UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-K  X. ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2012  . TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________  Commission File Number: 000-52860   [f10k123112_10k001.jpg] Shrink Nanotechnologies, Inc. (Exact name of registrant as specified in its charter)  Delaware20-2197964(State or other jurisdiction of
incorporation or organization)(I.R.S. Employer
Identification No.)  7020 Belcrest Drive
Plano, Texas  75024(972) 342-0982
(Registrants telephone number, including area code)(Address of principal executive offices)  Securities registered pursuant to Section 12(b) of the Act: None  Securities registered pursuant to Section 12(g) of the Exchange Act:   Common Stock, par value $0.001 per share  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes.NoX.  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes.NoX.  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesX.No.  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes.NoX.  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, 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-K or any amendment to this Form 10-K.X.  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.  Large accelerated filer.Accelerated filer.Non-accelerated filer. (Do not check if a smaller reporting company)Smaller reporting companyX.  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes.NoX.  On June 30, 2012, the last business day of the registrants most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $___, based upon the closing price on that date of the Common Stock of the registrant on the OTC Bulletin Board system of $0.__.  For purposes of this response, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.  As of as of March 26, 2013 the registrant had 224,746,249 shares of its Common Stock, $0.001 par value, outstanding.     [f10k123112_10k002.jpg]  SHRINK NANOTECHNOLOGIES, INC.  Annual Report on FORM 10-K For the Fiscal Year Ended December 31, 2012    TABLE OF CONTENTS  PagePART I3ITEM 1.BUSINESS3Forward Looking Statements3Use of Terms4Business Overview4Intellectual Property We Own4ITEM 1A.RISK FACTORS21ITEM 1B.UNRESOLVED STAFF COMMENTS32ITEM 2.PROPERTIES32ITEM 3.LEGAL PROCEEDINGS32ITEM 4.MINE SAFETY DISCLOSURES32PART II32ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES32Securities Authorized for Issuance Under Equity Compensation Plans33ITEM 6.SELECTED FINANCIAL DATA34ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS34ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK49ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAF-1ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE50ITEM 9A.CONTROLS AND PROCEDURES50ITEM 9B.OTHER INFORMATION51PART III52ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE52ITEM 11.EXECUTIVE COMPENSATION53ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS55ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE56ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES57PART IV58ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES58EXHIBITS58SIGNATURES61   2      PART I    ITEM 1.  BUSINESS  FORWARD LOOKING STATEMENTS  Certain information contained in this Annual Report on Form 10-K (this Report or Annual Report) includes forward-looking statements within the meaning of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, (thee Exchange Act).  These statements are expressed in good faith and based upon information currently available to the Company and management and their interpretation of what are believed to be significant factors affecting the businesses, including many assumptions regarding future events. These forward looking statements can be identified by the use of terms and phrases such as believe, plan, intend, anticipate, target, estimate, expect, and the like, and/or future-tense or conditional constructions (will, may, could,   should,  etc.).  Forward-looking statements include statements regarding, without limitation:  · the development, commercialization and market acceptance of our structured” cell culturing devices (StemDiscTM) and related software, our microfluidic technology licensed in part from Corning Incorporated and, our shrinkable film based products such as CellAllignTM, NanoShrinkTM and Metal-enhanced fluorescence substrates, and the costs related to bringing these technologies and products to market, · our immediate and growing need to raise the capital needed or obtain government grants to commercialize our products and implement our business plan, · our ability to access cash to fund our ongoing operations, · our ability to transition from an R&D company to a company with commercialized products, · our ability to innovate using our existing platform technology, a shrinkable plastic film material branded as NanoShrinkTM” and to find new market accepted uses for the same, · our ability to secure and continue to access economical component and manufacturing sourcing for the various businesses we seek to engage in, · our ability to continue funding research and development relationships we have and/or may enter into, · our ability to secure certain critical licenses from third parties, some of which may be potential commercial competitors for one or more of our products, · our ability to find attractive acquisition candidates in the life sciences business, · the progress of our research and development activities, · our ability to further acquire, and hold and defend our intellectual property, · the projected growth in stem cell research and public policy changes relating to government funding of the same, and · the presumed size and growth of the market for lab-on-a-chip devices in life sciences.  These forward looking statements should be considered in addition to our risk factors (contained in this Annual Report under the heading Risk Factors).  Additional risks not described above, or unknown to us, may also adversely affect the Company or its results.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the Risk Factors section in this Annual Report.  Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.  We assume no obligation to update any forward-looking statements.  Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the SEC (which shall also include by reference herein and incorporate the same as if fully included in their entirety, all Form 10-Ks, Form 10-Qs, Form 8-Ks and other periodic reports filed by us in the SECs EDGAR filing system (www.sec.gov) as may be amended from time to time, which attempt to update interested parties of the risks and factors and other disclosures that may affect our business, financial condition, results of operation and cash flows.   3    Use of Terms  Except as otherwise indicated by the context, references in this report to (i) the Shrink Parent or Parent or similar terms refer to the publicly traded parent holding company and registrant, Shrink Nanotechnologies, Inc., a Delaware corporation, and Shrink refers to our wholly owned subsidiaries, both (a) Shrink Technologies, Inc., a California corporation and (b) Shrink Technologies B, Inc., a California corporation (ii) Shrink Chips, Shrink Solar and Blackbox refer to our Delaware subsidiaries ShrinkChips LLC, Shrink Solar LLC and Blackbox Semiconductor, Inc., (iii) the Company, we, us, or our, refer to the combined business of Shrink Parent, together with its wholly owned subsidiaries, Shrink, ShrinkChips, Shrink Solar and Blackbox, unless the context requires otherwise, (iv) Forward Split refers to the 5 for 1 forward split of the Parents stock effective as of April 8, 2010, (v) SEC are to the United States Securities and Exchange Commission, (vi) Securities Act are to Securities Act of 1933, as amended, and (vii) Exchange Act are to the Securities Exchange Act of 1934, as amended.  All references to share amounts, exercise, sale or conversion prices in this Annual Report are as adjusted to reflect post-Forward Split amounts and prices.  Business Overview  General  We are, with our subsidiaries, dedicated to commercializing biotechnology and other high technology intellectual property, know-how and related products, from universities and medium to large commercial businesses, that may be deployed as commercial products or licensing opportunities in the near (immediate to 2 years) and mid-term (2-4 years).  We have also recently undertaken a program to seek to acquire small companies (or business segments of larger companies) with developed and ready-to-go-to-market products, strong intellectual property portfolios, management and operational infrastructure.  Historically, we have primarily focused our resources in the life sciences market; however, we also have successfully acquired technologies in, for example, the semiconductor space.  With all technologies we acquire and allocate our limited resources to, our objective is to develop products and intellectual property resources in order to generate cash flow, and ultimately, value for our shareholders.  The Company has undergone, and continues to undergo, marked and sometimes volatile operational changes as we attempt to transition towards commercialization efforts and liquidate undesired assets.  Our business currently consists of four units: Cell Culturing Products; Microfluidic Systems and Kits; Special Substrates; and Internal Development and Acquisitions.  Our Cell Culturing Unit is dedicated to the commercialization of our stem cell culture platform known as StemDisc® and its related software, as well as NanoShrink® based tissue engineering substrates known for our Cell Align®.  Our Microfluidic Systems and Kits business is seeking to market a unique and patented modular microfluidic system we exclusively licensed from Corning Incorporated, as well as a version of NanoShrink® (metal enhanced fluorescence) that will enable the low cost development of two dimensional microfluidic system prototypes.  Our Special Substrates business is developing specialized versions of NanoShrink® substrates that have unique surface plasmon resonance capabilities and which may be integrated into existing market leading devices and systems.  Our Internal Development and Acquisitions Unit is actively developing technologies that are a part of a development and commercialization program, as well as engaging in due diligence on technologies and businesses we are in the process of evaluating for acquisition purposes.  The use of the word unit is not meant to imply that Shrink has four separate fully functioning organizations of personnel and facilities.  Rather the opposite is true.  The Company has extremely limited personnel resources (aside from its access to academic research facilities) and the personnel the Company does employ regularly serve the Company across all of the Companys business units.  Business Focus  The Company intends to direct its focus, and expects to continue to allocate a material portion of its meager resources, towards (1) the commercialization and development of technologies in its four business units as discussed in greater depth in this Report, and (2) making acquisitions of high technology companies and other accretive technology assets that either supplement or otherwise enhance the Companys core abilities and interests.   4    Assets; Intellectual Property and Research Agreements  Our assets include exclusive and non-exclusive patent rights, as more fully described in this Report and in our Annual Report, from agreements with third parties, as follows:  · Our exclusive License Agreement with Corning, Inc. (the Corning License Agreement) wherein the Company licensed the exclusive worldwide right to use and sublicense Cornings patent-pending Modular Microfluidic System and Method for Building Modular Microfluidic System. · Our two Sponsored Research Agreements with the University of California Regents on behalf of University of California, Irvine campus entered into in May 2010 (the Biosensing Research Agreement), and in September 2010 (the EB Research Agreement), and rights to acquire additional license rights funded by us under these agreements, (the Sponsored Research Agreements).  Our assets also included, through June 3, 2011, the exclusive License Agreement (the Chicago License Agreement) between our previously wholly-owned subsidiary BlackBox and the University of Chicago (Chicago), wherein BlackBox licensed the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (a/k/a electronic glue chemistry) for fields of use other than thermoelectric applications. We have completed the sale of our BlackBox subsidiary along with this license to BlackBox Semiconductors, Inc., a Nevada corporation (BlackBox Parent).  We also have entered into other agreements, such as our agreement with the MF3 Consortium, accessing matching funds from MF3s relationship with DARPA.  This agreement could provide us with research co-funding agreements as more fully provided below; however, it necessarily requires that the Company have investable cash to put into a research program in order to access matching funds.  Because of the limited cash we have had, making such investments has been extremely limited.  Finally, we intend to attempt to commercialize our assets through relationships with third party manufacturers we contract with.  No assurance can be made that the Company will have funds sufficient to further develop and license new technologies or to commercialize the ones we have.  We may, from time-to-time and as a result of rights granted in one or more of our (or our subsidiarys) licensing agreements, take a license to inventions (and the related license to domestic and international patent application rights) which result from a sponsored research arrangement or private (non-academic sector) license agreement.  Doing so may give Shrink the license rights, but will also trigger the payment of certain fees and various ongoing financial commitments, all of which have been negotiated and are disclosed in the license agreement as provided elsewhere in this Report.  The Company regularly reviews its licenses and patents and, as technologies or inventions have been further commercially vetted or newer competing technologies are developed by others, management may determine using its reasonable business judgment, to not continue to support the development of a technology, and may therefore abandon its licensing rights and or intellectual property rights (if not otherwise licensed) with respect to that technology, invention and the related license.  The Company may, from time to time, abandon intellectual property rights which it formerly thought would be valuable or which may still have some value but would be too expensive to maintain.  Abandonment or an outright termination of a license to a particular invention may occur more often as Shrink acquires more IP rights, and the same inventions are commercially vetted.  License or patent rights may also be abandoned based on no other reason other than limited capital or the Companys need to expend its capital on other vital needs.  To the extent the Company abandons such non-critical IP rights, the Company may not file a specific abandonment notice.  During late 2010, we terminated our research agreement with the UC Merced and the related license agreement with the UC Regents, as management felt that, given our limited funds, the costs of these agreements were cost prohibitive and were yielding unsuccessful results while viable alternative technologies were found elsewhere.  As a result, we lost any patent license rights associated with these agreements.  The Company has dissolved its Shrink Solar, LLC entity which had no revenues or assets.  In March 2011, we entered into an agreement in principle to transfer our BlackBox Semiconductor, Inc. subsidiary (the BlackBox Subsidiary) to a separate public company as the BlackBox business will require different management and commercial resources and relationships, as well as significant amounts of capital and time to commercialize products.  On June 3, 2011, we  finalized the agreement with BlackBox Semiconductor, Inc., f/k/a Visitrade, Inc., a Nevada corporation, a publicly traded company, (the BlackBox Parent), as purchaser, for the exchange of all of the shares of  BlackBox Subsidiary from the Company (the Share Exchange).  5    The material terms of the Share Exchange were:  Shrink Nanotechnologies, Inc. issued 14,000,000 shares of restricted common stock to BlackBox Parent and 100% equity interest in BlackBox Subsidiary.  In exchange, Shrink Nanotechnologies, Inc. received $12,500 cash and 27,030,000 shares of BlackBox Parent, representing approximately 19.9% of BlackBox Parents equity at the time of the transaction.  The cash received from the transaction shall be used to recover costs Shrink Nanotechnologies, Inc. invested into BlackBox Subsidiary.   Shares of BlackBox Parent will either be sold or spun off to shareholders in whole or in part pursuant to an effective registration statement, as may be determined by the board at a later date, if and when such shares become liquid.  The primary asset of the BlackBox Subsidiary includes an exclusive License Agreement (the Chicago License Agreement) with the University of Chicago, granting to BlackBox Subsidiary the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246, and provisional applications 61/214,434 and 61,264,790) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License Agreement.  Discussion of Business Strategy; Short-Term Goals  Although management constantly monitors market trends, as well as available capital and has in the past, and continues to, refine and re-prioritize the Companys goals, so as to attain commercialization as quickly as possible, the goals we will need to attain for our various businesses are currently:  (1) commercialization of existing and newer commercial versions of StemDisc®, Cell Align® and NanoShrink®products; (2) entering into a joint development agreement to commercialize the Corning microfluidic system; (3) joint development of certain materials from our Special Substrates business unit; and (4) entering into technologically accretive and synergistic acquisitions.  We acquired our assets and rights by using a business model that has inexpensively allowed us to license technologies from two primary sources: (1) university laboratories, and (2) secondary technologies from very large industrial businesses.  Traditionally and historically, university engineering labs have been used as commercial resources for venture capital organizations and other funding sources looking for high quality low cost technology.  We have also recently undertaken a program to develop commercial relationships with larger, multi-national United States-based industrial companies in order to potentially work with their technologies and products which have been abandoned or orphaned for one or a number of reasons  primarily due to a limited market opportunity or limited funding at the time of abandonment.  We are actively seeking to develop licensing agreements in this regard to provide the right to develop and market these orphaned technologies and product lines.  In addition to our licensed technologies, we may develop technologies on our own as a result of our research or joint development activities.  We also have developed a Science Advisory Board (SAB).  Through the relationships with our SAB members, we have the exclusive right to certain intellectual property rights derived from their respective work for the Company.  To date, we have not filed any applications to protect intellectual property rights derived from work provided to the Company by a member of the SAB. Nonetheless, much of the Companys scientific decision making process is guided in part by our SAB members.  We also intend to review, and as such opportunities present themselves, seek to acquire synergistic assets and businesses, although these are not within the Companys primary initial focus as management believes that initial development, manufacturing and commercialization will be most economical through joint venture or third party OEM manufacturers we contract.  The execution of our business requires sufficient amounts of cash.  The Company has found the current economic environment extremely challenging in terms of finding investors who are willing to invest cash into the Company.  The inability to raise cash gives rise to the Company considering numerous alternatives to its current business, including focusing more attention on acquiring assets and other businesses that may provide value for shareholders sooner than the current life science focus of the Company.  In any case, until the Company has sufficient cash to operate or is able to acquire assets that produce value for shareholders, the value of the company will be severely limited by these facts.   6    Sponsored Research Agreements with UCI  Sponsored Research Agreement with UC Regents (September 2010)  As of September 22, 2010, Shrink entered into the EB Research Agreement with UC Regents on behalf of the Irvine Campus.  The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010.  Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on a good faith between the two parties.  The EB Research Agreement was terminable by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.  The EB Research Agreement provided, among other things, that the Company sponsor specified research relating to the development of a complete system for culturing, imaging, and digitizing a large number of embryoid bodies (EBs) in custom-designed microfluidic devices, including developing protocols for staining and imaging EBs in 3-D.  In addition, the research involved specifying and testing a suitable hardware/software platform for collecting images in a high-throughput setting.  Regarding any inventions, discoveries or other commercially useful research products that may arise from research being conducted under the SRA, we will have a time-limited, first right to negotiate an exclusive license of such things with UCI.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the three month term of the EB Research Agreement.  To date the Company has paid $5,000, and at September 30, 2012 owes $12,598 under this agreement.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  Sponsored Research Agreement with UC Regents (May 2010)  As of May 3, 2010, Shrink Parent entered into the Sponsored Research Agreement or, the Biosensing Research Agreement, with UC Regents on behalf of UCI.  The Biosensing Research Agreement is for a term of three years or such time as the research is completed, whichever is longer. The Biosensing Research Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.  The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement.  The Biosensing Research Agreement provides that the Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA. We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.  Obligations under Biosensing Research Agreement  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement.  To date the Company has paid $20,000 to the UC Regents and owes $59,302 under this agreement.  The Company does not have any capital commitments to satisfy the required cash payments under this contract. Any funding amounts under the Biosensing Research Agreement are subject to adjustment down based on actual expenditures on the research.  Additional IP that is subject to our license rights under the UCI Biosensing SRA includes both research performed under the specified work order of the UCI Biosensing SRA, as well as discoveries developed between July 2009 and May 3, 2010 by Dr. Michelle Khine that name Dr. Khine as primary inventor, and which are not under pre-existing obligations to third parties.   7    We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.  The Biosensing Research Agreement provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the Biosensing Research Agreement (the UCI Biosensing License).  We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the License Date).  In addition, we will be required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date.  In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing License to include additional patents from time to time.  With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors.  A copy of the UCI Biosensing SRA License is included as an annex to the Biosensing Research Agreement, filed as an exhibit to our public filings, and is incorporated by reference herein.  Results of UCI Biosensing Research To Date  To date, the Biosensing Research Agreement has led to two patent applications being filed with the USPTO.  We do not have any commitments for financings or grants for this agreement and no assurance can be made that the Company will attain the funding necessary to fulfill our funding obligations under the Biosensing Research Agreement or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  License Agreement with University of Chicago - Sold  Effective June 3, 2011, following the Share Exchange with BlackBox Subsidiary the License Agreement with the University of Chicago is no longer a part of our operations and business focus.  Proceeds of Debt Financing  Private Placement of 12% Convertible Notes and Series B Warrants  During November 2010, the Company issued, $117,000 in 12% convertible notes convertible at $.10 per share (post forward split), and 585,000 Series B Common Stock Purchase Warrants, exercisable at $0.20 per share (or, Series B Warrants) for a cash purchase price of $117,000.The Notes and Series B Warrants were sold at face value for each dollar amount of Notes sold.  No placement agent compensation has been paid in this financing.  The foregoing are the material terms of the 12% note and Series B Warrant financing.  2009 Private Placement of 12% Convertible Notes and Series A Warrants;  Between November 2009 through May, 2010, the Company issued, on a private basis, $635,000 (inclusive of $100,000 reported in our Annual Report on Form 10-K, as previously filed) of 12% convertible notes initially convertible (post forward split) at $.10 per share, and 2,675,000 Series A Common Stock Purchase Warrants, exercisable at $0.20 per share (or, Series A Warrants) as part of a private financing at face value for a purchase price of $535,000.The notes are repayable one year from issuance (with some of the earliest issued notes becoming due in November 2010) and the warrants are exercisable commencing 6 months from issuance and expire 36 months from issuance.  At any time following its maturity date, the Company may induce conversion of the notes at a discounted rate at 80% of the effective conversion price. In November 2010 to January 2011, the Company note holders with total principal balances of $575,000 and accrued interest of $65,694 converted their principal and interest into 6,406,940 shares of common stock, and such notes, to the extent converted are deemed satisfied and discharged in full, with $60,000 of principal and their accrued interest remaining outstanding.   8    When combined with notes and warrants sold during late fiscal 2009 (andnot including any 14% convertible notes issued to Noctua Fund, LP) the following (andnot including any 14% convertible notes issued to Noctua Fund, LP) is a brief summary of the notes and warrants outstanding:  · $177,000 principal amount 12% convertible notes, currently convertible at $.10 per share into an aggregate of 1,777,000 shares of common stock (plus shares issuable as interest), payable one year from their respective issuance dates.  The note was converted on October 28 2011. · 3,175,000 Series A Warrants, exercisable at $.20 per share, and expiring three years from their respective issuance dates. · 585,000 Series B Warrants, exercisable at $.20 per share, and expiring three years from their respective issuance dates in 2010.  The foregoing are the material terms of the 12% note and Series A and B Warrant financing.  Other details of the same may be found below in this Annual Report.  All Noctua, BCGU, Noctua Fund LP instruments, both debt and equity, in regards to the 50% interest owned by Mark L. Baum, Esq., were acquired for value by an entity indirectly controlled by James Panther, in April 2012.  Sponsored Research Agreement with UC Regents (September 2010)  As of September 22, 2010, Shrink entered into the EB Research Agreement with UC Regents on behalf of the Irvine Campus.  The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010.  Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on a good faith between the two parties.  The EB Research Agreement was terminable by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.  The EB Research Agreement provided, among other things, that the Company sponsor specified research relating to the development of a complete system for culturing, imaging, and digitizing a large number of embryoid bodies (EBs) in custom-designed microfluidic devices, including developing protocols for staining and imaging EBs in 3-D.  In addition, the research involved specifying and testing a suitable hardware/software platform for collecting images in a high-throughput setting.  Regarding any inventions, discoveries or other commercially useful research products that may arise from research being conducted under the SRA, we will have a time-limited, first right to negotiate an exclusive license of such things with UCI.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the three month term of the EB Research Agreement.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  As of May 3, 2010, Shrink Parent entered into the Sponsored Research Agreement or, the Biosensing Research Agreement, with UC Regents on behalf of UCI.  The Biosensing Research Agreement is for a term of three years or such time as the research is completed, whichever is longer. The Biosensing Research Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.  The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement.  Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA.  The Biosensing Research Agreement provides that the Company shall sponsor the research costs up to a budget of $632,051, of which $20,000 has been paid to the UC Regents.  We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement.  Of this amount $202,796 is to be paid during the 12 month period ended April 30, 2011; $211,311 shall be paid during the 12 month period ended April 30, 2012; and the remaining $217,944 shall be paid during the 12 month period ended April 30, 2013.  The foregoing payments are to be paid in quarterly installments of 1⁄4 of the total cash fees payable during such 12 month period.  9    Additional IP that is subject to our license rights under the UCI Biosensing SRA includes both research performed under the specified work order of the UCI Biosensing SRA, as well as discoveries developed between July 2009 and May 3, 2010 by Dr. Michelle Khine that name Dr. Khine as primary inventor, and which are not under pre-existing obligations to third parties.  We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.  The UCI Biosensing SRA provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the UCI Biosensing SRA (the UCI Biosensing SRA License).  We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the License Date).  In addition, we are required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing SRA License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date.  In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing SRA License to include additional patents from time to time.  With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors.  A copy of the UCI Biosensing SRA License is included as an annex to the UCI Biosensing SRA, filed as an exhibit to our public filings, and is incorporated by reference herein.  Our research sponsorship obligations require us to provide funding (which may be from us or other third parties) totaling $632,051 during the three year term of the UCI Biosensing SRA.  Any funding amounts under the UCI Biosensing SRA are subject to adjustment down based on actual expenditures on the research.  The foregoing is a summary only of the UCI Biosensing SRA (which includes the form of UCI Biosensing SRA License annexed thereto), which is filed as an exhibit to our public filings.  To date, the UCI Biosensing SRA has led to two patent applications being filed with the USPTO.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA Agreement or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  License Agreement with University of Chicago  This agreement was in effect until June 2011 when it was sold to a related third party.  General  We are, with our subsidiaries, dedicated to commercializing biotechnology and other high technology intellectual property, know-how and related products, from universities and medium to large commercial businesses, that may be deployed as commercial products or licensing opportunities We have also recently undertaken a program to seek to acquire small companies with developed and ready-to-go-to-market products, strong intellectual property portfolios, management and operational infrastructure.  Historically, we have primarily focused our resources in the life sciences market; however, we also have successfully acquired technologies in, for example, the semiconductor space.  With all technologies we acquire and allocate resources to, our objective is to develop products and intellectual property resources in order to generate cash flow, and ultimately, value for our shareholders.  The Company has undergone, and continues to undergo, marked and sometimes volatile operational changes as we attempt to transition towards commercialization efforts and liquidate undesired assets.  Our business currently consists of four operating units: Cell Culturing Products ; Microfluidic Systems and Kits ; Special Substrates ; and Internal Development and Acquisitions .  10    Our Cell Culturing Unit is dedicated to the commercialization of our stem cell culture platform known as StemDisc® and its related software, as well as NanoShrink® based tissue engineering substrates known for our Cell Align®.  Our Microfluidic Systems and Kits business is seeking to market a unique and patented modular microfluidic system we exclusively licensed from Corning Incorporated, as well as a version of NanoShrink® (metal enhanced fluorescence) that will enable the low cost development of two dimensional microfluidic system prototypes.  Our Special Substrates business is developing specialized versions of NanoShrink® substrates that have unique surface plasmon resonance capabilities and which may be integrated into existing market leading devices and systems.  Our Internal Development and Acquisitions Unit is actively developing technologies that are a part of a development and commercialization program, as well as engaging in due diligence on technologies and businesses we are in the process of evaluating for acquisition purposes.  Our corporate mission is to become a leading high technology development company.  While we presently possess unique product and technology capabilities for the cell culture, immunoassay development, cell imaging, device prototyping and drug discovery markets, we intend to continue to create shareholder value through organic and inorganic growth.  The use of the word unit is not meant to imply that Shrink has four separate fully functioning organizations of personnel and facilities.  Rather the opposite is true.  The Company has extremely limited personnel resources (aside from its access to academic research facilities) and the personnel the Company does employ regularly serve the Company across all of the Companys business units.  The Company reports its business under the following SIC Code:  SIC Code Description 3674 Semiconductors and Related Services  Business Focus  The Company intends to direct its focus, and expects to continue to allocate a material portion of its meager resources, towards (1) the commercialization and development of technologies in its four business units as discussed in greater depth in this Report, and (2) making acquisitions of high technology companies and other accretive technology assets that either supplement or otherwise enhance the Companys core abilities and interests.  Business Strategy  Our business strategy, based on the FIGA TM model, is to use experts from critical economic segments in order to meet commercial ends.  Our strategy is to fund research in outside (typically academic) research labs, all of which we have established technology development and in some cases, licensing arrangements with.  Around our hub of mainly academic research relationships, we connect teams consisting of people with financial, related industry (physical or life sciences) and government (typically regulatory) backgrounds.  We use these teams to assess internal and external opportunities, to first determine the commercial viability of the technology, and then to create specific commercialization plans for the same technology.   Assets; Intellectual Property and Research Agreements  Our assets include certain intellectual know how, patent rights and trademarks as more fully described in this Report from agreements with third parties, as follows:  · Our exclusive License Agreement with Corning, Inc. (the Corning License Agreement) wherein the Company licensed the exclusive worldwide right to use and sublicense Cornings patent-pending Modular Microfluidic System and Method for Building Modular Microfluidic System.  Our assets also included, through June 3, 2011, the exclusive License Agreement (the Chicago License Agreement) between our previously wholly-owned subsidiary BlackBox and the University of Chicago (Chicago), wherein BlackBox licensed the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (a/k/a electronic glue chemistry) for fields of use other than thermoelectric applications. We have completed the sale of our BlackBox subsidiary along with this license to BlackBox Semiconductors, Inc., a Nevada corporation (BlackBox Parent).  This was part of the BlackBox sale and is no longer an asset as of December 31, 2012.  11    We also have entered into other agreements, such as our agreement with the MF3 Consortium, accessing matching funds from MF3s relationship with DARPA.  This agreement could provide us with research co-funding agreements as more fully provided below; however, it necessarily requires that the Company have investable cash to put into a research program in order to access matching funds.  Because of the limited cash we have had, making such investments has been extremely limited.  Finally, we intend to attempt to commercialize our assets through relationships with third party manufacturers we contract with.  No assurance can be made that the Company will have funds sufficient to further develop and license new technologies or to commercialize the ones we have.  We may, from time-to-time and as a result of rights granted in one or more of our (or our subsidiarys) licensing agreements, take a license to inventions (and the related license to domestic and international patent application rights) which result from a sponsored research arrangement or private (non-academic sector) license agreement.  Doing so may give Shrink the license rights, but will also trigger the payment of certain fees and various ongoing financial commitments, all of which have been negotiated and are disclosed in the license agreement as provided elsewhere in this Report.  The Company regularly reviews its licenses and patents and, as technologies or inventions have been further commercially vetted or newer competing technologies are developed by others, management may determine using its reasonable business judgment, to not continue to support the development of a technology, and may therefore abandon its licensing rights and or intellectual property rights (if not otherwise licensed) with respect to that technology, invention and the related license.  The Company may, from time to time, abandon intellectual property rights which it formerly thought would be valuable or which may still have some value but would be too expensive to maintain.  Abandonment or an outright termination of a license to a particular invention may occur more often as Shrink acquires more IP rights, and the same inventions are commercially vetted.  License or patent rights may also be abandoned based on no other reason other than limited capital or the Companys need to expend its capital on other vital needs.  To the extent the Company abandons such non-critical IP rights, the Company may not file a specific abandonment notice.  During late 2010, we terminated our research agreement with the UC Merced and the related license agreement with the UC Regents, as management felt that, given our limited funds, the costs of these agreements were cost prohibitive and were yielding unsuccessful results while viable alternative technologies were found elsewhere.  As a result, we lost any patent license rights associated with these agreements.  The Company has dissolved its Shrink Solar, LLC entity which had no revenues or assets.  In March 2011, we entered into an agreement in principle to transfer our BlackBox Semiconductor, Inc. subsidiary (the BlackBox Subsidiary) to a separate public company as the BlackBox business will require different management and commercial resources and relationships, as well as significant amounts of capital and time to commercialize products.  On June 3, 2011, we  finalized the agreement with BlackBox Semiconductor, Inc., f/k/a Visitrade, Inc., a Nevada corporation, a publicly traded company, (the BlackBox Parent), as purchaser, for the exchange of all of the shares of  BlackBox Subsidiary from the Company (the Share Exchange).  