UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period year: March 31, 2012

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

For the transition period from ____________ to _____________

Commission File Number: 000-52860

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Shrink Nanotechnologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-2197964

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

7020 Belcrest Drive

Plano, Texas 75024

(972) 342-0982

(Address of principal executive offices)

(Registrant’s telephone number,

including area code)

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

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

Large accelerated filer . Accelerated filer . Non-accelerated filer . Smaller reporting company X .

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes . No X .

The aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registration’s most recently completed second quarter: $ 1,011,358.

APPLICABLE ONLY TO CORPORATE ISSUERS

Shares of the registrant’s common stock held by each executive officer and director and each by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were a total of 224,746,249 common shares outstanding, $0.001 par value, as of May 1, 2012

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SHRINK NANOTECHNOLOGIES, INC.

Quarterly Report on FORM 10-Q

March 31, 2012

Form10-Q Quarterly Report

TABLE OF CONTENTS


	Page

Forward Looking Statements	2
Use of Terms	2

PART I - FINANCIAL INFORMATION	3

Item 1. - Financial Statements	3
Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011	3
Consolidated Statements of Operations and Other Comprehensive Income for the Three Months Ended March 31, 2012 and October 28, 2010 (date of inception) through December 31, 2011 (unaudited)	4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and October 28, 2010 (date of inception) through March 31, 2012 (unaudited)	5
Notes to Unaudited Consolidated Financial Statements	6

Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	27

Item 4 - Controls and Procedures	27

PART II - OTHER INFORMATION	27

Item 1 - Legal Proceedings	27

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3 - Defaults Upon Senior Securities	27

Item 4 - Submission of Matters to a Vote of Security Holders	27

Item 5 - Other Information	27

Item 6 - Exhibits	28

FORWARD LOOKING STATEMENTS

Certain information contained in this Quarterly Report on Form 10-Q (this “Report” or “Annual Report”) includes forward-looking statements within the meaning of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (thee “Exchange Act”). These statements are expressed in good faith and based upon information currently available to the Company and management and their interpretation of what are believed to be significant factors affecting the businesses, including many assumptions regarding future events. These forward looking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.).

Forward-looking statements include statements regarding, without limitation:

the development, commercialization and market acceptance of our “structured” cell culturing devices (StemDisc™) and related software, our microfluidic technology licensed in part from Corning Incorporated and, our shrinkable film based products such as CellAllign™, NanoShrink™ and Metal-enhanced fluorescence substrates, and the costs related to bringing these technologies and products to market,

our immediate and growing need to raise the capital needed or obtain government grants to commercialize our products and implement our business plan,

our ability to access cash to fund our ongoing operations,

our ability to transition from an R&D company to a company with commercialized products,

our ability to innovate using our existing platform technology, a shrinkable plastic film material branded as “NanoShrink™” and to find new market accepted uses for the same,

our ability to secure and continue to access economical component and manufacturing sourcing for the various businesses we seek to engage in,

our ability to continue funding research and development relationships we have and/or may enter into,

our ability to secure certain critical licenses from third parties, some of which may be potential commercial competitors for one or more of our products,

our ability to find attractive acquisition candidates in the life sciences business,

the progress of our research and development activities,

our ability to further acquire, and hold and defend our intellectual property,

the projected growth in stem cell research and public policy changes relating to government funding of the same, and

the presumed size and growth of the market for lab-on-a-chip devices in life sciences.

These forward looking statements should be considered in addition to our risk factors (contained in our Annual Report for the year ended December 31, 2011 under the heading “Risk Factors”). Additional risks not described above, or unknown to us, may also adversely affect the Company or its results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the Risk Factors section in this Report.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the SEC (which shall also include by reference herein and incorporate the same as if fully included in their entirety, all Form 10-Ks, Form 10-Qs, Form 8-Ks and other periodic reports filed by us in the SEC’s EDGAR filing system (www.sec.gov) as may be amended from time to time, which attempt to update interested parties of the risks and factors and other disclosures that may affect our business, financial condition, results of operation and cash flows.

Use of Terms

Except as otherwise indicated by the context, references in this report to (i) the “Shrink Parent” or “Parent” or similar terms refer to the publicly traded parent holding company and registrant, Shrink Nanotechnologies, Inc., a Delaware corporation, and “Shrink” refers to our wholly owned subsidiaries, both (a) Shrink Technologies, Inc., a California corporation and (b) Shrink Technologies B, Inc., a California corporation (ii) “Shrink Chips,” “Shrink Solar” and “Blackbox” refer to our Delaware subsidiaries ShrinkChips LLC, Shrink Solar LLC and Blackbox Semiconductor, Inc., (iii) the “Company,” “we,” “us,” or “our,” refer to the combined business of Shrink Parent, together with its wholly owned subsidiaries, Shrink, ShrinkChips, Shrink Solar and Blackbox, unless the context requires otherwise, (iv) “Forward Split” refers to the 5 for 1 forward split of the Parent’s stock effective as of April 8, 2010, (v) “SEC” are to the United States Securities and Exchange Commission, (vi) “Securities Act” are to Securities Act of 1933, as amended, and (vii) “Exchange Act” are to the Securities Exchange Act of 1934, as amended.

All references to share amounts, exercise, sale or conversion prices in this Annual Report are as adjusted to reflect post-Forward Split amounts and prices.

PART I

ITEM 1.

FINANCIAL STATEMENTS


SHRINK NANOTECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED - BALANCE SHEETS

				March 31,		December 31,
				2012		2011
				(Unaudited)
ASSETS

Current assets
	Cash		$	119	$	731
	Deposits			-		1,500
	Prepaid expenses			3,806		4,291
	Inventory			2,780		2,780
		Total current assets		6,705		9,302

Property, plant and equipment, net				5,496		6,154
Intangible assets, net				10,118		10,118

		TOTAL ASSETS	$	22,319	$	25,574

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
	Convertible debentures, net of discount, default - related party		$	293,121	$	290,621
	Convertible debentures, related party			675,000		675,000
	Accounts payable			909,855		909,537
	Due to related parties			288,983		228,983
	Accrued interest			142,378		122,212
	Deferred revenue			-		2,727

		Total current liabilities		2,309,337		2,229,080

		TOTAL LIABILITIES		2,309,337		2,229,080

COMMITMENTS (See Note 7)

STOCKHOLDERS' DEFICIT
	Preferred stock, 25,000,000 shares authorized, $0.001 par value issued and outstanding 20,000,000 and 20,000,000 at March 31, 2012 and December 31, 2011, respectively			20,000		20,000
	Common stock, 475,000,000 shares authorized, $0.001 par value issued and outstanding 224,746,249 and 217,393,308 at March 31, 2012 and December 31, 2011, respectively			224,746		217,393
	Additional paid in capital			7,070,059		7,019,323
	Accumulated deficit			(9,601,822)		(9,460,222)
		TOTAL STOCKHOLDERS' DEFICIT		(2,287,018)		(2,203,506)

		TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	22,319	$	25,574

The accompanying notes are an integral part of these consolidated financial statements
Unaudited


CONSOLIDATED - STATEMENTS OF OPERATIONS
(UNAUDITED)
							From Inception
							(January 15, 2008)
			For the Three Months Ended				through
			March 31,				March 31,
			2012		2011		2012
REVENUES
	Revenues	$	2,755.64	$	-	$	10,268.64
	Cost of sales		-		-		151.00
Gross profit			2,755.64		-		10,117.64

EXPENSES
	Research and development		-		31,442.00		516,868.00
	Professional fees		60,000.00		48,887.00		489,835.00
	General and administrative		61,034.00		152,461.00		7,097,413.00
	Loss on disposal of property, plant and equipment		-		-		14,096.00
	Loss on asset impairment		-		-		347,921.00
	Depreciation and amortization		657.00		3,820.00		118,185.00
Total operating expenses			121,691.00		236,610.00		8,584,318.00

Loss from operations			(118,935.36)		(236,610.00)		(8,574,200.36)
					-
Other income (expense)
	Equity investment loss		-		-		(38,036.00)
	Interest expense		(22,665.00)		(136,933.00)		(1,010,094.00)
	Loss from extinguishment of debt		-		-		(118,121.00)
Total other income (expense)			(22,665.00)		(136,933.00)		(1,166,251.00)

Loss from continuing operations			(141,600.36)		(373,543.00)		(9,740,452.36)

Discontinued Operations
	(Loss) from discontinued Blackbox business		-		-		(5,195.00)
	Income from discontinued Audiostocks business		-		-		143,825.00
Income (loss) from discontinued operations			-		-		138,630.00

NET LOSS		$	(141,600.36)	$	(373,543.00)	$	(9,601,822.36)

Net loss per common share, basic and diluted:
	Loss from continuing operations	$	(0.00)	$	(0.00)
	Loss from discontinued operations		-		-
Net loss per common share:		$	(0.00)	$	(0.00)

Weighted average common and common equivalent shares outstanding
	Basic and diluted		222,887,813		198,077,379

The accompanying notes are an integral part of these consolidated financial statements
Unaudited


SHRINK NANOTECHNOLOGIES, INC. and SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED - STATEMENTS OF CASH FLOWS
(UNAUDITED)
							From Inception
							(January 15, 2008)
			For the Three Months Ended				through
			March 31,				March 31,
			2012		2011		2012

CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss	$	(141,600)	$	(373,543)	$	(9,601,821)

