10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2008

or

[ ]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: 000-49901

NATURALNANO, INC.

(Exact name of registrant as specified in its charter)

Nevada	87-0646435
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
832 Emerson St, Rochester, NY	14613
(Address of principal executive offices)	(Zip Code)

585-286-1836

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions 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	[ ]	Smaller reporting company	[ X ]

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 65,707,045as of November 13, 2008

Table of Contents

PART I—FINANCIAL INFORMATION1

Item 1. Financial Statements. 1

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 18

Note Regarding Forward-Looking Statements 18

Plan of operations for the period from July 1, 2008 through June 30, 2009 19

Management Discussion and Analysis 22

Item 3. Quantitative and Qualitative Disclosures About Market Risk. 27

Item 4. Controls and Procedures. 27

PART II—OTHER INFORMATION28

Item 1. Legal Proceedings. 28

Item 1A. Risk Factors. 28

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 28

Item 3. Defaults Upon Senior Securities. 28

Item 4. Submission of Matters to a Vote of Security Holders. 29

Item 5. Other Information. 29

Item 6. Exhibits. 29

SIGNATURES34

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

Assets	September 30, 2008		December 31,2007
Current assets:	(Unaudited)
Cash and cash equivalents	$	187,495	$	404,940
Halloysite and Pleximer inventory		20,286		27,149
Accounts receivable		480		6,500
Other current assets		48,456		125,445
Total current assets		256,717		564,034
Non-current assets:
Deferred financing costs, net		242,042		444,928
License, net of amortization		607,197		707,061
Property and equipment, net		525,919		517,943
Total non-current assets		1,375,158		1,669,932
Total Assets	$	1,631,875	$	2,233,966

See notes to consolidated financial statements

(continued on next page)

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NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(continued)

	September 30, 2008			December 31, 2007
	(Unaudited)
Liabilities and Stockholders’ Deficiency
Liabilities
Current liabilities:
Accounts payable	$	398,322		$	345,479
Accrued payroll		435,687			58,801
Accrued expenses		299,476			143,522
Capital lease obligations-current		51,328			76,986
Patent license obligation-current		200,000			250,000
Deferred revenue		164,000			—
Registration rights liability		82,489			82,489
Due to related parties		62,835			56,206
Total current liabilities		1,694,137			1,013,483
Non-current liabilities:
Related party note payable		—			987,584
8% Senior secured convertible notes, net of $1,139,973 and $2,017,427 discount		2,597,527			1,330,073
Deferred tax liability		148,763			—
Patent license obligation		200,000			200,000
Capital lease obligations		23,374			38,945
Other long term liabilities		17,500			31,034
Total Liabilities		4,681,301			3,601,119
Stockholders’ Equity (Deficiency)
Series B Preferred – $.001 par value, convertible: authorized, issued and outstanding 750,000 with an aggregate liquidation preference of $1,500 in 2008		750			—
Series C Preferred – $.001 par value, convertible: authorized, issued and outstanding 4,250,000 with an aggregate liquidation preference $8,500 in 2008		4,250			—
Common Stock - $.001 par value 300 million authorized, issued and outstanding 64,607,045 and 122,880,740, respectively		64,607			122,881
Additional paid in capital		18,527,253			15,907,241
Accumulated deficit		(21,646,286	)		(17,397,275	)
Total stockholders’ deficiency		(3,049,426	)		(1,367,153	)
Total liabilities and stockholders’ deficiency	$	1,631,875		$	2,233,966

See notes to consolidated financial statements

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NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

	For the three months ended						For the nine months ended						From inception:
	September 30,						September 30,						December 22, 2004
	2008			2007			2008			2007			to September 30, 2008
Income:
Revenue	$	53,361		$	5,500		$	180,286		$	8,750		$	211,036
Cost of goods sold		24,105			—			66,859			—			66,859
Gross profit	$	29,256		$	5,500		$	113,427		$	8,750		$	144,177
Operating expenses:
Research and development (a)		298,842			529,301			1,239,316			1,585,905			5,965,769
General and administrative (a)		275,024			317,065			1,102,846			1,367,614			8,910,167
Write down of prepaid inventory		—			—			—			—			249,650
		573,866			846,366			2,342,162			2,953,519			15,125,586
Loss from Operations		(544,610	)		(840,866	)		(2,228,735	)		(2,944,769	)		(14,981,409	)
Other income (expense):
Interest (expense) income, net		(634,578	)		(610,679	)		(1,959,545	)		(1,328,884	)		(3,830,168	)
Income from cooperative research project		—			—			—			—			180,000
Gain (loss) on warrant		—			—			—			—			326,250
Financing fees		—			—			—			—			(3,280,228	)
Other, net		(60,731	)		—			(60,731	)		—			(60,731	)
		(695,309	)		(610,679	)		(2,020,276	)		(1,328,884	)		(6,664,877	)
Net loss	$	(1,239,919	)	$	(1,451,545	)	$	(4,249,011	)	$	(4,273,653	)	$	(21,646,286	)
Loss per common share - basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)
Weighted average shares outstanding		129,332,579			121,975,740			126,329,603			121,861,143

(a) Stock based compensation expense included in the Statement of Operations are as follows:

-Research and development expense of $69,516 and $357,721 for the three and nine months ended September 30, 2008,

respectively and, $155,067 and $507,128 for the three and nine months ended September 30, 2007, respectively.

-General and administrative expense of $127,518 and $400,805 for the three and nine months ended September 30, 2008,

respectively and, $(106,975) and $315,627 for the three and nine months ended September 30, 2007, respectively.

See notes to consolidated financial statements

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NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

(unaudited)

											Deficit
								Additional			Accumulated			Stockholders’
	Common Stock					Preferred Stock		Paid-in			in Development			Equity
	Shares		Amount			Shares	Amount	Capital			Stage			(Deficiency)
December 22, 2004 (inception)
20,000,000 shares issued for cash @ $.005 per share	20,000,000		$	20,000				$	80,000		$	—		$	100,000
Net loss from inception to 12/31/04												(7,336	)		(7,336	)
Balance at December 31, 2004	20,000,000		$	20,000				$	80,000		$	(7,336	)	$	92,664
Warrant issued for 4,500,000 shares of common stock for services									273,442						273,442
Vesting of stock options granted									270,082						270,082
Shares issued pursuant to convertible bridge notes on 11/29/05	20,939,200			20,939					4,135,061						4,156,000
Recapitalization on 11/29/05	79,820,840			79,821					(79,821	)					—
Net loss for the year ended 12/31/05												(2,666,382	)		(2,666,382	)
Balance at December 31, 2005	120,760,040		$	120,760				$	4,678,764		$	(2,673,718	)	$	2,125,806
Grant of common stock in exchange for license @ $1.45 per share	200,000			200					289,800						290,000
Grant of common stock as settlement of liability @ $1.45 per share	60,600			61					87,809						87,870
Grant of common stock as settlement of liability @ $1.52 per share	54,100			54					82,178						82,232
Common stock returned and cancelled @ $0.42 per share	(200,000	)		(200	)				(83,800	)					(84,000	)
Vesting of stock options granted									2,970,959						2,970,959
Warrants issued:
4,770,000 shares at exercise prices from $0.75 to $1.30 per share									3,006,786						3,006,786
200,000 shares at $0.28 per share									32,460						32,460
Exercise of stock options @ $.05 per share	826,000			826					40,474						41,300
Net loss for the year ended 12/31/06												(8,862,917	)		(8,862,917	)
Balance at December 31, 2006	121,700,740		$	121,701				$	11,105,430		$	(11,536,635	)	$	(309,504	)

See notes to consolidated financial statements

(continued on next page)

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NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

(unaudited-continued)

										Deficit
							Additional			Accumulated			Stockholders’
	Common Stock				Preferred Stock		Paid-in			in Development			Equity
	Shares		Amount		Shares	Amount	Capital			Stage			(Deficiency)
Balance at December 31, 2006	121,700,740		121,701				$	11,105,430		$	(11,536,635	)	$	(309,504	)
Allocation of proceeds to warrants								3,213,600						3,213,600
Fair market value of warrant issued to purchase:
2,947,162 with an exercise price of $0.22 price per share in partial payment of offering costs								501,018						501,018
240,741 shares at $0.26 per share for services								50,767						50,767
Vesting of stock options granted								912,006						912,006
Grant of common stock for services @:
$0.36 per share	160,000		160					57,440						57,600
$0.10 per share	340,000		340					33,660						34,000
Exercise of stock options @ $.05 per share	680,000		680					33,320						34,000
Net loss for the year ended 12/31/07											(5,860,640	)		(5,860,640	)
Balance at December 31, 2007	122,880,740		122,881				$	15,907,241		$	(17,397,275	)	$	(1,367,153	)
Vesting of stock options granted								758,526						758,526
Beneficial conversion feature of debt, net of tax as of 9/30/2008								241,237						241,237
Grant of common stock for services @:
$0.10 per share	360,000		360					35,640						36,000
$0.06 per share	162,000		162					10,008						10,170
$0.05 per share	480,000		480					23,520						24,000
$0.04 per share	734,286		734					27,903						28,637
$0.03 per share	2,685,715		2,686					83,885						86,571
Fair market value of warrant issued as interest								6,490						6,490
Issuance of common stock as interest payment:
$0.05 per share	6,607,493		6,607					339,900						346,507
Redemption of common stock	(69,303,189	)	(69,303	)				68,303						(1,000	)
Gain on extinguishment of debt by shareholder								1,029,600						1,029,600
Issuance of Series B Preferred stock					750,000	750		(750	)					—
Issuance of Series C Preferred stock					4,250,000	4,250		(4,250	)					—
Net loss for the nine months ended 9/30/08											(4,249,011	)		(4,249,011	)
Balance at September 30, 2008	64,607,045		64,607		5,000,000	5,000	$	18,527,253		$	(21,646,286	)	$	(3,049,426	)

See notes to consolidated financial statements

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NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

							From inception:
	For the nine months ended						December 22, 2004
	September 30,						to September 30,
Cash flows from operating activities	2008			2007			2008
Net loss	$	(4,249,011	)	$	(4,273,653	)	$	(21,646,286	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		186,450			81,184			404,594
Amortization of discount on convertible notes		1,267,454			923,910			2,597,527
Amortization of deferred financing costs		288,886			218,246			603,076
Vesting of stock options		758,526			822,755			4,911,573
Issuance of warrants for services		6,490			50,767			3,369,945
Issuance of stock for services		119,378			—			153,378
Issuance of stock for interest		346,507			—			346,507
Receipt of and gain on Atlas Mining warrant		—			—			(506,250	)
Loss (gain) on disposal of asset		61,231			(1,823	)		60,313
Deferred rent		(9,034	)		6,324			—
Changes in operating assets and liabilities:
Decrease (increase) in inventory		6,863			(21,302	)		(20,286	)
Decrease (increase) in accounts receivable and other current assets		83,009			(21,627	)		(36,808	)
Increase (decrease) in accounts payable,
accrued payroll and accrued expenses		585,683			(121,044	)		1,303,587
Increase in deferred revenue		164,000			—			164,000
Decrease in other liability		(4,500	)		28,942			17,500
Net cash used in operating activities		(388,068	)		(2,307,321	)		(8,277,630	)
Cash flows from investing activities:
Purchase of property and equipment		(131,219	)		(169,073	)		(558,815	)
Proceeds from sale of property and equipment		192			2,937			3,129
Purchase of license		(50,000	)		—			(200,000	)
Proceeds from sale of Atlas Mining warrant		—			—			506,250
Net cash (used in) provided by investing activities		(181,027	)		(166,136	)		(249,436	)
Cash flows from financing activities:
Proceeds from convertible notes		390,000			3,250,000			7,796,000
Advances on related party line of credit		—			300,000			900,000
Advances from related parties		141,948			326,095			1,338,309
Repayment of amounts due to related parties		(93,303	)		(326,791	)		(1,145,874	)
Repayment of capital lease obligations		(65,995	)		(18,794	)		(104,035	)
Payment of registration rights damages		—			(30,097	)		(63,539	)
Deferred financing costs		(20,000	)		(160,600	)		(180,600	)
(Redemption) issuance of common stock		(1,000	)		—			99,000
Proceeds from exercise of stock options		—			14,000			75,300
Net cash provided by financing activities		351,650			3,353,813			8,714,561
Increase (decrease) in cash and cash equivalents		(217,445	)		880,356			187,495
Cash and cash equivalents at beginning of period		404,940			139,638			—
Cash and cash equivalents at end of period	$	187,495		$	1,019,994		$	187,495

See notes to consolidated financial statements

(continued on next page)

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NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited - continued)

					From inception:
	For the nine months ended				December 22, 2004
	September 30,				to September 30,
	2008		2007		2008
Supplemental disclosure of cash flow information:
Cash paid for interest during the period	$	8,589	$	132,552	$	143,555
Schedule of non-cash investing and financing activities:
Issuance of warrants in partial payment of financing costs	$	6,490	$	501,018	$	507,508
Note issued in consideration of deferred financing costs			$	97,500	$	97,500
Allocation of proceeds from discount on
notes payable and warrants grants	$	390,000	$	3,213,600	$	3,603,600
Registration rights liability			$	133,900	$	164,978
Capital lease obligations	$	24,766	$	153,971	$	178,737
Common stock issued for:
Convertible notes					$	4,156,000
Property and equipment			$	57,600	$	115,600
Services	$	77,700			$	178,102
Acquisition of license settled through issuance
of common stock (net of $100,000 cash)					$	290,000
Common stock returned and cancelled in
connection with license agreement					$	(84,000	)
Gain on extinguishment of debt by shareholder	$	1,029,600			$	1,029,600

See notes to consolidated financial statements

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NaturalNano, Inc. for the three and six months ended September 30, 2008 and 2007

1) PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The condensed consolidated financial statements as of September 30, 2008 and for the three and nine months ended September 30, 2008 and 2007 are unaudited. However, in the opinion of management of the Company, these financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position and results of operations for such interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results to be obtained for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. Certain prior period amounts have been reclassified to be consistent with current period presentation.

Basis of Consolidation

The condensed consolidated financial statements include the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its wholly owned subsidiary NaturalNano Research, Inc. (“NN Research”) a Delaware corporation. All significant inter-company accounts and transactions have been eliminated in consolidation.

Description of the Business

NaturalNano, located in Rochester, New York, has been a development stage company through September 30, 2008. The Company expects to begin reporting material revenues during the year ending December 31, 2008, and will make a determination on reporting as a development stage company in each future reporting period. Our mission is to develop and commercialize material science technologies with a special emphasis on additives to polymers and other industrial and consumer products by taking advantage of technological advances developed in-house and through licenses from third parties. The Company’s current activities are directed toward research, development, production and marketing of its proprietary technologies relating to the treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for:

• polymers, plastics and composites,

• cosmetics and personal care products,

• household products, and

• agrichemical products.

NaturalNano is domiciled in the state of Nevada as a result of the merger with Cementitious Materials, Inc. (“CMI”), which was completed on November 29, 2005.

Liquidity

Going Concern – The accompanying condensed 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. As shown in the accompanying condensed consolidated financial statements, the Company incurred a net loss for the nine months ended September 30, 2008 of $4,249,011 and had negative working capital of $1,437,420 and a stockholders’ deficiency of $3,049,426 at September 30, 2008. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing and, ultimately, to attain successful operations.

In addition, management is currently assessing the Company’s operating structure for the purpose of reducing ongoing expenses, increasing sources of revenue and is assessing the availability of additional debt and equity financing on terms that would be acceptable to the Company. In addition, recent successes in product testing for Pleximer and filled-tube applications are being leveraged in an attempt to increase revenues from sales.

As of September 30, 2008 the Company had received $390,000 of a contingent commitment for $2,500,000 of additional working capital (see Note 2). The commitment for such additional capital has been obtained contingent on

- 8 -

certain operational milestones to be achieved by the Company. If the Company fails to achieve the milestones, no assurance can be given that such additional capital will be made available on terms acceptable to the Company, or at all. If the Company fails to meet the milestones, it will be forced to secure additional capital or it will be forced to curtail or discontinue its operations.

The Company will continually evaluate funding options including additional offerings of its securities to private and institutional investors and other credit facilities as they become available. There can be no assurance as to the availability or terms upon which such financing alternatives might be available.

The Company has incurred a $21,646,286 loss from operations since its inception, December 22, 2004. Since inception the Company’s growth has been funded through a combination of convertible debt from private investors and from cash advances from its former parent and majority owned shareholder Technology Innovations, LLC.

The Company has experienced an average monthly cash usage of approximately $63,000, which includes the receipt of $501,000 in tax rebates from the State of New York and the deferral of approximately $327,000 of employee salaries, during the first nine months of 2008. During the first nine months of 2007, the Company experienced monthly cash use of approximately $275,000.

Due to Related Party

On June 6, 2008 the Company received $200,000 under a promissory note. Such note did not bear any interest and was repaid on July 17, 2008 following the collection of certain receivables. The note had an attached 5 year warrant to purchase 200,000 shares of the Company’s common stock for $0.33 per common share. The Company valued such warrant at $6,490 as of June 30, 2008. During the nine months ended September 30, 2008, $6,490 was realized as additional interest related to this warrant.

Income Taxes

As of September 30, 2008 the Company had a deferred income tax liability of $148,763, which consisted of the tax effect of the difference in basis between GAAP and tax purposes for the beneficial conversion feature in connection with the Notes entered into during August and September of 2008 (see Note 2) with the offset recorded through additional paid-in capital as an offset to the beneficial conversion feature.  This deferred tax liability will decrease with a corresponding increase to additional paid-in capital as the beneficial conversion feature is amortized over the term of the Notes.

Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses and other corporate tax attributes as ownership changes occur.  As a result of the transactions discussed in Notes 2, 3 and 6, a Section 382 ownership change is expected and a study will be required to determine the date of the ownership change. The amount of the Company’s net operating losses and other corporate tax attributes incurred prior to the ownership change may be limited based on the value of the Company on the date of ownership change.  A full valuation allowance has been established for the deferred tax asset related to the net operating losses and other corporate tax attributes available.  Accordingly, any limitation is not expected to have an impact on the balance sheet or statements of operations of the Company.  The net operating loss and related corporate tax attributes along with the related deferred tax assets as of December 31, 2007 were disclosed in the notes to the audited financial statements included in the Company’s 10-KSB filed on April 9, 2008.

Tax Rebate from the State of New York

During the nine months ended September 30, 2008 the Company received a QETC Facilities, Operations, and Training tax rebate from the State of New York of $244,000 related to 2006 and $257,000 related to 2007 which were recorded as a reduction in general and administrative expenses.

Revenue Recognition

We have earned nominal operating revenue since our inception (December 22, 2004). This revenue was generated from funded development or the delivery of Pleximer and sample products specifically for customer applications in various industries in connection with product development evaluations and as such are considered operating revenue for financial reporting purposes. We earn and recognize such revenue to the extent such development activities are completed or when the shipment of the sample products has occurred.

Property and Equipment and Capital Lease Agreements

Depreciation of property and equipment is provided on a straight-line basis over the estimated useful lives of the related assets. Costs of internally developed intellectual property rights with indeterminate lives are expensed as incurred.

- 9 -

During the first nine months of 2008, the Company entered into one capital lease obligation totaling $24,766 for laboratory equipment. Assets under capital lease have been included in property and equipment. Additionally, the Company relocated its operations to a new facility, consequently the $61,231 net asset value of leasehold improvements and certain furnishings that did not move with the Company became impaired on the date of the move, and were expensed in the period.

On August 21, 2008, the lease for one of the Company’s facilities was assigned to Technology Innovations, LLC, an affiliate of the Company, releasing the Company from the related lease obligation for that facility.

