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          to Table of Contents**





**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB/A**





**QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR**


**15(D)
      OF THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended March 31, 2006







Commission
      file number 0-4846-3




**MEMS
      USA, INC.**


**(Name
      of small business issuer in its charter)**




Nevada
              **(State
                or other jurisdiction of**
              **incorporation
                or organization)**
              
              
              5701
                Lindero Canyon Road, Suite 2-100
              Westlake
                Village, California
              **(Address
                of principal executive offices)**
            82-0288840
              **(I.R.S.
                employer**
              **identification
                no.)**
              
              
              
              91362
              **(Zip
                code)**





**Issuer’s
      telephone number, including area code**  (818)
      735-4750




**** Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act of 1934 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  No X




The
      number of shares of the common stock outstanding as of May 1, 2006 was 19,395,330 .




**Documents
      incorporated by reference:**


The
        amended 10-QSB includes reviewed Financial Statements as of March 31, 2006
        and
        2005 by the independently registered accounting firm. The 10-QSB filed on
        May
        15, 2006 included the financial statements which were not completely reviewed
        by
        the independent registered accounting firm.
 
 
 Form
        8-K
        Dated April 29, 2005 Re. Can Am Ethanol One, Inc.
 
 Form
        8-K
        Dated December 21, 2005 Re. Hearst Ethanol One, Inc.
  Form
        10-KSB Dated February 2, 2006 Re. MEMS USA, Inc. Annual Report.
 
 Form
        8-K
        Dated March 30, 2006 Re. MEMS USA, Inc. - CDI Customer Order
 
 Form
        8-K
        Dated April 21, 2006 Re. Hearst Ethanol One, Inc.







**Back
        to Table of Contents**





**FORM
      10-QSB**





**For
      The Quarterly Period Ended March 31, 2006**





**INDEX**


**Page****PART
                I - FINANCIAL INFORMATION**Item
                1. Financial Statements•Consolidated
                Balance Sheets as of March 31, 2006 and September 30, 2005
            3•
Consolidated
                Statements of Operations (unaudited) for the
                three months ended March 31, 2006 and 2005
            4•ConsolidatedStatements of Cash Flows (unaudited) for the three months ended March
                31,
                2006 and 2005
            5•Consolidated
                Statement of Equity (unaudited) as of March 31, 2006
            6•
Notes
                to Consolidated Financial Statements (unaudited)
            7
                -
                19Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            19
                - 26Item
                3. Controls and Procedures
            26**PART
                II****-
                OTHER INFORMATION**Item
                1. Legal Proceedings
            27Item
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds
            28Item
                3. Defaults upon Senior Securities
            30Item
                4. Submission of Matters to a Vote of Security Holders
            30Item
                5. Other Information
            30Item
                6. Exhibits
            30Signatures
            31






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**Item
      1. Financial statements:**





MEMS
                USA, INC.Consolidated
                Balance
                Sheets









A
                S
                S E T S(Unaudited)
            
            (audited)March
                31,2006
            
            September
                30, 2005Current
              Assets:Cash
                and cash equivalent
            
            $
            408,501
            
            $
            828,153Accounts
                receivable, net allowance for uncollectible of $83,340 and $46,196
                respectively
            
            
            1,749,705
            
            
            756,840Inventories,
                net of provision for slow moving items of $25,000 and $25,000
                respectively
            
            
            836,340
            
            
            880,370Other
                current assets
            
            
            222,294
            
            
            170,197Total
                current assets
            
            
            3,216,840
            
            
            2,635,560Plant,
                property and equipment, net
            
            
            2,264,526
            
            
            2,316,836Other
                assets
            
            
            364,907
            
            
            388,906Investment
                in Can Am Ethanol One, Inc.
            
            
            71,765
            
            
            71,765Goodwill
            
            
            915,373
            
            
            915,373Total
                assets
            
            $
            6,833,411
            
            $
            6,328,440LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            2,145,959
            
            $
            1,395,264Lines
                of credits
            
            
            351,239
            
            
            750,744Notes
                payable
            
            
            352,281
            
            
            —Current
                portion of long-term debt
            
            
            34,974
            
            
            29,292Other
                liabilities
            
            
            56,216
            
            
            —Loans
                from shareholders
            
            
            222,330
            
            
            —Convertible
                loan payable
            
            
            150,000
            
            
            —Liability
                to be satisfied through the issuance of shares
            
            
            1,740,540
            
            
            1,111,000Total
                current liabilities
            
            
            5,053,539
            
            
            3,286,300Long-term
                liabilities
            
            
            57,260
            
            
            211,942Loans
                from shareholders
            
            
            —
            
            
            191,600Liability
                due to a legal settlement
            
            
            307,000
            
            
            —Common
                shares with mandatory redemption
            
            
            1,400,000
            
            
            1,400,000Common
                shares payable under terms of acquisition agreement
            
            
            —
            
            
            809,966Total
                Liabilities
            
            
            6,817,799
            
            
            5,899,808Stockholders'
                equity:Common
                stock, $0.001 par value; 100,000,000 shares authorized;19,395,330and 17,404,197 sharesrespectively
                issued and outstanding
            
            
            22,015
            
            
            17,404Stock
                subscriptions receivable
            
            
            (2,512,850
            )
            
            (250
            )Additional
                paid in capital
            
            
            9,977,304
            
            
            5,956,931Shares
                to be redeemed (165,054 shares)
            
            
            (
                231,076
            )
            
            —Accumulated
                deficit
            
            
            (3,440,223
            )
            
            (5,545,453
            )Treasury
                stock (2,699,684 shares)
            
            
            (3,799,558
            )
            
            —Total
                stockholders' equity
            
            
            15,612
            
            
            428,632Total
                liabilities and stockholders' equity
            
            $
            6,833,411
            
            $
            6,328,440






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




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MEMS
                USA, INCConsolidated
                Statement of OperationsThree
                and six months ended March 31(Unaudited)





Three
                months ended March 31,
            
            Six
                months ended March 31,2006
            
            2005
            
            2006
            
            2005Revenues
            
            $
            2,515,412
            
            $
            1,864,543
            
            $
            5,141,931
            
            $
            4,879,240Cost
                of revenues
            
            
            1,958,351
            
            
            1,362,702
            
            
            4,030,095
            
            
            3,517,192Gross
                profit
            
            
            557,061
            
            
            501,841
            
            
            1,111,836
            
            
            1,362,048Selling,
                general and administrative expenses
            
            
            1,354,190
            
            
            1,207,609
            
            
            2,675,737
            
            
            2,305,114Loss
                from operations
            
            
            (797,129
            )
            
            (705,768
            )
            
            (1,563,901
            )
            
            (943,066
            )Other
                income (expense)
            
            
            (11,222
            )
            
            6,481
            
            
            (34,503
            )
            
            9,343Income
                due to legal settlement
            
            
            —
            
            
            —
            
            
            3,703,634
            
            
            —Net
                income (loss)
            
            $
            (808,351
            )
            $
            (699,287
            )
            $
            2,105,230
            
            $
            (933,723
            )Net
                income (loss) per share, basic and diluted:Weighted
                average number of shares outstanding, basic
            
            
            15,406,228
            
            
            15,035,895
            
            
            16,192,280
            
            
            15,035,895Net
                income (loss) per share, basic
            
            $
            (0.05
            )
            $
            (0.05
            )
            $
            0.13
            
            $
            (0.06
            )Weighted
                average number of shares outstanding, diluted
            
            
            15,406,228
            
            
            16,950,966
            
            
            19,319,827
            
            
            16,410,871Net
                income (loss) per share, diluted
            
            $
            (0.05
            )
            $
            (0.04
            )
            $
            0.11
            
            $
            (0.06
            )






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




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MEMS
                USA, INC.CONSOLIDATED
                STATEMENT OF CASH FLOWSSix
                Months ended March 31(Unaudited)





2006
            
            2005Cash
                flows provided by (used for) operating activities:Net
                income (loss)
            
            $
            2,105,230
            
            $
            (933,723
            )Adjustments
                to reconcile net income (loss) to net cash provided by (used in)
                operating
                activities:Depreciation
            
            
            115,648
            
            
            61,622Common
                stock issued for services
            
            
            235,280
            
            
            25,000Income
                due to legal settlement
            
            
            (3,703,634
            )
            
            —Change
                in assets and liabilities:Accounts
                receivable
            
            
            (992,865
            )
            
            (118,994
            )Inventories
            
            
            44,030
            
            
            26,026Other
                current assets
            
            
            (52,097
            )
            
            12,349Accounts
                payable and accrued expenses
            
            
            750,694
            
            
            (63,411
            )Other
                current liabilities
            
            
            56,216
            
            
            —Deferred
                revenue
            
            
            —
            
            
            10,550Total
                adjustments
            
            
            (3,546,728
            )
            
            (46,858
            )Net
                cash provided by (used for) operating activities
            
            
            **(1,441,498**
            **)**
            
            **(980,581**
            **)**Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (63,338
            )
            
            (6,873
            )Cash
                balance net of payments for purchase of Bott and Gulfgate
            
            
            —
            
            
            5,073Common
                stock issued for cash
            
            
            —
            
            
            1,347Other
                assets
            
            
            24,000
            
            
            —Net
                cash used for investing activities
            
            
            **(39,338**
            **)**
            
            **(453**
            **)**Cash
                flows from financing activities:Lines
                of credit
            
            
            (399,505
            )
            
            9,323Notes
                payable
            
            
            352,281
            
            
            —Current
                portion of long-term debt
            
            
            5,682
            
            
            (4,099
            )Liability
                to be satisfied through the issuance of shares
            
            
            735,540
            
            
            1,088,108Loan
                from shareholders
            
            
            30,730
            
            
            5,000Payment
                on long term liabilities
            
            
            (4,682
            )
            
            (51,297
            )Purchase
                of shares pursuant to acquisition of subsidiaries
            
            
            (20,000
            )
            
            —Underwriting
                related to issuance of shares
            
            
            (68,362
            )
            
            90,149Common
                stock issued for cash
            
            
            429,500
            
            
            —Net
                cash provided (used) by financing activities
            
            
            **1,061,184**
            
            
            **1,137,184**Net
                increase in cash and cash equivalents
            
            
            (419,652
            )
            
            156,150Cash
                and cash equivalents, beginning of period
            
            
            828,153
            
            
            26,439Cash
                and cash equivalents, end of period
            
            **$**
            **408,501**
            
            **$**
            **182,589**Supplemental
                disclosure of cash flow information:Income
                taxes paid
            
            $
            —
            
            $
            —Interest
                paid
            
            $
            63,233
            
            $
            27,882Supplemental
                disclosure of non-cash financing activities:Common
                stock (including $1,400,000 of shares subject to mandatory redemption
                factor) issued for acquisition of Bott and Gulfgate
            
            $
            809,966
            
            $
            3,059,966Common
                stock issued for services
            
            $
            235,280
            
            $
            25,000






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




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MEMS
                USAConsolidated
                Statement of Equity(Unaudited)




**Common**
              **stock**
            
            **Subscrip-tions**
              **receivable**
            
            **Additional**
              **paid
                in capital**
            
            **Treasury**
              **Stock**
            
            **Accumulated**
              **deficit**
            
            **Stockholders'**
              **equity**Balance
                as of September 30, 2005
            
            **$**
            **17,404**
            
            **$**
            **(250**
            **)**
            **$**
            **5,956,932**
            
            **$**
            —
            
            **$**
            **(5,545,454**
            **)**
            **$**
            **428,632**Common
                stock issued for service
            