The material terms of the Share Exchange were:   Shrink Nanotechnologies, Inc. issued 14,000,000 shares of restricted common stock to BlackBox Parent and 100% equity interest in BlackBox Subsidiary.  In exchange, Shrink Nanotechnologies, Inc. will receive $75,000 cash payable prior to December 31, 2011, and 27,030,000 shares of BlackBox Parent, representing approximately 19.9% of BlackBox Parents equity at the time of the transaction.  The cash received from the transaction shall be used to recover costs Shrink Nanotechnologies, Inc. invested into BlackBox Subsidiary.   Shares of BlackBox Parent will either be sold or spun off to shareholders in whole or in part pursuant to an effective registration statement, as may be determined by the board at a later date, if and when such shares become liquid.  In October 2011, the Company agreed to settle the payable of $75,000 due in December 2011 from BlackBox Parent as related to the Share Exchange for immediate payment of $12,500.  This amount was paid on October 25, 2011, and there are no other amounts are due as related to this agreement and the Company.  The primary asset of the BlackBox Subsidiary includes an exclusive License Agreement (the Chicago License Agreement) with the University of Chicago, granting to BlackBox Subsidiary the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246, and provisional applications 61/214,434 and 61,264,790) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License Agreement.  12    Discussion of Business Strategy; Short Term Goals  Although management constantly monitors market trends, as well as available capital and has in the past, and continues to, refine and re-prioritize the Companys goals, so as to attain commercialization as quickly as possible, the goals we will need to attain for our various businesses are currently:  (1) commercialization of existing and newer commercial versions of StemDisc ® , Cell Align ® and NanoShrink ® products; (2) entering into a joint development agreement to commercialize the Corning microfluidic system; (3) joint development of certain materials from our Special Substrates business unit; and (4) entering into technologically accretive and synergistic acquisitions.  We acquired our assets and rights by using a business model that has inexpensively allowed us to license technologies from two primary sources: (1) university laboratories, and (2) secondary technologies from very large industrial businesses.  Traditionally and historically, university engineering labs have been used as commercial resources for venture capital organizations and other funding sources looking for high quality low cost technology.  We have also recently undertaken a program to develop commercial relationships with larger, multi-national United States-based industrial companies in order to potentially work with their technologies and products which have been abandoned or orphaned for one or a number of reasons  primarily due to a limited market opportunity or limited funding at the time of abandonment.  We are actively seeking to develop licensing agreements in this regard to provide the right to develop and market these orphaned technologies and product lines.  In addition to our licensed technologies, we may develop technologies on our own as a result of our research or joint development activities.  We also intend to review, and as such opportunities present themselves, seek to acquire synergistic assets and businesses, although these are not within the Companys primary initial focus as management believes that initial development, manufacturing and commercialization will be most economical through joint venture or third party OEM manufacturers we contract.  The execution of our business requires sufficient amounts of cash.  The Company has found the current economic environment extremely challenging in terms of finding investors who are willing to invest cash into the Company.  The inability to raise cash gives rise to the Company considering numerous alternatives to its current business, including focusing more attention on acquiring assets and other businesses that may provide value for shareholders sooner than the current life science focus of the Company.  In any case, until the Company has sufficient cash to operate or is able to acquire assets that produce value for shareholders, the value of the company will be severely limited by these facts.  Short-Term Business Goals  Although management constantly monitors market trends, as well as available capital and has in the past, and continues to, refine and re-prioritize the Company’s goals, so as to attain commercialization as quickly as possible, the goals we will need to attain for our various businesses are currently:  (1) commercialization of existing and newer versions of StemDiscTM, Cell AlignTM and NanoShrinkTM products; (2) entering into a joint development agreement to commercialize the Corning microfluidic system; (3) joint development of certain materials from our Special Substrates business unit; and (4) entering into technologically accretive and synergistic acquisitions.   Product and Technology Overview (By Business Unit)  Cell Culturing Products  StemDiscTM and Stemage Software  StemDiscTM is a cell culture platform designed to uniquely produce uniform embryiod bodies (EBs) and other spheroid tissues.  The device is made with 24-well bottomless wellplate and an embossed micro-well substrate.  This product is expected to be our first commercial product offering and we anticipate to begin commercial sales this year.  We also expect to begin the development of additional mold and wells, based on customer feedback and the success of our initial StemDiscTM product launch. StemdiscTM will be primarily marketed for use in the life sciences industry.   13    StemageTM is tradename for our proprietary software that will integrate into nearly all major manufacturer microscopy platforms and enhances the usefulness of our StemDiscTM hardware, enabling biology researchers to geo-locate, count and 2D image thousands of individual samples on a single SBS footprint well plate.  We have completed several prototypes of StemageTM and expect to deploy a trial (beta) version this year.  We hope to eventually sell premium versions of StemageTM once we establish a customer base, but also integrate the ability to perform high quality 3D imaging as well, along with additional planned features.  Cell AlignTM  Cell AlignTM is a patent-pending cell culture platform used to orient cell cultures.  The device is a surface treated substrate with non-periodic uni-axial features that have been documented to uniquely and successfully orient tissues in culture.  The productization of Cell Align (in various formats, including discs at the bottom of well plates and larger sizes of Cell Align in dishes) fits well with our abilities.  The product has the potential to offer higher margins than some of our other offerings and we believe will have a high value use for numerous applications involving cell and tissue biology.  Microfluidic Systems and Kits  Corning Incorporated  Earlier in 2011, we secured an exclusive license to a then patented pending complete microfluidic system that was developed at Corning Incorporated.  The system, which has ancillary pumping, heating and electronics systems, has numerous applications in the small but growing microfluidics market.  The most interesting aspect of the technology are the inter-connects between parts of the system (which is similar to the way “LegoTM” blocks work).  We believed then and still believe the intellectual property for the interconnects of the Corning system will drive the potential for the Corning system to perhaps establish a “standard” for the microfluidics space.  On April 5, 2011, the USPTO issued patent 7.919,062 to Corning, entitled “Modular Microfluidic System and Method for Building Modular Microfluidic Systems.  NanoShrinkTM Film Kits  NanoShrinkTM and other shrinkable plastic substrates that we are developing are used in countless industrial applications because of their flexible material properties and relative material stability.  By taking advantage of these inherent characteristics, NanoShrinkTM is being developed for the ultra-rapid direct patterning of complex, even three-dimensional, stacked polystyrene micro- and nanostructures as well as low cost optoelectronic devices.  Management believes that NanoShrinkTM and similar materials readily available at economic rates both in the US and abroad as the demand for low cost diagnostics in low resource settings increases.  What follows are some examples of technological and/or cost benefits of our shrinkable plastic-based technologies over other competing technologies.  · Quicker Manufacturing.  Developing intricate micro patterns into substrates of silicon, glass, or quartz requires large investments in capital equipment, manufacturing clean rooms, and costly consumables.  The soft lithography processes which we use, we believe, can accelerate microfluidic chip fabrication from weeks or months (using standard silicon technology) to typically less than 2 days.   · Better Material Characteristics.  We believe that our shrinkable technology using NanoShrink is advantageous over other substrates such as silicon because of its desirable flow characteristics in microfluidic applications.  Microfluidic devices typically require dimensions in the 100 μ m range, whereas we are able to achieve resolutions near 70 μ m in width and operate well within the requirements and capabilities of current lithography techniques.  PDMS is a standard material used to create 2 dimensional microfluidic systems.  However, many hydrophobic molecules absorb easily into the porous PDMS matrix of competing technologies, potentially affecting results which have intolerable in many applications.  So far, testing indicates that NanoShrinkTM is not as easily impacted by solvents or environmental factors such as extreme heat, cold or physical impact.  For this reason as well as the other reasons relating to ease and economics in manufacture, we believe that shrinkable plastic materials (such as NanoShrinkTM ) may be an ideal material for products such as cell-culture dishes and plates used in drug discovery.  We believe that this is one property that links industry adoption of PDMS for applications in drug discovery and other sensitive assays.  14    · Design and Manufacturing Efficiencies; Three Dimensional Structures.  Traditional photolithography creates planar or 2-dimensional structures.  Rounded and/or multi-height features are therefore difficult to create and require additional processing steps.  To achieve multi-heights, several masks and high precision alignment are required.  Our processes, we believe, creates inherently rounded features, and multi-heights are easily achievable.  Additionally, because of the unique characteristics of our shrinkable plastic technologies, design and fabrication can occur sequentially, with immediate results allowing for quick turn-around prototype testing.  We believe that we now have developed significant proprietary know-how with respect NanoShrinkTM and the kits we intend to offer for sale.  We have however built numerous systems of various materials along with special tools (e.g. an oven, as well as trays and presses) which we intend to launch in the next year, depending on the results of ongoing performance reviews.  The systems we have built also appear to work with inks and metals, which will potentially open the uses for the material and tools well beyond the life science business.  Special Substrates  Assays and Special Substrates  We have created a number of dynamic Low Precision NanoShrinkTM shrink film product categories.  There are two main types of products we are working on:  Uni-Axial (left below, as in the case of Cell Align) and Bi-Axial Films (right below).  Some are metalized and others are not.  We also have additional treatments and surface enhancements for films that broaden the applications of the materials we research and make.  Our non-metalized surface enhancements are, we believe, those most likely to result in a commercial application, although we continue to conduct research on these materials.    15    Petal Based NanoShrink TM and Special Substrates  We believe that through continued research and development, these substrates may act as an “enhancement material” to enable immunoassays to produce higher quality results.  This is a large market potential application.  We have conducted initial studies with one large immunoassay business using our materials.  We did a head-to-head study, testing one of their leading immunoassays against the same test which used one of our metalized shrink film substrates.  Our testing showed that our methodologies enables us to reduce the noise of the subject immunoassay, even when a very aggressive dye candidate was utilized.  Although this work did not ultimately yield a commercial relationship or license, we did yield good enough results to continue our work in this area.  Additionally, today, we have materials that work much better than those we used in the study.  Also, the subject project, while successful, was done under non-optimal conditions and was being performed by students primarily in Dr. Khines lab. We believe it makes sense to put together a more controlled and reliable study of the material under more optimal real world conditions.  We plan to continue to pursue this project with additional resources (both third party and our own) when the time is right.   Internal Development; Acquisitions (and Divestitures)  Ultra Hydrophobic Surface Treatments  We are working with a large multi-national corporation under a material transfer agreement to provide them with low haze ultra hydrophobic materials.  There are numerous large market applications for these materials.  We have supplied our initial quantities of these materials and are presently awaiting feedback.  Lydalls Solupore®  In May 2010, we signed a development agreement with Lydall to use their Solupore material in one of a number of strategic ways.  Reproductive Sciences Project  We have an exclusive option to license patent pending IP which is owned by Dr. Elliot Botvinick, a professor at UCI, Dr. Michelle Khine and Mark L. Baum, our former founder and CEO.  The project relates to the idea of commercializing the racing of, in microfluidic devices, various motile biological agents.  There is an advertising and gaming business model associated with the IP.  Recently we hired a part time consultant to provide us with a proof of concept video demonstration of what would be the worlds first controlled race between a single species or multiple species in a sub-millimeter channel track (i.e. a microfluidic track).  Acquisitions  We executed a binding letter of intent with Nanopoint, Inc., a Hawaii-based life sciences instrumentation business.  This event was reported in a Form 8-K filed with the SEC on April 12, 2011.  The pending transaction was terminated prior to completion.  Technology and Intellectual Property  We develop intellectual property (IP) internally, and our objective is to acquire IP through sponsored research agreements and related licensing agreements and through stand-alone licensing agreements.  A description of all of our material agreements and related technologies, applications and cost estimates is provided below along with a list of patents and other intellectual property owned by or licensed to us.  Additionally, we have filed applications with the USPTO, and as a result of our research and experience, we possess significant proprietary know-how outside of the technologies that we licensed, as it relates to using shrinkable films in the manner in which we seek to design and build products for the life sciences.  Product Commercialization and Marketing  We intend to increase our focus on commercialization by, in part, inorganically acquiring distribution for our products (i.e. acquiring synergistic businesses with established distribution channels).  In each business unit, presuming adequate funding and that no unusual impediments are incurred, we do not foresee any limitation on our ability to continue to design and eventually market the related products for our businesses.  16    Sponsored Research Agreements with UCI  Sponsored Research Agreement with UC Regents (September 2010)  As of September 22, 2010, Shrink entered into the EB Research Agreement with UC Regents on behalf of the Irvine Campus.  The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010.  Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on a good faith between the two parties.  The EB Research Agreement was terminable by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.  The EB Research Agreement provided, among other things, that the Company sponsor specified research relating to the development of a complete system for culturing, imaging, and digitizing a large number of embryoid bodies (EBs) in custom-designed microfluidic devices, including developing protocols for staining and imaging EBs in 3-D.  In addition, the research involved specifying and testing a suitable hardware/software platform for collecting images in a high-throughput setting.  Regarding any inventions, discoveries or other commercially useful research products that may arise from research being conducted under the SRA, we will have a time-limited, first right to negotiate an exclusive license of such things with UCI.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the three month term of the EB Research Agreement.   To date the Company has paid $5,000, and at December 31, 2012 owes $12,598 under this agreement.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  The Company has discontinued research in regards to this agreement.  Sponsored Research Agreement with UC Regents (May 2010)  As of May 3, 2010, Shrink Parent entered into the Sponsored Research Agreement or, the Biosensing Research Agreement, with UC Regents on behalf of UCI.  The Biosensing Research Agreement is for a term of three years or such time as the research is completed, whichever is longer. The Biosensing Research Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.  The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement.  Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA. We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.  The Company has discontinued research in regards to this agreement.  Obligations under Biosensing Research Agreement  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement.  To date the Company has paid $20,000 to the UC Regents and owes $59,302 under this agreement.  The Company does not have any capital commitments to satisfy the required cash payments under this contract. Any funding amounts under the Biosensing Research Agreement are subject to adjustment down based on actual expenditures on the research.  Additional IP that is subject to our license rights under the UCI Biosensing SRA includes both research performed under the specified work order of the UCI Biosensing SRA, as well as discoveries developed between July 2009 and May 3, 2010 by Dr. Michelle Khine that name Dr. Khine as primary inventor, and which are not under pre-existing obligations to third parties.  We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.  17    The Biosensing Research Agreement provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the Biosensing Research Agreement (the UCI Biosensing License).  We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the License Date).  In addition, we will be required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date.  In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing License to include additional patents from time to time.  With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors.  A copy of the UCI Biosensing SRA License is included as an annex to the Biosensing Research Agreement, filed as an exhibit to our public filings, and is incorporated by reference herein.  The Company has discontinued research in regards to this agreement.  License Agreement with University of Chicago - Sold  Effective June 3, 2011, following the Share Exchange involving our BlackBox Subsidiary the License Agreement with the University of Chicago is no longer a part of our operations and business focus.  Agreements Terminated in 2010  During 2010 the Company terminated certain agreements for economic reasons and because alternative resources were available. These terminated agreements include:   Our original microfluidics research agreement with the University of California, Merced, originally entered into in May 2009, and the underlying Exclusive License Agreement with the UC Regents, Merced, for Processes for Microfluidic Fabrication and Other Inventions.  We no longer rely on these patents or intellectual property rights.  Nonetheless, the Company still owns and maintains its rights to the ShrinkChip® related trademarks, which were not part of the terminated agreement. The Company will not be refunded its initial research and license fees paid (amounting to $90,985 and 495,500 shares issued to date), and the Company has certain additional further material liabilities under this agreement relating to patent filing legal prosecution costs or development fees of up to $234,000, which are subject to dispute.  In addition, the Company is required to cover certain legal patent costs during the 90- day period after termination.  Because the Company no longer is focusing on its solar segment, the Company also terminated its Strategic Marketing and Development Agreement (the Marketing Agreement) with Inabata America Corporation.  This agreement provided for the appointment of Inabata as the Companys non-exclusive representative for the purposes of marketing and promoting the Companys solar concentrator technology and ShrinkChipTM RPS solar products to third parties (the “ Solar Products ” ).   Trademarks  We hold a number of trademarks and service marks and have been using most since late 2008 to early 2009.  These marks have also been filed with the USPTO and include the following:  TrademarkShrink TrademarksDate Filing or Issue77/822182StemDiscTM9/8/200977/822211Cell AlignTM9/8/200977/822232MetalfluorTM9/8/200977/822176ShrinkchipTM9/8/200977/853822NanoshrinkTM10/21/200977/822153ShrinkTM9/8/2009Reg. No. 3866464Shrink®10/26/2010  Our Patent Filing Policy  We are required by the Corning License Agreement and the Chicago License Agreement to pay the costs of obtaining patents, and the Companys board of directors along with the Shrink Scientific Advisory Board, intend to regularly reassess the technologies and applications we have, develop, or acquire an interest in, to determine, in good faith, whether the benefits of obtaining a patent outweigh the costs of obtaining it and the resulting public disclosure of our processes, technologies or proprietary technologies.  18    In June 2011, in the disposition of Blackbox, the patents related to the Chicago License Agreement were maintained by Blackbox post-disposition.  No assurance can be made that the Company will be able to assess the patent-worthiness of all its products, or, if a patent is desirable, that the Company will have sufficient funds or wherewithal to secure or prosecute its intellectual property rights.  Research and Development Priorities and Expenditures  We estimated that Shrink has invested approximately $____ and $109,739 into its technologies in 2012 and 2011, respectively, primarily from government and university grants and direct investments by Shrink using cash on hand, and $122,416 into its technologies in 2009, most of which has stemmed from payments from Shrink through UC Merced and UC Irvine or, to a limited extent, California Institute for Regenerative Medicine (CIRM). (See Item 7.  Managements Discussion and Analysis of Financial Condition and Results of Operations below).  In determining our allocation of resources, we assess which fields we believe are closer to commercial development and which we believe hold greater financial and strategic potential for us.  Our goal is to penetrate those areas that we are most prepared to commercialize and that have the fewest relative barriers to market acceptance.  In order to best describe the fields and the relative priority of each to us at this time, what follows is a summary of applications currently being pursued in order of currently intended priority.  In June 2010, we became a part of the MF3 Consortium.  Formed in 2006, the MF3 Center brings together 20 leading micro-and nano-fluidics professors from 12 universities nationwide to advance the basic science and applications of a field seen as key to creating a vast array of new technologies. With scientists representing the disciplines of biomedical engineering, mechanical engineering, electrical engineering, and chemistry, MF3 research is expected to apply to many areas including health care, electronics, and environmental and food monitoring. MF3 is funded by the Defense Advanced Research Projects Agency (DARPA) and the Centers industrial members. MF3 is a spin-off of activities ongoing at the Integrated Nanosystems Research Facility, an interdisciplinary research laboratory at the Henry Samueli School of Engineering at UC Irvine.   As a result of our membership in MF3, we qualify to have every dollar we invest in research through a MF3 member professor, matched by 50%.  This means that when we spend $20,000 through our SRA with Dr. Michelle Khine, we receive an additional $10,000 in our account for the subject project.  Agreements Terminated in 2010  University of California at Merced  In December 2010, due to high costs and poor results, we terminated our research agreement (signed in May 2009) with the University of California, Merced (UC Merced) and our Exclusive License Agreement with the UC Regents relating to microfluidics (the UC Regents Microfluidics Agreement).  As a result we abandoned IP rights owned by the UC Regents associated with these agreements.  Our Exclusive License Agreement with the UC Regents; Exclusive Patent Licenses (Terminated)  On April 29, 2009 and pursuant to the terms of the Research Agreement, Shrink and the UC Regents entered into an Exclusive License Agreement for Processes for Microfluidic Fabrication and Other Inventions.  The UC Regents Microfluidics Agreement was terminated in December 2010.  Shrink no longer relies on any patents or other intellectual property rights licensed under the UC Regents Microfluidics Agreement. Nonetheless, the Company still owns and maintains its rights to the ShrinkChipTM related trademarks, which were not part of the terminated UC Regents Microfluidics Agreement. The Company will not be refunded its initial research and license fees paid (amounting to $90,985 and 495,500 shares issued to date), and the Company has certain additional further material liabilities under this agreement relating to patent filing legal prosecution costs or development fees of up to $234,000, which are subject to dispute.  In addition, the Company is required to cover certain legal patent costs during the 90- day period after termination.   19    Inabata America Corporation  In September 2009, we entered into a Strategic Marketing and Development Agreement (the Marketing Agreement) with Inabata America Corporation (Inabata), a subsidiary of Inabata & Co. Ltd., which provides for the appointment of Inabata as the Companys non-exclusive representative for the purposes of marketing and promoting the Companys solar concentrator technology and ShrinkChipTM RPS solar products to third parties (the “Solar Products” ).  Because we ceased our work in the solar energy space, the agreement with Inabata is no longer relevant to our operational focus.  Employees  We currently have no employees and resort to management and subcontractors for all services.  During 2012, there were no full time employees.  We hire independent contractor labor for executive management, legal, accounting and other administrative functions, on an as needed basis and have entered into consulting arrangements with certain directors and advisory board members in exchange for stock or derivative securities. We have not entered into a collective bargaining agreement with any union.  Competition  There are numerous competitors in every space/market we seek to exploit, with the strongest competitors in the life sciences industry boasting large market capitalizations and liquidity, as well as scientific and marketing resources and recognition.  While competing technologies and companies exist for all of our products, we believe that we have certain opportunities that we can exploit which may increase our opportunity to be successful in the markets we seek to exploit.  However, even if our technologies are successful, no assurance can be made that we will be able to compete effectively and yield significant or sustained value for our shareholders.  We continue to require access to capital, tested IP and bright and motivated people, the lack of which remain impediments to our success.    Government Regulation  Shrink is a research and development business and to date, has not commercialized or sold any products using its technologies.  Therefore, the Company cannot be certain exactly which governmental regulations will ultimately be applicable to the final products.  However, certain of our products and manufacturing processes will be subject to regulation under various portions of the U.S. Federal Food, Drug and Cosmetic Act, if we consider expanding our applications for use in or as part of certain medical devices or in vitro diagnostic devices. The effects of this are that, among other things, our manufacturing facilities, when and if created, may be subject to delays on approval, and periodic inspection by the U.S. Food and Drug Administration, or FDA, other product-oriented federal agencies and various state and local authorities in the U.S. for compliance with the requirements of the FDAs Quality System Regulation (formerly known as Good Manufacturing Practices), other federal, state and local regulations and other quality standards such as ISO 9001 or ISO 13485.  To the extent our products are used in medical devices or other regulated applications, our products may be subject to extensive medical, FDA or other government regulation, testing and pre-market approval or clearance processes.  Prior to application for approval or clearance, we may need to conduct clinical trials to test the safety and efficacy of our products or we may be required to identify predicate devices to which we can establish substantial equivalence.  In addition, we may be required to satisfy testing criterion or submit product applications in other countries where we intend to market our goods.  These processes may take an extensive period of time and would necessarily require significant capital outlays, which we have no commitments for at this time.  We do not use and we anticipate that we will not utilize, manufacture or operate with substances deemed controlled under the Controlled Substances Act, administered by the Drug Enforcement Agency, or DEA, and therefore, no special procedures need be in place.  Because we do not actually do any material amount of testing, but rather, the manufacturing of devices that will be used as tools, we do not employ Centers for Disease Control/National Institutes of Health, Guidelines for Research Involving Recombinant DNA Molecules, Biosafety in Microbiological and Biomedical Laboratories, but, if and as our operations expand, may be required to do so in the future.  20    We are subject to federal, state, and local laws and regulations regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, in those jurisdictions where we operate or maintain facilities.  Our operations to date have only been R&D and within universities in the State of California.  Therefore, we do not believe that any liability arising under, or compliance with, these laws and regulations will have a material effect on our business, and no material capital expenditures are expected for environmental control.  Environmental Laws  To date, we have not encountered any costs related to compliance with environmental laws.  Corporate History and Structure  General  We were incorporated in the state of Delaware on January 15, 2002 as Jupiter Processing, Inc.  On January 13, 2005, the Company changed its name to Audiostocks, Inc.  On May 14, 2009, the Parent company changed its name to Shrink Nanotechnologies, Inc. in anticipation of its acquisition of Shrink Technologies, Inc.  On May 29, 2009, the Company entered into and completed a share exchange agreement with the former principals of Shrink Technologies, Inc., for the acquisition of Shrink.  The exchange of shares with Shrinks owner was accounted for as a reverse acquisition under the purchase method of accounting with the business of Shrink Technologies, Inc. as the surviving company for accounting and financial reporting purposes.  As of December 31, 2012, Shrink determined that all future economic benefit will be derived from operations that existed as of that date, and all prior operating assets were fully impaired.  Below is a chart of our organizational structure:  The Company has negotiated a spin off transaction to sell our BlackBox business and retain approximately 20% of the equity in the post-spin-out business (pre dilution).  Our common stock is quoted on the OTC Market under the symbol INKN.  Our principal operational offices are located at 7020 Belcrest Drive, Plano, Texas 75024.  Our principal corporate contact is Norman Meier and may be reached at 760-5762-7119.     ITEM 1A.   RISK FACTORS  We have not yet commercialized products from our technologies and therefore have not attained revenues from them.  The nature of our business activities subjects us to certain hazards and risks and uncertainties.  We are a research and development stage company that will need substantial additional capital and development to be able to commercialize and gain market acceptance for our innovative products.  You should carefully consider the risk factors and all of the other information included in, or incorporated by reference into, this Report or any supplement, including those included in our most recent Reports or documents provided as exhibits to this Report or other Reports as may be incorporated from time to time.  An investment in our Common Stock involves a high degree of risk and should be made by those who are willing to and who can afford to lose their entire investment.  Our independent accounting firm and our board of directors, given the present resources and condition of the company agree that our internal controls are ineffective and that we may not be able to continue as a going concern.  We are taking steps to correct our internal controls and are also moving to improve the financial condition of the company.   21    General Risks:  We may not be able to continue operations as a going concern and we need substantial additional capital to continue our research and development activities and begin commercialization plans.  Research and Development costs of Shrink have been completely paid for to date by the UC Regents, and to a lesser extent, CIRM and our two of our founders, Baum and Panther, and we do not have any capital commitments at this time.  Our independent auditors have expressed doubt about ability to continue as a going concern.  Shrink is, for all material purposes, currently a research and development company only.  We do not have grant or capital commitments at this time and previous Shrink research has been funded by the UC Regents and CIRM.  We have no further commitments for grants and grant funds cannot, generally, be used towards commercialization and manufacturing efforts.  Accordingly, we will be dependent on obtaining additional external sources of capital in order to fund its operations or even continue as a going concern.  A future capital raise could involve a private or public sales of equity securities or the incurrence of additional indebtedness. Additional funding may not be available on favorable terms, or at all.  If we borrow additional funds, we likely will be obligated to make periodic interest or other debt service payments and may be subject to additional restrictive covenants. If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our growth strategy by reducing or delaying capital expenditures, selling assets or downsizing or restructuring our operations.  If we raise additional funds through public or private sales of equity securities, the sales may be at prices below the market price of our stock, and our shareholders may suffer significant dilution as a result of such sale.  You will suffer immediate and subsequent dilution; and the costs of the securities you purchase may significantly exceed the price paid by current principal shareholders.  The Company has several convertible notes which are primarily controlled by affiliated entities of James B. Panther.  The cost basis is less than the open market.  Some of our debt is in default and could result in us losing some or all of our assets.  The default status with respect to the notes owned by Noctua Fund LP, an affiliate of certain management, provides them with the right to take potentially aggressive actions, including levying on some or all of our assets, in order to recover monies owed.  This default could result in an action against us, including, one for enforcement of their rights by levying our assets.  The existence of a default also hinders our ability to raise additional capital or enter into long term contractual commitments.  Our Shrink subsidiary is a research and development startup company and has not generated any operating revenues and may never achieve profitability, and we have yet to commercialize its inventions.  Shrink is a risky and unproven development stage company and, to date, has not generated any revenues from sales.  We cannot assure you that we will generate revenues or that we can achieve or sustain profitability in the future.  Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable.  Revenues and profits, if any, will depend upon various factors, including whether our product development can be completed, and if we can achieve market acceptance.  We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us. Preferred Stockholders maintain controlling interest of our stock; the existence of these derivative securities, may adversely affect your stock price and our ability to raise capital or into business ventures and transactions.  Currently, twenty million shares (20,000,000) of Series A Preferred Stock are issued and outstanding and held by a principal shareholder or their affiliates, namely Mr. Panther.  These shares are all convertible and contain other restrictive covenants.  As a result, over 90% of our voting control is vested in one beneficial owner.  Moreover, as shares of preferred stock are converted and sold, such sales are likely to have a highly dilutive effect on our stock price.  Additionally, the existence of our outstanding preferred stock may hinder our ability to raise capital at favorable prices if and as needed, or to make acquisitions.  22    Our principal stockholders have the ability to exert significant control in matters requiring stockholder vote and could delay, deter or prevent a change in control of our company.  Since our stock ownership is concentrated among a limited number of holders, those holders have significant influence over all actions requiring stockholder approval, including the election of our board of directors.  Through their concentration of voting power, they could delay, deter or prevent a change in control of our company or other business combinations that might otherwise be beneficial to our other stockholders.  In deciding how to vote on such matters, they may be influenced by interests that conflict with other stockholders. Accordingly, investors should not invest in the Companys securities without being willing to entrust the Companys business decisions to such persons.  As a result, the forgoing and of our Series A Preferred Stock, members of management will be able to:  · control the composition of our board of directors; control our management and policies;  · determine the outcome of significant corporate transactions, including changes in control that may be beneficial to stockholders; and  · act in each of their own interests, which may conflict with, or be different from, the interests of each other or the interests of the other stockholders.  Conflicts of interest between the stockholders and our company or our directors could arise because we do not comply with the listing standards of any exchange with regard to director independence.  There are a variety of conflicts of interests and related party transactions with members of management, which control the vast majority of our shares and our board.  We are not listed on a stock exchange and our Board of Directors does not comply with the independence and committee requirements which would be imposed upon us if we were listed on an exchange.  In the absence of a majority of independent directors, our directors could establish policies and enter into transactions without independent review and approval. This could present the potential for a conflict of interest between the stockholders and our company or our directors.  We have a significant amount of preferred stock, convertible debt and warrants outstanding.  If we issue additional shares or derivative securities as we raise capital, the notes are converted or the warrants are exercised, you will suffer immediate and substantial dilution to your common stock.  The bylaws allow the board to issue common shares without stockholder approval.  