Loss Per Share

Basic loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per common share gives effect to preferred stock, dilutive debt, options and warrants outstanding during the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss per share as their effect is anti-dilutive based on the net loss incurred. As of September 30, 2008 and 2007 there were 1,734,838,651 (see Note 7) and 64,411,905 shares, respectively, underlying convertible debt, outstanding options and warrants which have been excluded from this calculation.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations” (“FAS 141R”). FAS 141R replaces Statement of Financial Accounting Standards No. 141, “Business Combinations” (“FAS 141”). Although it retains the fundamental requirement in FAS 141 that the acquisition method of accounting be used for all business combinations, FAS 141R establishes principles and requirements for how the acquirer in a business combination (a) recognizes and measures the assets acquired, liabilities assumed and any noncontrolling (“minority”) interest in the acquiree, (b) recognizes and measures the goodwill acquired in a business combination or a gain from a bargain purchase and (c) determines what information to disclose regarding the business combination. FAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the Company’s 2009 fiscal year. The Company does not expect that this Statement will have an effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling (“minority”) Interests in Consolidated Financial Statements” (“FAS 160”). FAS 160 establishes accounting and reporting standards for the noncontrolling (“minority”) interest in a subsidiary, commonly referred to as minority interest. Among other matters, FAS 160 requires (a) the noncontrolling (“minority”) interest be reported within equity in the balance sheet and (b) the amount of consolidated net income attributable to the parent and to the noncontrolling (“minority”) interest to be clearly presented in the statement of income. FAS 160 is effective for the Company’s 2009 fiscal year. FAS 160 is to be applied prospectively, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company does not expect that this Statement will have an effect on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133” (“SFAS No. 161”), which changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This statement will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (that is, fiscal 2009 for the Company). The Company is currently assessing the potential effect of FAS No. 161 on its financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect that this Statement will have an effect on the Company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60”. This Statement interprets Statement 60, “Accounting and Reporting by Insurance Enterprises” and amends existing accounting pronouncements to clarify their application to the financial

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guarantee insurance contracts included within the scope of this Statement. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities.  This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008 (that is, fiscal 2009 for the Company), and all interim periods within those fiscal years. The Company does not expect that this Statement will have an effect on the Company’s consolidated financial statements.

In June 2008, the Emerging Issues Task Force (“EITF”) Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entities Own Stock” is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently assessing the potential effect of EITF No. 07-05 on its financial statements.

2. 8% SENIOR CONVERTIBLE DEBT

On March 7, 2007, we entered into a Loan and Security Agreement for $3,347,500 (the “Initial Notes”) with Platinum Partners Long Term Growth IV, Longview Special Financing, Inc. (collectively the “Investors”) and Platinum Advisors, LLC (collectively with the Investors “Platinum”). On August 4, 2008, we issued notes aggregating $170,000 with the Investors in contemplation of a new loan and security agreement for $2.5 million. On September 29, 2008 we entered into a Loan and Security Agreement and under this agreement, the Company issued another $220,000 of convertible notes. The loan and security agreement and the notes issued under that agreement had a conversion price of $0.005, resulting in a reset of a) the conversion price of the Initial Notes, b) the exercise price of the warrants related to the Initial Notes and c) the number of shares that may be purchased by such warrants. As of September 30, 2008 the shares underlying the Notes represent an aggregate of 747,500,000 common shares issuable upon the conversion of the principal amount of the Notes at the fixed conversion price of $0.005 per share. On September 29, 2008, the Investors agreed to cancel warrants to purchase 1,218,750,060 shares of common stock at $0.005 per share in exchange for shares of preferred stock (see Note 6). The remaining warrants held by Platinum Advisors, LLC gave the holder the right to purchase 162,734,651 shares of the Company’s common stock for $0.005 per share.

On September 29, 2008, the Company entered into a Loan and Security Agreement, by and among Platinum Long Term Growth IV, LLC (“Platinum”) and Longview Special Financing Inc. (“Longview” and together with Platinum, collectively, the “Lenders”). As of September 30, 2008 the Company had received an aggregate of $390,000 and issued 8% senior secured promissory notes due January 31, 2010 to the Lenders (the “New Notes”). The Loan Agreement provides for additional advances, subject to performance milestones being achieved by the Company, that could total an additional $2,110,000. The New Notes are convertible into common stock of the Company, with a conversion price of $0.005 that bear interest at the rate of 8% per annum, with interest payable quarterly, in arrears, in freely traded stock or in cash at election of the Company. All unpaid interest and principal will be due and payable at maturity on January 31, 2010 and no payments of interest are required prior to January 31, 2009.

The New Notes are secured on a pari-passu basis with the Initial Notes and (i) senior to all other current and future indebtedness, (ii) secured by all of the assets of the Company and each of the Company’s subsidiaries and (iii) unconditionally guaranteed by all of the Company’s subsidiaries. The Company and the Lenders (and their affiliates) entered into Forbearance Agreements for the purpose of making the maturity for the Existing Debt coterminous with the maturity date for the New Notes and that they will not enforce their rights provided for in the loan documents.

The Company considered SFAS No. 133 and EITF 00-19 and determined that the embedded conversion feature met the criteria to be classified as equity and as a result did not require derivative treatment. Because the New Notes are convertible into common stock of the Company at a price less than the fair market value of the Company’s common stock on the dates the New Notes were issued, there is a beneficial conversion feature related to the New Notes. The intrinsic value of the common stock each note is convertible into is greater than the face value of each note. The value of the beneficial conversion feature to be recorded was limited by EITF 98-05 to $390,000, the face value of the New Notes. The beneficial conversion feature was recorded as equity as a discount to the New Notes. As of December 31, 2007, the condensed consolidated balance sheet reflects a long term liability of $1,330,073 for the Notes, net of $2,017,427 of discount for warrants to purchase 25,106,254 shares of the Company’s common stock for a weighted average price of $0.28 per share issued to Platinum related to the Initial Notes. As of September 30, 2008 the condensed consolidated balance sheet reflects a long term liability of $2,597,527 for the Notes, net of $1,139,973 of discount, including the beneficial conversion feature of the New Notes. The discount will be amortized using a straight line method as interest during the term of the Notes (including the forbearance period), ending January 31, 2010. The Company has determined the use of the straight-line method for the amortization of the beneficial conversion feature is an appropriate effective yield method as required by EITF 98-5 as the principal of the note is due in full at maturity, the interest in not compounding and therefore this method appropriately matches the interest expense to the cash flow of the note.

During the nine months ended September 30, 2008 and 2007, the Company recorded $1,267,454 and $923,910, respectively, in amortization expense relating to the discount on the Notes. This amortization is included as interest expense in the accompanying Statement of Operations.

In May 2008 we issued an aggregate of 1,190,225 shares of our common stock to Platinum in satisfaction of $133,900 of interest due on the Notes. We were advised by Platinum that they believed our calculation of the number of shares required to be issued in satisfaction of such interest was incorrect. On June 2, 2008, we issued an aggregate of 5,417,268 additional shares of common stock, of which 2,618,197 was for satisfaction of $133,528 of interest due on

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June 1, 2008 and 2,799,071 shares to settle the disputed amount of $79,079 for the six month period ended March 1, 2008.

3. AGREEMENTS WITH TECHNOLOGY INNOVATIONS, LLC

Technology Innovations, LLC (“TI”) was our principal stockholder with a beneficial ownership of 56.3% of our outstanding common stock as of December 31, 2007. TI is a New York limited liability corporation established in 1999 to develop intellectual property assets. A director on of our Board of Directors represents the interests of TI and has an 11.29% ownership of TI. TI founded NaturalNano, Inc., a Delaware corporation on December 22, 2004, with an initial cash contribution of $100,000 for all of the then outstanding shares of common stock.

In connection with the 8% senior secured convertible debt more fully described in Note 2, on March 2 and 5, 2007, NN Research entered into Patent Assignment agreements (the “Patent Assignments”) with TI, pursuant to which TI assigned to NN Research all of its rights, title and interest in certain issued patents and pending patent applications, with respect to which TI had previously granted NN Research licenses. No value was assigned to these patents. TI also agreed, in a letter to Platinum dated March 7, 2007 (the “Lock-Up Letter”), that for a period of two years from the date of the Lock-Up Letter it will not (except as permitted under the Lock-Up Letter in certain limited circumstances) sell, transfer or otherwise dispose of any shares of our common stock or any securities convertible into or exchangeable or exercisable for shares of our common stock. TI further agreed, in a letter to Platinum dated March 7, 2007 (the “Standstill Letter”), that it would not demand repayment by us or NN Research of any obligations for money borrowed except as defined in the Purchase Agreement.

On June 28, 2006, we entered into a Line of Credit agreement with TI pursuant to which TI committed to make advances in an aggregate amount of $1 million. Under the Line of Credit Agreement, advances were allowed in such amounts and at such times upon 15 days notice except that no more than $300,000 could be advanced in any 30-day period. Amounts borrowed bear interest at the rate of 8% per annum. The Agreement contains conventional terms, including provisions relating to events of default. Amounts borrowed under this agreement are to be used for general working capital needs.

On August 1, 2008 the $900,000 advanced by TI, along with $129,600 of accrued and unpaid interest, was satisfied in exchange for a warrant, described below, resulting in a gain on extinguishment of liabilities with a shareholder recorded as an increase in additional-paid-in-capital. Accordingly, no amount was outstanding as of September 30, 2008. During the nine months ended September 30, 2008, the Company recorded a total of $42,016 of interest related to this note, as compared to $52,690 for the same period of 2007. As of December 31, 2007, $900,000 had been advanced under the Line of Credit Agreement. The TI line of credit was established on terms we believed to be competitive with comparable transactions involving unaffiliated parties and was approved by the independent members of our Board of Directors. Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities, the fair value of the debt approximates the carrying amount. The repayment obligation under the Line of Credit Agreement was originally scheduled to expire on March 31, 2007, at which time TI would be able to demand repayment upon 15 days notice. In connection with the March 7, 2007 issuance of the Notes (see Note 2), TI agreed not to demand repayment as long as any amounts were outstanding on the Notes.

On August 1, 2008, in connection with, and as a condition to the financing provided by Platinum and Longview (see Note 2), TI agreed (x) to sell its common share holdings in the Company at the direction of the Company for the sum of $1,000, and (y) agreed to cancel and forgive all principal, interest, fees and expenses accrued and due pursuant the Credit Agreement and note entered into by the Company with TI in connection with a line of credit provided by TI to the Company (the “TI Debt”). In consideration for the cancellation of the debt, the Company has agreed to issue to TI a warrant to purchase up to 4.99% of the Company’s common stock on terms more particularly set forth in the agreement with TI.

On August 6, 2008 the Company issued TI a warrant to purchase up to 4.99% of the Company’s common stock. Under the warrant TI may purchase up to that number of shares that would give TI beneficial ownership of not more than 4.99% of the Company. The price to be paid for the shares, if purchased on or before February 13, 2009 will be computed as $25 million divided by the fully diluted common stock outstanding on the date of exercise. If any such purchase occurs after February 13, 2009 and before the warrant expires on February 11, 2011, the purchase price shall be computed as $40 million divided by the fully diluted common shares outstanding on the date of exercise. On the date that the warrant was issued, TI beneficially owned 4.05% of the Company through common stock and derivatives convertible into common stock within 60 days from the issue date held by TI and its affiliates. The Company had 2,173,714,879 fully diluted common shares, which gave effect to the conversion of all debt and equity instruments into common stock, per the terms of the warrant. As of the date of issuance, a maximum of 646,377 common shares were issuable at a price of $0.0115 per share.

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On September 26, 2008, the Company paid TI $1,000 and redeemed the 69,303,189 shares of common stock held by TI. Additionally, TI, and an affiliate of TI, Biomed, Inc. forgave approximately $66,000 of outstanding current account payable.

Also on September 26, 2008, TI and the Company entered into a consulting agreement under which the TI agreed to provide certain advisory services until September 26^, 2009. In exchange for such services, the Company is to issue to TI common stock valued at an aggregate of $66,000 based upon the trailing 20 day volume weighted average price (the “VWAP”) on the date of issue. To the extent that the VWAP on the date of an effective Form S-8 registering shares issued to TI is less than the VWAP on the date such shares were issued, the Company agreed to pay TI such difference in cash. As of September 30, 2009, TI was issued 300,000 shares of common stock valued at $11,700 under the Company’s 2007 Incentive Stock Plan.

4. INVENTORY AND TRANSACTIONS WITH ATLAS MINING COMPANY

During 2007, the Company purchased a supply of 15 tons of halloysite nanotubes from a mine in New Zealand. A portion of these halloysite nanotubes have been used to produce Pleximer which is available for sale. As of September 30, 2008, the $20,286 cost to purchase, ship, store halloysite nanotubes and produce Pleximer being held in inventory is reflected on the Company’s balance sheet as a current asset. The Company expects that such inventory may be substantially utilized in 2008.

When halloysite nanotubes or Pleximer held in inventory are used, the carrying value of any such inventory used (i) for research and development is expensed in the period that it is used for the development of proprietary applications and processes or (ii) cost of goods sold will be charged as customer shipments are made.

In December 2007, the board of directors determined that the Company should make its best efforts to recover the $250,000 it had pre-paid Atlas Mining Company for halloysite. On January 28, 2008, after attempts to contact Atlas Mining Company management failed, the Company formally notified Atlas Mining Company that it believes Atlas Mining Company was in breach of its contract with the Company for the supply of halloysite, for which the Company had prepaid $250,000 for future deliveries. The Company intends to file a claim against Atlas Mining Company and is seeking to recover the $250,000 it had previously paid and now believes it may never receive material from Atlas Mining Company. In addition, on February 4, 2008, the Company notified Atlas Mining Company’s distribution partner, NanoDynamics, Inc., that it may be liable for the $250,000. Any portion of such amount covered will be recognized by the Company when and as recovered.

The Company believes it has identified various sources of halloysite that are considered suitable as alternate suppliers of this raw material, and as such, is not solely dependent upon Atlas Mining Company nor the mine in New Zealand for delivery of halloysite materials.

5. PATENT LICENSE AGREEMENTS

Navy License Agreement

On October 3, 2007, the Company entered into a license agreement with the United States Department of the Navy as represented by the Naval Research Laboratory (“NRL”) (the “License Agreement”). Under the License Agreement, the Company has been granted rights to certain patents for use in the electromagnetic shielding/strength enhancement, cosmetic, fragrance, agriculture, ink and paper, electronics, fabrics and textiles, and local drug delivery fields.

The License Agreement provides for a license issue fee of $500,000 to be fully paid by December 31, 2009 and royalties of 5% of net sales, subject to certain minimum royalty payments. As of September 30, 2008, the Company has paid $100,000 of this obligation.

The License Agreement provides that the Company may sublicense the licensed inventions provided that the royalty for such sublicense shall be between 10% and 25% of any such sublicense revenue, depending on the number of such sublicenses in effect.

The $500,000 license issue fee will be amortized over the 5 year term of the license agreement on a straight-line basis. As of September 30, 2008, the net value of the Navy License was $400,000. Future royalty payments resulting from this agreement will be expensed as incurred. During the three and nine months ended September 30, 2008, $25,000 and $75,000, respectively, of amortization expense was recognized for this license agreement.

Ambit License Agreement

On December 31, 2005, the Company entered into an exclusive licensing agreement for the rights to a patented technology in the field of electronics shielding. On November 13, 2006, the parties signed an amended and restated non-exclusive license agreement, effective October 1, 2006, modifying the terms of the original agreement. The

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amended license agreement calls for 20% royalty payments upon our sale of licensed products utilizing the technology or in instances of sublicense agreements and eliminates the original requirement calling for minimum royalty payments. The amended agreement includes annual reporting of progress made on product development and various confidentiality elements. This agreement shall remain in effect until the expiration date of the last-to-expire related patent that is cited in the agreement, which is currently projected to be in fiscal year 2014.

The license was recorded as a non-current asset and is amortized on a straight line basis over an estimated useful life of nine years ending in fiscal year 2014. As of September 30, 2008 the net value of the Ambit License was $207,197. Future royalty payments resulting from this agreement will be expensed as incurred. Amortization expense of $8,288 was recognized for this license agreement in the three months ended September 30, 2008 and 2007. Amortization expense of $24,864 was recognized for this license agreement in the nine months ended September 30, 2008 and 2007.

6. STOCKHOLDERS EQUITY, STOCK OPTIONS, WARRANTS AND CONVERTIBLE DEBT

As of September 30, 2008 the Company was authorized to issue up to 300,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of September 30, 2008, the Company had 64,607,045 shares of common stock issued and outstanding and had 5,000,000 shares of preferred stock outstanding. On October 9, 2008, the Company mailed an Information Statement on Schedule 14c, more fully described in Note 7, informing the stockholders that a majority of the common shares outstanding as of September 12, 2008 had voted to, among other things, amend the Company’s Certificate of Incorporation to increase the authorized common stock to 5,000,000,000 shares.

Preferred Stock Issuances

On September 29, 2008 the Investors (see Note 2) agreed to exchange detachable warrants to purchase 1,218,750,060 shares of common stock of the Company for $0.005 per share held by such Investors related to the March 6, 2007 convertible notes payable for 5,000,000 shares of preferred stock.

On October 7, 2008, the Company filed a Certificate of Designation of Rights, Preferences, Designations, Qualifications and Limitations of the Series C Preferred Stock (the “Series C Designation”) with the Secretary of State of the State of Nevada, and prepared a preferred stock certificate for delivery to Platinum Long Term Growth IV, LLC, evidencing 4,250,000 shares of Series C Convertible Preferred Stock of the Company (“Series C”). On October 7, 2008, the Company also filed a Certificate of Designation of Rights, Preferences, Designations, Qualifications and Limitations of the Series B Preferred Stock (the “Series B Designation”) with the Secretary of State of the State of Nevada, and prepared a preferred stock certificate for delivery to Longview Special Funding, Inc., evidencing 750,000 shares of Series B Convertible Preferred Stock of the Company (“Series B”). The Series B and Series C have an aggregate liquidation preference of $10,000 and participate in any dividends or distributions to the common shareholders on an as converted basis.

Each share of the Series B Convertible Preferred Stock, and each share of Series C Convertible Preferred Stock is convertible into 160 shares of the Company’s common stock and votes on an as-converted basis (with each share having 160 votes). However, the Series B Designation limits the holder’s right to convert its Series B Convertible Preferred Stock, and the aggregate voting power attributable to its Series B Convertible Preferred Stock, to no more than 4.99% of the votes attributable to the total outstanding common shares. Accordingly, the votes attributable to the Series B Convertible Preferred constitutes 4.99% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis) and the votes attributable to the Series C Convertible Preferred Stock, therefore, represent approximately 86.74% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis), and the votes Series B Convertible Preferred and the Series C Convertible Preferred, voting together represent approximately 91.73% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis).

Common Stock Issuances

In January 2008, the Company issued 360,000 shares of its common stock as part of a 700,000 share obligation to Sichenzia Ross Friedman and Ference in settlement of a liability accrued for general legal services to be received by the Company between October 2007 and February 2008. The Company issued 340,000 shares of common stock for such obligation in 2007 which was valued at $34,000 as of December 31, 2007. The aggregate of 700,000 shares of common stock issued and received in connection with this transaction has been valued at $70,000 based on the market price of the Company’s common stock as of February 29, 2008 being when the required performance by the attorney was complete, therefore the Company valued the 360,000 shares issued at $36,000.

In February 2008, the Company issued 150,000 shares of its common stock to Sichenzia Ross Friedman and Ference in settlement of a liability accrued for general legal services to be received by the Company upon filing of the complaint against Atlas Mining Company (see Note 4). As of September 30, 2008, the 150,000 shares were valued at $9,450

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based on the market price of the Company’s common stock as of September 30, 2008 and will be revalued and charged against the liability accrued as of December 31, 2007, when the required performance by the attorney is complete. Any amount in excess of the accrued liability will be charged to operations.

In March 2008 the Company issued 480,000 shares of its common stock to Sichenzia Ross Friedman and Ference in settlement of a liability accrued for general legal services to be valued by the Company between March 2008 and June 2008 upon performance by the attorney. The common stock issued and received in connection with this transaction has been valued at $24,000 based on the market price of the Company’s common stock as of June 30, 2008 when the required performance by the attorney was complete.

In March 2008 the Company issued 12,000 shares of its common stock to Everblak, Inc. in settlement of a liability accrued for services to be received by the Company between November 2007 and March 2008. The common stock issued and received in connection with this transaction has been valued at $720 based on the market price of the Company’s common stock as of April 10, 2008, when the shares were delivered and the required performance by Everblak, Inc. was complete.