            
            **189**
            
            
            
            
            
            **235,090**
            
            
            
            
            
            
            
            
            **235,279**Common
                stock issued for cash received in prior year
            
            
            **129**
            
            
            
            
            
            **105,871**
            
            
            
            
            
            
            
            
            **106,000**Common
                stock issued for cash received
            
            
            **522**
            
            
            
            
            
            **428,978**
            
            
            
            
            
            
            
            
            **429,500**Shares
                to be redeemeddue
                to legal settlement
            
            
            
            
            
            
            
            
            **(231,076**
            **)**
            
            
            
            
            
            
            
            **(231,076**
            **)**Common
                stock issued for subscriptions receivable
            
            
            **3,400**
            
            
            **(2,512,600**
            **)**
            
            **2,509,200**
            
            
            
            
            
            
            
            
            **-**Common
                stock issued pursuant to terms of acquisition
            
            
            **371**
            
            
            
            
            
            **809,595**
            
            
            
            
            
            
            
            
            **809,966**Treasury
                stock from legal settlement
            
            
            
            
            
            
            
            
            
            
            
            **(3,799,558**
            **)**
            
            
            
            
            **(3,799,558**
            **)**Underwriting
                fees
            
            
            
            
            
            
            
            
            **(68,362**
            **)**
            
            
            
            
            **1**
            
            
            **(68,361**
            **)**Net
                income for the six months
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **2,105,230**
            
            
            **2,105,230**Balance
                as ofMarch
                31, 2006
            
            **$**
            **22,015**
            
            **$**
            **(2,512,850**
            **)**
            **$**
            **9,746,228**
            
            **$**
            **(3,799,558**
            **)**
            **$**
            **(3,440,223**
            **)**
            **$**
            **15,612**






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




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**Notes
      to consolidated financial statements:**




**(1)**
            **Company
                and Summary of Significant Accounting
                Policies:**




**Nature
      of Business:**




MEMS
      USA,
      Inc. (the “Company”) was incorporated in Nevada in 2002.  The Company is
      comprised of three wholly owned subsidiaries, California MEMS USA, Inc., (“CA
      MEMS”) fka, MEMS USA, Inc., a California Corporation, Bott Equipment Company,
      Inc. (“Bott”) and Gulfgate Equipment, Inc. (“Gulfgate”). In December 2005, the
      Company incorporated Hearst Ethanol One, Inc., a Federal Canadian Corporation
      (“HEO”), for the purpose of developing, owning and operating a wood waste to
      ethanol production facility in Canada. As of March 31, 2006 the Company owns
      ninety-three point three percent (93.3%) of HEO. Dr. James A. Latty and Mr.
      Daniel Moscaritolo are directors and officers of HEO. (See subsequent events
      for
      more details.)




In
      November 2004, the Company formed a joint venture, Can Am Ethanol One,
      Inc.  (“Can Am”). We presently own forty-nine point three percent (49.3%)
      of Can Am and maintain 50% of Can Am’s voting rights.




CA
      MEMS
      is a California based professional engineered systems, products, services,
      and
      ethanol project development company (see Subsequent event), serving the
      alternative fuels, oil, petro-chemical, natural gas and electric utility
      industries.




Gulfgate
      produces particulate filtration equipment for the oil and power
      industries.   Gulfgate also produces vacuum dehydration and coalescing
      systems that remove water from hydrocarbon oils.  These same systems are
      used by electric power generation facilities to remove water from transformer
      oils.  To help meet its customers’ diverse needs, Gulfgate maintains and
      operates a rental fleet of filtration and dehydration systems.




Bott
      is a
      stocking distributor for lines of industrial pumps, valves and instrumentation.
      Bott specializes in the construction of aviation refueling systems for
      helicopter refueling on oil rigs throughout the world.  Bott also
      constructs refueling systems for commercial marine vessels.  Bott’s
      customers include chemical manufacturers, refineries, power plants and other
      industrial customers.




CA
      MEMS,
      Bott and Gulfgate have a combined direct sales force as well as commissioned
      sales representatives that sell their products.




Hearst
      Ethanol One, Inc. (HEO) was created to develop, own and operate one ethanol
      production facility in Ontario, Canada.  The plant will utilize a synthetic
      biomass conversion process to convert wood waste materials into ethanol. 
Subject to receipt of the required funding, other biomass-to-ethanol plants
      are
      planned for Canada that will also use a synthetic biomass conversion
      process.  HEO recently completed the purchase of 720 acres and
      approximately two million tons of wood waste biomass for its planned plant.
      (see
      Subsequent Event)




We
      are
      continuing the process of vertically integrating our subsidiaries, which we
      believe will promote efficiency and lower operating costs.  Each of our
      subsidiaries will remain a  separate
      operating entity.




**Accounts
      Receivable:**




In
      the
      normal course of business, the Company provides credit to customers. We monitor
      our customers’ payment history, and perform credit evaluation of their financial
      condition. We maintain adequate reserves for potential credit losses based
      on
      the age of the receivable and specific customer circumstance.




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**Inventories:**




Inventories
      are valued at the lower of cost (first-in, first-out) or market value and have
      been reduced by an allowance for excess, slow-moving and obsolete inventories.
      The estimated allowance is based on Management's review of inventories on hand
      compared to historical usage and estimated future usage and sales. Inventories
      under long-term contracts reflect accumulated production costs, factory
      overhead, initial tooling and other related costs less the portion of such
      costs
      charged to cost of sales and any un-liquidated progress payments. In accordance
      with industry practice, costs incurred on contracts in progress include amounts
      relating to programs having production cycles longer than one year, and a
      portion thereof may not be realized within one year.




**Revenue
      Recognition**




The
      majority of the Company’s revenues are recognized when products are shipped to
      or when services are performed for unaffiliated customers. Other revenue
      recognition methods the Company uses include the following: revenue on
      production contracts is recorded when specific contract terms are fulfilled,
      which is when the product or service is delivered; revenue from cost
      reimbursement contracts is recorded as costs are incurred.




**Stock
      Based Compensation:**




Pro
      forma
      information regarding net loss and loss per share, pursuant to the requirements
      of SFAS 123, as amended by FAS 148 Accounting For Stock-Base Compensation
      Transaction and Disclosure - An Amendment to FAS-123, for the six months ended
      March 31, 2006 and 2005 are as follows:




2006
            
            2005Net
                income (loss), as reported
            
            $
            2,105,230
            
            $
            (933,723
            )Deduct:Total
                stock-based employee compensation expenses determined under the fair
                value
                Black-Scholes method with a 161% and 80% volatility at March 31,
                2006 and
                2005 respectively and a 6% and 3% respectively risk free rate of
                return
                assumption
            
            
            (468,527
            )
            
            (66,672
            )Pro
                forma net income (loss)
            
            $
            1,636,703
            
            $
            (1,000,395
            )Income
                (loss) per share:Weighted
                average shares, basic
            
            
            16,192,280
            
            
            15,035,895Basic,
                pro forma, per share
            
            $
            0.10
            
            $
            (0.07
            )Weighted
                average shares, diluted
            
            
            19,319,827
            
            
            15,035,895Diluted,
                pro forma, per share
            
            $
            0.08
            
            $
            (0.07
            )




**Interim
      Financial Statements:**




The
      accompanying unaudited consolidated financial statements for the six months
      ended March 31, 2006 and 2005 include all adjustments (consisting of only normal
      recurring accruals), which, in the opinion of management, are necessary for
      a
      fair presentation of the results of operations for the periods presented.
      Interim results are not necessarily indicative of the results to be expected
      for
      a full year. These unaudited consolidated financial statements should be read
      in
      conjunction with the audited consolidated financial statements for the year
      ended September 30, 2005 included in the Company’s Form 10-KSB/A.




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**Going
      Concern:**




The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States of America, which
      contemplates the Company as a going concern. However, the Company has sustained
      substantial operating losses in recent years ($1,563,901) and has used
      substantial amounts of working capital in its operations. Realization of a
      major
      portion of the assets reflected on the accompanying balance sheet is dependent
      upon continued operations of the Company which, in turn, is dependent upon
      the
      Company's ability to meet its financing requirements and succeed in its future
      operations. Management believes that actions presently being taken to revise
      the
      Company's operating and financial requirements provide them with the opportunity
      for the Company to continue as a going concern. We will continue to raise
      additional cash through debt or equity financings in 2006 in order to meet
      our
      working capital requirements.




**(2)**
            **Business
                Acquisition:**




On
      October 26, 2004 (“Closing Date”), effective October 1, 2004, the Company
      purchased 100% of the outstanding shares of two Texas corporations, Bott
      Equipment Company, Inc. (“Bott”) and Gulfgate Equipment, Inc. (“Gulfgate”) from
      their president and sole shareholder, Mr. Mark Trumble.




Under
      the
      terms of the stock purchase agreement, the Company acquired 100% of the shares
      of Bott and Gulfgate from Mr. Trumble for $50,000 in cash and 1,309,677 shares
      of the Company’s newly issued common stock.




752,688
      shares of the shares issued to Trumble are subject to a one time put. On or
      about October 26, 2005, Mr. Trumble exercised this put. Under the terms of
      the
      put, Trumble has elected to exchange all of the 752,688 shares for an amount
      equal to $1.86 per share (which is the average price of the Company’s stock on
      the OTC BBC for the thirty trading days comprising September 13, 2004 through
      October 22, 2004) times the number of shares exchanged by Trumble pursuant
      to
      the put. The Company shall have sixty (60) days from the date of exercise to
      pay
      off any sums due thereby. An extension for
      payment of the put has been negotiated between Mr. Trumble and the Company. The
      Company’s performance under the terms of
      the
      put is secured by second deeds of
      trust with vendors’ liens in favor of Trumble on
      certain parcels of the Companies’ Texas real estate.




The
      752,688 shares subject to the put, have been properly treated as a $1.4 million
      liability, pursuant to Statement of Financial Accounting Standards no. 150
      (SFAS
      150) Accounting for Certain Financial Instruments with Characteristics of both
      Liabilities and Equity until the terms of the put expire.




The
      Company agreed to create an employee stock option plan for its employees and
      those of its affiliates, including Bott and Gulfgate. In connection with said
      plan, the Company agreed to file Form S-8 Registration Statement under The
      Security Act of 1933 (securities to be offered to employees in employee benefit
      plans) within 30 days of the Closing Date. The Company had also agreed that
      it
      would issue Trumble an additional 123,659 shares of the Company’s restricted
      stock if it failed to achieve this milestone. The Company filed the Form S-8
      Registration Statement within 30 days of the Closing Date thereby achieving
      this
      milestone and avoiding the issuance of penalty shares to Mr.
      Trumble.




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The
      Agreement also provided that Trumble will personally introduce the Company’s
      officers and representatives to five (5) qualified Texas bankers and that the
      Company will utilize its best efforts to remove Trumble’s name as guarantor from
      the Bott and Gulfgate lines of credit (See note 6 and 7) within 90 days of
      the
      fifth introduction. The Company agreed that it will issue Trumble an additional
      370,977 shares of restricted stock should it fail to achieve this milestone.
      Mr.
      Lawrence Weisdorn, Mr. Daniel Moscaritolo and Dr. James Latty have also agreed
      to join Trumble as guarantors on the Bott and Gulfgate credit lines. Mr.
      Weisdorn joined Trumble as guarantor on the Bott and Gulfgate credit lines
      in or
      around mid-November 2004. Mr. Moscaritolo and Mr. Latty have agreed to join
      as
      guarantors should the Company fail to recognize the milestone of removing
      Trumble’s name as guarantor from the existing credit lines within the specified
      time period. As of the date of this report, only four qualified personal
      introductions have occurred. Thus, the 90 day milestone has not been triggered.
      The Company is committed to removing Mark Trumble as guarantor from the existing
      lines of credit and has submitted applications for credit lines with a number
      of
      financial institutions.




