##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



---

FORM 10-KSB



---

(Mark One)

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

For the fiscal year ended June 30, 2006



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 000-26067



---

Nano Chemical Systems Holdings,
Inc.

(Name of small business issuer in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|NEVADA                                                         |  | 87-0571300                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



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

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



---

Securities registered under
12(b) of the Exchange Act:

None

Securities registered under 12 (g) of the Exchange Act:

Common Stock

(Title of Class)



---

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ̈

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities
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  x    No ̈

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

The issuers revenues for its most recent fiscal year were $1,226,982. The aggregate market value of the voting and non-voting common equity held by non-affiliates
as of October 11, 2006 is $8,786,334. For purposes of the foregoing calculation only, directors and executive officers and holders of 10% or more of the issuers common capital stock have been deemed affiliates. The number of shares
outstanding of the Registrants common stock as of October 11, 2006 was 56,577,988.

Transitional Small Business
Disclosure Format:    Yes ̈No  x



---



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

2006 FORM 10-KSB

TABLE OF CONTENTS



|         |  |                                                                                                      |  |     
|-------- |  | ---------------------------------------------------------------------------------------------------- |  | ----
|ITEM     |  |                                                                                                      |  | Page
|ITEM 1.  |  | DESCRIPTION OF BUSINESS                                                                              |  | 1   
|         |  |                                                                                                     
|ITEM 2.  |  | DESCRIPTION OF PROPERTY                                                                              |  | 4   
|         |  |                                                                                                     
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                    |  | 5   
|         |  |                                                                                                     
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                  |  | 6   
|         |  |                                                                                                     
|ITEM 5.  |  | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                             |  | 7   
|         |  |                                                                                                     
|ITEM 6.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                            |  | 8   
|         |  |                                                                                                     
|ITEM 7.  |  | FINANCIAL STATEMENTS                                                                                 |  | 15  
|         |  |                                                                                                     
|ITEM 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                 |  | 31  
|         |  |                                                                                                     
|ITEM 8A. |  | CONTROLS AND PROCEDURES                                                                              |  | 31  
|         |  |                                                                                                     
|ITEM 8B. |  | OTHER INFORMATION                                                                                    |  | 31  
|         |  |                                                                                                     
|ITEM 9.  |  | DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT |  | 32  
|         |  |                                                                                                     
|ITEM 10. |  | EXECUTIVE COMPENSATION                                                                               |  | 35  
|         |  |                                                                                                     
|ITEM 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS       |  | 37  
|         |  |                                                                                                     
|ITEM 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                       |  | 38  
|         |  |                                                                                                     
|ITEM 13. |  | EXHIBITS                                                                                             |  | 39  
|         |  |                                                                                                     
|ITEM 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                               |  | 40  



---

##### Table of Contents

PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Nano Chemical Systems Holdings, Inc., a Nevada corporation, was incorporated on July 30, 1999 under the name Heritage Scholastic
Corporation. Prior to conducting its current operations, the Company was engaged in the business of publishing and distributing supplemental history textbooks for grades K through 12. However, on January 27, 2005, pursuant to a Stock
Purchase and Share Exchange Agreement (the Share Exchange Agreement) between Heritage Scholastic Corporation, Nano Chemical Systems, Inc., a Nevada corporation (NCS), and the shareholders of NCS, Heritage Scholastic
Corporation issued 9,000,000 shares of its issued and outstanding stock to the shareholders of NCS in exchange for 100% of the issued and outstanding stock of NCS. As a result of the Share Exchange Agreement, NCS became a wholly-owned subsidiary of
Heritage Scholastic Corporation. In connection with the Share Exchange Agreement, on February 15, 2005, Heritage Scholastic Corporation changed its name from Heritage Scholastic Corporation to Nano Chemical Systems Holdings, Inc. (hereinafter
the Company).

References to we, our, or us, as those terms may be used throughout this
Annual Report on Form 10-KSB, also mean the Company.

ACQUISITION OF ASSETS OF
GREENTREE SPRAY TECHNOLOGIES, LLC

On March 15, 2005, pursuant to an
Asset Purchase Agreement between the Company and GreenTree Spray Technologies, LLC, a Delaware limited liability company (GreenTree) (the GreenTree Asset Purchase Agreement), the Company purchased manufacturing assets,
technical know-how, proprietary chemical formulae, and other assets of GreenTree and, in exchange for the transferred assets, the Company issued 32,000,000 shares of its restricted common stock and a promissory note in the principal amount of One
Million Three-Hundred Thirty-Three Thousand and No/100 Dollars ($1,333,000) (the GreenTree Note). The GreenTree Note requires quarterly interest payments at 8% per annum with a final balloon payment equal to all remaining
outstanding principal and interest due on March 15, 2007. The GreenTree Note is secured by certain assets of the Company.

REORGANIZATION OF OPERATIONS

On April 20, 2006 the Company incorporated
SeaSpray Aerosol, Inc. (Sea Spray) in the State of Delaware. This wholly-owned subsidiary was created to house the aerosol operations of the Company. Formerly, the Company directly operated its aerosol business. Sea Spray is currently
active. Ownership of the Companys intellectual property remains in the Companys subsidiary Nano Chemical Systems, Inc.

PRODUCTS AND CUSTOMERS

The Company currently manufactures and sells
aerosol-delivered janitorial and industrial products, waxes, lubricants, and polishes to other companies, which those companies then sell under their own brand-names. The Company also has its own line of branded products. The Company is primarily
dependent upon four large customers and operates in a highly competitive environment. One of these four customers, Pioneer Manufacturing, Inc., provides the majority of the Companys sales. The loss of this major customer would have a negative
impact on the future operations of the Company.

Management believes that the Company could possibly employ its excess production capacity
to combine its aerosol operations with nanotechnology in order to bring to market aerosol-delivered nanoparticle products. In applications, nanomaterials can offer advantages such as improved performance, increased marketability, and/or the
development of new products or processes. Additionally, often only minute quantities of material are required to obtain the desired performance because of a tremendous increase in surface area per unit of mass.



- 1 -



---

##### Table of Contents

Nanomaterials are made of very small particles (nanoparticles) less than 100 nanometers in diameter. A
nanometer is one billionth of one meter. To put this in perspective, a tall person is approximately two billion nanometers tall. In other words, if every person in the U.S. were only one nanometer tall, and if each person were then stacked one on
top of the other, the resulting figure would be less than 12 inches in height. At the nanometer scale, the properties of a material depend more on the size, shape, structure, arrangement, and surface of the individual particles than on its chemical
identity.

In order to make the most efficient use of the capital available to us, we are conducting a limited research and development
program for new products that will attempt to take advantage of nano-particulate enhancement. In particular, the Company has a line of solvents, penetrating oils, glass cleaners, and polishes for automobiles which could benefit from the inclusion of
nano-particulates. Additionally the company is engaged in research to produce a material which may find application in mold and fungus control.

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

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



| | 1. | products utilizing our titanium dioxide nanoparticle products, most of which are in the research or development stage, may not be completed or, if completed, may not be readily
accepted by expected end-users;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | we may be unable to customize our titanium dioxide nanoparticle products to meet the distinct needs of potential customers;
| | -- | ---------------------------------------------------------------------------------------------------------------------------



| | 3. | potential customers may purchase from competitors because of perceived or actual quality or compatibility differences;
| | -- | ----------------------------------------------------------------------------------------------------------------------



| | 4. | our marketing and branding efforts may be insufficient to attract a sufficient number of customers;
| | -- | ---------------------------------------------------------------------------------------------------



| | 5. | because of our limited funding, we may be unable to continue our development efforts until a strong market for nanoparticles develops;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------



| | 6. | some environmental groups have expressed concerns as to the safety of nanoparticle-enhanced products, which could dampen the market for such products or lead to burdensome
governmental regulation.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Some potential products we are researching are as follows:



| | 1) | A Temporary Tagging Paint product which allows temporary marking in a fluorescent color, for approximately one hour, after which the markings fade. The product would employ
chemiluminesence, a cold chemical process, which mimics that of a firefly. Development work is planned to (a) extend the product to multiple colors, (b) to increase the effective time to two hours and make it less dependent on ambient
temperature, and (c) provide a method of accelerating the removal of the marking. The Company intends to file a patent application for this product.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | A UV Protection for Fabric product using nanoparticles of titanium dioxide to absorb damaging ultra-violet radiation. This product has been prototyped and tested for effectiveness.
Just as sunscreens have an SPF rating system, fabrics have a rating system measured in UPF. The
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 2 -



---

##### Table of Contents

Company plans to offer the UV Protection of Fabric product with a UPF of 30 for moderate protection and
with a UPF of 45 for a high level of protection to the person wearing the clothing. The Company had filed a patent application for this product, which subsequently lapsed. The Company plans to refile a patent application soon.



| | 3) | A Friction-Reducing Lubricant has been planned but has not yet been formulated or prototyped. This product is planned to be a new, composite lubricant designed to reduce friction
and wear and to increase load-bearing capacity by incorporating nano-ball bearings into hydrocarbon lubricants such as motor oil in a proprietary formulation.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company believes that, if developed, the Friction Reducing Lubricant could complement the Companys own aerosol-delivered nano-products. The
Company has developed and successfully passed testing of a conventional lubrication product.



| | 4) | The Company has a Mold/Fungus Control product in concept and hopes to prototype the product in the coming year. Mold and fungus are significant problems on the interior surfaces of
living spaces and shorten the useful lives of roofs in the southern United States. Management believes that a nanoparticle-enhanced product which could both remove and prevent mold and fungus could be developed. There are significant EPA hurdles for
any product with mold claims, including prior testing and registration. Currently, the Company has retained a researcher at Northwestern University in Chicago to test this product.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company is in the process of developing individual names for each product and a corporate brand identity for this family of products to support
marketing and sales. Management believes that no government approval is required before launching of most of these products, since the products are principally reformulations of chemicals which are not currently under EPA or other government
pre-sale registration requirements.

Research and development expenses, which primarily consist of costs associated with the Companys
development or acquisition of new products, increased to approximately $110,000 in 2006, compared to $97,000 in 2005. The increase in research and development expenses was largely attributed to initiating work on new nanomaterials products. None of
the costs for research and development was passed on to customers. The Company plans to increase expenditures for research and development to twenty percent of sales. The Company is primarily dependent upon four large customers and operates in a
highly competitive environment.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company is in the process of gathering its proprietary technology for filing patent applications. Such patent applications may
include:



| | - | Enhanced Petroleum Based Aliphatic Hydrocarbons Lubricant Through the Addition and Dispersion of Inorganic Fullerene-like Nano-spheres
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | - | Nano Polymeric Encapsulation of Reactant to Modulate Chemo-Fluorescent Reaction to Extend the Life of Marking Paint
| | - | -------------------------------------------------------------------------------------------------------------------

These two potential applications would cover technology for manufacturing the Friction Reduced Lubricant and Temporary Tagging Paint products. The former product utilizes
nano-spheres, acting as nanometer-scale ball bearings, to improve lubricants performance. The latter product could allow marking of surfaces for a period of approximately two hours, after which the marking disappears. The Company anticipates
that these products could have significant economic value when sold, however, there can be no assurance that there is any value to the potential applications, that the technology will be marketable, or that there will be any market for the products
created from these technologies.



- 3 -



---

##### Table of Contents

MANUFACTURING OPERATIONS

The Company operates at its plant located at 105 Park Avenue, Seaford, Delaware. The plant consists of approximately 36,000 square feet of office space,
laboratories, warehouse space, mixing rooms, and manufacturing space. At this location, the Company purchases raw materials, mixes them according to its formulae, and places them into aerosol cans. Most of the raw materials used in the
Companys products are commercially available.

