 in 2011 auditing fees to bring the Company current in its SEC filings which reflected four years of filings offset largely by compensation and travel increases during 2012.

Other Income: For fiscal 2012, we reported other expense of $26,314 consisting primarily of interest expense exceeding gains from settlement of outstanding liabilities. For 2011, we reported other income of $335,448 consisting primarily of a gain on settlement outstanding liabilities offset marginally by interest expense.

Depreciation and Amortization: During 2012, $498 was recognized as depreciation expense, compared with $312 recorded in 2011.

Research and Development (R&D) Costs: R & D expenditures for the years ended December 31, 2012 and 2011 were very similar, $3,379 and $3,500, respectively. If resources are available in the future, the Company intends to bring additional products to market, assuming those products are still viable at the time the resources are available. The significant components of the Company’s research and development costs ordinarily include prototype development and materials, governmental filings and laboratory testing.

Net Loss: We experienced a net loss of $831,119 for fiscal 2012 compared to a net loss of $580,162 in the prior year. The decrease in net loss in fiscal 2011 was primarily due to the recognition of gain on the settlement of outstanding liabilities described above.

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Liquidity and Capital Resources

We have not been able to generate sufficient net cash inflows from operations to sustain our business efforts as well as to accommodate our growth plans. Cash used in our operating activities for the years ended December 31, 2012 and 2011 was funded primarily by the sale of common stock for cash or from the issuance of short term notes payable. During 2012, 3,600,000 shares were issued for the $51,000 cash received in private placement offerings from four individual investors. 1,400,000 shares were issued in 2011 for $35,000 cash received in a private placement offering from four individual investors. A short term loan of $25,000 was secured in 2011 as well.

Cash Flows from Operating Activities: The cash outflow totaled $226,252 in 2012 compared to a cash outflow of $114,106 in 2011, primarily due to increased salaries in 2012 offset, in large part, by high auditing expenses in 2011.

Cash Flows from Investing Activities: No cash was used in investing activities during 2012, but totaled $4,700 in the prior year for the purchase of equipment.

Cash Flows from Financing Activities: Cash flows from financing activities in fiscal 2012 totaled $174,157 compared to $177,500 in 2011. The Company obtained advances from executive officers amounting to $125,700 in 2012 compared to $117,500 in 2011.

Beginning in the third quarter of 2008, the United States has been experiencing a severe and widespread recession accompanied by, among other things, instability in the financial markets and reduced credit availability which are likely to continue to have far reaching effects on economic activity in the country for an indeterminate period. The effects and probable duration of these conditions and related risks and uncertainties on the Company's ability to obtain financing, success in its marketing efforts and ultimately, profitable operations and positive cash flows, cannot be estimated at this time. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

In 2004, we adopted a stock option and award plan (the "Plan") under which options to acquire our common stock or bonus stock may be granted from time to time to employees, including officers and directors and/or subsidiaries. On December 27 2012, the Board of Directors unanimously dissolved the Plan, thereby making available for issuance 1,021,000 shares that had previously been restricted to issuance under the Plan.

At the filing date of this report, we do not believe that we currently have sufficient capital to sustain our business efforts for the next twelve months. Accordingly, we will need to raise additional capital during 2013 to sustain operations. These funds will be required to sustain our development and marketing efforts to sell our SilverCare Plus™ Products and Nano Zyme™ products. We will then need working capital to maintain our operations once the product sales are initiated. We are also working on operating expenses, to the extent possible, by reducing overhead costs, in order to conserve our available cash pending sales of the new products mentioned above. We are particularly concentrating our efforts in reducing third-party manufacturing costs. Our management and board members continue to discuss other alternative financing options, but no definitive proposals or agreements have been reached.

Consequently, our ability to continue as a going concern may be dependent upon the success of our new business plan which, as explained above, includes a) generating sales of the new products noted above, b) continuing efforts to increase our product sales internationally through our broad network of distributors, and c) obtaining additional equity or debt financing. We do not know if such additional capital will be available or available on terms acceptable to us. We do not know if we will sustain operations long enough to generate revenues, to obtain additional equity or debt financing or otherwise execute our long-term business plans. Accordingly, for these and other reasons, in their report on our 2012 financial statements, our auditors expressed substantial doubt as to our ability to continue as a going concern.

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Effect of Inflation and Interest Rates

At this time, we do not expect that either inflation or interest rate variations will be among the economic factors likely to have a material effect on our future operations. However, as discussed elsewhere in this report, general economic factors may likely have a significant effect on the demand for the Company’s products and its ability to raise funds to conduct it operations.

Critical Accounting Policies and Estimates

Except as follows, we do not employ any critical accounting policies or estimates that are either selected from among available alternatives or require the exercise of significant management judgment to apply or that if changed are likely to materially affect future periods.

Impairment of long-lived assets. Management reviews the carrying value of the Company’s inventories, property and equipment and technology assets annually based on its current marketing activities, plans and expectations, and the perceived effects of competitive and other market factors (i.e., lower of cost or market adjustments), such as declines in replacement value and obsolescence and impairment, to determine whether any write-downs should be taken or whether the estimated useful lives should be shortened.

Share-based compensation. Effective January 1, 2010, the Board of Directors authorized issuance of its common stock to key officers and directors based on a trailing thirty-day average of its closing prices. The Board of Directors reserves the right to either pay in cash or in restricted common stock at its option.

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

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

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

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

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

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

Off balance sheet arrangements

Not applicable.

Recent accounting pronouncements

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements for the reporting period are set forth immediately following the signature page to this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures that are designed for the purpose of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosures.

For the period ended December 31, 2012, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness in the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report on Form 10-K, our disclosure controls and procedures were not effective.

