Form 10-QSB

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QBWdaUKFlH0RItFuYBQzTTXC4xweYvEBV4YHB+hA74G1LiqKiNQMK+ck/v3dFI5M grxQhVPLDv6vgc87aDDzoA== 0001193125-06-112440.txt : 20060515 0001193125-06-112440.hdr.sgml : 20060515 20060515144228 ACCESSION NUMBER: 0001193125-06-112440 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060515 DATE AS OF CHANGE: 20060515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NANO CHEMICAL SYSTEMS HOLDINGS, INC. CENTRAL INDEX KEY: 0001172324 STANDARD INDUSTRIAL CLASSIFICATION: SPECIALTY CLEANING, POLISHING AND SANITATION PREPARATIONS [2842] IRS NUMBER: 330675154 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-49998 FILM NUMBER: 06839790 BUSINESS ADDRESS: STREET 1: P.O BOX 10591 CITY: PORTLAND STATE: OR ZIP: 97296 BUSINESS PHONE: (503) 236-7171 MAIL ADDRESS: STREET 1: P.O BOX 10591 CITY: PORTLAND STATE: OR ZIP: 97296 FORMER COMPANY: FORMER CONFORMED NAME: HERITAGE SCHOLASTIC CORP DATE OF NAME CHANGE: 20020429 10QSB 1 d10qsb.htm FORM 10-QSB Form 10-QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-QSB

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006.

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission file number: 00-26067

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)

Nevada

87-0571300

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


105 Park Avenue, Seaford, Delaware		19973
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number: (480) 816-6140

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the Registrant’s common stock as of May 15, 2006 was 54,439,571.

Transitional Small Business Disclosure Format:

Yes ¨ No x

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION

	Item 1.	Financial Statements	3

		Balance Sheet as at March 31, 2006 (unaudited)	4

		Statement of Operations for the Nine Months Ended March 31, 2006 and March 31, 2005 (unaudited) and the Three Months Ended March 31, 2006 and March 31, 2005 (unaudited)	5

		Statement of Cash Flows for the Nine Months Ended March 31, 2006 and March 31, 2005 (unaudited)	6

		Statement of Changes in Stockholders’ Equity from September 1, 2003 (Inception) through the Nine Months Ended March 31, 2006	8

		Notes to Financial Statements	9

	Item 2.	Management’s Discussion and Analysis or Plan of Operation	17

	Item 3.	Controls and Procedures	22

PART II – OTHER INFORMATION

	Item 1.	Legal Proceedings	23

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Submission of Matters to a Vote of Security Holders	25

	Item 5.	Other Information	25

	Item 6.	Exhibits and Reports on Form 8-K	26

SIGNATURES			27

ITEM 1. FINANCIAL STATEMENTS

As used herein, the term “Company” refers to Nano Chemical Systems Holdings, Inc., a Nevada corporation, and its subsidiary and predecessors unless otherwise indicated. Unaudited, interim, condensed, consolidated financial statements including a balance sheet for the Company as of the period March 31, 2006, and statements of operations, and statements of cash flows, for the interim period up to the date of such balance sheet and the comparable period of the preceding year are attached hereto as Pages 1 through 13 and are incorporated herein by this reference.

BASIS OF PRESENTATION

The accompanying consolidated interim unaudited financial statements are presented in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions for Form 10-QSB and Item 310 under subpart A of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements for the year ended June 30, 2005. In the opinion of management, all adjustments considered necessary in order to make the financial statements not misleading have been included. Operating results for the quarter and period ended March 31, 2006 are not necessarily indicative of results that may be expected for the year ended June 30, 2006. The financial statements are presented on the accrual basis.

[THIS SPACE LEFT BLANK INTENTIONALLY]

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED BALANCE SHEET

(CONDENSED INTERIM FINANCIAL STATEMENTS)

AS OF MARCH 31, 2006


ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents	$	405,802
Accounts Receivable, Net of Allowance for Uncollectibles		235,564
Inventory		737,204
Prepaid Expenses		60,469

Total Current Assets		1,439,039

PROPERTY & EQUIPMENT
Property and Equipment		432,179
(Less) Accumulated Depreciation		(231,735	)

Total Property & Equipment		200,444

OTHER ASSETS
Utility Deposit		12,000
Formulas & Patents, Net of Accumulated Amortization		46,324

Total Other Assets		58,324

Total Assets	$	1,697,807


LIABILITIES

CURRENT LIABILITIES:
Accounts payable	$	796,788
Accrued payroll		56,350
Due to related parties		303,310

Total Current Liabilities		1,156,448

LONG-TERM DEBT
Note payable - related party		1,333,000

Total Liabilities		2,489,448

STOCKHOLDERS’ EQUITY (DEFICIENCY)

Preferred stock - $.001 par value, 20,000,000 shares authorized, none issued and outstanding		—
Common stock, - $.001 par value, 100,000,000 shares authorized, 52,049,491 shares issued and outstanding		52,049

Additional paid-in capital		1,157,679

Accumulated (Deficit)		(2,001,369	)

Net Stockholders’ Equity (Deficiency)		(791,641	)

Total Liabilities & Equity (Deficiency)	$	1,697,807

See Notes to Financial Statements

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(CONDENSED INTERIM FINANCIAL STATEMENTS)

FOR THE THREE AND NINE MONTHS ENDING MARCH 31,


	THREE MONTHS						NINE MONTHS
	2006			2005			2006			2005
SALES	$	193,234		$	384,894		$	1,022,625		$	1,402,793

COST OF DIRECT MATERIALS		140,042			250,717			687,083			957,795

MARGIN AFTER DIRECT COST OF MATERIALS		53,192			134,177			335,542			444,998

ALL OTHER OPERATING EXPENSES
Plant Salaries, labor and Employee payroll taxes and benefits		66,145			103,565			273,484			284,031
Plant rent, utilities, depreciation, and other plant overhead		74,818			35,155			268,653			207,696
Administrative Costs, including Compensation and Benefits		202,462			45,699			369,211			142,875

TOTAL ALL OTHER OPERATING EXPENSES		343,425			184,419			911,348			634,602

OPERATING INCOME (LOSS)		(290,233	)		(50,242	)		(575,806	)		(189,604	)

OTHER INCOME (EXPENSE):
Interest income		—			—			—			—
Interest (expense)		(26,601	)		—			(79,819	)		—
Other Income (expense)		—			20			2,887			4,373

NET OTHER INCOME (EXPENSE):		(26,601	)		20			(76,932	)		4,373

NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX		(316,834	)		(50,222	)		(652,738	)		(185,231	)

PROVISION FOR INCOME TAX		—			—			—			—

NET INCOME (LOSS)	$	(316,834	)	$	(50,222	)	$	(652,738	)	$	(185,231	)

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

BASIC & DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK (000 OMITTED)		49,835			10,416			50,413			16,554

See Notes To Financial Statements

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(CONDENSED INTERIM FINANCIAL STATEMENTS)

FOR THE NINE MONTHS ENDING MARCH 31,


	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(652,738	)	$	(185,231	)
Adjustments to reconcile net (loss) to net cash from (to) operating activities:
Stock Issued for Services		—			—
Depreciation Property & Equipment		59,310			37,500
Amortization Patents & Formulas		3,676			—
Changes in operating assets and liabilities which increase (decrease) cash flow:
Accounts Receivable		87,447			35,314
Inventory		173,259			117,001
Prepaid Expenses		—			—
Accounts Payable and accrued expenses		294,552			(45,483	)

Net cash provided (used) from operating activities		(34,494	)		(40,899	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital (Outlays)/Disposals - net		(1,029	)		(184	)
Other Assets		—			(850	)
Investment in Subsidiary Nano Chemical Systems, Inc.		—			—

Net cash provided (used) from investing activities		(1,029	)		(1,034	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Due to Related Parties		103,310			—
Term note due to major shareholder		—			—
Owner contributes to Company in acquisition of GreenTree		—			—
Stock sales for cash		330,467			—

Net cash provided (used) from financing activities		433,777			—

NET INCREASE (DECREASE) IN CASH EQUIVALENTS		398,254			(41,933	)

CASH AND CASH EQUIVALENTS - Beginning of Period		7,548			80,756

CASH AND CASH EQUIVALENTS - End of Period	$	405,802		$	38,823

See Notes to Unaudited Financial Statements

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(CONDENSED INTERIM FINANCIAL STATEMENTS)

FOR THE NINE MONTHS ENDING MARCH 31,


	2006		2005
SUPPLEMENTAL DISCLOSURE

CASH PAID FOR:
Interest	$	79,819	$	—
Taxes	$	—	$	—

NON CASH INVESTING AND FINANCING ACTIVITIES:

Acquisition of Nano Chemnical Systems, Inc., a subsidiary Stock issued for assets (formulas)	$	—	$	50,000

Asset purchase acquiring selected assets and liabilities of GreenTree LLC in a reverse merger acquisition
Stock issued	$	—	$	133,333
Note payable to GreenTree LLC (Marc Mathys)	$	—	$	1,333,000
Elimination of part of the debts and advances of Marc Mathys and affiliates in the asset purchase and ongoing operations	$	—	$	577,595
Contribution to paid in capital in excess of par	$	—	$	695,928

See Notes to Unaudited Financial Statements

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

FROM SEPTEMBER 1, 2003 (INCEPTION) TO YEAR ENDING JUNE 30, 2005 (AUDITED)

AND FOR THE NINE MONTHS ENDING MARCH 31, 2006 (UNAUDITED)


	Common Stock Par Value $0.001					Paid In Excess of Par			Owner’s Capital Pre Merger			Accumulated (Deficit)			Net Equity (Deficiency)
	Shares		Amount			Paid In Excess of Par			Owner’s Capital Pre Merger			Accumulated (Deficit)			Net Equity (Deficiency)
Balance - September 1, 2003	—		$	—		$	—		$	—		$	—		$	—
Owner’s investment										1,584,666						1,584,666
(Loss) for Period September 1, 2003 (Inception) to June 30, 2004 (Year End) (10 Months)													(785,474	)		(785,474	)

Balance - June 30, 2004	—			—			—			1,584,666			(785,474	)		799,192
Common Stock Issued prior to the change of control of the Company on January 27, 2005 when previously known as Heritage Scholastic Corp.
Not part of the change in control	5,551,000			5,551			(5,551	)								—
Part of the change in control	25,928,500			25,928			(25,928	)								—
Common stock issued on January 27, 2005 in exchange for Nano Chemical Systems, Inc., a wholly owned subsidiary	36,000,000			36,000			14,000						—			50,000
Stock returned from the January 27, 2005 ownership change of 61,928,500 shares of previously issued and newly issued stock	(49,926,500	)		(49,926	)		49,926			—			—			—
First phase in purchase of a portion of the assets and customer base of GreenTree Spray Technologies, Inc. on March 15, 2005
Stock issued	24,000,000			24,000			76,000			(100,000	)					—
Note issued to owner										(1,000,000	)					(1,000,000	)
Second phase completing the passing all of the assets and operations of GreenTree Spray Technologies, Inc. into the Company on June 30, 2005
Stock issued	8,000,000			8,000			25,333			(33,333	)					—
Note issued to owner										(333,000	)					(333,000	)
Debt GreenTree Spray retained										577,595						577,595
Reclassify rest of Owner’s Capital							695,928			(695,928	)					—
(Loss) for the fiscal year													(563,157	)		(563,157	)

Balance - June 30, 2005	49,553,000			49,553			829,708			—			(1,348,631	)		(469,370	)
(Loss) for the period													(101,980	)		(101,980	)

Balance - September 30, 2005	49,553,000		$	49,553		$	829,708		$	—		$	(1,450,611	)	$	(571,350	)
(Loss) for the period													(233,924	)		(233,924	)

Balance - December 31, 2005	49,553,000		$	49,553		$	829,708		$	—		$	(1,684,535	)	$	(805,274	)
Stock issued for cash	2,496,491			2,496			327,971									330,467
(Loss) for the period													(316,834	)		(316,834	)

Balance - March 31, 2006	52,049,491		$	52,049		$	1,157,679		$	—		$	(2,001,369	)	$	(791,641	)

See Notes to Financial Statements

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

NOTE 1 – Organization, History and Business Activity

General

As a result of the Share Exchange Agreement, NCS became a wholly owned subsidiary of Heritage Scholastic Corporation. In connection with the Share Exchange Agreement, on February 15, 2005, Heritage Scholastic Corporation changed its name from Heritage Scholastic Corporation to Nano Chemical Systems Holdings, Inc. (hereinafter the “Company”).