Currently, the board is authorized to issue a total of 475,000,000 common shares, of which 47% have been issued or reserved for issuance as of April 2012.  In addition, the board is authorized to issue up to 25,000,000 preferred shares of which 20,000,000 are already designated and issue and an addition 5,000,000 blank check preferred may be issued.  Currently, 224,746,249 shares of common stock are issued and outstanding and, the following shares are issuable underlying outstanding securities:  · 20,000,000 shares issuable upon conversion of Series A Preferred Stock, owned primarily by Panther and convertible on a one-for-one basis.  On April 5, 2012, this debt instrument was acquired by an entity indirectly controlled by Panther.  · 1,770,000 shares of common stock issuable upon conversion of $177,000 principal amount of unsecured one year 12% convertible notes, convertible at $.10 per share, in addition to shares that may be issued in respect of interest payments which notes became due commencing February 2011.  The note was converted on October 28, 2011.  · 3,175,000 shares issuable upon exercise of Series A Common Stock Purchase Warrants issued between November 2009 and May 2010, at $.20 per share.  · 585,000 shares issuable upon exercise of Series B Common Stock Purchase Warrants issued in November 2010, at $.20 per share.  · 20,890,196 shares issuable upon conversion of convertible notes with principal amounts totaling $973,121, issued to Noctua Fund, LP and BCGU, LLC, affiliates of Panther.  These notes are in default and accrue interest 18%.  Accrued interest on these notes at April 30, 2012 was $122,212.  On April 5, 2012, all of the convertible debts owned by Noctua and BCGU, LLC were acquired by a single entity indirectly controlled by Panther.   23    Sales of a substantial number of shares of our common stock in the public market could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.  In addition, it is not likely that we will be able to raise convertible debt or equity financing without issuing shares at or below market rates, which would cause further dilution to shareholders.  Our board of directors has the authority, without the consent of any of the stockholders, to cause us to issue more shares or our common stock and shares of our preferred stock at such prices and on such terms and conditions as are determined by the Board in our sole discretion.  Moreover, cashless exercise provisions in warrants may have an additional adverse effect on the Company in that we would be required to reflect the value of such warrants as a potential liability to the Company.  No assurance can be made, therefore, that we will be able to raise capital, or, if we do, that the same will not have a material adverse effect on our capitalization or to our balance sheet.  If additional funds are raised through the issuance of equity securities, the percentage of equity ownership of the existing stockholders will be reduced. The issuance of additional shares of capital stock by us would materially dilute the stockholders ownership in us.  Presently, we have under-qualified management operating the company.  The present management team is not experienced enough and sufficient in number to realize the potential of Shrink, especially with respect to developing commercial diagnostic device products and other technologies we are developing and may seek to market.  It is very likely that more qualified managers, with significantly more experience in the businesses we seek to engage in, will need to be hired.  The sooner we can hire these people the better.  These persons will likely require substantial salaries and compensation packages that the Company cannot presently afford.  Additionally, there may be substantial fees associated with recruiting new additional or replacement managers.  To the extent that we are unable to ultimately bring managers into the Company who are more qualified than our present team, the Company and its shareholders will be negatively impacted.  Risks Relating to an Investment in Our Securities:  Anti-takeover provisions in our organizational documents and Delaware law may limit the ability of our stockholders to control our policies and effect a change of control of our company and may prevent attempts by our stockholders to replace or remove our current management, which may not be in your best interests.  There are provisions in our certificate of incorporation and bylaws that may discourage a third party from making a proposal to acquire us, even if some of our stockholders might consider the proposal to be in their best interests, and may prevent attempts by our stockholders to replace or remove our current management.  Currently, we have 20 million shares of Series A Preferred Stock outstanding (post Forward Split), all of which contain significant anti-takeover and change of control deterrents.  Additionally, our certificate of incorporation authorizes our board of directors to designate any special priority or preference or other rights of, and issue up to 5,000,000 additional shares of blank check preferred stock without stockholder approval and to establish the preferences and rights of any preferred stock issued, which would allow the board to issue one or more classes or series of preferred stock that could discourage or delay a tender offer or change in control.  Our bylaws require advance written notice of stockholder proposals and director nominations. Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which, in general, imposes restrictions upon acquirers of 15% or more of our stock. Finally, the board of directors may in the future adopt other protective measures, such as a stockholder rights plan, which could delay, deter or prevent a change of control.  Compliance with Sarbanes-Oxley could be time consuming and costly, which could cause our independent registered public accounting firm to conclude that our internal control over financial reporting is not effective.  As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting.  24    During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404. Testing and maintaining internal controls can divert our managements attention from other matters that are important to our business. We also expect the new regulations to increase our legal and financial compliance cost, make it more difficult to attract and retain qualified officers and members of our Board of Directors (particularly to serve on an audit committee) and make some activities more difficult, time consuming and costly.  We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404.   If we conclude that our internal control over financial reporting is not effective, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations since there is presently no precedent available by which to measure compliance adequacy.  If we are unable to conclude that we have effective internal control over financial reporting then we may not be able to raise capital from certain sources, or list on exchanges or the NASDAQ and investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.  In addition, we may not be able to complete our audits or financial statements in a timely fashion resulting in trading stoppages or delistings from the OTC bulletin Board system, if we are able to re-list.  If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.  It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures. Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. In addition, if we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant certifications required by such act, which may preclude us from keeping our filings with the SEC current and may adversely affect any market for, and the liquidity of, our common stock.  Lack of economic review may interfere with investors ability to fully assess merits and risks associated with purchase of our stock.  The procurement by prospective investors of an independent review of the investments merits of a proposed subscription for our stock would be costly and can normally be conducted only by those prospective investors whose subscriptions will be of sufficient magnitude that they, either alone or by a pooling of their resources with those of other prospective investors, could afford the expense of such independent analysis, including the retaining of independent consultants. Such a review might or might not prove favorable. Accordingly, subscription to the stock is suitable only for such proposed investors willing and able to accept the risks created by a failure to conduct an independent analysis of this investment.  We do not anticipate paying cash dividends, which could reduce the value of your stock.  We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. Even if we do attain revenues and become profitable, we intend on reinvesting profits, if any.  The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as our board of directors may consider relevant.  Our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.  There is limited historical information available for investors to evaluate our performance or a potential investment in our shares.  We are a development stage company with little historical information available to help prospective investors evaluate our performance or an investment in our shares, and our historical financial statements are not necessarily a meaningful guide for evaluating our future performance because we have not begun to manufacture and market our products.   25    Our common stock does not trade in a mature market and therefore has limited liquidity.  Our common stock trades on the over-the-counter market.  The average daily trading volume and prices of our common stock on the over-the-counter market has not been consistent. Our daily volume remains limited with fewer market makers and there is no assurance that increased volume, if any occurs, will continue. Holders of the our common stock may not be able to liquidate their investments in a short time period or at the market prices that currently exist at the time a holder decides to sell.  Because of this limited liquidity, it is unlikely that shares of our common stock will be accepted by lenders as collateral for loans.  Public company compliance may make it more difficult for us to attract and retain officers and directors.  The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.   The Companys shareholders may face significant regulatory restrictions relating to the sale of their stock, as a result of penny stock and similar rules.  The Companys stock differs from many stocks in that it is a penny stock. The Commission has adopted a number of rules to regulate penny stocks including, but not limited to, those rules from the Securities Act as follows:  · 3a51-1 which defines penny stock as, generally speaking, those securities which are not listed on either NASDAQ or a national securities exchange and are priced under $5, excluding securities of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years, greater than $5 million if in operation less than three years, or average revenue of at least $6 million for the last three years; · 15g-1 which outlines transactions by broker/dealers which are exempt from 15g-2 through 15g-6 as those whose commissions from traders are lower than 5% total commissions; · 15g-2 which details that brokers must disclose risks of penny stock on Schedule 15G; · 15g-3 which details that broker/dealers must disclose quotes and other information relating to the penny stock market; · 15g-4 which explains that compensation of broker/dealers must be disclosed; · 15g-5 which explains that compensation of persons associated in connection with penny stock sales must be disclosed; · 15g-6 which outlines that broker/dealers must send out monthly account statements; and · 15g-9 which defines sales practice requirements.  Since the Companys securities constitute a penny stock within the meaning of the rules, the rules would apply to us and our securities. Because these rules provide regulatory burdens upon broker-dealers, they may affect the ability of shareholders to sell their securities in any market that may develop; the rules themselves may limit the market for penny stocks. Additionally, the market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. Shareholders should be aware that, according to Commission Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered from patterns of fraud and abuse. These patterns include:  · control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; · manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; · boiler room practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; · excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and · the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.   26    Risks Related To Our Operations:  Our technologies are unproven and new. No assurance can be made that our technologies will work as anticipated, or, even if they do work, will be commercially accepted.  We are a primarily R&D company with a newly developing and novel manufacturing technology.  We do not have agreements with purchasers yet and no assurance can be made that we will be able to make our technology viable.  Even if we are able to continue to fund our research and development and make our technologies viable, no assurance can be made that our chips will attain market acceptance in light of the larger, more established competitors in the life sciences industry.  If we are unable to raise sufficient capital or commercialize our unproven products, our stock price will decline and you will be adversely affected.  We may suffer the loss of key personnel or may be unable to attract and retain qualified personnel to maintain and expand our business.  Our success is highly dependent on the services of a limited number of skilled scientists. We also depend on the insight and backgrounds of members of our Scientific Advisory Board. As of December 31, 2012, we have no scientists on staff.  In addition, our success will depend upon, among other factors, our ability to attract, retain and motivate qualified research and development, engineering and operating personnel, generally and during periods of rapid growth, especially in those areas of our businesses focused on new products and advanced manufacturing processes. There can be no assurance that we will be able to retain existing employees or to attract and retain additional personnel on acceptable terms.  The competition for qualified personnel in industrial, academic and nonprofit research sectors is significant.   The loss of the services of any of our key research and development, engineering or operational personnel or senior management without adequate replacement, or the inability to attract new qualified personnel, would have a material adverse effect on our operations.  Some of the processes we require in order to commercialize our products are in short supply which may delay commercialization and hinder our development of products.  As an example, we use a manufacturing process called hot embossing.  The machines that do commercial scale hot embossing are in short supply and are very expensive.  Therefore, we rely on third party contractors in order to assist us with prototype commercial scale production and will also perhaps rely on these same parties for larger scale production, assuming there is market acceptance.  The costs of using these parties may significantly reduce our profit margins, and to the extent we decide to purchase our own equipment to build a manufacturing line, such an effort will not only take time, but will also amount to a significant risk of capital to the Company given our limited resources.  Significant existing or additional governmental regulation could subject us to unanticipated delays and costs, which would adversely affect our revenues.  Our products are still in the development stage.  However certain products which we may produce may be subject to government regulation depending upon their ultimate use. The successful implementation of our business strategy depends in part on our ability to get our products into the market as quickly as possible. Additional laws and regulations, or changes to existing laws and regulations, applicable to our business may be enacted or promulgated and the interpretation, application or enforcement of existing laws and regulations may change. We cannot predict the nature of any future laws, regulations, interpretations, applications or enforcements, or the specific effects any of these might have on our business. Any future laws, regulations, interpretations, applications, or enforcements could delay or prevent regulatory approval or clearance of our products and our ability to market our products. Moreover, if we do not comply with existing or future laws or regulations, we could be subject to the following types of enforcement actions by the FDA and other agencies:  · Fines; · Injunctions; · Civil penalties; · Recalls or seizures of our products; · Total or partial suspension of the production of our products; · Withdrawal of existing approvals or premarket clearances of our products; · Refusal to approve or clear new applications or notices relating to our products; · Recommendations by the FDA that we not be allowed to enter into government contracts; and · Criminal prosecution.  27    We rely, in part, on the UC Regents to file and secure our patents.  In addition to the option agreement with the UC Regents, Shrink has entered into a research and development agreement with UC Irvine in order to fund certain research.  The agreement provides Shrink with an exclusive first opportunity to negotiate to license any technology that flows (derivative IP).  Should any intellectual property flow from this research and development agreement and Shrink elects to exercise such rights, it will be required to make annual payments to the UC Regents as well as royalty payments as commercialization occurs.  Disputes with campuses related to the UC Regents (such as UC Merced) could impact our ability to do business with other UC Regents controlled campuses (such as UCI).  Under our research and development agreements we rely on third party laboratories that can experience manufacturing problems or delays, which could result in decreased revenue or increased costs.  All of our research and development agreements require processes that are complex and require specialized and expensive equipment. Replacement parts for this specialized equipment can be expensive and, in some cases, can require lead times of up to a year to acquire. There can be no assurance that our funding commitment under the development agreements will be adequate to fund the equipment requirements.  We also rely on numerous third parties to supply production materials and in some cases there may not be alternative sources immediately available, or they may not be available at a reasonable cost.   Shrink has substantial risk in being sued with respect to its intellectual property rights or in having to assert claims against others to protect its rights.  The world of intellectual property rights is very murky and it is often very difficult to determine the specific abilities of a business to use and exploit intellectual property rights.  Moreover even to the extent a business has solid rights, there could be substantial costs involved in defending ones rights.  Shrink has not completed nor sought any freedom to operate opinions from competent intellectual property counsel with respect to its related intellectual property rights and it is reasonable to assume that as the market for Shrinks products evolves and we produce products for these markets, Shrink will be a target for such lawsuits.  Given our limited resources to defend ourselves, this may be, from a corporate perspective, a life threatening scenario.  If we are not able to protect our intellectual property and proprietary trade secrets we will not be able to compete effectively and will be adversely affected.  The risks and uncertainties that we face with respect to our patents and other proprietary rights include the following:  · the pending patent applications we have filed or to which we have exclusive rights may not result in issued patents or may take longer than we expect to result in issued patents; · the claims of any patents which are issued may not provide meaningful protection; · we may not be able to develop additional proprietary technologies that are patentable; the patents licensed or issued to us or our customers may not provide a competitive advantage; · other parties may challenge patents or patent applications licensed or issued to us or our customers; · patents issued to other companies may harm our ability to do business; and · other companies may design around technologies we have patented, licensed or developed.  We also may not be able to effectively protect our intellectual property rights in some foreign countries.  In order to protect or enforce our patent rights, we may initiate patent litigation against third parties, such as infringement suits or interference proceedings.  Litigation may be necessary to:  · assert claims of infringement; · enforce our patents; · protect our trade secrets or know-how; or · determine the enforceability, scope and validity of the proprietary rights of others.  Any lawsuits that we initiate could be expensive, take significant time and divert managements attention from other business concerns. Litigation also puts our patents, if any, at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us.  28    We will be subject to applicable regulatory approval requirements of the foreign countries in which we could sell products, which are costly and may prevent or delay us from marketing our products in those countries.  In addition to regulatory requirements in the United States, we will be subject to the regulatory approval requirements for each foreign country to which could export our products. In the European Union, regulatory compliance requires affixing the CE mark to product labeling. Although our new products could be made eligible for CE marking through self-certification, this process can be lengthy and expensive. In Canada, as another example, our new products could require approval by Health Canada prior to commercialization along with International Standards Organization, or ISO, 13485/CMDCAS certification. It generally takes from three to six months from submission to obtain a Canadian Device License. Any changes in foreign approval requirements and processes may cause us to incur additional costs or lengthen review times of our new products, if any. We may not be able to obtain foreign regulatory approvals on a timely basis, if at all, and any failure to do so may cause us to incur additional costs or prevent us from marketing our products in foreign countries, which may have a material adverse effect on our business, financial condition and results of operations.  We may experience difficulties that may delay or prevent our development, introduction or marketing of new or enhanced products.  We intend to continue to invest in product and technology development. The development of new or enhanced products is a complex and uncertain process. We may experience research and development, manufacturing, marketing and other difficulties that could delay or prevent our development, introduction or marketing of new products or enhancements. We cannot be certain that:  · any of the products under development will prove to be effective in generating sales demand;  · we will be able to obtain, in a timely manner or at all, regulatory approval, if required, to market any of our products that are in development or contemplated;   · we are able to find adequate supplies of the necessary component parts for the devices we intend to sell, which is a very challenging risk because we presently do not manufacture anything, relying exclusively on third party company partners and business relationships;  · the products we develop can be manufactured at acceptable cost and with appropriate quality; or these products, if and when approved, can be successfully marketed.  The factors listed above, as well as manufacturing or distribution problems, or other factors beyond our control, could delay new product launches. In addition, we cannot assure you that the market will accept these products.  Accordingly, there is no assurance that our overall revenue will increase if and when new products are launched.  Intense competition could limit our ability to secure market share which could impair our ability to sell our products and harm our financial performance.  The microfluidics and biochip industries, along with nearly every market we seek to penetrate, are new and underdeveloped markets and industries are rapidly evolving, and developments are expected to continue at a rapid pace. Competition in this industry, which includes competition from professional diagnostic, consumer diagnostic and renewable energy businesses, among others, is intense and expected to increase as new products and technologies become available and new competitors enter the market. Our competitors in the United States and abroad are numerous and include, among others, diagnostic testing, medical products and renewable energy companies, universities and other research institutions.  Our future success depends upon maintaining a competitive position in the development of products and technologies in our areas of focus. Our competitors may:  · develop technologies and products that are more effective, less expensive, safer or more readily available than our products or that render our technologies or products obsolete or noncompetitive;  · obtain patent protection or other intellectual property rights that would prevent us from developing potential products; or  · obtain regulatory approval for the commercialization of our products more rapidly or effectively than we do.  As a result, our products or processes may not compete successfully, and research and development by others may render our products or processes obsolete or uneconomical.  29    Also, the possibility of patent disputes with competitors holding domestic and/or foreign patent rights may limit or delay expansion possibilities. In addition, many of our existing or potential competitors have or may have substantially greater research and development capabilities, clinical, manufacturing, regulatory and marketing experience and financial and managerial resources, giving them a competitive advantage in the markets in which we hope to operate.  The market for the sale of our products is also highly competitive. This competition is based principally upon price, quality of products, customer service and marketing support. We believe that a number of our competitors are substantially larger than we are and have greater financial resources, and have a more established sales and marketing force already operating in the market, which would give them a competitive advantage over us.  Presuming we are able to commercialize our products, we must then quickly develop ways to efficiently manufacture new and improved products to meet customer demand on a timely and cost-effective basis.  We do not have any manufacturing facilities and have limited relationships with third party manufacturers. We are negotiating with third parties for the development and manufacture of our products initially.  However, even if we are able to develop our products, and penetrate the drug and life science industries, we may have to construct or acquire a manufacturing facility or utilize third parties, both of which would require us to train appropriate personnel.  To build a manufacturing facility, we will need substantial additional capital and we do not have any capital commitments to fund such construction.  In addition, the recent financial crisis has made it extremely difficult to obtain commercial property or industrial financing.  In addition, we must be able to resolve in a timely manner manufacturing issues that may arise from time to time as we commence production of our complex products.  With a start-up manufacturing facility, unexpected problems may be more frequent as new equipment is put on line and operators are inexperienced in its operation.  These and other unanticipated difficulties or delays in manufacturing our products during commercialization, in sufficient quantities to meet customer demand could diminish future demand for our products, cause us to incur greater debt and materially harm our business.   A significant portion of our sales will be dependent upon our customers capital spending policies and research and development budgets, and government funding of research and development programs at universities and other organizations, which are subject to significant and unexpected fluctuations.  Our target markets include pharmaceutical and biotechnology companies, academic institutions, government laboratories, and private foundations. Fluctuations in the research and development budgets at these organizations could have a significant effect on the demand for our products and services. Research and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities, general economic conditions, and institutional and governmental budgetary policies. Our business could be seriously damaged by any significant decrease in capital equipment purchases or life sciences research and development expenditures by pharmaceutical and biotechnology companies, academic institutions, government laboratories, or private foundations.  The timing and amount of revenues from customers that rely on government funding of research may vary significantly due to factors that can be difficult to forecast.  Research funding for life science research has increased more slowly during the past several years compared to the previous years and has declined in some countries, and some grants have been frozen for extended periods of time or otherwise become unavailable to various institutions, sometimes without advance notice. Although the level of research funding increased significantly during the years 1999 through 2003, increases for fiscal 2004 through 2008 were significantly lower. Government funding of research and development is subject to the political process, which is inherently fluid and unpredictable. Other programs, such as homeland security or defense, or general efforts to reduce the federal budget deficit could be viewed by the U.S. government as a higher priority. These budgetary pressures may result in reduced allocations to government agencies that fund research and development activities. Past proposals to reduce budget deficits have included reduced NIH and other research and development allocations.  Any shift away from the funding of life sciences research and development or delays surrounding the approval of government budget proposals may seriously damage our business.  Many of our current and potential competitors have longer operating histories, larger customer or user bases, greater brand recognition, greater access to brand name suppliers, and significantly greater financial, marketing and other resources than we do.  Many of these current and potential competitors can devote substantially more resources to the development of their business operations than we can at present.  Currently, we do not have a marketing or manufacturing infrastructure in place.   In addition, larger, well-established and well-financed entities may acquire, invest in or form joint ventures with other established competitors or with specific product manufacturers, which will allow them pricing advantages due to economies of scale or pursuant to distribution agreements with suppliers. Some large product distributors may also have exclusive distribution agreements or protected territories in which they can sell specific brand name products at a significant discount, or territories in which they may seek to exclude us from selling a specific brand of product. These types of arrangements between our competitors and manufacturers and suppliers may limit our ability to distribute certain products and could adversely affect our revenues.  30    There can be no assurance that new products we introduce will achieve significant market acceptance or will generate significant revenue.  The market for products in micro-fluidics, bio-sensing and renewable energy industries is characterized by rapid technological advances, evolving standards in technology and frequent new product and service introductions and enhancements. Possible short life cycles for products we sell may necessitate high levels of expenditures for continually selecting new products and discontinuing the sale of obsolete product lines. To obtain a competitive position, we must continue to introduce new products and new versions of existing products that will satisfy increasingly sophisticated customer requirements and achieve market acceptance.  Our inability or failure to position and/or price our new or existing products competitively, in response to changes in evolving standards in technology, could have a material adverse effect on our business, results of operations or financial position.  If we deliver products with defects, our credibility may be harmed, market acceptance of our products may decrease and we may be exposed to liability.  The manufacturing and marketing of our products will involve an inherent risk of product liability claims. In addition, our product development is and production will be extremely complex and could expose our products to defects. Any defects could harm our credibility and decrease market acceptance of our products. In the event that we are held liable for a claim for which we are not indemnified or insured that claim could materially damage our business and financial condition. Even if we are indemnified, we may not be able to obtain reimbursement of our damages from the indemnifying party, because for example they do not have sufficient funds or insurance coverage to pay us.  If a claim is made for which we have insurance coverage, we cannot be certain that the amount of such coverage will be sufficient, or that we will be able to collect on a claim when we make it.   Because we have not yet begun to sell our products, we have not obtained insurance covering product liability claims or product recall claims against us.  When we begin to market our products, such insurance may not be available to us, or not available on terms which we find acceptable.   We may determine that the cost of such insurance is too high when compared to the risks of not having coverage and we may determine not to obtain policies insuring such risks, or we may obtain policies with a high deductible.   We could suffer monetary damages, incur substantial costs or be prevented from using technologies important to our products as a result of a legal proceedings being commenced against us.  Because of the nature of our business, we may be subject at any particular time to commercial disputes, consumer product claims, negligence or various other lawsuits arising in the ordinary course of our business, including employment matters, and we expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. An adverse ruling or rulings in one or more such lawsuits could, individually or in the aggregate, have a material adverse effect on our sales, operations or financial performance.  We cannot assure you that any future lawsuits relating to our businesses will not have a material adverse effect on us.  We are currently in a growth stage and may experience setbacks in both business and product development.  We are subject to all of the risks inherent in both the creation of a new business and the development of new and existing products.  Our cash flows may be insufficient to meet expenses relating to our operations and the growth of our business, and may be insufficient to allow us to develop new and existing products. We currently so not manufacture or market any product and we cannot be certain that we will ever be able to develop, manufacture, market or sell any product.  We currently do not have adequate insurance coverage for claims against us.  We face the risk of loss resulting from product liability, securities, fiduciary liability, intellectual property, antitrust, contractual, warranty, environmental, fraud and other lawsuits, whether or not such claims are valid.  In addition, we do not have adequate or in some cases, any product liability, fiduciary, directors and officers, property, natural catastrophe and comprehensive general liability insurance.  To the extent we secure adequate insurance it may not be adequate to cover such claims or may not be available to the extent we expect. If we are able to secure adequate insurance our costs could be volatile and, at any time, can increase given changes in market supply and demand. We may not be able to obtain adequate insurance coverage in the future at acceptable costs.  A successful claim that exceeds or is not covered by our policies could require us to pay substantial sums.  Even to the extent we are able to acquire adequate insurance, we may not be able to afford to continue coverage through a policy period or in multiple and successive policy periods.   31    ITEM 1B.  UNRESOLVED STAFF COMMENTS  Not Applicable.      ITEM 2.  PROPERTIES  The Companys corporate office is located at 7020 Belcrest Drive Plano Texas 75024.  It is the office of our CEO and is used by the Company at no cost.    ITEM 3.  LEGAL PROCEEDINGS  We are not aware of any legal proceedings or investigations involving the Company.  From time to time, we may become involved in lawsuits and legal proceedings which arise in the ordinary course of business, in particular, that may relate to defense of our intellectual property rights.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.  We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.   ITEM 4.  MINE SAFETY DISCLOSURES  None.        PART II   ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.  Market Information  Our common stock is quoted under the symbol INKN on the OTC Markets system.  Our shares trade on a limited and sporadic basis and the trading price of our shares is not necessarily of the existence of a trading market for our securities or indicative of our value.  The following table sets forth, for the periods indicated, the high and low closing prices of our common stock.  These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission as adjusted to reflect the Forward Split, and may not represent actual transactions   Closing Prices (1 )HighLowYear Ended December 31, 20124th Quarter$0.0044$0.00113rd Quarter$0.0054$0.00112nd Quarter$0.0055$0.00251st Quarter$0.0017$0.0055Year Ended December 31, 20114th Quarter$0.0399$0.00063rd Quarter$0.079$0.032nd Quarter$0.10$0.051st Quarter$0.131$0.07  (1) The above table sets forth the range of high and low closing prices per share of our common stock as reported by www.nasdaq.com for the periods indicated, as adjusted for the Forward Split in April 2010.  Recently our stock has not been quoted on the OTC Bulletin Board, and is now being quoted by the OTC Market Group and on the Pink Sheets.  Our stock is no longer trading on the OTC Bulletin Board because the market maker that had filed originally to quote our stock on the OTC Bulletin Board is no longer providing quotes on the OTC Bulletin Board.  A large number of initiating market makers have ceased to provide quotes on the OTC Bulletin Board causing many companies to cease having quotations on the OTC Bulletin Board during 2011 and 2012.  32    The Companys transfer agent is Action Stock Transfer, located at 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, UT 84121, (801) 274-1088 (www.actionstocktransfer.com).  Approximate Number of Holders of Our Common Stock  As of January 15, 2013, there were ___ holders of record of our common stock.  This number excludes the shares of our common stock owned by stockholders holding stock under nominee security position listings. In aggregate, we had 224,746,249 shares of common stock outstanding as of January 15, 2013.  Dividends  We have never declared or paid a cash dividend and do not foresee paying one in the near future, except to the extent our shareholders subsequently approve of and the Board of Directors then authorizes, Any future decisions regarding dividends will be made by our board of directors.  We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.  Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders.  Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.   Securities Authorized for Issuance Under Equity Compensation Plans  We have 750,000 shares and no options outstanding under our 2010 Stock Incentive Plan (the 2010 Plan), which was adopted by the Board in December 2010 and was approved by stockholders. The 2010 Plan is the Companys only equity compensation plan currently in effect. Under the 2010 Plan, 25,000,000 shares were authorized for issuance pursuant to awards made under the plan with 24,250,000 shares remaining available for issuance.  Options granted under the 2010 Plan are exercisable at prices at least equal to the fair market value of such stock on the dates the options were granted. Options expire ten years after the date of grant.  The following is a summary of the securities issued and authorized for issuance under the 2010 Plan at December 31, 2012:   Plan Category(a) Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights(b) Weighted-average
exercise price of
outstanding options,