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We are responsible for the preparation and integrity of our published financial statements. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, include amounts based on judgments and estimates made by our management. We also prepared the other information included in the annual report and are responsible for its accuracy and consistency with the financial statements.

We are responsible for establishing and maintaining a system of internal control over financial reporting, which is intended to provide reasonable assurance to our management and Board of Directors regarding the reliability of our financial statements. We have assessed our internal control system in relation to criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based upon these criteria, we have identified the following material weaknesses in our internal control over financial reporting:

Lack of Independent Board of Directors and Audit Committee

Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established. Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, management has concluded that the risks associated with the lack of an independent audit committee are not sufficient to justify the creation of such a committee at this time. Management will periodically reevaluate this situation.

Lack of Segregation of Duties

Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.

Based on the identification of the weaknesses, our management has concluded that, as of the end of the period covered by this report on Form 10-K, our disclosure controls and procedures were not effective. Also, based upon that evaluation, our principal executive and financial officers have concluded that our company’s controls and procedures over financial reporting are inadequate at the end of the period covered by this report. To overcome these weaknesses, our principal executive and financial officers have reviewed and provided additional substantive accounting information and data to our independent auditors in connection with the preparation of this annual report. Therefore, despite the weaknesses identified, our principal executive and financial officers believe that there are no material inaccuracies or omissions of material facts necessary to make the statements included in this report not misleading in light of the circumstances under which they are made.

There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

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

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 our registered public accounting firm pursuant to the SEC rule that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2012 that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The members of our Board of Directors serve until the next annual meeting of the stockholders, or until their successors have been elected. The officers serve at the pleasure of the Board of Directors. Information as to our current and past directors and executive officers is presented below:

Name	Age	Position	Periods Held From and To
Edward Suydam	55	Chief Executive Officer: Director	March, 2010 – Present
Michael J. Marx	68	Chief Financial Officer; Director	December, 2009 – Present
Marc Kahn	57	Chief Medical Officer; Director	June, 2009 – Present
David J. Willoughby	50	Vice President, Marketing & Sales; Director	July, 2011 – Present
Vicki L. Aksland	46	Director	July, 2011 – Present
Mark Cox	48	Director	February, 2010 – September, 2012
Hassan Bennani	47	Director	January 1, 2013 – Present

The principal occupation and business experience for each of the current and past directors and executive officers are as follows:

Edward J. Suydam was appointed as Chief Executive Officer (“CEO”) and president, effective March 1, 2010. Mr. Suydam had been serving as the Company’s Chief Operations Officer (“COO”) since June 2009. Mr. Suydam had been a managing member of Buildex, LLC in New York since November 2007. Prior to that time, from May 1992 to November 2007, he was president of S & S Builders Corporation of New York. Mr. Suydam’s professional career has been in construction and construction management.

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Michael J. Marx was appointed as the Company’s Chief Financial Officer (“CFO”) in December 2009. Mr. Marx is the Chief Executive Officer of CPA Services Unlimited, P.C., a private accounting firm located in Peekskill, New York, a position he has held since 1985. Mr. Marx began his professional career at Peat, Marwick, Mitchell & Co., CPAs (now KPMG, LLC) from 1967 to 1972. From 1972 to 1974, he was Supervisor of the Audit Department for AMAX, Inc. (NYSE). From 1974 to 1975, he was Assistant Corporate Controller for Esterline Corp. (NYSE). He then joined EDO Corporation (NYSE), now a unit of ITT Corporation, as Director of Auditing (1976 to 1981) and Director of Financial Management (1981 to 1984). Mr. Marx received his B.S. from Lehigh University (1966) and his New York State CPA in 1972.

Dr. Marc L. Kahn has been a radiologist with the Clarkson Medical Group in Michigan since May 2007. Prior to that time, from September 1994 to May 2007, he was a radiologist with Diagnostic Radiology Associates in Michigan. Mr. Kahn earned a BA from Albion College (1977) and an MD from Wayne State Medical School (1981). He did his residency in radiology at Sinai Hospital (1989) and a fellowship at Columbia Presbyterian (1995).

David J. Willoughby, Vice President - Marketing & Sales, was appointed on July 1, 2011. He has served in numerous marketing, sales, and product development capacities within the health care industry for the last 20 years. Since 2000 until joining the Company, Mr. Willoughby was Vice President of Granvid Technologies Inc., a health care marketing and intellectual property development company where he was responsible for marketing with a strategic focus on new product development and applications within the areas of infection control, wound care and biomaterial coatings. Prior to that position, from 1995 to 1999, he was instrumental in establishing Ultravena Industries USA Ltd., a medical device manufacturer which developed the first ever patented alternative donning technology for the medical latex and synthetic glove markets. At Ultravena, Mr. Willoughby was assigned responsibilities as senior marketing manager for Ultravena (Canada). He eventually oversaw the majority of its North American dental and industrial marketing activities. From 1992 to 1995 Mr. Willoughby worked for DFS GmbH (Germany), holding the position of North American marketing manager responsible for building the company’s private label programs with internationally recognized health care manufacturers in the US, Canada and Japan. During his years in the health care industry, he has demonstrated strong skills in product development, channel marketing and sales management along with a thorough understanding of the processes behind effective international business development and management. His participation as an officer and director will add support and guidance in expanding both our domestic and international business strategies and activities.