The Company has authorized 100,000,000 shares of common stock, par value of $0.001, with 52,049,491 shares issued and outstanding as of March 31, 2006. In addition, the Company has authorized 20,000,000 shares of preferred stock, par value of $0.001, none of which is issued or outstanding. Rights of preferred stock will be defined before or when issuance on such stock occurs.

Refer to the Note for “Related Party Transactions” for significant ownership and control, and to Note for “Financial Condition and Going Concern” as to the change in management.

ACQUISITION OF ASSETS AND OPERATIONS OF GREENTREE SPRAY TECHNOLOGIES, LLC

Pursuant to an Asset Purchase Agreement between the Company and GreenTree Spray Technologies, LLC, a Delaware limited liability company (“GreenTree”) hereinafter referred to as the “GreenTree Asset Purchase Agreement,” or the “GreenTree Agreement”, the Company purchased the manufacturing assets, technical know-how, proprietary chemical formulae, and other assets and forward going operations of GreenTree in exchange for 32,000,000 shares of its restricted common stock and a promissory note in the principal amount of $1,333,000 (the “GreenTree Note”). The GreenTree Note requires quarterly interest accrued at 8% per annum with a final balloon payment equal to all remaining outstanding principal and interest due on March 31, 2007. Certain assets of the Company secure the GreenTree Note. The GreenTree Asset Purchase Agreement took effect over two phases. The first phase encompassed approximately 75% of the assets and operations on March 15, 2005, and the second phase brought in the balance of the assets and operations on June 30, 2005.

This agreement brought about a merger referred to as a “reverse acquisition” as discussed further in this footnote. For purposes of simplicity, the entire acquisition is recognized as of March 31, 2006.

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

Refer also to other Notes discussing this purchase from GreenTree Agreement.

Financial reporting of Company treated as a “reverse acquisition”

The Subsidiary, Nano Chemical Systems, Inc., owns two patent applications it acquired for a value of $50,000. The Company is seeking funding to develop these patents, while at present it has no operations. The rest of the Company and its operations are operated under the Company and come from the GreenTree Asset Agreement.

Pursuant to the GreenTree Agreement, all GreenTree assets were transferred into the Company in two steps, the first on March 15, 2005 and the second on June 30, 2005. The owner of GreenTree took control and owns the majority of stock in the Company. Prior to the Agreement, the Company had assets in the form of two patent applications valued at $50,000 but no operations. GreenTree has assets and on going operations.

The GreenTree Agreement constitutes a “reverse acquisition.” Accordingly, the prior financial history of the Company drops out and the financial history of GreenTree steps into its place, even though the Company survives the merger.

In August 2003, Marc Mathys (owner of GreenTree) purchased the assets of the then recently closed aerosol plant and operations of GreenTree Chemical Technologies, Inc., a division of an unrelated company, located in Seaford, Delaware. He reopened the plant in the same location and reestablished the manufacturing of canned aerosol products. On March 21, 2005, a Delaware limited liability company (LLC) was organized under the name of GreenTree Spray Technologies, LLC (“GreenTree”) and is owned 100% by Marc Mathys. It holds the secured promissory note the Company owes of $1,333,000.

NOTE 2 – Summary of Significant Accounting Policies

(a) – General Statement of Accounting and Basis of Presentation

The Company prepares its books and records on the accrual basis for financial reporting. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The Company has the following wholly owned subsidiary:

Nano Chemical Systems, Inc.

The accompanying consolidated financial statements include the accounts of its subsidiary. All significant intercompany balances and transactions have been eliminated.

(b) – Income Taxes

The Company has adopted the provisions of statements of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” which incorporates the use of the asset and liability approach of accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future consequences of

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

temporary differences between the financial reporting basis and the income tax basis of assets and liabilities. Due to the GreenTree Agreement, the Company underwent an ownership change as defined in Section 382 of the Internal Revenue Code. Refer to the Note on “GreenTree Agreement.” Of the $1,685,000 accumulated losses of the Company, only $450,000 is available to the Company as a net operating loss carry forward useable through June 30, 2026. No income tax benefit is recognized in the financial statements, as it is not known whether such losses will be applied in the future.

NOTE 3 – Financial Condition and Going Concern

The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The operations of the Company since inception (September 1, 2003) have sustained continued operating losses. In the event the Company is unable to raise sufficient operating capital, the aforementioned conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the occurrence of such conditions and have been prepared assuming that the Company will continue as a going concern.

Since June 30, 2005, the Company has appointed James Ray as the new Chief Executive Officer (“CEO”), and Marc Mathys has resigned as a member of the Board of Directors. Under the direction of James Ray, new management has concluded that a more effective marketing approach is needed to increase the operations and to turn the Company into a profitable operation. The Company plans to begin efforts to develop a marketing arm for the Company once additional funding is obtained. The plant can handle much more volume in its existing plant configuration.

The Company continues working on raising capital funds that management anticipates will sustain the operations of the Company and provides the means for the Company to turn its operations into a profitable situation.

NOTE 4 - GreenTree Agreement

On or about March 15, 2005 a Form 8-K was filed with the Securities and Exchange Commission (“SEC”) disclosing the GreenTree Agreement and that the first phase had taken place and that the second phase would take place on or before June 30, 2005. The second phase took place on June 30, 2005. Under the GreenTree Agreement, the Company ultimately acquires all of the assets, proprietary chemical formulations, know how, intellectual property, goodwill, and operations going forward, of GreenTree. The Company’s results of operations as of December 31, 2005 and 2004 recognize the entire operations of GreenTree.

On March 15, 2005, the Company and GreenTree Spray Technologies, LLC (“GreenTree”), owned 100% by Marc Mathys, entered into an Asset Purchase Agreement (“GreenTree Agreement”) buying approximately 75% of all of the assets and ongoing operations of GreenTree in exchange for a $1,000,000 promissory note bearing 8% accrued interest with the entire amount due on March 31, 2007 and for 24,000,000 newly issued restricted shares of common stock of the Company valued at $100,000. On June 30, 2005, the remaining balance of the assets and ongoing

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

operations completed the asset purchase in exchange for an additional $330,000 promissory note and 8,000,000 shares of common stock of the Company valued at $33,333. This totals $1,333,000 for the note payable to GreenTree, as a related party, and $133,333 for the fair value of the stock issued. The debt obligation is secured by the assets transferred, or its equivalent thereafter, as outlined in the Security Agreement. The Company has not made the required quarterly interest payments under the GreenTree Note, and therefore, is currently in default under the GreenTree Note. Currently, $79,819 in accrued interest is payable and is included as part of the $303,310 Due to Related Parties on the Balance Sheet as of March 31, 2006.

The excess paid over the recorded value of the assets, including the $133,333 fair value for the common stock issued, is considered intangible assets, including goodwill. However, in a “reverse acquisition,” the excess rather than recognize it as “intangible assets” is recognized as an offset in equity. This is as per the guidelines set forth by the Staff of the Securities and Exchange Commission (“SEC”). In dealing with “reverse acquisitions,” the Staff of the SEC takes the position that a “reverse acquisition” is a restructuring of the ownership and equity of the Company, not a purchase, and therefore, it does not fall under the guidelines of the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 141, “Business Combinations” (“FASB 141”). FASB 141 recognizes an asset purchase as a business combination and requires an entity to record the asset purchase as a purchase, wherein the Company then assigns the fair value as the amount to record the value of assets on the financial statements at the point of purchase. Consequently, FASB 141, which would recognize goodwill and intangibles, does not get recognized in this form of an asset purchase under the guidelines of the Staff of the SEC. These financial statements follow the guidelines of the Staff of the SEC.

NOTE 5 - GreenTree Initial Asset Value & its Affect on the Financial Statements

Marc Mathys purchased the assets of GreenTree from an unrelated third party company effective September 1, 2003 for $300,000 plus additional amounts he had to pay over the next few months to keep selected vendors supplying raw materials and selected other creditors to continue providing needed services and facilities. This increased his actual purchase price to approximately $365,000. He did not buy the predecessor’s company nor assume their position. Rather, he acquired it as an asset purchase. He did buy and use the predecessor’s computer software and accounting system that has remained in place to do the accounting even as of March 31, 2006.

When GreenTree was originally acquired the assets of the predecessor company, effective September 1, 2003, by Marc Mathys, the assets were recorded at the value as carried on the predecessor company’s records. As this was at the predecessor’s cost, or what was thought at the time to be the estimated market value on the date of purchase by Marc Mathys, then this accounting treatment approximated fair value at the date of purchase. This does not conform to the accounting requirements as promulgated by FASB No. 141, effective after June 30, 2001, which requires virtually all business combinations be accounted for based on the values exchanged; i.e., the purchase method of accounting (recording what you paid for the assets, not what they may be worth).

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

GreenTree recorded its assets at the value as carried on the predecessor company’s records, which approximated $1,100,000, or approximately $735,000 more than cost. The Company in developing the financial statements concluded that the spirit of FASB No. 141 is best served to have comparable statements of operations at the sacrifice of using the purchase method of accounting. So, rather than recognize a “built in gain” in the statement of operations, this difference of approximately $735,000 has been removed from the statement of operations and instead placed in the balance sheet as part of “Owner’s Capital Pre Merger” as recognized on the Statement of Stockholders’ Equity. Management is of the opinion that the accounting treatment reporting the assets at the predecessor’s cost more uniformly recognizes revenues and expenses in a more consistent light than if the purchase method of accounting had been used. The method used more clearly reflects the results of operations for each year ending June 30, 2004 and 2005 and each corresponding quarter therein, thus allowing one to more clearly see the results of operations in a consistent and more meaningful manner than would otherwise be reported. It also reflects more clearly the overall results of operations and asset values on a consistent basis, taking into consideration the required method of accounting to recognize the asset purchase of the assets from GreenTree by the Company on March 15, 2005 and completed on June 30, 2005 as discussed in the prior Note “GreenTree Agreement.”

The only difference in comparing the assets from September 1, 2003 (date of inception), which is not using the purchase price, and as recognized as of June 30, 2005, which uses the purchase price, is the values assigned to property and equipment. The Company has elected accelerated depreciation methods to more quickly bring the two methods into compliance with each other. Management estimates that the net asset value of property and equipment at March 31, 2006 is approximately $75,000 greater using the predecessor’s basis over what the purchase method of accounting would reflect. All other assets as of March 31, 2006 are at cost, as the flow through of the costs established at September 1, 2003 have long since passed through the accounting in the financial statements. Again, these “built in gains, “ or differences, are not recognized in the statements of operations, but rather are recognized in one step in the statement of stockholders’ equity as part of the initial balance of “Owner’s Capital Pre Merger,” except for the additional depreciation expense recognized through the statement of operations of approximately $66,700 for the ten months ended June 30, 2004 and of approximately $67,100 for the fiscal year ended June 30, 2005, and of approximately $52,000 for the nine months ended March 31, 2006.

NOTE 6 – Related Parties

As of March 31, 2006, four shareholders own the controlling interest in the Company, namely:


Marc Mathys		32,000,000 shares, or 61.5% interest
Treya, Inc.		8,000,000 shares, or 15.4% interest
Katrina Cleburn		4,000,000 shares, or 7.7% interest

As of March 31, 2006, one individual not listed above controls approximately 5,300,000 stock options he can exercise at $0.10 per share. As of May 8, 2006, he has exercised none of the stock options. A dispute has arisen concerning the viability and transferability of the stock options as well as the number of stock options available. The parties have requested a legal opinion from the Company attorney to help resolve this matter. This matter remains unresolved.

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

Marc Mathys and his related companies (GreenTree LLC and Harvard Chemical) combined are owed by the Company at least $1,333,000 plus accrued interest at 8% since around March 15, 2005. Refer to Note on “Contingent Liability Regarding GreenTree Agreement” for further explanation regarding this matter.

The $1,333,000 note payable plus accrued interest is due March 31, 2007. The $1,333,000 note amount is reported as a long-term debt even though it is due one year from March 31, 2006. Management is of the opinion that for the time being it should remain reporting as a long-term debt rather than as a current liability because there remains an unresolved dispute between the Company and the related party creditor. The resolution of this dispute most likely will alter the terms and amount of the note to a more favorable position for the Company. In addition, the note payable, in Management’s opinion, does not adequately address what happens in the event the note goes into default or is not paid off when due. The note holder has resigned from management as an officer and as a director of the Company and presently does not participate in the operations and activities of the Company.

NOTE 7 – Contingent Liabilities Regarding GreenTree Agreement

In the GreenTree Agreement, the Management takes the position that the Company assumes no liabilities, both known and unknown. Marc Mathys, who has since resigned as an officer and director of the Company even though he remain as the majority shareholder, disagrees and also indicates the receivables did not go to the Company. Legal counsel is being sought to resolve the issue, which remains unresolved as of May 9, 2006.