During the six months ended June 2008, the Company issued an aggregate of 6,607,493 shares of its common stock in satisfaction of interest obligations to its senior debt holders (see Note 2).

In July 2008 the Company issued 685,715 shares of its common stock to Sichenzia Ross Friedman and Ference in settlement of a liability accrued for general legal services to be valued by the Company between July 2008 and August 2008 upon performance by the attorney. The common stock issued and received in connection with this transaction was valued at $20,571 based on the market price of the Company’s common stock as of August 31, 2008 when the required performance by the attorney was complete.

In August 2008, the Company issued 2,000,000 shares of its common stock to Sichenzia Ross Friedman and Ference for retention of legal services related to the efforts of the Company to secure financing as discussed in Note 2. These shares were valued at $66,000, which was capitalized and is being amortized over the term of the debt.

In September 2008 the Company issued 34,286 shares of its common stock to Everblak, Inc. in settlement of a liability accrued for services to be received by the Company between November 2008 and March 2009. The common stock issued and received in connection with this transaction has been valued at $1,337 based on the market price of the Company’s common stock as of September 30, 2008. These shares will be revalued at each reporting period until the services are complete. Any change in value for a given reporting period will be realized as operating income or expense.

In September 2008 the Company issued 400,000 shares of its common stock to Sichenzia Ross Friedman and Ference in settlement of a liability accrued for general legal services to be valued by the Company between September 2008 and October 2008 upon performance by the attorney. The common stock issued and received in connection with this transaction will be valued based on the market price of the Company’s common stock as of October 31, 2008 charged to operations, when the required performance by the attorney is complete.

In September 2008, the Company issued 300,000 shares of common stock to TI as partial satisfaction of a contractual liability (see Note 3).

Options, Warrants and Convertible Debt

Under the Company’s 2005 Incentive Stock Plan (the “2005 Plan”) and Amended and Restated 2007 Incentive Stock Plan (the “2007 Plan”), officers, employees, directors and consultants may be granted options to purchase the Company’s common stock at fair market value as of the date of grant. Options become exercisable over varying vesting periods commencing from the date of grant and have terms of five to ten years. The plan also provides for the granting of performance-based and restricted stock awards. The Company’s board of directors has approved the Company’s 2008 Incentive Stock Plan (the “2008 Plan”), but this plan was not in effect as of September 30, 2008 because the Company did not have sufficient capital authorized for such 2008 Plan as of September 30, 2008 (see Note 7).

The Company has issued warrants to purchase shares of its common stock to certain consultants and debt holders. In addition, during 2007 the Company issued $3,347,500 of 8% senior convertible notes (see Note 2) that may be converted into Common Stock of the Company. The terms of the 8% senior convertible notes and related warrants provide an exercise or conversion price per common share, and such price shall be adjusted if the Company sells its securities to private and institutional investors in the future at a price less than the current exercise or conversion price. During the three months ended September 30, 2008, the Company issued an additional $390,000 of debt securities having a conversion price of $0.005 per common share, which triggered the anti-dilution provisions of the Initial Notes and the attached warrants (see note 2). As of September 30, 2008, the holders of the 8% senior convertible notes can

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convert such notes into 747,500,000 shares of the Company’s common stock. On September 29, 2008, the Investors agreed to cancel their warrants in exchange for shares of preferred stock, as described above. The remaining warrants held by Platinum Advisors, LLC gave the holder the right to purchase 162,734,651 shares of the Company’s common stock for $0.005 per share.

On June 6, 2008 the Company received $200,000 under a promissory note and issued a 5 year warrant to purchase 200,000 shares of the Company’s common stock for $0.33 per common share, the Company valued such warrant at $6,490 as of the repayment date of the note. During the three and nine months ended September 30, 2008, $2,781 and $6,490, respectively, was realized as additional interest related to this warrant.

In consideration for the cancellation of TI’s debt (see Note 3), on August 6, 2008 the Company issued TI a warrant to purchase up to 4.99% of the Company’s common stock. Under the warrant TI may purchase up to that number of shares that would give TI beneficial ownership of not more than 4.99% of the Company. The price to be paid for the shares, if purchased on or before February 13, 2009 will be computed as $25 million divided by the fully diluted common stock outstanding on the date of exercise. If any such purchase occurs after February 13, 2009 and before the warrant expires on February 11, 2011, the purchase price shall be computed as $40 million divided by the fully diluted common shares outstanding on the date of exercise. On the date that the warrant was issued, TI beneficially owned 4.05% of the Company through common stock and derivatives convertible into common stock within 60 days from the issue date held by TI and its affiliates. The Company had 2,173,714,879 fully diluted common shares, which gave effect to the conversion of all debt and equity instruments into common stock, per the terms of the warrant. On the date of issuance, the warrant was for a maximum of 646,377 common shares at a price of $0.0115 per share.

As of September 30, 2008 and December 31, 2007, the Company had the following options, warrants and convertible debt outstanding, excluding the warrant held by TI to purchase that number of shares which would provide TI with no more than a 4.99% ownership of the Company:

	As of September 30, 2008		As of December 31, 2007
	Shares of Common Stock subject to purchase	Weighted average exercise price per share of Common Stock	Shares of Common Stock subject to purchase	Weighted average exercise price per share of Common Stock
Incentive stock plans	24,604,000	$0.172	18,479,000	$0.20
Warrants	162,734,651	0.006	25,546,995	0.27
Preferred Stock	800,000,000	-	-	-
Convertible debt	747,500,000	0.005	15,215,909	0.22
Total	1,734,838,651	$0.005	59,241,904	$0.24

For the three months ended September 30, 2008 and 2007, the Company recorded $197,034 and $48,092 respectively, in compensation costs for stock options granted to employees and consultants under the Company’s incentive stock plans. For the nine months ended September 30, 2008 and 2007, the Company recorded $758,526 and $822,755 respectively, in compensation costs for stock options granted to employees and consultants under the Company’s incentive stock plans.

As of September 30, 2008, the Company had 12,390,000 stock options outstanding under the Company’s 2007 Plan. On September 30, 2008 the options outstanding and exercisable under the 2007 Plan had a weighted exercise price of $0.14 per share and had no intrinsic value at September 30, 2008. No option grants made in connection with the 2007 Plan were exercised and 212,500 stock options were cancelled during the nine months ended September 30, 2008. As of September 30, 2008 the 2007 Plan had 188,000 option shares available for future grant.

During the nine months ended September 30, 2008, the Company granted 6,395,000 stock options from the 2007 Plan. These option grants included 5,975,000 shares that vested upon the date of grant, with five year terms, an exercise price between $0.05 and $0.11 per share and grant date fair values between $0.04 and $0.09 per share. 350,000 of such options were granted to directors of the Company for their service through June 30, 2009 and will fully vest on that date. The vesting schedule for all options in the 2007 Plan includes vesting dates at various times through August 31, 2010. The fair market value of these options was determined at the date of grant utilizing the Black-Scholes model, as described below.

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As of September 30, 2008, the Company had 12,124,000 stock options outstanding under the Company’s 2005 Plan. On September 30, 2008 the options outstanding and exercisable under the 2005 Plan had a weighted exercise price of $0.19 per share and had no intrinsic value at September 30, 2008. No option grants made in connection with the 2005 Plan were exercised and 13,333 stock options were cancelled during the nine months ended September 30, 2008. As of September 30, 2008 the 2005 Plan had 30,000 option shares available for future grant.

In addition to options granted under the Company’s 2005 and 2007 Plans described above, during 2006 the Company made certain option grants for an aggregate of 90,000 common stock options, outside of these plans. These grants include vesting criteria commencing from the grant date, an exercise price of $0.10 per share and expiration dates varying from five to ten years from the date of grant. The fair value of these stock options on the date of grant was determined utilizing the Black-Scholes model as described below. At September 30, 2008 there was no intrinsic value of these outstanding options.

The fair value of the stock options granted to consultants has been recorded as an expense of $10,592 and $39,464 for the three and nine months ended September 30, 2008, and reflects changes in fair market value of the unvested options since the prior reporting period and new grants during the quarter, calculated using the Black-Scholes valuation method. The Black-Scholes model utilizes the undiscounted quoted market price of the Company’s common stock and considers assumptions related to exercise price, expected volatility, risk-free interest rate, and the weighted average expected term of the stock option grants. Expected volatility assumptions utilized in the model were based on volatility of the Company’s stock price, the risk-free rate is derived from the U.S. treasury yield and the Company used a weighted average expected term.

	For the Nine Months Ended
Black-Scholes Valuation Assumptions:	September 30, 2008			September 30, 2007
Risk-free interest rate		2.5-3.7	%		4.2-5.0	%
Expected life in years		3.9-8.9			3-9.7
Weighted average expected stock volatility		115 to 182	%		107 to 109	%
Expected dividends		zero			zero

As of September 30, 2008, unvested compensation cost for all stock options granted to employees and consultants was approximately $700,000. Future expenses will be recognized through 2010 for these charges in accordance with the underlying vesting conditions of each grant.

7. SUBSEQUENT EVENTS

On or about October 6, 2008, an information statement was furnished to all holders of Common Stock of the Company as of September 12, 2008, in connection with the proposed actions to be taken by the Company without a meeting pursuant to the written consent of the holder of a majority of the voting power of the Company:

1.	The amendment and restatement of the Articles of Incorporation to increase the number of authorized shares of the Company’s common stock, par $0.001 per share, from 300,000,000 shares to 5,000,000,000 shares.
2.	The amendment and restatement of the Articles of Incorporation to give the board of directors the power and authority, without a shareholder vote, to approve and implement forward and reverse splits of our common stock upon approval of a majority of the directors.
3.	The approval of the NaturalNano, Inc. 2008 Incentive Stock Plan (the “2008 Plan”) and the reservation of 800 million shares of the Company’s common stock for issuance under the 2008 Plan.

On October 30, 2008, the Company filed a certificate of amendment to its second Amended and Restated Articles of Incorporation and filed the Amended and Restated Articles of Incorporation, authorizing for issuance up to 5,000,000,000 shares of common stock and 10,000,000 shares of preferred stock.

On October 31, 2008, the Company issued $85,000 of additional 8% senior secured debt securities to the Investors (see Note 2) under the terms of the Loan and Security Agreement dated September 29, 2008.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” and similar expressions. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed for the reasons described in this report. You should not place undue reliance on these forward-looking statements.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors such as:

• the successful implementation of research and development programs;

• the ability to demonstrate the effectiveness of our technology;

• the timeline for customer accreditation for product formulations;

• our ability to enter into strategic partnering and joint development agreements;

• our ability to competitively market our Pleximer and filled tube products;

• the terms and timing of product sales and licensing agreements;

• the timing and approval of filed and pending patent applications;

• the ability to raise additional capital to fund our operating and research activities until we generate adequate cash flow from operations;

• our ability to attract and retain key personnel and;

• general market conditions.

Our actual results may differ significantly from management’s expectations. The potential risks and uncertainties that could cause our actual results to differ materially from those expressed or implied herein are set forth in our Annual Report on Form 10-KSB for the year ended December 31, 2007 and our other filings with the Securities and Exchange Commission, all of which are available on Edgar.

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

The forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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Plan of operations for the period from September 1, 2008 through September 30, 2009

Milestones Anticipated for the Twelve Month Period Ending September 30, 2009

• Re-negotiate the terms of our partially exclusive license agreement with the US Department of the Navy at the Naval Research Laboratory to, reduce the license cost and extend the timeframe of payment by changing the number and definition of the fields of use which are exclusive to NaturalNano, Inc. ( the anticipated new terms have been used to present the plan of operations below)

• Establishment of funded joint development agreements that will identify and develop additional applications for Pleximer and commercialize Pleximer and filled tube application products.

• Complete customer formulation and optimization trials demonstrating Pleximer and nanotube technology advantages in multiple application models.

• Complete manufacturing scale accreditation of multiple products.

• Achieve and grow revenue by establishing supply agreements for Pleximer, filled-tube applications and funded joint developments.

• File additional patents to expand our proprietary position on specialty applications and materials.

Research and Development and Capital Expenditures for the Twelve Month Period ending September 30, 2009

Our research and development plans for the next twelve months include material characterization, formulation testing and product accreditation for our Pleximer and filled-tube products. These efforts will focus in the areas of:

• Use of halloysite as an additive in composites and polymers.

• Extended release properties.

• Halloysite material characteristics.

• Process development and scale-up of HNT treatment processes.

During the three and nine months ended September 30, 2008, research and development resources were used to support revenue generating activities. To the extent such resources are used to generate revenues, such costs will be reported as cost of goods sold.

For the twelve months ending September 30, 2009 we forecast spending approximately $1,021,000 in support of our research and development programs and an approximately $477,000 for investments in capital assets in the research and development area and approximately $40,000 in licensing fees required under existing licensing agreements.

The cash requirements for our research and development programs for the twelve months ending September 30, 2009 are summarized below.

Cash Requirements for Research and Development	For the twelve months ending September 30, 2009
Research and development team, including salaries, benefits and travel for staff and full-time consultants	$	739,000
Professional and technical consultants and advisors		147,000
Laboratory testing, materials, supplies, safety and other		60,000
Facility leases		75,000
Research and product development expenditures	$	1,021,000

Our cash spending for research and development projects, for the twelve months ended September 30, 2008, aggregated approximately $1.2 million. Research and development expenditures for the twelve month period ending September 30, 2009 will be focused on: testing and validation costs associated with customer accreditation and product development for our polymer based Pleximer products and filled-tube applications with our joint development partners. The Company is seeking additional joint development partners in order to expand our product and industry applications and as these develop; our research efforts will grow in response to these additional product and market opportunities. Product design and attribute validation for each joint development agreement may include: numerous lab, pilot and manufacturing scale tests in support of customer application and significant joint collaborative consulting efforts to refine and introduce process and product enhancements. During the 12 months ending September 30, 2009, we

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anticipate that new joint development agreements will include funded research which will be used to offset our overall research and development costs.

Total research and development spending for the twelve month period ending September 30, 2009 reflects increases in capital expenditures compared to prior periods. Investments in capital assets in support of our research and development efforts is forecast to aggregate approximately $477,000 in the twelve month period ending September 30, 2009 as compared to approximately $255,000 for the twelve month period ended September 30, 2008. The planned increase in capital equipment spending reflects management’s commitment to product characterization, development of new application areas and investment in establishing reliable sources of halloysite in anticipation of new product sales and introductions. These investments will be evaluated internally before purchase as to the Company’s intention to buy or lease the relevant equipment based on the conditions and financing costs at that time. The investments anticipated in this capital expenditure forecast include investments for: (i) commercial scale surface treatment processes, (ii) polymer extruder upgrades, (iii) tube filling characterization and evaluation tools and (iv) enhancements and upgrades to various microscopic measuring equipment.

General and Administrative Expenses

The cash requirements for general and administrative efforts for the twelve month period ending September 30, 2009 (including interest) are projected to be approximately $1,318,000. The cash needs projected for our general and administrative expenses for the twelve months ending September 30, 2009, are composed of (i) salaries, benefits and travel of $773,000, (ii) professional services of $252,000, (iii) office rental and facility costs of $5,000, (iv) investor relations and marketing of $91,000 and (v) all other costs of $197,000. Actual cash spending for general and administrative expenses incurred during the twelve months ended September 30, 2008 was approximately $780,000, including $602,000 of tax rebates related to 2005, 2006 and 2007 that we received during such period. The planned increase reflects spending on marketing and public relations costs.

Employees

As of September 30, 2008 we employed a total of eleven full time employees. During the twelve months ending September 30, 2009, we anticipate adding an additional five full-time positions, primarily technicians, scientists and engineers to our research and product development team, as demand for our product developments increases and as our operating cash position allows. The cost of these incremental positions included in our forecast for the twelve months ended September 30, 2009 is $181,000, representing salaries for the portion of the 12 month period they are expected to be employed.

Financing Activities

During the twelve months ended September 30, 2008, the Company received tax rebates of $602,000, cash receipts on revenue or deferred revenue of $350,000 and $390,000 from additional 8% Senior Secured Convertible Notes. These sources have provided working capital proceeds of $4,592,000, that enabled the Company to continue as a viable business through September 30, 2008.

We will need additional funding to execute the 2008 business plan and otherwise continue our operations for the twelve months ending September 30, 2009. In light of this, management intends to seek additional sources of cash to be in place and available starting in the fourth quarter of 2008. Our business plan anticipates the receipt of net proceeds from a future funding source in the amount of $2 million to fund operations for the balance of 2008 and to continue operations through the September 30, 2009.

As of September 30, 2008 the Company had a contingent commitment for up to $2,110,000 of additional working capital. The commitment for such additional capital has been obtained contingent on certain operational milestones to be achieved by the Company. As of November 14, 2008, the Company had not yet met all the milestones it needs to achieve. If the Company fails to achieve the milestones, no assurance can be given that such additional capital will be made available on terms acceptable to the Company, or at all. If the Company fails to meet the milestones, it will be forced to secure additional capital or it will be forced to curtail or discontinue its operations.

The Company will continually evaluate funding options including additional offerings of its securities to private and institutional investors and other credit facilities as they become available. There can be no assurance as to the availability or terms upon which such financing alternatives might be available. No commitment for such additional capital has been obtained and no assurance can be given that such additional capital will be available on terms acceptable to us, or at all. If we fail to secure additional capital, we will be forced to curtail or discontinue our operations.

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Cash Requirements and Liquidity

Our cash balance as of September 30, 2008 and projected cash outflows for the twelve-month period through September 30, 2009 are presented below.

Cash on hand at September 30, 2008			$	187,000
Projected cash requirements for the twelve-month period ending June 30, 2009 :
Research and product development expenses	(1,021,000	)
Capital expenditures for research and development	(477,000	)
Collaborative research & licensing agreements	(40,000	)
General and administrative expenses including: administrative salaries and benefits, office, rent, legal expenses, accounting, investor relations and marketing	(1,318,000	)
Interest on convertible debt	(350,000	)
Total estimated cash needs for the twelve month period ending June 30, 2009				(3,206,000	)
Projected cash receipts as of September 30, 2009 on forecast product sales of $3 million				2,317,000
Estimated direct cost of materials for such sales				(1,155,000	)
Anticipated financing required by 6/30/2009, net of financing costs				2,000,000
Estimated cash balance on September 30, 2009			$	143,000

Our average monthly cash usage for operating and investing activities has averaged $63,000 per month during the nine months ended September 30, 2008, inclusive of the $501,000 of tax rebates received during such period.

We estimate that we will need to raise additional capital of approximately $2 million during the 9 month period ending June 30, 2009 to accomplish our business objectives and otherwise continue our operations and will actively evaluate all funding options including additional offerings of our securities to private and institutional investors and other credit facilities as they become available. It has been assumed that this financing is raised through sale of our equity securities, if all $2,000,000 of such amount is raised through sale of debt securities under the terms of the Loan and Security Agreement dated September 29, 2008, there would be additional interest expense of approximately $140,000. We have no commitment for such future capital and cannot be assured that additional capital will be available on terms acceptable to us, or at all. If we fail to secure additional capital, we will be forced to curtail or discontinue our operations.

Our operating plan for the twelve months ending September 30, 2009 assumes revenue of $3 million for which $2.3 million in gross cash receipts would be realized during that period. During the twelve months ended September 30, 2009, we will be required to spend approximately $1.2 million to purchase the raw materials needed to support the portion of such sales which are for Pleximer related products. If we are unable to achieve such sales, or unable to do so at the assumed margin, we will likely require additional capital to fund our operations.

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Management Discussion and Analysis

General

NaturalNano, located in Rochester, New York, has been a development stage company from its inception through September 30, 2008. The Company expects to begin reporting material revenues during the year ended December 31, 2008, and will make a determination on reporting as a development stage company in each future reporting period. Our mission is to develop and commercialize material science technologies with a special emphasis on additives to polymers and other industrial and consumer products by taking advantage of technological advances developed in-house and through licenses from third parties. Our current activities are directed toward research, development, production and marketing of our proprietary technologies relating to the treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for:

• polymers, plastics and composites to provide stronger, lighter and less expensive materials,

• cosmetics and personal care products utilizing filled nanotube technology for extended release of fragrances or other active agents,

• household products utilizing filled nanotube technology for extended release of fragrances or other active agents and

• agrichemical products utilizing filled nanotube technology for extended release of pesticides or herbicides or other active agents resulting in the use lower concentrations of active ingredients and achieving longer lasting treatment.