	Adjustments to reconcile net earnings to net cash used
	by operating activities:
	Depreciation and amortization		657		3,820		120,764
	Asset impairment		-		-		347,921
	Debt discount accretion		2,500		115,965		765,833
	Non-cash share-based payments		58,089		178,215		5,143,537
	Loss on disposal of property, plant and equipment		-		-		14,096
	Loss from extinguishment of debt		-		-		118,121
	Loss from equity investment		-		-		38,036
	Changes in assets and liabilities, net of effects from acquisitions
	Deposits		1,500		-		-
	Accounts receivable		-		-		1,672
	Prepaid expenses		485		28,242		16,444
	Inventory		-		-		(2,780)
	Accounts payable		318		(14,246)		686,978
	Accrued interest		20,166		-		215,570
	Due to related parties		60,000		-		902,333
	Deferred revenue		(2,727)		-		-

NET CASH USED IN OPERATING ACTIVITIES			(612)		(61,547)		(1,233,296)

CASH FLOWS FROM INVESTING ACTIVITIES
	Cash purchased at acquisition		-		-		62,404
	Proceeds from the sale of BlackBox		-		-		12,500
	Additions to equipment		-		(682)		(18,284)
	Proceeds from disposal of intangible assets		-		-		500
	Additions to intangible assets		-		(294)		(269,200)

NET CASH USED IN INVESTING ACTIVITIES			-		(976)		(212,080)

CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from subsidiary prior to merger		-		-		12,500
	Advances from related parties		-		-		64,900
	Proceeds from issuance of common stock		-		70,000		425,001
	Proceeds from convertible debentures		-		60,000		943,094

NET CASH PROVIDED BY FINANCING ACTIVITIES			-		130,000		1,445,495

NET CHANGE IN CASH			(612)		67,477		119
CASH BALANCES
	Beginning of period		731		2,131		-

	End of period	$	119	$	69,609	$	119

NON-CASH INVESTING AND FINANCING TRANSACTIONS :
	Stock-based prepaid expenses	$	-	$	-	$	-
	Stock issued to satisfy convertible debt obligation	$	-	$	527,071	$	729,776
	Stock issued in share exchange of Blackbox Semiconductor, Inc.	$	-	$	-	$	37,036
	Convertible debt issue to satisfy related party payable	$	-	$	-	$	675,000

The accompanying notes are an integral part of these consolidated financial statements
Unaudited

SHRINK NANOTECHNOLOGIES, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

For the three months ended March 31, 2012

(Unaudited)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012. For further information, refer to the Company’s audited financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2011. These consolidated financial statements have been prepared treating the Company as a development stage company, effective as of January 15, 2008.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained net losses of $141,600 and used cash in operating activities of $612 for the three months ended March 31, 2012. The Company had a working capital deficiency, stockholders’ deficiency and accumulated deficit of $2,302,632, $2,287,018 and $9,601,822, respectively, at March 31, 2012. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations.

As a result of the aforementioned conditions, the Company may be unable to meet certain obligations to fund future research and development activities. The Company’s continuation as a going concern is dependent on obtaining additional outside financing, as it is not anticipated that the Company will have profitable operations from its research and development activities during the near term. The Company has funded losses from its research and development and other operations primarily from the issuance of debt and equity. The Company believes that through government grants, partnerships and arrangements with universities, and the issuance of equity and debt it may be able continue to fund operating losses in the short-term until the Company can generate revenues sufficient to fund its operations. If management cannot achieve its plans there is a possibility that operations will discontinue.

Principles of Consolidation

The consolidated balance sheets include the accounts of Shrink Nanotechnologies, Inc. and its wholly owned subsidiary Shrink Technologies, Inc., and thereby reflecting the transactions related to the May 29, 2009 effective date of the Exchange Agreement. The consolidated statements of operations include the operations (which consisted mostly of research and development) of the predecessor entity, Shrink Technologies, Inc. from inception on January 15, 2008 and the Company from May 29, 2009, the effective date of the acquisition of the Shrink business. All significant intercompany accounts and transactions have been eliminated in consolidation.

Research and Development

The Company expenses all costs related to research and development as they are incurred.

Revenue Recognition and Deferred Revenue

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. In addition to the aforementioned general policy, the following are the Company’s statement of policy with regard to certain service contracts.

The Company records revenue from certain service contracts which include milestones using the milestone method if the milestones are determined to be substantive. A milestone is considered to be substantive if management believes there is substantive uncertainty that it will be achieved and the milestone consideration meets all of the following criteria:

It is commensurate with either of the following:

The Company’s performance to achieve the milestone; or

The enhancement of value of the delivered item or times as a result of a specific outcome resulting from the Company’s performance to achieve the milestone.

It relates solely to past performance

It is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement

The individual milestones are determined to be substantive or non-substantive in their entirety and milestone consideration is not bifurcated.

Related to these certain service contracts accounted for under the milestone method the Company may also receive service fees in advance upon signing of the contract. Amounts in excess of revenue recognized are classified as deferred revenue on the consolidated balance sheet.

Cash and Cash Equivalents

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

Inventory

Inventory at March 31, 2012 consisted of StemDisc450 devices, which are carried at the lower of cost or market value on a first-in first-out basis.

Inventories at March 31, 2012 and December 31, 2011 consist of finished goods.

The cost of materials and supplies purchased for testing and prototype products are expensed as research and development.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over estimated useful lives of the asset. During the three months ended March 31, 2012 and 2011 the Company recorded $657 and $3,820 in depreciation expense, respectively.


		March 31,		December 31,
		2012		2011
Property Plant and Equipment, net:
Computer Software and Hardware	$	12,503	$	12,503
Furniture and Equipment		682		692
Building and Improvements		-		-
Accumulated Depreciation		(7,689)		(7,032)
Total	$	5,496	$	6,154

Intangible Assets

Intangible assets consist of intellectual property rights of an exclusive license to several patent pending inventions surrounding our core technologies and trademarks. Intangible assets are tested on an annual basis for impairment or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. .

Intangible assets consisted of the following at:


		March 31,		December 31,
		2012		2011
Intangible Assets, net:
Trademarks		10,118		10,118
Less: Amortization		-		-
Total	$	10,118	$	10,118

To date, the Company has not utilized its current trademarks to manufacture products/parts for sale, testing and evaluation. However management expects to utilize the trademarks in the future. Shrink continues to make the required legal filings and uses of the trademark, the trademarks have an indefinite life, therefore there is no amortization.

Investment in BlackBox Semiconductor, Inc.

The Company owns approximately 19% interest in BlackBox Parent and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to influence the operating and financial decisions of BlackBox Parent. Under this method, the Company recognizes earnings and losses of BlackBox Parent in its financial statements and adjusts the carrying amount of its investment in BlackBox Parent accordingly. The Company’s share of earnings and losses are based on the shares of common stock and in-substance common stock of BlackBox Parent held by the Company. Any intra-entity profits and losses are eliminated.

For the year ended December 31, 2011 the Company incurred a loss of $38,036 related to the Company's proportionate share of BlackBox Parent activity. As a result, the Company discontinued applying the equity method.

Accounts Payable

Accounts payable consisted of the following at:


		March 31,		December 31,
		2012		2011
Accounts payable	$	658,422	$	598,104
Stock based payables		311,433		311,433
Accrued payroll		-		-
Total	$	969,855	$	909,537

Fair Value Measurements

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

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

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

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

Concentration of Risk

A financial instrument which potentially subjects the Company to concentrations of credit risk is cash. The Company places its cash with financial institutions deemed by management to be of high credit quality.

Basic Net Loss per Share of Common Stock

Basic net loss per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. At March 31, 2012 there was $1,115,499 in convertible debt outstanding, 20,000,000 preferred shares and stock options that total approximately 44.5 million in common stock equivalents. The Company also has consulting contracts involving possible common stock issuances of up to approximately 2 million shares. Common stock equivalents resulting from the issuance of these stock options have been considered, but have not been included in the per share calculations because such inclusion would be anti-dilutive.


		For the Three Months		For the Three Months
		ended March 31,		ended March 31,
		2012		2011

Numerator – (loss)	$	(141,600)	$	(373,543)
Denominator – weighted average
number of shares outstanding		222,887,813		198,077,379
Loss per share	$	(0.00)	$	(0.00)

Stock-Based Payments

The Company measures the cost of services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant, and recognizes the cost over the period during which an employee is required to provide services in exchange for the award.

For purposes of determining estimated fair value of stock-based payment awards, the Company utilizes a Black-Scholes option pricing model, which requires the input of certain assumptions requiring management judgment. Because the Company’s stock option awards have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect fair value estimates, existing models may not provide a reliable single measure of the fair value of employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of stock-based compensation. Circumstances may change and additional data may become available over time that could result in changes to these assumptions and methodologies and thereby materially impact the fair value determination of future grants of stock-based payment awards. If factors change and the Company employs different assumptions in future periods, the compensation expense recorded may differ significantly from the stock-based compensation expense recorded in the current period.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions principally relate to the fair value and forfeiture rates of stock based transactions, and long-lived asset depreciation and amortization, and potential impairment.

Recent Accounting Pronouncements

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

NOTE 2.

CONVERTIBLE DEBENTURES

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

Notes Payable consists of the following at:


		March 31,		December 31,
		2012		2011
14% convertible notes due October 2012	$	278,121	$	278,121
4% convertible note due April 2012		675,000		675,000
14% convertible notes due June 2013	$	20,000	$	20,000
Total convertible notes payable	$	973,121	$	973,121
Less: Discount on notes		(5,000)		(7,500)
Less: Current portion		(968,121)		(965,621)
Long-term portion	$	-	$	-

As of March 31, 2012, the Company had certain notes payable due to a related party in the amount of $298,121 (represented on the Company’s consolidated balance sheet as $293,121, which is net of a $5,000 discount). These notes are currently in default due to non-payment of monthly interest accruals and are classified as current liabilities on the balance sheet. Interest payments are due monthly on these notes.