COMPETITION

Within the aerosol market, the Company faces current and potential competition from many advanced materials and chemical companies and suppliers of
traditional materials. In many markets, the Companys competitors are larger and more diversified than the Company. With respect to traditional suppliers, however, the Company competes against lower priced traditional materials where the
benefits of using nanomaterials do not always outweigh their typically higher costs.

With respect to larger producers of nanomaterials,
while many of these producers do not currently offer competitive products, these companies have greater financial and technical resources, larger research and development staffs and greater manufacturing and marketing capabilities and could soon
begin to compete directly against the Company. In addition, the number of development-stage companies involved in nanomaterials continues to grow on a global basis, posing significant and increasing competitive risks. Many of these companies are
associated with university or national laboratories and use chemical and physical methods to produce nanocrystalline materials. Management believes that most of these companies are engaged primarily in funded research and is not aware that any of
them have commercial production capabilities; however, they may represent competitive risks in the future. Some development-stage companies, especially in foreign countries, receive significant government assistance.

GOVERNMENT REGULATION

The manufacture and use of certain of the Companys products are subject to governmental regulations, specifically those administered by the Environmental Protection Agency. In addition, the Companys facilities and all of its
operations are subject to the plant and laboratory safety requirements of various occupational safety and health laws. To date, other than creating additional expense due to their reach and complexity, those regulations have not materially
restricted or impeded operations. The costs of compliance with federal and state regulations amount to approximately $50,000 per year.

EMPLOYEES

On June 30, 2006, the Company had approximately 15 employees, of which ten were full time
employees and five were temporary employees. The Company has no collective bargaining arrangements.

Special Note Regarding Forward-Looking
Statements

Information included or incorporated by reference in this Annual Report on Form 10-KSB may contain forward-looking
statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements
expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words may,
should, expect, anticipate, estimate, believe, intend or project or the negative of these words or other variations on these words or comparable terminology.

ITEM 2. DESCRIPTION OF PROPERTY

The Company leases a 36,000 square foot facility, which includes a
laboratory, a production area, and 3,870 square feet of office space. The facility is located at 105 Park Avenue, Seaford, Delaware 19973. The property is in good condition. Management feels that its insurance on the plant property is adequate.
Formerly, pursuant to the GreenTree Asset Purchase Agreement, the Company agreed to sublease the property from GreenTree



- 4 -



---

##### Table of Contents

and to assume and pay for 75% of GreenTrees existing lease commitments for its industrial plant. The Company no
longer subleases its manufacturing and office space. The Companys subsidiary, SeaSpray, has since directly assumed the lease of the property.

SeaSpray leases the plant from Park Avenue Associates, a Delaware limited liability company. The lease payments for the upcoming fiscal year will total $138,180 per year, with a two and one-half percent (2.5%) increase per year
thereafter, with the lease terminating on August 31, 2010. There is no additional renewal term. The lease can enter default for nonpayment of rent, violation of a lease term, or abandonment of the property. SeaSpray may use the property for any
lawful purpose, but must notify Park Avenue Associates if the facility is used for anything other than aerosol production.

The Company
does not own any real property.

ITEM 3. LEGAL PROCEEDINGS

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

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

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

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



- 5 -



---

##### Table of Contents

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

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

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

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

None.



- 6 -



---

##### Table of Contents

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



|(a) | MARKET INFORMATION
|--- | ------------------

The Companys common stock is quoted on the Over-The-Counter Bulletin Board operated by the National Association of Security Dealers, Inc. under the symbol NCSH.OB The stock began trading on the
Over-The-Counter Bulletin Board on February 2004 and accordingly did not trade for a full fiscal year in 2004. The Company declared a 4-1 forward split of its common stock on February 7, 2005.

The following table sets forth the quarterly high and low bid prices for our common stock during the past two fiscal years in which we have been listed
on the Over-the-Counter Bulletin Board. The information contained in the table below was obtained from the Over-the-Counter Bulletin Board Quarterly Trade and Quote Summary Report. The quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission, and may not necessarily represent actual transactions.



|                                 |  |            |      |           |   |     
|-------------------------------- |  | ---------- | ---- | --------- | - | ----
|YEAR 2005                        |  | High Price |      | Low Price
|Quarter Ended June 30, 2006      |  | $          | 1.05 |           | $ | 0.31
|Quarter Ended March 31, 2006     |  | $          | 0.94 |           | $ | 0.30
|Quarter Ended December 31, 2005  |  | $          | 1.80 |           | $ | 0.48
|Quarter Ended September 30, 2005 |  | $          | 2.50 |           | $ | 0.89
|Quarter Ended June 30, 2005      |  | $          | 3.45 |           | $ | 1.55
|Quarter Ended March 31, 2005     |  | $          | 2.40 |           | $ | 0.25
|Quarter Ended December 31, 2004  |  | $          | 2.70 |           | $ | 0.20
|Quarter Ended September 30, 2004 |  | $          | 0.25 |           | $ | 0.16



|(b) | HOLDERS OF COMMON STOCK
|--- | -----------------------

As of October 11, 2006, we had approximately 211 holders of record of our common stock. This number does not include beneficial owners whose
securities are held by brokers or in street name.



|(c) | DIVIDENDS
|--- | ---------

We have
not paid any dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to finance the growth of the business. We cannot assure that we will ever pay cash dividends.
Whether we pay any cash dividends in the future will depend on the Companys financial condition, results of operations and other factors which the Board of Directors will consider.



- 7 -



---

##### Table of Contents

|(d) | SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
|--- | ------------------------------------------------------------------

The following table sets forth information concerning the number of shares of our
common stock which may be issued under all of our equity compensation plans.

Equity Compensation Plan Information



|                                                       |                                                                                          |           |   |                                                                          |     |                                                                                                                                        |     |          
|------------------------------------------------------ | ---------------------------------------------------------------------------------------- | --------- | - | ------------------------------------------------------------------------ | --- | -------------------------------------------------------------------------------------------------------------------------------------- | --- | ---------
|Plan Category                                          |                                                                                          | (a)       |   |                                                                          | (b) |                                                                                                                                        | (c)
|                                                       | Number of securities to beissued upon exercise ofoutstanding options,warrants and
rights |           |   | Weighted-average exerciseprice of outstandingoptions, warrants andrights |     | Number of securitiesremaining available forfuture issuance
underequity compensation plans(excluding securitiesreflected in column (a))
|Equity compensation plans approved by shareholders     |                                                                                          | 5,300,000 | * |                                                                          | $   | 0.10                                                                                                                                   |     | 4,700,000
|Equity compensation plans not approved by shareholders |                                                                                          | -0-       |   |                                                                          |     | -0-                                                                                                                                    |     | -0-      
|TOTAL                                                  |                                                                                          | 5,300,000 | * |                                                                          | $   | 0.10                                                                                                                                   |     | 4,700,000

---

|* | The Company declared a 4-1 forward split of its common stock on February 7, 2005. Immediately before the forward stock split, the Company had 2,500,000 stock options authorized
and 1,325,000 stock options issued and outstanding, which could be exercised at $0.10 per share. As a result of the forward split, the 1,325,000 stock options issued and outstanding increased to 5,300,000 stock options and the number of stock
options authorized increased to 10,000,000. As a result of the forward split, the exercise price of the options should have been reduced to $0.025 per share. However, the Company and the holders of the options have agreed that the exercise price
shall remain $0.10. All of the issued and outstanding options described in the table above were held by one individual, who has since attempted to assign them to new holders. The options are not exerciseable for freely-trading shares, since the
holding period for the option shares begins upon exercise of the options.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

RECENT SALES OF
UNREGISTERED SECURITIES

Under the Xtera Stock Purchase Agreement (described below under the heading
Financing), over the course of the quarter ended June 30, 2006 the Company sold 3,306,068 shares of its common stock in transactions which were not registered under the Securities Act. With respect to the sale of unregistered
securities referenced above, all transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 (the 1933 Act), and Regulation S promulgated under the 1933 Act. In each instance, the purchaser had
access to sufficient information regarding us and our business so as to make an informed investment decision. More specifically, we had a reasonable basis to believe that each purchaser was a non U.S. Person as defined in Regulation S of
the 1933 Act and otherwise had the requisite sophistication to make an investment in our securities.

The Company received
$349,143 for these shares.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

INFORMATION
RELATED TO FORWARD LOOKING STATEMENTS

In connection with the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the Reform Act), we are hereby providing cautionary statements identifying important factors which could cause our



- 8 -



---

##### Table of Contents

actual results to differ materially from those projected in forward-looking statements made herein. Any statements which
express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions of future events or performance are not statements of historical facts and may be forward-looking. These forward-looking statements are based largely on our
expectations and are subject to a number of risks and uncertainties, including but not limited to, economic, competitive, regulatory, growth strategies, available financing and other factors discussed elsewhere in this report and in documents we
have filed with the SEC. Many of these factors are beyond our control. Actual results could differ materially from the forward-looking statements made. In light of these risks and uncertainties, there can be no assurance that the results anticipated
in the forward-looking information contained in this report will, in fact, occur.

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

GENERAL

Nano Chemical Systems Holdings, Inc., a Nevada corporation, was incorporated on July 30, 1999 under the name Heritage Scholastic
Corporation. Prior to conducting its current operations, the Company was engaged in the business of publishing and distributing supplemental history textbooks for grades K through 12. However, on January 27, 2005, pursuant to a Stock
Purchase and Share Exchange Agreement (the Share Exchange Agreement) between Heritage Scholastic Corporation, Nano Chemical Systems, Inc., a Nevada corporation (NCS), and the shareholders of NCS, Heritage Scholastic
Corporation issued 9,000,000 shares of its issued and outstanding stock to the shareholders of NCS in exchange for 100% of the issued and outstanding stock of NCS. As a result of the Share Exchange Agreement, NCS became a wholly-owned subsidiary of
Heritage Scholastic Corporation. In connection with the Share Exchange Agreement, on February 15, 2005, Heritage Scholastic Corporation changed its name from Heritage Scholastic Corporation to Nano Chemical Systems Holdings, Inc. (hereinafter
the Company). Our ability to generate revenues is primarily dependent upon our ability to cost-effectively and efficiently develop and market our proprietary products, and successfully serve our present customers. During the next six to
twelve months of operations our priorities are to:



| | 1. | implement a marketing strategy to reach our target markets;
| | -- | -----------------------------------------------------------



| | 2. | develop and strengthen our strategic relationships with suppliers and distributors;
| | -- | -----------------------------------------------------------------------------------



| | 3. | respond to competitive developments in the marketplace;
| | -- | -------------------------------------------------------



| | 4. | establish the brand identity of our proprietary products; and
| | -- | -------------------------------------------------------------



| | 5. | continue the service of our present customer base.
| | -- | --------------------------------------------------

In
order to make the most efficient use of the capital available to us, we plan to conduct a limited research and development program for new products, which will attempt to take advantage of nano-particulate enhancement. In particular, the Company has
a line of solvents, penetrating oils, glass cleaners and polishes for automobiles which could benefit from the inclusion of nano-particulates. See Item 1, Description of Business, for more information on the Companys research and
development expenditures.

The Companys original provisional patent applications were allowed to expire on October 1, 2005.

The Company will be contacting and, where possible, securing the services of distributors to represent the Companys products in
certain markets. We believe that there is sufficient gross margin in the sales prices to allow any distributor to be competitive in the marketplace and allow the Company to increase its opportunities for profitable operations. At this time,
distributors and strategic partners have not been located; therefore, the aforementioned revenues are speculative and should not be viewed as a confirmed revenue source.