NaturalNano is domiciled in the state of Nevada as a result of the merger with Cementitious Materials, Inc. (“CMI”), which was completed on November 29, 2005.

Redemption of common stock

On August 1, 2008, in connection with, and as a condition to the financing provided by Platinum and Longview (see Note 2 to the condensed consolidated financial statements), TI agreed (x) to sell its common share holdings in the Company at the direction of the Company for the sum of $1,000, and (y) agreed to cancel and forgive all principal, interest, fees and expenses accrued and due pursuant the Credit Agreement and note entered into by the Company with TI in connection with a line of credit provided by TI to the Company (the “TI Debt”). In consideration for the cancellation of the debt, the Company has agreed to issue to TI a warrant to purchase up to 4.99% of the Company’s common stock on terms more particularly set forth in the agreement with TI.

On September 26, 2008, the Company paid TI $1,000 and redeemed the 69,303,189 shares of common stock held by TI.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Our actual results may differ from these estimates.

We believe, that of the significant accounting policies described in the notes to our consolidated financial statements, the following policies involve a greater degree of judgment and complexity and accordingly; these policies are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Revenue Recognition

We have earned nominal operating revenue since our inception (December 22, 2004). This revenue was generated from funded development or the delivery of Pleximer and sample products specifically for customer applications in various industries in connection with product development evaluations and as such are considered operating revenue for financial reporting purposes. We earn and recognize such revenue to the extent such development activities are completed or when the shipment of the sample products has occurred.

Deferred Revenue

Deferred revenue consists of amounts received by us in cash or receivables which cannot yet be recognized as revenue to the extent that further performance obligations still remain as of the end of the period presented.

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Intangible Assets

Licenses are initially measured and recorded based on their cost at the date of their acquisition. We evaluate the recoverability of identifiable intangibles whenever events or changes in circumstances indicate that an intangible asset’s carrying value may not be recoverable. Such circumstances could include, but are not limited to, a significant decrease in fair value of the asset or a significant adverse change in the extent or manner in which an asset is used. The evaluation of potential asset impairment requires significant judgments about future cash flows over the life of the asset under evaluation and actual future results may differ from assumed and estimated amounts.

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply when the differences are expected to be realized. A valuation allowance is recognized if it is anticipated that some or all of the deferred tax asset may not be realized.

As of September 30, 2008 the Company had a deferred income tax liability of $148,763, which consisted of the tax effect of the difference in basis between GAAP and tax purposes for the beneficial conversion feature in connection with the Notes entered into during August and September of 2008 (see Note 2 to the condensed consolidated financial statements) with the offset recorded through additional paid-in capital as an offset to the beneficial conversion feature.  This deferred tax liability will decrease with a corresponding increase to additional paid-in capital as the beneficial conversion feature is amortized over the term of the Notes.

Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses and other corporate tax attributes as ownership changes occur.  As a result of the transactions discussed in Notes 2, 3 and 6 to the condensed consolidated financial statements, a Section 382 ownership change is expected and a study will be required to determine the date the ownership change occurred. The amount of our net operating losses incurred prior to the ownership change will be limited based on the value of the Company on the date of ownership change.  A full valuation allowance has been established for the deferred tax asset related to the net operating losses available.  Accordingly, the limitation will not have an impact on our balance sheet or statements of operations.  The net operating loss and related deferred tax assets as of December 31, 2007 were disclosed in the notes to the audited financial statements included in the Company’s 10-KSB filed on April 9, 2008.

Share-Based Compensation

On January 1, 2006, we adopted the stock option expensing rules of Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment,” using the fair value recognition provisions of FAS No. 123, “Accounting for Stock-Based Compensation” for stock options already granted. We utilized the modified prospective approach of adoption under SFAS No. 123R. Results for prior periods have not been restated. We previously accounted for our employee stock option plan under Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, no stock-based employee compensation cost was reflected in the statement of operations in reporting periods prior to the first quarter of 2006, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. For the years ended December 31, 2007 and 2006, we recorded stock-based compensation costs of $912,006 and $2,970,959, respectively in accordance with SFAS No. 123(R). The estimated fair value of stock options granted in 2007 and 2006 were calculated using the Black-Scholes model. This model requires the use of input assumptions. These assumptions include expected volatility, expected life, expected dividend rate, and expected risk-free rate of return.

As of September 30, 2008, unvested compensation cost for all stock options granted to employees and consultants was approximately $700,000. Future expenses will be recognized through 2010 for these options in accordance with the underlying vesting conditions of each grant.

Liquidity and Capital Resources

As of September 30, 2008, we had a cash balance of $187,495 and working capital deficit of $1,437,420. We incurred a net loss attributable to common shareholders for the nine months ended September 30, 2008 of $4,249,011 and had a stockholders’ deficiency of $3,049,426 at September 30, 2008. These factors, among others, may indicate that we will be unable to continue as a going concern for a reasonable period of time.

On June 6, 2008 we received $200,000 under a promissory note. Such note did not bear any interest and was repaid on July 17, 2008 following the collection of certain receivables. The note had an attached 5 year warrant to purchase 200,000 shares of our common stock for $0.33 per common share, we valued such warrant at $6,490. During the nine months ended September 30, 2008, $6,490 was realized as additional interest related to this warrant.

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As of September 30, 2008 we had received $390,000 of a contingent commitment for $2,500,000 of additional working capital. The commitment for such additional capital has been obtained contingent on certain operational milestones to be achieved by the Company. If the Company fails to achieve the milestones, no assurance can be given that such additional capital will be made available on terms acceptable to the Company, or at all. If the Company fails to meet the milestones, it will be forced to secure additional capital or it will be forced to curtail or discontinue its operations.

The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations, to obtain additional financing and, ultimately, to attain successful operations.

In addition, management is currently assessing our operating structure for the purpose of reducing ongoing expenses, increasing sources of revenue and is assessing the availability of additional debt and equity financing on terms that would be acceptable to us. In addition, recent successes in product testing for Pleximer and filled-tube applications are being leveraged in an attempt to increase revenues from sales.

We will continually evaluate funding options including additional offerings of its securities to private and institutional investors and other credit facilities as they become available. There can be no assurance as to the availability or terms upon which such financing alternatives might be available.

We have incurred a loss from operations since inception, December 22, 2004. Since inception our growth has been funded through a combination of convertible debt from private investors and from cash advances from our parent and majority owned shareholder Technology Innovations, LLC.

We have experienced an average monthly cash usage of approximately $63,000, which includes the receipt of a $501,000 tax rebate from the State of New York and the deferral of approximately $327,000 of employee salaries, during the first nine months of 2008. During the first nine months of 2007, the Company experienced monthly cash usage of approximately $275,000.

Comparison of Statement of Operations For the three and nine months ended September 30, 2008 and 2007

Income

During the three and nine months ended September 30, 2008, we recognized revenue of $53,361 and $180,286, respectively, as compared to $5,500 and $8,750 in the same respective periods of 2007. For the three and nine months ended September 30, 2008, this revenue consisted of $13,361 and $61,236, respectively, from shipments of quantities of our Pleximer product and $40,000 and $119,050, respectively, for funded development. The cost of goods sold during the three and nine months ended September 30, 2008 was $24,105 and $66,859, respectively, providing a gross margin of $29,256 and $113,427 for the same respective periods.

We expect that revenues and cost of goods sold will both increase in future periods. These revenues are expected to be generated through the sale of Pleximer related products as well as funding for development of specific applications for our proprietary halloysite technologies in the consumer products and other industries.

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Operating Expenses

Total research and development expenses for the three and nine months ended September 30, 2008 were $298,842 and $1,239,316 as compared to $529,301 and $1,585,905 for the same respective periods of 2007. The decrease in spending on research and development was primarily due to the allocation of a portion of research and development expenses directly related to the generation of revenue as well as decreases in consulting services used, equipment costs, salaries due to the reduction of employees from 9 to 6 and stock option compensation expense realized due to vesting of grants during the periods net of increases in depreciation and patent costs, as follows:

	For the three months ended					Variance			For the nine months ended					Variance
	September 30,					favorable			September 30,					favorable
	2008			2007		(unfavorable)			2008			2007		(unfavorable)
Consulting Services	$	16,484		$	110,933	$	94,449		$	137,470		$	335,695	$	198,225
Depreciation		25,966			22,595		(3,371	)		75,365			44,846		(30,519	)
Equipment Costs		3,753			12,707		8,954			6,066			35,555		29,489
Patents		30,667			6,917		(23,750	)		155,136			19,689		(135,447	)
Salaries		114,928			126,999		12,071			361,162			394,537		33,375
Stock option compensation		69,516			155,067		85,551			357,721			507,127		149,406
Allocation to cost of goods		(19,240	)		—		19,240			(57,250	)		—		57,250
All other		56,768			94,083		37,315			203,646			248,456		44,810
	$	298,842		$	529,301	$	230,459		$	1,239,316		$	1,585,905	$	346,589

We expect that we will continue to invest in research and development and that our investment may increase during 2008 as we develop commercial applications for Pleximer and other potential applications for halloysite to the extent that such development activities are not directly offset by revenue. No assurance can be given that such spending for research and development will result in increased revenue from the sale of Pleximer or any other application of halloysite.

Total general and administrative expenses for the three and nine months ended September 30, 2008 were $275,024 and $1,102,846, respectively, as compared to $317,065 and $1,367,614 for the same respective periods of 2007. The decrease in spending on general and administrative was primarily due to a 2006 and 2007 R&D tax rebate for which we qualified and the decrease of professional fees related to the registration of securities related to the 8% senior secured notes (see Note 2 to the financial statements) net of increases in stock option compensation expense realized due to vesting of grants during the periods, salaries and benefits due to increasing employees from 2 to 4 and amortization expense related to the license of patents for the Department of the Navy (see Note 5 to the financial statements), as follows:

	For the three months ended						Variance			For the nine months ended					Variance
	September 30,						favorable			September 30,					favorable
	2008			2007			(unfavorable)			2008			2007		(unfavorable)
Amortization	$	33,288		$	8,288		$	(25,000	)	$	99,864		$	24,864	$	(75,000	)
Professional fees		105,600			116,430			10,830			315,800			338,771		22,971
Salaries		145,306			110,241			(35,065	)		383,112			248,964		(134,148	)
Stock option compensation		127,518			(106,975	)		(234,493	)		400,805			315,627		(85,178	)
State Tax		(249,969	)		—			249,969			(491,211	)		3,315		494,526
All other		113,281			189,081			75,800			394,476			436,073		41,597
	$	275,024		$	317,065		$	42,041		$	1,102,846		$	1,367,614	$	264,768

We expect that spending in the forth quarter of 2008 for general and administrative will be relatively consistent with the prior quarters of 2008, we will need to invest in marketing and sales, investor relations and will likely incur additional professional fees related to financing activities required if we succeed in obtaining the additional working capital needed to fund our operations.

Other income (expense)

Other expense for the three and nine months ended September 30, 2008 which was $695,309 and $2,020,276, respectively, as compared to $610,679 and $1,328,884 for the same respective periods of 2007. Other expense primarily consisted of interest expense. There was $60,731 of non-interest expense which was related to disposals of the leasehold improvement assets resulting from the relocation of our operations into a new facility.

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Interest is earned on cash balances held at certain financial institutions and we pay interest as part of our capital equipment leases arrangements; interest accrued for the 8% convertible note payable to TI, debt discount accretion, amortization of deferred financing cost and adjustments to the registration rights liability related to the 8% senior secured convertible notes described in Note 2 to the financial statements. Interest expense and interest income were as follows:

	For the three months ended						Variance			For the nine months ended						Variance
	September 30,						favorable			September 30,						favorable
	2008			2007			(unfavorable)			2008			2007			(unfavorable)
Interest earned on cash	$	187		$	17,403		$	(17,216	)	$	3,384		$	54,273		$	(50,889	)
Interest paid on capital leases		(3,060	)		(1,917	)		(1,143	)		(8,589	)		(2,371	)		(6,218	)
Interest to TI note		(6,115	)		(18,148	)		12,033			(42,016	)		(52,690	)		10,674
Interest to 8% senior notes		(70,682	)		(66,950	)		(3,732	)		(349,494	)		(152,498	)		(196,996	)
Accretion of debt discount		(455,128	)		(410,627	)		(44,501	)		(1,267,454	)		(923,910	)		(343,544	)
Interest on financed receivables		(2,781	)		—			(2,781	)		(6,490	)		—			(6,490	)
Amortization of financing costs		(96,998	)		(96,998	)		—			(288,886	)		(218,246	)		(70,640	)
Registration right obligation		—			(33,442	)		(33,442	)		—			(33,442	)		(33,442	)
	$	(634,578	)	$	(610,679	)	$	(23,899	)	$	(1,959,545	)	$	(1,328,884	)	$	(630,661	)

Comparison of Liquidity and Capital for the nine months ended September 30, 2008 and 2007

Operating activities

Net cash used in operating activities in the nine months ended September 30, 2008 and 2007 were $388,068 and $2,307,321, respectively. The net loss generated in 2008 was $24,642 less than the prior period and non-cash items (depreciation, amortization, stock option vesting, warrant expense and stock issued for services or interest) were $462,645 more than the prior period in 2007.

Non-cash expenses increased by $414,184 during the nine months ended September 30, 2008 as compared to the same period of 2007 for amortization of debt discount and deferred financing costs incurred in connection with the 8% senior secured convertible debt. The amortization of the remaining $1,139,973 of debt discount and deferred financing costs will continue as non-cash expenses through January 2010.

The increase of accounts payable, payroll and other accrued expenses as of September 30, 2008 as compared to September 30, 2007 includes approximately $327,000 of deferred salaries, an increase of $53,000 in accounts payable and $156,000 in accrued expenses.

The increase of $164,000 of deferred revenue as of September 30, 2008 as compared to September 30, 2007 includes amounts collected which are expected to be realized as revenue in future periods.

Investing activities

Net cash used in investing activities in the nine months ended September 30, 2008 and 2007 was $181,027 and $166,136, respectively. Our capital investments during 2008 were related to our research and development efforts.

The growth in the research and development capital assets reflects approximately $113,000 of leasehold improvements required to relocate our laboratory facility and $10,614 related to a capital lease agreement commencing in 2008 for improved feeder systems for our twin screw extruder equipment. This capital lease has a term of twenty-four months and includes a $1 purchase option at the end of the term. Our intent is to purchase the equipment at that time. As a result, the leased equipment is being depreciated over the expected life (five years) of the equipment rather than the term of the lease. We had capital lease obligations of $74,702 as of September 30, 2008 in connection with lease agreements.

Financing Activities

Net cash provided from financing activities in the nine months ended September 30, 2008 and 2007 was $351,650 and $3,353,813, respectively. The cash flow from financing activities during 2008 primarily reflects long term related party financing of $390,000, net of $20,000 in expenses, during the three month period.

The cash flows from financing activities during 2007 primarily reflects the net proceeds received in connection with the 8% senior secured convertible notes on March 7, 2007.

- 26 -

During the first quarter of 2007, we also received $300,000 in advances in accordance with the TI line of credit agreement. No additional borrowings are available under this line of credit agreement that expired on March 31, 2007. On August 1, 2008 in connection with the note issued to Platinum (see Note 2), TI agreed to discharge the $900,000 principal balance of these notes and $129,600 of unpaid interest in exchange for warrants.

During the nine months ended September 30, 2008, we received net cash advances from affiliated entities for shared services agreements, of $48,645 and had net cash repayments of $696 for the same period of 2007. This change in net payables outstanding between affiliates reflects the sharing of certain networking and consultant services provided among these affiliate entities. Our independent board members review all shared service agreements for commercially reasonable terms.

During the nine months ended September 30, 2008, we made capital lease payments of $65,995 as compared to $18,794 for the same period of 2007.

During the nine months ended September 30, 2008, we incurred cash expenses of $20,000 for fees and professional services in connection with the issuance of our 8% sr. convertible debt as compared to $160,600 for the same period of 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

N/A

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures were effective as of September 30, 2008.

Disclosure controls and procedures and other procedures are designed to ensure that information required to be disclosed in our reports or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our president and financial officer as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2008, which have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Reader should refer to “Risk Factors”, which are incorporated herein by reference, found in our Annual Report of Form 10-KSB for the years ended December 31, 2007 and 2006 as filed with the Securities and Exchange Commission on April 9, 2008.

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

In consideration for the cancellation of TI’s debt (see Note 3 to the Condensed Consolidated Financial Statements), on August 6, 2008 the Company issued TI a warrant to purchase up to 4.99% of the Company’s common stock. Under the warrant TI may purchase up to that number of shares that would give TI beneficial ownership of not more than 4.99% of the Company. The price to be paid for the shares, if purchased on or before February 13, 2009 will be computed as $25 million divided by the fully diluted common stock outstanding on the date of exercise. If any such purchase occurs after February 13, 2009 and before the warrant expires on February 11, 2011, the purchase price shall be computed as $40 million divided by the fully diluted common shares outstanding on the date of exercise. On the date that the warrant was issued, TI beneficially owned 4.05% of the Company through common stock and derivatives convertible into common stock within 60 days from the issue date held by TI and its affiliates. The Company had 2,173,714,879 fully diluted common shares, which gave effect to the conversion of all debt and equity instruments into common stock, per the terms of the warrant. On the date of issuance, the warrant was for a maximum of 646,377 common shares at a price of $0.0115 per share.

On September 29, 2008 the Investors (see Note 2 to the Condensed Consolidated Financial Statements) agreed to exchange detachable warrants to purchase 1,218,750,060 shares of common stock of the Company for $0.005 per share held by such Investors related to the March 6, 2007 convertible notes payable for 5,000,000 shares of preferred stock.

On October 7, 2008, the Company filed a Certificate of Designation of Rights, Preferences, Designations, Qualifications and Limitations of the Series C Preferred Stock (the “Series C Designation”) with the Secretary of State of the State of Nevada, and prepared a preferred stock certificate for delivery to Platinum Long Term Growth IV, LLC, evidencing 4,250,000 shares of Series C Convertible Preferred Stock of the Company (“Series C”). On October 7, 2008, the Company also filed a Certificate of Designation of Rights, Preferences, Designations, Qualifications and Limitations of the Series B Preferred Stock (the “Series B Designation”) with the Secretary of State of the State of Nevada, and prepared a preferred stock certificate for delivery to Longview Special Funding, Inc., evidencing 750,000 shares of Series B Convertible Preferred Stock of the Company (“Series B”). The Series B and Series C have an aggregate liquidation preference of $10,000 and participate in any dividends or distributions to the common shareholders on an as converted basis.

Each share of the Series B Convertible Preferred Stock, and each share of Series C Convertible Preferred Stock is convertible into 160 shares of the Company’s common stock and votes on an as-converted basis (with each share having 160 votes). However, the Series B Designation limits the holder’s right to convert its Series B Convertible Preferred Stock, and the aggregate voting power attributable to its Series B Convertible Preferred Stock, to no more than 4.99% of the votes attributable to the total outstanding common shares. Accordingly, the votes attributable to the Series B Convertible Preferred constitutes 4.99% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis) and the votes attributable to the Series C Convertible Preferred Stock, therefore, represent approximately 86.74% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis), and the votes Series B Convertible Preferred and the Series C Convertible Preferred, voting together represent approximately 91.73% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis).