warrants and rights(c) Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)Equity compensation plans approved by security holdersEquity compensation plans not approved by security holders (1)750,00024,250,000Total  (1)  Includes the 2010 Plan, which has not yet been approved by stockholders. In addition, the Company has issued and may continue to issue share- and/or option -based compensation on occasion outside of any plan. To date only 750,000 options have been issued under this plan.  Recent Sales of Unregistered Securities  In January 2011, pursuant our 2010 Plan, the Company issued 750,000 shares valued at $95,625 to Heiner Dreismann, a member of our Board of Directors, for services rendered and as an incentive to remain on the board with the Company.  As a result of the Mr. Dreismanns issuance there are 24,250,000 remaining shares authorized for issuance pursuant to the 2010 Plan.  These shares were registered for resale pursuant to a registration statement on Form S-8.  In January 2011, the Company received conversion demand notices for convertible notes with total principal balances of $475,000 and accrued interest of $52,771.  The notes and their accrued interest were converted at $0.10 per share (5,277,714 shares of common stock), and pursuant to the stock issuance considered paid in full.  In January 2011, the Company issued a 14% convertible note with a principal balance of $60,000 in exchange for $60,000.  The note is convertible at $0.17 per share.  The note matures on October 1, 2012.  33    In February 2011, the Company issued 140,000 shares valued at $16,330 for payment of professional services provided during the year ended December 31, 2010 and thru February 2011.  At the time of the BlackBox acquisition, the Company issued 14,000,000 shares of common stock accordingly.  In March 2011, the Company received $70,000 in cash from a private investor.  In exchange, the Company agreed to issue 411,765 shares of common stock.  In January 2012, pursuant our 2010 Plan, the Company issued 7,352,941 shares valued at $29,412 for payment of professional services provided by our attorney during January and February 2012.   The Company reasonably believes that all of the issuances of securities described above were deemed to be exempt from registration in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering.  Each investor had a pre-existing relationship with the Company, represented that it had the financial wherewithal, knowledge and sophistication to invest in the securities of the Company and only legend restricted securities were issued.  In addition, each recipient represented that they are acquiring the securities as an investment only and not with a view towards distribution of the same to the public.  We made available to each investor with disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information.  Finally, all securities issued were either restricted with an appropriate restrictive legend on certificates for shares, notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom, or were issued pursuant to an exemption provided under Rule 144.  Purchases of Equity Securities  No repurchases of our common stock were made during the fourth quarter 2012 and as of the date of this report.    ITEM 6.  SELECTED FINANCIAL DATA.  Not Applicable.        ITEM 7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  This report on Form 10-K contains forward-looking statements within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. Words such as anticipate, expects, intends, plans, believes, seeks and estimates and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-K. Investors should carefully consider all of such risks before making an investment decision with respect to the Companys stock. The following discussion and analysis should be read in conjunction with our consolidated financial statements and summary of selected financial data for Shrink NanoTechnologies, Inc. Such discussion represents only the best present assessment from our Management.  The following discussion and analysis should be read in conjunction with our unaudited financial statements and related notes included in this Report and the Forward Looking Statements section in the forepart of this Report (see page 1 above) and the Risk Factors set forth in Item 1A of this Report, as may be amended or updated from time to time.  The statements contained in this Report that are not historic in nature, particularly those that utilize terminology such as may, will, should, expects, anticipates, estimates, believes, or plans or comparable terminology are forward-looking statements based on current expectations and assumptions.  No assurance can be made that any of our forward looking statements will materialize as planned.  Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. For ease of reference we use certain defined terms as defined in Use of Terms on page 3 above, in the forepart of this Report.   34    Background  General  We are, with our subsidiaries, dedicated to commercializing biotechnology and other high technology intellectual property, know-how and related products, from universities and medium to large commercial businesses, that may be deployed as commercial products or licensing opportunities in the near (immediate to 2 years) and mid-term (2-4 years).  We have also recently undertaken a program to seek to acquire small companies (or business segments of larger companies) with developed and ready-to-go-to-market products, strong intellectual property portfolios, management and operational infrastructure.  Historically, we have primarily focused our resources in the life sciences market; however, we also have successfully acquired technologies in, for example, the semiconductor space.  With all technologies we acquire and allocate our limited resources to, our objective is to develop products and intellectual property resources in order to generate cash flow, and ultimately, value for our shareholders.  The Company has undergone, and continues to undergo, marked and sometimes volatile operational changes as we attempt to transition towards commercialization efforts and liquidate undesired assets.  Our business currently consists of four units: Cell Culturing Products ; Microfluidic Systems and Kits ; Special Substrates ; and Internal Development and Acquisitions .  Our Cell Culturing Unit is dedicated to the commercialization of our stem cell culture platform known as StemDisc® and its related software, as well as NanoShrink® based tissue engineering substrates known for our Cell Align®.  Our Microfluidic Systems and Kits business is seeking to market a unique and patented modular microfluidic system we exclusively licensed from Corning Incorporated, as well as a version of NanoShrink® (metal enhanced fluorescence) that will enable the low cost development of two dimensional microfluidic system prototypes.  Our Special Substrates business is developing specialized versions of NanoShrink® substrates that have unique surface plasmon resonance capabilities and which may be integrated into existing market leading devices and systems.  Our Internal Development and Acquisitions Unit is actively developing technologies that are a part of a development and commercialization program, as well as engaging in due diligence on technologies and businesses we are in the process of evaluating for acquisition purposes.  The use of the word unit is not meant to imply that Shrink has four separate fully functioning organizations of personnel and facilities.  Rather the opposite is true.  The Company has extremely limited personnel resources (aside from its access to academic research facilities) and the personnel the Company does employ regularly serve the Company across all of the Companys business units.   Business Focus  The Company intends to direct its focus, and expects to continue to allocate a material portion of its meager resources, towards (1) the commercialization and development of technologies in its four business units as discussed in greater depth in this Report, and (2) making acquisitions of high technology companies and other accretive technology assets that either supplement or otherwise enhance the Companys core abilities and interests.  Assets; Intellectual Property and Research Agreements  Our assets include exclusive and non-exclusive patent rights, as more fully described in this Report and in our Annual Report, from agreements with third parties, as follows:  · Our exclusive License Agreement with Corning, Inc. (the Corning License Agreement) wherein the Company licensed the exclusive worldwide right to use and sublicense Cornings patent-pending Modular Microfluidic System and Method for Building Modular Microfluidic System.  · Our two Sponsored Research Agreements with the University of California Regents on behalf of University of California, Irvine campus entered into in May 2010 (the Biosensing Research Agreement), and in September 2010 (the EB Research Agreement), and rights to acquire additional license rights funded by us under these agreements, (the Sponsored Research Agreements).   35    Our assets also included, through June 3, 2011, the exclusive License Agreement (the Chicago License Agreement) between our previously wholly-owned subsidiary BlackBox and the University of Chicago (Chicago), wherein BlackBox licensed the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (a/k/a electronic glue chemistry) for fields of use other than thermoelectric applications. We have completed the sale of our BlackBox subsidiary along with this license to BlackBox Semiconductors, Inc., a Nevada corporation (BlackBox Parent).  We also have entered into other agreements, such as our agreement with the MF3 Consortium, accessing matching funds from MF3s relationship with DARPA.  This agreement could provide us with research co-funding agreements as more fully provided below; however, it necessarily requires that the Company have investable cash to put into a research program in order to access matching funds.  Because of the limited cash we have had, making such investments has been extremely limited.  Finally, we intend to attempt to commercialize our assets through relationships with third party manufacturers we contract with.  No assurance can be made that the Company will have funds sufficient to further develop and license new technologies or to commercialize the ones we have.  We may, from time-to-time and as a result of rights granted in one or more of our (or our subsidiarys) licensing agreements, take a license to inventions (and the related license to domestic and international patent application rights) which result from a sponsored research arrangement or private (non-academic sector) license agreement.  Doing so may give Shrink the license rights, but will also trigger the payment of certain fees and various ongoing financial commitments, all of which have been negotiated and are disclosed in the license agreement as provided elsewhere in this Report.  The Company regularly reviews its licenses and patents and, as technologies or inventions have been further commercially vetted or newer competing technologies are developed by others, management may determine using its reasonable business judgment, to not continue to support the development of a technology, and may therefore abandon its licensing rights and or intellectual property rights (if not otherwise licensed) with respect to that technology, invention and the related license.  The Company may, from time to time, abandon intellectual property rights which it formerly thought would be valuable or which may still have some value but would be too expensive to maintain.  Abandonment or an outright termination of a license to a particular invention may occur more often as Shrink acquires more IP rights, and the same inventions are commercially vetted.  License or patent rights may also be abandoned based on no other reason other than limited capital or the Companys need to expend its capital on other vital needs.  To the extent the Company abandons such non-critical IP rights, the Company may not file a specific abandonment notice.  During late 2010, we terminated our research agreement with the UC Merced and the related license agreement with the UC Regents, as management felt that, given our limited funds, the costs of these agreements were cost prohibitive and were yielding unsuccessful results while viable alternative technologies were found elsewhere.  As a result, we lost any patent license rights associated with these agreements.  The Company has dissolved its Shrink Solar, LLC entity which had no revenues or assets.   In March 2011, we entered into an agreement in principle to transfer our BlackBox Semiconductor, Inc. subsidiary (the BlackBox Subsidiary) to a separate public company as the BlackBox business will require different management and commercial resources and relationships, as well as significant amounts of capital and time to commercialize products.  On June 3, 2011, we  finalized the agreement with BlackBox Semiconductor, Inc., f/k/a Visitrade, Inc., a Nevada corporation, a publicly traded company, (the BlackBox Parent), as purchaser, for the exchange of all of the shares of  BlackBox Subsidiary from the Company (the Share Exchange).  The material terms of the Share Exchange were:  Shrink Nanotechnologies, Inc. issued 14,000,000 shares of restricted common stock to BlackBox Parent and 100% equity interest in BlackBox Subsidiary.  In exchange, Shrink Nanotechnologies, Inc. received $12,500 cash and 27,030,000 shares of BlackBox Parent, representing approximately 19.9% of BlackBox Parents equity at the time of the transaction.  The cash received from the transaction shall be used to recover costs Shrink Nanotechnologies, Inc. invested into BlackBox Subsidiary.   Shares of BlackBox Parent will either be sold or spun off to shareholders in whole or in part pursuant to an effective registration statement, as may be determined by the board at a later date, if and when such shares become liquid.   36    The primary asset of the BlackBox Subsidiary includes an exclusive License Agreement (the Chicago License Agreement) with the University of Chicago, granting to BlackBox Subsidiary the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246, and provisional applications 61/214,434 and 61,264,790) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License Agreement.  Discussion of Business Strategy; Short Term Goals  Although management constantly monitors market trends, as well as available capital and has in the past, and continues to, refine and re-prioritize the Companys goals, so as to attain commercialization as quickly as possible, the goals we will need to attain for our various businesses are currently:  (1) commercialization of existing and newer commercial versions of StemDisc® , Cell Align® and NanoShrink® products; (2) entering into a joint development agreement to commercialize the Corning microfluidic system; (3) joint development of certain materials from our Special Substrates business unit; and (4) entering into technologically accretive and synergistic acquisitions.  We acquired our assets and rights by using a business model that has inexpensively allowed us to license technologies from two primary sources: (1) university laboratories, and (2) secondary technologies from very large industrial businesses.  Traditionally and historically, university engineering labs have been used as commercial resources for venture capital organizations and other funding sources looking for high quality low cost technology.  We have also recently undertaken a program to develop commercial relationships with larger, multi-national United States-based industrial companies in order to potentially work with their technologies and products which have been abandoned or orphaned for one or a number of reasons  primarily due to a limited market opportunity or limited funding at the time of abandonment.  We are actively seeking to develop licensing agreements in this regard to provide the right to develop and market these orphaned technologies and product lines.  In addition to our licensed technologies, we may develop technologies on our own as a result of our research or joint development activities.  We also have developed a Science Advisory Board (SAB).  Through the relationships with our SAB members, we have the exclusive right to certain intellectual property rights derived from their respective work for the Company.  To date, we have not filed any applications to protect intellectual property rights derived from work provided to the Company by a member of the SAB. Nonetheless, much of the Companys scientific decision making process is guided in part by our SAB members.  We also intend to review, and as such opportunities present themselves, seek to acquire synergistic assets and businesses, although these are not within the Companys primary initial focus as management believes that initial development, manufacturing and commercialization will be most economical through joint venture or third party OEM manufacturers we contract.  The execution of our business requires sufficient amounts of cash.  The Company has found the current economic environment extremely challenging in terms of finding investors who are willing to invest cash into the Company.  The inability to raise cash gives rise to the Company considering numerous alternatives to its current business, including focusing more attention on acquiring assets and other businesses that may provide value for shareholders sooner than the current life science focus of the Company.  In any case, until the Company has sufficient cash to operate or is able to acquire assets that produce value for shareholders, the value of the company will be severely limited by these facts.   Sponsored Research Agreements with UCI  Sponsored Research Agreement with UC Regents (September 2010)  As of September 22, 2010, Shrink entered into the EB Research Agreement with UC Regents on behalf of the Irvine Campus.  The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010.  Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on a good faith between the two parties.  The EB Research Agreement was terminable by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.   37    The EB Research Agreement provided, among other things, that the Company sponsor specified research relating to the development of a complete system for culturing, imaging, and digitizing a large number of embryoid bodies (EBs) in custom-designed microfluidic devices, including developing protocols for staining and imaging EBs in 3-D.  In addition, the research involved specifying and testing a suitable hardware/software platform for collecting images in a high-throughput setting.  Regarding any inventions, discoveries or other commercially useful research products that may arise from research being conducted under the SRA, we will have a time-limited, first right to negotiate an exclusive license of such things with UCI.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the three month term of the EB Research Agreement.  To date the Company has paid $5,000, and at September 30, 2011 owes $12,598 under this agreement.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  Sponsored Research Agreement with UC Regents (May 2010)  As of May 3, 2010, Shrink Parent entered into the Sponsored Research Agreement or, the Biosensing Research Agreement, with UC Regents on behalf of UCI.  The Biosensing Research Agreement is for a term of three years or such time as the research is completed, whichever is longer. The Biosensing Research Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.  The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement.  The Biosensing Research Agreement provides that the Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA. We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.  Obligations under Biosensing Research Agreement  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement.  To date the Company has paid $20,000 to the UC Regents and owes $59,302 under this agreement.  The Company does not have any capital commitments to satisfy the required cash payments under this contract. Any funding amounts under the Biosensing Research Agreement are subject to adjustment down based on actual expenditures on the research.  Additional IP that is subject to our license rights under the UCI Biosensing SRA includes both research performed under the specified work order of the UCI Biosensing SRA, as well as discoveries developed between July 2009 and May 3, 2010 by Dr. Michelle Khine that name Dr. Khine as primary inventor, and which are not under pre-existing obligations to third parties.  We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.   The Biosensing Research Agreement provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the Biosensing Research Agreement (the UCI Biosensing License).  We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the License Date).  In addition, we will be required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date.  In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing License to include additional patents from time to time.  With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors.  A copy of the UCI Biosensing SRA License is included as an annex to the Biosensing Research Agreement, filed as an exhibit to our public filings, and is incorporated by reference herein.  38    Results of UCI Biosensing Research To Date  To date, the Biosensing Research Agreement has led to two patent applications being filed with the USPTO.  We do not have any commitments for financings or grants for this agreement and no assurance can be made that the Company will attain the funding necessary to fulfill our funding obligations under the Biosensing Research Agreement or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  License Agreement with University of Chicago - Sold  Effective June 3, 2011, following the Share Exchange involving our BlackBox Subsidiary the License Agreement with the University of Chicago is no longer a part of our operations and business focus.  Agreements Terminated in 2010  During 2010 the Company terminated certain agreements for economic reasons and because alternative resources were available.  These terminated agreements include:  Our original microfluidics research agreement with the University of California, Merced, originally entered into in May 2009, and the underlying Exclusive License Agreement with the UC Regents, Merced, for Processes for Microfluidic Fabrication and Other Inventions.  We no longer rely on these patents or intellectual property rights.  Nonetheless, the Company still owns and maintains its rights to the ShrinkChip® related trademarks, which were not part of the terminated agreement. The Company will not be refunded its initial research and license fees paid (amounting to $90,985 and 495,500 shares issued to date), and the Company has certain additional further material liabilities under this agreement relating to patent filing legal prosecution costs or development fees of up to $234,000, which are subject to dispute.  In addition, the Company is required to cover certain legal patent costs during the 90- day period after termination.  Because the Company no longer is focusing on its solar segment, the Company also terminated its Strategic Marketing and Development Agreement (the Marketing Agreement) with Inabata America Corporation.  This agreement provided for the appointment of Inabata as the Company’s non-exclusive representative for the purposes of marketing and promoting the Company’s solar concentrator technology and ShrinkChipTM RPS solar products to third parties (the “Solar Products” ).  Proceeds of Debt Financing  Private Placement of 12% Convertible Notes and Series B Warrants  During November 2010, the Company issued, $117,000 in 12% convertible notes convertible at $.10 per share (post forward split), and 585,000 Series B Common Stock Purchase Warrants, exercisable at $0.20 per share (or, Series B Warrants) for a cash purchase price of $117,000. The Notes and Series B Warrants were sold at face value for each dollar amount of Notes sold.  No placement agent compensation has been paid in this financing.  The foregoing are the material terms of the 12% note and Series B Warrant financing.   2009 Private Placement of 12% Convertible Notes and Series A Warrants;  Between November 2009 through May, 2010, the Company issued, on a private basis, $635,000 (inclusive of $100,000 reported in our Annual Report on Form 10-K, as previously filed) of 12% convertible notes initially convertible (post forward split) at $.10 per share, and 2,675,000 Series A Common Stock Purchase Warrants, exercisable at $0.20 per share (or, Series A Warrants) as part of a private financing at face value for a purchase price of $535,000.  The notes are repayable one year from issuance (with some of the earliest issued notes becoming due in November 2010) and the warrants are exercisable commencing 6 months from issuance and expire 36 months from issuance.  At any time following its maturity date, the Company may induce conversion of the notes at a discounted rate at 80% of the effective conversion price. In November 2010 to January 2011, the Company note holders with total principal balances of $575,000 and accrued interest of $65,694 converted their principal and interest into 6,406,940 shares of common stock, and such notes, to the extent converted are deemed satisfied and discharged in full, with $60,000 of principal and their accrued interest remaining outstanding.    39    When combined with notes and warrants sold during late fiscal 2009 (and not including any 14% convertible notes issued to Noctua Fund, LP) the following (and not including any 14% convertible notes issued to Noctua Fund, LP) is a brief summary of the notes and warrants outstanding:  · $177,000 principal amount 12% convertible notes, currently convertible at $.10 per share into an aggregate of 1,777,000 shares of common stock (plus shares issuable as interest), payable one year from their respective issuance dates.  The note was converted on October 28 2011.  · 3,175,000 Series A Warrants, exercisable at $.20 per share, and expiring three years from their respective issuance dates.  · 585,000 Series B Warrants, exercisable at $.20 per share, and expiring three years from their respective issuance dates in 2010.  The foregoing are the material terms of the 12% note and Series A and B Warrant financing.  Other details of the same may be found below in this Annual Report.  All Noctua, BCGU, Noctua Fund LP instruments, both debt and equity, in regards to the 50% interest owned by Mark L. Baum, Esq., were acquired for value by an entity indirectly controlled by James Panther, in April 2012.  Sponsored Research Agreement with UC Regents (September 2010)  As of September 22, 2010, Shrink entered into the EB Research Agreement with UC Regents on behalf of the Irvine Campus.  The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010.  Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on a good faith between the two parties.  The EB Research Agreement was terminable by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.  The EB Research Agreement provided, among other things, that the Company sponsor specified research relating to the development of a complete system for culturing, imaging, and digitizing a large number of embryoid bodies (EBs) in custom-designed microfluidic devices, including developing protocols for staining and imaging EBs in 3-D.  In addition, the research involved specifying and testing a suitable hardware/software platform for collecting images in a high-throughput setting.  Regarding any inventions, discoveries or other commercially useful research products that may arise from research being conducted under the SRA, we will have a time-limited, first right to negotiate an exclusive license of such things with UCI.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the three month term of the EB Research Agreement.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  As of May 3, 2010, Shrink Parent entered into the Sponsored Research Agreement or, the Biosensing Research Agreement, with UC Regents on behalf of UCI.  The Biosensing Research Agreement is for a term of three years or such time as the research is completed, whichever is longer. The Biosensing Research Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.   The Biosensing Research Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the Biosensing Research Agreement.   Historically, we have spent far less than the amounts we are otherwise committed to under the UCI Biosensing SRA.  The Biosensing Research Agreement provides that the Company shall sponsor the research costs up to a budget of $632,051, of which $20,000 has been paid to the UC Regents.  We have exclusive access to license intellectual property from the Biosensing Research Agreement beginning from July 1, 2009 forward according to the terms of the Biosensing Research Agreement.   40    The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the Biosensing Research Agreement.  Of this amount $202,796 is to be paid during the 12 month period ended April 30, 2011; $211,311 shall be paid during the 12 month period ended April 30, 2012; and the remaining $217,944 shall be paid during the 12 month period ended April 30, 2013.  The foregoing payments are to be paid in quarterly installments of 1⁄4 of the total cash fees payable during such 12 month period.  Additional IP that is subject to our license rights under the UCI Biosensing SRA includes both research performed under the specified work order of the UCI Biosensing SRA, as well as discoveries developed between July 2009 and May 3, 2010 by Dr. Michelle Khine that name Dr. Khine as primary inventor, and which are not under pre-existing obligations to third parties.  We are also required to indemnify UC Regents and certain affiliates from losses and claims stemming from the agreement.  The UCI Biosensing SRA provides that in the event that we desire to license Additional IP, if any is discovered, such license must be pursuant to license terms annexed to the UCI Biosensing SRA (the UCI Biosensing SRA License).  We are not required to pay an initial license issue fee, and the terms of the annual license fee is $5,000 for rights to each Additional IP license we acquire, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the License Date).  In addition, we are required to pay a fee of 30% of certain income generated from third party sublicenses of the Additional IP that are covered under the UCI Biosensing SRA License, as well as royalty payments of: 2.5% of net sales where the first sale occurs within three years after the License Date; 4% of net sales where the first sale occurs between three and six years after the License Date; and 5% of net sales where the first sale occurs beyond six years after the License Date.  In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the Additional IP licensed, subject to increase, if and as we expand the UCI Biosensing SRA License to include additional patents from time to time.  With respect to any patent comprising the Additional IP, UC Regents reserves the right to utilize such intellectual property in connection for educational and research purposes, including research conducted for other sponsors.  A copy of the UCI Biosensing SRA License is included as an annex to the UCI Biosensing SRA, filed as an exhibit to our public filings, and is incorporated by reference herein.  Our research sponsorship obligations require us to provide funding (which may be from us or other third parties) totaling $632,051 during the three year term of the UCI Biosensing SRA.  Any funding amounts under the UCI Biosensing SRA are subject to adjustment down based on actual expenditures on the research.  The foregoing is a summary only of the UCI Biosensing SRA (which includes the form of UCI Biosensing SRA License annexed thereto), which is filed as an exhibit to our public filings.  To date, the UCI Biosensing SRA has led to two patent applications being filed with the USPTO.  No assurance can be made that the Company will attain the funding necessary to fulfill its funding obligations under the SRA Agreement or, that the research performed will necessarily produce commercially viable new inventions.  In addition, in the event that discoveries are made, no assurance can be made that the Company will be able to fund commercialization of these technologies or that it will exercise its right to an exclusive license of these products.  License Agreement with University of Chicago  This agreement was in effect until June 2011 when it was sold to a related third party.   Critical Accounting Estimates  Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of our consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The significant accounting policies that are believed to be the most critical to fully understanding and evaluating the reported financial results include recoverability of intangible assets, the recovery of deferred income tax assets and share-based compensation.  Our intangible assets consist principally of intellectual properties such as trademarks. Shrink continues to make the required legal filings and uses of the trademarks, the trademarks have an indefinite life, therefore there is no amortization.  The Company will re-evaluate its amortization practice once products related to these trademarks are put into full production.  When our products are placed in full production we can better evaluate market demand for our technology.  41    We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or indicate that impairment exists. Once our intellectual property is placed into productive service, we expect to utilize a net present value of future cash flows analysis to calculate carrying value after an impairment determination.  As part of the process of preparing our consolidated financial statements, we must estimate our actual current tax liabilities together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance must be established. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, the impact will be included in the tax provision in the statement of operations.  The Company strives to save liquid capital by paying for services or satisfying liabilities, whenever able, by issuance of stock and stock options to consultants and services providers.  We also grant stock options, restricted stock units and restricted stock to directors and consultants under the Companys 2010 Equity Incentive Plan.  We measure compensation cost for all stock-based awards at fair value on date of grant and recognize compensation over the requisite service period for awards expected to vest. The fair value of restricted stock and restricted stock units is determined based on the number of shares granted and the quoted price of our common stock on the date of grant. The determination of grant-date fair value for stock option awards is estimated using a Black-Scholes model, which includes variables such as the expected volatility of our share price, the anticipated exercise behavior of our employees, interest rates, and dividend yields. These variables are projected based on our historical data, experience, and other factors. Changes in any of these variables could result in material adjustments to the expense recognized for share-based payments.  Such value is recognized as an expense over the requisite service period, net of estimated forfeitures, using the straight-line attribution method. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.  Year Ended December 31, 2012 compared to the Year Ended December 31, 2011   Results of Operations; Material Changes in Financial Condition; Development Stage Company  As Shrink is a development stage company, we expect to incur substantial additional investment expenses in commercializing our Shrink related technologies.  Since our acquisition of Shrink we have also made various trademark applications relating to our ShrinkChip technologies and entered into additional service or research contracts to develop our manufacturing process.  The Company, including its subsidiaries, had minimal revenues in 2012 or 2011, as it is a research and development stage company.  In 2012, there were revenues of $2,756 compared to $7,513 in 2011, which were primarily related to a contract with Kimberly Clark.   Operating Expenses  Our Shrink related business had total operating expenses of $231,089 for the year ended December 31, 2012 and $789,418, as compared to the same period for the Shrink related business in 2011.  General and Administrative Expenses.  Our general and administration expenses decreased to $145,081 in the fiscal year ended December 31, 2012 from $506,920 in 2011.  This decrease was mainly due to the Company decreasing its expenses in conjunction with its decreased activities.  Professional Fees.  Professional fees are generally related to public company reporting and governance expenses as well as costs related to our acquisitions.  Our costs for professional fees decreased to $83,275 in the fiscal year ended December 31, 2012 from $130,216 in 2011. The slight decrease was due to management stabilizing its fixed costs in this area throughout the year.  Depreciation and Amortization. Our depreciation expenses decreased to $2,733 in the fiscal year ended December 31, 2012 from $6,400 in 2011. The decrease in depreciation expenses was mainly due to the disposal of assets.  42    Interest Expense. Interest expense decreased to $90,660 in the fiscal year ended December 31, 2012 from $292,392 in 2011, primarily due to the conversion of certain convertible note issuances.  We expect operating expenses to continue as we invest further in research and development activities.  We do not have capital commitments yet to cover any of our operating expenses and to date.  To date, our capital needs for Shrink have been funded by grants, restricted stock issuances and private convertible debt financing.  We have limited cash on hand, and to the extent we are able to negotiate with parties with whom we enter into business agreements with to accept stock in lieu of cash, these issuances could dilute the ownership of our shareholders.  Net Loss From Operations  For the year ended December 31, 2012, we had a net loss of $318,993 from continuing operations as compared to a net loss of $1,112,484 from continuing operations for the period ended December 31, 2011.  Management attributes the decrease in net loss due to a decrease in operational and research activities.  In 2011, the Company switched its focus from developing and acquiring intellectual property, to the development of products derived from the intellectual property.  As a result, the Company hired several consultants to help bring those products to a point of commercialization.  We anticipate continued losses relating to investment into our research and development activities relating to Shrink, and to our capital raising activities.  We intend to fund our R&D activities, through government grants, partnerships and arrangements with universities (such as those that are in effect with the University of California Regents) and equity and debt financings.  Net Loss  In the fiscal year ended December 31, 2012, we generated a net loss of $318,993 compared to a net loss of $1,117,276 in 2011. The decrease in net loss is due to an overall change in our business operations.   Liquidity and Capital Resources  Our cash on hand at December 31, 2012 was $6,673 as compared to $731 on hand December 31, 2011.  The increase is primarily attributable to managements inability to raise capital through equity and debt financings.  During the year ended December 31, 2012, management primarily focused on product development and commercialization of products.  As a result, management neglected to spend significant time, as compared to the year ended December 31, 2011, raising capital through the equity and debt financings.  The Company had minimum revenues during the years ended December 31, 2012 and 2011.  Given our current commitments and working capital, we cannot support our operations for the next 12 months without additional capital (See Need for Additional Capital below).   The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.   Cash Flow (All amounts in U.S. dollars)Year Ended December 31,20122011Net cash provided by (used in) operating activities$(23,558)$(202,680)Net cash provided by (used in) investing activities$0$9,630Net cash provided by (used in) financing activities$29,500$191,650Net Increase (decrease) in Cash and Cash Equivalents$5,942$(1,400)Cash and Cash Equivalent at Beginning of the Year$731$2,131Cash and Cash Equivalent at End of the Year$6,673$731  In early May, 2010, through our entry into a Consortium Agreement with Micro/Nano Fluidics Fundamentals Focus MF3 Center, as led by the University of California at Irvine,  our research qualified to receive matched funding from Defense Advanced Research Projects Agency, as described above.  Under the policies of the consortium agreement the Companys funded research projects are eligible to receive matched funding on a dollar-for-dollar basis, for each dollar we invest in certain qualifying projects.   Since we are dependent on our ability to raise additional capital for our research, no assurance can be made that we will be able to utilize this funding source.  Even if we do raise additional capital, no assurance can be made that we will dedicate it towards those same research projects that qualify for DARPA matching funds.  43    Our expectations are based on certain assumptions concerning the anticipated costs associated with any new projects.  These assumptions concern future events and circumstances that our officers believe to be significant to our operations and upon which our working capital requirements will depend.  Some assumptions will invariably not materialize and some unanticipated events and circumstances occurring subsequent to the date of this Report.  