Mark R. Cox was appointed as a Director in February, 2010. Mr. Cox is president and co-founder of AlvaMed LLC, a medical device consulting company, since November 2002. Prior to that, from November 2001 until November 2002, he was founder and president of Fast Product, a consulting company assisting with the development of new products and businesses. From January 1992 until November 2001, Mr. Cox served in several capacities at Arthur D. Little, Inc., including Senior Manager of Product Technology Practice (January 1992 – January 1998), Director of Business Development for Epyx Corporation (now Nuvera) (January 1998 – January 1999), and Project Manager of the Arthur D. Little Technology Investment Board as well as Director of Arthur D. Little Enterprises from January 1999 – November 2001. Mr. Cox’s experience with new technology and technology companies includes technical evaluation, general business development and networking, selection of investment opportunities, market assessment, product development, intellectual property review and sales presentations. Mr. Cox earned a Bachelor of Engineering degree in Materials Science, Imperial College of Science and Technology, London 1987 and a Masters in Materials Engineering, Massachusetts Institute of Technology 1990. Mark resigned effective September 30, 2012.

Vicki L. Aksland was appointed as Director, effective July 1, 2011. Since April 2009 she has served as an Executive Assistant for the Company. Prior to that, from February 2006 to June 2010, she was employed as a licensed real estate salesperson with Coldwell Banker, Manteca, CA. From July 1996 to December 1998 she was employed with Re/Max Almond Valley as a licensed real estate salesperson with offices in Manteca and Ripon, CA and from March 1994 to June 1996 she was with Century 21 Yeoman's Real Estate in Tracy, CA as a licensed salesperson. From July 1987 to March 2005, she was co-owner and bookkeeper for Bennett's Backhoe Service. From February 1986 to February 1988, Ms. Aksland was a bookkeeper responsible keeping accounts for 5 Exxon stations. Her in-depth knowledge of the Company and her previous business experience make her particularly suited to understand what is necessary for the Company to succeed.

Hassan Bennani, MD, was appointed as a Director effective January 1, 2013. Dr. Bennani, MD, is the co-founder and CEO of KellBenx, Incorporated, a closely held Long Island, NY based biotechnology company focused on women's healthcare, concentrating on the development of a patented breakthrough non-invasive prenatal diagnostic (NIPD) for analyzing genetic disorders and a patent pending breakthrough test to determine a woman's risk of preterm delivery. Dr. Bennani was previously the head of business development at Lenetix, a women's health focused lab acquired by Bio-Reference Laboratories. Prior to that, Dr. Bennani was a Vice President of Sales and Marketing for Adeza Biomedical Corporation, which was acquired by Hologic.

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Our current directors, Edward Suydam, Michael Marx, Marc Kahn, David Willoughby and Vicki Aksland serve the Company in various capacities and, therefore, are not deemed to be independent. Director Mark Cox was not an officer or employee and, therefore, may be deemed independent. Dr. Bennani, newly appointed, is not an officer or employee and, therefore, may also be deemed independent.

All directors hold office until the next annual stockholders’ meeting or until death, resignations, retirement, removal, disqualification, or until their successors have been elected and qualified. Officers serve at the will of the Board of Directors.

There are no agreements or understandings for any of our officers or directors to resign at the request of another person and none of the officers or directors are acting on behalf of or will act at the direction of any person.

The board of directors met four times via telephone during 2012.

Committees of the Board of Directors

We are not obligated to have an audit committee nor to comply with any requirements for its composition should we have one. Our Board of Directors maintains an Audit and Compensation Committee. Michael J. Marx and Marc Kahn, neither of whom is independent of management, comprise this Committee. Michael J. Marx serves as Chairman. The Board of Directors decides on the recommendations made by the Audit and Compensation Committee.

Code of Ethics

We have a Code of Ethics for our executive officers and key employees. The Code of Ethics is posted on our website at www.nmihealth.com.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following Compensation Discussion and Analysis describes the material elements of compensation for the executive officers identified in the Summary Compensation Table set forth below (the “Named Executive Officers”). The information below provides the description of compensation policies applicable to executive officers and other highly compensated individuals under employment and/or consulting arrangements.

Objectives of Our Compensation Program

We are in the early stages of completing an overall compensation program. As proposed, the primary objective of our compensation program, including our executive compensation program, is to maintain a compensation program that will fairly compensate our executives and employees, attract and retain qualified executives and employees who are able to contribute to our long-term success, encourage performance consistent with clearly defined corporate goals and align our executives’ long-term interests with those of our stockholders. To that end, our compensation practices are intended to:

Tie total compensation to the Company’s performance and individual performance in achieving financial and non-financial objectives;

Align senior management’s interests with stockholders’ interests through long-term equity incentive compensation.

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Role of the Compensation Committee

The Compensation Committee determines the compensation of our Chief Executive Officer and, in consultation with the Chief Executive Officer, our other executive officers. In addition, the Compensation Committee is responsible for adopting, reviewing and administering our compensation policies and programs. Our Compensation Committee intends to adhere to a compensation philosophy that (i) seeks to attract and retain qualified executives who will add to the long-term success of the Company, (ii) promotes the achievement of operational and strategic objectives, and (iii) compensates executives commensurate with each executive’s level of performance, level of responsibility and overall contribution to the success of the Company.

In determining the compensation of our Chief Executive Officer and our other executive officers, the Compensation Committee considers the financial condition and operational performance of the Company during the prior year. In determining the compensation for executive officers other than the Chief Executive Officer, the Compensation Committee considers the recommendations of the Chief Executive Officer and comparable market rates. The Compensation Committee may review the compensation practices of other companies, based in part on market survey data and other statistical data relating to executive compensation obtained through industry publications and other sources.

Components of Executive Compensation for 2012 and 2011

Our executive employment agreements for 2012 and 2011 provided that employees would be compensated by salary, with potential bonuses that could include cash and equity components. Salaries were determined by negotiation between the Company and the particular executive based on each individual’s qualifications and relevant experience and the Compensation Committee’s and board’s best business judgment. While each of the agreements had a general description of the employee’s responsibilities associated with his/her title and/or position, the agreements did not include specific written performance objectives for the individual or the Company.