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.	Description		Location
2.1	Agreement and Plan of Merger among NaturalNano, Inc., Cementitious Materials, Inc. and Cementitious Acquisitions, Inc.		(1)
3.1	Third Amended and Restated Articles of Incorporation		**
3.2	By-laws		**
4.1	NaturalNano, Inc. Amended and Restated 2007 Incentive Stock Plan #		(46)
4.2	NaturalNano, Inc. 2005 Incentive Stock Plan #		(4)
4.3	Form of Non-Qualified Stock Option Agreement #		(5)
4.4	Non-Qualified Stock Option Agreement dated July 24, 2006 between NaturalNano, Inc. and Cathy A. Fleischer #		(6)
4.5	Non-Qualified Stock Option Agreement dated December 7, 2006 between NaturalNano, Inc. and Sir Harold Kroto #		(7)
4.6	Registration Rights Agreement dated as of December 22, 2004 between NaturalNano, Inc. and Technology Innovations, LLC		(8)
4.7	Form of Subscription Agreement for the Purchase of Convertible Notes of NaturalNano, Inc.		(9)
4.8	Loan and Security Agreement, dated March 7, 2007, by and among NaturalNano, Inc., NaturalNano Research, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein		(10)
4.9	Registration Rights Agreement, dated March 7, 2007, by and among NaturalNano, Inc., and the Investors named therein		(11)
4.10		Observation Rights Agreement dated July 20, 2007 among NaturalNano, Inc., Technology Innovations, LLC, Michael L. Weiner and Ross B. Kenzie		(12)
4.11		Warrant for 4,770,000 shares of Common Stock issued to SBI Brightline XIII		(13)
4.12		Warrant for 4,500,000 shares of Common Stock issued to SBI USA, LLC		(14)
4.13		Form of 8% Senior Secured Promissory Notes due March 7, 2009 issued pursuant to the Loan and Security Agreement, dated March 7, 2007, by and among NaturalNano, Inc., NaturalNano Research, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein		(15)
4.14		Form of Series A Common Stock Purchase Warrants issued pursuant to the Loan and Security Agreement, dated March 7, 2007, by and among NaturalNano, Inc., NaturalNano Research, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein		(16)
4.15		Form of Series B Common Stock Purchase Warrants issued pursuant to the Loan and Security Agreement, dated March 7, 2007, by and among NaturalNano, Inc., NaturalNano Research, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein		(17)
4.16		Form of Series C Common Stock Purchase Warrants issued to Platinum Advisors LLC pursuant to the Loan and Security Agreement, dated March 7, 2007, by and among NaturalNano, Inc., NaturalNano Research, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein		(18)
4.17		Certificate Of Designation Of Rights, Preferences, Designations, Qualifications And Limitations Of The Series B Preferred Stock, a copy of which is filed herewith.		(2.1)
4.18		Certificate Of Designation Of Rights, Preferences, Designations, Qualifications And Limitations Of The Series C Preferred Stock, a copy of which is filed herewith.		(2.2)
4.19	NaturalNano, Inc. 2008 Incentive Stock Plan #		**
10.1		Lease Agreement – Schoen Place		(19)
10.2		Amendment No. 1 to Lease between Schoen Place, LLC and NaturalNano, Inc.		(20)

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10.3	Exclusive License Agreement between Technology Innovations, LLC and NaturalNano, Inc. effective as of January 24, 2006	(21)
10.4	Joint Research Agreement between Nanolution, LLC and NaturalNano, Inc. dated as of May 25, 2005	(22)
10.5	Patent Assignments dated March 2, 2007 and March 5, 2007 by and between Technology Innovations, LLC and NaturalNano Research, Inc.	(23)
10.6	Amended and Restated License Agreement between Ambit Corporation and NaturalNano, Inc., effective as of October 1, 2006	(24)
10.7	Nonexclusive License between NaturalNano and U.S. Department of the Navy at Naval Research Laboratory	(25)
10.8	Employment Agreement with Cathy A. Fleischer, Ph.D. #	(26)
10.9	Employment Letter of Michael D. Riedlinger and Amendment No. 1 thereto #	(27)
10.10	Separation Agreement and Mutual Release dated as of October 31, 2006 between NaturalNano, Inc. and Michael D. Riedlinger #	(28)
10.11	Employment Letter of Kathleen A. Browne and Amendment No. 1 thereto #	(29)
10.12	Employment Letter of Sarah Cooper #	(30)
10.13	Stock Purchase Agreement dated March 30, 2006 between NaturalNano, Inc. and SBI Brightline XIII, LLC	(31)
10.14	Termination Agreement dated July 9, 2006 between SBI Brightline XIII, LLC and NaturalNano, Inc.	(32)
10.15	Stock Purchase Agreement dated July 9, 2006 between NaturalNano, Inc. and SBI Brightline XIII, LLC	(33)
10.16	Line of Credit Agreement dated as of December 29, 2004 between NaturalNano, Inc. and Technology Innovations, LLC	(34)
10.17	Line of Credit Agreement dated as of June 28, 2006 between NaturalNano, Inc. and Technology Innovations, LLC	(35)
10.18	Promissory Note dated June 28, 2006 to the order of Technology Innovations, LLC	(36)
10.19	Letter from Technology Innovations, LLC to Platinum Advisors LLC, as Agent, and the Investors named therein	(37)
10.20	Pledge Agreement, dated March 7, 2007, by and among NaturalNano, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein	(38)
10.21	Patent Security Agreement, dated March 7, 2007, by and among NaturalNano Research, Inc., Platinum Advisors LLC, as Agent, and the Investors named therein	(39)
10.22	Warrant Purchase Agreement dated August 9, 2006 between NaturalNano, Inc. and Crestview Capital Master, LLC	(40)
10.23	Joint Development Agreement dated April 23, 2007 between Nylon Corporation of America and NaturalNano, Inc.	(47)
10.24	Joint Development Agreement dated April 24, 2007 between Cascade Engineering, Inc. and NaturalNano, Inc.	(47)
10.25	Joint Development Agreement dated July 18, 2007 between Pactiv Corporation and NaturalNano, Inc.	(47)
10.26	Employment Agreement with Kent A. Tapper #	(41)
10.27	Partially Exclusive License between NaturalNano, Inc. and United States Department of the Navy at Naval Research Laboratory, dated October 3, 2007.	(42)
10.28	Lease Agreement between Cottrone Development Co., Inc. and NaturalNano, Inc. dated December 7, 2007.	(43)
10.29	Promissory Note dated June 6, 2008 to the order of Ross B. Kenzie	**

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10.30	Warrant purchase agreement dated June 6, 2008 between NaturalNano, Inc. and Ross B. Kenzie	**
10.31	8% Senior Secured Promissory Note Due March 6, 2009, in the principal amount of $150,000, payable to the order of Platinum Long Term Growth IV, LLC.	(48)
10.32	8% Senior Secured Promissory Note Due March 6, 2009, in the principal amount of $20,000, payable to the order of Longview Special Financing Inc.	(49)
10.33	Agreement with Technology Innovations, LLC, dated August 1, 2008.	(50)
10.34	Agreement with Technology Innovations, LLC, dated August 1, 2008.	(51)
10.35	Loan and Security Agreement, dated September 29, 2008, by and among investors listed on Schedule 1 thereto, and Platinum Advisors LLC, as agent for the investors.	(2.3)
10.36	8% Senior Secured Promissory Note Due January 31, 2010, made to Platinum Long Term Growth IV, LLC on September 29, 2008, in the amount of $190,000.	(2.4)
10.37	8% Senior Secured Promissory Note Due January 31, 2010, made to Longview Special Financing Inc. on September 29, 2008, in the amount of $30,000.	(2.5)
10.38	Form of Forbearance Agreement, dated September 29, 2008.	(2.6)
10.39	Joint Development and Supply Agreement, dated October 20, 2008.	(52)
10.40	8% Senior Secured Promissory Note Due January 31, 2010, made to Platinum Long Term Growth IV, LLC on October 31, 2008, in the amount of $59,500.	(53)
10.41	8% Senior Secured Promissory Note Due January 31, 2010, made to Longview Special Financing Inc. on October 31, 2008, in the amount of $25,500.	(54)
14.1	Code of Ethics for CEO and Senior Financial Officer	(44)
21.1	Subsidiaries	(45)
31.1	Certification of principal executive officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002	**
31.2	Certification of principal accounting officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002	**
32.1	Certification of principal executive officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002	**
32.2	Certification of principal accounting officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002	**

*	Previously filed
**	Filed herewith
#	May be deemed a compensatory plan or arrangement
1.	Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed September 30, 2005
2.1	Incorporated by reference to Exhibit4.1 to Current Report on Form 8-K filed October 3, 2008.
2.2	Incorporated by reference to Exhibit4.2 to Current Report on Form 8-K filed October 3, 2008.
2.3	Incorporated by reference to Exhibit10.1 to Current Report on Form 8-K filed October 3, 2008.
2.4	Incorporated by reference to Exhibit10.2 to Current Report on Form 8-K filed October 3, 2008.
2.5	Incorporated by reference to Exhibit10.3 to Current Report on Form 8-K filed October 3, 2008.
2.6	Incorporated by reference to Exhibit10.4 to Current Report on Form 8-K filed October 3, 2008.
4.	Incorporated by reference to Appendix C to Information Statement on Schedule 14C filed November 8, 2005
5.	Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed December 5, 2005

- 31 -

6.	Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed July 28, 2006
7.	Incorporated by reference to Exhibit 4.5 to Annual Report on Form 10-KSB for the year ended December 31, 2006
8.	Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed December 5, 2005
9.	Incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed December 5, 2005
10.	Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed March 8, 2007
11.	Incorporated by reference to Exhibit 4.6 to Current Report on Form 8-K filed March 8, 2007
12.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 26, 2007
13.	Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed July 10, 2006
14.	Incorporated by reference to Exhibit 4.6 to Registration Statement on Form SB-2 (No. 333-135667) filed July 10, 2006
15.	Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed March 8, 2007
16.	Incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed March 8, 2007
17.	Incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K filed March 8, 2007
18.	Incorporated by reference to Exhibit 4.5 to Current Report on Form 8-K filed March 8, 2007
19.	Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-QSB for the period ended September 30, 2006
20.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed March 7, 2007
21.	Incorporated by reference to Exhibit 10.1 to Quarterly Report (amended) on Form 10-QSB/A for the period ended March 31, 2006, filed June 26, 2006
22.	Incorporated by reference to Exhibit 10.4 to Registration Statement on Form SB-2 (No. 333-135667) filed July 10, 2006
23.	Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed March 8, 2007
24.	Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-QSB for the period ended September 30, 2006
25.	Incorporated by reference to Exhibit 10.7 to Annual Report on Form 10-KSB for the year ended December 31, 2006
26.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 28, 2006
27.	Incorporated by reference to Exhibit 10.2 to Registration Statement on Form SB-2 (No. 333-135667) filed July 10, 2006
28.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 2, 2006
29.	Incorporated by reference to Exhibit 10.5 to Registration Statement on Form SB-2 (No. 333-135667) filed July 10, 2006
30.	Incorporated by reference to Exhibit 10.6 to Registration Statement on Form SB-2 (No. 333-135667) filed July 10, 2006
31.	Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed March 31, 2006
32.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 10, 2006
33.	Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed July 10, 2006
34.	Incorporated by reference to Exhibit 10.7 to Registration Statement on Form SB-2 (No. 333-135667) filed July 10, 2006
35.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 3, 2006
36.	Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed July 3, 2006
37.	Incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed March 8, 2007
38.	Incorporated by reference to Exhibit10.1 to Current Report on Form 8-K filed March 8, 2007
39.	Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed March 8, 2007
40.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed August 14, 2006
41	Incorporated by reference to Exhibit 10.1 to Current Report on form 8-K filed September 4, 2007

- 32 -

42.	Incorporated by reference to Exhibit 10.1 to Current Report on form 8-K filed October 9, 2007
43.	Incorporated by reference to Exhibit 10.1 to Current Report on form 8-K filed December 7, 2007
44.	Incorporated by reference to Exhibit 14.1 to Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005
45.	Incorporated by reference to Exhibit 21.1 to Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005
46.	Incorporated by reference to Exhibit 4.1 to Registration Statement on Form SB-2 (No. 333-142688) filed December 12, 2007
47.	Incorporated by reference to Exhibit 4.1 to Registration Statement on Form SB-2 (No. 333-142688) filed October 3, 2007
48.	Incorporated by reference to Exhibit 10.1 to Current Report on form 8-K filed August 7, 2008
49.	Incorporated by reference to Exhibit 10.2 to Current Report on form 8-K filed August 7, 2008
50.	Incorporated by reference to Exhibit 10.3 to Current Report on form 8-K filed August 7, 2008
51.	Incorporated by reference to Exhibit 10.4 to Current Report on form 8-K filed August 7, 2008
52.	Incorporated by reference to Exhibit 10.1 to Current Report on form 8-K filed October 24, 2008
53.	Incorporated by reference to Exhibit 10.2 to Current Report on form 8-K filed November 6, 2008
54.	Incorporated by reference to Exhibit 10.3 to Current Report on form 8-K filed November 6, 2008

- 33 -

SIGNATURES

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

		NaturalNano, Inc.
Date:	November 14, 2008	/s/Cathy A. Fleischer
		Cathy A. Fleischer, President
Date:	November 14, 2008	/s/Kent A. Tapper
		Kent A. Tapper, CFO

- 34 -

EX-3.(I)

Exhibit 3.01

CERTIFICATE OF AMENDMENT

TO SECOND AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

NATURALNANO, INC.

The undersigned secretary of NaturalNano, Inc. (the “Corporation”), hereby certifies that the following amendments to the Corporation’s Second Amended and Restated Articles of Incorporation (the “Articles”) were duly adopted pursuant to the provisions of Sections 78.390 and 78.403 of the Nevada Revised Statutes, and that, as so amended, the Articles are deemed to be the “Third Amended and Restated Articles of Incorporation”, effective as of this 27th day of October 2008:

FIRST: The name of the corporation is NaturalNano, Inc.

SECOND: The Articles of Incorporation of the corporation were filed by the Secretary of State on the 18^th day of February 2000 and were amended and restated on May 7, 2007 and December 6, 2007.

THIRD: The Board of Directors of the corporation, at a meeting duly convened and held on the 9^th day of September 2008 adopted a Resolution to Amend the Articles of Incorporation as follows:

I. To amend Article 3 to read in its entirety as follows:

“3. Shares: The number of shares the corporation is authorized to issue is 5,000,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. Preferred shares may be issued from time to time in one or more series in the discretion of the board of directors. The board has the authority to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.”

II. To add the following new Article 9:

“9. Directors: The corporation shall be governed by a Board of Directors consisting of no less than three (3) nor more than nine (9) directors. Directors need not be shareholders of the corporation. Additionally, the Directors of the corporation shall have the power and authority to approve, by majority vote, forward and reverse splits of the authorized and/or issued and outstanding shares of Common Stock of the Corporation, when they have determined, by majority vote, that the same is in the best interests of the Corporation, without having to obtain any vote of the shareholders of the Corporation approving such forward or reverse split of the Common Stock of the Corporation.”

FOURTH: The number of shares of the corporation outstanding and entitled to vote on an amendment to the Articles of Incorporation on the record date for approval of the amendment was 133,175,948 shares of common stock; and the above amendments were consented to and approved by the written consent of the holders of 69,303,189 shares of common stock, being at least a majority of each class of stock outstanding and entitled to vote thereon.

Exhibit 3.01

FIFITH: The Articles, as amended and restated to the date of this Certificate, are hereby further amended and restated as follows:

1. Name of Corporation:	NaturalNano, Inc.
2. Resident Agent Name and Street Address:	Not Required
3. Shares:	The number of shares the corporation is authorized to issue is 5,000,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. Preferred shares may be issued from time to time in one or more series in the discretion of the board of directors. The board has the authority to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.
4. Governing Board:	Shall be styled as Directors.
Names, Addresses, Number of Board of Directors/Trustees:	Not Required
5. Purpose:	Any Legal
6. Other Matters:	See Articles 9, 10 and 11
7. Names, Addresses and Signatures of Incorporators:	Not Required
8. Certificate of Acceptance of Appointment of Resident Agent:	Not Required
9. Directors:	The corporation shall be governed by a Board of Directors consisting of no less than three (3) nor more than nine (9) directors. Directors need not be shareholders of the corporation. Additionally, the Directors of the corporation shall have the power and authority to approve, by majority vote, forward and reverse splits of the authorized and/or issued and outstanding shares of Common Stock of the Corporation, when they have determined, by majority vote, that the same is in the best interests of the Corporation, without having to obtain any vote of the shareholders of the Corporation approving such forward or reverse split of the Common Stock of the Corporation.
10. Exemption from Corporate Debt:	The private property of the shareholders of the corporation shall not be subject to the payment of any corporate debt to any extent whatsoever.

Exhibit 3.01

11. Indemnification:

As enumerated by the Nevada Code and as the Board of Directors may from time to time provide in the By-Laws or by resolution, the corporation shall indemnify its officers, directors, agents and other persons against personal liability for monetary damages for breach of fiduciary duty as a director to the full extent permitted by the laws of the State of Nevada.

12. Consent to Waiver of Terms and Conditions:

The terms and conditions of any rights, options and warrants or other securities approved by the Board of Directors may provide that any or all of such terms and conditions may not be waived or amended or may be waived or amended only with the consent of the holders of a designated percentage of a designated class or classes of capital stock of the corporation (or a designated group or groups of holders within such class or classes, including but not limited to disinterested holders), and the applicable terms and conditions of any such rights, options or warrants so conditioned may not be waived or amended or may not be waived or amended absent such consent.

The undersigned, Kent A. Tapper is the secretary of the corporation; he has been authorized to execute this Certificate by resolution of the Board of Directors on the 9 day of September 2008, and this Certificate sets forth the text of the Corporation’s Articles of Incorporation, as amended to the date of this Certificate.

Date October 27, 2008

NATURALNANO, INC.

By: /s/Kent A. Tapper

Kent A. Tapper, its Secretary

EX-3.(II)

Exhibit 3.02

AMENDED AND RESTATED BY-LAWS

OF

NATURALNANO, INC.

Article I - OFFICES

Article II - MEETINGS OF SHAREHOLDERS

Article III - DIRECTORS

Article IV - OFFICERS

Article V - EXECUTION OF INSTRUMENTS, BORROWING OF

MONEY AND DEPOSIT OF CORPORATE FUNDS

Article VI - CAPITAL SHARES

Article VII - EXECUTIVE COMMITTEE AND OTHER

COMMITTEES

Article VIII - INDEMNIFICATION, INSURANCE, AND OFFICER

AND DIRECTOR CONTRACTS

Article IX - FISCAL YEAR

Article X - DIVIDENDS

Article XI - AMENDMENTS

ARTICLE I

OFFICES

Section 1.01 Location of Offices. The corporation may maintain such offices within or without the State of New York as the Board of Directors may from time to time designate or require.

Section 1.02 Principal Office. The address of the principal office of the corporation will be at the address of the registered office of the corporation as so designated in the office of the Secretary of State of the state of incorporation, or at such other address as the Board of Directors will from time to time determine.

ARTICLE II

MEETING OF SHAREHOLDERS

Section 2.01 Annual Meeting. The annual meeting of the shareholders will be held the second Wednesday of April of each year, or at such other time designated by the Board of Directors and as is provided for in the notice of the meeting, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors will not be held on the day designated for the annual meeting of the shareholders, or any adjournment thereof, the Board of Directors will cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient.

Section 2.02 Special Meetings. Special meetings of the shareholders may be called at any time by the Chairman of the Board, the President, or by the Board of Directors, or in their absence or disability, by any Vice President; and will be called by the President, or in his or her absence or disability, by a Vice President or by the Secretary upon the

written request of the holders of not less than 15% of all the shares entitles to vote at the meeting, such written request to state the purpose or purposes of the meeting and to be delivered to the President, each Vice President, or Secretary. In case of failure to call such meeting within 60 days after such request, such shareholder or shareholders may call the same.

Section 2.03 Place of Meetings. The Board of Directors may designate any place, either within or without the state of incorporation, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the state of incorporation, as the place for the holding of such meeting. If no designation is made, or if the special meeting be otherwise called, the place of meeting will be at the principal office of the corporation.

Section 2.04 Notice of Meetings. The Secretary or Assistant Secretary, if any, will cause notice of the time, place, and purpose or purposes of all meetings of the shareholders (whether annual or special), to be mailed at least 10 days, but not more than 60 days, prior to the meeting, to each shareholder of record entitled to vote.