NOTE 3. COMMITMENTS AND LEASES – RELATED PARTY

Mark L. Baum, Esq. (“Baum”) our former CEO and president, is a managing member of the Noctua Fund Manager, LLC. James B. Panther, (“Panther”), Shrink’s chairman of its Board of Directors, is also a managing member of the Noctua Fund Manager, LLC. Noctua Fund Manager, LLC has subsequently assigned ownership of this debt to an entity controlled exclusively by Panther. This liability is recorded as due to related parties our balance sheets.

The Company subleased space from Business Consulting Group Unlimited, Inc., an entity owned by Panther and Baum, pursuant to which the Company leases approximately 3,000 square feet of office and administrative space, as well as use of, among other things, internet, postage, copy machines, electricity, furniture, fixtures etc. at a rate of $6,000 per month. The lease with Business Consulting Group Unlimited, Inc. expired April 30, 2010, and has continued as a month to month tenancy thereafter. The lease agreement was terminated on January 31, 2011. This liability is recorded in recorded in Due to related parties on our balance sheets. Business Consulting Group Unlimited, Inc. has subsequently assigned ownership of this debt to an entity controlled exclusively by Panther.

On May 29, 2009, the Company signed an operating agreement (the “Operating Agreement”) with BCGU, LLC, an entity indirectly controlled by Panther and Baum, for a fee of $6,000 per month. During October 2009, the Company amended the Operating Agreement with BCGU, LLC. The amended Operating Agreement (“the “Amended Operating Agreement”) allows us to retain certain day-to-day administrative services and management in consideration of a monthly fee of $30,000 per month. The Amended Operating Agreement also included a $270,000 signature bonus. Effective as of January 31, 2011, we entered into the Second Amended Operating Agreement (the “Second Amended Operating Agreement”) with BCGU, LLC which amended the terms of the previously existing First Amended Operating Agreement among the parties, entered into on October 1, 2009. The Amended Operating Agreement provides for a term of 21 months ending in October 2012 and provides for services to be provided that include day to day management, provision of bookkeeping and accounting personnel and administrative support staff as well as record keeping and accounting maintenance, in exchange for a new and lesser fee of $20,000 per month. The Company was indebted to BCGU under the old agreement, in the amount of $615,000 which continues to be due and payable as of the date of the Second Amended Operating Agreement. The Second Amended Operating Agreement expires October 1, 2012. In April 2011, the Company issued to BCGU, LLC a 4% $675,000 convertible note for the amounts due. This liability is recorded in Due to related parties on our balance sheets whereas the expense for 2011 was $250,000. There is an option within the Amended Operating Agreement that allows BCGU, LLC to convert outstanding payables related to the Operating Agreement into a 10% convertible note. At such time BCGU, LLC had not converted any of its outstanding payables into a note. BCGU, LLC has subsequently assigned ownership of this debt to an entity controlled exclusively by Panther.

Due to related parties consist of:


		March 31,		December 31,
		2012		2011
Due to BCGU, LLC	$	220,000	$	160,000
Due to Business Consulting Group Unlimited, Inc.		7,333		7,333
Due to Noctua Fund Manager, LLC		61,650		61,650
Total	$	288,983	$	228,983

There have been no payments made to related parties during the three months ended March 31, 2012.

NOTE 4.

COMMON STOCK ISSUANCES

In January 2012, pursuant our 2010 Plan, the Company issued 7,352,941 shares valued at $58,088 for payment of professional services provided by our attorney during January.

NOTE 5.

WARRANTS

The following summarizes stock purchase warrants as of March 31, 2012:


			Weighted Average
	Amount		Exercise Price
Outstanding December 31, 2011	3,760,000	$	0.20
Expired/Retired	-		-
Exercised	-		-
Issued	-		-
Outstanding March 31, 2012	3,760,000	$	0.20

NOTE 6. STOCK OPTIONS

The Company has issued stock options to consultants, and non-employee's advisors and directors of the Company. These options are not a part of the 2010 Stock Incentive Plan. These issuances are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable. The Company has elected to account for the stock option plan where the compensation to recipient is recognized over the period(s) in which the related services are rendered. The fair value of a stock option granted is estimated using an option-pricing model.

The options outstanding were valued using a Black-Scholes model. The variables used in the model included: (1) discount rates of 0.53-1.04%, (2) expected option life is the actual remaining life of the options as of each period end, (3) expected volatility of 110%-575% and (4) zero expected dividends.

The following summarizes options as of March 31, 2012:


			Weighted Average
	Amount		Exercise Price
Outstanding December 31, 2011	675,000	$	0.19
Expired/Retired	(150,000)		(0.08)
Exercised	-		-
Issued	-		-
Outstanding March 31, 2012	525,000	$	0.19

NOTE 7. SERVICE AGREEMENTS

In May 2011, the Company entered into a service agreement with a worldwide, market leading company that supplies brands and solutions that enhance the world with improved health, hygiene and well-being (the “Customer”). Under the terms of the contract Shrink will provide the Customer with temporary services in the field of nanotechnology-enabled diagnostics. Shrink was due $10,000 at signing of the contract and is eligible to receive future milestone payments of up to $40,000. Specifically related to the milestone payments, the Company will be due: (i) $20,000 upon proof of concept data and (ii) $20,000 upon quantifying the range and sensitivity of certain diagnostics. The $10,000 due at signing is being amortized over the life of the contract ending March 30, 2012. Management had determined the milestones are substantive and will require the revenue to be recognized under the milestone method in accordance with the Company’s revenue policy. To date there has been no revenue recognized related to the achievement of milestones.

NOTE 8. SUBSEQUENT EVENTS

The Company has performed an evaluation of events occurring subsequent to the period end through the issuance date of this report. Based on our evaluation, nothing other than the events described below need to be disclosed.

On April 5, 2012, an entity indirectly controlled by Panther, acquired a convertible debt which converts to 20,000,000 shares issuable upon conversion of Series A Preferred Stock, owned primarily by Panther and convertible on a one-for-one basis.

On April 5, 2012, an entity indirectly controlled by Panther, acquired a convertible debt which converts to 2,953,032 shares issuable upon conversion of $118,121 principal amount of 14% convertible promissory note, issued to Noctua Fund, LP in May 2009, an affiliate of Panther, convertible at $.04 per share (or 3,740,507 shares inclusive of 787,475 shares underlying $31,499 of accrued interest, through March 31, 2011), which note was in default as of December 31, 2011.

On April 5, 2012, an entity controlled by Panther, acquired a convertible debt which converts to 2,500,000 shares issuable upon conversion of $100,000 principal amount of 14% convertible promissory Note issued to Noctua Fund, LP, an affiliate, and Panther, reflecting loans made by it in 2008 and 2009, convertible at $0.04 per (or 3,166,667 shares inclusive of 666,667 shares underlying $26,667 of accrued interest, through March 31, 2011), which note was in default as of December 31, 2012.

On April 5, 2012, an entity controlled by Panther, acquired a convertible debt which converts to 500,000 shares issuable upon conversion of $20,000 principal amount of 14% convertible promissory Note issued to Noctua Fund, LP, an affiliate of Panther, reflecting loans made by it in 2010, convertible at $0.04 per share (or 543,333 shares inclusive of 43,333 shares underlying $1,733 of accrued interest, through March 31, 2011), which note was in default as of December 31, 2012.

On April 5, 2012, an entity controlled by Panther, acquired a convertible debt with a $60,000 principal amount of 14% convertible promissory Note issued to Panther reflecting loans made by it in 2011, convertible at $0.17 per share into an aggregate of 352,941 shares (or 366,275 shares inclusive of 13,334 shares underlying $2,667 of accrued interest, through March 31, 2011), which note is currently in default.

On April 5, 2012, an entity controlled by Panther, acquired a convertible debt which converts to 11,250,000 issuable upon conversion of $675,000 principal amount of 4% convertible promissory Note issued to BCGU, LLC, an entity owned primarily by Messrs. Baum and Panther reflecting unpaid fees from May 2009 through April 2011.

On April 4, 2120, Devkom International Investmetn Series V, LLC acquired all of the interest in the notes, common stock, preferred stock and consulting agreements from BCGU and Baum. Devkom International Investment Series V, LLC is a member of BCGU, LLC.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Report and the “Forward Looking Statements” section in the forepart of this Report (see page 2 above) and the “Risk Factors” set forth in our Annual Report filed on Form 10-K for the year ended December 31, 2011, as may be amended or updated from time to time. The statements contained in this Report that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions. No assurance can be made that any of our forward looking statements will materialize as planned. In addition, the below is not intended as a complete business description but rather, supplements and updates information which may be contained in our Annual Report or other reports filed from time to time.

Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. For ease of reference we use certain defined terms as defined in “Use of Terms” on page 3 above, in the forepart of this Report.