- 9 -



---

##### Table of Contents

Periodically, management reviews the carrying values of its long-lived assets. Due the relatively short
time from the merger which created the Company, management believes the carrying value of the long-lived assets are a conservative estimate of the market value of such assets.

We have experienced a loss from operations in every fiscal year since our inception. Our losses from operations were $1,224,660 in 2006. We will continue
to experience a net operating loss at least until the application of our nanomaterials and titanium dioxide technology begin generating revenues in excess of our operating expenses, which may never occur. Even if any or all applications of the
nanomaterials and titanium dioxide technology begin generating such revenues, the revenues may not exceed our costs of production and operating expenses. We may not ever realize a profit from operations.

We regard our intellectual property, particularly our proprietary rights in our nanomaterials, titanium dioxide technology, and other trade secrets as
important. Any patent and various other measures we take to protect our intellectual property from use by others may not be effective for various reasons.

Because the value of our Company and common stock is in part rooted in our proprietary intellectual property rights, our inability to protect these rights, or gain a competitive advantage from such rights, could have
a material, adverse effect on our business.

In addition, we may inadvertently be infringing on the proprietary rights of other persons and
may be required to obtain licenses to certain intellectual property or other proprietary rights from third parties. Such licenses or proprietary rights may not be made available under acceptable terms, if at all. If we do not obtain required
licenses or proprietary rights, we could encounter delays in product development or find that the development or sale of products requiring such licenses is foreclosed.

We plan to use the nanomaterials and titanium dioxide technology in conjunction with our current proprietary formulations to create new, nano-enhanced products. We are still testing and customizing our titanium
dioxide nanoparticle products for various applications and have no long-term agreements with end-users to purchase any of our titanium dioxide nanoparticle products. We may be unable to recoup our investment in the nanomaterials and titanium dioxide
technology and equipment for various reasons, including the following:



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



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



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



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



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



| |  |  | even if laboratory testing proves successful, we may be unable to protect our intellectual property from piracy;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | the manufacture of nanoparticles is complex and may prove to be probibitively expensive or dangerous; and
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | some environmental groups have expressed concerns as to the safety of nanoparticle-enhanced products, which could dampen the market for such products or lead to burdensome
governmental regulation.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 10 -



---

##### Table of Contents

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

Finally, virtually any prior or future use of the nanomaterials and
titanium dioxide technology is subject to federal, state and local environmental laws. As such, courts or government agencies may impose liability for, among other things, the improper release, discharge, storage, use, disposal or transportation of
hazardous substances.

RESULTS OF OPERATIONS - YEAR ENDING
JUNE 30, 2006 AND 2005

For the year ending June 30, 2006, we had losses totaling $1,224,660
compared to losses of $563,157 for the same period in 2005. This increased loss of $661,503 is primarily attributed to lower gross sales, leaving fixed costs as a higher percentage of sales. Since inception to June 30, 2006, we had losses
totaling $2,573,291. By focusing our efforts on limiting general and administrative expenses as we increase revenue, we expect to generate net income.

Costs of goods sold generally include costs associated with direct costs of materials. Costs of materials sold decreased to $978,697 in 2006, compared to $1,357,813 in 2005. The decrease was generally attributed to a
large decrease in sales. We expect that this figure will increase significantly as we implement our business plan and increase production of our products.

Research and development expenses, which primarily consist of costs associated with the Companys development or acquisition of new products, increased to approximately $110,000 in 2006, compared to $97,000 in
2005. The increase in research and development expenses was largely attributed to initiating research on the new nano materials products.

Plant wages, selling, general, and administrative expenses increased to $1,324,249 in 2006, compared to $1,136,663 in 2005. The net increase was primarily attributed to general price increases. We expect that this figure will increase as
the Company implements its business plan. We expect this increase to take the form of increased wages and employee expenses, sales and marketing expenses, and other general and administrative expenses. Administrative costs increased from $265,779 in
2005 to $558,368 in 2006.

Interest expenses increased to $106,420 in 2006, compared to $23,333 in 2005. This increase was primarily due to
increased amounts due under the GreenTree Note (described below).

We impaired our patents during 2006 for the remaining net book value of
$45,588 because our original patent applications were allowed to expire, thus becoming public domain.

LIQUIDITY AND
CAPITAL RESOURCES

The Companys cash, cash equivalents and investments amounted to $279,566 on
June 30, 2006, compared to $7,548 on June 30, 2005. The net cash used in the Companys operating activities was $654,500 and $447,185 for the years ended June 30, 2006 and 2005, respectively. Net cash provided by investing
activities, which is due to an increase in prepaid expenses, amounted to $3,241 for the year ended June 30, 2006 compared to $2,209 of net cash used in investing activities for the year ended June 30, 2005. Net cash provided by financing
activities, which is primarily due to major shareholder capital contributions and a note payable, amounted to $923,277 for the year ended June 30, 2006, compared to $376,185 for the year ended June 30, 2005.

As of October 13, 2006, we had cash on hand of approximately $15,000, which is sufficient to satisfy our operating requirements through
October 31, 2006. To satisfy our operating requirements through December 31, 2006, we estimate that we will need an additional $200,000. If we do not generate revenues or secure debt or equity financing before October 31, 2006, we
will be unable to sustain our current level of operations and may have to cut back or shut down our operations, sell material assets, or enter bankruptcy.



- 11 -



---

##### Table of Contents

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

FINANCING

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

On February 28, 2006, we entered into a Regulation S Stock Purchase Agreement (Stock Purchase
Agreement) with Xtera Establishment Corporation, a Panamanian company (Xtera). Under the Stock Purchase Agreement, Xtera may, at its discretion, periodically purchase shares of our common stock for a total purchase price of up to
$2,000,000. For each share of common stock purchased under the Stock Purchase Agreement, Xtera will pay us 32% of the previous days trading price of our common stock, as reported on the Over-the-Counter Bulletin Board or other principal market
on which our common stock is traded. Xtera will notify us of its desire to purchase shares of our common stock by sending us a written purchase notice, which notice shall set forth the number of shares Xtera desires to purchase and the total
consideration due to us. To date, we have sold 4,886,571 shares of our common stock to Xtera and have received proceeds of $679,610 under the Stock Purchase Agreement. There can be no assurance that Xtera will purchase any additional shares of our
common stock under the Stock Purchase Agreement.

On December 15, 2005, we entered into two Stock Purchase and Subscription Agreements
with Mercatus & Partners, LP (Mercatus) (collectively, the Mercatus Agreements). Under each Mercatus Agreement, Mercatus may purchase 4,455,310 shares of our common stock at $0.38 per share. Each Mercatus Agreement
provides Mercatus up to thirty (30) days to purchase our common stock. If we do not receive payment for the common stock within thirty (30) days from the date of execution of the Mercatus Agreements, we may demand that the shares be
returned to us. As of the date of this filing, the Company has not sold any shares and has not received any funding under either Mercatus Stock Purchase Agreement. The common shares held in escrow number 8,910,620 and are included in the number of
shares issued and outstanding on the cover page of this Form 10-KSB. Management believes that it has terminated the Mercatus Agreements, has demanded the return of the shares from escrow, and has placed a stop transfer order on the escrowed shares.
Accordingly, the Company has not recognized the escrowed shares as issued and outstanding in the financial statements included in this Form 10-KSB.

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

Should events arise that make it appropriate for the Company to seek additional financing,
it should be noted that additional financing may not be available on acceptable terms or at all, and any such additional financing could be dilutive to the Companys stockholders. Such a financing could be necessitated by such things as the
loss



- 12 -



---

##### Table of Contents

of existing customers, currently unknown capital requirements in light of the factors described above, new regulatory
requirements that are outside the Companys control; or various other circumstances coming to pass that are currently not anticipated by the Company.

GOING CONCERN

Due to the Companys limited working capital, and continued losses, the
Companys independent auditor has identified a substantial doubt about our ability to continue as a going concern (please refer to footnote three of the consolidated financial statements). Our consolidated financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities which may result from the possible inability of the Company to continue as a going concern.

From our inception on September 1, 2003 through June 30, 2006, we have incurred operating losses of $2,573,291. The likelihood
of our success must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new businesses. Our independent auditors have issued a going concern qualification in
their report dated October 12, 2006 which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate sufficient cash flows to meet our
obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitable operations. However, there can be no assurance that we will generate sufficient revenues from the services offered by us to operate
at a profit or pay expenses. Our consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities which may
result from the possible inability of the Company to continue as a going concern.

CRITICAL ACCOUNTING
POLICIES AND ESTIMATES

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

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

Impairment or Disposal of
Long-Lived Assets.In August 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 clarifies the accounting for the impairment of long-lived assets and for long-lived
assets to be disposed of, including the disposal of business segments and major lines of business. The adoption of this Statement is not expected to have a material effect on our financial statements, as we had an impairment for 2006 that would have
been recognized even without SFAS 144.



- 13 -



---

##### Table of Contents

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

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

Accounting for Servicing of Financial Assets. Statement of Financial Accounting Standards (SFAS) No. 156, Accounting for
Servicing of Financial Assets  an amendment of FASB Statement No. 140 (SFAS No. 156) simplifies the accounting for servicing assets and liabilities. The adoption of SFAS No. 156 is not anticipated to have an impact on the
Companys Consolidated Financial Statements.

Accounting for Uncertainty in Income Taxes.FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48) is an interpretation which clarifies FASB Statement No. 109, Accounting for Income Taxes. This Statement addresses uncertainty in income taxes recognized in an
enterprises financial statements and prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. Any cumulative impact resulting from the adoption of FIN 48 would be recorded as an
adjustment to beginning retained earnings. The Company is currently evaluating the impact of FIN 48 on the Companys Consolidated Financial Statements.

Accounting for Certain Hybrid Financial Instruments. SFAS No. 155, Accounting for Certain Hybrid Financial Instruments  an amendment of FASB Statements No. 133 and 140 (SFAS
No. 155) addresses the application of beneficial interests in securitized financial assets. The adoption of SFAS No. 155 is not anticipated to have an impact on the Companys Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.



- 14 -



---

##### Table of Contents

ITEM 7. FINANCIAL STATEMENTS



|                                                      |  |                        |  |                 
|----------------------------------------------------- |  | ---------------------- |  | ----------------
|MADSEN & ASSOCIATES CPAs, INC.                        |  | 684 East Vine St #3   
|Certified Public Accountants and Business Consultants |  | Murray, Utah 84107    
|                                                      |  | Telephone 801-268-2632 |  | Fax 801-262-3978

Board of Directors

Nano Chemical Systems Holdings, Inc.

Seaford, Delaware.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Nano Chemical Systems Holdings, Inc. and Subsidiaries as of June 30, 2006 and 2005, and the related
consolidated statements of operations, stockholders equity, and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of June 30, 2006 and 2005, and the results of its consolidated operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the
United States.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As
disclosed in the notes to the consolidated financial statements, the Company will need additional working capital for its planned activity and to service its debt. This raises substantial doubt about the Companys ability to continue as a going
concern. Managements plans regarding these matters are described in the notes to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ Madsen & Associates CPAs, Inc.