Section 2.05 Waiver of Notice. Any shareholder may waive notice of any meeting of shareholders (however called or noticed, whether or not called or noticed and whether before, during, or after the meeting), by signing a written waiver of notice or a consent to the holding of such meeting, or an approval of the minutes thereof. Attendance at a meeting, in person or by proxy, will constitute waiver of all defects of call or notice regardless of whether waiver, consent, or approval is signed or any objections are made. All such waivers, consents, or approvals will be made a part of the minutes of the meeting.

Section 2.06 Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any annual meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the share transfer books will be closed, for the purpose of determining shareholders entitled to notice of or to vote at such meeting, but not for a period exceeding 60 days. If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at such meeting, such books will be closed for at least 10 days immediately preceding such meeting.

In lieu of closing the share transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the share transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting or to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, will be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section will not affect the validity of any action taken at a meeting of shareholders.

Section 2.07 Voting Lists. The officer or agent of the corporation having charge of the share transfer books for shares of the corporation will make, at least 10 days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of, and the number of shares held by each, which list, for a period of 10 days prior to such meeting, will be kept on file at the registered office of the corporation and will be subject to inspection by any shareholder during the whole time of the meeting. The original share transfer book will be prima facie evidence as to the shareholders who are entitled to examine such list or transfer books, or to vote at any meeting of shareholders.

Section 2.08 Quorum. A majority of the total voting power of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, will constitute a quorum at a meeting of the shareholders. If a quorum is present, the affirmative vote of the majority of the voting power represented by shares at the meeting and entitled to vote on the subject will constitute action by the shareholders, unless the vote of a greater number or voting by classes is required by the laws of the state of incorporation of the corporation or the Articles of Incorporation. If less than a majority of the outstanding voting power is represented at a meeting, a majority of the voting power represented by shares so present may adjourn the meeting from time to time without further notice. At such

 

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adjourned meeting at which a quorum will be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.

Section 2.09 Voting of Shares. Each outstanding share of the corporation entitled to vote will be entitled to one vote on each matter submitted to vote at a meeting of share holders, except to the extent that the voting rights of the shares of any class or series of stock are determined and specified as greater or lesser than one vote per share in the manner provided by the Articles of Incorporation.

Section 2.10 Proxies. At each meeting of the shareholders, each shareholder entitled to vote will be entitled to vote in person or by proxy; provided, however, that the right to vote by proxy will exist only in case the instrument authorizing such proxy to act will have been executed in writing by the registered holder or holders of such shares, as the case may be, as shown on the share transfer of the corporation or by his or her or her attorney thereunto duly authorized in writing. Such instrument authorizing a proxy to act will be delivered at the beginning of such meeting to the Secretary of the corporation or to such other officer or person who may, in the absence of the Secretary, be acting as Secretary of the meeting. In the event that any such instrument will designate two or more persons to act as proxies, a majority of such persons present at the meeting, or if only one be present, that one will (unless the instrument will otherwise provide) have all of the powers conferred by the instrument on all persons so designated. Persons holding stock in a fiduciary capacity will be entitled to vote the shares so held and the persons whose shares are pledged will be entitled to vote, unless in the transfer by the pledge or on the books of the corporation he or she will have expressly empowered the pledge to vote thereon, in which case the pledge, or his or her proxy, may represent such shares and vote thereon.

Section 2.11 Written Consent to Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting, if a consent in writing, setting forth the action so taken, will be signed by shareholders holding at least a majority of the shares entitled to vote with respect to the subject matter thereof, except that if a different proportion of voting power is required for such an action at a meeting, then the proportion of written consents is required.

ARTICLE III

DIRECTORS

Section 3.01 General Powers. The property, affairs, and business of the corporation will be managed by its Board of Directors. The Board of Directors may exercise all the powers of the corporation whether derived from law or the Articles of Incorporation, except such powers as are by statute, by the Articles of Incorporation or by these By-Laws, vested solely in the shareholders of the corporation.

Section 3.02 Number, Term, and Qualifications. (a) The Board of Directors will consist of three to seven persons. Increases or decreases to said number may be made, within the numbers authorized by the Articles of Incorporation, as the Board of Directors will from time to time determine by amendment to these By-Laws. An increase or a decrease in the number of the members of the Board of Directors may also be had upon amendment to these By-Laws by a majority vote of all of the shareholders, and the number of directors to be so increased or decreased will be fixed upon a majority vote of all of the shareholders of the corporation. Each director will hold office until the next annual meeting of shareholders of the corporation and until his or her successor will have been elected and will have qualified. Directors need not be residents of the state of incorporation or shareholders of the corporation.

(b) Notwithstanding any other provisions of this Article III or these By-Laws to the contrary, as long as there shall remain outstanding any Series C Preferred Stock of the corporation, (i) there shall not be more than seven directors of the corporation without the prior written consent of the holder of a majority in interest of the Series C Preferred Stock, (ii) one of the directors shall be elected and appointed by the holders of a majority of the Series C Preferred Stock, voting separately as a class, (the “Series C Director”) who (x) shall be entitled to six (6) votes in connection with any matter subject to a vote or other approval of the Board of Directors of the corporation (with each remaining director entitled to one vote each), and (y) may be removed only by action of the holders of more than two-thirds of the shares of the Series C Preferred Stock, voting separately as a class; provided, however, that, (A) any vacancy created by the death, resignation or other removal of the Series C Director shall be filled only as directed by the vote of a majority of the shares of the Series C Preferred Stock outstanding, voting separately as a

 

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class, and (B) the holders of the Series C Preferred Stock need not exercise their rights to appoint a Series C Director and, in the absence of such election, no vacancy with respect to the Series C Director shall be deemed to exist.  Any reference herein to an act, vote, consent, approval or similar action by the Board of Directors shall be deemed to refer to the act, vote, consent or approval of a majority of the voting power of the directors then in office.

Section 3.03 Classification of Directors. In lieu of electing the entire the entire number of directors annually, the Board of Directors may provide that the directors be divided into either two or three classes, each class to be as nearly equal in number as possible, the term of office of the directors of the first class to expire at the first annual meeting of shareholders after their election, that of the second class to expire at the second annual meeting after their election, and that of the third class, if any to expire at the third annual meeting after their election. At each annual meeting after such classification, the number of directors equal to the number of the class whose term expires at the time of such meeting will be elected to hold office until the second succeeding annual meeting, if there be two classes, or until the third succeeding annual meeting, if there be three classes.

Section 3.04 Regular Meetings. A regular meeting of the Board of Directors will be held without other notice than this By-Law immediately following, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide by resolution the time and place, either within or without the state of incorporation, for the holding of additional regular meetings without other notice than such resolution.

Section 3.05 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the President, Vice President, or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the state of incorporation, as the place for holding any special meeting of the Board of Directors called by them.

Section 3.06 Meetings by Telephone Conference Call. Members of the Board of Directors may participate in a meeting of the Board of Directors or a committee of the Board of Directors by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can bear each other, and participation in a meeting pursuant to this Section will constitute presence in person at such meeting.

Section 3.07 Notice. Notice of any special meeting will be given at least 3 business days prior thereto by written notice delivered personally or sent by U.S. mail to each director at his or her regular business address or residence, or sent by telegram or electronic mail. A mailed notice will be deemed to be delivered when received by the addressee. If notice be given by telegram or electronic mail, such notice will be deemed to be delivered when the telegram is delivered to the telegraph company or when the electronic mail is properly transmitted. Any director may waive notice of any meeting. Attendance of a director at a meeting will constitute a waiver of notice of such meeting, except where a director attends a meeting solely for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

Section 3.08 Quorum. If there is a Series C Director, then, a majority of the number of directors will constitute a quorum for the transaction of business at any meeting of the Board of Directors, if the majority includes the Series C Director. If less than a majority is present at the meeting or if the Series C Director is not present at the meeting, then there shall not be a quorum for the transaction of business. However, a majority of the voting power of the directors present may adjourn the meeting from time to time without further notice.

Section 3.09 Manner of Acting. The act of a majority of the directors present at a meeting at which a quorum is present will be the act of the Board of Directors, and the individual directors will have no power as such.

Section 3.10 Vacancies and Newly Created Directorship. Subject to the provisions of paragraph 3.02(b) above, if any vacancies will occur in the Board of Directors by reason of death, resignation or otherwise, or if the number of directors will be increased, the directors then in office will continue to act and such vacancies or newly created directorships will be filled by a vote of the directors then in office, though less than a quorum, in any way approved by the meeting. Subject to the provisions of paragraph 3.02(b) above, any directorship to be filled by reason of removal of one or more directors by the shareholders may be filled by election by the shareholders at the meeting at which the director or directors are removed.

Section 3.11 Compensation. By resolution of the Board of Directors, the directors may be paid their expenses, if any of attendance at each meeting of the Board of Directors, and may be paid a fixed sum for attendance at each

 

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meeting of the Board of Directors or a stated salary as director. No such payment will preclude any director from serving the corporation in any other capacity and receiving compensation thereof.

Section 3.12 Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporation matter is taken will be presumed to have assented to the action taken unless his or her or her dissent will be entered in the minutes of the meeting, unless her or she will file his or her written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof, or will forward such dissent by registered or certified mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent will not apply to a director who voted in favor of such action.

Section 3.13 Resignations. A director may resign at any time by delivering a written resignation to either the President, a Vice President, the Secretary, or Assistant Secretary, if any. The resignation will become effective on its acceptance by the Board of Directors; provided, that if the board has not acted thereon within 10 days from the date presented, the resignation will be deemed accepted.

Section 3.14 Written Consent to Action by Directors. Any action required to be taken at a meeting of the directors of the corporation or any other action which may be taken at a meeting of the directors of a committee, may be taken without a meeting, if a consent in writing, setting forth the action so taken, will be signed by all of the directors, or all of the members of the committee, as the case may be. Such consent will have the same legal effect as a unanimous vote of all the directors or members of the committee.

Section 3.15 Removal. Subject to the provisions of paragraph 3.02(b) above, any director may be removed for cause by action of the Board of Directors. At a meeting of shareholders expressly called for that purpose, one or more directors may be removed by a vote of a majority of the shares of outstanding stock of the corporation entitled to vote at an election of directors.

ARTICLE IV

OFFICERS

Section 4.01 Number. All officers must be natural persons and the officers of the corporation will be a President one or more Vice Presidents, as will be determined by resolution of the Board of Directors, a Secretary, a Treasurer, and such other officers as may be appointed by the Board of Directors. The Board of Directors may elect, but will not be required to elect, a Chairman of the Board and the Board of Directors may appoint a Chief Executive Officer.

Section 4.02 Election, Term of Office, and Qualifications. The officers will be chosen by the Board of Directors annually at its annual meeting. In the event of failure to choose officers at an annual meeting of the Board of Directors, officers may be chosen at any regular or special annual meeting of the Board of Directors. Each such officer (whether chosen at an annual meeting of the Board of Directors to fill a vacancy or otherwise) will hold his or her office until the next ensuing annual meeting of the Board of Directors and until his or her successor will have been chosen and qualified, or until his or her death, or until his or her resignation or removal in the manner provided in these By-Laws. Any one person may hold any two or more of such offices. The Chairman of the Board, if any, will remain a director of the corporation during the term of his or her office. No other officer need be a director.

Section 4.03 Subordinate Officers, Etc. The Board of Directors from time to time may appoint such other officers or agents as it may deem advisable, each of which will have such title, old office for such period, have such authority, and perform such duties as the Board of Directors from time to time may determine. The Board of Directors from time to time may delegate to any officer or agent the power to appoint any such subordinate officer or agents and to prescribe their respective titles, terms of office, authorities, and duties. Subordinate officers need not be shareholders or directors.

Section 4.04 Resignations. Any officer may resign at any time by delivering a written resignation to the Board of Directors, the President, or the Secretary. Unless otherwise specified therein, such resignation will take effect on delivery.

Section 4.05 Removal. Any officer may be removed from office at any special meeting of the Board of Directors called for that purpose or at a regular meeting, by vote of a majority of the directors, with or without cause. Any

 

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officer or agent appointed in accordance with the provisions of Section 4.03 hereof may also be removed, either with or without cause, by any officer on whom, such power of removal will have been conferred by the Board of Directors.

Section 4.06 Vacancies and Newly Created Offices. If any vacancy will occur in any office by reason of death, resignation, removal, disqualification, or any other cause, or if a new office will be created, then such vacancies or newly created offices may be filled by the Board of Directors at any regular or special meeting.

Section 4.07 Chairman of the Board. The Chairman of the Board, if there be such an officer, will have the following powers and duties:

(a) He or she will preside at all shareholders’ meetings;

(b) He or she will preside at all meeting of the Board of Directors; and

(c) He or she will be a member of the executive committee, if any.

Section 4.08 President. The President will have the following powers and duties:

(a) If no Chief Executive Officer has been appointed, he or she will be the chief executive officer of the corporation, and, subject to the direction of the Board of Directors, will have general charge of the business, affairs, and property of the corporation and general supervision over its officers, employees, and agents;

(b) If no Chairman of the Board has been chosen, or if such officer is absent or disabled, he or she will preside at meetings of the shareholders and Board of Directors;

(c) He or she will be a member of the executive committee, if any;

(d) He or she will be empowered to sign certificated representing shares of the corporation, the issuance of which will have been authorized by the Board of Directors; and

(e) He or she will have all power and will perform all duties normally incident to the office of a President of a corporation, and will exercise such other powers and perform such other duties as from time to time may be assigned to him or her by the Board of Directors.

Section 4.09 Vice Presidents. The Board of Directors may, from time to time, designate and elect one or more Vice Presidents, one of whom may be designated to serve as executive Vice President. Each Vice President will have such powers and perform such duties as from time to time may be assigned to him or her by the Board of Directors or the President. At the request or in the absence or disability of the President, the Executive Vice President or, in the absence or disability of the Executive Vice President, the Vice President designated by the Board of Directors or (in the absence of such designation by the Board of Directors) by the President, the Senior Vice President, may perform all the duties of the President, and when so acting, will have all the powers of, and be subject to all the restriction upon, the President.

Section 4.10 Secretary. The Secretary will have the following powers and duties:

(a) He or she will keep or cause to be kept a record of all of the proceeding of the meetings of the shareholders and of the Board of Directors in books provided for that purpose;

(b) He or she will cause all notices to be duly given in accordance with the provisions of these By-Laws and as required by statute;

(c) He or she will be the custodian of the records and of the seal of the corporation, and will cause such seal (or a facsimile thereof) to be affixed to all certificates representing shares of the corporation prior to the issuance thereof and to all instruments, the execution of which on behalf

 

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of the corporation under its seal will have been duly authorized in accordance with these By-Laws, and when so affixed, he or she may attest the same;

(d) He or she will assume that the books, reports, statements, certificates, Articles of Incorporation, By-Laws and other documents and records required by statue are properly kept and filed;

(e) He or she will have charge of the share books of the corporation and case the share transfer books to be kept in such manner as to show at any time the amount of the shares of the corporation of each class issued and outstanding, the manner in which and the time when such stock was paid for, the names alphabetically arranged and the addresses of the holders of record thereof, the number of shares held by each holder and time when each became such holder or record; and he or she will exhibit at all reasonable times to any director, upon application, the original or duplicate share register. He or she will cause the share book referred to in Section 6.04 hereof to be kept and exhibited at the principal office of the corporation, or at such other place as the Board of Directors will determine, in the manner and for the purposes provided in such Section;

(f) He or she will be empowered to sign certificates representing shares of the corporation, the issuance of which will have been authorized by the Board of Directors; and

(g) He or she will perform in general all duties incident to the office of Secretary and such other duties as are given to him or her by these By-Laws or as from time to time may be assigned to him or her by the Board of Directors or the President.

Section 4.11 Treasurer. The Treasurer will have the following powers and duties:

(a) He or she will have charge and supervision over and be responsible for the monies, securities, receipts, and disbursements of the corporation.

(b) He or she will cause the monies and other valuable effects of the corporation to be deposited in the name and to the credit of the corporation in such banks or trust companies or with such banks or other depositories as will be selected in accordance with Section 5.03 hereof;

(c) He or she will cause the monies of the corporation to be disbursed by checks or drafts signed as provided in Section 5.04 hereof drawn on the authorized depositories of the corporation, and cause to be taken and preserved property vouchers for all monies disbursed;

(d) He or she will render to the Board of Directors or the President, whenever requested, a statement of the financial condition of the corporation and of all of this transactions as Treasurer, and render a full financial report at the annual meeting of the shareholders, if called upon to do so;

(e) He or she will cause to be kept correct books of account of all the business and transactions of the corporation and exhibit such books to any director on request during business hours;

(f) He or she will be empowered from time to time to require all officers or agents of the corporation reports or statements given such information as he or she may desire with respect to any and all financial transactions of the corporation; and

(g) He or she will perform in general all duties incident to the office of Treasurer and such other duties as are given to him or her by these By-Laws or as from time to time may be assigned to him or her by the Board of Directors or the President.

Section 4.12 Chief Executive Officer. The Board of Directors may employ and appoint a Chief Executive Officer who may, or may not, be one of the officers or directors of the corporation. The Chief Executive Officer, if any will have the following powers and duties:

 

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(a) He or she will be the Chief Executive Officer of the corporation and, subject to the directions of the Board of Directors, will have general charge of the business affairs and property of the corporation and general supervision over its officers, employees, and agents;

(b) He or she will be charged with the exclusive management of the business of the corporation and of all of its dealings, but at all times subject to the control of the Board of Directors;

(c) Subject to the approval of the Board of Directors or the executive committee, if any or will employee all employees of the corporation, or delegate such employment to subordinate officers, and will have authority to discharge any person so employed; and

(d) He or she will make a report to the President and Directors as often as required, setting forth the results of the operations under his or her charge, together with suggestions looking toward improvement and betterment of the condition of the corporation, and will perform such other duties as the Board of Directors may require.

Section 4.13 Salaries. The salaries and other compensation of the officers of the corporation will be fixed from time to time by the Board of Directors, except that the Board of Directors may delegate to any person or group of persons the power to fix the salaries or other compensation of any subordinate officers or agents appointed in accordance with the provisions of Section 4.03 hereof. No officer will be prevented from receiving any such salary or compensation by reason of the fact that he or she is also a director of the corporation.

Section 4.14 Surety Bond. In case the Board of Directors will so require, any officer or agent of the corporation will execute to the corporation a bond in such sums and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his or her duties to the corporation, including responsibility for negligence and for the accounting of all property, monies, or securities of the corporation which may come into his or her hands.

Section 5.01 Execution of Instruments. Subject to any limitation contained in the Articles of Incorporation or these By-Laws, the President or Chief Executive Officer, if any, or any Vice President duly designated by the Board of Directors as a signatory, may, in the name and on behalf of the corporation, execute and deliver any contract or other instrument authorized in writing by the Board of Directors. The Board of Directors may, subject to any limitation contained in the Articles of Incorporation or in these By-Laws, authorize in writing any officer or agent to execute and deliver any contract or other instrument in the name and behalf of the corporation; any such authorization may be general or confined to specific instances.

Section 5.02 Loans. No loans or advances will be contracted on behalf of the corporation, no negotiable Paper or other evidence of its obligation under any loan or advance will be issued in its name, and no property of the corporation will be mortgaged, pledged, hypothecated, transferred, or conveyed as security for the payment of any loan, advance, indebtedness, or liability of the corporation, unless and except as authorized by the Board of Directors. Any such authorization may be general or confined to specific instances.

Section 5.03 Deposits. All monies of the corporation not otherwise employed will be deposited from time to time to its credit in such banks and/or trust companies or with such bankers or other depositories as the Board of Directors may select, or as from time to time may be selected by any officer or agent authorized to do so by the Board of Directors.

Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances, checks, endorsements, and, subject to the provisions of these By-Laws, evidences of indebtedness of the corporation, will be signed by such officer or officers or such agent or agents of the corporation and in such manner as the Board of Directors from time to time may determine. Endorsements for deposit to the credit of the corporation in any of its duly authorized depositories will be in such manner as the Board of Directors from time to time may determine.