As of March 31, 2006, the Company has recognized some liabilities it claims it does not owe as well as the receivables Marc Mathys claims are not the Company’s, the net of which approximates $680,000 liabilities over what management believes the GreenTree Agreement states. In contrast, Marc Mathys believes the GreenTree Agreement requires the Company to assume approximately $578,000 more in liabilities over what is recognized in the financial statements as of June 30, 2005 as well as in these financial statements as of March 31, 2006.

Management and Marc Mathys continue negotiating how to resolve these matters. Management is of the opinion that the Company is presently recognizing in these financial statements the maximum it will ultimately owe Marc Mathys and his entities.

GreenTree has not paid Tech Spray, L.P., a supplier, for $226,000 in raw material product purchased the end of June 2005. The vendor filed a complaint in Delaware seeking collection against GreenTree as well as Marc Mathys personally. GreenTree claims the debt is owed by the Company, while the Company claims it is owed by Marc Mathys, d.b.a. GreenTree. Both GreenTree and the Company acknowledge the money is owed; each claiming it is the responsibility of the other. The entire amount due is recognized as part of the accounts payable by the Company and is part of the $680,000 the Company believes is not its responsibility to pay.

In conjunction with pending legal matters, the Company could be indirectly held obligated to pay two legal proceedings regarding the GreenTree operations prior to the Company acquiring the GreenTree assets and operations. Management considers these two legal matters as not obligations of the Company and therefore no amounts have been recognized in the financial statements for these contingent liabilities.

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

The first matter deals with sixteen containers used in the operations that GreenTree understood and said it owned. However, Mitchell Container Services, Inc. has filed a lawsuit in Delaware which may now be in a default judgment, demanding $22,000 in back rents and other related costs to collect and another $26,000 to buy out the containers, for a total of $48,000.

The second matter stems from a series of violations identified by the Environmental Protection Agency (“EPA”). The EPA has proposed a series of penalties totaling approximately $105,000. These proposed penalties EPA has filed against GreenTree LLC and Marc Mathys personally. The Company is not named in the EPA complaint. The proposed penalties relate to violations occurring prior to 2005, and have nothing to do with the time since the Company took over the operations of GreenTree.

NOTE 8 – Equity

During the quarter ended March 31, 2006 the Company completed three stock subscription agreements executed under Regulation S Stock Purchase Agreement. As further discussed under Note “Subsequent Events,” a total of 2,496,491 new shares of common stock were issued for $330,467.

NOTE 9 – SEC Investigation of the Company

During the quarter ended March 31, 2006 the Company received a subpoena issued by the Securities and Exchange Commission (“SEC”) asking for certain data, documents, and depositions dealing primarily with the acquisitions and ownership changes of the Company since 2004 and forward. Management is of the opinion that it has provided all that the SEC has requested and intends to remain totally cooperative with the requests of the SEC. The current status of this investigation is unknown by the Company.

NOTE 10 – Subsequent Events

On April 20, 2006 the Company incorporated SeaSpray Aerosol, Inc. in the State of Delaware. This wholly owned subsidiary is created to house the operations of the Company rather than have the operations in the Company. Management anticipates this new wholly owned subsidiary will be up and functioning before June 30, 2006.

An additional 2,390,080 shares of common stock have been issued for $256,372 since March 31, 2006 up to and including May 8, 2006. No additional shares of stock have been issued since then to the date of the filing of the March 31, 2006 Form 10-QSB.

NANO CHEMICAL SYSTEMS HOLDINGS, INC AND SUBSIDIARY

NOTES TO CONSOLIDATED CONDENSED INTERIM

UNAUDITED FINANCIAL STATEMENTS

MARCH 31, 2006

As of May 8, 2006, the Company had three (3) Regulation S Stock Purchase Agreements in place (Subscription Agreements), with only the subscription agreement effective February 28, 2006 as active. This subscription agreement authorizes the sale of stock at 32% of the previous day’s last trade price for a maximum of $2,000,000. As of May 9, 2006 this subscription agreement has sold 4,886,571 shares for a total of $586,839. The other two subscription agreements, dated December 16, 2005 for 4,455,310 shares at $0.38 per share, and the other also dated December 16, 2005 for 4,455,310 shares at $.038 per share, remain inactive as of May 8, 2006.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

INFORMATION RELATED TO FORWARD LOOKING STATEMENTS

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”), we are hereby providing cautionary statements identifying important factors which could cause our actual results to differ materially from those projected in forward-looking statements made herein. Any statements which express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions of future events or performance are not statements of historical facts and may be forward-looking. These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, including but not limited to, economic, competitive, regulatory, growth strategies, available financing and other factors discussed elsewhere in this report and in documents we have filed with the Securities and Exchange Commission. Many of these factors are beyond our control. Actual results could differ materially from the forward-looking statements made. In light of these risks and uncertainties, there can be no assurance that the results anticipated in the forward-looking information contained in this report will, in fact, occur.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Nano Chemical Systems Holdings, Inc., a Nevada corporation, was incorporated on July 30, 1999 under the name “Heritage Scholastic Corporation.” Prior to conducting its current operations, the Company was engaged in the business of publishing and distributing supplemental history textbooks for grades K through 12. However, on January 27, 2005, pursuant to a Stock Purchase and Share Exchange Agreement (the “Share Exchange Agreement”) between Heritage Scholastic Corporation, Nano Chemical Systems, Inc., a Nevada corporation (“NCS”), and the shareholders of NCS, Heritage Scholastic Corporation issued 36,000,000 shares of its issued and outstanding stock to the shareholders of NCS in exchange for 100% of the issued and outstanding stock of NCS. As a result of the Share Exchange Agreement, NCS became a wholly-owned subsidiary of Heritage Scholastic Corporation. In connection with the Share Exchange Agreement, on February 15, 2005, Heritage Scholastic Corporation changed its name from Heritage Scholastic Corporation to Nano Chemical Systems Holdings, Inc. (hereinafter the “Company”). To date we have devoted most of our efforts to developing our business plan, generating a demand for our products and raising working capital through equity financing. Our ability to generate revenues is primarily dependent upon our ability to cost-effectively and efficiently develop and market our proprietary products and successfully service our present customers. During the next six to twelve months of operations our priorities are to:

implement a marketing strategy to reach our target markets;

develop and strengthen our strategic relationships with suppliers and distributors;

respond to competitive developments in the marketplace;

establish the brand identity of our proprietary products; and

continue to service our present customer base.

The Company currently manufactures and sells aerosol-delivered janitorial and industrial products, waxes, lubricants, and polishes to other companies, which those companies then sell under their own brand-names. The Company also has its own line of branded products. Management believes that the Company can employ its excess production capacity to combine its aerosol operations with nanotechnology in order to bring to market aerosol-delivered nanoparticle products.

In order to make the most efficient use of the capital available to us, we plan to conduct a limited research and development program for new products that will attempt to take advantage of nano-particulate enhancement. In particular, the Company has a line of solvents, penetrating oils, glass cleaners, and polishes for automobiles which will benefit from the inclusion of nano-particulates.

We plan to use the nanomaterials and titanium dioxide technology to produce titanium dioxide nanoparticles. Titanium dioxide nanoparticles and other products we intend to initially produce with the nanomaterials and titanium dioxide technology generally must be customized for a specific application working in cooperation with the end-user. We are still testing and customizing our titanium dioxide nanoparticle products for various applications and have no long-term agreements with end-users to purchase any of our titanium dioxide nanoparticle products. We may be unable to recoup our investment in the nanomaterials and titanium dioxide technology and nanomaterials and titanium dioxide equipment for various reasons, including the following:

products utilizing our titanium dioxide nanoparticle products, most of which are in the research or development stage, may not be completed or, if completed, may not be readily accepted by expected end-users;

we may be unable to customize our titanium dioxide nanoparticle products to meet the distinct needs of potential customers;

potential customers may purchase from competitors because of perceived or actual quality or compatibility differences;

our marketing and branding efforts may be insufficient to attract a sufficient number of customers; and

because of our limited funding, we may be unable to continue our development efforts until a strong market for nanoparticles develops.

We have not produced any nanoparticles or other products using our nanomaterials and titanium dioxide technology and equipment on a commercial basis. Our actual costs of production, or those of our licensees, may exceed those of competitors. Even if our costs of production are lower, competitors may be able to sell titanium dioxide and other products at a lower price than is economical for us or our licensees.

The Company is primarily dependent upon six large customers and operates in a highly competitive environment. One of these six customers, Pioneer Manufacturing, Inc., provides the majority of the Company’s sales. The loss of this major customer would have a negative impact on the future operations of the Company.

RESULTS OF OPERATIONS—QUARTER ENDING MARCH 31, 2006 AND 2005

For the nine months ended March 31, 2006, we had losses totaling $652,738 compared to losses of $185,231 for the same period in 2005. This increased loss of $467,507 is primarily attributed to a $380,168 decrease in sales. Since inception to March 31, 2006, we had losses totaling $2,001,369. For the quarter ended March 31, 2006, we had losses totaling $316,834 compared to losses of $50,222 for the same period in 2005. As we implement our business plan, we believe our revenues should increase consistently. By focusing our efforts on limiting general and administrative expenses as we increase revenue, we expect to establish net income.

Cost of revenue generally includes costs associated with direct costs of materials. Cost of revenue for the nine months ended March 31, 2006 was $687,083 compared to $957,795 for the same period in 2005. For the quarter ended March 31, 2006, we had costs totaling $140,042 compared to costs of $250,717 for the same period in 2005. The decrease in cost of revenue was generally attributed to a decrease in sales. We expect that this figure will increase significantly as we implement our business plan and increase production of our products.

Research and development expenses, which primarily consist of costs associated with the Company’s development or acquisition of new products, was $46,800 for the nine months ended March 31, 2006, compared to $-0- for the same period in 2005. For the quarter ended March 31, 2006, we had costs totaling $46,800 compared to costs of $-0- for the same period in 2005. The increase in research and development expense was largely attributed to initiating work on the new nanomaterials products.

Selling, general, and administrative expense were $911,348 for the nine months ended March 31, 2006, compared to $634,602 for the same period in 2005. For the quarter ended March 31, 2006, we had costs totaling $343,425 compared to costs of $189,419 for the same period in 2005. The increase was primarily attributed to an increase in legal and accounting fees and costs. We expect that selling, general and administrative expenses will increase as the Company implements its business plan. We expect this increase to take the form of increased wages and employee expenses, sales and marketing expense, and other general and administrative expenses; however, we intend to ensure that any increase in the aforementioned expenses remains commensurate with an increase in revenues.

Interest expense for the nine month period ended March 31, 2006 was $79,819, compared to $0 for the same period in 2005. These increases were due to the GreenTree Note, described below in “Financing.”

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash, cash equivalents, and investments amounted to $405,802 as of March 31, 2006. The net cash used by the Company’s operating activities was $34,494 and $40,899 for the nine months ended as of March 31, 2006 and 2005, respectively. Net cash provided by financing activities, which is primarily due to major shareholder capital contributions and a note payable, amounted to $437,777 for the nine months ended March 31, 2006, compared to $0 used in the quarter ended March 31, 2005.

As of May 10, 2006, we had cash on hand of approximately $95,193 which is sufficient to satisfy our operating requirements through May 31, 2006. To satisfy our operating requirements through June 30, 2006 we estimate that we will need an additional $100,000. If we do not generate revenues or secure debt or equity financing before the end of June 30, 2006, we anticipate that we will be unable to adequately package and sell the nano enhanced products that are being developed by our Research and Development department.

The Company’s actual future capital requirements in 2006 and beyond will depend, however, on many factors, including customer acceptance of the Company’s current and potential products, continued progress in the Company’s research and development activities and product testing programs, the magnitude of these activities and programs, and the costs necessary to increase and expand the Company’s manufacturing capabilities and to market and sell the Company’s products. Other important issues that will drive future capital requirements will be the development of new markets and new customers as well as the continued service of existing customers.

FINANCING

On June 30, 2005, the Company completed the issuance of a promissory note in the principal amount of One Million Three Hundred Thirty Three Thousand and No/100 Dollars ($1,333,000) to the Company’s largest shareholder, Green Tree Spray Technologies, LLC, a Delaware limited liability company (the “GreenTree Note”). The GreenTree Note was issued as part of the consideration under the Asset Purchase Agreement dated March 15, 2005, by and between GreenTree Spray Technologies, LLC and the Company. The GreenTree Note requires quarterly interest payments at 8% per annum with a final balloon payment equal to all remaining outstanding principal and interest due on March 15, 2007. The GreenTree Note is secured by certain assets of the Company. The Company has not made the required quarterly interest payments under the GreenTree Note, and therefore, is currently in default under the GreenTree Note.