October 12, 2006

Murray, Utah



- 15 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2006



|                                |  |   |           |  
|------------------------------- |  | - | --------- | -
|ASSETS                          |  |   |           |  
|                                | 
|CURRENT ASSETS:                 |  |   |           |  
|Cash and Cash Equivalents       |  | $ | 279,566   |  
|Accounts Receivable             |  |   | 201,001   |  
|Inventories                     |  |   | 597,140   |  
|                                |  |   |           |  
|Total Current Assets            |  |   | 1,077,707 |  
|                                |  |   |           |  
|PROPERTY & EQUIPMENT            |  |   |           |  
|Property and Equipment          |  |   | 431,149   |  
|(Less) accumulated depreciation |  |   | (248,029  | )
|                                |  |   |           |  
|Total Property & Equipment      |  |   | 183,120   |  
|                                |  |   |           |  
|OTHER ASSETS                    |  |   |           |  
|Prepaid Expenses                |  |   | 57,227    |  
|Utility Deposit                 |  |   | 12,000    |  
|Formulas & Patents              |  |   |          |  
|                                |  |   |           |  
|Total Other Assets              |  |   | 69,227    |  
|                                |  |   |           |  
|Total Assets                    |  | $ | 1,330,054 |  
|                                |  |   |           |  

See Notes to Financial Statements



- 16 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2006



|                                                                                                         |  |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | - | ---------- | -
|LIABILITIES                                                                                              |  |   |            |  
|CURRENT LIABILITIES:                                                                                     |  |   |            |  
|Accounts Payable                                                                                         |  | $ | 525,578    |  
|Accrued Payroll                                                                                          |  |   | 8,200      |  
|Due to Related Party                                                                                     |  |   | 477,696    |  
|Current Maturities Long Term Debt - Related party                                                        |  |   | 1,333,000  |  
|Total current liabilities                                                                                |  |   | 2,344,474  |  
|                                                                                                         |  |   |            |  
|LONG-TERM DEBT                                                                                           |  |   |            |  
|                                                                                                         |  |   |            |  
|Note Payable - Related Party                                                                             |  |   |           |  
|                                                                                                         |  |   |            |  
|Total Liabilities                                                                                        |  |   | 2,344,474  |  
|                                                                                                         |  |   |            |  
|STOCKHOLDERS EQUITY (DEFICIENCY)                                                                        |  |   |            |  
|                                                                                                         | 
|Preferred stock - $.001 par value, 20,000,000 shares authorized, none issued and outstanding             |  |   |           |  
|                                                                                                         | 
|Common stock, - $.001 par value, 100,000,000 shares authorized, 55,355,559 shares issued and outstanding |  |   | 55,356     |  
|                                                                                                         | 
|Additional paid-in capital                                                                               |  |   | 1,503,515  |  
|                                                                                                         | 
|Accumulated (Deficit)                                                                                    |  |   | (2,573,291 | )
|                                                                                                         | 
|Net Stockholders Equity (Deficiency)                                                                    |  |   | (1,014,420 | )
|                                                                                                         |  |   |            |  
|Total Liabilities & Equity (Deficiency)                                                                  |  | $ | 1,330,054  |  
|                                                                                                         |  |   |            |  

See Notes to Financial Statements



- 17 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

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



|                                                                                                                                                                                                              |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | - |  | -------------------- | ------- | - | ------------------------- | - | --------- | --------------------- |  | - | ----------------------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                                                                                                              |  | Common Stock Par Value $0.001 |   |  | Paid InExcess of Par |         |   | OwnersCapital Pre Merger |   |           | Accumulated (Deficit) |  |   | Net Equity (Deficiency) |  
|                                                                                                                                                                                                              |  | Shares                        |   |  | Amount               |         |   |                           |   |          
|BALANCE - September 1, 2003 (Date of Inception)                                                                                                                                                               |  |                              |   |  | $                    |        |   |                           | $ |          |                       |  | $ |                        |   |  | $ |           |   |  | $ |           |  
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|Owners investment                                                                                                                                                                                            |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   | 1,584,666               |   |  |   |            |   |  |   | 1,584,666  |  
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|(Loss) for Period September 1, 2003 (Inception) to June 30, 2004 (Year End) (10 Months)                                                                                                                       |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   | (785,474   | ) |  |   | (785,474   | )
|                                                                                                                                                                                                              |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|Balance - June 30, 2004                                                                                                                                                                                       |  |                              |   |  |                      |        |   |                           |   |          |                       |  |   | 1,584,666               |   |  |   | (785,474   | ) |  |   | 799,192    |  
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|Common Stock Issued prior to the change of control of the Company on January 27, 2005 when previously known as Heritage Scholastic
Corp.                                                                      |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|Not part of the change in control                                                                                                                                                                             |  | 5,551,000                     |   |  |                      | 5,551   |   |                           |   | (5,551    | )                     |  |   |                         |   |  |   |            |   |  |   |           |  
|Part of the change in control                                                                                                                                                                                 |  | 25,928,500                    |   |  |                      | 25,928  |   |                           |   | (25,928   | )                     |  |   |                         |   |  |   |            |   |  |   |           |  
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|Common stock issued on January 27, 2005 in exchange for Nano Chemical Systems, Inc., a wholly owned subsidiary                                                                                                |  | 36,000,000                    |   |  |                      | 36,000  |   |                           |   | 14,000    |                       |  |   |                         |   |  |   |           |   |  |   | 50,000     |  
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|Common stock returned to the Company from the 61,928,500 shares of previously issued stock relating to the January 27, 2005 ownership
change. This included both the old and the newly issued shares of stock |  | (49,926,500                   | ) |  |                      | (49,926 | ) |                           |   | 49,926    |                       |  |   |                        |   |  |   |           |   |  |   |           |  
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|First phase in purchase of a portion of the assets and customer base of GreenTree Spray Technologies, Inc. (Owner) on March 15,
2005                                                                          |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|Common Stock issued to Owner                                                                                                                                                                                  |  | 24,000,000                    |   |  |                      | 24,000  |   |                           |   | 76,000    |                       |  |   | (100,000                | ) |  |   |            |   |  |   |           |  
|Note payable issued to Owner                                                                                                                                                                                  |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   | (1,000,000              | ) |  |   |            |   |  |   | (1,000,000 | )
|                                                                                                                                                                                                              |  |                               |   |  |                      |        
|Second phase completing the passing of all assets, some debt, and all operations of GreenTree Spray Technologies, Inc. (Owner) into the
Company on June 30, 2005                                              |  |                              |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|Common stock issued to Owner                                                                                                                                                                                  |  | 8,000,000                     |   |  |                      | 8,000   |   |                           |   | 25,333    |                       |  |   | (33,333                 | ) |  |   |            |   |  |   |           |  
|Note payable issued to Owner                                                                                                                                                                                  |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   | (333,000                | ) |  |   |            |   |  |   | (333,000   | )
|Debt Owner retained                                                                                                                                                                                           |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   | 577,595                 |   |  |   |            |   |  |   | 577,595    |  
|Reclassify rest of Owners Capital                                                                                                                                                                            |  |                               |   |  |                      |         |   |                           |   | 695,928   |                       |  |   | (695,928                | ) |  |   |            |   |  |   |           |  
|(Loss) for the fiscal year                                                                                                                                                                                    |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   | (563,157   | ) |  |   | (563,157   | )
|                                                                                                                                                                                                              |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|Balance - June 30, 2005                                                                                                                                                                                       |  | 49,553,000                    |   |  |                      | 49,553  |   |                           |   | 829,708   |                       |  |   |                        |   |  |   | (1,348,631 | ) |  |   | (469,370   | )
|Common stock issued for cash                                                                                                                                                                                  |  | 5,802,559                     |   |  |                      | 5,803   |   |                           |   | 673,807   |                       |  |   |                         |   |  |   |            |   |  |   | 679,610    |  
|(Loss) for the fiscal year                                                                                                                                                                                    |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   | (1,224,660 | ) |  |   | (1,224,660 | )
|                                                                                                                                                                                                              |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  
|Balance - June 30, 2006                                                                                                                                                                                       |  | 55,355,559                    |   |  | $                    | 55,356  |   |                           | $ | 1,503,515 |                       |  | $ |                        |   |  | $ | (2,573,291 | ) |  | $ | (1,014,420 | )
|                                                                                                                                                                                                              |  |                               |   |  |                      |         |   |                           |   |           |                       |  |   |                         |   |  |   |            |   |  |   |            |  

See Notes to Financial Statements



- 18 -



---

##### Table of Contents

NANO CHECMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

FOR THE FISCAL YEARS
ENDING



|                                                              |  |               |            |   |               |   |            |  
|------------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | - | ---------- | -
|                                                              |  | June 30, 2006 |            |   | June 30, 2005 |  
|SALES                                                         |  | $             | 1,226,982  |   |               | $ | 1,937,363  |  
|                                                              |  |              
|COST OF MATERIALS                                             |  |               | 978,697    |   |               |   | 1,357,813  |  
|                                                              |  |               |            |   |               |   |            |  
|MARGIN AFTER DIRECT COST OF MATERIALS                         |  |               | 248,285    |   |               |   | 579,550    |  
|                                                              |  |               |            |   |               |   |            |  
|ALL OTHER OPERATING EXPENSES                                  |  |               |            |   |               |   |            |  
|Plant Salaries, labor and Employee payroll taxes and benefits |  |               | 400,276    |   |               |   | 509,178    |  
|Plant rent, utilities, depreciation, and other plant overhead |  |               | 365,605    |   |               |   | 361,706    |  
|Administrative Costs, including Compensation and Benefits     |  |               | 558,368    |   |               |   | 265,779    |  
|                                                              |  |               |            |   |               |   |            |  
|TOTAL ALL OTHER OPERATING EXPENSES                            |  |               | 1,324,249  |   |               |   | 1,136,663  |  
|                                                              |  |               |            |   |               |   |            |  
|OPERATING INCOME (LOSS)                                       |  |               | (1,075,964 | ) |               |   | (557,113   | )
|                                                              |  |               |            |   |               |   |            |  
|OTHER INCOME (EXPENSE):                                       |  |               |            |   |               |   |            |  
|Interest (Expense)                                            |  |               | (106,420   | ) |               |   | (23,333    | )
|Impairment of Patents                                         |  |               | (45,588    | ) |               |   |           |  
|Interest Income                                               |  |               |           |   |               |   | 45         |  
|Other Income                                                  |  |               | 3,312      |   |               |   | 17,244     |  
|                                                              |  |               |            |   |               |   |            |  
|NET OTHER INCOME (EXPENSE):                                   |  |               | (148,696   | ) |               |   | (6,044     | )
|                                                              |  |               |            |   |               |   |            |  
|NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX             |  |               | (1,224,660 | ) |               |   | (563,157   | )
|PROVISION FOR INCOME TAX                                      |  |               |           |   |               |   |           |  
|                                                              |  |               |            |   |               |   |            |  
|NET INCOME (LOSS)                                             |  | $             | (1,224,660 | ) |               | $ | (563,157   | )
|                                                              |  |               |            |   |               |   |            |  
|BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                   |  | $             | (0.02      | ) |               | $ | (0.04      | )
|                                                              |  |               |            |   |               |   |            |  
|BASIC & DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK       |  |               | 51,118,362 |   |               |   | 15,169,082 |  
|                                                              |  |               |            |   |               |   |            |  