Section 5.05 Bond and Debentures. Every bond or debenture issued by the corporation will be evidenced b y an appropriate instrument which will be signed by the President, or a Vice President duly authorized to so act by the Board of Directors, and by the Secretary and sealed with the seal of the corporation. The seal may be a facsimile, engraved or printed. Where such bond or debenture is authenticated with the manual signature of an authorized

 

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officer of the corporation or other trustee designated by the indenture of trust or other agreement under which such security is issued, the signature of any of the corporation’s officers named thereon may be a facsimile. In case any officer who signed, or whose facsimile signature has been used on any such bond or debenture, should cease to be an officer of the corporation for any reason before the same has been delivered by the corporation, such bond or debenture may nevertheless be adopted by the corporation and issued and delivered as through the person who signed it or whose facsimile signature has been used thereon had not ceased to be such officer.

Section 5.06 Sale, Transfer, Etc. of Securities. Sales transfers, endorsements, and assignments of stocks, bonds, and other securities owned by or standing in the name of the corporation, and the execution and delivery on behalf of the corporation of any and all instruments in writing incident to any such sale, transfer, endorsement, or assignment,. Will be affected by the President, or by any Vice President duly authorized to so act by the Board of Directors, together with the Secretary, or by any other officer or agent thereunto authorized by the Board of Directors.

Section 5.07 Proxies. Proxies to vote with respect to shares of other corporations owned by or standing in the name of the corporation will be executed and delivered on behalf of the corporation by the President, or any Vice President duly authorized by the Board of Directors, and the Secretary or Assistant Secretary of the corporation, or by any officer or agent thereunder authorized by the Board of Directors.

 

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ARTICLE VI

CAPITAL SHARES

Section 6.01 Share Certificates. Every holder of shares in the corporation will be entitled to have a certificate, signed by the President or any Vice President and the Secretary or Assistant Secretary, and sealed with the seal (which May be a facsimile, engraved, or printed) of the corporation, certifying the number and kind, class or series of shares owned by him or her in the corporation; provided, however, that where such a certificate is countersigned by (a) a transfer agent or an assistant transfer agent, or (b) registered by a registrar, the signature of any such President, Vice President, Secretary, or Assistant Secretary may be a facsimile. In case any officer who will have signed, or whose facsimile signature or signatures will have been used on any such certificate, will cease to be such officer of the corporation, for any reason, before the delivery of such certificate by the corporation, such certificate may nevertheless be adopted by the corporation and be issued and delivered as though the person who signed it, or whose facsimile signature or signatures will have been used thereon, has not ceased to be such officers. Certificates representing shares of the corporation will be in such form as provided by the statues of the state of incorporation. There will be entered on the share books of the corporation at the time of issuance of each share, the number of the certificate issued, the name and address of the person owning the shares represented thereby, the number and kind, class or series of such shares, and the date of issuance thereof. Every certificate exchanged or returned to the corporation will be marked “Canceled” with the date of cancellation.

Section 6.02 Transfer of Shares. Transfers of shares of the corporation will be made on the books of the corporation by the holder of record thereof, or by his or her attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the Secretary of the corporation or any of its transfer agents, and on surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares. Except as provided by law, the corporation and transfer agents and registrars, if any, will be entitled to treat the holder of record of any such stock as the absolute owner thereof for all purposes, and accordingly, will not be bound to recognize any legal, equitable, or other claim to or interest in such shares on the part of any other person whether or not it or they will have express or other notice thereof.

Section 6.03 Regulations. Subject to the provisions of this Article VI and of the Articles of Incorporation, the Board of Directors may make such rules and regulation as they deem expedient concerning the issuance, transfer, redemption, and registration of certificates for shares of the corporation.

Section 6.04 Maintenance of Stock Ledger at Principal Place of Business. A share book (or books where more than one kind, class, or series of stock is outstanding) will be kept at the principal place of business of the corporation, or at such other place as the Board of Directors will determine, containing the names, alphabetically arranged, or original shareholders of the corporation, their addresses, their interest, the amount paid on their shares, and all transfer thereof and the number and class of shares held by each. Such share books will at all reasonable hours be subject to inspection by persons entitled by law to inspect the same.

Section 6.05 Transfer Agents and Registrars. The Board of Directors may appoint one or more transfer agents and one or more registrars with respect to the certificates representing shares of the corporation, and may require all such certificates to bear the signature of either or both. The Board of Directors may from time to time define the respective duties of such transfer agents and registrars. No certificate for shares will be valid until countersigned by a transfer agent, if at the date appearing thereon the corporation had a transfer agent for such shares, and until registered by a registrar, if at such the date the corporation had a registrar for such shares.

Section 6.06 Closing of Transfer Books and Fixing of Record Date.

(a) The Board of Directors will have power to close the share books of the corporation for a period of not to exceed 10 days preceding the date of any meeting of shareholders, or the date for payment of any dividend, or the date the allotment of rights, or capital shares will go into effect, or a date in connection with obtaining the consent of shareholders for any purpose.

(b) In lieu of closing the share transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding 60 preceding the date of any meeting of shareholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or

 

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conversion or exchange of capital shares will got into effect, or a date in connection with obtaining any such consent, as a record date for the determination of the shareholders entitled to a notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent.

(c) If the share transfer books will be closed or a record date set for the purpose of shareholders entitled to notice of or to vote at a meeting of shareholders, such books will be closed for, or such record date will be, at least 10 days immediately preceding such meeting.

Section 6.07 Lost or Destroyed Certificates. The corporation may issue a new certificate for shares of the corporation of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate or his or her legal representatives, to give the corporation a bond in such form and amount as the Board of Directors may direct, and with such surety or sureties as may be satisfactory to the board, to indemnify the corporation and its transfer agents and registrars, if any, against any claims that may be made against the corporation and its or any such transfer agent or registrar on account of the issuance of such new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors, it is proper to do so.

Section 6.08 No Limitation on Voting Rights; Limitation on Dissenter’s Rights. To the extent permissible under the applicable law of any jurisdiction to which the corporation may become subject by reason of the conduct of business, the ownership of assets, the residence of shareholders, the location of offices or facilities, or any other item, the corporation elects not to be governed by the provisions of any offices or facilities, or any other item, the corporation elects not to be governed by the provisions of any statue that (i) limits, restricts, modified, suspends, terminates, or otherwise affects the rights of any shareholder to cast one vote for each share of common stock registered in the name of such shareholder on the books of the corporation, without regard to whether such shares were acquired directly from the corporation or from any other person and without regard to whether such shareholder has the power to exercise or direct the exercise of voting power over any specific fraction of the shares of common stock of the corporation issued and outstanding or (ii) grants to any shareholder the right to have his or her stock redeemed or purchased by the corporation or any other shareholder on the acquisition by any person or group of persons of shares of the corporation. In particular, to the extent permitted under the laws of the state of incorporation, the corporation elects not to be governed by any such provision, including the provisions of the New York Control Share Acquisitions Act, Sections 78.378 to 78.3793, inclusive, of the New York Revised Statues, or any statue of similar effect or tenor.

ARTICLE VII

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

Section 7.01 How Constituted. The Board of Directors may designate an executive committee and such other committees as the Board of Directors may deem appropriate, each of which committees will consist of two or more directors. Members of the executive committee and of any such other committees will be designated annually at the annual meeting of the Board of Directors; provided, however, that at any time the Board of Directors may abolish or reconstitute the executive committee or any other committee. Each member of the executive committee and of any other committee will hold office until his or her resignation or removal in the manner provided in these By-Laws.

Section 7.02 Power. During the intervals between meetings of the Board of Directors, the executive committee will have and may exercise all powers of the Board of Directors in the management of the business and affairs of the corporation, except for such powers as by law may not be delegated by the Board of Directors to an executive committee.

Section 7.03 Proceedings. The executive committee, and such other committees as may be designated hereunder by the Board of Directors, may fix its own presiding and recording officer or officers, and may meet at such place or places, at such time or times and on such notice (or without notice) as it will determine from time to time. It will keep a record of its proceedings and will report such proceedings to the Board of Directors at the meeting of the Board of Directors next following.

 

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Section 7.04 Quorum and Manner of Acting. At all meetings of the executive committee, and of such other committees as may be determined hereunder by the Board of Directors, the presence of members constituting a majority of the total authorized membership of the committee will be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present will be the act of such committee. The members of the executive committee, and of such other committees as may be designated hereunder by the Board of Directors, will act only as a committee and the individual members thereof will have no powers as such.

Section 7.05 Resignations. Any member of the executive committee, and of such other committees as may be designated hereunder by the Board of Directors, may resign at any time by delivering a written resignation to either the President, the Secretary, or Assistant Secretary, or to the presiding officer of the committee of which he or she is a member, if any will have been appointed and will be in office. Unless otherwise specified herein, such resignation will take effect on delivery.

Section 7.06 Removal. The Board of Directors may at any time remove any member of the executive committee or of any other committee designated by it hereunder either for or without cause.

Section 7.07 Vacancies. If any vacancies will occur in the executive committee or of any other committee designated by the Board of Directors hereunder, by reason of disqualification, death, resignation, removal, or otherwise, the remaining members will, until the filling of such vacancy, constitute the then total authorized membership of the committee and, provided that two or more members are remaining, continue to act. Such vacancy may be filled at any meeting of the Board of Directors.

Section 7.08 Compensation. The Board of Directors may allow a fixed sum and expenses of attendance to any member of the executive committee, or of any other committee designated by it hereunder, who is not an active salaried employee of the corporation for attendance at each meeting of said committee.

ARTICLE VIII

INDEMNIFICATION, INSURANCE, AND

OFFICER AND DIRECTOR CONTRACTS

Section 8.01 Indemnification: Third Party Actions. The corporation will have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys’ fees) judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with any such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, will not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, he or she had reasonable cause to believe that his or her conduct was unlawful.

Section 8.02 Indemnification: Corporate Actions. The corporation will have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership joint venture, trust, or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue, or matter as to which such a person will have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation, unless and only to the extent that

 

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the court in which the action or suit was brought will determine on application that, despite the adjudication of liability but in view of all circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

Section 8.03 Determination. To the extent that a director, officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in Sections 8.01 and 8.02 hereof, or in defense of any claim, issue, or matter therein, he or she will be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith. Any other indemnification under Sections 8.01 and 8.02 hereof, will be made by the corporation upon a determination that indemnification of the officer, director, employee, or assent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 8.01 and 8.02 hereof. Such determination will be made either (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding; or (ii) by independent legal counsel on a written opinion; or (iii) by the shareholders by a majority vote of a quorum at any meeting duly called for such purpose.

Section 8.04 General Indemnification. The indemnification provided by this Section will not be deemed exclusive of any other indemnification granted under any provision of any statue, in the corporation’s Articles of Incorporation, these By-Laws, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and will continue as to a person who has ceased to be a director, officer, employee, or agent, and will inure to the benefit of the heirs and legal representatives of such a person.

Section 8.05 Advances. Expenses incurred in defending a civil or cranial action, suit, or proceeding as contemplated in this Section may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding upon a majority vote of a quorum of the Board of Directors and upon receipt of any undertaking by or on behalf of the director, officers, employee, or agent to repay such amount or amounts unless if it is ultimately determined that he or she is the agent to indemnified by the corporation as authorized by this Section.

Section 8.06 Scope of Indemnification. The indemnification authorized by this Section will apply to all present and future directors, officers, employees, and agents of the corporation and will continue as to such persons who ceases to be directors, officers, employees, or agents of the corporation, and will inure to the benefit of the heirs, executors, and administrators of all such persons and will be in addition to all other indemnification permitted by law.

Section 8.07 Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to him or her against any such liability and under the laws of the state of incorporation, as the same may hereafter be amended or modified.

ARTICLE IX

FISCAL YEAR

The fiscal year of the corporation will be fixed by resolution of the Board of Directors.

ARTICLE X

DIVIDENDS

The Board of Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and on the terms and conditions provided by the Articles of Incorporation and these By-Laws.

 

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ARTICLE XI

AMENDMENTS

These By-Laws may be altered or repealed at any regular meeting of the stockholders or of the Board of Directors, or at any special meeting of the stockholders or Board of Directors if notice of such alteration or repeal be contained in the notice of such special meeting. These By-Laws will be subject to amendment, alteration, or repeal and new By-Laws may be made, except that:

(a) No By-Laws adopted or amended by the shareholders will be altered or repealed by the Board of Directors.

(b) No By-Laws will be adopted by the Board of Directors which will require more than a majority of the voting shares for a quorum at a meeting of shareholders, or more than a majority of the votes cast to constitute action, by the shareholders, except where higher percentages are required by law; provided, however, that (i) if any By-Law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there will be set forth in the notice of the next meeting of shareholders for the election of directors, the By-Laws so adopted, amended or repealed, together with a concise statement of the change made; and (ii) no amendment, alteration or repeal of this Article XI will be made except by the shareholders.

CERTIFICATE OF SECRETARY

The undersigned does hereby certify that he or she is the Secretary of NaturalNano, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of New York; that the above and foregoing Amended and Restated By-Laws of said corporation were duly and regularly adopted as such by the Board of Directors of the Corporation by unanimous written consent of the Board of Directors, on the 7th day of October, 2008, and that the above and foregoing Amended and Restated By-Laws are now in full force and effect.

DATED THIS 8th day of October, 2008.

NATURALNANO, INC

/s/ Kent A. Tapper , Secretary

 

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EX-32

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of NaturalNano, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report"), I, Kent A. Tapper, Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: November 14, 2008

By: /s/Kent A. Tapper

Name: Kent A. Tapper,

Title: Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of NaturalNano, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report"), I, Cathy A. Fleischer, President of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: November 14, 2008

By: /s/Cathy A. Fleischer

Name: Cathy A. Fleischer,

Title: President

EX-31

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)

I, Kent A. Tapper, certify that:

1) I have reviewed the quarterly report on Form 10-Q of NaturalNano, Inc. (the “registrant”) for the period ended September 30, 2008, filed with the Securities and Exchange Commission on the date hereof;

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

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

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

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

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

c) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: November 14, 2008

By: /s/Kent A. Tapper

Name: Kent A. Tapper,

Title: Chief Financial Officer (Principal Financial and Accounting Officer)

EX-31

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)

I, Cathy A. Fleischer, certify that:

1) I have reviewed the quarterly report on Form 10-Q of NaturalNano, Inc. (the “registrant”) for the period ended September 30, 2008, filed with the Securities and Exchange Commission on the date hereof;

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

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

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

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

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

c) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: November 14, 2008

By: /s/Cathy A. Fleischer

Name: Cathy A. Fleischer,

Title: President

EX-10

Exhibit 10.30

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

NATURALNANO, INC.

WARRANT – Special C

Warrant No. 1 Dated: June 6, 2008

NaturalNano, Inc., a Nevada corporation (the "Company"), hereby certifies that, for value received, Ross B. Kenzie or his registered assigns (the "Holder"), is entitled to purchase from the Company, on the terms and subject to the provisions of this Warrant, at an exercise price (the “Exercise Price”) of thirty-three cents ($0.33) per share, 200,000 shares of common stock, par value $.001 per share (“Common Stock”), of the Company at any time during the period (the “Exercise Period”) commencing on the date of this Warrant and ending at 5:30 P.M. New York City time, on June 5, 2013; provided, however, that if such date is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which such banks are not authorized to close. The number of shares of Common Stock to be issued upon the exercise or conversion of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time in the manner set forth in this Warrant. The shares of Common Stock deliverable upon such exercise or conversion, and as adjusted from time to time, are hereinafter sometimes referred to as “Warrant Shares,” and the exercise price for the purchase of a share of Common Stock pursuant to this Warrant in effect at any time, as the same may be adjusted from time to time, is hereinafter sometimes referred to as the “Exercise Price.” This Warrant was issued in connection with a certain Promissory Note, dated the date hereof and delivered contemporaneously herewith (the “Note”), made by the Company to the initial holder of this Warrant.

1. Exercise of Warrant.

(a) This Warrant may be exercised in whole at any time or in part from time to time during the Exercise Period by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of shares of Common Stock specified in such form. Payment of the Exercise Price may be made either by check (subject to collection) or wire transfer in the amount of the Exercise Price. If this Warrant should be exercised in part only, whether pursuant to this Section 1(a) or pursuant to Section 1(b) of this Warrant, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. The Holder shall not be required to physically deliver this Warrant upon exercise of this Warrant pursuant to this Section 1(a) or on conversion of this Warrant as provided in Section 1(b) of this Warrant. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, or upon delivery of the notice of conversion or exercise without delivery of this Warrant, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder.

Exhibit 10.30

(b) In lieu of exercising this Warrant by payment of the Exercise Price pursuant to Section 1(a) of this Warrant, and subject to the limitations provisions of Section 1(c) of this Warrant, the Holder shall have the right, on notice to the Company, to convert this Warrant, in whole or in part to the extent that this Warrant has not been exercised pursuant to said Section 1(a) of this Warrant or converted pursuant to this Section 1(b), for the number of shares of Common Stock equal to a fraction of the number of shares of Common Stock as to which this Warrant is being converted, the numerator of which is excess of the Current Market Value (as defined below) per share over the total cash exercise price per share, and the denominator of which is the Market Price of the Common Stock as of the trading day immediately prior to the Conversion Date. For the purpose of this Warrant, the terms (x) “Current Market Value” shall be the last sales per share of the Common Stock (as reported by Bloomberg, L.P. or, if the Common Stock is traded on the Nasdaq Stock Market or the New York or American Stock Exchange, as reported by such market or exchange) as of the trading day immediately prior to the Conversion Date, and (y) “Market Price of the Common Stock” shall be the average of the low bid price per share of the Common Stock (as reported by Bloomberg L.P. or, if the Common Stock is traded on the Nasdaq Stock Market or the New York or American Stock Exchange, as reported by such market or exchange) for the five trading days prior to the Conversion Date. The “Conversion Date” shall mean, the date on which the Holder gives the Company notice of conversion by hand delivery or telecopier or email. In the event that Bloomberg, L.P. shall not provide such information, the information shall be provided by a person or entity that regularly provides price and volume information that is selected by the Holders of a majority of the Company’s warrants then outstanding, based on the number of shares of Common Stock issuable upon exercise of all of such outstanding warrants. The parties understand and agree that, for purposes of Rule 144 of the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), if the holder converts the Warrant pursuant to this Section 1(b), its holding period will commence on the date hereof.

(c) The Holder shall not be entitled to exercise or convert this Warrant to the extent that, on the date of such conversion or exercise, the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates, as defined in Act, on such date plus (ii) the number of shares of Common Stock issuable upon exercise or conversion of this Warrant would result in the Holder and its Affiliates beneficially owning more than 4.99% of the outstanding shares of Common Stock of the Company, except as expressly provided in Section 1(e) of this Agreement. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act of 1934, as amended, and Regulation 13d-3 of the Commission thereunder. This limitation shall not affect the ability of the Investor to exercise or convert the warrants in a manner which would result in the Company having issued in the aggregate shares of Common Stock in excess of the 4.99% limitation as long as the Holder does not, at any one time as a result of such conversion or exercise, beneficially own more than such percentage. 

(d) The 4.99% Limitation shall terminate upon the close of business on the business day immediately preceding the date fixed for consummation of any transaction resulting in a Change of Control of the Company. A “Change in Control” means a consolidation or merger of the Company with or into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company in a transaction or series of transactions. Upon the occurrence of a Change of Control, the Company shall promptly send written notice thereof, by hand delivery or by overnight delivery, to the Holder.

2. Reservation and Delivery of Shares.

(a) The Company hereby agrees that at all times there shall be reserved for issuance upon exercise of this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise or conversion of this Warrant and that it shall not increase the par value of the Common Stock.