On February 28, 2006, we entered into a Regulation S Stock Purchase Agreement (“Stock Purchase Agreement”) with Xtera Establishment Corporation, a Panamanian company (“Xtera”). Under the Stock Purchase Agreement, Xtera may, at its discretion, periodically purchase shares of our common stock for a total purchase price of up to $2,000,000. For each share of common stock purchased under the Stock Purchase Agreement, Xtera will pay us 32% of the previous day’s trading price of our common stock, as reported on the Over-the-Counter Bulletin Board or other principal market on which our common stock is traded. Xtera will notify us of its desire to purchase shares of our common stock by sending us a written purchase notice, which notice shall set forth the number of shares Xtera desires to purchase and the total consideration due to us. To date, we have sold 4,886,571 shares of our common stock to Xtera and have received proceeds of $586,839 under the Stock Purchase Agreement. There can be no assurance that Xtera will purchase any additional shares of our common stock under the Stock Purchase Agreement.

On December 15, 2005, we entered into two Stock Purchase and Subscription Agreements with Mercatus & Partners, LP (“Mercatus”) (collectively, the “Mercatus Agreements”). Under each Mercatus Agreement, Mercatus may purchase 4,455,310 shares of our common stock at $.38 per share. Each Mercatus Agreement provides Mercatus up to thirty (30) days to purchase our common stock. If we do not receive payment for the common stock within thirty (30) days from the date of execution of the Mercatus Agreements, we may demand that the shares be returned to us. As of the date of this filing, the Company has not received any funding under either Mercatus Stock Purchase Agreement and there can be no assurance that the Company will ever receive any proceeds under either Mercatus Stock Purchase Agreement.

We compete or may compete against entities which are much larger than we are, have more extensive resources than we do, and have an established reputation and operating history. Because of their size, resources, reputation, history and other factors, certain of our competitors may be able to exploit acquisition, development, and joint venture opportunities more rapidly, easily or thoroughly than we can. In addition, potential customers may choose to do business with our more established competitors, without regard to the comparative quality of our products, because of their perception that our competitors are more stable, are more likely to complete various projects, are more likely to continue as a going concern, and lend greater credibility to any joint venture.

Should events arise that make it appropriate for the Company to seek additional financing, it should be noted that additional financing may not be available on acceptable terms or at all, and any such additional financing could be dilutive to the Company’s stockholders. Such a financing could be necessitated by such things as the loss of existing customers, currently unknown capital requirements in light of the factors described above, new regulatory requirements that are outside the Company’s control; or various other circumstances coming to pass that are currently not anticipated by the Company.

GOING CONCERN

From our inception on September 1, 2003 through March 31, 2006, we have incurred operating losses of $2,001,369. The likelihood of our success must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new businesses. Our independent auditors have issued a going concern qualification in their report dated October 8, 2005, which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate sufficient cash flows to meet our obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations. However, there can be no assurance that we will generate sufficient revenues from the services offered by us to operate at a profit or pay expenses.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make significant estimates and judgments which affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions 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 which are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Stock Based Compensation. In December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based Payment.” SFAS 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) replaces FASB Statement No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply SFAS 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The Company has evaluated the impact of the adoption of SFAS 123(R), and does not believe that it will impact the company’s overall results of operations and financial position.

Impairment or Disposal of Long-Lived Assets. In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. The adoption of this Statement is not expected to have a material effect on our financial statements.

Revenue Recognition. The Company expects our primary source of revenue to come from the sales of our products. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or the service has been performed, the fee is fixed and determinable, and collectibility is probable.

In May 2003 the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument which is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after December 15, 2003. The adoption of this Statement is not expected to have a material effect on our financial statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 3. CONTROL AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures are, in fact, not effective in recording, processing, summarizing and reporting information required to be disclosed by the Company in the reports it files or submits under the Exchange Act within the time periods specified in the Commission’s rules and forms.

Historically, the Company has not had a formal system of controls and procedures due to the fact that the Company is small in size and has had limited operations. Currently, management, with the oversight of the Principal Executive Officer and Principal Financial Officer, is devoting considerable effort to developing and implementing a formal system of disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

In connection with the evaluation of the Company’s internal controls during the Company’s quarter ended March 31, 2006, the Company’s Principal Executive Officer and Principal Financial Officer have

determined that there are no changes to the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially effect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the Matter of Nano Chemical Systems Holdings, Inc., (SF-2982). On January 26, 2006, the Company received a subpoena from the U.S. Securities and Exchange Commission (the “SEC”) requesting production of documents relating to the following matters: (i) the Stock Purchase and Share Exchange Agreement with Heritage Scholastic Corporation; (ii) the Asset Purchase Agreement with GreenTree Spray Technologies, LLC; (iii) our issuance of stock to various investors; (iv) our issuance of press releases; and (v) our filings under the Securities Exchange Act of 1934. The Company has responded to the subpoena and intends to cooperate fully with the SEC in this matter.

In conjunction with the following pending legal matters, management believes that there is a remote possibility that the Company will be held liable to pay damages and/or fines alleged or assessed against GreenTree Spray Technologies, LLC (“GreenTree”) as a result of its acquisition of certain assets of GreenTree. Although management believes that these legal matters are not obligations of the Company, it has reserved sufficient amounts to discharge the obligations owed to Tech Spray in the event the Company is found legally responsible for these matters. No amounts have been reserved in the financial statements included in this 10-QSB for the action brought by the Environmental Protection Agency against Marc Mathys or for the action brought by Mitchell Container against GreenTree.

In the Matter of: Marc Mathys d/b/a GreenTree Spray Technologies, LLC, U.S. EPA Docket Number RCRA-03-2005-0191, pending before Administrative Law Judge Carl Charneski. On June 30, 2005, the Environmental Protection Agency filed a complaint against Marc Mathys d/b/a GreenTree Spray Technologies, LLC (“GreenTree”), seeking fines of $103,738.00 for violations of the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Sections 6901 et seq. The complaint is divided into seven counts as follows: 1) owning and/or operating a hazardous waste storage facility without a permit or interim status, 2) failure to keep hazardous waste containers closed, 3) failure to provide workers with hazardous waste training, 4) inadequate contingency plan, 5) failure to conduct weekly inspections, 6) inadequate 2003 annual report, and 7) improper management of universal waste lamps. The conduct complained of has been corrected since 2004. The EPA named Mr. Mathys individually because it alleges that the violations complained of occurred before the formation of GreenTree Spray Technologies, LLC. The director of Research and Development at GreenTree, via a response to the complaint, has admitted GreenTree’s guilt as to most of the violations. The Company does not believe that it is liable for these civil fines, and is of the opinion that payment of any fines is the responsibility of the parties who operated the plant at the time of the alleged violations. Furthermore, the Company believes that the parties who operated the plant at the time of the alleged violations are contractually bound to indemnify the Company against any environmental liability assessed against the Company.

Mitchell Container Services, Inc. v. GreenTree Spray Technologies, LLC, Case No. 2005-04-094, pending before the Court of Common Pleas of the State of Delaware in New Castle County. On April 6, 2005, Mitchell Container filed an action for replevin of fourteen separate 550 gallon steel containers leased to GreenTree Chemical Technologies, Inc. The plaintiff claims that GreenTree Spray Technologies, LLC had wrongfully taken possession of the containers, which GreenTree Chemical Technologies, Inc. had no right to sell. No representative from GreenTree Spray Technologies, LLC responded to the plaintiff’s complaint, and the plaintiff has obtained a default judgment of $46,235.50 against GreenTree Spray Technologies, LLC. The Company is in possession of the containers.

Tech Spray, L.P. v. GreenTree Spray Technologies, LLC, Case No. 093670-00-C, pending before the 251st District Court of Potter County Texas. On August 24, 2005, Tech Spray, L.P. filed an action to recover $226,149.00 it claims it is owed by GreenTree Spray Technologies, LLC for a delivery of 37,590 pounds of compressed gas. The court granted summary judgment in favor of Tech Spray against GreenTree. The plaintiff recently named the Company as a defendant in this matter. The Company answered the complaint on April 3, 2006.

In addition to the foregoing proceedings, the Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Other than those proceedings described above, neither the Company nor our property is a party to any known proceeding that a governmental authority is contemplating.

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

With respect to the sale of unregistered securities referenced above, all transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 (the “1933 Act”), and Regulation S promulgated under the 1933 Act. In each instance, the purchaser had access to sufficient information regarding us and our business so as to make an informed investment decision. More specifically, we had a reasonable basis to believe that each purchaser was a non “U.S. Person” as defined in Regulation S of the 1933 Act and otherwise had the requisite sophistication to make an investment in our securities.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

On March 15, 2005, the Company issued a promissory note in the principal amount of One Million Three Hundred Thirty Three Thousand and No/100 Dollars ($1,333,000) to the Company’s largest shareholder, GreenTree Spray Technologies, LLC, a Delaware limited liability company (the “GreenTree Note”). The GreenTree Note was issued as part of the consideration under that certain Asset Purchase Agreement dated March 15, 2005, by and between GreenTree Spray Technologies, LLC and the Company. The GreenTree Note requires quarterly interest payments at 8% per annum with a final balloon payment equal to all remaining outstanding principal and interest due on March 15, 2007. The GreenTree Note is secured by certain assets of the Company. The Company has not made the required quarterly interest payments under the GreenTree Note, and therefore, is currently in default under the GreenTree Note.

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

None.

ITEM 5. OTHER INFORMATION

On February 24, 2006, Dr. David Tomanek resigned as a member of the Company’s Board of Directors. Based upon written correspondence received from Dr. Tomanek, which correspondence has been filed as Exhibit 17.1 to this filing, the Company believes that Dr. Tomanek resigned for the following reasons:

Dr. Tomanek believes that the Company undertook corporate action without his approval in October 2005.

Dr. Tomanek believes that the Company owes him compensation for scientific consulting services.

Dr. Tomanek objected to the association of his likeness with the Company’s products.

The Company reluctantly accepted Dr. Tomanek’s resignation on April 20, 2006 at a meeting of the Company’s Board of Directors.

On April 20, 2006, at a meeting of the Company’s Board of Directors, the Company’s sole remaining director, Henry Simpson, increased the number of seats on the Company’s Board of Directors from three to four and appointed Mr. James Ray, Ms. Tina Dennis and Ms. Shannon Norwood to fill the three remaining vacant seats. Mr. Ray currently serves as the Company’s Chief Executive Officer. Ms. Dennis currently serves as the Company’s Chief Financial Officer. Ms. Shannon Norwood currently serves as the Company’s Vice President of Marketing and Sales. There were no transactions during the last two fiscal years, and there are no proposed transactions, that involve amounts in excess of $60,000 between the aforementioned individuals and the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


Exhibits
3.0		Articles of Incorporation of Nano Chemical Systems Holdings, Inc., previously filed as Exhibit 3.a. to the Company’s Form 10-SB, filed with the Securities and Exchange Commission on September 12, 2002, are hereby incorporated herein by reference.

3.1		Amendment to Articles of Incorporation of Nano Chemical Systems Holdings, Inc., previously filed as Exhibit 3.b. to the Company’s Form 10-SB, filed with the Securities and Exchange Commission on September 12, 2002, are hereby incorporated herein by reference.

3.2		By-Laws of Nano Chemical Systems Holdings, Inc., previously filed as Exhibit 3.c. to the Company’s Form 10-SB, filed with the Securities and Exchange Commission on September 12, 2002, are hereby incorporated herein by reference.

*10.1		Regulation S Stock Purchase Agreement dated February 28, 2006 by and between Nano Chemical Systems Holdings, Inc., Xtera Establishment Corporation, and Omega Financial Services, LLC.

*10.2		SICAV One Securities Purchase Agreement dated December 16, 2005 by and between Nano Chemical Systems Holdings, Inc., and Mercatus & Partners, LP.

*10.3		SICAV Two Securities Purchase Agreement dated December 16, 2005 by and between Nano Chemical Systems Holdings, Inc., and Mercatus & Partners, LP.

*17.1		Letter of Resignation of Director

*31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a).

*31.2		Certification of Chief Financial officer pursuant to Rule 13a-14(a).

*32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

*32.2		Certification of the Chief Financial Officer 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed Herewith

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


NANO CHEMICAL SYSTEMS HOLDINGS, INC.