Background

General

We are, with our subsidiaries, dedicated to commercializing biotechnology and other high technology intellectual property, know-how and related products, from universities and medium to large commercial businesses, that may be deployed as commercial products or licensing opportunities in the near (immediate to 2 years) and mid-term (2-4 years). We have also recently undertaken a program to seek to acquire small companies (or business segments of larger companies) with developed and ready-to-go-to-market products, strong intellectual property portfolios, management and operational infrastructure. Historically, we have primarily focused our resources in the life sciences market; however, we also have successfully acquired technologies in, for example, the semiconductor space. With all technologies we acquire and allocate our limited resources to, our objective is to develop products and intellectual property resources in order to generate cash flow, and ultimately, value for our shareholders.

The Company has undergone, and continues to undergo, marked and sometimes volatile operational changes as we attempt to transition towards commercialization efforts and liquidate undesired assets.

Our business currently consists of four units: Cell Culturing Products; Microfluidic Systems and Kits; Special Substrates; and Internal Development and Acquisitions.

Our Cell Culturing Unit is dedicated to the commercialization of our stem cell culture platform known as StemDisc® and its related software, as well as NanoShrink® based tissue engineering substrates known for our Cell Align®. Our Microfluidic Systems and Kits business is seeking to market a unique and patented modular microfluidic system we exclusively licensed from Corning Incorporated, as well as a version of NanoShrink® (metal enhanced fluorescence) that will enable the low cost development of two dimensional microfluidic system prototypes. Our Special Substrates business is developing specialized versions of NanoShrink® substrates that have unique surface plasmon resonance capabilities and which may be integrated into existing market leading devices and systems. Our Internal Development and Acquisitions Unit is actively developing technologies that are a part of a development and commercialization program, as well as engaging in due diligence on technologies and businesses we are in the process of evaluating for acquisition purposes.

The use of the word “unit” is not meant to imply that Shrink has four separate fully functioning organizations of personnel and facilities. Rather the opposite is true. The Company has extremely limited personnel resources (aside from its access to academic research facilities) and the personnel the Company does employ regularly serve the Company across all of the Company’s business “units.”

Business Focus

The Company intends to direct its focus, and expects to continue to allocate a material portion of its meager resources, towards (1) the commercialization and development of technologies in its four business units as discussed in greater depth in this Report, and (2) making acquisitions of high technology companies and other accretive technology assets that either supplement or otherwise enhance the Company’s core abilities and interests.

Assets; Intellectual Property and Research Agreements

Our assets include exclusive and non-exclusive patent rights, as more fully described in this Report and in our Annual Report, from agreements with third parties, as follows:

Our exclusive License Agreement with Corning, Inc. (the “Corning License Agreement”) wherein the Company licensed the exclusive worldwide right to use and sublicense Corning’s patent-pending Modular Microfluidic System and Method for Building Modular Microfluidic System.

Our two Sponsored Research Agreements with the University of California Regents on behalf of University of California, Irvine campus entered into in May 2010 (the “Biosensing Research Agreement”), and in September 2010 (the “EB Research Agreement”), and rights to acquire additional license rights funded by us under these agreements, (the “Sponsored Research Agreements”).

Our assets also included, through June 3, 2011, the exclusive License Agreement (the “Chicago License Agreement”) between our previously wholly-owned subsidiary BlackBox and the University of Chicago (“Chicago”), wherein BlackBox licensed the exclusive, worldwide right to use and sublicense Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites (a/k/a “electronic glue” chemistry) for fields of use other than thermoelectric applications. We have completed the sale of our BlackBox subsidiary along with this license to BlackBox Semiconductors, Inc., a Nevada corporation (“BlackBox Parent”).

We also have entered into other agreements, such as our agreement with the MF3 Consortium, accessing matching funds from MF3’s relationship with DARPA. This agreement could provide us with research co-funding agreements as more fully provided below; however, it necessarily requires that the Company have investable cash to put into a research program in order to access “matching” funds. Because of the limited cash we have had, making such investments has been extremely limited. Finally, we intend to attempt to commercialize our assets through relationships with third party manufacturers we contract with. No assurance can be made that the Company will have funds sufficient to further develop and license new technologies or to commercialize the ones we have.

We may, from time-to-time and as a result of rights granted in one or more of our (or our subsidiary’s) licensing agreements, take a license to inventions (and the related license to domestic and international patent application rights) which result from a sponsored research arrangement or private (non-academic sector) license agreement. Doing so may give Shrink the license rights, but will also trigger the payment of certain fees and various ongoing financial commitments, all of which have been negotiated and are disclosed in the license agreement as provided elsewhere in this Report.

The Company regularly reviews its licenses and patents and, as technologies or inventions have been further commercially vetted or newer competing technologies are developed by others, management may determine using its reasonable business judgment, to not continue to support the development of a technology, and may therefore abandon its licensing rights and or intellectual property rights (if not otherwise licensed) with respect to that technology, invention and the related license. The Company may, from time to time, abandon intellectual property rights which it formerly thought would be valuable or which may still have some value but would be too expensive to maintain.

Abandonment or an outright termination of a license to a particular invention may occur more often as Shrink acquires more IP rights, and the same inventions are commercially vetted. License or patent rights may also be abandoned based on no other reason other than limited capital or the Company’s need to expend its capital on other vital needs. To the extent the Company abandons such non-critical IP rights, the Company may not file a specific abandonment notice.

During late 2010, we terminated our research agreement with the UC Merced and the related license agreement with the UC Regents, as management felt that, given our limited funds, the costs of these agreements were cost prohibitive and were yielding unsuccessful results while viable alternative technologies were found elsewhere. As a result, we lost any patent license rights associated with these agreements.

The Company has dissolved its Shrink Solar, LLC entity which had no revenues or assets.

In March 2011, we entered into an agreement in principle to transfer our BlackBox Semiconductor, Inc. subsidiary (the “BlackBox Subsidiary”) to a separate public company as the BlackBox business will require different management and commercial resources and relationships, as well as significant amounts of capital and time to commercialize products.

On June 3, 2011, we finalized the agreement with BlackBox Semiconductor, Inc., f/k/a Visitrade, Inc., a Nevada corporation, a publicly traded company, (the “BlackBox Parent”), as purchaser, for the exchange of all of the shares of BlackBox Subsidiary from the Company (the “Share Exchange”).

The material terms of the Share Exchange were:

Shrink Nanotechnologies, Inc. issued 14,000,000 shares of restricted common stock to BlackBox Parent and 100% equity interest in BlackBox Subsidiary. In exchange, Shrink Nanotechnologies, Inc. received $12,500 cash and 27,030,000 shares of BlackBox Parent, representing approximately 19.9% of BlackBox Parent’s equity at the time of the transaction. The cash received from the transaction shall be used to recover costs Shrink Nanotechnologies, Inc. invested into BlackBox Subsidiary. Shares of BlackBox Parent will either be sold or spun off to shareholders in whole or in part pursuant to an effective registration statement, as may be determined by the board at a later date, if and when such shares become liquid.

The primary asset of the BlackBox Subsidiary includes an exclusive License Agreement (the “Chicago License Agreement”) with the University of Chicago, granting to BlackBox Subsidiary the exclusive, worldwide right to use and sublicense Chicago’s patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246, and provisional applications 61/214,434 and 61,264,790) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License Agreement.

Discussion of Business Strategy; Short Term Goals

Although management constantly monitors market trends, as well as available capital and has in the past, and continues to, refine and re-prioritize the Company’s goals, so as to attain commercialization as quickly as possible, the goals we will need to attain for our various businesses are currently: (1) commercialization of existing and newer commercial versions of StemDisc®, Cell Align® and NanoShrink® products; (2) entering into a joint development agreement to commercialize the Corning microfluidic system; (3) joint development of certain materials from our Special Substrates business unit; and (4) entering into technologically accretive and synergistic acquisitions.

We acquired our assets and rights by using a business model that has inexpensively allowed us to license technologies from two primary sources: (1) university laboratories, and (2) “secondary” technologies from very large industrial businesses. Traditionally and historically, university engineering labs have been used as commercial resources for venture capital organizations and other funding sources looking for high quality low cost technology.

We have also recently undertaken a program to develop commercial relationships with larger, multi-national United States-based industrial companies in order to potentially work with their technologies and products which have been abandoned or “orphaned” for one or a number of reasons – primarily due to a limited market opportunity or limited funding at the time of abandonment. We are actively seeking to develop licensing agreements in this regard to provide the right to develop and market these “orphaned” technologies and product lines.

In addition to our licensed technologies, we may develop technologies on our own as a result of our research or joint development activities.

We also have developed a Science Advisory Board (“SAB”). Through the relationships with our SAB members, we have the exclusive right to certain intellectual property rights derived from their respective work for the Company. To date, we have not filed any applications to protect intellectual property rights derived from work provided to the Company by a member of the SAB. Nonetheless, much of the Company’s scientific decision making process is guided in part by our SAB members.

We also intend to review, and as such opportunities present themselves, seek to acquire synergistic assets and businesses, although these are not within the Company’s primary initial focus as management believes that initial development, manufacturing and commercialization will be most economical through joint venture or third party OEM manufacturers we contract.

The execution of our business requires sufficient amounts of cash. The Company has found the current economic environment extremely challenging in terms of finding investors who are willing to invest cash into the Company. The inability to raise cash gives rise to the Company considering numerous alternatives to its current business, including focusing more attention on acquiring assets and other businesses that may provide value for shareholders sooner than the current life science focus of the Company. In any case, until the Company has sufficient cash to operate or is able to acquire assets that produce value for shareholders, the value of the company will be severely limited by these facts.