The
      Company agreed to secure a best efforts underwriting commitment letter from
      a
      qualified investment banker within 45 days of the Closing Date to raise a
      minimum of $2 million in equity capital. An additional 123,659 shares of the
      Company’s restricted stock were to be issued to Trumble should the Company fail
      to achieve this milestone. The Company obtained a commitment letter within
      45
      days of the Closing Date thereby achieving this milestone and avoiding the
      issuance of penalty shares to Mr. Trumble. The Company also agreed, in
      connection with the $2 million equity raise, that the Company would receive
      $2
      million in gross equity funding within 120 days of the Closing Date. The Company
      has agreed that it will issue Trumble an additional 123,659 shares of its
      restricted stock should it fail to achieve this milestone. The Company did
      not
      achieve this milestone and is obligated to issue 123,659 penalty shares to
      Mark
      Trumble. During January, 2006 the Company issued and delivered 123,659 penalty
      shares in satisfaction of its obligation to Mr. Trumble.




Finally, the
      Company has recognized that Trumble shall sell 326,344 shares of his stock
      at a
      purchase price of approximately $607,000 to private parties, including a related
      party Lawrence Weisdorn, Sr., the former CEO’s father and a shareholder and/or
      Weisdorn Sr.’s assignees pursuant to a written agreement between Trumble and
      Weisdorn Sr. Should
      Trumble fail to recognize $607,000, through no fault of Trumble, the Company
      agreed to issue up to 494,636 shares of restricted stock to Trumble. The
      percentage of the Penalty Shares the Company shall issue, if any, shall be
      prorated in accordance with any monies received by Trumble during the 60-day
      period. It is further understood that the penalties are subject to the following
      schedule: (1) Trumble shall have recognized at least $75,000 within 15 days
      of
      the Closing Date or he shall receive up to 61,829 Penalty Shares; (2) Trumble
      shall recognize an additional $75,000 within 30 days of the Closing Date or
      he
      shall receive up to an additional 61,829 Penalty Shares; (3) Trumble shall
      recognize an additional $150,000 within 45 days of the Closing Date or he shall
      receive up to an additional 123,659 Penalty Shares; and (4) Trumble shall
      recognize an additional $307,000 within 60 days of Closing Date or he shall
      receive up to an additional 247,318 Penalty Shares. Each milestone is to be
      calculated as a stand-alone event. The obligations of items 1, 2, and 3 were
      met
      which avoided the associated penalty shares.  All of the above Penalty
      Share calculations shall be subject to a pro-rata offset for monies received
      that fall short of the indicated milestones.




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On
      December 15, 2005, the Company assumed Weisdorn Sr.’s obligation to purchase
      165,054 shares from Mr. Trumble at $1.86 per share, which constituted the
      remainder of Weisdorn, Sr.’s obligation to purchase such shares pursuant to the
      written agreement referenced in the paragraph above. During the first quarter
      of
      fiscal year 2005, the Company, in order to avoid the issuance of 61,829 penalty
      shares, paid $75,000 directly to Mr. Trumble. The Company has received
      approximately $39,000 of the $75,000 from Mr. Weisdorn Sr. The Company has
      recorded this payment as a reduction to additional paid-in capital.




Mr.
      Trumble did not recognize $307,000 within 60 days of the closing date. As a
      result, the Company is obligated to issue 247,318 penalty shares to Mr. Trumble.
      During January, 2006 the Company issued and delivered 247,318 penalty shares
      in
      satisfaction of its obligation to Mr. Trumble. Additionally, the covenant to
      remove Mr. Trumble from the lines of credit remains and may require us to issue
      up to 370,977 additional penalty shares in the event that we fail to satisfy
      that remaining covenant. Effective May 8, 2006 the Company and Mr. Trumble
      amended the original Stock Purchase Agreement dated October 26, 2004 (the “SPA”)
      and agreed, among other things, to issue 60,000 shares to Mr. Trumble in full
      and final satisfaction of all claims that Trumble has or may have to additional
      shares of the Company’s common stock as a result of any breach of, or failure to
      meet a milestone under the SPA. See Subsequent events for details of First
      Amended Stock Purchase Agreement.




**Non-Competition
      Agreement:**




The
      agreement also provides that Trumble shall not for a period of eighteen (18)
      months following his separation from the Company, unless permitted to do so
      by
      the Company, engage, directly or indirectly as an individual, representative
      or
      employee of others, in the business of designing, manufacturing or selling
      products in competition with the Company or any of its subsidiaries in any
      geographic area where the Company or its subsidiaries are doing business.




Management
      believes that the acquisition of Bott and Gulfgate will provide the Company
      with
      cost effective means to engineer, manufacture and distribute products for its
      customers in the energy sector. Bott and Gulfgate may also provide or construct
      products used in ethanol production facilities. The acquisition has been
      accounted for as a purchase transaction pursuant to Statement of Financial
      Accounting Standards No. 141 Business Combinations (SFAS 141) and accordingly,
      the acquired assets and liabilities assumed are recorded at their book values
      at
      the effective date of acquisition except for the real property which approximate
      the most current appraised value. Excess cost of $915,373 over the appraised
      real property and book value of the other acquired assets and liabilities
      assumed was assigned to goodwill. Goodwill included 370,977 of penalty common
      shares valued at $809,966.




The
      following table summarizes the estimated fair values of the assets acquired
      and
      liabilities assumed at the date of acquisition.




Current
                assets
            
            $
            1,826,720Plant,
                property, and equipment, net
            
            
            2,237,749Total
                assets acquired
            
            
            4,064,469Total
                liabilities assumed
            
            
            (1,827,942
            )Net
                assets acquired
            
            
            2,236,527Excess
                costs over fair value
            
            
            915,373Total
                purchase price
            
            $
            3,151,900





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The
      $3,151,900 purchase price was comprised of the following:




Cash
            
            $
            50,000Common
                Stock (370,977 penalty shares)
            
            
            809,965Common
                Stock (1,309,677 shares)
            
            
            2,291,935Total
                purchase price
            
            $
            3,151,900




**(3)**
            **Inventories:**




Inventories
      consist of finished goods of $488,995 and $502,430 at March 31, 2006 and
      September 30, 2005 respectively; and work in process in the amount of $372,345
      and $402,940 respectively.




**(4)**
            **Plant,
                Property and Equipment**:




A summary
      at March 31, 2006 and September
      30, 2005 are
      as
      follows:




2006
            
            2005Land
            
            $
            502,000
            
            $
            502,000Buildings
                and improvements
            
            
            1,073,000
            
            
            1,073,000Furniture,
                Machinery and equipment
            
            
            822,009
            
            
            769,590Automobiles
                and trucks
            
            
            180,652
            
            
            180,652Leasehold
                improvement
            
            
            82,879
            
            
            79,1052,660,540
            
            
            2,604,347Less
                accumulated depreciation
            
            
            (396,014
            )
            
            (287,511
            )$
            2,264,526
            
            $
            2,316,836




Depreciation
      expense charged to operations for six months and three months ended March 31,
      2006 and 2005 were $115,648 and $61,622; and $53,955 and $30,811
      respectively.




**(5)**
            **Business
                Lines of Credits - Bott:**




Bott
      previously maintained three lines of credits with a bank in Houston, Texas.
      The
      credit lines were evidenced by three promissory notes, a Business Loan Agreement
      and certain commercial guarantees issued in favor of the bank. The material
      terms of these agreements follow:




In
      May
      2004, Bott entered into a promissory note with a bank whereby Bott could borrow
      up to $250,000 over a three year term. Bott could obtain credit line advances
      based upon its asset base. The note required monthly payments of one
      thirty-sixth (1/36) of the outstanding principal balance plus accrued interest
      at the Bank's prime rate plus 1.0 percent.




In
      June
      2004, Bott executed a promissory note ("Note") with a bank whereby Bott could
      borrow up to $600,000, at an interest rate equal to the bank's prime rate.
      The
      Note provided for monthly payments of all accrued unpaid interest due as of
      the
      date of each payment. The Note further provided for a balloon payment of all
      principal and interest outstanding on the Note's one year anniversary. The
      Company informed the bank that it would not renew the line of credit and
      negotiated a long-term promissory note.




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This
      promissory note was finalized in December 2005, for $372,012 at a variable
      interest rate equal to the bank's prime rate. The note provides for five monthly
      principal payments of $3,092 and a final payment of the remaining principal
      and
      interest in June 2006.




All
      of
      the foregoing promissory notes contained the following common terms: The notes
      specified that no advances under the notes may be used for personal, family
      or
      household purposes and that all advances shall be used solely for business,
      commercial, agricultural or similar purposes. Bott could draw down on the lines
      of credit provided that: it was not in default under the note evidencing the
      particular line of credit or any other agreement that it might have with the
      bank; it was not insolvent; no guarantor had revoked or limited the terms of
      his
      or her guarantee respecting the note; Bott used the funds available under the
      particular note for an unauthorized purpose; and/or the bank believed that
      its
      interests under the note are not secured. The notes provided the following
      limitations on the use of methods and advancements respecting the credit line,
      and the bank may not honor requests for additional advances if: the requested
      advance would cause the amounts requested under the particular note to exceed
      its initial limit; Bott's checks or bank cards relating to the credit line
      are
      reported lost or stolen; the note is in default; or the amount requested is
      less
      than allowed under the note. The notes permit prepayment of all or part of
      the
      outstanding balances without penalty.




The
      Agreements and Notes are secured by the inventory, chattel paper, accounts
      receivable and general intangibles. The Agreements and Notes are also secured
      by
      the personal performance guarantees of Mr. Mark Trumble and Mr. Lawrence
      Weisdorn (Commercial Guarantees). The Commercial Guarantees require the
      guarantors to assure that all payments due under the Notes are timely made
      or to
      make such payments. All amounts related to Bott’s outstanding promissory notes
      totaled $352,281 and $555,028 on March
      31,
      2006 and September
      30, 2005 respectively.




**(6)**
            **Business
                Line of Credit - Gulfgate:**




In
      June
      2002, Gulfgate executed a promissory note (“Note”) with a bank that allowed
      Gulfgate to borrow up to $200,000 at an interest rate equal to the bank’s prime
      rate, or a minimum interest rate of 5.00% per annum, whichever was greater.
      Gulfgate could draw down on the line of credit provided: that it was not in
      default on this Note or any other agreement that it might have with the bank;
      it
      was not insolvent; no guarantor revoked or limited the terms of his guarantee;
      the Borrower used the funds available under the Note for an unauthorized purpose
      (i.e., other than for a business purpose without first obtaining the bank’s
      written consent); and /or the bank believed that its interests are not secured.
      The Note provided the following limitations on the use of methods and
      advancements respecting the credit line, and the bank may not honor requests
      for
      advances if: the requested advance would cause the amounts requested under
      the
      Note to exceed $200,000; Gulfgate’s checks or bank cards relating to the credit
      line are reported lost or stolen; the Note was in default; or the amount
      requested is less than allowed under the Note. The Note provided for monthly
      payments of all accrued unpaid interest due as of the date of each payment.
      The
      Note remains in force and effect until the bank provides notice to Gulfgate
      that
      no additional withdrawals are permitted (Final Availability Date). Thereafter,
      payments equal to either $250 or the outstanding interest plus one percent
      of
      the outstanding principal as of the Final Availability Date are due monthly
      until the Note is repaid in full. The Note allows for prepayment of all or
      part
      of the outstanding principal or interest without penalty. The Note is secured
      by
      Gulfgate’s accounts with the bank, and by Gulfgate’s inventory, chattel paper,
      accounts receivable, and general intangibles. The Agreement is also secured
      by
      the performance guarantees of Mr. Mark Trumble, Mr. Lawrence Weisdorn and the
      Company. The personal guarantees require the guarantors to assure that all
      payments due under the Note are timely made or to make such payments. Amounts
      outstanding at March
      31,
      2006 and September
      30, 2005 totaled $181,276 and $195,716 respectively.