By:		/s/ James Ray
		James Ray
		President and Chief Executive Officer

By:		/s/ Tina Dennis
		Tina Dennis,
		Treasurer and Chief Financial Officer (Principal Financial Officer)

EX-10.1 2 dex101.htm REGULATION S STOCK PURCHASE AGREEMENT Regulation S Stock Purchase Agreement

EXHIBIT 10.1

REGULATION S STOCK PURCHASE AGREEMENT

This Regulation S Stock Purchase Agreement is executed in reliance upon the transaction exemption afforded by Regulation S (“Regulation S”) as promulgated by the Securities and Exchange Commission (“SEC”), under the Securities Act of 1933, as amended (“1933 Act”).

This Agreement has been executed by the undersigned in connection with the private placement of shares of the Common Stock (hereinafter referred to as the “Shares”) of Nano Chemical Systems Holdings, Inc., a Nevada corporation (NASDAQ B.B. Symbol: NCSH), (hereinafter referred to as the “Seller”), Xtera Establishment Corporation, a Panamanian company, a resident of a non USA Jurisdiction (hereinafter referred to as the “Purchaser”), and Omega Financial Services LLC (a Delaware Limited Liability Corporation hereinafter referred to as the “Escrow Agent”) hereby represents and warrants to, and agrees with the Seller as follows:

1. Agreements to Purchase; Purchase Price

The Seller agrees to sell to the Purchaser in an offshore transaction negotiated outside the U.S. and to be consummated and closed outside the U.S. and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchaser agrees to purchase, subject to the conditions hereinafter set forth, from the Seller up to Two Million ($2,000,000) dollars worth of common shares (the “Shares”) of the Company at a per share purchase price (the “Purchase Price”) equal to 32% of the previous day’s last trade price (the “Closing Price”), as traded on the OTCBB, adjusted as the Closing Price changes from time to time, and subject to the conditions set forth below.

Closing; Payment. The transaction will be closed in an offshore transaction, and the Purchaser will pay the Purchase Price in US Dollars to the account of the Escrow Agent designated by the Purchaser for this purpose. Purchaser shall initiate the closing process for each purchase by sending or faxing a written purchase notice to Seller at the address set forth below (the “Purchase Notice”). The Purchase Notice shall set forth the number of Shares to be purchased and the total consideration to be paid in accordance with Purchase Price formula described in 1.a above (the “Closing”). The Company will deliver a stock certificate representing such Shares in the name of Purchaser (collectively “Certificate”) to the Escrow Agent.

Form of Payment; Escrow. Purchaser shall cause the payment of the Purchase Price by delivering good and immediately available funds in United States Dollars to the escrow trust account of Wachovia Bank, N.A. at Spotswood, NJ, 08884 for credit to the account of Seller as set forth herein. Upon receipt by Escrow Agent of the Certificate representing such shares specified within the Purchase Notice the Escrow Agent will complete the closing process by wiring the Purchase Price to the designated bank account of the Seller and forwarding the Certificate to the Purchaser.

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Delivery of Purchase Notice; Term. A Purchase Notice may be for all or a part of the Purchase Price described in l.a above. Purchaser may deliver more than one Purchase Notice, provided, however, that the number of shares purchased pursuant to all Purchase Notices shall not exceed Two Million ($2,000,000) as described in la. above. Purchaser shall have to and until January 31, 2006 (the “Termination Date”) to deliver one or more Purchase Notices to the Company at which time this Agreement shall terminate, unless extended in writing by the parties. Purchaser understands and agrees that the Company, in its sole discretion, may terminate this Agreement by providing Purchaser with a written notice two (2) days prior to the desired termination date. In the event this Agreement is terminated prior to the Termination Date, company agrees to honor all sales made prior to the Termination Date.

Covenant of Best Efforts. The Purchaser agrees to use its best efforts to purchase up to $1,000,000 dollars of shares between the date hereof and January 31, 2006. Purchaser shall only be liable to purchase the number of Shares set forth in each Purchase Notice.

2. Purchaser Representations: Access to Information; Independent Investigation

Offshore Transaction. Purchaser represents and warrants to Seller as follows:

(i)

Purchaser is not a U.S. person as that term is defined under Regulation S;

(ii)

At the time the buy order was originated, Purchaser was outside the United States and is outside of the United States as of the date of the execution and delivery of this Agreement;

(iii)

Purchaser is purchasing the Shares for its own account and not on behalf of any U.S. person, and the sale has not been pre-arranged with a purchaser in the United States;

(iv)

Purchaser acknowledges that the purchase of the Shares involves a high degree of risk and further acknowledges that it can bear the economic risk of the purchase of the Shares, including the total loss of its investment.

(v)

Purchaser understands that the Shares are being offered and sold to it in reliance on specific exemption from the registration requirements of Federal and State securities laws and that the Seller is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of Purchaser to acquire the Shares.

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Current Public Information. Purchaser acknowledges that Purchaser has been furnished with or has acquired copies of the Company’s most recent financial statement.

Independent Investigation; Access. Purchaser acknowledges that Purchaser in making the decision to purchase the Shares subscribed for, has relied upon independent investigations made by it and it’s purchaser representatives, if any and Purchaser and such representatives, if any, have, prior to any sale to it, been given access and the opportunity to examine all material books and records of the Corporation, all material contracts and documents relating to this offering and an opportunity to ask questions of, and to receive answers from Seller or any person acting on its behalf concerning the terms and conditions of this offering. Purchaser and its advisors, if any, have been furnished with access to all publicly available materials relating to the business, finances and operation of the Seller and materials relating to the offer and sale of the Shares, which have been requested. Purchaser and its advisors, of any, have received complete and satisfactory answers to any such inquiries.

No Government Recommendation or Approval. Purchaser understands that no federal or state agency has passed on or made any recommendation or endorsement of the Shares.

Sophistication and Knowledge. The Purchaser and/or its representatives has such knowledge and experience in financial and business matters that it can represent itself and is capable of evaluating the merits and risks of the purchase of the Shares. The Purchaser is not relying on the Company with respect to the tax and other economic considerations of an investment in the Shares, and the Purchaser has relied on the advice of, or has consulted with, only the Purchaser’s own advisor(s). The Purchaser represents that it has not been organized for the purpose of acquiring the Shares.

Lack of Liquidity. The Purchaser acknowledges that the purchase of the Shares involves a high degree of risk and further acknowledges that it can bear the economic risk of the purchase of the Shares, including the total loss of its investment. The Purchaser acknowledges and understands that the Shares may not be sold to a U.S. Person (as hereinafter defined) or into the United States for a period of one (1) year from the date of purchase, only in accordance with the provisions provided under Regulation S, and that Purchaser has no present need for liquidity in connection with its purchase of the Shares.

No Public Solicitation. The Purchaser is not subscribing for the Shares as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation of a subscription by a person not previously known to the Purchaser in connection with investments in securities generally. Neither the Company nor the Purchaser nor any person acting on behalf of either of them has engaged or will engage in

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any “Directed Selling Efforts in the U.S.” as defined in Regulation S promulgated by the SEC pursuant to the Securities Act with respect to the Shares purchased hereby.

Requirements for Transfer. Purchaser agrees that it will not transfer the Shares, and the Company shall not be required to transfer the shares on its books unless the transferee executes a representation letter in a form reasonably acceptable to the Company. A form certificate of delivery instructions, that is acceptable, is attached as Exhibit B and by this reference, is made a part of herein.

Compliance with Local Laws. The Purchaser will only make offers and sales of the Shares during the “distribution compliance period” as defined in Rule 902(f) of Regulation S to persons permitted to purchase such Shares in offshore transactions in reliance upon Regulation S. Further, any such sale of the Shares in any jurisdiction outside of the United States will be made in compliance with the securities laws of such jurisdiction. Purchaser will not offer to sell or sell the Shares in any jurisdiction unless the Purchaser obtains all required consents, if any.

Regulation S Exemption. The Purchaser understands that the Shares are being offered and sold to it in reliance on an exemption from the registration requirements of United States federal and state securities laws under Regulation S promulgated under the Securities Act and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of the Purchaser to acquire the Shares. In this regard, the Purchaser represents, warrants and agrees that:

The Purchaser is not a U.S. Person (as defined below) and is not an affiliate (as defined in Rule 501(b) under the Securities Act) of the Company. A U.S. Person means any one of the following:

any natural person resident in the United States of America;

ii.

any partnership or corporation organized or incorporated under the laws of the United States of America;

iii.

any estate of which any executor or administrator is a US. person;

iv.

any trust of which any trustee is a U S. person;

any agency or branch of a foreign entity located in the United States of America;

vi.

any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U S. person;

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vii.

any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States of America; and

viii.

any partnership or corporation if

Organized or incorporated under the laws of any foreign jurisdiction; and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

At the time of the origination of contact concerning this Agreement and the date of the execution and delivery of this Agreement, the Purchaser was outside of the United States.

The Purchaser will not, during the period commencing on the date of issuance of the Shares and ending on the first anniversary of such date, or such shorter period as may be permitted by Regulation S or other applicable securities law (the “Restricted Period”), offer, sell, pledge or otherwise transfer the Shares in the United States, or to a U.S. Person for the account or for the benefit of a U.S. Person, or otherwise in a manner that is not in compliance with Regulation S.

The Purchaser will, after expiration of the Restricted Period, offer, sell, pledge or otherwise transfer the Shares only pursuant to registration under the Securities Act or an available exemption therefrom, and in accordance with all applicable state and foreign securities laws. Without limiting the foregoing, the Purchaser will not, in connection with its resale of the Shares, make any untrue statement of a material fact or omit to state any material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading. Purchaser agrees that, in connection with its resale of Shares, it will provide to the persons who purchase Shares no information regarding the Company that is not contained in the SEC Filings, the Company’s website, or written materials approved in advance in writing by the Company.

The Purchaser has not in the United States engaged in, and will not engage in, any short selling of or any hedging transaction with respect to the Shares, including without limitation, any put, call or other option transaction, option writing or equity swap.

Neither the Purchaser nor any person acting on its behalf has engaged, nor will engage, in any directed selling efforts to a U.S. Person with respect to the Shares and the Purchaser and any person acting on its behalf have complied and will comply with the “offering restrictions” requirements of Regulation S under the Securities Act.

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The transactions contemplated by this Agreement have not been pre-arranged with a buyer located in the United States or with a U.S. Person, and are not part of a plan or scheme to evade the registration requirements of the Securities Act.

Neither the Purchaser nor any person acting on its behalf has undertaken or carried out any activity for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States, its territories or possessions, for any of the Shares. The Purchaser agrees not to cause any advertisement of the Shares to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Shares, except such advertisements that include the statements required by Regulation S under the Securities Act, and only offshore and not in the U.S. or its territories, and only in compliance with any local applicable securities laws.

L. The Purchaser understands and agrees that the Company shall be under no obligation whatsoever to include any of said securities in any future registration statement filed under the Securities Act of 1933 and that, consequently, the sale or transfer thereof in the future will be subject to significant restrictions as provided in Regulation S under the Securities Act. Purchaser expressly acknowledges that the Company is making and in the future may make other offers and sale of its securities on different terms and conditions as determined in the Company management’s sole discretion.

3. Seller Representations.

a.	Reporting Company Status. Nano Chemical Systems Holdings Inc. is a reporting company.

b.	Offshore Transaction.

(i)

Seller has not offered these securities to any person in the United States or to any U.S. person as that term is defined in Regulation S.

(ii)

At the time the buy order was originated, Seller and/or its agent reasonably believed Purchaser was outside of the United States and was not a U.S. person.

(iii)

Seller and/or it’s agents reasonably believe that the transaction has not been pre-arranged with a Purchaser in the United States.

No Directed Selling Efforts. In regard to this transaction, Seller has not conducted any “directed selling efforts” as that term is defined in Rule 902 of Regulation S, nor has Seller conducted any general solicitation relating to the offer and sale of the Shares within securities to person resident within the United States or elsewhere.

Removal of Restrictive Legend. At the end of the Restricted Period the Company will provide to its Transfer Agent a legal opinion prepared by Company Counsel to the effect that the restrictive legend may be appropriately removed from the Share Certificates, should such a legal opinion be required by the Transfer Agent in order to

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so remove the restrictive legend. All fees relating to the removal of the legend, except for selling or brokerage commissions, shall be borne by the Company. However, nothing contained herein shall affect in any way the Subscriber’s obligation and agreement to comply with all applicable securities laws upon the sale of the Shares.