A portion of our research is being conducted by the University of California, through grants.  We will continue to seek to fund our capital requirements over the next 12 to 24 months from the additional sale of our securities; however, it is possible that we will be unable to obtain sufficient additional capital through the sale of our securities as needed.  As part of the Companys business plan and when feasible, it regularly elects to pay consulting and professional fees in stock, as opposed to cash, so as to preserve capital.   In particular, between April and July 2010, the Company issued an aggregate of 1,602,197 shares of restricted common stock to five consultants and professional service providers for services rendered, some of which covers services rendered through mid-2010.  The Company recognizes, however, that share issuances are highly dilutive to investors and existing shareholders and, not all service providers are willing to accept share compensation in lieu of cash.  Accordingly, the Company is required to expend funds regularly for services.  The amount and timing of our future capital requirements will depend upon many factors, including the level of cash needed to continue our research program, fulfill our obligations under license agreements, or fund initial production efforts.  We intend to retain future earnings, if any, to retire any existing debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes.  The Company estimates that it will cost approximately $9,000,000 in deficit cash flows through 2014 until sustained potential profitability, and that substantial additional costs will be incurred in order to commercialize its Shrink related technologies.  The Company is not aware as to how much, if any, of these funds will be obtainable from government grants or offset by joint venturing development of our products.   Operating Activities  Net cash used in operating activities was $23,558 for the year ended December 31, 2012, as compared to $202,680 used in operating activities during 2011. The decrease in net cash used in operating activities was mainly due to a decrease in operating activities and a lack of revenue.  Investing Activities  Net cash provided by investing activities for the year ended December 31, 2012 was $0 as compared to $9,630 net cash provided by investing activities in 2011.  The decrease in net cash provided by investor activities was mainly due to a decrease in business operations, research and development activities and a lack of revenue.    Financing Activities  Net cash provided by financing activities for the year ended December 31, 2012 was $29,500, as compared to $180,150 net cash provided by financing activities for the year ended December 31, 2011.  To date, a material portion of our operations, and of the operations of our Shrink subsidiary, have been funded by certain members of management and Noctua Fund, LP, which is an affiliate of Messrs. Baum and Panther, our current directors.  Specifically, and without limitation, Noctua Fund, LP loaned the Company over $100,000 between 2008 and April 2009, as represented by the 14% convertible promissory note, convertible at $0.04 per share; and the identical $118,000 14% convertible promissory note, convertible at $0.04 per share, reflecting loans to our Shrink subsidiary prior to our acquisition of them, to fund their operations.  Interest to date on the notes exceeds $58,000 and both of the foregoing notes to Noctua are in default.  The Company raised $100,000 through a Convertible Note and Series A Warrant financing during the year ended December 31, 2009, and an additional $535,000 from January 2010 through March 2010, and $117,000 through a Convertible Note and Series B Warrant financing in November 2010, with gross proceeds to the Company of $752,000.  44    Our expectations are based on certain assumptions concerning the anticipated costs associated with any new projects.  These assumptions concern future events and circumstances that our officers believe to be significant to our operations and upon which our working capital requirements will depend.  Some assumptions will invariably not materialize and some unanticipated events and circumstances occurring subsequent to the date of this annual report.  A portion of our research is being conducted by the University of California.  We will continue to seek to fund our capital requirements over the next 12 months from the additional sale of our securities; however, it is possible that we will be unable to obtain sufficient additional capital through the sale of our securities as needed.  The amount and timing of our future capital requirements will depend upon many factors, including the level of funding received by us anticipated private placements of our common stock and the level of funding obtained through other financing sources, and the timing of such funding.  We intend to retain any future earnings to retire any existing debt, finance the expansion of our business and any necessary capital expenditures, and for general corporate purposes.  The Company estimates that it will cost approximately $8,000,000 in deficit cash flows until sustained potential profitability, and that substantial additional costs will be incurred in order to commercialize its Shrink related technologies.  Trends  To a great extent, we expect government grants and university/academic funding to be cyclical based on public policy (e.g. stem cell research limitations), the amount allocated by governments and universities generally to commercial and developmental research, and general economic trends. We expect that we will have to compete diligently in order to secure grants and research funding from universities, if feasible.  We also anticipate that, for the foreseeable future, our ability to attain conventional bank or secured financing for our products will be difficult as a result of our limited fungible assets and banking constraints that limit commercial loans available to weaker balance sheet companies like Shrink.  We are a cash-deprived company and must secure cash in order to operate going forward.  Capital raising activities will likely be dilutive to our shareholders.  Contractual Obligations  The Company (on its own or through its subsidiary) was a party to a license agreement with the UC Regents and sponsored research agreements with the UC Regents and more recently, Corning Agreement mentioned above and incorporated herein, as well as to its Strategic Marketing Agreement described above and incorporated by reference herein.  The Company does not have all of the funds necessary to fund these agreements or to commercialize its products and no assurance can be made that it will raise the capital necessary to do so.  The Company also enters into agreements with science consultants and professional service providers calling for payment by issuance of stock in lieu of cash, where able.  Some of these agreements call for cash payments at hourly rates as well, if and as needed and with prior consent of the Company.  The Company has not yet, approved hourly cash payments to consultants, but intends on doing so if and as our cash availability increases.   Sublease with Business Consulting Group Unlimited, Inc. - Terminated  The Company subleased space from Business Consulting Group Unlimited, Inc., an entity owned by two of our directors and majority stockholders, James B. Panther, and Mark L. Baum, Esq. pursuant to which the Company leased approximately 3,000 square feet of office and administrative space, as well as use of, among other things, internet, postage, copy machines, electricity, furniture, fixtures etc. at a rate of $6,000 per month.  The lease with Business Consulting Group Unlimited, Inc. expired April 30, 2010, and continued as a month to month tenancy thereafter.   The lease was terminated on January 31, 2011.  For the year ended December 31, 2012 $50,000 had been paid to Business Consulting Group Unlimited, Inc. and $18,000 was owed to Business Consulting Group Unlimited, Inc.  45    On May 29, 2009, the Company signed an operating agreement with BCGU, LLC, an entity indirectly controlled by James B. Panther, and Mark L. Baum, Esq., who are two of our directors and majority control persons, for a fee of $6,000 per month.  During October 2009, the Company amended the Operating Agreement with BCGU, LLC.  The amended Operating Agreement (the Amended Operating Agreement) allows us to retain certain day-to-day administrative services and management in consideration of a monthly fee of $30,000 per month.  The Amended Operating Agreement also included a $270,000 signature bonus.  Effective as of January 31, 2011, we entered into the Second Amended Operating Agreement (the Second Amended Operating Agreement) with BCGU, LLC which amended the terms of the previously existing First Amended Operating Agreement among the parties, entered into on October 1, 2009.  The Amended Operating Agreement provides for a term of 21 months ending in October 2012 and provides for services to  be provided that include day to day management, provision of bookkeeping and accounting personnel and administrative support staff as well as record keeping and accounting maintenance, in exchange for a new and lesser fee of $20,000 per month.  The Company was indebted to BCGU under the old agreement, in the amount of $615,000 which continues to be due and payable as of the date of the Second Amended Operating Agreement. The Second Amended Operating Agreement expires October 1, 2012.  For the year ended December 31, 2012, $121,000 had been paid to BCGU, LLC and there was $585,000 owed to BCGU, LLC.  This liability is recorded in accounts payable and accrued expenses on our balance sheets which were primarily converted into approximately 12 million shares of common stock leaving an insignificant liability on the balance sheet.  There is an option within the Second Amended Operating Agreement that allows BCGU, LLC to convert outstanding payables related to the Operating Agreements into a convertible note.  On April 6, 2011 BCGU, LLC exercised its right to memorialize its debt in note form.  As a result the Company issued BCGU, LLC a 4% convertible promissory note with a principal balance of $675,000 (representing all unpaid accrued fees beginning in May 2009 through April 2011 under this agreement), that is convertible at $.06 per share and matures on April 6, 2012.  Because BCGU, LLC is (i) substantially managing the affairs of the company, (ii) is familiar with the affairs of the Company and its strategic direction, (iii) is receiving minimal cash compensation for its efforts and is deferring most payments, the Company believes that the transactions are no less favorable to the Company than would otherwise be available from independent third parties, the Company believes, based on review of its independent directors, that the foregoing transactions and agreements are no less favorable (or even more favorable, given the flexibility) to the Company than would otherwise be available from independent third parties.  The Company has incurred debt and obligations to entities directly owned by or otherwise controlled by two of our founders, Mark L. Baum and James B. Panther, in order to fund its operations, as discussed above and elsewhere in this report.  The notes and related obligations to these founders are disclosed throughout this Report, particularly in the Risk Factors section of this report.  Agreements for Consulting Services  The Company strives to save liquid capital by paying for services or satisfying liabilities, whenever able, by issuance of stock to consultants, services providers and consultants.  The issuance of restricted stock in lieu of cash payment sometimes requires that the company pay a premium for such services.  Management believes, nonetheless, that given credit crisis, and difficulty in raising capital for R&D companies such as our own, that the benefits of issuing restricted stock for services outweigh the downside in that it leaves cash available to satisfy debts with vendors where able.  Below is a list material agreements entered into with consultants for services, all of which consultants are independent parties.  In March 2010, we issued 7,250,000 shares valued at $1,595,000 to a consultant in satisfaction of a one year consulting agreement originally entered into in January, 2010 for assistance in developing the Companys biotech and related products and, in providing research, prototype and product development assistance on our life sciences related products as well instructional videos and materials for use in academic and corporate laboratories.  The agreement is renewable by the parties for successive one-year periods and provides, among other things, for cash compensation at $250.00 per hour commencing only after June 4, 2010, for services if and as requested and agreed to by the Company.  This agreement also provides that any inventions or intellectual property created or discovered by the consultant during the course of providing services for the Company shall belong to the Company and also provides for indemnification by the consultant for damages from claims brought as a result of the consultants violation of law or fraudulent misrepresentations or breach of the agreement.   In March 2010, we issued 8,700,000 shares valued at $1,914,000 to a consultant in satisfaction of a consulting agreement entered into in January 2010, for public relations, assistance with press releases and branding, marketing awareness programs, procurement of third party research and web/statistical content and investor relations. The agreement provides, among other things, that any inventions or intellectual property created or discovered by the consultant during the course of providing services for the Company shall belong to the Company and also provides for indemnification by the consultant for damages from claims brought as a result of the consultants violation of law or fraudulent misrepresentations or breach of the agreement.  46    In March 2010, we issued 1,500,000 shares valued at $162,000 to a consultant in satisfaction of a consulting agreement entered into in February 2010, for services relating to marketing of our medical device products, and marketing to researches, academia and medical professionals. The agreement is renewable by the parties for successive one-year periods and provides, among other things, for cash compensation at $250.00 per hour commencing only after July 15, 2010, for services if and as requested and agreed to by the Company.  This agreement also provides that any inventions or intellectual property created or discovered by the consultant during the course of providing services for the Company shall belong to the Company and also provides for indemnification by the consultant for damages from claims brought as a result of the consultants violation of law or fraudulent misrepresentations or breach of the agreement.  In March 2010, we issued 600,000 shares, subject to lock-up and release restrictions based on continued services over a 3 year period ended March 1, 2013, valued at $120,000 to an accounting professional for previous and ongoing accounting, SEC compliance and financial statement preparation and compilation and related services.  In March 2010, we issued 180,000 restricted shares valued at $30,600 to a consultant in satisfaction of a consulting agreement entered into in March 2010, for services rendered.  In March 2010, we issued 112,500 restricted shares valued at $19,125 to a member of the Scientific Advisory Board, pursuant to an agreement dated as of March 1, 2010.  In March 2010, we issued 40,000 restricted shares valued at $5,560 (in addition to 60,000 shares issued in November 2010) as payment for professional services rendered. No additional amounts are owed for services under this agreement for said time period.    In May 2010, we issued 40,000 shares valued at $11,958 as payment for professional services rendered.  In May 2010, we issued 50,000 shares valued at $10,500 as payment for marketing services related to press releases and branding. No additional amounts are owed under this agreement for said period.  In May 2010, we issued 1,000,000 restricted shares valued at $204,000 to Dr. Sayatani Ghosh, a member of the Scientific Advisory Board (SAB) since 2009, pursuant to her agreement dated March 1, 2009.  This agreement has expired by its terms and no additional amounts are owed under said agreement.  In July 2010, we issued 40,000 restricted shares valued at $5,100 as full payment for professional services rendered during the months of June and July.  No additional amounts are owed for these months of service under this agreement.  In July 2010, pursuant to a consulting agreement entered into as of June 1, 2010, we issued 76,364 restricted shares valued at $12,000 as payment for solar research and film manufacturing related consulting services rendered during the months of June and July.  The consulting agreement is for a one year term and requires payment of a monthly fee of $6,000 to be paid in shares of common stock of the Company for the duration of the term unless terminated early.  In July 2010, we issued 395,833 restricted shares valued at $92,625 as payment for financial advisory related services, and development of financial models and due diligence research from December 2009 through May 2010.  In addition, the Consultant was paid cash compensation of $27,708 in 2010. No additional amounts are owed under said agreement.  In January 2011, pursuant our 2010 Plan (see Note 12.), the Company issued 750,000 shares valued at $95,625 to Heiner Dreismann, a member of our Board of Directors, for services rendered and as an incentive to remain on the board with the Company.  As a result of the Mr. Dreismanns issuance there are 24,250,000 remaining shares authorized for issuance pursuant to the 2010 Plan.  In February 2011, the Company issued 140,000 shares valued at $16,330 for payment of professional services provided during the year ended December 31, 2011 and thru February 2011.  Some of the agreements under which these shares were issued were not originally committed to writing and were entered into based on an oral agreement between the independent contractor(s) and a company representative and subsequently memorialized. These shares are cancellable based on performance of said independent contractor.   The foregoing agreements do not require us to make further issuances (except for the issuances for professional services which continue insofar as such persons continue to provide services and agree to accept shares in lieu of cash payment.  The foregoing are the material terms of the foregoing agreements, copies of which, to the extent material, are annexed as exhibits to this Report.  All stock issuances are subject to Board approval.  47    Lease For Space At University Of California- Irvine, TechPortal TM  In September 2010, the Company entered into a lease for laboratory space with the University of California, Irvine (UCI) TechPortalTM technology facilitator center, which lease commences November 1, 2010.  The lease provides approximately 150 square feet of laboratory space and certain equipment and shared office space that will be used for the Companys UCI developed patents under the Companys exclusive license agreement with UCI entered into in April 2009.  The lease is for a minimum of six (6) months and may be extended for another 24 months and may be extended thereafter by the discretion of the parties,  and provides for rent to be paid by the Company of $5,400 per year with each party required to bear the costs of their own insurance and related expenses.  The Company did not effectively commence utilizing this space until November 2010.  The foregoing is a summary only of this lease, a copy of which is filed as an exhibit to this Report.  Recent Accounting Pronouncements  We are not aware of any additional pronouncements that materially affect our financial position or results of operations.  Properties  In September 2010, we entered into a lease for laboratory space with the University of California, Irvine (UCI) TechPortalTM technology facilitator center, which lease commenced November 1, 2010.  The lease provides approximately 150 square feet of laboratory space and certain equipment and shared office space that will be used for our UCI developed patents under the UCI Biosensing SRA.  The lease is for a minimum of six (6) months and may be extended for another 24 months and may be extended thereafter by the discretion of the parties, and provides for rent of $5,400 per year with each party required to bear the costs of their own insurance and related expenses.  We did not effectively commence utilizing this space until November 2010, and in January, 2011 we moved our corporate headquarters to this location.  The foregoing are the material terms of our lease with the UCI Tech Portal, a copy of which is attached as an Exhibit to our Current Report Form 8-K, Filed November 1, 2010, the provisions of which are incorporated by reference herein.  Hedging and Derivative Activities  As at December 31, 2012, and, at December 31, 2011, we have not entered into any type of hedging or interest rate swap transaction.  We do not have any foreign operations or research activities, and, management believes, we do not have exposure to financial product risks.  Need for Additional Capital  As indicated above, management does not believe that the Company has sufficient capital to sustain its operations beyond 12 months or commercializing its technologies without raising additional capital.  We presently do not have any available credit, bank financing or other external sources of liquidity.  Accordingly, we expect that we will require additional funding through additional equity and/or debt financings.  However, there can be no assurance that any additional financing will become available to us, and if available, on terms acceptable to us.  The conversion of our outstanding notes and exercise of our outstanding warrants into shares of common stock would have a dilutive effect on our common stock, which would in turn reduce our ability to raise additional funds on favorable terms.  In addition, the subsequent sale on the open market of any shares of common stock issued upon conversion of our outstanding notes and exercise of our outstanding warrants could impact our stock price which would in turn reduce our ability to raise additional funds on favorable terms.  Any financing, if available, may involve restrictive covenants that may impact our ability to conduct our business or raise additional funds on acceptable terms.  If we are unable to raise additional capital when required or on acceptable terms, we may have to delay, scale back or discontinue our expansion plans.  In the event we are unable to raise additional capital we will not be able to sustain any growth or continue to operate.  Effects of Inflation  Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.  However, our management will closely monitor the price change and continually maintain effective cost control in operations.   48    Off Balance Sheet Arrangements  We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.  Seasonality  Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.     ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  Not Applicable.      49    ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.   The information required by this Item 8 is incorporated by reference to the Index to Consolidated Financial Statements beginning at page F-1 of this Annual Report.      Shrink NanoTechnologies, Inc. and Subsidiaries  Table of Contents  PageReports of Independent Registered Public Accounting FirmsF-2Consolidated Balance SheetsF-4Consolidated Statements of OperationsF-5Consolidated Statements of Changes in Shareholders Equity (Deficiency)F-6Consolidated Statements of Cash FlowsF-7Notes to Consolidated Financial StatementsF-8     F-1    2451 N. McMullen Booth Road
Suite.308
Clearwater, FL 33759

855.334.0934 Toll free
   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Stockholders of Shrink Nanotechnologies, Inc.  We have audited the accompanying consolidated balance sheets of Shrink Nanotechnologies, Inc. (a development stage company) as of December 31, 2012, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year then ended and for the period from January 15, 2008 (inception) through December 31, 2012.  The management of Shrink Nanotechnologies, Inc. is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements as of December 31, 211 and for the year then ended were audited by another accounting firm which issued an unqualified opinion on May 15, 2012.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Shrink Nanotechnologies, Inc. as of December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the footnotes to the financial statements, the Company has not generated revenue and has not established operations which raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in the notes. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.   /s/ DKM Certified Public Accountants  DKM Certified Public Accountants fka Drake & Klein CPAs Clearwater, Florida March 28, 2013    F-2    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors Shrink Nanotechnologies, Inc. Plano, Texas  We have audited the accompanying consolidated balance sheet of Shrink Nanotechnologies, Inc. (a development stage company) as of December 31, 2011, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year 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 audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit 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 audit provides 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 Shrink Nanotechnologies, Inc. as of December 31, 2011, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.  The accompanying 2011 financial statements were prepared assuming that the Company would continue as a going concern.  The Company had not yet generated revenue, had incurred losses from operations, and was dependent on financing to continue operations.  These conditions raised substantial doubt about the Company's ability to continue as a going concern.  Management's plans in regards to those matters are described in Note 2.  The 2011 financial statements do not include any adjustments that might result from the outcome of that uncertainty.  /S/ PETERSON SULLIVAN LLP  Seattle, Washington May 15, 2012   F-3     SHRINK NANOTECHNOLOGIES, INC. and SUBSIDIARIES(A Development Stage Company)CONSOLIDATED - BALANCE SHEETSDecember 31,20122011ASSETSCurrent assetsCash$6,673$731Deposits1,5001,500Prepaid expenses4314,291Inventory2,7802,780Total current assets11,3849,302Property, plant and equipment, net3,4216,154Intangible assets, net10,11810,118TOTAL ASSETS$24,923$25,574LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilitiesConvertible debentures, net of discount, default - related party$298,121$290,621Convertible debentures, related party675,000675,000Notes payable, related party22,000-Accounts payable and accrued expenses1,167,190909,537Due to related parties121,650228,983Accrued interest205,374122,212Deferred revenue-2,727Total current liabilities2,489,3352,229,080TOTAL LIABILITIES2,489,3352,229,080COMMITMENTS (See Note 7)STOCKHOLDERS' DEFICITPreferred stock, 25,000,000 shares authorized, $0.001 par value
issued and outstanding 20,000,000 and 20,000,000
at September 30, 2012 and December 31, 2011, respectively20,00020,000Common stock, 475,000,000 shares authorized, $0.001 par value
issued and outstanding 224,746,249 and 217,393,308
at September 30, 2012 and December 31, 2011, respectively224,746217,393Additional paid in capital7,070,0577,019,323Accumulated deficit(9,779,215)(9,460,222)TOTAL STOCKHOLDERS' DEFICIT(2,464,412)(2,203,506)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT$24,923$25,574The accompanying notes are an integral part of these consolidated financial statements.   F-4    SHRINK NANOTECHNOLOGIES, INC. and SUBSIDIARIES(A Development Stage Company)CONSOLIDATED - STATEMENTS OF OPERATIONSFromInception(January 15,For the Years Ended2008) throughDecember 31,December 31,201220112012REVENUESRevenues$2,756$7,513$10,269Cost of sales-151151Gross profit2,7567,36210,118EXPENSESResearch and development-131,786516,868Professional fees83,275130,216513,110General and administrative145,081506,9207,181,461Loss on disposal of property, plant and equipment-14,09614,096Loss on asset impairment--347,921Depreciation and amortization2,7336,400120,260Total operating expenses231,089789,4188,693,716Loss from operations(228,333)(782,056)(8,683,598)-Other income (expense)Equity investment loss-(38,036)(38,036)Interest expense(90,660)(292,392)(1,078,090)Loss from extinguishment of debt--(118,121)Total other income (expense)(90,660)(330,428)(1,234,247)Loss from continuing operations(318,993)(1,112,484)(9,917,845)Discontinued Operations(Loss) from discontinued Blackbox business-(4,792)(5,195)Income from discontinued Audiostocks business--143,825Income (loss) from discontinued operations-(4,792)138,630NET LOSS$(318,993)$(1,117,276)$(9,779,216)Net loss per common share, basic and diluted:Loss from continuing operations$(0.00)$(0.01)Loss from discontinued operations-(0.00)Net loss per common share:$(0.00)$(0.01)Weighted average common and common equivalent shares outstanding
Basic and diluted224,284,179208,724,810The accompanying notes are an integral part of these consolidated financial statements.   F-5


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|--------------------------------------------------------------------------------------- | ---------- | --------------- | ------ | ------------ | ----------- | ---------- | ------- | ----------- | --------- | ------- | ----------- | ----------- | ----------- | ----------
|SHRINK NANOTECHNOLOGIES, INC. and SUBSIDIARIES                                         
|(Development Stage Company)                                                            
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)                              
|From January 15, 2008 date of inception through December 31, 2012                      
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             | Deficit     |             |           
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             | accumulated |             |           
|                                                                                        |            | Preferred Stock |        | Common Stock |             | Additional |         | during  the |           | Total  
|                                                                                        |            |                 |        | Par          |             |            |         | Par         |           | Paid-in |             | development |             |           
|                                                                                        |            | Shares          |        | Value        |             | Shares     |         | Value       |           | Capital |             | stage       |             |           
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             | (restated)  |             | (restated)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Issuance founder shares                                                                 | 50         | $               | -      |              | 44,444,440  | $          | 44,444  | $           | (44,443)  | $       | -           | $           | 1          
|Net Loss                                                                                | -          |                 | -      |              | -           |            | -       |             | -         |         | (88,493)    |             | (88,493)   
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Balance at December 31, 2008                                                            | 50         | $               | -      |              | 44,444,440  | $          | 44,444  | $           | (44,443)  | $       | (88,493)    | $           | (88,492)   
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Reverse merger                                                                          | 20,000,100 |                 | 20,000 |              | 115,004,875 |            | 115,005 |             | (153,896) |         | -           |             | (18,891)   
|Beneficial conversion feature convertible notes                                         | -          |                 | -      |              | -           |            | -       |             | 69,900    |         | -           |             | 69,900     
|Value associated with warrants detached
from notes                                      |            |                 |        |              |             |            |         |             |           |         |             |             |            
|-                                                                                       |            | -               |        | -            |             | -          |         | 30,100      |           | -       |             | 30,100     
|Conversion of convertible debt                                                          | -          |                 | -      |              | 1,916,670   |            | 1,916   |             | 55,584    |         | -           |             | 57,500     
|Issuance of shares for license issuance fee                                             | -          |                 | -      |              | 495,500     |            | 496     |             | 99,504    |         | -           |             | 100,000    
|Shares issued for cash at $.04 per share                                                | -          |                 | -      |              | 8,875,000   |            | 8,875   |             | 346,125   |         | -           |             | 355,000    
|Issuance of shares for services valued at
$0.215 per share                              |            |                 |        |              |             |            |         |             |           |         |             |             |            
|-                                                                                       |            | -               |        | 2,185,000    |             | 2,185      |         | 467,713     |           | -       |             | 469,898    
|Value of stock options granted                                                          | -          |                 | -      |              | -           |            | -       |             | 69,901    |         | -           |             | 69,901     
|Cancellation of series c preferred stock                                                | (150)      |                 | -      |              | -           |            | -       |             | (143,825) |         | -           |             | (143,825)  
|Loss from extinguished debt                                                             | -          |                 | -      |              | -           |            | -       |             | 118,121   |         | -           |             | 118,121    
|Net Loss                                                                                | -          |                 | -      |              | -           |            | -       |             | -         |         | (1,725,202) |             | (1,725,202)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Balance at December 31, 2009                                                            | 20,000,000 | $               | 20,000 |              | 172,921,485 | $          | 172,921 | $           | 914,784   | $       | (1,813,695) | $           | (705,990)  
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Beneficial conversion feature convertible notes                                         | -          |                 | -      |              | -           |            | -       |             | 80,679    |         | -           |             | 80,679     
|Value associated with warrants detached
from notes                                      |            |                 |        |              |             |            |         |             |           |         |             |             |            
|-                                                                                       |            | -               |        | -            |             | -          |         | 590,154     |           | -       |             | 590,154    
|Conversion of convertible debt at $.10 per share                                        | -          |                 | -      |              | 1,129,226   |            | 1,129   |             | 111,793   |         | -           |             | 112,922    
|Issuance of shares for services valued at
$0.21 per share                               |            |                 |        |              |             |            |         |             |           |         |             |             |            
|-                                                                                       |            | -               |        | 19,984,697   |             | 19,985     |         | 4,088,260   |           | -       |             | 4,108,246  
|Value of stock options granted                                                          | -          |                 | -      |              | -           |            | -       |             | 196,854   |         | -           |             | 196,854    
|Net Loss                                                                                | -          |                 | -      |              | -           |            | -       |             | -         |         | (6,529,252) |             | (6,529,252)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Balance at December 31, 2010                                                            | 20,000,000 | $               | 20,000 |              | 194,035,408 | $          | 194,035 | $           | 5,982,525 | $       | (8,342,947) | $           | (2,146,387)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Blackbox Semiconductor share exchange                                                   | -          |                 | -      |              | 14,000,000  |            | 14,000  |             | (1,500)   |         | -           |             | 12,500     
|Issuance of shares at $0.17 per share                                                   | -          |                 | -      |              | 411,764     |            | 412     |             | 69,588    |         | -           |             | 70,000     
|Conversion of convertible debt at $0.10 per share                                       | -          |                 | -      |              | 6,589,442   |            | 6,589   |             | 651,655   |         | -           |             | 658,244    
|Conversion of convertible debt at $0.08 per share                                       | -          |                 | -      |              | 894,152     |            | 894     |             | 70,638    |         | -           |             | 71,532     
|Issuance of shares for services valued
at $0.16 per share                               |            |                 |        |              |             |            |         |             |           |         |             |             |            
|-                                                                                       |            | -               |        | 1,462,542    |             | 1,463      |         | 229,098     |           | -       |             | 230,561    
|Value of stock options granted                                                          | -          |                 | -      |              | -           |            | -       |             | 17,319    |         | -           |             | 17,319     
|Net Loss                                                                                | -          |                 | -      |              | -           |            | -       |             | -         |         | (1,117,276) |             | (1,117,276)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Balance at December 31, 2011                                                            | 20,000,000 | $               | 20,000 |              | 217,393,308 | $          | 217,393 | $           | 7,019,323 | $       | (9,460,222) | $           | (2,203,506)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Issuance shares for services at .0079                                                   | -          |                 | -      |              | 7,352,941   |            | 7,353   |             | 50,735    |         | -           |             | 58,088     
|Net Loss                                                                                | -          |                 | -      |              | -           |            | -       |             | -         |         | (318,993)   |             | (318,993)  
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|Balance at December 31, 2012                                                            | 20,000,000 | $               | 20,000 |              | 224,746,249 | $          | 224,746 | $           | 7,070,058 | $       | (9,779,215) | $           | (2,464,411)
|                                                                                        |            |                 |        |              |             |            |         |             |           |         |             |             |             |           
|The accompanying notes are an integral part of these consolidated financial statements.