Sponsored Research Agreements with UCI

Sponsored Research Agreement with UC Regents (September 2010)

As of September 22, 2010, Shrink entered into the EB Research Agreement with UC Regents on behalf of the Irvine Campus. The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010. Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on a good faith between the two parties. The EB Research Agreement was terminable by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.

The EB Research Agreement provided, among other things, that the Company sponsor specified research relating to the development of a complete system for culturing, imaging, and digitizing a large number of embryoid bodies (EBs) in custom-designed microfluidic devices, including developing protocols for staining and imaging EBs in 3-D. In addition, the research involved specifying and testing a suitable hardware/software platform for collecting images in a high-throughput setting. Regarding any inventions, discoveries or other commercially useful research products that may arise from research being conducted under the SRA, we will have a time-limited, first right to negotiate an exclusive license of such things with UCI.

The Company’s research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the three month term of the EB Research Agreement.

To date the Company has paid $5,000, and at September 30, 2011 owes $12,598 under this agreement. No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions. In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.

Sponsored Research Agreement with UC Regents (May 2010)

As of May 3, 2010, Shrink Parent entered into the Sponsored Research Agreement or, the “Biosensing Research Agreement”, with UC Regents on behalf of UCI. The Biosensing Research Agreement is for a term of three years or such time as the research is completed, whichever is longer. The Biosensing Research Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.

The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement. The Biosensing Research Agreement provides that the Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA. We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.

Obligations under Biosensing Research Agreement

The Company’s research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement. To date the Company has paid $20,000 to the UC Regents and owes $59,302 under this agreement. The Company does not have any capital commitments to satisfy the required cash payments under this contract. Any funding amounts under the Biosensing Research Agreement are subject to adjustment down based on actual expenditures on the research.

Additional IP that is subject to our license rights under the UCI Biosensing SRA includes both research performed under the specified work order of the UCI Biosensing SRA, as well as discoveries developed between July 2009 and May 3, 2010 by Dr. Michelle Khine that name Dr. Khine as primary inventor, and which are not under pre-existing obligations to third parties.

We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.

The Biosensing Research Agreement provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the Biosensing Research Agreement (the “UCI Biosensing License”). We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the “License Date”). In addition, we will be required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date. In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing License to include additional patents from time to time. With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors. A copy of the UCI Biosensing SRA License is included as an annex to the Biosensing Research Agreement, filed as an exhibit to our public filings, and is incorporated by reference herein.

Results of UCI Biosensing Research To Date

To date, the Biosensing Research Agreement has led to two patent applications being filed with the USPTO.

We do not have any commitments for financings or grants for this agreement and no assurance can be made that the Company will attain the funding necessary to fulfill our funding obligations under the Biosensing Research Agreement or, that the research performed will necessarily produce commercially viable new inventions. In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.

License Agreement with University of Chicago - Sold

Effective June 3, 2011, following the Share Exchange involving our BlackBox Subsidiary the License Agreement with the University of Chicago is no longer a part of our operations and business focus.

Agreements Terminated in 2010

During 2010 the Company terminated certain agreements for economic reasons and because alternative resources were available. These terminated agreements include:

Our original microfluidics research agreement with the University of California, Merced, originally entered into in May 2009, and the underlying Exclusive License Agreement with the UC Regents, Merced, for Processes for Microfluidic Fabrication and Other Inventions. We no longer rely on these patents or intellectual property rights. Nonetheless, the Company still owns and maintains its rights to the ShrinkChip® related trademarks, which were not part of the terminated agreement. The Company will not be refunded its initial research and license fees paid (amounting to $90,985 and 495,500 shares issued to date), and the Company has certain additional further material liabilities under this agreement relating to patent filing legal prosecution costs or development fees of up to $234,000, which are subject to dispute. In addition, the Company is required to cover certain legal patent costs during the 90- day period after termination.

Because the Company no longer is focusing on its solar segment, the Company also terminated its Strategic Marketing and Development Agreement (the “Marketing Agreement”) with Inabata America Corporation. This agreement provided for the appointment of Inabata as the Company’s non-exclusive representative for the purposes of marketing and promoting the Company’s solar concentrator technology and ShrinkChip™ RPS solar products to third parties (the “Solar Products”).

Proceeds of Debt Financing

Private Placement of 12% Convertible Notes and Series B Warrants

During November 2010, the Company issued, $117,000 in 12% convertible notes convertible at $.10 per share (post forward split), and 585,000 Series B Common Stock Purchase Warrants, exercisable at $0.20 per share (or, “Series B Warrants”) for a cash purchase price of $117,000. The Notes and Series B Warrants were sold at face value for each dollar amount of Notes sold. No placement agent compensation has been paid in this financing.

The foregoing are the material terms of the 12% note and Series B Warrant financing.

2009 Private Placement of 12% Convertible Notes and Series A Warrants;

Between November 2009 through May, 2010, the Company issued, on a private basis, $635,000 (inclusive of $100,000 reported in our Annual Report on Form 10-K, as previously filed) of 12% convertible notes initially convertible (post forward split) at $.10 per share, and 2,675,000 Series A Common Stock Purchase Warrants, exercisable at $0.20 per share (or, “Series A Warrants”) as part of a private financing at face value for a purchase price of $535,000. The notes are repayable one year from issuance (with some of the earliest issued notes becoming due in November 2010) and the warrants are exercisable commencing 6 months from issuance and expire 36 months from issuance. At any time following its maturity date, the Company may induce conversion of the notes at a discounted rate at 80% of the effective conversion price. In November 2010 to January 2011, the Company note holders with total principal balances of $575,000 and accrued interest of $65,694 converted their principal and interest into 6,406,940 shares of common stock, and such notes, to the extent converted are deemed satisfied and discharged in full, with $60,000 of principal and their accrued interest remaining outstanding.

When combined with notes and warrants sold during late fiscal 2009 (and not including any 14% convertible notes issued to Noctua Fund, LP) the following (and not including any 14% convertible notes issued to Noctua Fund, LP) is a brief summary of the notes and warrants outstanding:

$177,000 principal amount 12% convertible notes, currently convertible at $.10 per share into an aggregate of 1,777,000 shares of common stock (plus shares issuable as interest), payable one year from their respective issuance dates. The note was converted on October 28 2011.

3,175,000 Series A Warrants, exercisable at $.20 per share, and expiring three years from their respective issuance dates.

585,000 Series B Warrants, exercisable at $.20 per share, and expiring three years from their respective issuance dates in 2010.

The foregoing are the material terms of the 12% note and Series A and B Warrant financing. Other details of the same may be found below in this Annual Report.

All Noctua, BCGU, Noctua Fund LP instruments, both debt and equity, in regards to the 50% interest owned by Mark L. Baum, Esq., were acquired for value by an entity indirectly controlled by James Panther, in April 2012.

Sponsored Research Agreement with UC Regents (September 2010)

No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions. In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.

The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement. Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA. The Biosensing Research Agreement provides that the Company shall sponsor the research costs up to a budget of $632,051, of which $20,000 has been paid to the UC Regents. We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.

The Company’s research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement. Of this amount $202,796 is to be paid during the 12 month period ended April 30, 2011; $211,311 shall be paid during the 12 month period ended April 30, 2012; and the remaining $217,944 shall be paid during the 12 month period ended April 30, 2013. The foregoing payments are to be paid in quarterly installments of ¼ of the total cash fees payable during such 12 month period.

We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.

The UCI Biosensing SRA provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the UCI Biosensing SRA (the “UCI Biosensing SRA License”). We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the “License Date”). In addition, we are required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing SRA License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date. In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing SRA License to include additional patents from time to time. With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors. A copy of the UCI Biosensing SRA License is included as an annex to the UCI Biosensing SRA, filed as an exhibit to our public filings, and is incorporated by reference herein.

Our research sponsorship obligations require us to provide funding (which may be from us or other third parties) totaling $632,051 during the three year term of the UCI Biosensing SRA. Any funding amounts under the UCI Biosensing SRA are subject to adjustment down based on actual expenditures on the research.

The foregoing is a summary only of the UCI Biosensing SRA (which includes the form of UCI Biosensing SRA License annexed thereto), which is filed as an exhibit to our public filings.

To date, the UCI Biosensing SRA has led to two patent applications being filed with the USPTO.

No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA Agreement or, that the research performed will necessarily produce commercially viable new inventions. In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.

License Agreement with University of Chicago

This agreement was in effect until June 2011 when it was sold to a related third party.

Critical Accounting Estimates

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

Our intangible assets consist principally of intellectual properties such as trademarks. Shrink continues to make the required legal filings and uses of the trademarks, the trademarks have an indefinite life, therefore there is no amortization. The Company will re-evaluate its amortization practice once products related to these trademarks are put into full production. When our products are placed in full production we can better evaluate market demand for our technology.

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

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

The Company strives to save liquid capital by paying for services or satisfying liabilities, whenever able, by issuance of stock and stock options to consultants and services providers. We also grant stock options, restricted stock units and restricted stock to directors and consultants under the Company’s 2010 Equity Incentive Plan.

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

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

Results of Operations for the Three Months Ended March 31, 2012

Revenues

The Company, recorded $2,756 in revenues for the three months ended March 31, 2012, and no revenues, as compared to the same period in 2011. The revenues recorded in 2012 are related to a service contract signed in May 2011.

Operating Expenses

Our Shrink related business had total operating expenses of $121,691 for the three months ended March 31, 2012 as compared to $236,610 for the same period in 2011.

General and Administrative Expenses. Our general and administration expenses decreased to $61,034 in the three months ended March 31, 2012 from $152,461 for the same period in 2011. This decrease was mainly due to the Company decreasing its expenses in conjunction with its decreased activities.