4. Escrow Agent Representations.

The Escrow Agent shall create a depository account with a recognized international bank for the receipt and safe keeping of funds during the term of this agreement, and for the receipt and safe keeping of Seller’s share certificates.

Escrow Agent shall be under no duty to determine whether the Seller and the Purchaser are complying with requirements of this Agreement in tendering to the Escrow Agent said proceeds of the sale of said Shares. The Escrow Agent may conclusively rely upon and shall be protected in acting upon any statement, certificate, notice, request, consent, order or other document believed by it to be genuine-and to have been signed or presented by the proper party or parties. The Escrow Agent shall have no duty or liability to verify any such statement, certificate, notice, request, consent, order or other document, and its sole responsibility shall be to act only as expressly set forth in this Agreement. The Escrow Agent shall be under no obligation to institute or defend any action, suit or proceeding in connection with this Agreement unless first indemnified to its satisfaction. The Escrow Agent may consult counsel in respect of any question arising under this Agreement and the Escrow Agent shall not be liable for any action taken or omitted in good faith upon advice of such counsel.

Upon receipt by the Escrow Agent of funds sufficient to consummate the sale and purchase of all or a portion of the Shares under the terms stated herein, and upon the completion by the Purchaser of the certificate of delivery instructions attached as Exhibit B, and upon receipt by the Escrow Agent of notice sufficient to the Escrow Agent of such funds having cleared Escrow Agent’s bank and being funds free, clear and available for payment by the Escrow Agent, Escrow Agent shall notify the Seller of number of shares to be purchased, and the funds availability for uses in the consummation of a sale and purchase of all or a portion of the Shares.

Escrow Agent shall maintain adequate records to ensure that the purchaser is properly credited with any amount remitted to Escrow Agent by the purchaser, and that purchaser receives the proper number of shares purchased by such purchaser.

All moneys and funds contemplated in this Agreement shall be in United States Dollars.

5. Legends on Certificates. The transaction restriction in connection with this offshore offer and sale restricts Purchaser from offering and selling to U.S. persons or for the account or benefit of a U.S. person. Purchaser acknowledges that the certificate(s) evidencing the Shares will have attached to it a Regulation S legend in the form of Exhibit A hereto.

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6. Exemptions; Reliance on Representations. Purchaser understands that the offer and sale of the Shares is not being registered under the 1933 Act. Seller is relying on the rules governing offers and sales made outside the United States pursuant to Regulation. Rules 901 through 904 of Regulation S govern this transaction.

7. Transfer Agent Instruction. Seller’s transfer agent will be instructed to issue one or more share certificates representing Shares with a restrictive legend attached thereto in the name of Purchaser (collectively “Certificate”). Seller further warrants that stop transfer instructions have been given to the transfer agent and that these shares are not freely transferable on the books and records of the Company until an exemption from registration for these shares has been complied with.

8. Stock Delivery Instructions. The share certificate shall be delivered by Seller to Escrow Agent with instructions to deliver the share certificate to Purchaser upon Purchaser’s payment of the full Purchase Price and the confirmation by Escrow Agent of good and immediately available funds in said amount to the account of Seller. Purchaser shall provide Escrow Agent with appropriate share certificate delivery information. Escrow Agent shall not deliver the share certificate unless and until good and immediately available funds in the amount of the full Purchase Price have been confirmed to the account of Seller.

9. Conditions to the Company’s Obligation to Sell. Purchaser understands that Seller’s obligation to sell the stock is conditioned upon:

The receipt and acceptance by Seller of this Agreement for all of the Shares as evidenced by execution of this Agreement by the President or any Vice President of the Seller.

Deliver into the closing depository by Purchaser of good funds as payment in full for the purchase of the Shares to be delivered subject to the receipt and acceptance of a purchase notice.

Compliance with the term and conditions of this Agreement.

10. Conditions to Purchaser’s Obligation to Purchase. Seller understands that Purchaser’s obligation to purchase the Stock is conditioned upon;

Acceptance by Purchaser of this Agreement for the sale of the Shares.

Delivery of Shares of common stock with a restrictive legend attached thereto.

Purchaser’s determination, in its sole and absolute discretion, to acquire the shares pursuant to this Agreement.

11. No Waiver; Cumulative Remedies. No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof;

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nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

12. Amendments, Waivers and Consents. Any provision in the Agreement to the contrary notwithstanding, and except as hereinafter provided, changes in, termination or amendments of or additions to this Agreement may be made, and compliance with any covenant or provision set forth herein may be omitted or waived, if the Company shall obtain consent thereto in writing from the Purchaser. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

13. Addresses for Notices. All notices, requests, demands and other communications provided for hereunder shall be in writing (including telegraphic communication) and mailed, telegraphed or delivered to each applicable party at the address set forth hereto or at such other address as to which such party may inform the other parties in writing in compliance with the terms of this Section. All such notices, requests, demands and other communications shall be considered to be effective when delivered.

Omega Financial Services LLC

36 Piedmont Drive

Old Bridge New Jersey 08857 USA

Xetera Establishment Corporation

Nano Chemical Systems Holdings Inc. 105 Park Avenue

Seaford DE 19973

USA

14. Costs, Expenses and Taxes. All parties to bear their own expenses.

15. Effectiveness; Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company, the Purchaser and the respective successors and assigns; provided, that, the Company may not assign any of its rights or obligations under this Agreement without the prior written consent of the Purchaser. The Purchaser may assign all or any part of its rights and obligations hereunder to any person who acquires any Shares or Warrants owned by the Purchaser subject to the conditions of this Agreement.

16. Prior Agreements. This Agreement along with the instruments contemplated hereby and executed and delivered in connection herewith (“Transaction Documents”) constitute the entire agreement between the parties and supersede any prior understandings or agreements concerning the subject matter hereof.

17. Severability. The provisions of the Transaction Documents are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of a provision contained therein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any

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other provision or part of a provision of such Transaction Document and the terms of the Shares shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provisions or part reformed so that it would be valid, legal and enforceable to the maximum extent possible.

18. Governing Law; Venue. This Agreement shall be enforced, governed and construed in accordance with the laws the State of Delaware or federal securities law where applicable without giving effect to choice of laws principles or conflict of laws provisions. Any suit, action or proceeding pertaining to this Agreement or any transaction relating hereto shall be brought to the courts sitting in Dover, Delaware, United States of America, and the undersigned hereby irrevocably consents and submits to the jurisdiction of such courts for the purpose of any such suit, action, or proceeding. Purchaser acknowledges and agrees that venue hereunder shall lie exclusively in California, United States of America.

Purchaser hereby waives, and agrees not to assert against the Company, or any successor assignee thereof, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, (i) any claim that the Purchaser is not personally subject to the jurisdiction of the above-named courts, and (ii) to the extent permitted by applicable law, any claim that such suit, action or proceeding is brought in an inconvenient forum or that the venue of any such suit, action or proceeding is improper or that this Agreement may not be enforced in or by such courts.

19. Headings. Article, section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

20. Survival of Representations and Warranties. All representations and warranties made in the Transaction Documents, the Shares, or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof.

21. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.

22. Parties in Interest. Nothing in this Agreement or the Transaction Documents, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement or the Transaction Documents on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Agreement or the Transaction Documents intended to relieve or discharge the obligation or liability of any third party to this Agreement or the Transaction Documents, nor shall any provision give any third person any right of subrogation or action over against any party to this Agreement or the Transaction Documents.

23. Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, the Company and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of the Transaction Documents and the Shares.

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IN WITNESS WHEREOF, the parties hereto have caused this Regulation SA Stock Purchase Agreement to become effective as of the date written below.


Effective the 28th day of February 2006

Seller Nano Chemical Systems Holdings, Inc.		Purchaser: Xetera Establishment Corporation
A Nevada Corporation		a Panamanian company

By:	/s/ James Ray	By:	/s/ Brian Hope
Title:	President and Chief Executive Officer	Title:	President
	Authorized Signatory		Authorized Signatory

Escrow Agent:

By:	Wiliam Slivka
Title:	Managing Member
	Authorized Signatory

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EX-10.2 3 dex102.htm SICAV ONE SECURITIES PURCHASE AGREEMENT SICAV One Securities Purchase Agreement

Exhibit 10.2

SICAV ONE SECURITIES PURCHASE AGREEMENT

THIS STOCK PURCHASE AND SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered into as of December 16, 2005, between Nano Chemical Systems Holdings, Inc, a corporation organized and existing under the laws of Nevada (the “Company”), and Mercatus & Partners, LP (the “Purchaser”).

WHEREAS, PURCHASER desires to subscribe for and purchase Shares of the Company; and

WHEREAS, Company desires for Purchaser to subscribe for and to purchase Shares of the Company.

NOW, THEREFORE, subject to the terms and conditions set forth in this Agreement, for good, valuable and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, now agree as follows:

ARTICLE I

INTRODUCTION AND DEFINITIONS

This Agreement is entered into by the parties for purchase of equity shares of the Company by the Purchaser for placement into a European bank SICAV fund. This is not an immediate funding, and the Company recognizes the Purchaser shall have up to thirty (30) days, as set forth in this Agreement to tender the Purchase Price to the company through the intermediary Custodial Bank and intermediary Purchaser, once the valuation and repurchase of the shares is made in accordance with the terms of this Agreement. The Company shall have the right to contact the Custodial Bank administrator for Purchaser account verification and for confirmation of the share status, location and control at each step of the process. Purchaser shall have up to thirty (30) days from the date of delivery of the Shares to the Custodial Bank to pay the Purchase Price. The particular expected time line and transaction sequence is set forth in schedule A to the agreement.

Certain Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“Affiliate” means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

“Agreement” shall have the meaning set forth in the introductory paragraph of this Agreement.

“Attorney-in-fact” means the agent of the bank account holder, Banca MB, Dwight Parscale, Esquire. The attorney-in-fact, Dwight Parscale, has full oversight authority of the Purchaser and the receiving bank to verify share deposit, valuation process and share transaction status.

“Business Day” means any day except Saturday, Sunday, any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government actions to close.

“Change of Control” means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company.

“Closing” shall have the meaning set forth in this document.

“Closing Date” shall be the date this Agreement is executed by both parties.

“Common Stock” shall have the meaning in the recital.

“Company” shall have the meaning set forth in the introductory paragraph.

“Custodial Bank” means the bank that will receive and retain the Shares of the Company on behalf of the parties, until payment is received and the purchase is complete in accordance with Schedule A. In this case, the Custodial Bank is Brown Brothers Herriman, (BBH), New York City, New York. The account holder is Banca MB as the intermediary fund receiving bank.

“Default” means any event or condition which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

“Disclosure Documents” means the Company’s reports filed under the Exchange Act with the SEC.

“Event of Default” shall have the meaning set forth in the document.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Execution Date” means the date of this Agreement first written above.

“Indemnified Party” shall have the meaning set forth in the document.

“Indemnifying Party” shall have the meaning set forth in the document.

“NASD” means the National Association of Securities Dealers, Inc.

“Nasdaq” shall mean the Nasdaq Stock Market, Inc.^®

“OTCBB” shall mean the NASD over-the counter Bulletin Board.

“Per Share Market Value” of the Common Stock means on any particular date (a) the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Placement Agent” shall have the meaning set forth in Section 3.1(k).

“Purchase Price” shall have the meaning set forth in this document.

“Purchaser” shall have the meaning set forth in the introductory paragraph.

“Reporting Issuer” means a company that is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.

“Required Approvals” shall have the meaning set forth in Section 3.1(1).

“Securities” means the Common Stock and stock of any other class into which such shares may hereafter have been reclassified or changed.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” shall have the meaning set forth herein.

“Subsidiaries” shall have the meaning set forth herein.

“Trading Day” means (a) a day on which the Common Stock is quoted on Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or any stock exchange.

“Transaction Documents” means this Agreement and all exhibits and schedules hereto and all other documents, instruments and writings required pursuant to this Agreement.

“U.S.” means the United States of America.

ARTICLE II

The PURCHASER hereby irrevocably subscribes for and agrees to purchase and accept the Shares of the Common Stock of the COMPANY. The purchase price to be paid by the Purchaser shall be $0.38 per share for 4,455,310 Shares. This represents a discount percentage for the purchase of the Securities of 60% for the Securities purchased (“Discount Amount^”).

This agreement is binding under the conditions and timing set forth herein.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchaser, all of which shall survive the Closing:

(a) Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth on Schedule 3.1(a) attached hereto (collectively, the “Subsidiaries”). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole (a “Material Adverse Effect”).

and the consummation by it of the transactions contemplated hereby and thereby has been duly authorized by all necessary action on the part of the Company. Each of this Agreement and each of the other Transaction Documents has been or will be duly executed by the Company and when delivered in accordance with the terms hereof or thereof will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

(c) Capitalization. The authorized, issued and outstanding capital stock of the Company is set forth on Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of this Agreement. Except as disclosed in Schedule 3.1(c), there are no outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary is in violation of any of the provisions of its Certificate of Incorporation, bylaws or other charter documents.