See Notes to Financial Statements



- 19 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE
FISCAL YEARS ENDING JUNE 30,



|                                                                                 |  |      |            |   |      |   |          |  
|-------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | -------- | -
|                                                                                 |  | 2006 |            |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                            |  |      |            |   |      |   |          |  
|Net (loss)                                                                       |  | $    | (1,224,660 | ) |      | $ | (563,157 | )
|Adjustments to reconcile net (loss) to net cash from (to) operating activities:  |  |      |            |   |      |   |          |  
|Stock Issued for Services                                                        |  |      |           |   |      |   |         |  
|Depreciation & Amortization Prop & Equip                                         |  |      | 80,017     |   |      |   | 91,284   |  
|Impairment of Patents                                                            |  |      | 45,588     |   |      |   |          |  
|Changes in operating assets and liabilities which increase (decrease) cash flow: |  |      |            |   |      |   |          |  
|Accounts Receivable                                                              |  |      | 122,011    |   |      |   | (57,067  | )
|Inventories                                                                      |  |      | 313,323    |   |      |   | (127,019 | )
|                                                                                 |  |     
|Accounts Payable                                                                 |  |      | 7,521      |   |      |   | 202,274  |  
|Accrued Liabilities                                                              |  |      | 1,700      |   |      |   | 6,500    |  
|                                                                                 |  |      |            |   |      |   |          |  
|Net cash provided (used) from operating activities                               |  |      | (654,500   | ) |      |   | (447,185 | )
|                                                                                 |  |      |            |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            |  |      |            |   |      |   |          |  
|Capital (Outlays)/Disposals  net                                                |  |      |           |   |      |   | (1,359   | )
|Prepaid Expenses                                                                 |  |      | 3,241      |   |      |   | (850     | )
|Other Assets                                                                     |  |      |           |   |      |   |         |  
|Investment in Subsidary Nano Chemical Systems, Inc.                              |  |      |           |   |      |   |         |  
|                                                                                 |  |      |            |   |      |   |          |  
|Net cash provided (used) from investing activities                               |  |      | 3,241      |   |      |   | (2,209   | )
|                                                                                 |  |      |            |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            |  |      |            |   |      |   |          |  
|Sale of Company Stock for Cash                                                   |  |      | 679,610    |   |      |   |          |  
|Investment from Related Parties                                                  |  |      | 243,667    |   |      |   | 376,185  |  
|Term note due to major shareholder                                               |  |      |           |   |      |   |         |  
|                                                                                 |  |      |            |   |      |   |          |  
|Net cash provided (used) from financing activities                               |  |      | 923,277    |   |      |   | 376,185  |  
|                                                                                 |  |      |            |   |      |   |          |  
|NET INCREASE (DECREASE) IN CASH EQUIVALENTS                                      |  |      | 272,018    |   |      |   | (73,209  | )
|                                                                                 |  |     
|CASH AND CASH EQUIVALENTS - Beginning of Period                                  |  | $    | 7,548      |   |      |   | 80,757   |  
|                                                                                 |  |      |            |   |      |   |          |  
|CASH AND CASH EQUIVALENTS - End of Period                                        |  | $    | 279,566    |   |      | $ | 7,548    |  
|                                                                                 |  |      |            |   |      |   |          |  

See Notes to Financial Statements



- 20 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE
FISCAL YEARS ENDING JUNE 30,



|                                                                                                                                         |  |      |   |      |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---- | - | --------- | -
|                                                                                                                                         |  | 2006 |   | 2005 |  
|SUPPLEMENTAL DISCLOSURE                                                                                                                  |  |      |   |      |   |           |  
|                                                                                                                                         |  |     
|CASH PAID FOR:                                                                                                                           |  |      |   |      |   |           |  
|Interest                                                                                                                                 |  | $    |  |      | $ |          |  
|Taxes                                                                                                                                    |  | $    |  |      | $ |          |  
|                                                                                                                                         |  |      |   |      |   |           |  
|NON CASH INVESTING AND FINANCING ACTIVITIES:                                                                                             |  |      |   |      |   |           |  
|                                                                                                                                         |  |     
|STOCK ISSUED FOR:                                                                                                                        |  |      |   |      |   |           |  
|Services                                                                                                                                 |  | $    |  |      | $ |          |  
|Acquisition of Nano Chemical Systems, Inc., a subsidiary                                                                                 |  | $    |  |      | $ | 50,000    |  
|Asset Purchase from GreenTree Sprays Technologies, LLC                                                                                   |  | $    |  |      | $ | 133,333   |  
|                                                                                                                                         |  |      |   |      |   |           |  
|ALL OTHER                                                                                                                                |  |      |   |      |   |           |  
|Transactions dealing with the asset purchase from GreenTree                                                                              |  |      |   |      |   |           |  
|Sprays Technologies, LLC ("GreenTree")                                                                                                   |  |      |   |      |   |           |  
|- Long-term debt assumed by Company for assets received from GreenTree                                                                   |  | $    |  |      | $ | 1,333,000 |  
|- Unanticipated debt Company recognized from the Asset Purchase                                                                          |  | $    |  |      | $ | 758,585   |  
|- GreenTree retained of its own debt from the Asset Purchase                                                                             |  | $    |  |      | $ | 577,595   |  
|- Negative Contributed capital by GreenTree of $695,928 (less) the Accumulated (deficit) brought into Company at that time of
$1,225,441 |  | $    |  |      | $ | (529,513  | )
|                                                                                                                                         |  |      |   |      |   |           |  

See Notes to Financial Statements



- 21 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 1  ORGANIZATION, HISTORY, AND BUSINESS ACTIVITY

General

Nano Chemical Systems Holdings, Inc., a Nevada
corporation, was incorporated on July 30, 1999 under the name Heritage Scholastic Corporation. Prior to conducting its current operations, the Company was engaged in the business of publishing and distributing supplemental history
textbooks for grades K through 12. However, on January 27, 2005, pursuant to a Stock Purchase and Share Exchange Agreement (the Share Exchange Agreement) between Heritage Scholastic Corporation, Nano Chemical Systems, Inc., a Nevada
corporation (NCS), and the shareholders of NCS, Heritage Scholastic Corporation issued 36,000,000 new shares to the shareholders of NCS in exchange for 100% of the issued and outstanding stock of NCS.

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

On or before March 15, 2005, the two new majority shareholders at the time (as of January 27, 2005) returned to the Company 49,926,500 out of 61,928,500 shares
of stock they held. In addition, 2,000 shares these majority shareholders had acquired from previous shareholders were never received. These actions left the two new majority shareholders at the time with 12,000,000 shares between the two of them.

The Company has authorized 100,000,000 shares of common stock, par value of $0.001, with 55,355,559 shares issued and outstanding as of June 30,
2006. In addition, the Company has authorized 20,000,000 shares of preferred stock, par value of $0.001, none of which is issued or outstanding. Rights of preferred stock will be defined before or when issuance of such stock occurs.

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

Acquisition of Assets and Operations of GreenTree Spray Technologies, LLC

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

This acquisition if reported in the financial statements as a reverse acquisition using a modified basis of predecessor cost. Refer also to other Notes
discussing this purchase from GreenTree Agreement.

Nano Chemical Systems, Inc.

Nano Chemical Systems, Inc., a wholly owned subsidiary, owned two patent applications it acquired for a value of $50,000. The original patent applications were allowed to expire during the fiscal year ending
June 30, 2006. The remaining cost is impairment and is written off in these financial statements. Two new Utility Patent Applications have been filed and are carried at no value. The Company is seeking funding to develop these patents and
patents pending. At present it has no other operations.



- 22 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

Sea Spray Aerosol, Inc.

The
wholly owned subsidiary Sea Spray Aerosol, Inc., a Delaware corporation, was created during 2006. It now owns and operates the Seaford, Delaware operations coming from the Asset Purchase of GreenTree Spray Technologies, LLC. Previous to this, these
operations were operated under the Company that came from the GreenTree Asset Agreement

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Principles of Consolidation

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

The Company has the following wholly owned subsidiaries:

Nano Chemical Systems, Inc.

Sea Spray Aerosol, Inc.

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

(b)  Cash and Cash Equivalents

The
Company considers all highly liquid investments with maturities of three months or less to be cash and cash equivalents.

(c)  Inventories

Inventories are valued at cost or market, which ever is less, computed on a modified First-In, First-Out method of accounting.

(d) Accounts Receivable

Accounts receivable are amounts due
from customers. An allowance for uncollectibles has been established in the amount of $14,049 and $17,230, which reduced receivables to a net of $201,001 and $323,011 as of June 30, 2006 and 2005. The allowance for uncollectibles is computed
based on the aging of the accounts receivable and the estimated amounts that may become uncollectible.

(e) - Property and Equipment

Property and equipment are valued at cost, except for the initial property and equipment purchased by Marc Mathys effective September 1, 2003
that was recorded on the books at the time of the purchase at the estimated fair value at the time of $354,790 (Refer to Note GreenTree Asset Purchase). It and subsequent purchases are depreciated over estimated useful lives ranging from
5 to 7 years using accelerated depreciation methods. As discussed in (f) below, management has evaluated the economic recoverability of these assets and has concluded that the assets are not impaired and no loss is recognized in the statement
of operations. Property and equipment purchases that extend asset useful life are capitalized.

(f)  Impairment of Long-Lived Assets

The Company by policy periodically evaluates the economic recoverability of all of its long-lived assets. In accordance with that policy, when the
Company determines that an asset has been impaired, it will recognize the loss in its statement of operations.

(g)  Fair Value of Financial
Instruments

The Methods and assumptions used to estimate the fair value of each class of financial instruments are
as follows:

Accounts receivable, inventory, accounts payable, and accrued payroll approximate fair value because of the short maturity of these
instruments.



- 23 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

It is currently not practicable to estimate the fair value of prepaid expenses and utility deposit because they remain as is unless
the operations are terminated. The Company does not have plans to terminate operations.

In addition, it is not practicable to estimate the fair value of
the amounts due to related parties as the amount due is in dispute (Refer to Note Contingent Liabilities Regarding GreenTree Agreement.

Current maturities of long-term debt  related party approximates fair value because it has attached to it a reasonable interest rate.

(h) - Intangible Assets and Related Impairment

The Financial Accounting Standards Board has issued FASB 142 Goodwill and
Other Intangible Assets effective for fiscal years beginning after December 15, 2001. According to FASB 142, goodwill and other intangible assets should not be amortized unless they have limited lives. In any event, they should be
reviewed for impairment at least annually and charged to earnings only when its recorded value exceeds its implied fair value. Once reduced, it remains reduced, even if the value should increase later.

The Company considers its formulas and patents to have a limited life; accordingly, they are amortized over their estimated useful lives of seventeen years.

As of June 30, 2005, management evaluated the fair value of its formulas and patents. During the period ending June 30, 2006, the original patent
applications were allowed to expire, thus becoming public domain. Consequently, impairment was total and the entire remaining net book value was written off and charges to operations.

Research and development is expensed as occurred. Once the research and development is ready for production, then the direct costs from that point going forward will be capitalized.

(i)  Revenue Recognition

The Company recognizes revenue in the period in which the services are rendered and the products are shipped.

(j)  Financial and
Concentrations of Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of
the number of customers of the Company. There are four major customers of the Company. One of these four customers provides the majority of the Companys sales. During the fiscal year ending June 30, 2006 this major customer stopped doing
business with the Company because of the negative cash flow of the Company could not produce the product as needed. Efforts have been made to recover this major customer with some limited success.

Cash and cash equivalents maintained in financial institutions in excess of their FDIC insurable limits put the Company at significant concentration of credit risk from
time to time. The Company believes this is mitigated to a large extent through because Company funds generally remain under the insurable limits of the financial institutions.

(k)  Income Taxes

The Company has adopted the provisions of statements of Financial Accounting
Standards No. 109, Accounting for Income Taxes, which incorporates the use of the asset and liability approach of accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and
liabilities for the expected future consequences of temporary differences between the financial reporting basis and the income tax basis of assets and liabilities.

Due to the GreenTree Agreement, effective June 30, 2005, the Company underwent an ownership change as defined in Section 382 of the Internal Revenue Code. Refer to the Note on GreenTree Agreement. Of the $1,349,000
accumulated losses of the Company as of June 30, 2005, only $123,000 is available to the Company as a net operating loss carry forward. Combined with the net operating loss of $1,224,660 for the period ending June 30, 2006 the combined
available net operating loss carry forward is $1,347,660, due to expire starting in the fiscal year ending June 30, 2020. No income tax benefit is recognized in the financial statements, as it is not known whether such losses will ever be
applied in the future.