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**(7)**
            **Liability
                to be satisfied through the issuance of shares******




The
      Company sold 670,000 shares of its common stock for $1,005,000 via a private
      placement offering through SW Bach & Company, a New York securities
      dealer.  The Company anticipates satisfying its obligations through
      issuance of common stock to shareholders as soon as the Company completes its
      SB-2 registration with the Securities & Exchange Commission . Additional
      details concerning this transaction may be found in the Company’s Form 10-KSB
      report filed February 2, 2006 (Sales Agency Agreement) which is hereby
      incorporated by reference.




The
      Company sold 897,000 shares of its common stock for $735,540 via another private
      placement offering from February through April 2006. The Company anticipates
      satisfying its obligations through issuance of common stock to shareholders
      in
      the next fiscal quarter.




**(8)**
            **Long-Term
                Debts and other
                liabilities:**




**Promissory
      Notes:**




In
      May
      2003, Bott executed a promissory note with a bank in the amount of $26,398
      at an
      interest rate equal to four point fifty five percent (4.55%) for a vehicle
      purchase. The term of the note is for fifty-nine (59) months at $494 per month.
      Balance outstanding at March
      31,
      2006 and September
      30, 2005 were $12,643 and $15,004 respectively.




**Mortgage:**




On
      May
      31, 2002, Gulfgate entered into a $140,000 promissory note (“Note”) with a bank
      in connection with the refinancing of Gulfgate’s real estate.   The
      Note bears a fixed interest rate of seven percent (7.00%) per annum.  
The Loan provided for fifty-nine monthly payments of $1,267 due beginning July
      2002 and ending June 2007.  The Note may be prepaid without fee or penalty
      and is secured by a deed of trust on Gulfgate’s realty.   Gulfgate is
      required under the terms of a separate agreement to provide replacement value
      fire and extended coverage insurance having a $2,500 deductible. Balance
      outstanding at March
      31,
      2006 and September
      30, 2005 were $28,732 and $58,934 respectively.




**Loans
      from shareholders:**




Mr.
      Daniel K. Moscaritolo, COO and Director, and James A. Latty, CEO and Chairman,
      (“Lenders”) each loaned the Company $105,800; $95,800 of which were received in
      September 2005, and $10,000 received in October 2005 (collectively $211,600).
      The transactions are evidenced by two notes dated November 1, 2005 (hereinafter,
      “Notes”). The terms of the Notes require repayment of the principal and
      interest, which accrues at a rate of ten percent (10%) per annum on May 1,
      2006.
      The Notes are accompanied by Securities Agreements that grant the Lenders a
      security interest in all personal property belonging to the Company, as well
      as
      granting an undivided 1⁄2 security interest in all of the Company’s right title
      and interest to any trademarks, trade names, contract rights, and leasehold
      interests.




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  **Financing
        Lease Agreements:**




In
      September 2002, Gulfgate entered into a non-cancelable debt financing agreement
      (“Agreement”) with the bank’s leasing corporation for the financing of certain
      equipment and a paint booth. The Agreement calls for the payment of forty-eight
      (48) monthly installment payments of $1,556 beginning September 2002 at the
      interest rate of 6.90 percent per annum. Balance outstanding at March
      31,
      2006 and September
      30, 2005 were $9,155 and $17,988 respectively.




**Convertible
      Loan Payable:**




In
      September 2004, the Company entered into a convertible loan with an investor.
      The principal amount of the convertible loan payable is $150,000 at an interest
      rate of 8% per annum paid quarterly. The loan is convertible into common stock
      at any time within two (2) years (24 months) starting September 3, 2004 at
      the
      conversion price of $2.20 or 68,182 shares. Each share converted entitles the
      holder to purchase one additional share of stock at an exercise price of $3.30
      within the ensuing 12 months.




If
      at the
      end of the two year period the loan has not been converted into common stock,
      the principal amount becomes due and payable.




**(9)**
            **Resignation
                of Executive Officer and Board
                Member:**




On
      October 17, 2005, the Company and its officers filed a complaint against
      Lawrence Weisdorn, Jr. (“Weisdorn), the Company’s former Chief Executive Officer
      and Chairman of the Board of Directors, Lawrence Weisdorn, Sr. (“Weisdorn Sr.”
and together with Weisdorn, the “Weisdorn Parties”), Nathan Drage (“Drage”) and
      Drage related parties in the Superior Court of the State of California for
      Los
      Angeles County, alleging claims for, among other things, breaches of Nevada
      and
      federal law and breach of fiduciary duty (the “Action”). The Company’s claims
      were based in substantial part on allegations of the unauthorized issuance
      of
      shares of the Company’s predecessor’s common stock in December 2003, prior to
      the reverse acquisition and merger with CA MEMS which was finalized in February,
      2004. The Company sought an injunction preventing the Weisdorn Parties and
      Drage
      and his related parties from selling or transferring any of the shares of the
      Company’s common stock issued in December 2003, the return of the shares to the
      Company for cancellation and monetary damages.




On
      November 3, 2005, the Weisdorn Parties filed a cross-complaint against the
      Company and its officers, alleging claims for, among other things, breach of
      employment agreement, libel and indemnification (the “Weisdorn Counterclaim”).
      The Weisdorn Parties’ claims were based in part on assertions by Weisdorn that
      he was improperly terminated without cause from his positions with the Company
      in June 2005, and that he was entitled to indemnification pursuant to Nevada
      corporations law in connection with the Action. The Weisdorn Parties sought
      monetary damages.




On
      December 15, 2005, the Company and its officers entered into a Settlement
      Agreement and Release with the Weisdorn Parties and other Weisdorn related
      parties, effective as of July 1, 2005 (the “Settlement Agreement”), pursuant to
      which the parties agreed to, among other things, dismiss the Action as it
      related to the Weisdorn Parties, dismiss the Weisdorn Counterclaim, mutually
      release all claims and mutually indemnify the other parties from certain claims.
      Weisdorn also agreed to deliver a letter of resignation to the Company,
      confirming his resignation as Chief Executive Officer and Chairman of the Board
      of Directors of the Company as of June 25, 2005 and clarifying and confirming
      the terms of his separation from the Company. The Weisdorn Parties and other
      Weisdorn related parties further agreed to deliver to the Company all shares
      or
      rights to shares of the Company’s common stock owned by such parties. The net
      stock returned to the Company by the Weisdorn parties was 2,699,684 shares,
      not
      including 670,000 shares of the Company’s common stock to be held by the Company
      in an account for the benefit of the Weisdorn Parties (the “Retained Stock”),
      which Retained Stock will be sold for the benefit of the Weisdorn Parties
      pursuant to the terms set forth in the Settlement Agreement. The Company has
      the
      option to purchase any portion of the Retained Stock at a price determined
      according to the terms of the Settlement Agreement. The Company also agreed
      to
      assume the obligations of the Weisdorn Parties to purchase certain shares of
      the
      Company’s common stock from Mark Trumble, and the Weisdorn Parties assigned to
      the Company their interests in their rights, if any, purchase such shares (the
      Trumble Claims).




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The
      Settlement Agreement did not in any way affect claims brought in the Action
      by the Company and its officers against Drage and the
      Drage-related entities. However, on January 13, 2006, Drage and
      Adrian Wilson verbally agreed to a settlement in principle with the Company,
      which the parties intend to memorialize shortly.  In connection with the
      verbal agreement to a settlement, the Company and its officers filed a Request
      for Dismissal without prejudice of all claims against Drage and the
      Drage-related entities on January 13, 2006.




**(10)**
            **Income
                from legal settlement:**




On
      December 15, 2005, the Company and its officers entered into a Settlement
      Agreement and Release with the Weisdorn Parties and other Weisdorn related
      parties, effective as of July 1, 2005 (the “Settlement Agreement”), pursuant to
      which the Weisdorn Parties and other Weisdorn related Parties agreed to deliver
      to the Company all shares or rights to shares of the Company’s common stock
      owned by such parties. The net common stock returned to the Company by the
      Weisdorn parties and other Weisdorn related parties was 2,699,684 shares. See
      note 11 for additional details.




The
      fair
      value of 2,669,684 shares of the Company’s common stock at December 15, 2005 was
      $3,779,558. The per share closing price of the Company’s stock at December 15,
      2005 was $1.40.




**Assignment
      of the Trumble Claims:**




The
      Company and the Weisdorn Parties further agreed the Weisdorn Parties, and each
      of them, assigned to the Company any and all rights or interest they, or any
      of
      them, have in or to the Trumble Claims. On December 15, 2005, the Company
      assumed Weisdorn Sr.’s obligation to purchase 165,054 shares from Mr. Trumble at
      $1.86 per share for a total liability of $307,000. The fair value of this
      obligation at December 15, 2005 is $231,076 (165,054 shares at $1.40 per share)
      with the difference charged to other income ($75,924).




**(11)**
            **Private
                placement of securities:**




On
      November 10, 2005, the Company entered into a stock purchase agreement with
      Mercatus & Partners, Limited, a private limited company of the United
      Kingdom (“Mercatus Limited”), for the sale of 1,530,000 shares of the Company’s
      common stock for a minimum purchase price of $0.73 per share (the “SICAV One
      Agreement), and another stock purchase agreement with Mercatus Limited also
      for
      the sale of 1,530,000 shares of the Company’s common stock for a minimum
      purchase price of $0.73 per share (the “SICAV Two Agreement” and together with
      the SICAV One Agreement, the “SICAV Agreements”). The shares offered and sold
      under the SICAV Agreements were offered and sold pursuant to a private placement
      that is exempt from the registration provisions of the Securities Act under
      Section 4(2) of the Securities Act pursuant to Mercatus Limited’s exemption from
      registration afforded by Regulation S. Pursuant to the terms of the SICAV
      Agreements, the Company issued and delivered an aggregate number of 3,060,000
      shares of the Company’s common stock within five days of the execution of the
      respective SICAV Agreements to a custodial lock box on behalf of Mercatus
      Limited for placement into two European SICAV funds. The SICAV Agreements
      provided Mercatus Limited with up to 30 days after the delivery of the shares
      of
      the Company’s common stock to issue payment to the Company. If payment for the
      shares was not received by the Company within 30 days of the delivery of the
      shares the Company had the right to demand the issued shares be returned. The
      Company has not yet received payment for the shares issued pursuant to the
      SICAV
      Agreements.