(d) Issuance of Securities. The Shares have been duly and validly authorized for issuance, offer and sale pursuant to this Agreement and, when issued and delivered as provided hereunder against payment in accordance with the terms hereof, shall be valid and binding obligations of the Company enforceable in accordance with their respective terms.

(e) No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of its Certificate of Incorporation or bylaws (each as amended through the date hereof) or (ii) be subject to obtaining any consents except those referred to in Section 3.1(f), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or its Subsidiaries is subject (including, but not limited to, those of other countries and the federal and state securities laws and regulations), or by which any property or asset of the

Company or its Subsidiaries is bound or affected, except in the case of clause (ii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in violation of any law, ordinance or regulation of any governmental authority.

(f) Consents and Approvals. Except as specifically set forth in Schedule 3.1(f), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents (together with the consents, waivers, authorizations, orders, notices and filings referred to in Schedule 3.1(f), the “Required Approvals”).

(g) Litigation; Proceedings. Except as specifically disclosed in Schedule 3.1(g), there is no action, suit, notice of violation, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) relates to or challenges the legality, validity or enforceability of any of the Transaction Documents, the Shares or the Underlying Shares, (ii) could, individually or in the aggregate, have a Material Adverse Effect or (iii) could, individually or in the aggregate, materially impair the ability of the Company to perform fully on a timely basis its obligations under the Transaction Documents.

(h) No Default or Violation. Except as set forth in Schedule 3.1(h) hereto, neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) (iv) adversely affect the legality, validity or enforceability of this Agreement, (v have a Material Adverse Effect or (vi) adversely impair the Company’s ability or obligation to perform fully on a timely basis its obligations under this Agreement.

(i) Disclosure Documents. The Disclosure Documents are accurate in all material respects and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(j) Non-Registered Offering. Neither the Company nor any Person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of the Securities under the Securities Act) which might subject the offering, issuance or sale of the Securities to the registration requirements of Section 5 of the Securities Act.

(k) Placement Agent. The Company accepts and agrees that Artemis Capital (“Artemis”) is acting for the Purchaser and does not regard any person other than the Purchaser as its customer in relation to this Agreement, and that it has not made any recommendation to the Company, in relation to this Agreement and is not advising the Company with regard to the suitability or merits of the transaction. The Placement Agent shall be the Company contact for all information relating to the status of funding, location of Shares, settlement of the payment of the Purchase Price and any other information requests of the Company. Notwithstanding the above, in the event the Purchase Price is not paid as required herein, Company may directly contact the Attorney-in-Fact to provide Company notice of demand for the return of the Shares.

The Purchaser acknowledges and agrees that the Company makes no representation or warranty with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.1 hereof.

3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows:

(a) Organization; Authority. The Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation with the requisite power and authority to enter into and to consummate the transactions contemplated hereby and by the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The acquisition of the Shares to be purchased by the Purchaser hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to, or affecting generally the enforcement of, creditors rights and remedies or by other general principles of equity.

(b) Investment Intent. The Purchaser is acquiring the Shares to be purchased by it hereunder, for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares, or any part thereof or interest therein, without prejudice, however, to such Purchaser’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws.

(c) Experience of Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Shares to be acquired by it hereunder, and has so evaluated the merits and risks of such investment.

(d) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able to bear the economic risk of an investment in the Securities to be acquired by it hereunder and, at the present time, is able to afford a complete loss of such investment.

(e) Access to Information. The Purchaser acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the Securities offered hereunder and the merits and risks of investing in such securities; (ii) access to information about the Company and the Company’s financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment in the Securities; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information that it has received about the Company.

(f) Reliance. The Purchaser understands and acknowledges that (i) the Shares being offered and sold to it hereunder are being offered and sold without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act and (ii) the availability of such exemption depends in part on, and that the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance.

(g) Regulation S. Purchaser understands and acknowledges that (A) the Shares have not been registered under the Securities Act, are being sold in reliance upon an exemption from registration afforded by Regulation S; and that such Shares have not been registered with any state securities commission or authority; (B) pursuant to the requirements of Regulation S, the Shares may not be transferred, sold or otherwise exchanged unless in compliance with the provisions of Regulation S and/or pursuant to registration under the Securities Act, or pursuant to an available exemption hereunder; and (C) Purchaser is under no obligation to register the Shares under the Securities Act or any state securities law, or to take any action to make any exemption from any such registration provisions available.

Purchaser is not a U.S. person and is not acquiring the Shares for the account of any U.S. person; (B) no director or executive officer of Purchaser is a national or citizen of the United States; and (C) it is not otherwise deemed to be a “U.S. Person” within the meaning of Regulation S.

Purchaser was not formed specifically for the purpose of acquiring the Shares purchased pursuant to this Agreement.

Purchaser is purchasing the Shares for its own account and risk and not for the account or benefit of a U.S. Person as defined in Regulation S and no other person has any interest in or participation in the Shares or any right, option, security interest, pledge or other interest in or to the Shares. Purchaser understands, acknowledges and agrees that it must bear the economic risk of its investment in the Shares for an indefinite period of time and that prior to any such offer or sale, the Company may require, as a condition to effecting a transfer of the Ordinary Shares, an opinion of counsel, acceptable to you, as to the registration or exemption therefrom under the Securities Act and any state securities acts, if applicable.

Purchaser will, after the expiration of the Restricted Period, as set forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or otherwise transfer the Shares only in accordance with Regulation S, or pursuant to an available exemption under the Securities Act and, in any case, in accordance with applicable state securities laws. The transactions contemplated by this Agreement have neither been pre-arranged with a purchaser who is in the U.S. or who is a U.S. Person, nor are they part of a plan or scheme to evade the registration provisions of the United States federal securities laws.

The offer leading to the sale evidenced hereby was made in an “offshore transaction.^” For purposes of Regulation S, Purchaser understands that an “offshore transaction^” as defined under Regulation S is any offer or sale not made to a person in the United States and either (A) at the time the buy order is originated, the purchaser is outside the United States, or the seller or any person acting on his behalf reasonably believes that the purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through a physical trading floor of an established foreign exchange that is located outside the United States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the facilities of a designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the U.S.

Neither we nor any affiliate or any person acting on our behalf, has made or is aware of any “directed selling efforts” in the United States, which is defined in Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Shares being purchased hereby.

Purchaser understands that you are the seller of the Shares which are the subject of this Agreement, and that, for purpose of Regulation S, a “distributor” is any underwriter, dealer or other person who participates, pursuant to a contractual arrangement, in the distribution of securities offered or sold in reliance on Regulation S and that an “affiliate” is any partner, officer, director or any person directly or indirectly controlling, controlled by or under common control with any person in question. Purchaser agrees that we will not, during the Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor, either directly or though any affiliate, nor shall it sell, transfer, hypothecate or otherwise convey the Shares other than to a non-U.S. Person.

Purchaser acknowledges that the Shares will bear a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN “OFFSHORE TRANSACTION” IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION. ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.

The Company acknowledges and agrees that the Purchaser makes no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1 Manner of Offering. The Securities are being issued pursuant to section 4(2) of the Securities Act, and Rule 506 of Regulation D and Regulation S thereunder. The Shares are being issued pursuant to section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder.

4.2 Notice of Certain Events. The Company shall, on a continuing basis, (i) advise the Purchaser promptly after obtaining knowledge of, and, if requested by the Purchaser, confirm such advice in writing, of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the Shares, for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, or (B) any event that makes any statement of a material fact made by the Company in Section 3.1 or in the Disclosure Documents untrue or that requires the making of any additions to or changes in Section 3.1 or in the Disclosure Documents in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of the Securities under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Securities under any such laws, and use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time.

4.3 Blue Sky Laws. The Company shall cooperate with the Purchaser in connection with the exemption from registration of the Securities under the securities or Blue Sky laws of such jurisdictions as the Purchasers may request; provided, however, that neither the Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign corporation where they are not now so qualified. The Company agrees that it will execute all necessary documents and pay all necessary state filing or notice fees to enable the Company to sell the Securities to the Purchasers.

4.4 Integration. The Company shall not and shall use its best efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchaser.

4.5 Furnishing of Rule 144(c) Materials. The Company shall, for so long as any of the Securities remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, make available to any registered holder of the Securities (“Holder” or “Holders”) in connection with any sale thereof and any prospective purchaser of such Securities from such Person, such information in accordance with Rule 144(c) promulgated under the Securities Act as is required to sell the Securities under Rule 144 promulgated under the Securities Act.

4.6 Solicitation Materials. The Company shall not (i) distribute any offering materials in connection with the offering and sale of the Shares other than the Disclosure Documents and any amendments and supplements thereto prepared in compliance herewith or (ii) solicit any offer to buy or sell the Shares or, if applicable, Underlying Shares by means of any form of general solicitation or advertising.

4.7 Listing of Common Stock. If the Common Stock is or shall become listed on the OTCBB or on another exchange, the Company shall (a) use its best efforts to maintain the listing of its Common Stock on the OTCBB or such other exchange on which the Common Stock is then listed until two years from the date hereof, and (b) shall provide to the Purchaser evidence of such listing.

4.8 Indemnification.

(a) Indemnification

(i) The Company shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless the Purchaser and its officers, directors, agents, employees and affiliates, each Person who controls or the Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each such Person, a “Control Person”) and the officers, directors, agents, employees and affiliates of each such Control Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Company under this Agreement or any other Transaction Document.

(ii) The Purchaser shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless the Company, its officers, directors, agents and employees, each Control Person and the officers, directors, agents and employees of each Control Person, to the fullest extent permitted by application law, from and against any and all Losses, as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Purchaser under this Agreement or the other Transaction Documents.

(b) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but will retain the right to control the overall Proceedings out of which the claim arose and such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled hereunder (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party.

No right of indemnification under this Section shall be available as to a particular Indemnified Party if there is a non-appealable final judicial determination that such Losses arise solely out of the negligence or bad faith of such Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its obligations under this Agreement.

(c) Contribution. If a claim for indemnification under this Section is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other and the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether there was a judicial determination that such Losses arise in part out of the negligence or bad faith of the Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or the Indemnified Party’s breach of its obligations under this Agreement. The amount paid or payable by a party as a result of any Losses shall be deemed to include any attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party.

(d) Non-Exclusivity. The indemnity and contribution agreements contained in this Section are in addition to any obligation or liability that the Indemnifying Parties may have to the Indemnified Parties.

ARTICLE V

MISCELLANEOUS

the Underlying Shares) pursuant hereto. The Purchaser shall pay the Placement Agent. The Purchaser shall be responsible for any taxes payable by the Purchaser that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement or any other Transaction Document. The Company shall pay all costs, expenses, fees and all taxes incident to and in connection with: (A) the issuance and delivery of the Securities, (B) the exemption from registration of the Securities for offer and sale to the Purchaser under the securities or Blue Sky laws of the applicable jurisdictions, and (C) the preparation of certificates for the Securities (including, without limitation, printing and engraving thereof), and (D) all fees and expenses of counsel and accountants of the Company.

5.2 Entire Agreement. This Agreement, together with all of the Exhibits and Schedules annexed hereto, and any other Transaction Document contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. This Agreement shall be deemed to have been drafted and negotiated by both parties hereto and no presumptions as to interpretation, construction or enforceability shall be made by or against either party in such regard.

5.3 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given upon facsimile transmission (with written transmission confirmation report) at the number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) whichever shall first occur. The addresses for such communications shall be:


If to the Company:		Nano Chemical Systems Holdings, Inc.
		OTCBB: NCSH
		105 Park Avenue
		Seaford, DE 19973
		Phone: (480) 816-6140

With copies to:

If to the Purchaser:		Mercatus & Partners, Limited
		4100 NINE MCFARLANE DRIVE
		ALPHARETTA, GEORGIA 30004
		Attn: Cary Masi, Director
		Phone: (678) 240-9070
		Fax: (678) 240-9069

With copies to:

5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

5.5 Headings. The headings herein are for convenience only, do not constitute part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. The assignment by a party of this Agreement or any rights hereunder shall not affect the obligations of such party under this Agreement.