- 24 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

(l)  Advertising

The Company has no significant advertising costs. Presently, all advertising costs are expensed as they are incurred.

(m)  Comprehensive Income

The Company has adopted SFAS No. 130 Reporting Comprehensive Income. The Company has no
reportable differences between net income and comprehensive income; therefore a statement of comprehensive income has not been presented.

(n) 
Earnings (Loss) per share of Common Stock

The basic and diluted net income (loss) per common share in the accompanying statements of operations are
based upon the net income (loss) divided by the weighted average number of shares outstanding during the periods presented. Diluted net (loss) per common share is the same as basic net (loss) per share because including any potential common shares
would be anti-dilutive.

(o) - Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(p)  Reclassifications

Certain amounts in the period
ending June 30, 2005 have been reclassified and represented to conform to the current financial statement presentation.

(q)  Other Recent
Accounting Pronouncements

The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on
its financial statements.

NOTE 3  FINANCIAL CONDITION AND GOING CONCERN

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

The Company continues working on raising capital funds that management anticipates will sustain the operations of the Company and provides the
means for the Company to turn its operations into a profitable situation. Inventories are valued at cost or market, which ever is lower, on a modified first-in, first-out (FIFO) method. It is modified because the individual products in
the raw material inventory are valued at



- 25 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

the cost of the last item received regardless of the quantity on hand and what the prior cost was on the remaining balance of the
product on hand otherwise would be. The new cost remains in raw material, and flows from raw material on through into finished goods. This new cost remains in the raw material product until the next time the product is purchased. When the next time
the product is purchased, then the process begins again with the new price of the product just purchased.

The plant does not have any work in process, as
the raw materials convert to finished goods with no step in between at the end of each day. Management is of the opinion this method of costing raw materials and the consequential results affecting the cost of material as it flows to finished goods
ultimately is insignificant, and in most cases will most efficiently rid the inventory of multiple levels of individual inventory costing in raw materials and finished goods.

NOTE 4  PLANT AND EQUIPMENT

When Marc Mathys purchased the original plant and equipment effective September 1, 2003, it was set on the books at the predecessors book value. Refer to Note GreenTree Initial Asset Value & Affect on Financial
Statements with a value assigned of $354,791, which was considered to approximate its fair value. All other additions are recorded at cost.

Management evaluated the fair value of such assets as of June 30, 2005 and concluded that fair value equals or exceeds the net book value on the books and records of the Company. Therefore, no impairment applies and none is recognized
in the financial statements as of June 30, 2006 or 2005.

Plant and equipment are valued at the following amounts, using MACRS as the depreciation
method with estimated lives as noted below:



|                                            |  |       |          |   |                |            
|------------------------------------------- |  | ----- | -------- | - | -------------- | -----------
|                                            |  | Value |          |   | Estimated Life
|Equipment in original purchase              |  | $     | 354,791  |   |                | 7 Years    
|Equipment additions since original purchase |  |       | 76,358   |   |                | 5 & 7 Years
|                                            |  |       |          |   |                |            
|Total Plant and Equipment                   |  | $     | 431,149  |   |                |            
|                                            |  |       |          |   |                |            
|(Less) Accumulated depreciation             |  |       | (248,029 | ) |                |            
|                                            |  |       |          |   |                |            
|Net property and equipment                  |  | $     | 183,120  |   |                |            
|                                            |  |       |          |   |                |            

In addition, refer to Note GreenTree Agreement.

NOTE 5  GREENTREE AGREEMENT

Under the GreenTree Agreement, the Company ultimately acquires all of the assets, proprietary chemical formulations, know-how, intellectual property, goodwill, and operations of GreenTree Technologies, LLC.



- 26 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

This took place in two phases. The first phase took place on March 15, 2005 and the second phase took place on June 30,
2005.

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

On June 30, 2005, the
remaining balance of the assets and ongoing operations completed the asset purchase in exchange for an additional $330,000 promissory note and 8,000,000 shares of common stock of the Company valued at $33,333.

The excess paid over the recorded value of the assets, including the $133,333 fair value for the common stock issued, is considered intangible assets, including
goodwill. However, in a reverse acquisition, the excess rather than recognize it as intangible assets is recognized as an offset in equity. This is as per the guidelines set forth by the Staff of the Securities and Exchange
Commission (SEC). In dealing with reverse acquisitions, the Staff of the SEC takes the position that a reverse acquisition is a restructuring of the ownership and equity of the Company, not a purchase, and
therefore, it does not fall under the guidelines of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 141, Business Combinations (FASB 141).

FASB 141 recognizes an asset purchase as a business combination and requires an entity to record the asset purchase as a purchase, wherein the Company then assigns the
fair value as the amount to record the value of assets on the financial statements at the point of purchase. Consequently, FASB 141, which would recognize goodwill and intangibles, does not get recognized in this form of an asset purchase under the
guidelines of the Staff of the SEC. These financial statements follow the guidelines of the Staff of the SEC.

The underlying intent of the Heritage
Agreement and the GreenTree Agreement are to transition the Company from an empty public shell to a going concern whereby certain Nano technology (undeveloped patent rights and formulas) is joined with the ongoing operations of
GreenTree. Management believes that the aerosol operations will allow it to manufacture and distribute products that will use Nano technology.

The
transaction involves a series of phases in the acquisition process wherein the management, operations, and majority ownership in the Company changes hands one-step at a time. The merger is not designed to qualify as a tax-free exchange under
Internal Revenue Code Section (IRC) 351 and net operating losses are not intended to be preserved under IRC #368.

On or about March 15,
2005 a Form 8-K was filed with the Securities and Exchange Commission (SEC) disclosing the Agreement and that the first phase had taken place and that the second phase would take place on or before June 30, 2005. The second phase
took place on June 30, 2005.

NOTE 6  GREENTREE INITIAL ASSET VALUE AND ITS AFFECT ON THE FINANCIAL STATEMENTS

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

Marc Mathys purchased the assets of GreenTree for $300,000 plus additional amounts he had to pay over the next few months to keep selected creditors providing needed
materials, services, and facilities. This increased his actual purchase price to approximately $365,000. He did not buy the predecessors company nor assume its position. He did buy and use the predecessors computer software and
accounting system that has remained in place to do the accounting even as of June 30, 2006.



- 27 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

When Marc Mathys acquired the assets of the predecessor company, the assets were recorded at the value carried on the predecessor
companys records. As this was at the predecessors cost, or what was thought at the time to be the estimated market value on the date of purchase by Marc Mathys, then this accounting treatment approximated fair value at the date of
purchase. This does not conform to the accounting requirements as promulgated by FASB No. 141, effective after June 30, 2001, which requires virtually all business combinations be accounted for based on the values exchanged; i.e., the
purchase method of accounting (recording what you paid for the assets, not what they may be worth). GreenTree recorded its assets as the same value carried on the predecessor companys records, which approximated $1,100,000, or approximately
$735,000 more than Marc Mathys cost.

The Company in developing the financial statements concluded that the spirit of FASB No. 141 is best
served to have comparable statements of operations at the sacrifice of using the purchase method of accounting. So, rather than recognize a built in gain in the statement of operations, this difference of approximately $735,000 has been
removed from the statement of operations and instead placed in the balance sheet as part of Owners Capital Pre Merger as recognized on the Statement of Stockholders Equity.

Management is of the opinion that the accounting treatment reporting the assets at the predecessors cost more uniformly recognizes revenues and expenses in a more
consistent light than if the purchase method of accounting had been used. The method used more clearly reflects the results of operations for each year ending June 30, 2004 and 2005 and each corresponding quarter therein, thus allowing one to
more clearly see the results of operations in a consistent and more meaningful manner than would otherwise be reported. It also reflects more clearly the overall results of operations and asset values on a consistent basis, taking into consideration
the required method of accounting to recognize the asset purchase of the assets from GreenTree by the Company on March 15, 2005 and completed on June 30, 2005 as discussed in the prior Note GreenTree Agreement.

The only difference in comparing the assets from September 1, 2003 (date of inception), using the predecessor cost rather than the purchase cost, the financial
statements as of June 30, 2006 and 2005 using the predecessor cost, is the values assigned to property and equipment. All other asset differences have already flowed through the financial reporting by or before June 30, 2004. The Company
has elected accelerated depreciation methods to more quickly bring the two methods into compliance with each other. Management estimates that the net asset value of property and equipment is greater as of June 30, 2006, 2005, and 2004 are
approximately $61,700, $106,900, and $173,600 respectively. The differences are anticipated to continue through June 30, 2007, 2008, 2009, 2010, and 2011 at approximately $40,400, $28,000, $15,600, $3,100, and $0 respectively.

Again, these built in gains,  or differences, are not recognized in the statements of operations, but rather are recognized in one step in the statement of
stockholders equity as part of the initial balance of Owners Capital Pre Merger, except for the additional depreciation expense recognized through the statement of operations as discussed in the prior paragraph.

NOTE 7  RELATED PARTIES

As of June 30, 2006, three shareholders own the controlling interest in the Company, namely:



|                              |  |                            |  
|----------------------------- |  | -------------------------- | -
|Green Spray Technologies, LLC |  | 32,000,000 shares, or 57.8 | %
|                              | 
|Treya, Inc.                   |  | 8,000,000 shares, or 14.4  | %
|                              | 
|Katrina Cleburn               |  | 4,000,000 shares, or 7.2   | %

As of June 30, 2006, Robert Esposito, or his assigns, owns approximately 5,300,000 stock options he can
exercise at $0.10 per share. As of October 12, 2006, none of the stock options have been exercised. After conferring with the company Attorney, the Board of Directors agreed to ratify the original plan as written, allowing the exercise of the
options.



- 28 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

Marc Mathys and his related companies (GreenTree LLC and Harvard Chemical) combined are owed by the Company at least $1,333,000
plus accrued interest at 8% since around March 15, 2005 for a total of $129,753. Refer to Note on Contingent Liability Regarding GreenTree Agreement for further explanation regarding this matter.

The $1,333,000 note payable plus accrued interest is due March 31, 2007. The $1,333,000 note amount is in default and is recognized and reported as current portion
long-term debt  related party. The accrued interest is part of the $447,696 due to related party. Marc Mathys, the effective note holder has resigned from management as an officer and as a director and does not participate in the operations
and activities of the Company. The promissory note is secured by selected assets of the Company.

NOTE 8  LEASE COMMITMENT

The Company has a lease where the plant and equipment are housed in Seaford, Delaware through August 31, 2010. Future lease commitments by fiscal year are:



|                               |  |                 |  |       |        
|------------------------------ |  | --------------- |  | ----- | -------
|                               |  | Average Monthly |  | Total
|June 30, 2007                  |  | 11,515          |  |       | 138,180
|June 30, 2008                  |  | 11,803          |  |       | 141,635
|June 30, 2009                  |  | 12,098          |  |       | 145,175
|June 30, 2010                  |  | 11,400          |  |       | 148,805
|August 31, 2010                |  | 12,451          |  |       | 24,902 
|                               |  |                 |  |       |        
|Total future lease commitments |  |                 |  | $     | 598,697
|                               |  |                 |  |       |        

NOTE 9  CONTINGENT LIABILITIES REGARDING GREENTREE AGREEMENT

In the GreenTree Agreement, present Management takes the position that the Company assumes no liabilities, both known and unknown. Marc Mathys, who has since resigned as
an officer and director of the Company even though he remains as the majority shareholder, disagrees and also indicates the accounts receivable did not go to the Company. Legal counsel is being sought to resolve the issue, which remains unresolved
as of October 12, 2006.