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On
      November 12, 2005, the Company also entered into another private stock purchase
      agreement with Mercatus & Partners, Limited, a private limited company of
      the United Kingdom (“Mercatus Limited”) for the sale of 170,000 shares of the
      Company’s common stock for a minimum purchase price of $0.82 per share (the
“Private SICAV One Agreement”) and another private stock purchase agreement with
      Mercatus LP also for the sale 170,000 shares of the Company’s common stock for a
      minimum purchase price of $0.82 per share (the “Private SICAV Two Agreement” and
      with the Private SICAV One Agreement, the “Private SICAV Agreements”). The
      shares offered and sold under the SICAV Agreements were offered and sold
      pursuant to a private placement that is exempt from the registration provisions
      of the Securities Act under Section 4(2) of the Securities Act pursuant to
      Mercatus Limited’s exemption from registration afforded by Regulation S.
      Pursuant to the terms of the Private SICAV Agreements, the Company issued and
      delivered an aggregate amount of 340,000 shares of the Company’s common stock
      within five days of the execution of the respective Private SICAV Agreements
      to
      a custodial lock box on behalf of Mercatus Limited for placement into a European
      bank SICAV fund. Subject to a valuation of the shares, Mercatus Limited had
      up
      to 30 days after the delivery of the shares of the Company’s common stock to
      issue payment to the Company. If payment was not received by the Company within
      45 days of the issuance of the shares to Mercatus LP, the Company had the right
      to demand the issued shares be returned. The Company has not yet received
      payment for the shares issued pursuant to the Private SICAV
      Agreements.




In
      a
      letter to Mercatus dated April 13, 2006 the Company declared Mercatus to be
      in
      material breach of the above Private Purchase Agreements due to non-payment,
      terminated the Agreements in their entirety and exercised its right to demand
      the return of all the shares. Mercatus has informed the Company of its intent
      to
      return all of the shares but, as of the date of this report the Company has
      not
      received them. The Company is currently exploring all available options in
      recovering its shares.




**(12)**
            **Material
                Agreement:**




**$1.5
      million contract to build an Intelligent Filtration System**




In
      February 2006, the Company won a $1.5 million order from CDI, who is under
      contract with a major oil refinery in Southern California to supply filtration
      equipment. CDI is an engineering, procurement and construction company, based
      in
      Houston with headquarters in Philadelphia. Mems will supply an integrated
“Intelligent Filtration System” consisting of a Smart Backflush Filtration
      System with an integral electronic decanting system, a carbon bed filter and
      an
      ion-exchange resin bed system. This equipment will purify the amine fluid by
      removing particulate, chemical contaminants, and heat stable salts to allow
      the
      amine to more effectively remove carbon dioxide and sulfur compounds during
      refining. This results in a cleaner burning, more environmentally friendly
      fuel
      for motor vehicles.




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This
      unique technology includes permanent filtration elements that are back-flushed
      clean, thereby eliminating the need to dispose of conventional filter elements.
      The system dramatically reduces hazardous waste disposal costs. These systems
      will provide years of effective utilization of the amine fluids and extend
      the
      useful life of the refinery’s amine process equipment.




This
      contract is cancelable subject to costs reimbursement and liquidated
      damages.




**(13)**
            **Subsequent
                Events:**




**MEMS
      USA, INC. changed its name to** **CONVERGENCE
      ETHANOL** **:**




To
      better
      reflect the Company’s emphasis in the alternative energy sector, on April 15,
      2006, the Company announced its decision to change its name to Convergence
      Ethanol, Inc., and to conduct its businesses, whether directly by the Company
      or
      through its wholly owned subsidiary, CA Mems.




**Hearst
      Ethanol One Inc. Agreement:**




On
      April
      21, 2006, Hearst Ethanol One, Inc., a Federal Canadian Corporation (“HEO”), a
      majority-owned subsidiary of Registrant, completed the acquisition of
      approximately 720 acres of real property, together with all biomass material
      located thereon (approximately two million tons of woodwaste), located in the
      Township of Kendall, District of Cochrane, Canada (cumulatively, the
“Property”), from C. Villeneuve Construction Co. LTD., a Canadian Corporation
      (“Villeneuve”), as provided under that agreement to purchase these assets
      earlier reported in Registrant’s 8-K dated December 27, 2005 (the “Agreement”).
      The Property was purchased to provide the site and the biomass material for
      the
      construction and operation of a 120,000,000 gallon per year bio-renewable
      woodwaste-to-ethanol refinery to be owned by HEO and designed, built and managed
      by  Convergence
      Ethanol, Inc. aka, CA MEMS, a subsidiary of Registrant. The on-site inventory
      of
      biomass is sufficient for 2 full years of production or 240,000,000 gallons
      of
      ethanol.




Pursuant
      to the provisions of the Agreement, HEO issued ten point five percent (10.5%)
      of
      HEO’s common shares to Villeneuve as consideration for the transfer of the
      Property. At the close of the transaction, Registrant owned 87.3% of the common
      stock of HEO.




Pursuant
      to a Memorandum of Understanding entered into on April 20, 2006 between HEO
      and
      Villeneuve to clarify the Agreement, Villeneuve shall be entitled to one member
      of HEO’s board of directors for so long as Villeneuve is at least a ten percent
      (10%) shareholder of HEO. Villeneuve shall also be entitled to the right to
      manage, blast, or otherwise remove the stone aggregate material located on
      the
      Property. All blasting ceases prior to plant construction.




The
      closing of the transaction contemplated by the Agreement was contingent upon
      HEO
      obtaining an easement through and on that parcel of real property owned by
      Villeneuve described as parcel 711 Centre Cochrane for rail access to the
      Property, and another easement through and on the same parcel of real property
      for a two way road for truck access to the Property, and otherwise satisfying
      HEO’s and Registrant’s due diligence. As of the date of this report HEO has
      incurred $86,000 for environmental certificates and legal expenses.




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**First
      amended stock purchase agreement with Mark Trumble**




Effective
      May 8, 2006, the Company and its officers entered into a First Amended Stock
      Purchase Agreement and Release (“Agreement”) with Mark Trumble, amending that
      certain Stock Purchase Agreement dated September 1, 2004 (the “SPA”), pursuant
      to which the parties agreed to, among other things, Trumble agreed to release
      the Company from its obligations under the Put, including any obligation to
      make
      the Interest Payment or to pay interest on any sum whatsoever, and shall release
      any security interest he claims in the real estate owned by Gulfgate and/or
      Bott, and the Company shall secure a funding commitment in which Trumble shall
      be paid the sum of $307,000 at the time of the closing of the funding. This
      sum
      shall be used to purchase 165,053 shares of the common stock of the Company
      from
      Trumble at the price of $1.86 per share. The Company shall also pay from the
      funding all amounts of bank or other indebtedness owed by the Company, Bott
      or
      Gulfgate which is personally guaranteed by Trumble. The Company shall issue
      Trumble, upon closing of the funding, 60,000 newly issued shares of the
      Company’s common stock. This additional issuance of shares of the common stock
      of the Company shall be in full and final satisfaction of all claims that
      Trumble has or may have to additional shares of the Company’s common stock as a
      result of any breach of, or failure to meet a milestone under, the SPA.




****ITEM
      2 -
      MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS





*Unless
      otherwise indicated, all references to our company include our wholly-owned
      subsidiaries, MEMS USA, Inc. a California corporation, Bott Equipment Company,
      Inc., a Texas corporation, Gulfgate Equipment, Inc., a Texas corporation, our
      joint venture Can Am Ethanol One, Inc., a British Columbia corporation and
      Hearst Ethanol One, Inc., an Ontario corporation (“HEO”).*





Plan
      of Operations:




We
      are
      engaged in the business of developing and manufacturing advanced engineered
      products, systems and plants, mostly for the energy, oil and natural gas
      industries. Our business is divided into three operating divisions, including
      (i) the design, development and operation of ethanol facilities, (ii) the
      provision of systems and components to the energy sector, and (iii) the
      engineering applications and sale of micro electro mechanical systems (MEMS)
      for
      scientific and engineering companies. As related in our annual report, in
      October 2005, the Company acquired two Texas corporations, Bott Equipment
      Company, Inc. (“Bott”) and Gulfgate Equipment, Inc. (“Gulfgate”).




In
      November 2004, the Company formed a joint venture, Can Am Ethanol One, Inc.
      (“Can Am”). As of the date of this report, the Company owns 49.3% of the
      outstanding shares of Can Am and has voting rights equal to 50%. Two of MEMS
      directors sit on the Can Am board. The purpose of this joint venture is to
      design, build and operate an ethanol production facility. In June 2005, the
      Company and its Canadian counterpart each made a CN$25,000 at risk deposit
      to
      open escrow toward purchase of 2,150 acres of land intended to serve as a plant
      site in British Columbia, Canada (“Purchase Agreement”).




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Subsequently,
      the Company paid an additional at-risk deposit of CN$50,000 for an extension
      of
      the Closing Date of the Purchase Agreement. As of the date of this report,
      the
      Purchase Agreement remains active, but has not closed. Due to the length of
      time
      that Purchase Agreement has remained pending, as well as other factors, the
      Company is contemplating selling its’ interest to Accelon Energy System, Inc.,
      the other owner of Can Am Ethanol One, Inc. We will continue to explore other
      potential plant sites in Canada.




In
      December 2005, the Company incorporated Hearst Ethanol One, Inc., an Ontario
      corporation (“HEO”) for the purpose of building, owning and operating an ethanol
      production facility in Canada. As of March 31, 2006 the Company owns ninety-nine
      point three percent (99.3%) of HEO. Dr. James A. Latty and Mr. Daniel
      Moscaritolo are directors and officers of HEO.




On
      December 21, 2005, HEO entered into a land purchase agreement with C. Villeneuve
      Construction Company, Ltd. Upon successful completion of due diligence
      concerning 600 acres of land to be acquired near Hearst, Ontario, Canada and
      at
      the discretion of the Company to accept the results, the transaction is
      anticipated to close on or before May 1 st ,
      2006.




On
      April
      21, 2006, Hearst Ethanol One, Inc., a Federal Canadian Corporation (“HEO”), a
      majority-owned subsidiary of Registrant, completed the acquisition of
      approximately 720 acres of real property, together with all biomass material
      located thereon (approximately two million tons of woodwaste), located in the
      Township of Kendall, District of Cochrane, Canada (cumulatively, the
“Property”), from C. Villeneuve Construction Co. LTD., a Canadian Corporation
      (“Villeneuve”), as provided under that agreement to purchase these assets
      earlier reported in Registrant’s 8-K dated December 27, 2005 (the “Agreement”).
      The Property was purchased to provide the site and the biomass material for
      the
      construction and operation of a 120,000,000 gallon per year bio-renewable
      woodwaste-to-ethanol refinery to be owned by HEO and designed, built and managed
      by  Convergence
      Ethanol, Inc. aka, CA MEMS, a subsidiary of Registrant. The on-site inventory
      of
      biomass is sufficient for 2 full years of production or 240,000,000 gallons
      of
      ethanol.




Pursuant
      to the provisions of the Agreement, HEO issued ten point five percent (10.5%)
      of
      HEO’s common shares to Villeneuve as consideration for the transfer of the
      Property. At the close of the transaction, Registrant owned 87.3% of the common
      stock of HEO.




Pursuant
      to a Memorandum of Understanding entered into on April 20, 2006 between HEO
      and
      Villeneuve to clarify the Agreement, Villeneuve shall be entitled to one member
      of HEO’s board of directors for so long as Villeneuve is at least a ten percent
      (10%) shareholder of HEO. Villeneuve shall also be entitled to the right to
      manage, blast, or otherwise remove the stone aggregate material located on
      the
      Property. All blasting ceases prior to plant construction.