F-6     SHRINK NANOTECHNOLOGIES, INC. and SUBSIDIARIES(A Development Stage Company)CONSOLIDATED - STATEMENTS OF CASH FLOWSFromInception(January 15For the years ended2008) throughDecember 31,December 31,201220112012CASH FLOWS FROM OPERATING ACTIVITIESNet loss$(318,993)$(1,117,276)$(9,779,215)Adjustments to reconcile net earnings to net cash usedby operating activities:Depreciation and amortization2,7338,578122,840Asset impairment--347,921Debt discount accretion-198,021763,333Non-cash share-based payments58,089247,8805,143,537Loss on disposal of property, plant and equipment-14,09614,096Loss from extinguishment of debt--118,121Loss from equity investment-38,03638,036Changes in assets and liabilities, net of effects from acquisitions-Deposits-(1,500)(1,500)Accounts receivable--1,672Prepaid expenses3,86024,77119,819Inventory-(2,780)(2,780)Accounts payable and accrued expenses257,65154,809944,312Accrued interest83,16293,875278,566Due to related parties(107,333)236,083735,000Deferred revenue(2,727)2,727-NET CASH USED IN OPERATING ACTIVITIES(23,558)(202,680)(1,256,242)CASH FLOWS FROM INVESTING ACTIVITIESCash purchased at acquisition--62,404Proceeds from the sale of BlackBox-12,50012,500Additions to equipment-(2,171)(18,284)Proceeds from disposal of intangible assets-500500Additions to intangible assets-(1,199)(269,200)NET CASH USED IN INVESTING ACTIVITIES-9,630(212,080)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from subsidiary prior to merger--12,500Advances from related parties-61,65064,900Proceeds from issuance of common stock-70,000425,001Proceeds from note payable, related party22,000-22,000Proceeds from convertible debentures7,50060,000950,594NET CASH PROVIDED BY FINANCING ACTIVITIES29,500191,6501,474,995NET CHANGE IN CASH5,942(1,400)6,673CASH BALANCESBeginning of period7312,131-End of period$6,673$731$6,673NON-CASH INVESTING AND FINANCING TRANSACTIONS :Stock issued to satisfy convertible debt obligation$-$729,776$729,776Stock issued in share exchange of Blackbox Semiconductor, Inc.$-$37,036$37,036Convertible debt issue to satsify related party payable$-$675,000$675,000The accompanying notes are an integral part of these consolidated financial statements.   F-7    SHRINK NANOTECHNOLOGIES, INC. Notes to the Consolidated Financial Statements For the years ended December 31, 2012 and 2011  NOTE 1.  ORGANIZATION AND NATURE OF OPERATIONS  Shrink Nanotechnologies, Inc. (the Company or the Successor Entity or us or we) was incorporated in the state of Delaware on January 15, 2002, as Jupiter Processing, Inc.  On January 13, 2005, the Company changed its name to Audiostocks, Inc.  On May 14, 2009, the Company changed its name to Shrink Nanotechnologies, Inc.  Following a shareholder action described in a Form 14C filed with the Securities and Exchange Commission on February 15, 2010, the Board of Directors affected a 5 for 1 forward split.  All per share amounts and calculations in our presentation reflect this change.  On May 29, 2009, the Company entered into and completed a share exchange agreement with Shrink Technologies, Inc., (Shrink) a privately-owned California corporation which held most of our Shrink related business and intellectual property assets.   The exchange of shares with Shrink Technologies, Inc. has been accounted for as a reverse acquisition with the business of Shrink Technologies, Inc. as the surviving Company for accounting and financial reporting purposes.  Accordingly, the acquisition has been recorded as a recapitalization of the Company.  Therefore, the historical financial statements presented prior to the acquisition date, are those of Shrink Technologies, Inc., the operating entity and consolidated with the Company post acquisition (see Note 5.).  We are, with our subsidiaries, dedicated to commercializing biotechnology and other high technology intellectual property, know-how and related products, from universities and medium to large commercial businesses, that may be deployed as commercial products or licensing opportunities in the near (immediate to 2 years) and mid-term (2-4 years).  We have also recently undertaken a program to seek to acquire small companies with developed and ready-to-go-to-market products, strong intellectual property portfolios, management and operational infrastructure.  Historically, we have primarily focused our resources in the life sciences market; however, we also have successfully acquired technologies in, for example, the semiconductor space.  With all technologies we acquire and allocate resources to, our objective is to develop products and intellectual property resources in order to generate cash flow, and ultimately, value for our shareholders.  Our business currently consists of four operating units: Cell Culturing Products ; Microfluidic Systems and Kits ; Special Substrates ; and Internal Development and Acquisitions .  Our Cell Culturing Unit is dedicated to the commercialization of our stem cell culture platform known as StemDisc TM and its related software, as well as patent pending NanoShrink TM based issue engineering substrates known for our Cell Align TM .  Our Microfluidic Systems and Kits business is seeking to market a unique and patented modular microfluidic system we exclusively licensed from Corning Incorporated, as well as a version of NanoShrink TM that will enable the low cost development of two dimensional microfluidic system prototypes.  Our Special Substrates business is developing specialized versions of NanoShrink TM substrates that have unique surface plasmon resonance capabilities and which may be integrated into existing market leading devices and systems, including immunoassays.  And finally, our Internal Development and Acquisitions Unit is actively seeking and/or developing technologies that are a part of a development and commercialization program, as well as engaging in due diligence on technologies and businesses we are in the process of evaluating for acquisition purposes.  Our corporate mission is to become a leading high technology development company.  While we presently possess unique product and technology capabilities for the cell culture, immunoassay development, cell imaging, device prototyping and drug discovery markets, we intend to continue to create shareholder value through organic and inorganic growth.  NOTE 2.   GOING CONCERN  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company sustained net losses of $318,993 and used cash in operating activities of $23,558 for the year ended December 31, 2012.  The Company had a working capital deficiency, stockholders deficiency and accumulated deficit of $2,477,951, $2,464,412 and $9,779,215, respectively, at December 31, 2012.  These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Companys continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations.  As a result of the aforementioned conditions, the Company may be unable to meet certain obligations to fund future research and development activities.  The Companys continuation as a going concern is dependent on obtaining additional outside financing, as it is not anticipated that the Company will have profitable operations from its research and development activities during the near term.  The Company has funded losses from its research and development and other operations primarily from the issuance of debt and equity.  The Company believes that through government grants, partnerships and arrangements with universities, and the issuance of equity and debt it may be able continue to fund operating losses in the short-term until the Company can generate revenues sufficient to fund its operations.  If management cannot achieve its plans there is a possibility that operations will discontinue.   F-8    NOTE 3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Principles of Consolidation  The consolidated balance sheets include the accounts of Shrink Nanotechnologies, Inc. and its wholly owned subsidiary Shrink Technologies, Inc., and thereby reflecting the transactions related to the May 29, 2009 effective date of the Exchange Agreement. The consolidated statements of operations include the operations (which consisted mostly of research and development) of the predecessor entity, Shrink Technologies, Inc. from inception on January 15, 2008 and the Company from May 29, 2009, the effective date of the acquisition of the Shrink business.  All significant intercompany accounts and transactions have been eliminated in consolidation.  Research and Development  The Company expenses all costs related to research and development as they are incurred.  Revenue Recognition and Deferred Revenue  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.  In addition to the aforementioned general policy, the following are the Companys statement of policy with regard to certain service contracts.  The Company records revenue from certain service contracts which include milestones using the milestone method if the milestones are determined to be substantive.  A milestone is considered to be substantive if management believes there is substantive uncertainty that it will be achieved and the milestone consideration meets all of the following criteria:  · It is commensurate with either of the following:  o The Companys performance to achieve the milestone; or  o The enhancement of value of the delivered item or times as a result of a specific outcome resulting from the Companys performance to achieve the milestone.  · It relates solely to past performance  · It is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement  The individual milestones are determined to be substantive or non-substantive in their entirety and milestone consideration is not bifurcated.  Related to these certain service contracts accounted for under the milestone method the Company may also receive service fees in advance upon signing of the contract.  Amounts in excess of revenue recognized are classified as deferred revenue on the consolidated balance sheet.  Cash and Cash Equivalents  Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.   Prepaid Expenses  Prepaid expenses consisted of the following at:  December 31,December 31,20122011Prepaid expenses$431$4,291Total Current Prepaid Expenses$431$4,291     F-9    Inventory  Inventory at December 31, 2012 consisted of StemDisc450 devices, which are carried at the lower of cost or market value on a first-in first-out basis.  Inventories at December 31, 2012 and December 31, 2011 consist of the following:  December 31,December 31,20122011Finished goods$2,780$2,780Total$2,780$2,780  The cost of materials and supplies purchased for testing and prototype products are expensed as research and development.   Property, Plant and Equipment  Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over estimated useful lives of the asset.  During the year ended December 31, 2012 and 2011 the Company recorded $2,733 and $4,727 in depreciation expense, respectively.  December 31,December 31,20122011Property Plant and Equipment, net:Computer Software and Hardware$12,503$12,503Furniture and Equipment682682Accumulated Depreciation(9,765)(7,032)Total$3,421$6,154  On December 31, 2011, the Company considered its Stockvert assets fully impaired.  Management concluded the asset was no longer being utilized and did not hold any current or future economic benefit for the Company.  The Company does not expect to sell the asset, nor does management plan to pursue potential buyers.  As a result of the impairment, the Company recorded a loss related to the impairment of its Stockvert assets of $67,869 during the year ended December 31, 2010.  Intangible Assets  Intangible assets consist of intellectual property rights of an exclusive license to several patent pending inventions surrounding our core technologies and trademarks.   Intangible assets are tested on an annual basis for impairment or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value.  Intangible assets with estimable useful lives and those assets with defined lives due to the legal nature of the asset are amortized over their estimated useful lives, of 8 years, using the straight-line method.  Intangible assets consisted of the following at:   December 31,December 31,20122011Intangible Assets, net:Trademarks$10,118$10,118Less: Amortization--Total$10,118$10,118  During June 2011 the Company completed a share exchange agreement with BlackBox Semiconductor, Inc., a Nevada publicly traded company and as a result sold its ownership interests in its subsidiary BlackBox Semiconductor, Inc., a Delaware company (BlackBox Subsidiary), which included the Companys interest related to the license agreement with the University of Chicago.   During year ended December 31, 2012 and 2011, the Company recorded $0 and $0 in amortization expense, respectively, related to the BlackBox Subsidiary intangible assets.  F-10    During year ended December 31, 2011, the Company disposed of intangible assets in the amount of $1,674.  To date, the Company has not utilized its current trademarks to manufacture products/parts for sale, testing and evaluation.  However management expects to utilize the trademarks in the future.  Shrink continues to make the required legal filings and uses of the trademark, the trademarks have an indefinite life, therefore there is no amortization.  Investment in BlackBox Semiconductor, Inc.  The Company owns approximately 19% interest in BlackBox Parent and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to influence the operating and financial decisions of BlackBox Parent.  Under this method, the Company recognizes earnings and losses of BlackBox Parent in its financial statements and adjusts the carrying amount of its investment in BlackBox Parent accordingly.  The Companys share of earnings and losses are based on the shares of common stock and in-substance common stock of BlackBox Parent held by the Company.  Any intra-entity profits and losses are eliminated.  For the year ended December 31, 2011 the Company incurred a loss of $38,036 related to the Company's proportionate share of BlackBox Parent activity.   Accounts Payable  Accounts payable consisted of the following at:  December 31,December 31,20122011Accounts payable$1,167,190$598,104Stock-based payables-311,433Total$1,167,190$909,537  Fair Value Measurements  Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. US GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used in valuation methodologies into the following three levels:  ·Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.·Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.·Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.  Convertible Notes  We calculated the value of the beneficial conversion feature embedded in the Convertible Notes.  If the note is contingently convertible, the intrinsic value of the beneficial conversion feature is not recorded until the note becomes convertible.  Convertible notes are split into two components: a debt component and a component representing the embedded derivatives in the debt. The debt component represents the Companys liability for future interest coupon payments and the redemption amount. The embedded derivatives represent the value of the option that debt holders have to convert into ordinary shares of the Company.  If the number of shares that may be required to be issued upon conversion of the Convertible Notes is indeterminate, the embedded conversion options of the Convertible Notes were accounted for as derivative instrument liabilities rather than equity.   The debt component of the convertible note is measured at amortized cost and therefore increases as the present value of the interest coupon payments and redemption amount increases, with a corresponding charge to finance cost  other than interest. The debt component decreases by the cash interest coupon payments made. The embedded derivatives are measured at fair value at each balance sheet date, and the change in the fair value is recognized in the income statement.  F-11    Concentration of Risk  A financial instrument which potentially subjects the Company to concentrations of credit risk is cash.  The Company places its cash with financial institutions deemed by management to be of high credit quality.  Provision for Income Taxes  The Company determines whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.  If the more-likely-than- not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.  Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  The components of current income tax expense as of December 31, 2012 and 2011 consist of the following:   December  31,December  31,20122011Current federal tax expense$-$-Current state tax expense--Change in NOL benefits(136,400)(520,386)Change in depreciation differences--Change in contribution benefits--Change in valuation allowance136,400520,386$-$-  The net deferred income taxes in the accompanying balance sheet include the following amounts of deferred income tax assets:   December  31,December  31,20122011Net income tax assets:Net operating loss carryforward$4,180,600$2,821,340Contribution carryforward--Less: Deferred income tax liabilitiesDepreciation differences--Less: Valuation allowance(4,180,600)(2,821,340)Net deferred income tax asset$-$-  The following is a reconciliation of the provision for income taxes at the United States of America federal income tax rate to the income taxes reflected in the statements of operations:  Tax expense (credit) at statutory rate  federal35%State tax expense net of federal tax8.75%Change in valuation allowance(43.75%)Tax expense at actual rate0%   As of December 31, 2012, the Companys net deferred tax assets are offset by a valuation allowance of $4,180,600. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the year in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment.  As of December 31, 2012 and 2011, the Company has approximately $9,779,000 and $8,298,000, respectively, of net operating loss carryforwards available to reduce future taxable income. These carryforwards will begin to expire in 2028.  F-12    At December 31, 2012, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate.  The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.  The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes.  As of December 31, 2012 and 2011, the Company had no accrued interest or penalties related to uncertain tax positions.  The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2012 through 2008 (inception).  Basic Net Loss per Share of Common Stock  Basic net loss per common share is based on the weighted average number of shares outstanding during the periods presented.  Diluted earnings per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period.  At December 31, 2012 there was $1,095,333 in convertible debt outstanding, 20,000,000 preferred shares and stock options that total 44,683,088 in common stock equivalents.  The Company also has consulting contracts involving possible common stock issuances of up to approximately 1,980,813 shares.  Common stock equivalents resulting from the issuance of these stock options have been considered, but have not been included in the per share calculations because such inclusion would be anti-dilutive.   For the yearFor the yearended December 31,ended December 31,20122011Numerator  (loss)$(318,993)$(1,117,276)Denominator  weighted average
number of shares outstanding224,284,179208,724,810Loss per share$(0.00)$(0.01)  Stock-Based Payments  The Company measures the cost of services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant, and recognizes the cost over the period during which an employee is required to provide services in exchange for the award.  For purposes of determining estimated fair value of stock-based payment awards, the Company utilizes a Black-Scholes option pricing model, which requires the input of certain assumptions requiring management judgment. Because the Companys stock option awards have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect fair value estimates, existing models may not provide a reliable single measure of the fair value of employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of stock-based compensation. Circumstances may change and additional data may become available over time that could result in changes to these assumptions and methodologies and thereby materially impact the fair value determination of future grants of stock-based payment awards. If factors change and the Company employs different assumptions in future periods, the compensation expense recorded may differ significantly from the stock-based compensation expense recorded in the current period.   Use of Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. Estimates and assumptions principally relate to the fair value and forfeiture rates of stock based transactions, and long-lived asset depreciation and amortization, and potential impairment.   F-13    Recent Accounting Pronouncements  In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and  IFRSs.  The update contains the results of the work of the FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this update are effective for periods beginning after December 15, 2011 and as a result are not yet applicable to the Company. The Company is evaluating the impact of the update on its consolidated financial statements.  NOTE 4.  BLACKBOX SEMICONDUCTOR SHARE EXCHANGE, RELATED PARTY, DISCONTINUED OPERATIONS  In March 2011, the Company entered into an agreement in principle to transfer its BlackBox Semiconductor, Inc. subsidiary (the BlackBox Subsidiary) to a separate public company as the BlackBox business will require different management and commercial resources and relationships, as well as significant amounts of capital and time to commercialize products.  On June 3, 2011, the Company finalized the agreement with BlackBox Semiconductor, Inc., f/k/a Visitrade, Inc., a Nevada corporation, a publicly traded company, (the BlackBox Parent), as purchaser, for the exchange of all of the shares of  BlackBox Subsidiary from the Company (the Share Exchange).  The material terms of the Share Exchange were:  Shrink Nanotechnologies, Inc. issued 14,000,000 shares of restricted common stock to BlackBox Parent and 100% equity interest in BlackBox Subsidiary.  In exchange, Shrink Nanotechnologies, Inc. should have received $75,000 cash payable prior to December 31, 2012, and 27,030,000 shares of BlackBox Parent, representing approximately 19.9% of BlackBox Parents equity.  The cash received from the transaction shall be used to recover costs Shrink Nanotechnologies, Inc. invested into BlackBox Subsidiary.   The $75,000 payment was settled for $12,500 in 2011.  Shares of BlackBox Parent will either be sold or spun off to shareholders in whole or in part pursuant to an effective registration statement, as may be determined by the board at a later date, if and when such shares become liquid.  No such determination has been made as of the date of this filing.  The primary asset of the BlackBox Subsidiary includes an exclusive License Agreement (the Chicago License Agreement) with the University of Chicago, granting to BlackBox Subsidiary the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246, and provisional applications 61/214,434 and 61,264,790) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License Agreement.  The foregoing transaction was deemed a related party transaction in that BlackBox Parent is controlled by Noctua Fund Manager, and its principals, namely, Messrs. Baum and Panther. These are the same principals that control the Company.  Accordingly, the Share Exchange has been accounted for as a transaction between entities under common control.   Because the transaction was between entities under common control, the Company did not record a gain or loss related to the Share Exchange.  The quoted market price of BlackBox Parents common stock received by Shrink Nanotechnologies, Inc. was equal to $12,159,000 at the date of the Share Exchange.  Due to factors including, but not limited to the transaction being consummated between entities under common control and lack of market/inactivity in BlackBox Parents common stock, the Company recorded the transaction based on the historical cost basis of BlackBox Subsidiary paid into by Shrink Nanotechnologies, Inc. and the cash consideration aspect of the Share Exchange.  Management has determined that the Company has the ability to influence the operating and financial decisions of BlackBox Semiconductor, Inc. following the transfer and has recorded this investment under the equity method of accounting.  At December 31, 2012, the quoted market price for these shares was equal to $540,600.  The Company does not believe that the market for these shares will mature in the near future and it is therefore difficult to assess the true potential to turn these shares into cash.  F-14    The Company has disposed of all assets related to its previous business segment, BlackBox Subsidiary.  The Company has no revenues from this business, and no longer has any assets, or liabilities that will be or would be transferred, sold or disposed of related to this business segment through the date of discontinuance.  Nonetheless, as the accompanying consolidated financial statements reflect the year ended December 31, 2011, said financial statements include these operations prior to the completion of the Share Exchange.  The following condensed Balance Sheet represents BlackBox Subsidiarys financial position as presented on a consolidated basis within the accompanying financial statements at June 3, 2011 (date of the Share Exchange) and December 31, 2011:   At June 3,At December 31,20112010(unaudited)ASSETSCash$-$1,000License, net39,67741,595TOTAL ASSETS$39,677$42,595LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Accounts payable$1,641$-Due to Shrink Nanotechnologies, Inc.-41,998TOTAL LIABILITIES1,64141,998TOTAL STOCKHOLDERS' EQUITY38,036597TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$39,677$42,595  NOTE 5.  RESEARCH AND LICENSE AGREEMENTS  A. UCM Research and License Agreements (April 2009)  Terminated  On June 16, 2008 we entered into an agreement (the Option Agreement) with the Regents of the University of California, Merced.  Parallel to the Option Agreement, Shrink entered into another agreement (the Research Agreement) with the UC Regents, based on work which was to be performed at the University of California, Merced.  The Option Agreement provided Shrink with the exclusive right to license two patent pending inventions (the Regents Inventions), and required Shrink to make annual payments to the Regents as well as royalty payments on any commercialized products based on the Regents Inventions.   Shrinks rights under the Option Agreement required customary measures of performance on the part of Shrink in terms of patent cost maintenance and other payments of costs associated with the Regents Inventions.  With respect to the Option Agreement, Shrinks rights were broad in terms of the potential access Shrink had to use the Regents Inventions in products, and services and many of the key economic terms of a future license, should Shrink exercise its rights under the Option Agreement, were agreed to in the Option Agreement.  We exercised our rights under the Option Agreement and as a result, entered into the License Agreement for processes for microfluidic fabrication and other inventions with the Regent on April 29, 2009.   On December 13, 2010, the Company terminated its License Agreement with the UC Regents Merced, (the Microfluidics License). This license required that the Company continue to pay ongoing research costs as well as license fees, in exchange for an exclusive license to use certain microfluidic fabrication and other inventions.  Some of these patent rights also related to the Company ’ s ShrinkChip Manufacturing Solution TM , however, the Company believes that there are commercially viable and affordable alternatives to the lost licenses that do not affect the Company ’ s intended product offerings.  In addition, the Company still owns and maintains its rights to the ShrinkChip TM related trademarks, which were not part of the terminated Microfluidics License. The Company will not be refunded its initial research and license fees paid (amounting to $90,985 and 495,500 shares issued to date), and the Company has certain additional further material liabilities under this agreement relating to patent filing legal prosecution costs or development fees of up to $234,000, which amount is included in accounts payable, and is subject to dispute.  In addition, the Company is required to cover certain legal patent costs during the 90 day period after termination.  The Company does not believe that it has any other costs or liabilities relating to this license agreement.  F-15    The Research Agreement committed Shrink to fund research based on the Regents Inventions at UCM up to the amount of $640,935 in accordance with a planned budget.  The Research Agreement provided Shrink with an exclusive right to license all technology that is discovered from the monies funded to UCM through the Research Agreement.  Shrink is required to reimburse UCM on a quarterly basis for all direct and indirect cost incurred in connection with the research.  These funds are used to fund researchers salaries, equipment, materials, supplies, and other miscellaneous expenses incurred by UCM.  On May 7, 2010, pending a review by our executive and management team, we requested that UC Merced halt all expenditures under the UC Merced Research Agreement.  Subsequent to the aforementioned review, going forward, Shrink management does not foresee conducting and therefore funding research under its current agreement with the UC Regents related to the Merced campus.  B.   Research Agreement UC Regents Irvine Campus (May 2010)  During May, 2010, Shrink entered into the Sponsored Research Agreement with UC Regents on behalf of the Irvine campus.  The SRA Agreement is for a term of three years or such time as the research is completed, whichever is longer. The SRA Agreement may be terminated by the Company subject to satisfying appropriate notice requirements required under the agreement.  The SRA Agreement provides, among other things, that the Company will sponsor specified research relating to development of (i) integrated, manufacturable, nanostructured substrates for biosensing and testing of new bioassays as well as assessing viability of other shrinkable materials, and (ii) stem cell tools that use shrinkable plastic microfluidic technologies, each as more fully provided in the SRA Agreement.  The SRA Agreement provides that the Company shall sponsor the research costs up to a budget of $632,051, of which $20,000 has been paid to the California Regents.  We have exclusive access to license intellectual property from the SRA Agreement beginning from July 1, 2009 forward according to the terms of the SRA Agreement.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling $632,051 during the three year term of the SRA Agreement.  Of this amount $202,796 shall be paid during the 12 month period ended April 30, 2011; $211,311 shall be paid during the 12 month period ended April 30, 2012; and the remaining $217,944 shall be paid during the 12 month period ended April 30, 2013.  The foregoing payments are to be paid in quarterly installments of 1⁄4 of the total cash fees payable during such 12 month period.  As of December 31, 2012 and through the date of this report, none of the payments were made.  In the event that research under the SRA Agreement yields additional inventions and intellectual property, we have the right to enter into an additional exclusive license agreement with the UC Regents.  