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

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

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



- 29 -



---

##### Table of Contents

NANO CHEMICAL SYSTEMS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

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

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

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

NOTE 10  COMMON STOCK ISSUED

The Company declared a 4-1 forward split of its common stock on February 7, 2005. These financial statements have presented this forward stock split retroactively
since inception.

As discussed in the Note titled Related Parties, the Company has 5,300,000 stock options outstanding. Prior management
challenged this, stating that the stock options before the 4-1 forward split was 1,325,000 and should not increase because of the 4-1 forward stock split. Prior management also disputed whether the stock options were even valid, and if they were
that the options should not be freely traded. Current management recognizes 5,300,000 valid outstanding options.

During the fiscal year ended
June 30, 2006 the Company completed one stock subscription agreement executed under Regulation S Stock Purchase Agreement. A total of 5,802,559 new shares of free trading common stock were issued for $679,610 in cash.

NOTE 11  SEC INVESTIGATION INTO THE COMPANY

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

NOTE 12  SUBSEQUENT EVENT

As of June 30, 2006, the Company had three (3) Regulation S Stock Purchase Agreements in place (Subscription Agreements), with only the subscription agreement effective February 28, 2006 as active. This subscription agreement
authorizes the sale of stock at 32% of the previous days last trade price for a maximum of $2,000,000. As of June 30, 2006 this subscription agreement sold 5,802,559 shares of common stock for a total of $679,610. Since June 30, 2006
this agreement has been cancelled by mutual consent.

The other two subscription agreements, dated December 16, 2005 for 4,455,310 shares at $0.38 per
share, and the other also dated December 16, 2005 for 4,455,310 shares at $.038 per share, remain inactive as of October 12, 2006. Management has concluded that they will not be closed and has begun the procedure to recover the common
stock from the escrow agent. This stock in escrow is not recognized as part of the Companys stock issued and outstanding.



- 30 -



---

##### Table of Contents

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS

An evaluation was conducted under the supervision and with the participation of the Companys management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of June 30, 2006. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Companys disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports which it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms.

INTERNAL
CONTROL OVER FINANCIAL REPORTING

The Companys management, including the Chief
Executive Officer and Chief Financial Officer confirm that there was no change in the Companys internal control over financial reporting during the quarter ended June 30, 2006 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

APPOINTMENT OF PRINCIPAL
OFFICERS.

On October 25, 2006, the Board of Directors appointed Shannon Norwood as Interim Chief Financial Officer.
Mrs. Norwoods business experience for the past five years and directorships held in reporting companies are disclosed on the following two pages of this Form 10-KSB. Mrs. Norwood has no family relationships with any directors or officers of
the Company. During the past two years there have been no transactions, and there are no proposed transactions, to which the Company was or is to be a party and in which Mrs. Norwood had any material interest.



- 31 -



---

##### Table of Contents

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

MANAGEMENT

OFFICERS AND DIRECTORS

As of the date hereof, the directors and executive officers of the Company, their ages, positions, the dates of their initial election or appointment as
directors or executive officers, and the expiration of the terms are as follows:



|                                   |  |     |  |                                           |  |                              
|---------------------------------- |  | --- |  | ----------------------------------------- |  | -----------------------------
|Name of Director/Executive Officer |  | Age |  | Position                                  |  | Period Served                
|James Ray                          |  | 68  |  | Chief Executive Officer and President     |  | September 20, 2005 to Present
|                                   |  |     |  | Director                                  |  | April 20, 2006 to Present    
|Tina Dennis                        |  | 40  |  | Chief Financial Officer, Vice President   |  | June 29, 2005 to Present     
|                                   |  |     |  | Director                                  |  | April 20, 2006 to Present    
|Henry Simpson                      |  | 56  |  | Vice-President of Operations and Director |  | March 15, 2005 to Present    
|Shannon Norwood                    |  | 36  |  | Director                                  |  | April 20, 2006 to Present    

Duties, Responsibilities and Experience

James Ray. Mr. Ray, 68, was appointed as the Companys President and Chief Executive Officer on September 20, 2005 and as a
member of the Board of Directors on April 20, 2006. Mr. Ray has a Bachelor of Arts in accounting from Lamar University. In the past five years, Mr. Ray has worked as a consultant, advising small corporations in various financial
matters. Mr. Ray has successfully operated companies specializing in extracting natural resources and the manufacturing of equipment used in the high tech industries. Mr. Ray also serves as President and Member of the Board of Directors of
Fallon Oil & Gas, Inc.

Tina Dennis. Ms. Dennis, 40, was appointed as the Companys Chief Financial
Officer on June 29, 2005 and as a member of the Board of Directors on April 20, 2006. Ms. Dennis worked at GreenTree Spray Technologies, a sole proprietorship later organized as a limited liability company (GreenTree) from
June 2001 until June 30, 2005. She held positions in sales and quality control with GreenTree and is currently Controller of SeaSpray Aerosol, Inc. In the six years prior to working at GreenTree, Ms. Dennis was a retail store manager.
Ms. Dennis is also a Vice President, Chief Financial Officer, and member of the board of directors of Sea Spray Aerosol, Inc., a subsidiary of the Company. Ms. Dennis duties have been temporarily suspended due to illness.

Henry Simpson. Mr. Simpson, 56, was appointed as the Companys Vice President of Operations, and a member of the Board of
Directors on March 15, 2005. Mr. Simpson has extensive managerial experience, namely twenty years of experience with a major delivery company. From 2002 until 2005, Mr. Simpson worked as the general manager for GreenTree. For the past
year, Mr. Simpson has worked as general manager for SeaSpray Aerosol, Inc. In the two years preceding his work at GreenTree, Mr. Simpson ran an airport shuttle service and worked as a building subcontractor.

Shannon Norwood. Mrs. Norwood, 36, was appointed as a member of the Board of Directors on April 20, 2006. Mrs. Norwood has
been Vice-President of Sales and Marketing for GreenTree since September 2003. From 1995 until 2005, Mrs. Norwood worked for GreenTree in various capacities, including, sales, purchasing, shipping management, inventory, accounts receivable and
scheduling. Mrs. Norwood now works in the same capacity for SeaSpray Aerosol, Inc. On October 25, Mrs. Norwood was appointed as Interim Chief Financial Officer.



- 32 -



---

##### Table of Contents

Significant Employees

The Company does not have any significant employees.

Family Relationships

There are no family relationships between any of our directors and executive officers.

Involvement in Legal Proceedings

To the best of our knowledge, during the past five years, none of
our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or
decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking
activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.

Audit Committee and Financial Expert

We do not have an audit committee. Mr. Ray and Ms. Dennis perform some of the same functions of an audit committee, such as: recommending a firm of independent certified public accountants to audit the
annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing managements administration of the system of internal accounting controls. We do not currently have a
written audit committee charter or similar document.

Code of Ethics

We have not adopted a corporate code of ethics which applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our
decision not to adopt such a code of ethics results from our having a limited management team operating our business.

Attendance of the Board of
Directors

During the year ended June 30, 2006, the Board of Directors held five meetings. All directors were present at each
meeting. As stated above, we have no standing audit, nominating, compensation committee, or any other committees of the Board of Directors and, therefore, there were no committee meetings.

If elected, all directors of the Company will hold office until the next annual meeting of the shareholders, or until their successors have been elected
and qualified. Officers of the Company are elected by the Board of Directors and hold office at the pleasure of the Board.

SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys
directors, officers and holders of more than 10% of the Companys common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership. Based solely upon a review of the



- 33 -



---

##### Table of Contents

forms, reports and certificates filed with the Company by such persons, former directors Dr. David Tomanek and Marc
Mathys, each served as a director of the Company during the last fiscal year and each failed to file a Form 3, which is required to be filed by all reporting persons. Mr. Mathys interest in the Company was disclosed via a footnote to a
Form 3 filed on behalf of GreenTree Spray Technologies, LLC, through which Mr. Mathys owns the Companys shares. Neither Robert Esposito nor Treya, Inc. has filed a Form 3. Also, to the extent applicable, any changes in the ownership of
the above-named reporting persons failed to be reported on a Form 4. The Company has advised the above-named parties to take the corrective actions necessary to rectify these delinquent filings. All current directors and officers have rectified
their formerly delinquent Form 3 filings.



- 34 -



---

##### Table of Contents

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information regarding the compensation
earned by our Chief Executive Officer and each of our most highly compensated executive officers whose aggregate annual salary and bonus exceeded $100,000, for each of the years indicated with respect to services rendered by such persons.

SUMMARY COMPENSATION TABLE



|                                                                                      |  |                               |  |                        |        |           |   |                              |  |                                              |        |                          |     |                           |     |  |    
|------------------------------------------------------------------------------------- |  | ----------------------------- |  | ---------------------- | ------ | --------- | - | ---------------------------- |  | -------------------------------------------- | ------ | ------------------------ | --- | ------------------------- | --- |  | ---
|                                                                                      |  | Annual Compensation           |  | Long-Term Compensation
|Name and Principal Position(2)                                                        |  | Year                          |  | Salary                 |        | Bonus ($) |   | Other AnnualCompensation ($) |  | Awards Securities UnderlyingOptions SARs (#) |        | Payouts LTIP Payouts ($) |     | All OtherCompensation ($)
|James Ray Chief Executive Officer, President, and Member of the Board of Directors(1) |  | June 30, 2005 toJune 30, 2006 |  | $                      | 0      |           | $ | 0                            |  | $                                            | 28,000 |                          | N/A |                           | N/A |  | N/A
|                                                                                      |  |                               |  |                        |        |           |  
|Marc Mathys Former President and Chief Executive
Officer                              |  | June 30, 2005 toJune 30, 2006 |  | $                      | 0      |           | $ | 0                            |  | $                                            | 0      |                          | N/A |                           | N/A |  | N/A
|                                                                                      |  |                               |  |                        |        |           |  
|Dr. David Tomanek Director(2)                                                         |  | June 30, 2005 toJune 30, 2006 |  | $                      | 0      |           | $ | 0                            |  | $                                            | 0      |                          | N/A |                           | N/A |  | N/A
|                                                                                      |  |                               |  |                        |        |           |  
|Tina Dennis Chief Financial Officer and
Director(2)                                   |  | June 30, 2005 toJune 30, 2006 |  | $                      | 36,000 |           | $ | 0                            |  | $                                            | 0      |                          | N/A |                           | N/A |  | N/A
|                                                                                      |  |                               |  |                        |        |           |  
|Henry Simpson Vice-President of Operations
and Director(3)                            |  | June 30, 2005 toJune 30, 2006 |  | $                      | 39,000 |           | $ | 0                            |  | $                                            | 0      |                          | N/A |                           | N/A |  | N/A
|                                                                                      |  |                               |  |                        |        |           |  
|Shannon Norwood Director(3)                                                           |  | June 30, 2005 toJune 30, 2006 |  | $                      | 40,000 |           | $ | 0                            |  | $                                            | 0      |                          | N/A |                           | N/A |  | N/A

---

|(1) | Mr. Ray and the Company renegotiated Mr. Rays compensation for the fiscal year which ended on June 30, 2006.
|--- | -------------------------------------------------------------------------------------------------------------

|(2) | Dr. Tomanek signed a consulting agreement with our subsidiary, Nano Chemical Systems, Inc., under which he was entitled to compensation of $1,500 per month ($18,000 per year)
once services were performed. The Company believes that, during the fiscal year ended on June 30, 2006, Dr. Tomanek did not perform any services under that agreement and, therefore, has not accrued any amounts due to Dr. Tomanek.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Ms. Dennis, Mr. Simpson, and Mrs. Norwood were compensated by the Company and the Companys subsidiary, SeaSpray Aerosol, Inc.
|--- | ------------------------------------------------------------------------------------------------------------------------------



- 35 -



---

##### Table of Contents

Option Grants

There were no stock options granted to the officers or directors for the fiscal year which ended on June 30, 2006.