The
      closing of the transaction contemplated by the Agreement was contingent upon
      HEO
      obtaining an easement through and on that parcel of real property owned by
      Villeneuve described as parcel 711 Centre Cochrane for rail access to the
      Property, and another easement through and on the same parcel of real property
      for a two way road for truck access to the Property, and otherwise satisfying
      HEO’s and Registrant’s due diligence.




We
      believe that these strategic acquisitions and alliances will allow us to grow
      our businesses. In January, 2006 the Company was approved for ISO 9001:2000
      certification. This certification will provide the Company with worldwide
      recognition that we have high quality products and standards and will allow
      us a
      greater ability to compete on a national and International basis.





CA
      MEMS
      was incorporated in November 2000. CA MEMS is an engineering and design firm.
      CA
      MEMS has been engaged in the engineering and sale of instrumentation, blending
      skids and Intelligent Filtration Systems (IFS). During 2004, CA MEMS’s engineers
      designed and constructed an acoustic viscometer. This instrument utilizes sound
      waves traveling through a fluid stream to determine the fluid’s viscosity. To
      date, the Company has determined that the instrument may be utilized to measure
      the viscosity of a range of aqueous and organic fluids, including refined and
      crude oils. In May 2005 the Company filed a utility patent application
      respecting this device which replaces the previously filed provisional patent.
      CA MEMS is presently designing a multi-variant pressure, temperature and flow
      meter for use in industrial applications.




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During
      2004, CA MEMS’s engineers also built a hydrocarbon blending system technology.
      One system we produced mixes three organic fluids, in differing percentages
      with
      accuracy. One of the Company’s long term goals is to be able to build blending
      systems to mix ethanol with motor gasoline. When properly mixed, ethanol and
      gasoline provide a higher octane, cleaner burning fuel for automobiles.





CA
      MEMS’s
      engineers have also been charged by the Company to oversee the Company’s IFS
      business. These systems are utilized to filter wastes from amine, oil or water
      streams. Unlike a typical canister filter system, such as the oil filter in
      an
      automobile, which needs to be periodically replaced and disposed of, the filters
      utilized in intelligent filtration systems can last for decades. Furthermore,
      the filter system is self cleaning. Once the system recognizes that its filter
      is becoming clogged by debris filtered from the fluid flow, it turns the fluid
      flow through the filter off and “back flushes” the debris caked on the filter
      into a collection vessel. The system then turns the fluid flow through the
      system back on through the freshly cleaned filter. The filter cleaning process
      takes only seconds to complete and repeats as necessary to assure optimum
      filtration. A facility utilizing IFS technology needn’t dispose of contaminated
      filters, but only need dispose of the contaminate itself. Thus, while a
      filtration system based upon IFS technology typically requires a greater capital
      investment on the part of the purchaser, these costs are offset in the long
      run
      by savings in filter replacement and disposal costs. The Company anticipates
      that it may be able to utilize its intelligent filtration systems as an integral
      part of any ethanol production facility that it may design. The Company is
      presently aware of three competitors offering similar technologies to MEMS
      IFS
      technology. In February, 2006 MEMS received a purchase order for $1.5 million
      for the engineering, manufacturing and installation of an automatic back
      flushable filtration system (ABF/IFS). This is the largest sale in the Company’s
      history. The customer is a Fortune 50 energy company serving the major
      integrated oil and gas industry. (See subsequent events for more
      details.)





Presently,
      CA MEMS utilizes a combination direct sales force as well as commissioned sales
      representatives to market and distribute its products. CA MEMS targets niche
      business segments and is not dependent upon any one or a few major customers.
      A
      typical contract requires CA MEMS to engineer a product that previously did
      not
      exist or improve upon an existing technology using MEMS (Micro Electro
      Mechanical Systems) devices. The vast majority of the monies raised since the
      Company’s acquisition of CA MEMS have been utilized to fund CA MEMS’s
      acquisition and development of new technologies.





Gulfgate
      produces particulate filtration equipment utilized in the oil and power
      industries. Gulfgate also produces vacuum dehydration and coalescing systems
      that are utilized to remove water from ground based turbine engine oil. These
      same systems are used by electric power generation facilities to remove water
      from transformer oils. To help meet its customer’s diverse needs, Gulfgate
      maintains and operates a rental fleet of filtration and dehydration systems.
      Presently, Gulfgate utilizes a combination direct sales force as well as
      commissioned sales representatives to market and distribute its
      products.




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Bott
      is a
      stocking distributor for various lines of industrial pumps, valves and
      instrumentation such as those utilized in CA MEMS’s IFS and blending skid
      systems. Bott specializes in the construction of aviation and refueling systems,
      including, but not limited to, helicopter refueling systems on oil rigs
      throughout the world. Bott also constructs refueling systems for commercial
      marine vessels. Bott’s customers include chemical plants, refineries, power
      plants and other industrial applications. Bott utilizes a combination direct
      sales force as well as commissioned sales representatives to market and
      distribute its products.




On
      April
      25, 2005 the Company and Accelon Energy System, Inc. (“Accelon”) entered into a
      contract with Can Am whereby the Company and Accelon agreed to provide certain
      services to Can Am on the condition that Can Am receives project funding on
      or
      before June 1 st ,
      2005.
      Please refer to the Company’s Form 8-K filing dated April 29, 2005 for details
      relating to this contract. The contract was amended on May 24, 2005 by the
      parties to extend the termination date from June 1, 2005 to October 31, 2005.
      Please see Exhibit 10.2 for details relating to this amendment.




Can
      Am
      was created to manufacture, own and operate one ethanol production facility
      in
      British Columbia Canada.  The plant was to utilize a synthetic biomass
      conversion process to convert wood waste materials into ethanol. In June 2005,
      the Company and its Canadian counterpart each made a CN$25,000 at risk deposit
      to open escrow toward purchase of 2,150 acres of land intended to serve as
      a
      plant site in British Columbia, Canada (“Purchase Agreement”).




Subsequently,
      the Company paid an additional at-risk deposit of CN$50,000 for an extension
      of
      the Closing Date of the Purchase Agreement. As of the date of this report,
      the
      Purchase Agreement remains active, but has not closed. Due to the length of
      time
      that Purchase Agreement has remained pending, as well as other factors, the
      Company is contemplating selling its’ interest to Accelon Energy System, Inc.,
      the other owner of Can Am Ethanol One, Inc.




HEO
      is a
      private Canadian corporation organized for the purpose of developing and
      operating a synthetic wood waste biomass-to-ethanol plant in Hearst, Ontario
      Canada. Subject to receipt of the required funding several
      biomass-to-ethanol plants are planned for Canada that will also use a synthetic
      biomass-to-ethanol conversion process. It is anticipated that the ethanol
      manufactured by these facilities will be sold to companies which blend ethanol
      with motor fuel. The blending of ethanol with motor fuel reduces emissions
      and
      will help countries such as Canada meet the Kyoto Accords for reduced greenhouse
      gas emissions. We estimate that each ethanol plant will require approximately
      $310 million in capital. MEMS USA’s engineering group, headquartered in Westlake
      Village, CA, will be entering into contract negotiations with HEO to develop
      the
      engineering data and direct the plant engineering and construction projects.
      It
      is anticipated that the Company’s Texas subsidiaries will be called upon to
      supply instrumentation for the project and assist in its modular construction,
      subject to receipt of funding.




On
      December 21, 2005, HEO entered into a land purchase agreement with C. Villeneuve
      Construction Company, Ltd. Upon successful completion of due diligence
      concerning 600 acres of land to be acquired near Hearst, Ontario, Canada and at
      the discretion of the Company to accept the results, the transaction is
      anticipated to close on or before May 1 st ,
      2006.
      Additional details concerning this transaction may be found in the Company’s
      Form 8K report filed December 27, 2005 which is hereby incorporated by
      reference.




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We
      are
      presently in the process of integrating and improving our subsidiaries, which
      we
      believe will promote efficiency and lower operating costs. While each of our
      subsidiaries will remain a separate operating entity, we intend to optimize
      the
      resources of each. CA MEMS’ primary responsibility will be to design and
      engineer new products and systems for the energy sector. It is anticipated
      that
      Bott will supply component parts for these systems, which will be assembled
      in
      Texas under CA MEMS’ supervision. We have already transferred our IFS and other
      technology to Texas in order to establish lines of communication and a working
      relationship. We also anticipate that once we obtain the necessary funding,
      the
      symbiotic relationship between our subsidiaries will allow us to engineer,
      design, and partially construct ethanol plants for our current and future
      Canadian joint ventures.


Comparison
      of Operations





Net
      sales
      were $2,515,414 and $1,864,543 for the three months ended March 31, 2006 and
      2005, respectively. Net sales for the six-month periods ended March 31, 2006
      and
      2005 were $5,141,931 and $4,879,240, respectively. The sales increases for
      the
      three months (34.9%) and for the six months (5.4%) ended March 31, 2006 as
      compared to the prior year were due primarily to strong “Oil Patch” customer
      demand for our industrial pumps, equipment rentals and repairs services. Sales
      for the second quarter of fiscal 2006 were at expected levels. Customer bookings
      this past quarter continued to push orders in sales backlog to record levels
      and
      finished the quarter at $4.6 million. In March, 2006 the Company booked a
      $1,500,000 order from CDI for an automatic back flushable filtration system.
      CDI
      is under contract with a major oil refinery in Southern California to supply
      our
      "Intelligent Filtration System” equipment. (Reference Form 8-K dated March 30,
      2006 Re. CDI - IFS/MEMS USA, Inc.)





The
      Company computes gross profit as net sales less cost of sales. The gross profit
      margin is the gross profit divided by net sales, expressed as a percentage.
      The
      gross profit margin was 22.1% and 21.6% in the second quarter of fiscal 2006
      and
      2005, respectively. Gross profit margin for the six-month periods ended March
      31, 2006 and 2005 were 21.6% and 27.9% respectively. This decrease of 6.3%
      was
      primarily due to lower margins on commercial aviation refueling systems
      shipments. Margins for this segment of the business for the quarter ended March
      31, 2006 reflect the significant competitive pressures encountered on bidding
      and winning several key customer jobs.




Selling,
      general and administrative (SG&A) expenses were $1,354,190 and $1,207,609
      for the three months ended March 31, 2006 and 2005, respectively. SG&A for
      the six-month periods ended March 31, 2006 and 2005 were $2,675,737 and
      $2,305,114, respectively. The increase in SG&A spending for the three months
      and for the six months ended March 31, 2006 as compared to the prior year were
      due primarily to auditing fees associated with the acquisition of Gulfgate
      and
      Bott, legal costs (See Part II, Item 1, Legal Proceedings) and consulting
      fees.




We
      expect
      that over the near term, our selling, general and administration expenses will
      increase as a result of, among other things, increased legal and accounting
      fees
      associated with increased corporate governance activities in response to the
      Sarbanes-Oxley Act of 2002, recently adopted rules and regulations of the
      Securities and Exchange Commission, the filing of a registration statement
      with
      the Securities and Exchange Commission to register for resale the shares of
      common stock and shares of common stock underlying warrants issued in various
      private offerings, increased employee costs associated with planned staffing
      increases, increased sales and marketing expenses, increased activities related
      to the design, engineering and construction of the Hearst Ethanol One, Inc.
      ethanol production facility and increased activity in searching for and
      analyzing potential acquisitions.