The elements of the Company’s planned compensation program may include base salary and long-term equity incentives. Our compensation program will be designed to provide our executives with incentives to achieve our short- and long-term performance goals and to pay competitive base salaries. Each Named Executive Officer’s current and prior compensation will be considered in setting future compensation.

Long Term Equity Incentives

The Company intends to adopt a plan for executive and employee equity compensation but there is no such plan in place at this filing date.

Perquisites and Other Benefits

The Company does not provide significant perquisites or personal benefits to executive officers.

Stock Ownership Requirements

The Board of Directors has historically encouraged its members and members of senior management to acquire and maintain stock in the Company to link the interests of such persons to the stockholders. However, neither the Board of Directors nor the Compensation Committee has established stock ownership guidelines for members of the Board of Directors or the executive officers of the Company.

The following Summary Compensation Table sets forth the aggregate compensation paid or accrued by the Company to the executive officers, (the “Named Executive Officers”) as of December 31, 2012 and 2011.

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Summary Compensation Table

Name and Principal Position	Year	Salary ($)		Bonus ($)		All Other Compensation ($) (2)		Total ($)

Edward Suydam, CEO	2012	$	150,000	$	75,000	$	5,769	$	230,769
	2011	$	150,000	$	15,000	$	16,186	$	181,186

Michael J. Marx, Chief Financial Officer	2012	$	80,000	$	40,000	$	3,077	$	123,077
	2011	$	80,000	$	6,667	$	6,154	$	92,821

Marc Kahn, Chief Medical Officer	2012	$	80,000	$	40,000	$	3,077	$	123,077
	2011	$	80,000	$	6,667	$	9,231	$	95,898

David Willoughby, VP Marketing & Sales (1)	2012	$	100,000	$	50,000	$	3,846	$	153,846
	2011	$	50,000	$	11,133	$	1,923	$	63,056

(1) Mr. Willoughby was appointed July 1, 2011. He was also awarded a signing bonus of 100,000 shares of the Company’s restricted common stock.

(2) Represents accrued vacation pay at December 31, 2012 and 2011

DIRECTOR COMPENSATION

The following table sets forth the aggregate compensation paid or accrued by the Company to the Directors for the fiscal year ended December 31, 2012:

Name	Fees Earned or Paid in Cash (In $)		Stock Awards (In $)		Option Awards (In $)		Non-Equity Incentive Plan Compensation (In $)		Non- Qualified Deferred Compensation Earnings (In $)		All Other Compensation (In $)		Total (In $)
Edward Suydam		-		-		-		-		-		-		-
Michael J. Marx		-		-		-		-		-		-		-
Marc Kahn		-		-		-		-		-		-		-
Vicki Aksland	$	15,000		-		-		-		-		-	$	15,000
Mark Cox	$	11,250		-		-		-		-		-	$	11,250

All directors are reimbursed for all travel related expenses incurred in connection with their activities as directors. Those directors also serving as officers have agreed to forego annual director compensation. Each director receives $15,000 per year as a fee for their service as directors.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT; AND RELATED STOCKHOLDER MATTERS.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of stock that the stockholder has a right to acquire within 60 days through the exercise of any option, warrant or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.

The following tables provide information, as of March 19, 2013, about the beneficial ownership of our common stock by those known to own more than 5% of the Company’s common stock as well as the beneficial ownership of our directors and executive officers. The percentage of beneficial ownership for the following table is based on 98,695,444 shares of our common stock issued and outstanding:

Title of Class	Name and Address	Number of Shares		% of Class

Common	Josiah T. Austin 12626 Turkey Creek Road Pearce, AZ 85625		11,426,839		11.58	%

Securities Ownership of Officers and Directors

Title of Class	Name and Title	Number of Shares		% of Class

Common	Edward Suydam Chief Executive Officer		11,028,089		11.18	%

Common	Michael J. Marx Chief Financial Officer		8,223,200		8.33	%

Common	Marc Kahn Chief Medical Officer		17,510,417		17.74	%

Common	David Willoughby Vice President, Marketing & Sales		4,087,042		4.14	%

Common	Vicki Aksland Director		1,056,109		1.07	%

	Total (5 persons)		41,904,857		42.46	%

Disclosure Regarding the Company's Equity Compensation Plans

On September 15, 2004, we adopted a 2004 Stock Option and Award Plan (the "Plan") under which options to acquire our common stock or bonus stock may be granted from time to time to employees, including officers and directors and/or subsidiaries.

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In addition, at the discretion of the board of directors or other administrator of the Plan, options to acquire common stock or bonus stock may from time to time be granted under the Plan to other individuals who contribute to our success but who are not employees. A total of 2,500,000 shares of common stock may be subject to, or issued pursuant to, options or stock awards granted under the terms of the Plan. The shares underlying the Plan were registered by us on a Registration Statement, Form S-8, filed with the Commission on September 29, 2004.

As of December 31, 2012, 1,479,000 shares of our common stock have been issued pursuant to the Plan for the services of various individuals. The 1,479,000 shares (issued during 2004) were recorded at the fair market value of the shares on the date of issuance, which was $0.45 per share for a total of $665,550. As of December 31, 2011, there was no deferred compensation and all capitalized patent and acquired technology costs had been written off. On December 27, 2012 On December 27 2012, the Board of Directors unanimously dissolved the Plan, thereby making available for issuance 1,021,000 shares that had previously been restricted to issuance under the Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The following related party transactions occurred during the years ended December 31, 2012 and 2011 which are required to be disclosed pursuant to Item 404 of Regulation S-K.