Compensation of
Directors

Directors do not receive compensation for their services as directors.



- 36 -



---

##### Table of Contents

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth
information with respect to the beneficial ownership of our common stock as of October 13, 2005 for (i) any person whom we know to be the beneficial owner of more than 5% of our outstanding common stock; (ii) each of our directors or
those nominated to be directors, and executive officers; and (iii) all of our directors and executive officers as a group.

SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



|               |  |                                                                               |  |                                           |  |                          
|-------------- |  | ----------------------------------------------------------------------------- |  | ----------------------------------------- |  | -------------------------
|Title of Class |  | Name and Address of Beneficial Owner                                          |  | Amount and Nature of Beneficial Ownership |  | Percentage of Class(1)(2)
|Common         |  | James Ray 105 Park Avenue, Seaford,
Delaware 19973                            |  | 0                                         |  | *                        
|               |  |                                                                               | 
|Common         |  | Tina Dennis 105 Park Avenue, Seaford,
Delaware 19973                          |  | 0                                         |  | *                        
|               |  |                                                                               | 
|Common         |  | Marc Mathys(3) 105 Park Avenue, Seaford, Delaware 19973                       |  | 32,000,000                                |  | 56.56%                   
|               |  |                                                                               | 
|Common         |  | Henry Simpson 105 Park Avenue, Seaford,
Delaware 19973                        |  | 0                                         |  | *                        
|               |  |                                                                               | 
|Common         |  | Shannon Norwood 105 Park Avenue, Seaford,
Delaware 19973                      |  | 0                                         |  | *                        
|               |  |                                                                               | 
|Common         |  | Katrina Cleburn 4031 NE Glisan Street Portland, Oregon 97232                  |  | 4,000,000                                 |  | 7.07%                    
|               |  |                                                                               | 
|Common         |  | Treya, Inc.(4) 1803 3rd St. Los Angeles, Ca.
90019                            |  | 8,000,000                                 |  | 14.14%                   
|               |  |                                                                               | 
|Common         |  | GreenTree Spray Technologies, LLC(3) 105 Park Avenue, Seaford, Delaware 19973 |  | 32,000,000                                |  | 56.56%                   
|               |  |                                                                               | 
|Common         |  | Robert Esposito(5) 621 West Lumsden Road Brandon, Florida
33511               |  | 5,300,000                                 |  | 9.37%                    
|               |  |                                                                               | 
|Common         |  | All officers and directors as a group (6 persons)                             |  | 0                                         |  | *                        

---

|* | Represents less than 1% of our outstanding common stock.
|- | --------------------------------------------------------



- 37 -



---

##### Table of Contents

|(1) | Unless otherwise noted, we believe that all shares are beneficially owned and that all persons named in the table have sole voting and investment power with respect to all shares of
common stock owned by them.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Applicable percentage of ownership is based on 56,577,988 shares of common stock outstanding as of October 11, 2006 for each stockholder. Beneficial ownership is determined in
accordance with the rules of the Commission and generally includes voting of investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently
exercisable or exercisable within 60 days of October 11,2006 are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such persons, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | GreenTree Spray Technologies, LLC received these shares pursuant to that certain Asset Purchase Agreement by and between GreenTree Spray Technologies, LLC and the Company dated
March 15, 2005. GreenTree Spray Technologies, LLC is controlled by Marc Mathys, a former member of the Companys Board of Directors. Of these 32,000,000 shares, 8,000,000 are not included in the common stock listed as issued and
outstanding on the cover page of this Form 10-KSB, because, although GreenTree Spray Technologies, LLC is contractually entitled to the shares, the Company has not yet issued them. These 8,000,000 shares are recognized as issued and outstanding in
the financial statements included in this Form 10-KSB.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Treya, Inc. is controlled by Sandra Zuckerman.
|--- | ----------------------------------------------

|(5) | Mr. Esposito is the assignee of 5,300,000 stock options of the Company. Each option can be exercised at $0.10 per share and, upon exercise, entitles the holder to purchase one
share of the Companys common stock. Mr. Esposito has indicated that he may have assigned the stock options to another individual or individuals.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as set forth below, there were no
transactions during the last two fiscal years, and there are no proposed transactions, involving amounts in excess of $60,000 to which we were or are to become a party in which any director, executive officer, beneficial owner of more than five
percent of our common stock, or members of their immediate families had, or is to have, a direct or indirect material interest.

On
March 15, 2005, pursuant to an Asset Purchase Agreement between the Company and GreenTree Spray Technologies, LLC, a Delaware limited liability company (GreenTree) (the GreenTree Asset Purchase Agreement), the Company
purchased manufacturing assets, technical know-how, proprietary chemical formulae, and other assets of GreenTree, and, in exchange for the transferred assets, the Company issued 32,000,000 shares of its restricted common stock and a promissory note
in the principal amount of One Million Three-Hundred Thirty-Three and No/100 Dollars ($1,333,000) (the GreenTree Note). The GreenTree Note requires quarterly interest payments at 8% per annum with a final balloon payment equal to
all remaining outstanding principal and interest due on March 15, 2007. The GreenTree Note is secured by certain assets of the Company. GreenTree Spray Technologies, LLC is our majority shareholder and is controlled by Marc Mathys, a former
member of the Companys Board of Directors.



- 38 -



---

##### Table of Contents

ITEM 13. EXHIBITS

Exhibits



|     |  |                                                                                                                                                                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Articles of Incorporation of Nano Chemical Systems Holdings, Inc., previously filed as Exhibit 3.a. to the Companys Form 10-SB, filed with the Securities and Exchange Commission on
September 12, 2002, are hereby incorporated herein by reference.                                         
|     | 
|3.2  |  | Amendment to Articles of Incorporation of Nano Chemical Systems Holdings, Inc., previously filed as Exhibit 3.b. to the Companys Form 10-SB, filed with the Securities and Exchange
Commission on September 12, 2002, are hereby incorporated herein by reference.                            
|     | 
|3.3  |  | By-Laws of Nano Chemical Systems Holdings, Inc., previously filed as Exhibit 3.c. to the Companys Form 10-SB, filed with the Securities and Exchange Commission on September 12, 2002, are
hereby incorporated herein by reference.                                                           
|     | 
|10.1 |  | Asset Purchase Agreement and Share Exchange Agreement by and among Heritage Scholastic Corporation and Nano Chemical Systems, Inc., dated January 27, 2005, previously filed as Exhibit 2.1 on
Form 8-K dated January 27, 2005, is hereby incorporated by reference.                           
|     | 
|10.2 |  | Amendment to Asset Purchase Agreement and Share Exchange Agreement by and among Heritage Scholastic Corporation and Nano Chemical Systems, Inc., dated January 27, 2005, previously filed as
Exhibit 2.2 on Form 8-K dated January 27, 2005, is hereby incorporated by reference.              
|     | 
|10.3 |  | Asset Purchase Agreement by and among GreenTree Spray Technologies, LLC and Nano Chemical Systems, Inc., dated March 15, 2005, previously filed as Exhibit 2.1 on Form 8-K dated March 15, 2005,
is hereby incorporated by reference.                                                          
|     | 
|10.4 |  | Promissory Note issued by Nano Chemical Systems, Inc., to GreenTree Spray Technologies, LLC dated March 15, 2005, previously filed as Exhibit 2.2 on Form 8-K dated March 15, 2005, is hereby
incorporated by reference.                                                                       
|     | 
|10.5 |  | Security Agreement by and among GreenTree Spray Technologies, LLC and Nano Chemical Systems, Inc., dated March 15, 2005, previously filed as Exhibit 2.1 on Form 8-K dated March 15, 2005, is
hereby incorporated by reference.                                                                
|     | 
|10.6 |  | Regulation S Stock Purchase Agreement dated February 28, 2006 by and between Nano Chemical Systems Holdings, Inc., Xtera Establishment Corporation, and Omega Financial Services, LLC, previously
filed as Exhibit 10.1 to Form 10-QSB filed May 15, 2005, is hereby incorporated by reference.
|     | 
|10.7 |  | SICAV One Securities Purchase Agreement dated December 16, 2005 by and between Nano Chemical Systems Holdings, Inc., and Mercatus & Partners, LP, previously filed as Exhibit 10.2 to Form
10-QSB filed May 15, 2005, is hereby incorporated by reference.                                     
|     | 
|10.8 |  | SICAV Two Securities Purchase Agreement dated December 16, 2005 by and between Nano Chemical Systems Holdings, Inc., and Mercatus & Partners, LP, previously filed as Exhibit 10.3 to Form
10-QSB filed May 15, 2005, is hereby incorporated by reference.                                     
|     | 
|16.1 |  | Letter on Change in Certifying Accountant from Nation Smith Hermes Diamond, P.C., dated February 14, 2005, previously filed as Exhibit 23.1 on Form 8-K dated February 14, 2005, is hereby
incorporated herein by reference.                                                                   



- 39 -



---

##### Table of Contents

|      |  |                                                                                                                                                                                                     
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|16.2  |  | Letter on Change in Certifying Accountant from Web & Company, P.A., dated May 10, 2005, previously filed as Exhibit 23.1 on Form 8-K dated May 10, 2005, is hereby incorporated
herein by reference.
|      | 
|*21.1 |  | List of consolidated entities of the Company.                                                                                                                                                       
|      | 
|*23.1 |  | Accountants Consent of Madsen & Associates, Inc.                                                                                                                                                   
|      | 
|*31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a).                                                                                                                                
|      | 
|*31.2 |  | Certification of Chief Financial officer pursuant to Rule 13a-14(a).                                                                                                                                
|      | 
|*32.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                                                      
|      | 
|*32.2 |  | Certification of the Chief Financial Officer 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  
|      | 
|*99.1 |  | Resolution of the Board of Directors appointing Interim Chief Financial Officer.                                                                                                                    

---

|* | Filed Herewith
|- | --------------

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed by Madsen &
Associates CPAs, Inc. for professional services rendered for the audit of the Companys financial statements for the fiscal year ended June 30, 2006 were $44,000 Fees for the reviews of the first three quarters of the fiscal year
ended on June 30, 2005 (audit-related fees) were $14,851. Madsen & Associates CPAs, Inc. does not perform tax services for the Company.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

Madsen & Associates CPAs, Inc. did not render any professional services to the Company for financial information systems design and
implementation, as described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X, during the year ended June 30, 2006.

ALL
OTHER FEES

There were no fees billed by Madsen & Associates CPAs, other than those fees
discussed in above.



- 40 -



---

##### Table of Contents

SIGNATURES

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



NANO CHEMICAL SYSTEMS HOLDINGS, INC.By:

/s/ James RayJames RayPresident and Chief Executive OfficerOctober 25, 2006


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on behalf of the Company and in the capacities indicated on October 25, 2006.



|                                |  |                                                                                       
|------------------------------- |  | --------------------------------------------------------------------------------------
|Signature                       |  | Title                                                                                 
|                                | 
|/s/ Shannon Norwood             |  | Interim Chief Financial Officer, Director (Principal Financial and Accounting Officer)
|Shannon Norwood                 | 
|                                | 
|/s/ James Ray James Ray         |  | President, Chief Executive Officer, Director (Principal Executive Officer)            
|                                | 
|/s/ Henry Simpson Henry
Simpson |  | Director                                                                              



- 41 -