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For
      the
      quarter ended March 31, 2006, shareholder’s equity was $15,612 as compared to
      equity of $428,632 for the prior year period ended September 30, 2005. The
      decrease in shareholder equity is
      primarily attributable to net operating losses incurred over the past six months
      but, partially offset by the issuance of common stock net of an accrual to
      record an obligation to purchase shares of MEMS common stock related to a legal
      settlement ($307,000; See note 10 & Subsequent Events).





Upon
      the
      issuance of 670,000 shares of MEMS common stock sold in a private placement
      offering in September, 2005 for $1.0 million (See Part II, Item 2, Unregistered
      Sales of Equity Securities and Use of Proceeds) less the obligations due to
      Mr.
      Trumble which were renegotiated effective May 8, 2006 and among other things,
      eliminated the $1,400,000 “Put Option” (See Subsequent Events), equity would
      increase $2.7 million and represent a $2.2 million increase over the prior
      year
      ended September 30, 2005.





Interest
      expense (income), net was $11,222 and $(6,481) for the fiscal quarters ended
      March 31, 2006 and 2005, respectively. Interest expense for the six-month
      periods ended March 31, 2006 and 2005 were $34,503 and $(9,343), respectively.
      The increase in interest expense is attributable to the interest payments made
      pursuant to the terms of the credit lines of Bott and Gulfgate and the “Put
      Option” (See note 13) with Mr. Trumble.





In
      summary, net losses were $808,351 and $699,287 for the fiscal quarters ended
      March 31, 2006 and 2005, respectively. Net income (loss) for the six-month
      periods ended March 31, 2006 and 2005 were $2,105,230 and $(933,723),
      respectively. The increased net loss for the fiscal quarter ended March 31,
      2006
      as compared to the prior year was primarily due to higher MEMS general and
      administrative expenses resulting from the initial start-up efforts associated
      with the Canadian Ethanol projects, legal fees and consulting expenses. The
      increased net income for the six months ended March 31, 2006 as compared to
      the
      prior year was due to the favorable settlement of a legal dispute ($3,703,634;
      See note 10). Excluding the income from the settlement agreement the Company
      would have reported a year-to-date net loss of $1,598,404 . The
      increased net loss for the six months ended March 31, 2006 as compared to the
      prior year was mainly due to lower margins on commercial aviation refueling
      systems shipments and higher general and administrative expenses (See Selling,
      general and administrative expenses).




Liquidity
      and Capital Resources




Our
      plan
      of operations over the next 12 months includes the continued pursuit of our
      goal
      to design, engineer, build and operate one or more ethanol plants. In that
      regard we are dependent upon Hearst Ethanol One, Inc.’s efforts to raise the
      necessary capital. We also intend to continue to develop our sensor technology.
      We believe that our working capital as of the date of this report will not
      be
      sufficient to satisfy our estimated working capital requirements at our current
      level of operations for the next twelve months. Our cash and cash equivalents
      were $408,501 as of March 31, 2006, compared to cash and cash equivalents of
      $828,153 as of September 30, 2005.





At
      our
      current cash “burn rate”, we will need to raise additional cash through debt or
      equity financings for the second half of 2006 in order to fund our continued
      development of our sensor technology and devices and to finance possible future
      losses from operations as we expand our business lines and reach a profitable
      level of operations. Before considering Hearst Ethanol One, Inc., we believe
      that we require a minimum of $2,500,000 in order to fund our planned operations
      over the next 12 months, in addition to the capital required for the
      establishment of any ethanol production facilities. We plan to obtain the
      additional working capital through private placement sales of our equity
      securities and debt financing. As of the date of this report the Company has
      not
      received any firm commitments for funding and there is no assurance that such
      funds will be available on commercially reasonable terms, if at all. Should
      we
      be unable to raise the required funds, our ability to finance our continued
      operations will be materially adversely affected.




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Subsequent
      Event




**First
      amended stock purchase agreement with Mark Trumble**




Effective
      May 8, 2006, the Company and its officers entered into a First Amended Stock
      Purchase Agreement and Release (“Agreement”) with Mark Trumble, amending that
      certain Stock Purchase Agreement dated September 1, 2004 (the “SPA”), pursuant
      to which the parties agreed to, among other things, Trumble agreed to release
      the Company from its obligations under the Put, including any obligation to
      make
      the Interest Payment or to pay interest on any sum whatsoever, and shall release
      any security interest he claims in the real estate owned by Gulfgate and/or
      Bott, and the Company shall secure a funding commitment in which Trumble shall
      be paid the sum of $307,000 at the time of the closing of the funding. This
      sum
      shall be used to purchase 165,053 shares of the common stock of the Company
      from
      Trumble at the price of $1.86 per share. The Company shall also pay from the
      funding all amounts of bank or other indebtedness owed by the Company, Bott
      or
      Gulfgate which is personally guaranteed by Trumble. The Company shall issue
      Trumble, upon closing of the funding, 60,000 newly issued shares of the
      Company’s common stock. This additional issuance of shares of the common stock
      of the Company shall be in full and final satisfaction of all claims that
      Trumble has or may have to additional shares of the Company’s common stock as a
      result of any breach of, or failure to meet a milestone under, the SPA.




**Hearst
      Ethanol One Inc. Agreement:**




On
      April
      21, 2006, Hearst Ethanol One, Inc., a Federal Canadian Corporation (“HEO”), a
      majority-owned subsidiary of Registrant, completed the acquisition of
      approximately 720 acres of real property, together with all biomass material
      located thereon (approximately two million tons of woodwaste), located in the
      Township of Kendall, District of Cochrane, Canada (cumulatively, the
“Property”), from C. Villeneuve Construction Co. LTD., a Canadian Corporation
      (“Villeneuve”), as provided under that agreement to purchase these assets
      earlier reported in Registrant’s 8-K dated December 27, 2005 (the “Agreement”).
      The Property was purchased to provide the site and the biomass material for
      the
      construction and operation of a 120,000,000 gallon per year bio-renewable
      woodwaste-to-ethanol refinery to be owned by HEO and designed, built and managed
      by  Convergence
      Ethanol, Inc. aka, CA MEMS, a subsidiary of Registrant. The on-site inventory
      of
      biomass is sufficient for 2 full years of production or 240,000,000 gallons
      of
      ethanol.




Pursuant
      to the provisions of the Agreement, HEO issued ten point five percent (10.5%)
      of
      HEO’s common shares to Villeneuve as consideration for the transfer of the
      Property. At the close of the transaction, Registrant owned 87.3% of the common
      stock of HEO.




Pursuant
      to a Memorandum of Understanding entered into on April 20, 2006 between HEO
      and
      Villeneuve to clarify the Agreement, Villeneuve shall be entitled to one member
      of HEO’s board of directors for so long as Villeneuve is at least a ten percent
      (10%) shareholder of HEO. Villeneuve shall also be entitled to the right to
      manage, blast, or otherwise remove the stone aggregate material located on
      the
      Property. All blasting ceases prior to plant construction.




The
      closing of the transaction contemplated by the Agreement was contingent upon
      HEO
      obtaining an easement through and on that parcel of real property owned by
      Villeneuve described as parcel 711 Centre Cochrane for rail access to the
      Property, and another easement through and on the same parcel of real property
      for a two way road for truck access to the Property, and otherwise satisfying
      HEO’s and Registrant’s due diligence.




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**MEMS
      USA, INC. changed its name to** **CONVERGENCE
      ETHANOL** **:**




To
      better
      reflect the Company’s emphasis in the alternative energy sector, on April 15,
      2006, the Company announced its decision to change its name to Convergence
      Ethanol, Inc., and to conduct its businesses, whether directly by the Company
      or
      through its wholly owned subsidiary, CA Mems.





Cautionary
      Statement Regarding Future Results, Forward-Looking Information and Certain
      Important Factors





We
      make
      written and oral statements from time to time regarding our business and
      prospects, such as projections of future performance, statements of management’s
      plans and objectives, forecasts of market trends, and other matters that are
      forward-looking statements. Statements containing the words or phrases “will
      likely result,” “are expected to,” “will continue,” “is anticipated,”
“estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,”
“target,” “goal,” “plans,” “objective,” “should” or similar expressions identify
      forward-looking statements, which may appear in documents, reports, filings
      with
      the Securities and Exchange Commission, news releases, written or oral
      presentations made by officers or other representatives made by us to analysts,
      stockholders, investors, news organizations and others, and discussions with
      management and other representatives of us.





Our
      future results, including results related to forward-looking statements, involve
      a number of risks and uncertainties. No assurance can be given that the results
      reflected in any forward-looking statements will be achieved. Any
      forward-looking statement made by or on behalf of us speaks only as of the
      date
      on which such statement is made. Our forward-looking statements are based upon
      assumptions that are sometimes based upon estimates, data, communications and
      other information from suppliers, government agencies and other sources that
      may
      be subject to revision. Except as required by law, we do not undertake any
      obligation to update or keep current either (i) any forward-looking
      statement to reflect events or circumstances arising after the date of such
      statement, or (ii) the important factors that could cause our future
      results to differ materially from historical results or trends, results
      anticipated or planned by us, or which are reflected from time to time in any
      forward-looking statement which may be made by or on behalf of us.




In
      addition to other matters identified or described by us from time to time in
      filings with the SEC, there are several important factors that could cause
      our
      future results to differ materially from historical results or trends, results
      anticipated or planned by us, or results that are reflected from time to time
      in
      any forward-looking statement that may be made by or on behalf of us. Some
      of
      these important factors, but not necessarily all important factors, include
      those risk factors set forth in our 2005 Annual Report on Form 10-KSB/A filed
      with the SEC on February 2, 2006





ITEM
      3. Controls and Procedures





Our
      disclosure controls and procedures are designed to ensure that information
      required to be disclosed in reports that we file or submit under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods specified in the rules and forms of the Securities and Exchange
      Commission and that such information is accumulated and communicated to our
      management, as appropriate, to allow timely decisions regarding required
      disclosure. Our President and Chief Financial Officer have reviewed the
      effectiveness of our disclosure controls and procedures and have concluded
      that
      the disclosure controls and procedures, overall, are effective as of the end
      of
      the period covered by this report. There has been no change in the Company’s
      internal control over financial reporting (as defined in Rule 13a-15(f) under
      the Exchange Act) during the period covered by this report that have materially
      affected, or are reasonably likely to materially affected, the Company’s
      internal control over financial reporting.




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PART
      II - OTHER INFORMATION




Item
      1. Legal Proceedings




On
      October 17, 2005, the Company and its officers filed a complaint against
      Lawrence Weisdorn, Jr. (“Weisdorn), the Company’s former Chief Executive Officer
      and Chairman of the Board of Directors, Lawrence Weisdorn, Sr. (“Weisdorn Sr.”
and together with Weisdorn, the “Weisdorn Parties”), Nathan Drage (“Drage”) and
      Drage related parties in the Superior Court of the State of California for
      Los
      Angeles County, alleging claims for, among other things, breaches of Nevada
      and
      federal law and breach of fiduciary duty (the “Action”). The Company’s claims
      were based in substantial part on allegations of the unauthorized issuance
      of
      shares of the Company’s predecessor’s common stock in December 2003, prior to
      the reverse acquisition and merger with MEMS-CA which was finalized in February,
      2004. The Company sought an injunction preventing the Weisdorn Parties and
      Drage
      and his related parties from selling or transferring any of the shares of the
      Company’s common stock issued in December 2003, the return of the shares to the
      Company for cancellation and monetary damages.