Professional Fees. Professional fees are generally related to public company reporting and governance expenses as well as costs related to our acquisitions. We incurred $60,000 in professional fees in the three months ended March 31, 2012 from $48,887 for the same period in 2011.

Depreciation and Amortization. Our depreciation and amortization expenses decreased to $657 in the three months ended March 31, 2012 from $3,820 for the same period in 2011. The decrease in depreciation expenses was mainly due to the disposal of assets.

Interest Expense. Interest expense decreased to $22,665 in three months ended March 31, 2012 from $136,933 for the same period in 2011, primarily due to the decrease in convertible note issuances.

We expect operating expenses to continue as we invest further in research and development activities. We do not have capital commitments yet to cover any of our operating expenses and to date. To date, our capital needs for Shrink have been funded by grants, restricted stock issuances and private convertible debt financing.

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

Net Loss From Operations

For the three months ended March 31, 2012, we had a net loss of $141,600 from continuing operations as compared to a net loss of $373,543 from continuing operations for the same period in 2011. Management attributes the decrease in net loss due to a decrease in operational and research activities. In 2011, the Company switched its focus from developing and acquiring intellectual property, to the development of products derived from the intellectual property. As a result, the Company hired several consultants to help bring those products to a point of commercialization.

We anticipate continued losses relating to investment into our research and development activities relating to Shrink, and to our capital raising activities. We intend to fund our R&D activities, through government grants, partnerships and arrangements with universities (such as those that are in effect with the University of California Regents) and equity and debt financings.

Net Loss

In the three months ended March 31, 2012, we generated a net loss of $141,600 compared to a net loss of $373,543 for the same period in 2011. The decrease in net loss is due to an overall change in our business operations.

Liquidity and Capital Resources

Our cash on hand at March 31, 2012 was $119 as compared to $731 at December 31, 2011. The decrease is primarily attributable to management’s inability to raise capital through equity and debt financings. During the year ended December 31, 2011, management primarily focused on product development and commercialization of products. As a result, management neglected to spend significant time, as compared to the year ended December 31, 2010, raising capital through the equity and debt financings. The Company had no significant revenues during the years ended December 31, 2011 and 2010.

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

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


Cash Flow (All amounts in U.S. dollars)		The Three months Ended March 31,
		2012		2011
Net cash provided by (used in) operating activities	$	(612)	$	(61,547)
Net cash provided by (used in) investing activities	$	0	$	(976)
Net cash provided by (used in) financing activities	$	0	$	130,000

Net Increase (decrease) in Cash and Cash Equivalents	$	(612)	$	(67,477)
Cash and Cash Equivalent at Beginning of the Year	$	731	$	2,131
Cash and Cash Equivalent at End of the Year	$	119	$	69,609

In early May, 2010, through our entry into a Consortium Agreement with Micro/Nano Fluidics Fundamentals Focus MF3 Center, as led by the University of California at Irvine, our research qualified to receive matched funding from Defense Advanced Research Projects Agency, as described above. Under the policies of the consortium agreement the Company’s funded research projects are eligible to receive matched funding on a dollar-for-dollar basis, for each dollar we invest in certain qualifying projects. Since we are dependent on our ability to raise additional capital for our research, no assurance can be made that we will be able to utilize this funding source. Even if we do raise additional capital, no assurance can be made that we will dedicate it towards those same research projects that qualify for DARPA matching funds.

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

As part of the Company’s business plan and when feasible, it regularly elects to pay consulting and professional fees in stock, as opposed to cash, so as to preserve capital. In particular, between April and July 2010, the Company issued an aggregate of 1,602,197 shares of restricted common stock to five consultants and professional service providers for services rendered, some of which covers services rendered through mid-2010. The Company recognizes, however, that share issuances are highly dilutive to investors and existing shareholders and, not all service providers are willing to accept share compensation in lieu of cash. Accordingly, the Company is required to expend funds regularly for services.

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

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

The Company estimates that it will cost approximately $9,000,000 in deficit cash flows through 2014 until sustained potential profitability, and that substantial additional costs will be incurred in order to commercialize its Shrink related technologies. The Company is not aware as to how much, if any, of these funds will be obtainable from government grants or offset by joint venturing development of our products.

Operating Activities

Net cash used in operating activities was $612 for the three months ended March 31, 2012, as compared to $61,547 used in operating activities for the same period in 2011. The decrease in net cash used in operating activities was mainly due to a decrease in operating activities and a lack of revenue.

Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2012 was $0 as compared to a use of $976 in investing activities for the same period in 2011. The decrease in net cash provided by investor activities was mainly due to a decrease in business operations, research and development activities and a lack of revenue.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2012 was $0, as compared to $130,000 net cash provided by financing activities for the same period in 2011. The decrease of net cash provided by financing activities was mainly attributable to due to a decrease in business operations, research and development activities and a lack of revenue.

To date, a material portion of our operations, and of the operations of our Shrink subsidiary, have been funded by certain members of management and Noctua Fund, LP, which is an affiliate of Messrs. Baum and Panther, our current directors. Specifically, and without limitation, Noctua Fund, LP loaned the Company over $100,000 between 2008 and April 2009, as represented by the 14% convertible promissory note, convertible at $0.04 per share; and the identical $118,000 14% convertible promissory note, convertible at $0.04 per share, reflecting loans to our Shrink subsidiary prior to our acquisition of them, to fund their operations. Interest to date on the notes exceeds $58,000 and both of the foregoing notes to Noctua are in default.

The Company raised $100,000 through a Convertible Note and Series A Warrant financing during the year ended December 31, 2009, and an additional $535,000 from January 2010 through March 2010, and $117,000 through a Convertible Note and Series B Warrant financing in November 2010, with gross proceeds to the Company of $752,000.

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

The amount and timing of our future capital requirements will depend upon many factors, including the level of funding received by us anticipated private placements of our common stock and the level of funding obtained through other financing sources, and the timing of such funding.

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

The Company estimates that it will cost approximately $9,000,000 in deficit cash flows until sustained potential profitability, and that substantial additional costs will be incurred in order to commercialize its Shrink related technologies.

Trends

To a great extent, we expect government grants and university/academic funding to be cyclical based on public policy (e.g. stem cell research limitations), the amount allocated by governments and universities generally to commercial and developmental research, and general economic trends. We expect that we will have to compete diligently in order to secure grants and research funding from universities, if feasible. We also anticipate that, for the foreseeable future, our ability to attain conventional bank or secured financing for our products will be difficult as a result of our limited fungible assets and banking constraints that limit commercial loans available to weaker balance sheet companies like Shrink. We are a cash-deprived company and must secure cash in order to operate going forward. Capital raising activities will likely be dilutive to our shareholders.

Contractual Obligations

The Company (on its own or through its subsidiary) was a party to a license agreement with the UC Regents and sponsored research agreements with the UC Regents and more recently, Corning Agreement mentioned above and incorporated herein, as well as to its Strategic Marketing Agreement described above and incorporated by reference herein. The Company does not have all of the funds necessary to fund these agreements or to commercialize its products and no assurance can be made that it will raise the capital necessary to do so. The Company also enters into agreements with science consultants and professional service providers calling for payment by issuance of stock in lieu of cash, where able. Some of these agreements call for cash payments at hourly rates as well, if and as needed and with prior consent of the Company. The Company has not yet, approved hourly cash payments to consultants, but intends on doing so if and as our cash availability increases.

Sublease with Business Consulting Group Unlimited, Inc. - Terminated

The Company subleased space from Business Consulting Group Unlimited, Inc., an entity owned by two of our directors and majority stockholders, James B. Panther, and Mark L. Baum, Esq. pursuant to which the Company leased approximately 3,000 square feet of office and administrative space, as well as use of, among other things, internet, postage, copy machines, electricity, furniture, fixtures etc. at a rate of $6,000 per month. The lease with Business Consulting Group Unlimited, Inc. expired April 30, 2010, and continued as a month to month tenancy thereafter. The lease was terminated on January 31, 2011. For the year ended December 31, 2011 $50,000 had been paid to Business Consulting Group Unlimited, Inc. and $18,000 was owed to Business Consulting Group Unlimited, Inc.

On May 29, 2009, the Company signed an operating agreement with BCGU, LLC, an entity indirectly controlled by James B. Panther, and Mark L. Baum, Esq., who are two of our directors and majority control persons, for a fee of $6,000 per month. During October 2009, the Company amended the Operating Agreement with BCGU, LLC. The amended Operating Agreement (“the “Amended Operating Agreement”) allows us to retain certain day-to-day administrative services and management in consideration of a monthly fee of $30,000 per month. The Amended Operating Agreement also included a $270,000 signature bonus. Effective as of January 31, 2011, we entered into the Second Amended Operating Agreement (the “Second Amended Operating Agreement”) with BCGU, LLC which amended the terms of the previously existing First Amended Operating Agreement among the parties, entered into on October 1, 2009. The Amended Operating Agreement provides for a term of 21 months ending in October 2012 and provides for services to be provided that include day to day management, provision of bookkeeping and accounting personnel and administrative support staff as well as record keeping and accounting maintenance, in exchange for a new and lesser fee of $20,000 per month. The Company was indebted to BCGU under the old agreement, in the amount of $615,000 which continues to be due and payable as of the date of the Second Amended Operating Agreement. The Second Amended Operating Agreement expires October 1, 2012. For the year ended December 31, 2011, $121,000 had been paid to BCGU, LLC and there was $585,000 owed to BCGU, LLC. This liability is recorded in accounts payable and accrued expenses on our balance sheets which were primarily converted into approximately 12 million shares of common stock leaving an insignificant liability on the balance sheet. There is an option within the Second Amended Operating Agreement that allows BCGU, LLC to convert outstanding payables related to the Operating Agreements into a convertible note. On April 6, 2011 BCGU, LLC exercised its right to memorialize its debt in note form. As a result the Company issued BCGU, LLC a 4% convertible promissory note with a principal balance of $675,000 (representing all unpaid accrued fees beginning in May 2009 through April 2011 under this agreement), that is convertible at $.06 per share and matures on April 6, 2012. Because BCGU, LLC is (i) substantially managing the affairs of the company, (ii) is familiar with the affairs of the Company and its strategic direction, (iii) is receiving minimal cash compensation for its efforts and is deferring most payments, the Company believes that the transactions are no less favorable to the Company than would otherwise be available from independent third parties, the Company believes, based on review of its independent directors, that the foregoing transactions and agreements are no less favorable (or even more favorable, given the flexibility) to the Company than would otherwise be available from independent third parties.