Stock Issuances to Related Parties

Name and Principal Position	Year	Compensation in Common Shares		Loan Conversions, Expense Reimbursements and Cash Proceeds (2)		Total Common Shares Issued

Edward Suydam,	2012		3,914,873		-		3,914,873
Chief Executive Officer	2011		5,807,537		-		5,807,537

Michael J. Marx,	2012		2,876,880		1,147,893		4,024,773
Chief Financial Officer	2011		3,097,629		377,412		3,475,041

Marc Kahn,	2012		2,943,770		2,400,000		5,343,770
Chief Medical Officer	2011		3,079,629		3,266,477		6,346,106

David Willoughby,	2012		3,090,263		-		3,090,263
Vice President, Marketing & Sales (2)	2011		681,395		-		681,395

Mark Cox,	2012		204,300		-		204,300
Director (3)	2011		581,395		1,556,521		2,137,916

Vicki Aksland,	2012		562,767		-		562,767
Director	2011		87,209		-		87,209

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(1) Mr. Willoughby was appointed July 1, 2011.

(2) Includes 400,000 shares issued to M Kahn in 2011 for his $10,000 in cash proceeds.

(3) Mr. Cox resigned effective September 30, 2012.

Director Mark Cox was deemed to be independent. Hassan Bennani was appointed January 1, 2013 and is deemed to be independent. Director Vicki Aksland performs consulting services as requested and may not be deemed independent. All of the other directors serve as officers and are not considered independent.

ITEM 14. PRINCIPAL ACCOUNTANTS’ FEES AND SERVICES

Information required by Item 9(c) of Schedule 14A

(1)

Audit Fees - The aggregate fees billed or estimated and expected to be billed for professional services rendered by our registered public accounting firm, MaloneBailey, LLP, (“MB”) for the audit of our annual financial statements and review of our quarterly financial statements for fiscal year 2012 was approximately $30,000 and $30,000 for fiscal year 2011.

(2)	Audit-Related Fees – The aggregate fees billed for professional audit-related services rendered by MB during fiscal year 2012 and 2011 were both $0.

(3)	Tax Fees – None

(4)	All Other Fees -- None

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PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) FINANCIAL STATEMENTS. The following financial statements are included in this report:

Title of Document	Page

Reports of independent registered public accounting firms		29
Balance sheets as of December 31, 2012 and 2011		30
Statements of operations for the years ended December 31, 2012 and 2011		31
Statements of stockholders' equity deficiency for the years ended December 31, 2012 and 2011		32
Statements of cash flows for the years ended December 31, 2012 and 2011		33
Notes to the financial statements		34

(a)(2) FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules are included as part of this report:

None.

(a)(3) EXHIBITS. The following exhibits are included as part of this report:

Exhibit No.		Description

3.1*		Articles of Incorporation
3.2*		Bylaws
4.1*		Specimen stock certificate
10.1*		Form of Executive Compensation Agreement
31.01		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.02		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL INSTANCE DOCUMENT
101.SCH		XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
101.DEF		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
101.LAB		XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

*Filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, March 27, 2012.

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SIGNATURES

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

	NANO MASK, INC.

March 26, 2013	By:	/s/ Edward Suydam
		Edward Suydam,
		Chief Executive Officer (Principal Executive Officer) and Director

March 26, 2013
	By :	/s/ Michael J. Marx
		Michael J. Marx,
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates stated.

Signature	Title	Date

/s/ Edward Suydam	Chief Executive Officer and Director	March 26, 2013
/s/ Michael J. Marx	Chief Financial Officer and Director	March 26, 2013
/s/ Marc Kahn	Chief Medical Officer and Director	March 26 2013
/s/ David J. Willoughby	Vice President, Marketing & Sales and Director	March 26, 2013
/s/ Vicki L. Aksland	Director	March 26, 2013
/s/ Hassan Bennani	Director	March 26, 2013

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Nano Mask, Inc.

Reno, Nevada

We have audited the accompanying balance sheets of Nano Mask, Inc. (the “Company”) as of December 31, 2012 and 2011, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 audits include 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying financial statements of the Company present fairly, in all material respects, its financial position as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has incurred a series of net losses resulting in negative working capital as of December 31, 2012. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP

MaloneBailey, LLP

Houston, Texas

March 26, 2013

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NANO MASK, INC.

Balance Sheets

December 31, 2012 and 2011

ASSETS
	2012			2011
CURRENT ASSETS
Cash	$	9,409		$	61,504
Accounts receivable, net		-			422
Prepaid expenses		-			18,000
Inventory, net		42,165			14,457

Total current assets		51,574			94,383

FIXED ASSETS
Equipment		973			5,673
Accumulated depreciation		(519	)		(490	)
		454			5,183
OTHER ASSETS
Non-performing assets		4,230			-

Total assets	$	56,258		$	99,566

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Customer advances	$	12,545		$	150,517
Accounts payable		449,331			457,452
Accounts payable – related party		10,380			8,703
Advances from related party		207,200			91,500
Accrued expenses		687,336			385,718
Notes payable		521,157			497,727
Note payable - related party		25,000			25,000

Total current liabilities		1,912,949			1,616,617

LONG-TERM DEBT
Note payable		-			23,430

Total liabilities		1,912,949			1,640,047

STOCKHOLDERS' DEFICIT
Common stock, $.001 par, 100,000,000 shares authorized;
98,695,444 outstanding in 2012 and 80,249,698 outstanding in 2011		98,695			80,250
Additional paid-in capital		21,624,265			21,127,801
Accumulated deficit		(23,579,651	)		(22,748,532	)

Total stockholders’ deficit		(1,856,691	)		(1,540,481	)

Total liabilities and stockholders’ deficit	$	56,258		$	99,566

The accompanying notes are an integral part of these financial statements

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NANO MASK, INC.