On
      November 3, 2005, the Weisdorn Parties filed a cross-complaint against the
      Company and its officers, alleging claims for, among other things, breach of
      employment agreement, libel and indemnification (the “Weisdorn Counterclaim”).
      The Weisdorn Parties’ claims were based in part on assertions by Weisdorn that
      he was improperly terminated without cause from his positions with the Company
      in June 2005, and that he was entitled to indemnification pursuant to Nevada
      corporations law in connection with the Action. The Weisdorn Parties sought
      monetary damages.




On
      December 15, 2005, the Company and its officers entered into a Settlement
      Agreement and Release with the Weisdorn Parties and other Weisdorn related
      parties, effective as of July 1, 2005 (the “Settlement Agreement”), pursuant to
      which the parties agreed to, among other things, dismiss the Action as it
      related to the Weisdorn Parties, dismiss the Weisdorn Counterclaim, mutually
      release all claims and mutually indemnify the other parties from certain claims.
      Weisdorn also agreed to deliver a letter of resignation to the Company,
      confirming his resignation as Chief Executive Officer and Chairman of the Board
      of Directors of the Company as of June 25, 2005 and clarifying and confirming
      the terms of his separation from the Company. The Weisdorn Parties and other
      Weisdorn related parties further agreed to deliver to the Company all shares
      or
      rights to shares of the Company’s common stock owned by such parties. The net
      stock returned to the Company by the Weisdorn parties was 2,699,684 shares,
      not
      including 670,000 shares of the Company’s common stock to be held by the Company
      in an account for the benefit of the Weisdorn Parties (the “Retained Stock”),
      which Retained Stock will be sold for the benefit of the Weisdorn Parties
      pursuant to the terms set forth in the Settlement Agreement. The Company has
      the
      option to purchase any portion of the Retained Stock at a price determined
      according to the terms of the Settlement Agreement. The Company also agreed
      to
      assume the obligations of the Weisdorn Parties and other Weisdorn related
      parties to purchase certain shares of the Company’s common stock from a third
      party, and the Weisdorn Parties assigned to the Company their interests in
      certain claims against a third party.




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The
      Settlement Agreement did not in any way affect claims brought in the Action
      by the Company and its officers against Drage and the
      Drage-related entities. However, on January 13, 2006, Drage and
      Adrian Wilson verbally agreed to a settlement in principle with the Company,
      which the parties intend to memorialize shortly.  In connection with the
      verbal agreement to a settlement, the Company and its officers filed a Request
      for Dismissal without prejudice of all claims against Drage and the
      Drage-related entities on January 13, 2006.




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




On
      October 26, 2004 the Company issued 1,309,667 shares of its common stock to
      Mr.
      Mark Trumble in consideration for the purchase of 100% of the shares of Bott
      Equipment Company, Inc. and Gulfgate Equipment, Inc. in accordance with the
      Stock Purchase Agreement (“Agreement”) entered into by the Company and Mr.
      Trumble. (A copy of the Agreement was filed as an Exhibit to our form 10KSB/A
      filed with the SEC on February 3, 2005.) The Agreement contains covenants in
      favor of Mr. Trumble that are secured with our promise to issue up to a total
      of
      1,236,591 additional shares of our stock to Mr. Trumble in the event we fail
      to
      satisfy those covenants. **** Effective
      May 8, 2006 the Company and Mr. Trumble amended the original Stock Purchase
      Agreement dated October 26, 2004 and agreed to, among other things, to issue
      60,000 shares to Mr. Trumble in full and final satisfaction of all claims that
      Trumble has or may have to additional shares of the Company’s common stock as a
      result of any breach of, or failure to meet a milestone under the SPA. See
      Subsequent events for details of First Amended Stock Purchase
      Agreement.




As
      of the
      date of this report, the Company is obligated to issue 60,000 additional shares
      to Mr. Trumble. Additionally, certain outstanding covenants may require us
      to
      issue up to 370,977 additional penalty shares in the event that we fail to
      satisfy those covenants.





In
      its
      stock purchase agreement with Mr. Trumble, respecting the purchase of Gulfgate
      and Bott, the Company recognized that Trumble would sell 326,344 shares of
      its
      stock at a purchase price of approximately $607,000 to private parties,
      including a related party Lawrence Weisdorn, Sr., the CEO’s father and a
      shareholder and/or Weisdorn Sr.’s assignees pursuant to a written agreement
      between Trumble and Weisdorn Sr.. As part of the Company’s agreement with Mr.
      Trumble, the Company agreed that if Mr. Trumble failed to recognize $607,000,
      portions of which were due on specific dates following the closing date of
      the
      transaction, the Company agreed to issue up to 494,636 shares of restricted
      stock to Trumble.




In
      December 2004 the Company paid $75,000 to Mr. Mark Trumble in order to avoid
      the
      issuance of 61,829 Penalty Shares to Mr. Trumble. In January 2005, the Company
      paid Mr. Trumble $158,000 to avoid the issuance of 123,659 Penalty Shares to
      Mr.
      Trumble. Although the Company had no obligation to make these payments under
      its
      agreement with Mr. Trumble, it did have an obligation to issue penalty shares
      to
      Mr. Trumble if Mr. Trumble did not recognize these monies through the sale
      of
      stock. When the Company learned that the primary obligor, Mr. Lawrence Weisdorn
      Sr., was then unable to fulfill his contractual obligations to Mr. Trumble,
      the
      Company believed that it was in the shareholder’s best interests to avoid
      dilution by making these payments and seeking to recoup the monies paid by
      the
      Company from Mr. Weisdorn Sr. at a later date. As of this date the company
      has
      received $185,000 from Lawrence Weisdorn Sr. The Company believes that it will
      recover some or all of the remaining balance, $48,000, before the close of
      the
      next quarter. The Company is obligated to issue to Mr. Trumble 247,318 Penalty
      Shares because Mr. Trumble did not recognize $307,000 within 60 days of the
      close of the acquisition. Finally, the Company is obligated to issue to Mr.
      Trumble an additional 123,659 Penalty Shares since the Company did not receive
      $2,000,000 in gross equity funding within 120 days of the Closing Date. In
      summary, the Company’s obligation to issue penalty shares totaling 370,977
      valued at $810,000 to Mr. Trumble has significantly increased
      goodwill.




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On
      November 10, 2005, the Company entered into a stock purchase agreement with
      Mercatus & Partners, Limited, a private limited company of the United
      Kingdom (“Mercatus Limited”), for the sale of 1,530,000 shares of the Company’s
      common stock for a minimum purchase price of $0.73 per share (the “SICAV One
      Agreement), and another stock purchase agreement with Mercatus Limited also
      for
      the sale of 1,530,000 shares of the Company’s common stock for a minimum
      purchase price of $0.73 per share (the “SICAV Two Agreement” and together with
      the SICAV One Agreement, the “SICAV Agreements”). The shares offered and sold
      under the SICAV Agreements were offered and sold pursuant to a private placement
      that is exempt from the registration provisions of the Securities Act under
      Section 4(2) of the Securities Act pursuant to Mercatus Limited’s exemption from
      registration afforded by Regulation S. Pursuant to the terms of the SICAV
      Agreements, the Company issued and delivered an aggregate number of 3,060,000
      shares of the Company’s common stock within five days of the execution of the
      respective SICAV Agreements to a
      custodial lock box on behalf of Mercatus
      Limited for placement into two European SICAV funds. The SICAV Agreements
      provided Mercatus Limited with up to 30 days after the delivery of the shares
      of
      the Company’s common stock to issue payment to the Company. If payment for the
      shares was not received by the Company within 30 days of the delivery of the
      shares, the Company had the right to demand the issued shares be returned.
      The
      Company has not yet received payment for the shares issued pursuant to the
      Private SICAV Agreements.




On
      November 12, 2005, the Company also entered into another private stock purchase
      agreement with Mercatus & Partners, Limited, a private limited company of
      the United Kingdom (“Mercatus Limited”) for the sale of 170,000 shares of the
      Company’s common stock for a minimum purchase price of $0.82 per share (the
“Private SICAV One Agreement”) and another private stock purchase agreement with
      Mercatus LP also for the sale 170,000 shares of the Company’s common stock for a
      minimum purchase price of $0.82 per share (the “Private SICAV Two Agreement” and
      with the Private SICAV One Agreement, the “Private SICAV Agreements”). The
      shares offered and sold under the SICAV Agreements were offered and sold
      pursuant to a private placement that is exempt from the registration provisions
      of the Securities Act under Section 4(2) of the Securities Act pursuant to
      Mercatus Limited’s exemption from registration afforded by Regulation S.
      Pursuant to the terms of the Private SICAV Agreements, the Company issued and
      delivered an aggregate amount of 340,000 shares of the Company’s common stock
      within five days of the execution of the respective Private SICAV Agreements
      to
      a custodial lock box on behalf of Mercatus Limited for placement into a European
      bank SICAV fund. Subject to a valuation of the shares, Mercatus LP had up to
      30
      days after the delivery of the shares of the Company’s common stock to issue
      payment to the Company. If payment was not received by the Company within 45
      days of the issuance of the shares to Mercatus Limited, the Company had the
      right to demand the issued shares be returned. The Company has not yet received
      payment for the shares issued pursuant to the Private SICAV
      Agreements.




In
      a
      letter to Mercatus dated April 13, 2006 the Company declared Mercatus to be
      in
      material breach of the above Private Purchase Agreements due to non-payment,
      terminated the Agreements in their entirety and exercised its right to demand
      the return of all the shares. Mercatus has informed the Company of its intent
      to
      return all of the shares but, as of the date of this report the Company has
      not
      received them. The Company is currently exploring all available options in
      recovering its shares.




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On
      December 13, 2005 the Company issued and delivered 125,000 shares of the
      Company’s common stock for $100,000.





During
      the month of December 2005, the Company issued and delivered an aggregate amount
      of 8,254 shares of the Company’s common stock to three consultants for services
      valued at approximately $16,000.





The
      Company sold 897,000 shares of its common stock for $735,540 via another private
      placement offering from February through April 2006. The Company anticipates
      satisfying its obligations through issuance of common stock to shareholders
      in
      the next fiscal quarter.




Exemption
      from the registration provisions of the Securities Act of 1933 for the
      transactions described above is claimed under Section 4(2) of the Securities
      Act
      of 1933, among others, on the basis that such transactions did not involve
      any
      public offering and the purchasers were sophisticated or accredited with access
      to the kind of information registration would provide.





Item
      3. Defaults upon Senior Securities - None





Item
      4. Submission of Matters to a Vote of Security Holders -
      None





Item
      5. Other Information




Principal
      Accountant Fees and Services


Our
      board
      of directors has selected Kabani & Company, Inc. as our independent
      accountants to audit our consolidated financial statements for the fiscal year
      2005. Stonefield Josephson, Inc. previously audited our consolidated financial
      statements for the two fiscal years ended September 30, 2004 and
      2003.





Item
      6. Exhibits





(a)
            Exhibits





31.1
            Certification
                of PresidentPursuant
                to Rule 13a-14(a) of the Securities Exchange Act of 1934 (Filed
                electronically herewith)





31.2
            Certification
                of Chief Financial OfficerPursuant
                to Rule 13a-14(a) of the Securities Exchange Act of 1934 (Filed
                electronically herewith)




32.2
            Certification
                of President and Chief Financial Officer Pursuant to18
                U.S.C Section 1350 (Furnished electronically
                herewith).






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SIGNATURES





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




**MEMS
                USA,
                INC.**
              **(Registrant)**Date: 
May
              31, 2006
            By:
            /s/ James
              A.
              LattyName:  
James
              A. LattyTitle:    
                Chief Executive Officer






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