The Company has incurred debt and obligations to entities directly owned by or otherwise controlled by two of our founders, Mark L. Baum and James B. Panther, in order to fund its operations, as discussed above and elsewhere in this report. The notes and related obligations to these founders are disclosed throughout this Report, particularly in the Risk Factors section of this report.

Agreements for Consulting Services

The Company strives to save liquid capital by paying for services or satisfying liabilities, whenever able, by issuance of stock to consultants, services providers and consultants. The issuance of restricted stock in lieu of cash payment sometimes requires that the company pay a premium for such services. Management believes, nonetheless, that given credit crisis, and difficulty in raising capital for R&D companies such as our own, that the benefits of issuing restricted stock for services outweigh the downside in that it leaves cash available to satisfy debts with vendors where able. Below is a list material agreements entered into with consultants for services, all of which consultants are independent parties.

In March 2010, we issued 7,250,000 shares valued at $1,595,000 to a consultant in satisfaction of a one year consulting agreement originally entered into in January, 2010 for assistance in developing the Company’s biotech and related products and, in providing research, prototype and product development assistance on our life sciences related products as well instructional videos and materials for use in academic and corporate laboratories. The agreement is renewable by the parties for successive one-year periods and provides, among other things, for cash compensation at $250.00 per hour commencing only after June 4, 2010, for services if and as requested and agreed to by the Company. This agreement also provides that any inventions or intellectual property created or discovered by the consultant during the course of providing services for the Company shall belong to the Company and also provides for indemnification by the consultant for damages from claims brought as a result of the consultant’s violation of law or fraudulent misrepresentations or breach of the agreement.

In March 2010, we issued 8,700,000 shares valued at $1,914,000 to a consultant in satisfaction of a consulting agreement entered into in January 2010, for public relations, assistance with press releases and branding, marketing awareness programs, procurement of third party research and web/statistical content and investor relations. The agreement provides, among other things, that any inventions or intellectual property created or discovered by the consultant during the course of providing services for the Company shall belong to the Company and also provides for indemnification by the consultant for damages from claims brought as a result of the consultant’s violation of law or fraudulent misrepresentations or breach of the agreement.

In March 2010, we issued 1,500,000 shares valued at $162,000 to a consultant in satisfaction of a consulting agreement entered into in February 2010, for services relating to marketing of our medical device products, and marketing to researches, academia and medical professionals. The agreement is renewable by the parties for successive one-year periods and provides, among other things, for cash compensation at $250.00 per hour commencing only after July 15, 2010, for services if and as requested and agreed to by the Company. This agreement also provides that any inventions or intellectual property created or discovered by the consultant during the course of providing services for the Company shall belong to the Company and also provides for indemnification by the consultant for damages from claims brought as a result of the consultant’s violation of law or fraudulent misrepresentations or breach of the agreement.

In March 2010, we issued 600,000 shares, subject to lock-up and release restrictions based on continued services over a 3 year period ended March 1, 2013, valued at $120,000 to an accounting professional for previous and ongoing accounting, SEC compliance and financial statement preparation and compilation and related services.

In March 2010, we issued 180,000 restricted shares valued at $30,600 to a consultant in satisfaction of a consulting agreement entered into in March 2010, for services rendered.

In March 2010, we issued 112,500 restricted shares valued at $19,125 to a member of the Scientific Advisory Board, pursuant to an agreement dated as of March 1, 2010.

In March 2010, we issued 40,000 restricted shares valued at $5,560 (in addition to 60,000 shares issued in November 2010) as payment for professional services rendered. No additional amounts are owed for services under this agreement for said time period.

In May 2010, we issued 40,000 shares valued at $11,958 as payment for professional services rendered.

In May 2010, we issued 50,000 shares valued at $10,500 as payment for marketing services related to press releases and branding. No additional amounts are owed under this agreement for said period.

In May 2010, we issued 1,000,000 restricted shares valued at $204,000 to Dr. Sayatani Ghosh, a member of the Scientific Advisory Board (“SAB”) since 2009, pursuant to her agreement dated March 1, 2009. This agreement has expired by its terms and no additional amounts are owed under said agreement.

In July 2010, we issued 40,000 restricted shares valued at $5,100 as full payment for professional services rendered during the months of June and July. No additional amounts are owed for these months of service under this agreement.

In July 2010, pursuant to a consulting agreement entered into as of June 1, 2010, we issued 76,364 restricted shares valued at $12,000 as payment for solar research and film manufacturing related consulting services rendered during the months of June and July. The consulting agreement is for a one year term and requires payment of a monthly fee of $6,000 to be paid in shares of common stock of the Company for the duration of the term unless terminated early.

In July 2010, we issued 395,833 restricted shares valued at $92,625 as payment for financial advisory related services, and development of financial models and due diligence research from December 2009 through May 2010. In addition, the Consultant was paid cash compensation of $27,708 in 2010. No additional amounts are owed under said agreement.

In January 2011, pursuant our 2010 Plan, the Company issued 750,000 shares valued at $95,625 to Heiner Dreismann, a member of our Board of Directors, for services rendered and as an incentive to remain on the board with the Company. As a result of the Mr. Dreismann’s issuance there are 24,250,000 remaining shares authorized for issuance pursuant to the 2010 Plan.

In February 2011, the Company issued 140,000 shares valued at $16,330 for payment of professional services provided during the year ended December 31, 2010 and thru February 2011.

Some of the agreements under which these shares were issued were not originally committed to writing and were entered into based on an oral agreement between the independent contractor(s) and a company representative and subsequently memorialized. These shares are cancellable based on performance of said independent contractor.

The foregoing agreements do not require us to make further issuances (except for the issuances for professional services which continue insofar as such persons continue to provide services and agree to accept shares in lieu of cash payment. The foregoing are the material terms of the foregoing agreements, copies of which, to the extent material, are annexed as exhibits to this Report.

All stock issuances are subject to Board approval.

Lease For Space At University Of California- Irvine, TechPortal™

In September 2010, the Company entered into a lease for laboratory space with the University of California, Irvine (UCI) TechPortal™ technology facilitator center, which lease commences November 1, 2010. The lease provides approximately 150 square feet of laboratory space and certain equipment and shared office space that will be used for the Company’s UCI developed patents under the Company’s exclusive license agreement with UCI entered into in April 2009. The lease is for a minimum of six (6) months and may be extended for another 24 months and may be extended thereafter by the discretion of the parties, and provides for rent to be paid by the Company of $5,400 per year with each party required to bear the costs of their own insurance and related expenses. The Company did not effectively commence utilizing this space until November 2010. The foregoing is a summary only of this lease, a copy of which is filed as an exhibit to this Report.

Recent Accounting Pronouncements

We are not aware of any additional pronouncements that materially affect our financial position or results of operations.

Properties

In September 2010, we entered into a lease for laboratory space with the University of California, Irvine (UCI) TechPortal™ technology facilitator center, which lease commenced November 1, 2010. The lease provides approximately 150 square feet of laboratory space and certain equipment and shared office space that will be used for our UCI developed patents under the UCI Biosensing SRA. The lease is for a minimum of six (6) months and may be extended for another 24 months and may be extended thereafter by the discretion of the parties, and provides for rent of $5,400 per year with each party required to bear the costs of their own insurance and related expenses. We did not effectively commence utilizing this space until November 2010, and in January, 2011 we moved our corporate headquarters to this location. The foregoing are the material terms of our lease with the UCI Tech Portal, a copy of which is attached as an Exhibit to our Current Report Form 8-K, Filed November 1, 2010, the provisions of which are incorporated by reference herein.

Hedging and Derivative Activities

As at December 31, 2011, and, at December 31, 2010, we have not entered into any type of hedging or interest rate swap transaction. We do not have any foreign operations or research activities, and, management believes, we do not have exposure to financial product risks.

Need for Additional Capital

As indicated above, management does not believe that the Company has sufficient capital to sustain its operations beyond 12 months or commercializing its technologies without raising additional capital. We presently do not have any available credit, bank financing or other external sources of liquidity. Accordingly, we expect that we will require additional funding through additional equity and/or debt financings. However, there can be no assurance that any additional financing will become available to us, and if available, on terms acceptable to us.