Statements of Operations

For the years ended December 31, 2012 and 2011

	2012			2011

NET SALES	$	454,513		$	97,997

COSTS AND EXPENSES
Cost of Sales		328,032			80,330
Research and development		3,379			3,500
Selling, general and administrative		920,298			929,777
Provision for inventory obsolescence		7,609			-

LOSS FROM OPERATIONS		(804,805	)		(915,610	)

OTHER INCOME (EXPENSE)
Interest expense		(43,598	)		(37,501	)
Gain on settlement of vendor liabilities and other		17,284			372,949

Total other income (expense)		(26,314	)		335,448

NET LOSS	$	(831,119	)	$	(580,162	)

BASIC LOSS PER SHARE	$	(0.01	)	$	(0.01	)

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		89,129,500			70,600,549

The accompanying notes are an integral part of these financial statements

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NANO MASK, INC.

Statements of Stockholders' Deficit

For the Years Ended December 31, 2012 and 2011

										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Dollars		paid in capital		deficit			Deficit
Balances, December 31, 2010		57,979,351		57,979		20,427,452		(22,168,370	)		(1,682,939	)
Common stock issued for cash		1,400,000		1,400		33,600					35,000
Common stock issued for settlement of accounts payable		1,900,000		1,900		82,400					84,300
Common stock issued for settlement of related party accounts payable		1,556,521		1,557		34,243					35,800
Common stock issued for advances from related parties		2,866,477		2,866		90,634					93,500
Common stock issued for services		14,018,198		14,019		447,831					461,850
Common stock issued for reimbursed expenses		529,151		529		11,641					12,170
Net loss		-		-		-		(580,162	)		(580,162	)
Balances, December 31, 2011		80,249,698	$	80,250	$	21,127,801	$	(22,748,532	)	$	(1,540,481	)
Common stock issued for cash		3,600,000		3,600		47,400					51,000
Common stock issued for settlement of accounts payable and accrued liabilities		5,085,671		5,085		164,778					169,863
Common stock issued for settlement of related party accounts payable		290,099		290		8,413					8,703
Common stock issued for advances from related parties		400,000		400		3,600					4,000
Common stock issued for services		8,812,182		8,812		266,086					274,898
Common stock issued for reimbursed expenses		257,794		258		6,187					6,445
Net loss		-		-		-		(831,119	)		(831,119	)
Balances, December 31, 2012		98,645,444	$	98,695	$	21,624,265	$	(23,579,651	)	$	(1,856,691	)

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

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NANO MASK, INC.

Statements of Cash Flows

For the Years Ended December 31, 2012 and 2011

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss	$	(831,119	)	$	(580,162	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		498			312
Provision for inventory obsolescence		7,609			-
Common stock issued for services rendered		274,898			461,850
Common stock issued for company expenses incurred		6,445			12,170
Gain on settlement of vendor liabilities		(17,284	)		(372,949	)
Changes in operating assets and liabilities:
Accounts receivable, net		422			(422	)
Refund receivable		-			2,500
Prepaid expenses and other		14,543			(17,429	)
Inventory		(35,317	)		(36	)
Customer advances		(137,972	)		150,517
Accounts payable		25,279			193,835
Accrued expenses		465,746			35,708

Net cash provided by (used in) operating activities		(226,252	)		(114,106	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		-			(4,700	)
Cash used in investing activities		-			(4,700	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from advances of related parties		119,700			117,500
Repayment of advances from related party		-			-
Proceeds from issuance of related party short-term note payable		-			25,000
Proceeds from issuance of short-term note payable		5,149			-
Repayments of short-term note payable		(1,692	)		-
Proceeds from the issuance of common shares		51,000			35,000

Net cash provided by financing activities		174,157			177,500

NET INCREASE (DECREASE) IN CASH		(52,095	)		58,694

CASH, BEGINNING OF YEAR		61,504			2,810

CASH, END OF YEAR	$	9,409		$	61,504

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	311	$	-
Cash paid for income taxes		-		-

NON-CASH INVESTING AND FINANCING ACTIVITIES
Reduction of note payable due to a reduction in prepaid insurance	$	3,457	$	-
Common stock issued for settlement of accounts payable and accrued liabilities		169,863		120,100
Common stock issued for settlement of related party advances		4,000		93,500
Property reclassified to other assets		4,230		-
Common stock issued for settlement of related party accounts payable		8,703		-
Note payable reclassified from long-term note to short-term note		23,430		-

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

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NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of business

Nano Mask, Inc. (“we”, “our” or the “Company”) is a materials-technology development company focused on health and wellness-related markets. The Company is evolving from a specialty filter products company that developed a state-of-the-art air filtration technology for removing infectious bacteria and viruses in air flow systems into a company that plans to provide a proprietary line of antibacterial and antimicrobial products for the hospital, clinic and health industry.

Significant accounting policies

Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts. Actual results could differ from those estimates.

Inventory. Inventory is carried at the lower of cost (determined on a first-in, first-out basis) or market. Obsolete or abandoned inventories (if any) are charged to operations in the period that it is determined that the items are no longer viable sales products. As of December 31, 2012 and 2011, respectively, the Company has provided allowances of $87,595 and $79,986 for slow moving and obsolete inventory.

Loss per share. The computation of basic loss per share of common stock is based on the weighted-average number of shares outstanding during the period of the financial statements.

Revenue recognition and sales returns. The Company recognizes revenue for its products generally when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. In general, these conditions are satisfied when the product is shipped and title passes to the buyer. The Company provides an allowance for sales returns based upon estimated and known returns.