In order to exercise its rights, we must not be in default of any payment or funding obligation under the SRA Agreement and, must notify the UC Regents of its intent to license the additional intellectual property within nine (9) months of receipt of notice from the UC Regents of the invention.  In addition, among other conditions and limitations, we would be required to pay for patent application and filing costs relating to additional patents licenses and, to prosecute its rights as against third parties.  The license we have the right to enter into under the SRA Agreement, is substantially similar to the previously disclosed license rights we have with the UC Regents above, except that we are not required to pay an initial license issue fee, or initial legal fee reimbursement of $35,000, and the terms of the annual license fee has changed to a fee of $5,000 for rights to each patent license acquired by us, with an overall license maintenance fee of $10,000 per annum commencing the fourth year after entry into the license (the License Date).  In addition, we are required to pay a fee of 30% of certain income generated from third party sublicenses of the additional intellectual property we license as well as royalty payments of:   · 2.5% of net sales where the first sale occurs within three years after the License Date; · 4% of net sales where the first sale occurs between three and six years after the License Date; · and 5% of net sales where the first sale occurs beyond six years after the License Date. · In each case, the minimum earned royalty payment paid shall be $15,000 commencing the year of the first commercial sale of the licensed technology, subject to increase, if and as we expand the SRA License to include additional patents from time to time.   F-16    C.  MF3 Membership and DARPA (June 2010)  The Company has become party to a Consortium Agreement (or, the DARPA Co-Funding Agreement) among Academic Partners and Sponsors of the Micro/Nano Fluidics Fundamentals Focus MF3 Center, which is headquartered at the UCI, which provides for partial matched funding from the Defense Advanced Research Projects Agency.  The DARPA Co-Funding Agreement became effective as of June 1, 2010.  The terms of the DARPA Co-Funding Agreement provides, among other things, that DARPA will match the Company, dollar for dollar (i.e. will provide 50% of certain funding on a matched dollar for dollar basis with third parties, if any), for funding commitments made by the Company, through a sponsored research agreement that is otherwise eligible for DARPA marching funds.  We have not received any capital commitments for funding yet and no assurance can be made that we will make or secure additional financing for research projects that qualify for DARPA matching funds, or that we will remain eligible for the same.  As a result, for the period ended December 31, 2011 the Company had not recorded any grant revenues related to this agreement.  D.   Research Agreement UC Regents Irvine Campus (September 2010)  As of September 22, 2010, Shrink entered into the Sponsor Research Agreement (or, the EB Research Agreement) with UC Regents on behalf of the Irvine Campus (UCI).  The EB Research Agreement was for a term of three months, retroactively beginning August 1, through October 31, 2010.  Although the term end date has passed, this agreement has not been terminated and work is ongoing with the project based on good faith between the two parties.  The EB Research Agreement may be terminated by the Company or UCI subject to satisfying the appropriate notice requirements required under the agreement.  The Companys research sponsorship obligations require it to provide funding (which may be from the Company or other third parties) totaling up to $67,040 during the term of the EB Research Agreement.  E.   License Agreement with University of Chicago (November 2010)  Effective as of November 30, 2010, through our wholly owned subsidiary, Blackbox Semiconductor, Inc., (Blackbox), entered into an exclusive License Agreement (the Chicago License Agreement) with the University of Chicago, wherein Blackbox licensed the exclusive, worldwide right to use and sublicense Chicagos patent-pending Materials and Methods for the Preparation of Nanocomposites (US PTO Application No. PCT/US10/32246, and provisional applications 61/214,434 and 61/264,790) and future patent applications filed by the University of Chicago based on certain other patentable technologies described in the Chicago License Agreement. Blackboxs license is restricted to fields of use other than thermoelectric applications.  Effective June 3, 2011, following the Share Exchange involving our BlackBox Subsidiary the License Agreement with the University of Chicago is no longer a part of our operations and business focus.  NOTE 6.  CONVERTIBLE DEBENTURES, PRIVATE PLACEMENT OFFERING  We recognize the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert the debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to the Company. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of debentures.  This feature is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the interest method.  A.  14% Convertible Debentures, Default  Related Party  On May 7, 2009, Shrink Nanotechnologies, Inc. entered into a debt consolidation agreement (the Debt Consolidation Agreement) with Noctua Fund LP to consolidate certain secured and unsecured liabilities (Dao Liabilities) which were originally assigned to Dao Information Systems, Inc. (Dao).  While the Company did make an assignment of the Dao Liabilities to Dao, the Company was legally responsible to Noctua Fund LP for the principal and interest related to the Dao Liabilities.  The principal amount of the secured part of the Dao Liabilities was $76,500 and the principal amount of the unsecured part of the Dao Liabilities was approximately $5,000.  All of the promissory notes underlying the Dao Liabilities have matured and were in default.  The Debt Consolidation Agreement consolidates all monies presently owed to Noctua Fund LP which are consolidated into one new secured convertible promissory note with a principal amount of $100,000.  The notes maturity date is October 1, 2012.  The new note accrues interest at fourteen percent (14%) but did not begin to accrue interest until October 1, 2009.  Interest payments on the note are due monthly and are in default.  The note has a conversion price of $.04 per share.    The Company determined this to be a substantial modification to the debt instruments and prior to the merger applied debt extinguishment accounting to record a loss on extinguishment of debt of $100,000.  F-17    The Company has not made any of the required interest payments and as a result this note is in default and accruing interest at its default rate of 18%.  As of December 31, 2012 and 2011, the effective interest rate was 18% and 18%, respectively.  The Company has recognized $18,000 and $18,000 for the contractual interest coupon for the years ended December 31, 2012 and 2011, respectively.  On September 30, 2010, the Company issued a $20,000 14% convertible note to Noctua Fund, LP in exchange of $20,000 cash.  The notes maturity date is October 1, 2012.  The note accrues interest at fourteen percent (14%), and interest payments on the note are due monthly.  The note is convertible into shares of our common stock at an original conversion price of $0.04 per share.  The number of shares issuable upon conversion of the notes shall be determined by dividing the outstanding principal amount, together with accrued but unpaid interest, to be converted by the conversion price.  The Company used the effective conversion price based on the proceeds received to compute the intrinsic value of the embedded conversion option.  The Company then calculated an effective conversion price and used that price to measure the intrinsic value of the embedded conversion option.  At the time of the issuance date, the Company recorded a $20,000 discount, which represents the intrinsic value of the beneficial conversion feature.  The discount of $20,000 is being amortized over the life of the note.  The Company has not made any of the required interest payments and as a result this note is in default and accruing interest at its default rate of 18%.  As of December 31, 2012 and 2011, the effective interest rate was 18% and 18%, respectively.  The Company has recognized $3,600 and $3,600 for the contractual interest coupon for the years ended December 31, 2012 and 2011, respectively.  Additionally, the Company has recognized $10,000 and $10,000 for the amortization of the discount on the liability component for the years ended December 31, 2012 and 2011, respectively.  On January 10, 2011, the Company issued a $60,000 14% convertible note to Noctua Fund, LP in exchange of $60,000 cash.  The notes maturity date is October 1, 2012.  The note accrues interest at fourteen percent (14%), and interest payments on the note are due monthly.  The note is convertible into shares of the Companys common stock at an original conversion price of $0.17 per share.  The number of shares issuable upon conversion of the notes shall be determined by dividing the outstanding principal amount, together with accrued but unpaid interest, to be converted by the conversion price. At the time of the agreement date the market price of the Companys stock was $0.125 per share, therefore there was no beneficial conversion feature that applied to this note.  The note is in default as of December 31, 2012.  The Company has not made any of the required interest payments and as a result this note was in default and accruing interest at its default rate of 18%.  As of December 31, 2012 and 2011, the effective interest rate was 18% and 18%, respectively.  The Company has recognized $10,367 and $10,367 for the contractual interest coupon for the years ended December 31, 2012 and 2011, respectively.  On May 29, 2009, we assumed convertible notes and accrued interest of $118,121 owed to Noctua Fund LP, as part of the share exchange agreement with the shareholders of Shrink Technologies, Inc. The terms of these notes were then renegotiated into a new note with a principal amount of $118,121.  The notes maturity date is October 1, 2012.  The note accrues interest at fourteen percent (14%) but did not begin to accrue interest until October 1, 2009.  Interest payments on the note are due monthly.  The note is convertible into shares of our common stock at an original conversion price of $0.04 per share.  The Company has determined this to be a substantial modification to the debt instruments and has applied debt extinguishment accounting to record a loss on extinguishment of debt of $118,121 for the year ended December 31, 2009.  The Company has not made any of the required interest payments and as a result this note is in default and accruing interest at its default rate of 18%.  As of December 31, 2012 and 2011, the effective interest rates were 18% and 18%, respectively.  The Company recognized $21,262 and $21,262 for the contractual interest coupon for the years ended December 31, 2012 and 2011, respectively.  There have been no transactions between the entities which are under common control and the existence of that control did not result in any significant different result in operating results or financial positions had both entities been autonomous.  F-18    B.  Private Placement Offerings  12% Convertible Notes and Warrants  During November 2009 through early 2010, a confidential private offering (the Offering) was made by the Company to various private accredited investors.  The principal amount of the Offering was set at $1,000,000 maximum with excess of $1,000,000 accepted at the option of the Company and consists of convertible notes and stock purchase warrants, with $635,000 of Notes and 3,175,000 warrants issued in aggregate.  The notes will mature at the one year anniversary of their effective date, be sold at their face value, accrue interest at 12% and have a conversion feature that allows the investor to convert the note and accrued interest into common stock at a price of $0.10 per share.  The Company has the option to induce conversion, at which the notes conversion price will be taken at the discounted rate of 80% ($.08 per share).  The Series A common stock purchase warrants are exercisable via cashless exercise commencing six months after each respective closing, at $0.20 per share, beginning to expire 3 years from the first closing of this Offering.  The investors shall be issued warrants to purchase such number of common stock as equals fifty percent (50%) of the number of common shares underlying the convertible note based on the fixed conversion price. The warrants shall contain a standard cashless provision, which permits the holder to exercise the warrants if the stock price is above the exercise price, by turning in warrants and not paying cash.  From November 12, 2009 through May 7, 2010, the Company issued  12% convertible notes totaling $635,000 and detachable Series A warrants to purchase up 3,175,000 shares of common stock  in exchange of cash as part of the Offering.  The notes maturity dates begin on November 12, 2010 through May 7, 2011.  At the time of the issuances, the Company recorded an $87,159 discount, which represents the intrinsic value of the beneficial conversion feature.  The discount is being accreted over 12 month life of the notes.  During November 2010, the Company issued, $117,000 in 12% convertible notes and detachable Series B Warrants to purchase up to 585,000 shares of common stock, exercisable at $0.20 per share (or, Series B Warrants) as part of the offering  for a cash purchase price of  $117,000.  The 12% notes are due one year from issuance, beginning on November 10, 2011 and are convertible as to principal and interest at $.10 per share and allow the Company the option to induce conversion, at which the notes conversion price will be taken at the discounted rate of 80% ($.08 per share).  At the time of the issuances, the Company recorded a $44,400 discount, which represents the intrinsic value of the beneficial conversion feature.  The discount is being accreted over 12 month life of the notes.  The form of these notes and Series B Warrants are identical in all respects, to the notes and Series A Warrants issued, with the exception of the issuance dates and expiration dates.  Warrants associated with the offerings were issued to purchase up to 3,760,000 shares at an exercise price of $.20 per share.  These warrants are valued at $620,254 and were combined with the beneficial conversion feature of $131,579, to record a total $751,833 discount on the convertible notes.  The warrants are exercisable at 6 months following their effective date and begin to expire 11/12/2012.  The warrants were valued using a Black-Scholes valuation model.  The variables used in this option-pricing model included: (1) discount rates of .77-1.64% (2) expected warrant life is the actual remaining life of the warrant as of each period end, (3) expected volatility of 267-300% and (4) zero expected dividends.  There are 3,760,000 and 3,760,000 warrants immediately exercisable at December 31, 2012 and 2011, respectively.  As of December 31, 2012 and 2011, the effective interest rate was 18% and 18%, respectively.  The Company has recognized $20,847 and $20,847 for the contractual interest coupon for the years ended December 31, 2012 and 2011, respectively.  Additionally, the Company has recognized $188,021 and $188,021 for the amortization of the discount on the liability component for the years ended December 31, 2012 and 2011, respectively.  The Company used the effective conversion price based on the proceeds received to compute the intrinsic value of the embedded conversion option.  The Company allocated the proceeds received from the offering to the convertible instrument and the detachable warrants included in the exchange on a relative fair value basis.  The Company then calculated an effective conversion price and used that price to measure the intrinsic value of the embedded conversion option.  The effective conversion price used is equal to $0.08 per share of the Companys common stock.  The number of shares issuable upon conversion of the notes shall be determined by dividing the outstanding principal amount, together with accrued but unpaid interest, to be converted by the conversion price in effect on the conversion date.  During November 2010 through December 2010, the Company received notices of conversion totaling $100,000 of principal balances and $12,923 of accrued interest.  The Company converted these notes into 1,129,226 shares of common stock. During the year ended December 31, 2011, the Company received conversion demand notices for convertible notes with total principal balances of $642,000 and accrued interest of $76,072, these notes were converted into 7,328,548 shares of common stock.   In October 2011, the Company forced conversion on the remaining note with a principal balance of $10,000 and $2,404 of accrued interest into 155,046 shares of common stock. Pursuant to the stock issuances the notes were deemed paid in full.  F-19    Notes Payable consists of the following at:   December 31,December 31,2011201114% convertible notes due October 2012$298,121$298,12112% convertible notes due November 2010--12% convertible notes due January 2011--12% convertible notes due February 2011--12% convertible notes due April 2011--12% convertible notes due May 2011--12% convertible notes due November 2011--4% convertible note due April 2012675,000675,000Total convertible notes payable$973,121$973,121Less: Discount on notes-(7,500)Less: Current portion(973,121)(965,621)Long-term portion$-$-  The following represents minimum payments due for notes payable:   Amount2012$965,1212013-Total$965,121  As of December 31, 2012, the Company had certain notes payable due to a related party in the amount of $298,121 (represented on the Companys consolidated balance sheet as $288,121, which is net of a $7,500 discount) with a maturity date of October 1, 2012.  These notes are currently in default due to non-payment of monthly interest accruals and are classified as current liabilities on the balance sheet.   Interest payments are due monthly on these notes.  NOTE 7.  COMMITMENTS AND LEASES  RELATED PARTY  Mark L. Baum, Esq. (Baum) our former CEO and president, is a managing member of the Noctua Fund Manager, LLC.  James B. Panther, (Panther), Shrinks chairman of its Board of Directors, is also a managing member of the Noctua Fund Manager, LLC.  Noctua Fund Manager, LLC has subsequently assigned ownership of this debt to an entity controlled exclusively by Panther.  This liability is recorded as due to related parties our balance sheets.  The Company subleased space from Business Consulting Group Unlimited, Inc., an entity owned by Panther and Baum, pursuant to which the Company leases approximately 3,000 square feet of office and administrative space, as well as use of, among other things, internet, postage, copy machines, electricity, furniture, fixtures etc. at a rate of $6,000 per month.  The lease with Business Consulting Group Unlimited, Inc. expired April 30, 2010, and has continued as a month to month tenancy thereafter.   The lease agreement was terminated on January 31, 2011.  This liability is recorded in recorded in Due to related parties on our balance sheets.  Business Consulting Group Unlimited, Inc. has subsequently assigned ownership of this debt to an entity controlled exclusively by Panther.  On May 29, 2009, the Company signed an operating agreement (the Operating Agreement) with BCGU, LLC, an entity indirectly controlled by Panther and Baum, for a fee of $6,000 per month.  During October 2009, the Company amended the Operating Agreement with BCGU, LLC.  The amended Operating Agreement (the Amended Operating Agreement) allows us to retain certain day-to-day administrative services and management in consideration of a monthly fee of $30,000 per month.  The Amended Operating Agreement also included a $270,000 signature bonus.  Effective as of January 31, 2011, we entered into the Second Amended Operating Agreement (the Second Amended Operating Agreement) with BCGU, LLC which amended the terms of the previously existing First Amended Operating Agreement among the parties, entered into on October 1, 2009.  The Amended Operating Agreement provides for a term of 21 months ending in October 2012 and provides for services to  be provided that include day to day management, provision of bookkeeping and accounting personnel and administrative support staff as well as record keeping and accounting maintenance, in exchange for a new and lesser fee of $20,000 per month.  The Company was indebted to BCGU under the old agreement, in the amount of $615,000 which continues to be due and payable as of the date of the Second Amended Operating Agreement. The Second Amended Operating Agreement expires October 1, 2012. In April 2011, the Company issued to BCGU, LLC a 4% $675,000 convertible note for the amounts due.   This liability is recorded in Due to related parties on our balance sheets whereas the expense for 2011 was $250,000.  There is an option within the Amended Operating Agreement that allows BCGU, LLC to convert outstanding payables related to the Operating Agreement into a 10% convertible note.  At such time BCGU, LLC had not converted any of its outstanding payables into a note.  BCGU, LLC has subsequently assigned ownership of this debt to an entity controlled exclusively by Panther.  F-20    Due to related parties consist of:  December 31,December 31,20122011Due to BCGU, LLC$697,000$835,000Due to Business Consulting Group Unlimited, Inc.7,3337,333Due to Noctua Fund Manager, LLC121,65061,650Total$825,983$903,983  There have been no payments made to related parties during the year month ended December 31, 2012.  NOTE 8.   COMMON STOCK ISSUANCES  In January 2012, pursuant our 2010 Plan, the Company issued 7,352,941 shares valued at $58,088 for payment of professional services provided by our attorney during January.  NOTE 9.    PREFERRED STOCK  The Preferred Series A shares (Series A) provide the holder of the same with certain voting rights, among other rights, that may equal, when cast, a majority of the votes which could be cast at a meeting of the Companys shareholders.  The Series A holders have such number of votes as is determined by multiplying (a) the number of shares of Series A held by such holder, (b) the number of issued and outstanding shares of the Companys Series A and common stock on a fully diluted basis as at the record date for the vote and (c) .0000002.  Series A have no express dividend right, and are convertible into common shares at a ratio of 1:1.  Pursuant to the reverse acquisition, the statement of stockholders equity was adjusted to reflect the Preferred Series A shareholders of the public entity (20,000,000) while establishing the equity of the parent Company.  The Preferred Series B shares provide the holder with a significant dividend right (59.5% of gross revenues), among other rights.  These shares carry no voting rights and are not convertible into common shares.  The Company currently has no shares of Preferred Series B Stock issued.  The Preferred Series C shares provide the holder the right to receive a cash dividend of 15% of the Companys gross revenues.  This dividend amount will be payable in the form of cash, but the holders may elect to accept stock as payment.  The value of any stock payable to the holders will be determined by the closing price of stock on the date the dividend is declared.  Holders of the Preferred Series C shares have no voting rights.  Pursuant to the reverse merger 50 Preferred Series C shares were issued to our founder as part of a founder issuance.  The statement of stockholders equity was then adjusted to reflect the Preferred Series C shareholders of the public entity (100) while establishing the equity of the parent Company.  During October 2009, the Company cancelled all of its Preferred Series C stock.  The holders of the Series C Stock in return received certain legacy assets of the Company.  Pursuant to the settlement of a legal matter, described in Note 11, the Company recorded a reduction of stockholders equity for $143,825, which was paid to the former Preferred Series C shareholders as part of their cancellation agreement.  The Company currently has no shares of Preferred Series C stock issued.    F-21    NOTE 10.   WARRANTS  The following summarizes stock purchase warrants as of December 31, 2012 and 2011:   The following summarizes the changes in warrants outstanding for the years ended December 31, 2012 and 2011:   Warrants OutstandingWarrants ExercisableNumberWeightedRemainingWeightedofAverageExercise LifeNumberAverageExpirationDate of GrantSharesExercise Pricein YearsExercisableExercise PriceDateFirst quarter fiscal 2009500,000$0.200.86500,000$0.2011/10/2012First quarter fiscal 2010750,0000.201.03750,0000.201/11/2013First quarter fiscal 2010250,0000.201.04250,0000.201/15/2013First quarter fiscal 2010125,0000.201.08125,0000.201/28/2013First quarter fiscal 2010375,0000.201.09375,0000.202/2/2013First quarter fiscal 201050,0000.201.1050,0000.202/4/2013First quarter fiscal 2010125,0000.201.13125,0000.202/14/2013Second quarter fiscal 2010250,0000.201.31250,0000.204/22/2013Second quarter fiscal 2010750,0000.201.35750,0000.205/7/2013Fourth quarter fiscal 2010585,0000.201.86585,0000.2011/10/2013Total at  December  31, 20113,760,000$0.203,760,000$0.20  NOTE 11.     STOCK OPTIONS  The Company has issued stock options to consultants, and non-employee's advisors and directors of the Company. These options are not a part of the 2010 Stock Incentive Plan. These issuances are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable. The Company has elected to account for the stock option plan where the compensation to recipient is recognized over the period(s) in which the related services are rendered. The fair value of a stock option granted is estimated using an option-pricing model.  The options outstanding were valued using a Black-Scholes model.  The variables used in the model included: (1) discount rates of 0.53-1.04%, (2) expected option life is the actual remaining life of the options as of each period end, (3) expected volatility of 110%-575% and (4) zero expected dividends.  The following summarizes options as of December 31, 2012:  Weighted AverageAmountExercise PriceOutstanding December 31, 2011675,000$0.19Expired/Retired(150,000)(0.08)Exercised--Issued--Outstanding December 31, 2012525,000$0.19  NOTE 13.   SERVICE AGREEMENTS  In May 2011, the Company entered into a service agreement with a worldwide, market leading company that supplies brands and solutions that enhance the world with improved health, hygiene and well-being (the Customer).  Under the terms of the contract Shrink will provide the Customer with temporary services in the field of nanotechnology-enabled diagnostics.  Shrink was due $10,000 at signing of the contract and is eligible to receive future milestone payments of up to $40,000.  Specifically related to the milestone payments, the Company will be due: (i) $20,000 upon proof of concept data and (ii) $20,000 upon quantifying the range and sensitivity of certain diagnostics.  The $10,000 due at signing is being amortized over the life of the contract ending March 30, 2012.  Management had determined the milestones are substantive and will require the revenue to be recognized under the milestone method in accordance with the Companys revenue policy.  To date there has been no revenue recognized related to the achievement of milestones.   NOTE 14.   SUBSEQUENT EVENTS  The Company has performed an evaluation of events occurring subsequent to the period end through the issuance date of this report. Based on our evaluation, there were no events that need to be disclosed.    F-22    ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.  On March 11, 2011, the Company terminated its relationship with its previous auditors, Mark Bailey & Company, Ltd. Reno Nevada.  Mark Bailey & Company, Ltd. had not yet rendered any audit report of the Companys financial statements.  Effective as of March 17, 2011, the Company appointed Peterson Sullivan LLP of Seattle, Washington as the auditors of its financial statements for the fiscal year 2011.  On May 22, 2012, the Company terminated its relationship with its previous auditors, Peterson Sullivan LLP.  On May 25, 2012, the Company appointed Drake & Klein CPAs of Clearwater, Florida as the auditors of its financial statements as provided in this report.     On December 17, 2012, the audit firm of Drake & Klein CPAs changed its name to DKM Certified Public Accountants.  The change was reported to the PCAOB as a change of name.  This is not a change of auditors for the Company.  ITEM 9A.   CONTROLS AND PROCEDURES.  Evaluation of Disclosure Controls and Procedures  We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2012, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures are not effective to satisfy the objectives for which they are intended.  Managements Annual Report on Internal Control Over Financial Reporting  Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Exchange Act defines internal control over financial reporting as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:  · Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;  · Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and  · Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.  50    Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Management has not assessed the effectiveness of our internal control over financial reporting as of December 31, 2012 as set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a companys internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Due to the December 2011 change in management, as well as other factors, it is assumed that our internal controls over financial reporting are not effective at the reasonable assurance level based on those criteria, due to the following weakness described below.  Insufficient segregation of duties in our finance and accounting functions due to limited personnel.  During the year ended December 31, 2012, the company internally performed all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements.  Due to the fact these duties were performed oftentimes by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.  These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.  Insufficient corporate governance policies.  Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented.  Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management.  We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies and we intend to consider the results of our remediation efforts and related testing as part of our next year-end assessment of the effectiveness of our internal control over financial reporting.  Due to the limited number of board members, we do not have an Audit Committee.  The Company intends on further staffing and the formation of an Audit Committee with new qualified board members with accounting experience or knowledge.  This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only managements report in this annual report.  Changes in Internal Control Over Financial Reporting  There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.     ITEM 9B.   OTHER INFORMATION.  During the fourth quarter 2009, the holders of our 150 shares of Series C Preferred Stock returned all shares of Series C Preferred Stock to the Company for cancellation, in exchange for $143,825 in consideration.  