The conversion of our outstanding notes and exercise of our outstanding warrants into shares of common stock would have a dilutive effect on our common stock, which would in turn reduce our ability to raise additional funds on favorable terms. In addition, the subsequent sale on the open market of any shares of common stock issued upon conversion of our outstanding notes and exercise of our outstanding warrants could impact our stock price which would in turn reduce our ability to raise additional funds on favorable terms.

Any financing, if available, may involve restrictive covenants that may impact our ability to conduct our business or raise additional funds on acceptable terms. If we are unable to raise additional capital when required or on acceptable terms, we may have to delay, scale back or discontinue our expansion plans. In the event we are unable to raise additional capital we will not be able to sustain any growth or continue to operate.

Effects of Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change and continually maintain effective cost control in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2012. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2012, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures are not effective to satisfy the objectives for which they are intended.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the first quarter of fiscal year 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1.

LEGAL PROCEEDINGS.

We are not aware of any legal proceedings or investigations involving the Company.

From time to time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business, in particular, that may relate to defense of our intellectual property rights. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

We are in default on payment of interest and principal upon the following notes: convertible notes with principal amounts totaling $973,121, issued to Noctua Fund, LP and BCGU, LLC, affiliates of Panther. These notes are in default and accrue interest 18%. Accrued interest on these notes at April 30, 2012 was $122,212. These notes were disclosed in our Annual Report on Form 10-K for year 2011.

ITEM 4.

submission of matters to a vote of security holders.

None.

ITEM 5.

other information.

None.

ITEM 6.

exhibits.

Financial Statements and Schedules

The financial statements are set forth under Item 1 of this Quarterly Report. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.


	The following exhibits are incorporated herein by reference to the following filings

Form 10-SB	10/19/2006
3.1.1	Certificate of Incorporation
3.1.2	Amended and Restated Certificate of Incorporation
3.2	Bylaws

Form 10-QSB	11/14/2007
3.1.3	Certificate of Designation (Series A and B Preferred Stock)

Form 10-Q	11/19/2008
10.1	Asset Purchase Agreement, dated as of September 30, 2009, between the Company as Seller, Dao Information Systems, LLC, DAO Information Systems, Inc. and Luis J. Leung.
10.2	Meaux Street Partners LP $25,000 10% Convertible Promissory Note, dated July 1, 2008
10.3	The Sonkei Trust $25,000 First Amended 10% Convertible Promissory Note, dated July 1, 2008
10.4	September 30, 2008 Settlement Agreements with SixTech Desenvolvmento Sistemas de Informatica Ltda.
10.5	September 30, 2008 Settlement Agreements with David F. Rubin, DAO Information Systems, LLC., and John Burkett
10.6	September 30, 2008 Settlement Agreement with Luis Leung

Form 8-K
10.1	Licensing Consent Agreement, dated as of September 30, 2008, between BCGU, LLC, the Company and Dao Information Systems, LLC
10.2	First Amended Licensing Consent Agreement, dated as of November 25, 2008, between BCGU, LLC, the Company and Dao Information Systems, LLC

Form 10-K Report	4/14/2009
11.1.1	September 30, 2008 Settlement Agreements between the Company and For Goodness
11.1.2	September 30, 2008 Settlement Agreements between the Company and Mathew Luchak
11.1.3	October 1, 2008 Omnibus Settlement Agreement between the Company and Luis Leung
11.1.4	Second Amended License Consent Agreement dated as of November 30, 2008 between the Company and BCGU
11.1.5	Exhibit 3.1 March 19, 2009 Amendment to the Articles of Incorporation
11.1.6	March 19, 2008 Designation of Series C Preferred Stock
11.1.7	Code of Ethics adopted on February 10, 2006
11.1.8	Share Exchange Agreement, dated as of January 15, 2009 between the Company and BCGU

Form 8-K	5/8/2009
10.1	Debt Consolidation Agreement with Noctua Fund L.P., dated May 7, 2009
10.2	$100,000 14% Secured Convertible Secured Promissory Note, issued May 7, 2009

Form 8-K	5/13/2009
10.1	Binding Letter of Intent to acquire Shrink Technologies, Inc., a California corporation

Form 8-K	5/15/2009
3.1	Certificate of ownership and merger, name change to Shrink Nanotechnologies, Inc.



Form 8-K	6/5/2009
10.1	Share Exchange Agreement between the Company, Marshall Khine and Shrink Technologies, Inc. (“Shrink”), dated as of May 29, 2009
10.2	Exclusive License Agreement for Processes for Microfluidic Fabrication and Other Inventions, between the Regents of the University of California (“UC Regents”) and Shrink
10.3	Research Agreement, dated as of June 2008, between Shrink and UC Regents (Merced)
10.4	Office space sublease, between Shrink and Business Consulting Group Unlimited, Inc.
10.5	Operating Agreement, dated as of May 29, 2009, between Shrink and BCGU, LLC
10.6	Debt Consolidation Agreement, May 29, 2009, between Shrink and Noctua Fund LP
10.7	Note Exchange Agreement
10.8	Consulting Agreement with Dr. Michelle Khine
21.1	List of Subsidiaries of Registrant
99.1	Unaudited Pro Forma Financial Statements: Shrink Nanotechnologies, Inc.
99.2	Audited Financial Statements of Shrink Technologies, Inc.

Form 8-K	6/19/2009
3.2	Amended and restated Bylaws of Shrink Nanotechnologies, Inc.

Form 8-K	6/25/2009
10.1	Consulting Agreement Heiner Dreismann, dated June 22, 2009

Form 10-Q	11/25/2009
10.1	First Amended Operating Agreement

Form 8-K	12/29/2009
10.1	First Amended Asset Purchase Agreement with Dao Information Systems, Inc., dated as of December 7, 2009

Form 8-K	2/3/2010 and Amended on 4/8/2010
99.1	Overview of Shrink Nanotechnologies, Inc.

Form 10-K Report	4/14/2010
3.1	Certificate of Amendment to Articles of Incorporation
4.1	Form of Convertible Note 12%
4.2	Form of Series A Warrant
10.1	Subscription Agreement

Form 8-K	5/7/2010
10.1	Sponsored Research Agreement Between the Company and The Regents of the University of California on behalf of Irvine campus dated May 3, 2010
10.2	Consortium Agreement among Academic Partners and Sponsors of the Micro/Nano Fluidics Fundamentals Focus MF3 Center, effective as of June 1, 2010

Form 10-Q	5/24/2010
10.12	Agreement dated as of January 4, 2010, between the Company and Justin Heit
10.13	Consulting Agreement dated January 4, 2010, between the Company and OTC Investor Source, Inc.
10.14	Consulting Agreement dated as of February 15, 2010, between the Company and Andrew Simon.
10.15	Consulting Agreement dated as of March 1, 2010, between the Company and Andrew Boll
10.16	Consulting Agreement, dated April 23, 2010, between the Company and Bruce Peterson

Form 10-Q	8/16/2010
10.17	Scientific Advisory Board Consulting Agreement, between the Company and Dr. Sayantani Ghosh



Form 8-K	10/18/2010
10.1	Patent and Know-How License Agreement between Shrink Nanotechnologies, Inc. and Corning Incorporated, dated as of July 26, 2010
10.2	Lease Agreement between Shrink Nanotechnologies, Inc. and The University of California on behalf of Irvine campus, dated as of October 1, 2010

Form 8-K/A	10/25/2010
16.1	Letter from Auditor, Chisholm, Bierwolf, Nilson & Morrill, LLC

Form 10-Q/A	11/29/2010
10.16	Sponsored Research Agreement, dated as of September 14, 2010, between Shrink Nanotechnologies, Inc. and University of California, Irvine
10.18	Consulting Agreement between the Company and Equire, LLC. Business Financial Advisory

Form 8-K	12/21/2010
10.1	License Agreement between Blackbox Semiconductor, Inc. and the University of Chicago, dated as of November 30, 2010
10.2	Shrink Nanotechnologies, Inc. 2010 Stock Incentive Plan

Form S-8	1/13/2011
4.1	2010 Stock Incentive Plan
5.1	Opinion of Levy International Law, LLC on legality
23.1	Consent of Independent Registered Public Accounting Firm
23.2	Consent of Levy International Law, LLC (included in Exhibit 5.1)
24.1	Power of Attorney (included on signature page to this Registration Statement)

Form 8-K/A	3/23/2011
10.1	Second Amended Operating Agreement between Shrink Nanotechnologies, Inc. and BCGU, LLC
10.2	Extension of Research Agreement with University of California Regents, Irvine
16.1	Letter from Auditor, Mark Bailey & Company, Ltd. Reno Nevada

Form 8-K	4/12/2011
10.1	Letter of Intent, dated as of March 29, 2011, between Shrink Nanotechnologies, Inc. and Nanopoint, Inc.

Filed Herewith in This Form 10-Q Report
31.1	Certification of Darren Miles, President and Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act 2002.
31.2	Certification of Darren Miles, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act 2002
32.1	Certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to section 906 The Sarbanes-Oxley Act 2002, executed by Darren Miles, President and Chief Financial Officer.
32.2	Certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to section 906 The Sarbanes-Oxley Act 2002, executed by Darren Miles, Principal Financial Officer

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 21, 2012

SHRINK NANOTECHNOLOGIES, INC.

By:        /s/ Darren Miles
    Darren Miles
   President
   (Principal Executive Officer, Principal
   Financial Officer and Principal Accounting
   Officer)

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Darren Miles	President	May 21, 2012
Darren Miles	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

/s/ Luis J. Leung	Director	May 21, 2012
Luis J. Leung

Shrink Nanotechnologies, Inc. 10-Q