Fair value measurements. The carrying values of prepaid expenses, accounts payable, accrued expenses and short term notes payable generally approximate the respective fair values of these instruments due to their current nature. The Company values its warrants and non-cash common stock transactions under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurement (ASC 820), which defines fair value and the criteria for its determination.

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

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

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NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Income taxes. We provide for income taxes in accordance with ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of the assets and liabilities. The recording of a net deferred tax asset assumes the realization of such asset in the future; otherwise a valuation allowance must be recorded to reduce this asset to its realizable value. The Company considers future pretax income and, if necessary, ongoing prudent and feasible tax planning strategies in assessing the need for such a valuation allowance. In the event that the Company determines that it may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income during the period such determination is made. The Company has recorded full valuation allowances as of December 31, 2012 and 2011.

Management has conducted an evaluation of the Company's tax positions taken on returns that remain subject to examination and has concluded that there are no uncertain tax positions, as defined in ASC 740, that require recognition or disclosure in the financial statements.

Interest and penalties incurred by the Company, if any, related to income tax matters are classified as part of the income tax provision/benefit.

Stock-based compensation. The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718 which requires companies to measure the cost of employee services received in exchange for an award of an equity instrument based upon the grant-date fair value of the award. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period (Note 4). Stock-based compensation awards to non-employees are accounted for in accordance with ASC 505-50.

Reclassifications. Certain minor reclassifications to prior year amounts have been made to conform to the current year’s presentation.

NOTE 2: GOING CONCERN

The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has historically incurred negative cash flow from operations and significant losses, which have substantially increased its operating deficit at December 31, 2012. In addition, at December 31, 2012, the Company has a working capital deficiency of $1,861,375. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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

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

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NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

NOTE 3: NOTES PAYABLE

The Company maintains various unsecured short term notes payable totaling $521,157 at December 31, 2012 ($497,727 at December 31, 2011), $497,727 of which are in default and bear annual interest at 6% to 8%, or the prime rate plus 2%, currently 5.5%.

A significant shareholder loaned the Company $25,000 with interest at prime, plus 2%, payable in six months from February 22, 2011.

At December 31, 2012, all notes payable continue to bear interest according to their original terms.

$412,140 of the above short term notes payable represent various loans payable to Applied Nanoscience, Inc. (Note 6, Litigation), net of the Company’s right of offset in the amount of $41,360 against the $453,500 face amount of the notes payable for monies the Company expended on behalf of Applied Nanoscience, Inc.

Interest expense for 2012 totaled $43,598 of which $311in interest payments were paid during the year. This compares with $37,501 interest expense incurred during 2011 for which no cash interest payments have been made during the year.

NOTE 4: SHARE-BASED TRANSACTIONS

Restricted shares. The following table summarizes the restricted share issuances during the years ended December 31, 2012 and 2011:

Summary of Stock Issuances during the Years ended December 31, 2012 and 2011
	Settlement of Accounts Payable and Accrued Liabilities						Settlement of Advances and Payables -Related Party						Compensation and Expenses				Cash from Offerings
Year Ended Dec. 31,	Common Shares		Fair Value		Carrying Value of Payables		Common Shares		Fair Value		Carrying Value of Related Advances		Common Shares		Fair Value		Common Shares		Fair Value		Cash Proceeds
2012		5,085,671	$	169,863	$	172,228		690,099	$	12,703	$	12,703		9,069,976	$	281,343		3,600,000	$	51,000	$	51,000

2011		1,900,000	$	84,300	$	436,375		4,422,998	$	129,300	$	129,300		14,547,349	$	474,020		1,400,000	$	35,000	$	35,000

For the year ended December 31, 2012, the Company issued 5,085,671 shares with a fair value of $169,863 to settle unrelated party accounts payable and prior period accrued payroll liabilities. An additional gain of $14,919 was generated by writing off payables due to the expiration of the statute of limitations. Further, the Company issued 690,099 shares with a fair value of $12,703 to settle advances and payables to related party with the same amount of carrying value.

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NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

During the year ended December 31, 2011, the Company issued 1,900,000 shares with a fair value of $ 84,300 to settle $ 436,375 unrelated party accounts payable. Due to the fair value of the common shares being less than the carrying value of the related payables, the Company recognized a gain of $352,075 on settlement of payables during 2011. An additional gain of $20,874 was generated by writing off payables due to the expiration of the statute of limitations. Further, the Company issued 4,422,998 shares with a fair value of $129,300 to settle advances and payables to related party with the same amount of carrying value.

Finally, during 2012 a total of 9,069,976 shares were issued with a fair value of $281,343 for services and operating expenses reimbursed during the year. During 2011, a total of 14,547,349 shares were issued with a fair value of $474,020 for services and operating expenses reimbursed during the year.

During 2012, the Company received $51,000 in cash proceeds from four individual investors in a private placement and issued 3,600,000 shares of common stock. During 2011, the Company received $35,000 in cash proceeds from four individual investors in a private placement and issued 1,400,000 shares of common stock.

Warrants. 4,420,834 warrants were issued during 2009, each having a two-year term with an exercise price of $0.50 per share, until various expiration dates in 2011. The terms of the warrants did not obligate the Company to register shares of common stock, nor did they obligate the Company to settle in cash or other assets. Accordingly, no liability was recorded for the outstanding warrants. No warrants were exercised subsequent to their issuance and there are no warrants outstanding at December 31, 2012. No further warrants were issued in 2012 or 2011.