No distributions or rights have ever been issued in respect of such Series C Preferred Stock.  We have no information to disclose that was required to be disclosed in a report on Form 8-K during fourth quarter of fiscal year 2010, but was not reported.   51    PART III      ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.    Directors and Executive Officers  The following table lists the officers and directors of Shrink Nanotechnologies:  NameAgePositionNorman Meier42PresidentLuis J. Leung44Director  Norman Meier, President  Mr. Norman Meier is our President. Norman Meier has been an investment professional since 1995. He has held executive positions with top-tier global investment firms such as MAN Investments and AWD in Switzerland, and Canaccord Capital Corporation in Canada. He also founded a Swiss financial services firm, which has been licensed by the Swiss Banking Commission and registered with a self-regulatory organization.  Mr. Meier has over 10 years of experience in the gold exploration industry and has participated in raising approximately $35 million to fund private US companies and a total of $400 million from private investors and $600 million from institutional clients for mutual funds, hedge funds and other financial products.. During his tenure as Director and Executive of Hemis Corporation, Tecton Corporation and a director of Windfire Capital Corp. in Canada.he was responsible for managing over 10 geologists with oversight of projects in Canada, USA, Mexico and Peru. He has been involved in over 25 different exploration projects all over the world. Most of these projects were gold, silver, copper and molybdenum.  Mr. Meier has a BBA, MBA and Ph D in Human Behavior from Newport University USA and Switzerland. His MBA has a concentration in Interpersonal Relationship & Communication and his PhD is concentrated in Personnel Management. He had originally received the Swiss Matura Typus D (languages) and went to the University of Zurich to study Psychology. After his service in the army, he received a Financial Planning Designation of AWD Switzerland where he worked for over six years. He continued to journey to Canada where he finished several courses and received designations in from the Canadian Securities Institute (equivalent to FINRA in the USA): Canadian Securities Course (CSC), Derivatives Fundamental Course (DFC), Conduct & Practices Handbook Course (CPH), Options Licensing Course (OLC), Ethics Case Study Course, Technical Analysis Course (TAC), Investment Management Techniques (IMT), Options Strategies Course (OSTC), Portfolio Management Techniques (PMT), Agricultural Markets  Risk Management (ARM) and he became a member of the FCSI  Fellowship of the Canadian Securities Institute. Norman Meier also received the following two financial designations Canadian Investment Manager Designation and Derivatives Market Specialist Designation.  Luis Leung, Secretary, Treasurer and Director  Mr. Leung is our Secretary, Treasurer and sole member of our Board. Mr. Leung began his career in São Paulo, Brazil in 1988 with Smar Equipamentos Industrias Ltd as a Research and Development Software Engineer. In 1991, he was helped establish the companys operations in the United States and was promoted to CIO and Comptroller.  From 1994 to 1997, Mr. Leung helped structure operations and systems for the companys headquarters as well as for its subsidiaries in Germany, France and Singapore. In 2004, Mr. Leung co-founded Scitus Corporation, a Microsoft VAR and ISV, and the Alba Spectrum Group a consulting company. The Alba Spectrum Group has operations in Chicago, Houston and São Paulo, Brazil. Its line of products includes Microsoft, SAP and Oracle. In 2001, Mr. Leung co-founded Advent Corporation, a software development company and Microsoft Partner. The company merged with Enterlogix Corporation in 1992. Enterlogix Corporation, after the merger, was the largest Microsoft Great Plains implementation practice in the state of Texas.  In 1997, Mr. Leung started his consulting career at Hein + Associates LLP in Houston, TX as a Project Manager. In 1999 he was hired by Grant Thornton, LLP as a Consulting Manager and participated in several multi-country systems implementations. In 2000, he worked at eParners Inc as a CRM Practice Leader.  Mr. Leung holds a Bachelors of Science from Instituto Tecnologico Aerospacial, Brazil  Presently, there are no agreements or understandings for any of our executive officers or director to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.  Directors are elected until their successors are duly elected and qualified.  52    Scientific Advisory Board  The Company has created a scientific advisory board and appointed members who previously served on the Scientific Advisory Board of Shrink.  Members of the Scientific Advisory Board are not employees of the Company or members of our Board of Directors.  We currently have no members.  Family Relationships  There is no family relationship among any of our officers or directors.  Involvement in Certain Legal Proceedings  To the best of our knowledge, none of our directors or executive officers have been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.  Except as set forth in our discussion below in Item 13, Certain Relationships and Related Transactions, and Director Independence, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.  Board Composition and Committees  Our board of directors is currently composed of one member, Mr.Leung.  Our board of directors has no independent directors at this time.  Audit Committee  We do not have an audit committee as we do not have any qualified members. The Company has adopted an Audit Committee Charter.  Section 16(a) Beneficial Ownership Reporting Compliance  Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated specific due dates for these reports.  Based solely on our review of copies of such reports filed with the SEC by and discussions with our directors and executive officers, and other than a late filing of a Form 4 with respect to shares under our 2010 Plan issued to Mr. Dreisman, we have no reason to believe that our directors and executive offers did not file the required reports on time in 2010 fiscal year.  Code of Ethics  On February 10, 2006 we adopted a Code of Ethics.  The same was filed as Exhibit 11.1.8 on a Form 10 Annual Report filed on April 14, 2009.      ITEM 11.   EXECUTIVE COMPENSATION.  As a result of the reverse merger and acquisition by Shrink Technologies, Inc., a California corporation, of Shrink Nanotechnologies, Inc., a Delaware corporation, we did not experience any cash flow event as a result of any payment to an executive.  Additionally, there were no stock awards or options granted to executives during 2012 and 2011.  We have not provided retirement benefits or severance or change of control benefits to our named executive offices.  No unexercised options or warrants were held by any of our executive officers at year ended 2012.  No equity awards were made during the year ended December 31, 2012.  (1)  Mr. Miles was appointed as President on November 30, 2011. (2)  Mr. Leung was appointed as Director on November 30, 2011. (3)  Mr. Baum, although he did not receive any cash compensation for employment services, was entitled to receive compensation through an agreement the Company had with BCGU, LLC.  Mr. Baum co-owned BCGU, LLC with James Panther, who also received 50% of the fees generated from the services rendered pursuant to this agreement.  Mr. Baum resigned on December 1, 2011.   53    Compensation of Directors  The table below sets forth the compensation of our directors for the fiscal year ended December 31, 2012.  NameFees earned or paid in cash ($)Stock awards ($)Option awards
($)Non-equity incentive plan compensation ($)Nonqualified deferred
compensation earnings
($)All other compensation ($)Total
($)Darren Miles
Luis J. Leung
Mark L. Baum, Esq.-------James B. Panther-------Marshall Khine, Esq.-------Heiner Dreismann-95,625----95,625 (1)(2)Victor Hollander, CPA-------  (1) Effective as of June 22, 2009, and simultaneously with the appointment of Dr. Dreismann as a director of the Company, the Company entered into a Consulting Agreement with Dr. Dreismann.  The material terms of the Consulting Agreement provide, among other terms,  that Dr. Dreismann shall dedicate not less than two days per month, as reasonably requested by the Company and as the Consultants schedule permits, towards providing life sciences related advisory services and assist in procuring strategic partners and relationships.  This Consulting Agreement ended on January 1, 2011. Mr. Dreisman has been issued 750,000 shares of the Companys common stock under his agreement, the value of which is as above.  Beginning January 1, 2011, Dr. Dreismann entered into a new agreement with the Company.  Our compensation to Dr. Dreismann under the agreement is as follows:  Fixed Compensation:  Beginning January 1, 2011, Dr. Dreismann is entitled to $40,000 in annual compensation payable in stock or cash which shall be determined by the Company at its discretion, and all Strategic Party Income, as defined below,  Additional Success Fees .  The Consulting Agreement also provides for a success based fee to be paid within 90 days of the end of the Companys fiscal year from cash received from either (i) sublicensing agreements entered into with certain third parties introduced by the Mr. Dreismann or (ii) revenues generated from the sale of goods or services to parties introduced by Mr. Dreismann (Strategic Party Income).  Specifically, the consultant will be paid 5% of Strategic Party Income, net of all royalties and dividends payments, or 3% of the revenues received by the Company from the sale of goods and services to or through a strategic party introduced by Dr. Dreismann, net of costs of goods or services and a pro-rata allocation of sales, general and administrative costs.  Notwithstanding the foregoing, the Company shall receive a credit towards any Success Fee otherwise payable during a year, of an amount equal to the amount of Quarterly Cash Fees paid to the consultant at the time a Success Fee is due, and in any event, such an amount shall not exceed $80,000; with an upper limit on Success Fees of five million dollars ($5,000,000).  Compensation Discussion and Analysis  The Company does not have any full time employees and has not entered into long term executive or non-executive employment agreements, so as to limit the Companys exposure and liability. As indicated elsewhere in this Report, the Company regularly engages outside consultants, accountants and other professional service providers for purposes of providing services to the Company or its Shink subsidiary.  The Company endeavors, where able, to issue shares in lieu of cash compensation, so as to preserve capital where needed and limit cash risk exposure.   54    Historically, funding for the Company, or for Shrink prior to our acquisition of it, were funded by management and its affiliates, namely, Noctua Fund, LP, which has loaned over $298,000 (on a consolidated basis) as reflected in a note to them, which is now in default and forbearance.  In addition, the Company, utilizes services, bookkeeping, administrative staff, equipment and extensive management and day to day operational services from BCGU, LLC, an entity indirectly co-owned by Messrs. Baum and Panther, which have provided such services under the Amended Operating Agreement since 2009 and, prior to such time, free of charge.  The Corporation believes that, given the extensive securities law experience of Mr. Baum, and the extensive small cap and microcap M&A and financing experience of Messrs. Baum and Panther, the years of experience for each of them, and the current opportunity cost factor for each of them, as combined with the fact that BCGU, LLC has continued to provide services and funding despite non-payment of over $675,000 since mid-2009, that the amount of compensation provided under the Amended Operating Agreement is fair and reasonable for the Corporation.  As was disclosed previously, this $675,000 was memorialized on April 6, 2011, when Shrink issued BCGU, LLC a 4% convertible note, payable in 12 months, that converts at $.06 per share.  Additionally, the Corporation has, in the past, sought to retain management, which would require that the Corporation enter into long term, inflexible employment arrangements with persons that may have a limited stake in the Corporations success as compared to our principals.  The Corporation also limits cash compensation to outside or internal directors and does not have a cash compensation policy.  The Company endeavors to enter into performance based compensation consulting packages with members of the Companys SAB or board of directors.  Performance based compensation tends to be conditioned on achieving milestones such as achieving certain minimum net revenue streams from sources introduced by the director or SAB member, securing government grants or similar financing for our research and development, or other specific activities or items for which a particular board or SAB member may have skills.      ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.  The following table sets forth certain information regarding the beneficial ownership of common stock of the Company by (i) each person who, to the Companys knowledge, owns more than 5% of its Common Stock, (ii) each of the Companys named executive officers and directors, and (iii) all of the Companys named executive officers and directors as a group.  Shares of the Companys Common Stock subject to options, warrants, or other rights currently exercisable, or exercisable within 60 days of the date hereof, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other person. As of May 1, 2012, the Company had 224,746,249 shares of Common Stock issued and outstanding and 19,800,000 shares of Series A Preferred Stock which is owned by affiliates.  Additionally, for this calculation purpose, due to the conversion rights of certain notes (38,133,558 shares of common stock), therefore, for this calculation, the outstanding shares are 282,679,807.  All of the below share amounts are adjusted to reflect the Forward Split.   Name and AddressAmount and Nature of Beneficial Ownership
(Post Forward Split)Percentage of Voting SecuritiesDarren Miles (7)
Luis J. Leung (8)
Mark L. Baum, Esq. (1)(2)-0-
53,900
116,027,721(3)-0-
0.02%
41.05%James B. Panther (2)(4)113,787,170(5)40.25%Marshall Khine (6)43,194,44015.28%Heiner Dreismann (6)-0--0-Victor Hollander-0--0-All Officers and Directors as a group (2 persons)53,9000.02%  (1) The address for Mr. Baum is 1302 Waugh Drive, Suite 618, Houston Texas 77019.  (2) The address for Noctua Fund, LP, is Noctua Fund Manager, LLC c/o Mr. Baum, 2038 Corte Del Nogal, Suite 110, Carlsbad, CA 92011.  Noctua Fund Manager, LLC, is an entity equally beneficially owned and controlled by Mr. Baum and Mr. Panther through entities owned or controlled by them.  Such persons are non-voting minority limited partners in the Noctua Fund, LP itself. Accordingly, Messrs. Baum and Panther disclaims the economic ownership of securities held by Noctua Fund LP   55    (3) Includes 10,000,000 shares underlying shares of Series A Preferred Stock, and 10,538,547 shares owned by entities principally owned and controlled by Mr. Baum.  Also includes: 76,422,395 shares held by BCGU, LLC, and 11,250,000 shares, in aggregate, issuable upon conversion of $675,000 principal convertible note issued to BCGU, LLC of which Mr. Baum and Panther are equal indirect beneficial owners and control persons.  Mr. Baum and Mr. Panther are equal indirect beneficial owners of Noctua Fund Manager, LLC, the general partner of Noctua Fund, LP, but are only non-voting minority investors in the Noctua Fund, LP  Accordingly, Mr. Baum disclaims economic ownership of half (38,211,198 shares) of all shares owned by BCGU, LLC and of any securities held by Noctua Fund LP  Does not include up to 7,816,779 shares, in aggregate, issuable upon conversion of $298,121 principal amount of 14% convertible notes plus interest issued Noctua Fund, LP.  (4) The address for Mr. James B. Panther is 381 Casa Linda Plaza, Suite 408, Dallas, Texas 75218.  (5) Includes 9,800,000 shares underlying shares of Series A Preferred Stock, and 8,880,975 shares of Common Stock owned by an entity indirectly beneficially owned and controlled by Mr. Panther.   Also includes: 76,422,395 shares held by BCGU, LLC, and 11,250,000 shares, in aggregate, issuable upon conversion of $675,000 principal convertible note issued to BCGU, LLC of which Mr. Baum and Panther are equal indirect beneficial owners and control persons.  Mr. Baum and Mr. Panther are equal indirect beneficial owners of Noctua Fund Manager, LLC, the general partner of Noctua Fund, LP, but are only non-voting minority investors in the Noctua Fund, LP.  Accordingly, Mr. Panther disclaims economic ownership of half (38,211,197 shares) of all shares owned by BCGU, LLC and of any securities held by Noctua Fund LP.  Does not include up to 7,816,779 shares, in aggregate, issuable upon conversion of $298,121 principal amount of 14% convertible notes plus interest issued Noctua Fund, L.P  (6) The address for Mr. Marshall Khine and Mr. Dreismann, is c/o the Company, 2038 Corte Del Nogal, Suite 110, Carlsbad, CA 92011.  (7) Officer.  (8) Director.  Changes in Control  There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.    ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.  A variety of conflicts of interest exist, and may continue to exist, from time to time, primarily as a result of our principal owners maintaining control of the Company, as well as our continued sublease and operating agreements with a principal shareholder and director, Mark. L. Baum and James B. Panther.  They also own and control, the Series A Preferred Stock which gives its holders voting control over the Company.  As is disclosed throughout this report, there are related party transactions regarding a sublease of the Companys Carlsbad located, certain operational personnel and infrastructure that Mr. Baum and Mr. Panther have provided to the company since the Companys inception, as well as various loans and funding arrangements provided to the Company by Mr. Baum and Mr. Panther.  The Company believes, that the terms of the foregoing arrangements are no less favorable to the Company than as would otherwise be available from independent commercial third parties.   At the time of some transaction consummated between them and the company, Mr. Baum and Mr. Panther were in control of the Company, with limited independent directors or management.  In other cases, Mr. Baum and Mr. Panther sought approval from disinterested parties in leadership positions at the Company.  Familial and other Relationships Relating to Shrink  Mr. Baum and Mr. Panther through Noctua Fund LP and other entities regularly invest in and manage, companies or other investments together.  Mr. Baum and Mr. Panther are also principals of Business Consulting Group Unlimited, Inc. and BCGU, LLC, both of which are parties to material compensation agreements as provided above.  Mr. Baum and Mr. Panther have been business partners for more than 8 years.  Mr. Khine and Dr. Michelle Khine are brother and sister, respectively.  Mr. Baum and Mr. Khine are attended law school together from 1995 to 1998.  56    Mr. Khine, who is now one of our new directors appointed at the time of the Shrink acquisition, is the person from whom we acquired Shrink and was issued 44,444,440 shares of our common stock and 50 shares of our Series C Preferred Stock (which have since been cancelled).  Series C Preferred Stock  Noctua Fund LP and Khine collectively owned 150 shares of Series Preferred Stock at the time of the Shrink Acquisition, issued for consideration valued at $15,000 and contained certain onerous protective provisions.  In late October 2010, each of these persons agreed to return all of the Series C Preferred Stock in exchange for cash consideration and certain releases.  Neither the issuance nor cancellation of the Series C Preferred Stock was valued by independent valuation agents.  Other Contracts  In addition, we may enter into contracts, agreements of arrangements from time to time with such persons, or with Mr. Marshall Khine, a member of our board of director and significant shareholder, or other persons on our scientific advisory board.  The Board endeavors to require that all interested party transactions be approved by a majority of the disinterested directors.  In addition, the Board, in good faith, negotiates or intends to negotiate transactions with affiliates at terms that are no less favorable to the Company than would otherwise be available from bona fide third party sources.  As a result of control by these persons, and their ability to appoint board members and officers, and, as a result of the outstanding Series A Preferred Stock, such persons has and will continue to have and be able to exert, substantial control over the Companys and Shrinks day to day operations, contracts, and long term prospects.  Mark L. Baum and James B. Panther are both limited partners in Noctua, and through entities which Mr. Baum and Mr. Panther own, equally own and control Noctua Fund Manager LLC, the general partner of Noctua.  As part of the consideration for the acquisition of Shrink, the Company assumed, pursuant to the terms of a note exchange agreement, the outstanding notes due to Noctua Fund LP, which had an aggregate currently outstanding balance of approximately $118,121, in consideration of Noctua consenting to the transaction.  Noctua also loaned the company $10,000 on March 31, 2009, at 15% interest, with a maturity date of March 31, 2010.  This loan was reflected as an amended promissory note.  Promoters and Certain Control Persons  We did not have any promoters at any time during the past five fiscal years.  Director Independence  We currently do not have any independent directors other than Dr. Heiner Dreismann, and Victor Hollander as the term independent is defined by the rules of the Nasdaq Stock Market.  ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES.  Independent Auditors Fees  The following is a summary of the fees billed to the Company by its principal accountants for professional services rendered for the fiscal years ended December 31, 2012 and 2011:  Fiscal Year Ended December 31,20122011Audit Fees$6,000$39,036Audit-Related Fees--All Other Fees--TOTAL$6,000$39,036  Audit Fees consisted of the aggregate fees billed for professional services rendered for the audit of our annual financial statements and the reviews of the financial statements included in our Forms 10-Q and for any other services that were normally provided in connection with our statutory and regulatory filings or engagements. Audit fees were paid to Peterson Sullivan LLP, as our auditors during the year ended December 31, 2011.  Audit fees were paid to DKM Certified Public Accountants, fkaDrake & Klein CPAs, our current auditors, during the year ended December 31, 2012.  57    Audit Related Fees consisted of the aggregate fees billed for professional services rendered for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and were not otherwise included in Audit Fees.  Tax Fees consisted of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. Included in such Tax Fees were fees for preparation of our tax returns and consultancy and advice on other tax planning matters.  All Other Fees consisted of the aggregate fees billed for products and services provided and not otherwise included in Audit Fees, Audit Related Fees or Tax Fees.  Pre-Approval Policies and Procedures  Under the Sarbanes-Oxley Act 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors independence from us.  In accordance with its policies and procedures, our board of directors pre-approved the audit and non-audit service performed by our auditors for our consolidated financial statements as of and for the year ended December 31, 2012.     PART IV    ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES.  Financial Statements and Schedules  The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.   Item 6. Exhibits.  The following exhibits are incorporated herein by reference to the following filingsForm 10-SB10/19/20063.1.1Certificate of Incorporation3.1.2Amended and Restated Certificate of Incorporation3.2BylawsForm 10-QSB11/14/20073.1.3Certificate of Designation (Series A and B Preferred Stock)Form 10-Q11/19/200810.1Asset Purchase Agreement, dated as of September 30, 2009, between the Company as Seller, Dao Information Systems, LLC, DAO Information Systems, Inc. and Luis J. Leung.10.2Meaux Street Partners LP $25,000 10% Convertible Promissory Note, dated July 1, 200810.3The Sonkei Trust $25,000 First Amended 10% Convertible Promissory Note, dated July 1, 200810.4September 30, 2008 Settlement Agreements with SixTech Desenvolvmento Sistemas de Informatica Ltda.10.5September 30, 2008 Settlement Agreements with David F. Rubin, DAO Information Systems, LLC., and John Burkett10.6September 30, 2008 Settlement Agreement with Luis LeungForm 8-K10.1Licensing Consent Agreement, dated as of September 30, 2008, between BCGU, LLC, the Company and Dao Information Systems, LLC10.2First Amended Licensing Consent Agreement, dated as of November 25, 2008, between BCGU, LLC, the Company and Dao Information Systems, LLC  58    Form 10-K Report4/14/200911.1.1September 30, 2008 Settlement Agreements between the Company and  For Goodness11.1.2September 30, 2008 Settlement Agreements between the Company and  Mathew Luchak11.1.3October 1, 2008 Omnibus Settlement Agreement between the Company and Luis Leung11.1.4Second Amended License Consent Agreement dated as of November 30, 2008 between the Company and BCGU11.1.5Exhibit 3.1  March 19, 2009 Amendment to the Articles of Incorporation11.1.6March 19, 2008 Designation of Series C Preferred Stock11.1.7Code of Ethics adopted on February 10, 200611.1.8Share Exchange Agreement, dated as of January 15, 2009 between the Company and BCGUForm 8-K5/8/200910.1Debt Consolidation Agreement with Noctua Fund L.P., dated May 7, 200910.2$100,000  14% Secured Convertible Secured Promissory Note, issued May 7, 2009Form 8-K5/13/200910.1Binding Letter of Intent to acquire Shrink Technologies, Inc., a California corporationForm 8-K5/15/20093.1Certificate of ownership and merger, name change to Shrink Nanotechnologies, Inc.Form 8-K6/5/200910.1Share Exchange Agreement between the Company, Marshall Khine and Shrink Technologies, Inc.  (Shrink), dated as of May 29, 200910.2Exclusive License Agreement for Processes for Microfluidic Fabrication and Other Inventions, between the Regents of the University of California (UC Regents) and Shrink10.3Research Agreement, dated as of June 2008, between Shrink and  UC Regents (Merced)10.4Office space sublease, between Shrink and Business Consulting Group Unlimited, Inc.10.5Operating Agreement, dated as of May 29, 2009, between Shrink and BCGU, LLC10.6Debt Consolidation Agreement, May 29, 2009, between Shrink and Noctua Fund LP10.7Note Exchange Agreement10.8Consulting Agreement with Dr. Michelle Khine21.1List of Subsidiaries of Registrant99.1Unaudited Pro Forma Financial Statements: Shrink Nanotechnologies, Inc.99.2Audited Financial Statements of Shrink Technologies, Inc.Form 8-K6/19/20093.2Amended and restated Bylaws of Shrink Nanotechnologies, Inc.Form 8-K6/25/200910.1Consulting Agreement Heiner Dreismann, dated June 22, 2009Form 10-Q11/25/200910.1First Amended Operating AgreementForm 8-K12/29/200910.1First Amended Asset Purchase Agreement with Dao Information Systems, Inc., dated as of December 7, 2009Form 8-K2/3/2010 and Amended on 4/8/201099.1Overview of Shrink Nanotechnologies, Inc.Form 10-K Report4/14/20103.1Certificate of Amendment to Articles of Incorporation4.1Form of Convertible Note 12%4.2Form of Series A Warrant10.1Subscription Agreement  59    Form 8-K5/7/201010.1Sponsored Research Agreement Between the Company and The Regents of the University of California on behalf of Irvine campus dated May 3, 201010.2Consortium Agreement among Academic Partners and Sponsors of the Micro/Nano Fluidics Fundamentals Focus MF3 Center, effective as of June 1, 2010Form 10-Q5/24/201010.12Agreement dated as of January 4, 2010, between the Company and Justin Heit10.13Consulting Agreement dated January 4, 2010, between the Company and OTC Investor Source, Inc.10.14Consulting Agreement dated as of February 15, 2010, between the Company and Andrew Simon.10.15Consulting Agreement dated as of March 1, 2010, between the Company and Andrew Boll10.16Consulting Agreement, dated April 23, 2010, between the Company and Bruce PetersonForm 10-Q8/16/201010.17Scientific Advisory Board Consulting Agreement, between the Company and Dr. Sayantani GhoshForm 8-K10/18/201010.1Patent and Know-How License Agreement between Shrink Nanotechnologies, Inc. and Corning Incorporated, dated as of July 26, 201010.2Lease Agreement between Shrink Nanotechnologies, Inc. and The University of California on behalf of Irvine campus, dated as of October 1, 2010Form 8-K/A10/25/201016.1Letter from Auditor, Chisholm, Bierwolf, Nilson & Morrill, LLCForm 10-Q/A11/29/201010.16Sponsored Research Agreement, dated as of September 14, 2010, between Shrink Nanotechnologies, Inc. and University of California, Irvine10.18Consulting Agreement between the Company and Equire, LLC. Business Financial AdvisoryForm 8-K12/21/201010.1License Agreement between Blackbox Semiconductor, Inc. and the University of Chicago, dated as of November 30, 201010.2Shrink Nanotechnologies, Inc. 2010 Stock Incentive PlanForm S-81/13/20114.12010 Stock Incentive Plan5.1Opinion of Levy International Law, LLC on legality23.1Consent of Independent Registered Public Accounting Firm23.2Consent of Levy International Law, LLC (included in Exhibit 5.1)24.1Power of Attorney (included on signature page to this Registration Statement)Form 8-K/A3/23/201110.1Second Amended Operating Agreement between Shrink Nanotechnologies, Inc. and BCGU, LLC10.2Extension of Research Agreement with University of California Regents, Irvine16.1Letter from Auditor, Mark Bailey & Company, Ltd. Reno NevadaForm 8-K4/12/201110.1Letter of Intent, dated as of March 29, 2011, between Shrink Nanotechnologies, Inc. and Nanopoint, Inc.Form 10-K5/15/20124.1Principal Balance $60,000 14% Convertible Promissory Note issued to Noctua Fund, LP4.2Principal Balance $675,000 4% Convertible Promissory Note issued to BCGU, LLC21.1Subsidiaries  60    Filed Herewith in This Form 10-K Report31.1Certification of Mark L. Baum, Esq., President and Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act 2002.31.2Certification of Mark L. Baum, Esq., Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act 200232.1Certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to section 906 The Sarbanes-Oxley Act 2002, executed by Mark L. Baum, Esq. Chief Executive Officer and President32.2Certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to section 906 The Sarbanes-Oxley Act 2002, executed by Mark L. Baum, Esq. Chief Financial and Accounting  Officer    SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  Date: April 16, 2013   SHRINK NANOTECHNOLOGIES, INC.   By: /s/ Norman Meier Norman Meier President (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)   In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.  SignatureTitleDate/s/ Norman MeierPresidentApril 16, 2013Norman Meier(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)/s/ Luis J. LeungDirectorApril 16, 2013Luis J. Leung        61