5.7 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

5.8 Governing Law; Venue; Service of Process. The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the State of New York. The parties hereto agree that the internal laws of the State of New York shall govern this Agreement and the exhibits hereto, including, but not limited to, all issues related to usury. Any action to enforce the terms of this Agreement or any of its exhibits, or any other Transaction Document shall be brought exclusively in the state and/or federal courts situate in the County and State of New York. Service of process in any action by the Purchaser to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the Company at its principal address set forth in this Agreement.

5.9 Survival. The representations and warranties of the Company and the Purchaser contained in this agreement shall survive the Closing.

5.10 Counterpart Signatures. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.

such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, unless counsel for the disclosing party deems such public statement to be required by applicable federal and/or state securities laws. Except as otherwise required by applicable law or regulation, the Company will not disclose to any third party (excluding its legal counsel, accountants and representatives) the names of the Purchaser.

5.12 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

5.13 Limitation of Remedies. With respect to claims by the Company or any person acting by or through the Company, or by the Purchaser or any person acting through the Purchaser, for remedies at law or at equity relating to or arising out of a breach of this Agreement, liability, if any, shall, in no event, include loss of profits or incidental, indirect, exemplary, punitive, special or consequential damages of any kind.

5.14 Delivery of Securities. The Company shall deliver the Shares directly to the Custodial Bank within five days of the execution of this Agreement in accordance with the directions provided in Schedule A, to BBH for deposit into the Banca MB account.

5.15 Delivery of Payment. The Purchaser shall, within thirty (30) days of the delivery of the Shares to the Custodial Bank issue the Payment to the Company via wire transfer to the directed wire transfer bank and account as specified below:

Beneficiary Account Name: Holland & Knight LLP

Beneficiary Account No.: 777774356

ABA/Transit No.: 021000021

Beneficiary Bank: Chase Manhattan Bank

If the Purchase Price is not paid within thirty (30) days of the delivery of the Shares to the Custodial Bank, the Company has the right to demand recall of the shares after that time, and such Shares shall be transmitted back to the Company within ten (10) business days from the date of the demand. See Appendix A for details of timeline from deposit to payment.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first indicated above.


Company:

Nano Chemical Systems Holding, Inc.

By:		/s/ James Ray
Name:
Title:		President

Purchaser:

Cary Masi on behalf of Purchaser

By:		/s/ Cary Masi
Name:
Title:

Schedule 1

Mercatus & Partners, LP

Via S. Roberto Bellarmino #4

00142 Roma, Italy

PH. +39 065 406 470

FX. +39 065 427 5224

EX-10.3 4 dex103.htm SICAV TWO SECURITIES PURCHASE AGREEMENT SICAV Two Securities Purchase Agreement

Exhibit 10.3

SICAV TWO SECURITIES PURCHASE AGREEMENT

THIS STOCK PURCHASE AND SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered into as of December 16, 2005, between Nano Chemical Systems Holdings, Inc., a corporation organized and existing under the laws of Nevada (the “Company”), and Mercatus & Partners, LP (the “Purchaser”).

WHEREAS, PURCHASER desires to subscribe for and purchase Shares of the Company; and

WHEREAS, Company desires for Purchaser to subscribe for and to purchase Shares of the Company.

ARTICLE I

INTRODUCTION AND DEFINITIONS

Certain Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“Agreement” shall have the meaning set forth in the introductory paragraph of this Agreement.

“Closing” shall have the meaning set forth in this document.

“Closing Date” shall be the date this Agreement is executed by both parties.

“Common Stock” shall have the meaning in the recital.

“Company” shall have the meaning set forth in the introductory paragraph.

“Default” means any event or condition which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

“Disclosure Documents” means the Company’s reports filed under the Exchange Act with the SEC.

“Event of Default” shall have the meaning set forth in the document. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Execution Date” means the date of this Agreement first written above. “Indemnified Party” shall have the meaning set forth in the document. “Indemnifying Party” shall have the meaning set forth in the document.

“NASD” means the National Association of Securities Dealers, Inc.

“Nasdaq” shall mean the Nasdaq Stock Market, Inc.^®

“OTCBB” shall mean the NASD over-the counter Bulletin Board^®

“Placement Agent” shall have the meaning set forth in Section 3.1(k).

“Purchase Price” shall have the meaning set forth in this document.

“Purchaser” shall have the meaning set forth in the introductory paragraph.

“Reporting Issuer” means a company that is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.

“Required Approvals” shall have the meaning set forth in Section 3.1(f).

“Securities” means the Common Stock and stock of any other class into which such shares may hereafter have been reclassified or changed.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” shall have the meaning set forth herein.

“Subsidiaries” shall have the meaning set forth herein.

“Transaction Documents” means this Agreement and all exhibits and schedules hereto and all other documents, instruments and writings required pursuant to this Agreement.

“U.S.” means the United States of America.

ARTICLE II

This agreement is binding under the conditions and timing set forth herein.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchaser, all of which shall survive the Closing:

(a) Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth on Schedule 3.1(a) attached hereto (collectively, the “Subsidiaries”). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole (a “Material Adverse Effect”).

(b) Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and by each other Transaction Document and to otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby has been duly authorized by all necessary action on the part of the Company. Each of this Agreement and each of the other Transaction Documents has been or will be duly executed by the Company and when delivered in accordance with the terms hereof or thereof will constitute the valid and binding obligation of the Company enforceable against the Company accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

(c) Capitalization. The authorized, issued and outstanding capital stock of the Company is set forth on Schedule 3.1(c). No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of this Agreement. Except as disclosed in Schedule 3.1(c), there are no outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary is in violation of any of the provisions of its Certificate of Incorporation, bylaws or other charter documents.

the execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents (together with the consents, waivers, authorizations, orders, notices and filings referred to in Schedule 3.1(f), the “Required Approvals”).

(g) Litigation; Proceedings. Except as specifically disclosed in Schedule 3.1(g), there is no action, suit, notice of violation, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) relates to or challenges the legality, validity or enforceability of any of the Transaction Documents, the Shares or the Underlying Shares, (ii) could, individually or in the aggregate, have a Material Adverse Effect or (iii) could, individually or in the aggregate, materially impair the ability of the Company to perform fully on a timely basis its obligations under the Transaction Documents.

(h) No Default or Violation. Except as set forth in Schedule 3.1(h) hereto, neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) (iv) adversely affect the legality, validity or enforceability of this Agreement, (v have a Material Adverse Effect or (vi) adversely impair the Company’s ability or obligation to perform fully on a timely basis its obligations under this Agreement.

3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows:

to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information that it has received about the Company.

Purchaser was not formed specifically for the purpose of acquiring the Shares purchased pursuant to this Agreement.

The offer leading to the sale evidenced hereby was made in an “offshore transaction.” For purposes of Regulation S, Purchaser understands that an “offshore transaction” as defined under Regulation S is any offer or sale not made to a person in the United States and either (A) at the time the buy order is originated, the purchaser is outside the United States, or the seller or any person acting on his behalf reasonably believes that the purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through a physical trading floor of an established foreign exchange that is located outside the United States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the facilities of a designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the U.S.

Purchaser acknowledges that the Shares will bear a legend in substantially the following form:

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.8 Indemnification.

(a) Indemnification

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any, such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but will retain the right to control the overall Proceedings out of which the claim arose and such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

No right of indemnification under this Section shall be available as to a particular Indemnified Party if there is a non-appealable final judicial determination that such Losses arise solely out of the negligence or bad faith of such. Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its obligations under this Agreement.

breach of its obligations under this Agreement. The amount paid or payable by a party as a result of any Losses shall be deemed to include any attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party.

ARTICLE V

MISCELLANEOUS

5.1 Fees and Expenses. Except as set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares (and, upon conversion or exercise thereof, the Underlying Shares) pursuant hereto. The Purchaser shall pay the Placement Agent. The Purchaser shall be responsible for any taxes payable by the Purchaser that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement or any other Transaction Document. The Company shall pay all costs, expenses, fees and all taxes incident to and in connection with: (A) the issuance and delivery of the Securities, (B) the exemption from registration of the Securities for offer and sale to the Purchaser under the securities or Blue Sky laws of the applicable jurisdictions, and (C) the preparation of certificates for the Securities (including, without limitation, printing and engraving thereof), and (D) all fees and expenses of counsel and accountants of the Company.


If to the Company:		Nano Chemical Systems Holdings, Inc.
		OTCBB: NCSH
		105 Park Avenue
		Seaford, DE 19973
		Phone: (480) 816-6140



With copies to:

If to the Purchaser:		Mercatus & Partners, Limited
		4100 NINE MCFARLANE DRIVE
		ALPHARETTA, GEORGIA 30004
		Attn: Cary Masi, Director
		Phone: (678) 240-9070
		Fax: (678) 240-9069

With copies to:

5.5 Headings. The headings herein are for convenience only, do not constitute part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the Company at its principal address set forth in this Agreement.

5.9 Survival. The representations and warranties of the Company and the Purchaser contained in this agreement shall survive the Closing.

5.11 Publicity. The Company and the Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, unless counsel for the disclosing party deems such public statement to be required by applicable federal and/or state securities laws. Except as otherwise required by applicable law or regulation, the Company will not disclose to any third party (excluding its legal counsel, accountants and representatives) the names of the Purchaser.

Beneficiary Account Name: Holland & Knight LLP

Beneficiary Account No.: 777774356

ABA/Transit No.: 021000021

Beneficiary Bank: Chase Manhattan Bank

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first indicated above.


Company:

Nano Chemical Systems Holding, Inc.

By:		/s/ James Ray
Name:
Title:		President

Purchaser:

Cary Masi on behalf of Purchaser

By:		/s/ Cary Masi
Name:
Title:

Schedule 1

Mercatus & Partners, LP

Via S. Roberto Bellarmino #4

00142 Roma, Italy

PH. +39 065 406 470

FX. +39 065 427 5224

EX-17.1 5 dex171.htm LETTER OF RESIGNATION OF DIRECTOR Letter of Resignation of Director

Exhibit 17.1

VIA ELECTRONIC MAIL

Friday, February 24, 2006

Subject: Role of David Tomanek in Nano Chemical Systems

Dear Jim:

Please consider this as a notification that I wish to resign my board seat.

Please advise me of the address of Nano Chemical Systems, where I could mail in such a resignation.

In particular, I am disturbed by three things:

1. It is still unclear to me, which (if any) function I hold in Nano Chemical Systems. I believe I became member of the Board of Directors of Nano Chemical Systems early 2005. An apparent major legal step, associated with a questionnaire from a law firm, appears to have been undertaken without my approval in October 2005.

2. To this date, the company has not fulfilled any of its commitments towards me regarding financial compensation for my scientific consulting services.

3. It appears my name is being used to provide credibility to products of Nano Chemical Systems that I am unaware of.

Whatever association you believe exists between myself and Nano Chemical Systems should herewith be considered as dissolved. In particular, I ask that my name no longer be used in press releases and advertisements on behalf of Nano Chemical Systems.

Sincerely yours,

/s/ David Tomanek

Dr. David Tomanek,

Professor of Physics

Physics and Astronomy Department

4231 Biomedical and Physical Sciences Bldg.

Michigan State University

East Lansing, MI 48824-2320, USA

EX-31.1 6 dex311.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, James Ray, certify that:

(1)	I have reviewed this quarterly report on Form 10-QSB of Nano Chemical Systems Holdings, Inc.;

(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


May 15, 2006		/s/ James Ray
		James Ray
		Chief Executive Officer

EX-31.2 7 dex312.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Tina Dennis, certify that:

(1)	I have reviewed this quarterly report on Form 10-QSB of Nano Chemical Systems Holdings, Inc.;

(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

(b)

(c)

(5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


May 15, 2006		/s/Tina Dennis
		Tina Dennis
		Chief Financial Officer

EX-32.1 8 dex321.htm SECTION 906 CEO CERTIFICATION Section 906 CEO Certification

EXHIBIT 32.1

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER

Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, James Ray, the undersigned President and Chief Executive Officer of Nano Chemical Systems Holdings, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-QSB of the Company for the quarter ended March 31, 2006 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof:

1.	Fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James Ray

James Ray

President and Chief Executive Officer

May 15, 2006

EX-32.2 9 dex322.htm SECTION 906 CFO CERTIFICATION Section 906 CFO Certification

EXHIBIT 32.2

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER

Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, I, Tina Dennis, the undersigned Treasurer and Chief Financial Officer of Nano Chemical Systems Holdings, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-QSB of the Company for the quarter ended March 31, 2006 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof:

1.	Fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	That the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Tina Dennis

Tina Dennis

Treasurer, Chief Financial Officer and Director

May 15, 2006

-----END PRIVACY-ENHANCED MESSAGE-----

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