Stock options. In 2004, the Company adopted a formal stock option and award plan (the "Plan") under which options to acquire the Company’s common stock or bonus stock may be granted from time to time to employees, including officers and directors. In addition, at the discretion of the board of directors or other administrator of the Plan, options to acquire common stock or bonus stock may from time to time be granted under the Plan to other individuals who may contribute to the Company’s success but who are not employees. A total of 2,500,000 shares of common stock may be subject to, or issued pursuant to, options or stock awards granted under the terms of the Plan. As of December 31, 2012 and 2011, 1,479,000 shares of common stock had been issued pursuant to the Plan for the services of various individuals. All related compensation expense has been recognized in years prior to 2011. While there were still 1,021,000 common shares available for future issuance, the Board of Directors approved the dissolution of the Plan as of December 27, 2012.

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NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

A summary of the status of our outstanding stock options at December 31, 2012 and December 31, 2011 and the related changes during the periods then ended is presented below:

	December 31, 2012								December 31, 2011
	Shares		Weighted-Average Exercise Price		Weighted – Average Remaining Life (Years)		Aggregate Intrinsic Value		Shares		Weighted-Average Exercise Price		Weighted – Average Remaining Life (Years)		Aggregate Intrinsic Value
Outstanding beginning of period		250,000	$	0.76		2.07		-		250,000	$	0.76		3.07		-
Granted		-		-				-		-		-				-
Expired/Cancelled		-		-				-		-		-				-
Exercised		-		-				-		-		-				-
Outstanding end of period		250,000	$	0.76		1.07		-		250,000	$	0.76		2.07		-
Exercisable		250,000	$	0.76		1.07		-		250,000	$	0.76		2.07		-

NOTE 5: INCOME TAX

At December 31, 2012, the Company had net operating loss carry-forwards of approximately $13,838,068 that may be used to offset future taxable income. These operating loss carry-forwards expire in the years 2012 through 2030. However, the Company may be limited in its ability to fully utilize its net operating loss carry-forwards and realize any benefits in the event of certain ownership changes described in Internal Revenue Code Section 382.

No tax benefit has been reported in the financial statements because the potential tax benefit of the net operating loss carry-forwards that would result in a deferred tax asset of approximately $4,704,943 is effectively offset by a 100% valuation allowance primarily because of significant uncertainty as to the Company’s ability to continue as a going concern (Note 2, Going Concern). Details of the reason there is no income tax benefit such as would ordinarily be computed at federal statutory rates of approximately 34% are as follows:

	2012			2011
Income tax benefit at statutory rate	$	282,580		$	197,255
Timing differences between book and tax depreciation		(154	)		1,492
Timing differences in inventory obsolescence recognition		(2,587	)		-
Expiration of net operating loss carry-backs		(271,209	)		-
Non-deductible expenses from common stock issued for services rendered		(93,466	)		(157,029	)
		(84,836	)		41,718
Change in valuation allowance		84,836			(41,718	)
	$	-		$	-

TABLE OF CONTENTS

NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Deferred tax assets are comprised of the following at December 31, 2012 and 2011:

	2012			2011
Operating loss carry forwards	$	4,704,943		$	4,789,779
Less valuation allowance		(4,704,943	)		(4,789,779	)
Net deferred tax assets	$	-		$	-

NOTE 6: COMMITMENTS AND CONTINGENCIES

Litigation. On December 29, 2010, the Company received a complaint from Applied Nanoscience, Inc. seeking collection of the as yet unpaid notes payable to Applied in the amount of $453,500, plus interest and litigation expenses. On February 1, 2011, the Company countersued for breach of contract and related claims. The Company maintains a right of offset in the amount of $41,360 against Applied’s notes and is reflected on the balance sheet in the net amount of $412,140 (Note 3, Notes Payable).

On March 5 2012, the Company received a complaint from a certain attorney seeking collection of his invoices in the amount of $167,167, plus interest and litigation expenses. The Company does not believe the claim has any merit and will respond to the complaint within the appointed time. The Company has already recognized $15,763 as a liability at March 26, 2013.

Employment agreements. At December 31, 2012, the Company has current employment agreements with certain officers with a remaining commitment of approximately $342,250, which has not yet been paid during the first quarter of 2013.

TABLE OF CONTENTS

NANO MASK, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

NOTE 7: OTHER TRANSACTIONS

Related party transactions.

Advances from related parties are summarized as follows:

Balance, January 1, 2011	$	67,500
2011 advances		117,500
Repayments		(93,500	)
Balance, December 31, 2011		91,500
2012 advances		119,700
Repayments		(4,000	)
Balance, December 31, 2012	$	207,200

The Company received $119,700 in cash advances from a key executive officer during 2012 and repaid $4,000 of this with 400,000 shares of common stock. The Company received $117,500 in cash advances from a key executive officer during 2011 and repaid $26,000 of this with 928,570 shares of common stock. In addition, during 2011, the Company repaid $67,500 of the advances with 1,937,907 shares of common stock.

As of December 31, 2012, the Company has a total balance of $10,380 to two officers for the expenses they incurred on behalf of the Company, which was recorded as related party accounts payable. During 2012, one officer paid $6,445 expense for the Company and was reimbursed with 257,794 shares of common stock at a fair value of the same amount. As of December 31, 2011, the Company has a related party accounts payable balance of $8,703 to one officer for the expenses he paid on behalf of the Company. During 2012, the Company issued 290,099 shares with a fair value of $8,703 to pay off the related party accounts payable balance.

During 2012, the Company issued 2,600,000 shares to two officers for cash proceeds of $26,000.

NOTE 8: SUBSEQUENT EVENTS

The Company recognized a gain of $26,973 on the sale of an interest in Medmarc Mutual Insurance Company that the Company had done business with for many years.

NMI Health, Inc. - FORM 10-K - March 28, 2013

Attached files

NMI Health, Inc. Reports