(b) Except as otherwise set forth herein, upon delivery of a completed Purchase Form accompanied, if the exercise is not a cashless exercise, by payment of the Exercise Price, not later

Exhibit 10.30

than three (3) business days after the Exercise Date (such third day being the “Delivery Date”), the Company shall deliver to the Holder a certificate or certificates which, after the effective date of a registration statement covering the shares of Common Stock issuable upon exercise of this Warrant (the “Effective Date”), shall be free of restrictive legends and trading restrictions (other than those required by the Securities Act) representing the number of shares of Common Stock being acquired upon such exercise. After the Effective Date, the Company shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Company under this Section 2(b) electronically through the Depository Trust Company or another established clearing company performing similar functions if the Company’s transfer agent has the ability to deliver shares of Common Stock in such manner. If in the case of any exercise of this Warrant such certificate or certificates are not delivered to or as directed by the applicable Holder by the second day after the Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the conversion shall be deemed void ab initio.

(c) The Company’s obligations to issue and deliver the Common Stock upon exercise of this Warrant in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such shares. In the event the Holder shall elect to exercise this Warrant in whole or in part, the Company may not refuse to effect such exercise based on any claim that the Holder or any one associated or affiliated with the Holder of has been engaged in any violation of law, agreement or for any other reason unless an injunction from a court, on notice, restraining and or enjoining such exercise shall have been sought and obtained and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the Value, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration or litigation of the dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of an injunction precluding the same, the Company shall issue the Common Stock upon a properly executed Purchase Form. If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 2(b) within two trading days of the Delivery Date applicable to such exercise, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Value of the Warrant being exercised, $50 per trading day (increasing to $100 per trading day three (3) trading days after such damages begin to accrue and increasing to $200 per trading day six (6) trading days after such damages begin to accrue) for each trading day after the Delivery Date until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages for the Company’s failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

(d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 2(b) by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Common Stock which the Holder was entitled to receive upon the exercise relating to such Delivery Date (a “Buy-In”), then the Company shall pay in cash to the Holder the amount by which (a) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (i) the product of (x) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the exercise at issue multiplied by (y) the price at which the sell order giving rise to such purchase obligation was executed. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of this Warrant with respect to which the aggregate sale price giving rise to such purchase obligation is $10,000, under the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Borrowers. Nothing in this Section 2(d) shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law

Exhibit 10.30

or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant pursuant to its terms.

3. Fractional Shares. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise or conversion of this Warrant, the Company shall round the number of shares of Common Stock to be issued to the next higher integral number of shares

4. Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Subject to the provisions of Section 11 of this Warrant, upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term “Warrant” as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.

5. Rights of the Holder. The Holder shall not, by virtue of this Warrant, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and the Note and are enforceable against the Company only to the extent set forth herein and therein, and as provided by applicable law.

6. Adjustments To Exercise Price; Warrant Shares. The Exercise Price in effect at any time and the number and kind of securities purchasable upon exercise of each Warrant shall be subject to adjustment as follows:

(a) In case the Company shall, subsequent to the date of the initial issuance of this Warrant, (i) pay a dividend or make a distribution on its shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares or otherwise effect a stock split or distribution, or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares or otherwise effect a reverse split, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 6. The number of shares of Common Stock that the Holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 6(a)) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 6(a)) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (prior to any adjustment pursuant to Section 6(f) of this Warrant).

Exhibit 10.30

(b) In case the Company shall, subsequent to the date of the initial issuance of this Warrant, distribute to all holders of Common Stock evidences of its indebtedness or assets (excluding (x) cash dividends or distributions paid out of current earnings and (y) dividends or distributions referred to in Section 6(a) of this Warrant), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, of which the numerator shall be the total number of shares of Common Stock outstanding multiplied by the Current Market Price per share of Common Stock, less the fair market value (as determined by the Company’s Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and of which the denominator shall be the total number of shares of Common Stock outstanding multiplied by such Current Market Price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive such distribution.

(c) If, while this Warrant is outstanding, the Company sells or otherwise issues any Convertible Securities, shares of Common Stock, or shares of any class of capital stock at a price per share of Common Stock, or with a conversion right or exercise price to acquire Common Stock at a price per share of Common Stock (other than (x) an Exempt Issuance (hereinafter defined), or (y) an issuance covered by Section 6(a) or 6(b) of this Warrant), that is less than the Exercise Price in effect at the time of such sale (such lower price being referred to as the “Lower Price”), the Exercise Price shall be reduced to an adjusted Exercise Price which is equal to the Lower Price. Such adjustment shall be made successively whenever any such sale or other issuance at a Lower Price is made. The term “Convertible Security” shall mean any debt or equity security or instrument upon the conversion or exercise of which shares of Common Stock may be issued. For purposes hereof, “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors of and consultants (other than consultants whose services relate to the raising of funds) of the Company pursuant to the Company’s outstanding stock option or long-term incentive plans, (b) securities upon the exercise or conversion of the Securities issued hereunder, in payment of principal or interest on indebtedness of the Company, (c) securities issued pursuant to acquisition, licensing agreements, or other strategic transactions, provided any such issuance shall only be to a person or entity which is, itself or through its subsidiaries, an operating company (including, without limitation, a company engaged primarily in research and development) in a business which the Company’s board of directors believes is beneficial to the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. For purposes of the parenthetical clause in clause (a), an investor relations firm that is not involved in fund raising is not deemed to be consultant whose services are related to the raising of funds.

(i) For purposes of this Section 6(c), the price at which such shares of Common Stock are issued shall be the consideration paid for the Common Stock or the price at which the Company agrees to issue shares of Common Stock. The price at which any Convertible Security is issued shall be the amount received for the issuance of the Convertible Security plus the minimum amount of additional consideration which is payable upon exercise or conversion of the Convertible Security. If the Company issues securities as a unit, regardless of whether such issuance is defined as a unit, a separate computation shall be made with respect to (x) shares of Common Stock and convertible securities (based on the maximum number of shares of Common Stock which may be issued upon conversion, including conversion of interest or dividends, but excluding warrants, rights and options) and (y) warrants, options or rights, with a separate computation being made as to each warrant, option or right which is issued. If warrants, options or rights are issued, the Company shall not be deemed to have received any consideration for the issuance of the shares upon exercise of the warrant, option or right other than the lowest exercise price provided therein. If the Company has an agreement which provides for the issuance of shares at a fixed price or a formula price with a maximum price, the Company shall be deemed to have issued securities at such maximum price regardless of whether any securities are actually sold, and any issuance of securities below such maximum price shall, if such price is a Lower Price, be a sale which results in an adjustment pursuant to this Section 2(c).

Exhibit 10.30

(ii) By way of example, if the Company issues for $1,000,000 securities consisting of 500,000 shares of Common Stock and a convertible note for $1,000,000 with a conversion price of $.40 and warrants to purchase 1,000,000 shares of Common Stock at $.40, the Lower Price would be determined by dividing the total consideration paid for the Common Stock and the note ($1,000,000) by the number of shares of Common Stock issued (3,000,000 shares, representing the 500,000 shares issued at closing plus the 2,500,000 shares issuable upon conversion of the note), which would result in Lower Price of $.333, which would become the adjusted Exercise Price of this Warrant. If, in the same example, the exercise price of the warrant were $.30 per share, the Lower Price would be $.30, which would become the adjusted Exercise Price. If, in either case, the conversion price of all or any part of the convertible notes or the exercise price of all or any of the warrants were subsequently reduced, a further adjustment would be made.

(iii) Any stock or convertible securities (other than warrants or options which shall be valued at the lowest stated exercise price thereof) issued for services that are not Exempt Issuances shall, for purposes of this Warrant, be valued at the par value thereof unless such issuance is made with the prior written approved of the Holder, in which event the securities shall be valued in the manner as set forth in the Holder’s approval.

(d) In case the Company shall, subsequent to the date of initial issuance of this Warrant, issue rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (or having a conversion price per share) less than the Current Market Price per share of Common Stock for the record date mentioned below, if issuance does not result in an adjustment pursuant to Section 6(c) of this Warrant, the Exercise Price shall be adjusted to an adjusted Exercise equal to the price determined by multiplying the Exercise Price in effect immediately prior to the date of such issuance by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the record date mentioned below plus the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at such Current Market Price per share of the Common Stock, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchased (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants; and shall be effective regardless of whether such rights are exercised or expire in whole or in part unexercised. The provisions of this Section 6(d) are in addition to the provisions of Section 6(c) and any adjustment pursuant to this Section 6(d) shall be made after the application of Section 6(c).

7. Officer’s Certificate. Whenever the Exercise Price shall be adjusted as required by the provisions of Section 6 of this Warrant, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer’s certificate showing the adjusted Exercise Price and the adjusted number of shares of Common Stock issuable upon exercise of each Warrant, determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer’s certificate shall be made available at all reasonable times for inspection by the Holder, and the Company shall, forthwith after each such adjustment, mail, by certified mail, return receipt requested and by telecopier and email, a copy of such certificate to the Holder at the Holder’s address set forth in the Company’s Warrant Register.

Exhibit 10.30

8. Notices To Warrant Holder. So long as this Warrant shall be outstanding, (a) if the Company shall pay any dividend or make any distribution upon Common Stock (other than a regular cash dividend payable out of retained earnings) or (b) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (c) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail, return receipt requested, to the Holder, at least fifteen days prior to the date specified in clauses (i) and (ii), as the case may be, of this Section 8 a notice containing a brief description of the proposed action and stating the date on which (i) a record is to be taken for the purpose of such dividend, distribution or rights, or (ii) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up.

9. Reclassification, Reorganization or Merger. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 9 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. Notwithstanding the foregoing, in the event that, as a result of any merger, consolidation, sale of assets or similar transaction, all of the holders of Common Stock receive and are entitled to receive no consideration other than cash in respect of their shares of Common Stock, then, at the effective time of the transaction, the rights to purchase Common Stock pursuant to the Warrants shall terminate, and the holders of the Warrants shall, notwithstanding any other provisions of this Warrant, receive in respect of each Warrant to purchase one (1) share of Common Stock, upon presentation of the Warrant Certificate, the amount by which the consideration per share of Common Stock payable to the holders of Common Stock at such effective time exceeds the Exercise Price in effect on such effective date, without giving effect to the transaction; provided, however, that if such transaction would, but for this Section 9, result in a reduction in the Exercise Price pursuant to Section 6(c) of this Warrant, the Exercise Price shall be reduced to reflect that transaction. In the event that, in such a transaction, the value of the consideration to be received per share of Common Stock is equal to or less than the Exercise Price, the Warrants shall automatically terminate and no consideration will be paid with respect thereof.

10. Mandatory Exercise.

(a) (i) The Company shall have the right at any time, on not less than forty five (45) days written notice, to require the Holder to exercise the Warrant entirely, if, and only if, the Market Price of the Common Stock shall equal or exceed the “Target Price” and the “Trading Volume” shall equal or exceed the “Target Volume” on any consecutive twenty (20) trading days ending on the trading day prior to the date that the Company delivers notice of mandatory exercise. Notice of mandatory exercise shall be mailed by first class mail, postage prepaid, and sent by telecopier or e-mail, and shall be deemed given on the date of receipt of the notice by the Holder, provided that receipt is acknowledged. The Company must require

Exhibit 10.30

that all Warrants be exercised if it requires any Warrants to be exercised; provided, however, that if exercise pursuant to this Section 10(a)(i) would result in a violation of the 4.99% Limitation (provided, however, that for purposes of this Section 10, the references to 4.99% shall be deemed to be 9.99%), the Company shall not have the right to require exercise of the Holders’ Warrants to the extent that the exercise of the Warrants would result in such a violation. In such event, the Company may subsequently exercise its right to require exercise of the remaining Warrants held by the Holder at such future time as, and to the extent that, such exercise would not result in a violation of the 4.99% Limitation.

(ii) As used in this Section 10, the following terms shall have the meanings set forth below:

(A) “Mandatory Exercise Date” shall mean the date by which the Warrants are required to be exercised, as set forth in the notice of mandatory exercise from the Company to the Holders of the Warrants, subject to Section 10(b)(ii) of this Warrant.

(B) “Market Price” shall mean the closing price of the Common Stock (as reported by Bloomberg L.P. or, if the Common Stock is traded on the Nasdaq Stock Market or the New York or American Stock Exchange, as reported by such market or exchange).

(C) “Target Price” shall mean thirty-three cents ($.33); which price shall be subject to adjustment for events described in Section 6(a) of this Warrant.

(D) “Trading Volume” shall mean the trading volume in the Common Stock (as reported by Bloomberg L.P. or the Nasdaq Stock Market or the New York or American Stock Exchange, as the case may be).

(E) “Target Volume” shall mean one hundred fifty thousand (150,000) shares.

(b) Notwithstanding any other provision of this Section 10:

(i) The Company may only exercise the right of required exercise pursuant to Section 10(a)(i) of this Warrant if a registration statement covering the sale by the Holder of the shares of Common Stock issuable upon exercise of this Warrant is current and effective and, based on the date of the prospectus forming a part of the registration statement and the age of the financial statements contained in the registration statement, the registration statement can be used by the Holder in connection with the sale of the Common Stock for at least three months after the Mandatory Exercise Date without the need to file a post-effective amendment to update the registration statement, and there shall not have occurred any material event concerning the Company or its Affiliates for which disclosure would be necessary in order that the information contained in the registration statement is true and correct in all material respects and does not omit any information necessary to make the information contained therein not misleading. The redemption notice shall include the certificate of the Borrowers’ respective chief executive officers as to the matters set forth in this Section 10(b)(i).

(ii) In the event that, at any time subsequent to the date on which the Company gives notice of mandatory exercise and before the Mandatory Exercise Date, the shares of Common Stock issuable upon exercise of the Warrants are not subject to a current and effective registration statement, the Company’s right to require exercise of the Warrants shall be suspended with respect to all Warrants that have not then been exercised or converted and such notice of mandatory exercise shall be deemed to have been withdrawn; provided, however, that the Holder’s right to convert the Warrant as provided in Section 1(b) of this Warrant shall continue for the balance of the Exercise Period. Nothing in the preceding sentence shall be construed to prohibit or restrict the Company from thereafter requiring mandatory exercise of the Warrants in the manner provided for, and subject to the provisions of, this Section 10.

(c) The notice of mandatory exercise shall specify (i) the Mandatory Exercise Date, (ii) the representation required by Section 10(b)(i) of this Warrant, and (iii) the number of Warrants with respect to which mandatory exercise is being demanded if exercise of less than all of the Warrants is being demanded. No failure to mail such notice or any defect therein or in the mailing thereof shall affect

Exhibit 10.30

the validity of the demand for mandatory exercise except as to a Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Chief Financial Officer of the Company that notice of mandatory exercise has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(d) The Holder’s obligation to exercise this Warrant in accordance with the terms of this Section 10 are absolute and unconditional, irrespective of any action or inaction by the Company to enforce the same.

11. Transfer to Company with the Securities Act.

This Warrant or the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may not be sold or otherwise disposed of except pursuant to an effective registration statement under the Securities Act, or an exemption from the registration requirements of such Act.

12. Notices.

Any notice or other communication between parties hereto shall be sufficiently given if delivered:

to the Company, addressed to it at:

NaturalNano, Inc.

15 Schoen Place

Pittsford, NY 14534

Attention: Kent A. Tapper, CFO

Facsimile Number: 585-267-4855

Email address: ktapper@naturalnano.com;

and, if to Holder, addressed to him at:

Ross B. Kenzie

6975 Sweetland Road

Derby, NY 14047

Facsimile Number: 716-857-6490

provided, however, that the parties may change its address for notices by delivery of a written notice to the other party at its then current address notices.

Dated as of June 6, 2008	NATURALNANO, INC.
	By:	/s/Kent A. Tapper
	Name:	Kent A. Tapper
	Title:	CFO

Exhibit 10.30

PURCHASE FORM

Dated: __________ __, 20  

______ The undersigned hereby irrevocably exercises this Warrant to the extent of purchasing _______ shares of Common Stock, and hereby makes payment of $____________ in payment of the Exercise Price therefor.

______ The undersigned hereby irrevocably converts this Warrant pursuant to the cashless conversion provisions of Section 1(b) of this Warrant with respect to _______ shares of Common Stock.

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name:______________________________________________________________________________________________________________________________________  

(Please typewrite or print in block letters)

Signature:___________________________________________

Social Security or Employer Identification No.________________________

Exhibit 10.30

ASSIGNMENT FORM

FOR VALUE RECEIVED,____________________________________________________________________________________________________________

hereby sells, assigns and transfer unto

Name ______________________________________________________________________________________________________________________________________

(Please typewrite or print in block letters)

Address____________________________________________________________________________________________________________________________________

Social Security or Employer Identification No._______________________

The right to purchase Common Stock represented by this Warrant to the extent of _________shares as to which such right is exercisable and does hereby irrevocably constitute and appoint __________________ attorney to transfer the same on the books of the Company with full power of substitution.

Dated: ___________ __, 20__

Signature_________________________________________

Signature Medallion Guaranteed:

_________________________________________________

EX-10

Exhibit10.29

PROMISSORY NOTE

June 6, 2008 $200,000

For value received, NaturalNano, Inc., having an office at 15 Schoen Place, Pittsford, NY 14534 (“Borrower”), hereby promises to pay to Ross B. Kenzie or order ("Lender"), at 6975 Sweetland Road, Derby, NY 14047 at such other place as Lender may specify from time to time, in lawful money of the United States, the principal amount of $200,000.

1. The outstanding principal balance of this Secured Promissory Note (this “Note”) shall not bear interest. Reference is made to that certain Warrant – Special C, issued by Borrower to Lender contemporaneously herewith (the “Warrant”). The parties acknowledge and agree that the Warrant is in lieu of interest that would have accrued from the date hereof until the Maturity Date (hereinafter defined).

2.        (a) The entire unpaid principal amount of this Note, together with all accrued but unpaid interest thereon, shall be due and payable on July 18, 2008 (the “Maturity Date”).

(b) Borrower covenants and agrees that the principal amount of this Note shall be used only to pay the following expenses of the Company: $95,000 – Salary and benefits; $30,000 – Operating costs; and $75,000 – Emerson build-out (the “Approved Disbursements”).

(c) If Borrower shall use the principal amount of this Note for any purpose other than to pay the Approved Disbursements, then the Maturity Date shall be accelerated and entire principal balance of this Note shall become due and payable on the date (which shall become the “Maturity Date” for all purposes) that any portion of the principal amount of this Note is not used to pay the Approved Disbursements.

3. This Note may be prepaid at any time, in whole or in part, without restriction, penalty or premium in Borrower’s sole and absolute discretion; provided, however, that prepayment shall in no way affect the Warrant or Lender’s rights in respect of or as provided in the Warrant.

4. Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest and all other demands, protests and notices in connection with the execution, delivery, performance, collection and enforcement of this Note.

5. If Borrower shall fail to repay this Note in full on or before the Maturity Date, then until this Note is repaid in full, interest shall accrue on the outstanding principal balance of this Note, and be payable, from the Maturity Date until the date of repayment in full (together with all accrued but unpaid interest) at the rate of interest (the “Default Rate”) that is the lesser of (x) 18% per annum, or (y) the highest rate of interest permitted by law. Interest payable at the Default Rate may be paid in cash or, at the election of Borrower, in its sole discretion, in shares of the common stock of NaturalNano, Inc., par value $.001 per share (“Common Stock”). In such event, the number of shares of Common Stock to be issued shall be determined by dividing the amount of the interest payment by the daily volume weighted average price (“VWAP”) of the

Exhibit10.29

Common Stock for the 20 trading days immediately preceding (but not including) the day that is one trading day prior to the interest payment date. For purposes hereof, VWAP means the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the primary trading market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function.

6. No failure on the part of Lender to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Lender of any right, remedy or power hereunder preclude any other or future exercise thereof or the exercise of any other right, remedy or power.

7. Borrower shall not have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void), except with the prior written consent of Lender. No failure or delay of Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. Neither this Note nor any provision hereof may be waived, amended or modified, nor shall any departure therefrom be consented to, except pursuant to a written agreement entered into between Borrower and Lender with respect to which such waiver, amendment, modification or consent is to apply.

8. Borrower hereby agrees to pay all reasonable costs and expenses incurred by Lender incidental to or in any way relating to Lender's enforcement of the obligations of Borrower under this Note or the Warrant or the protection of Lender's rights against Borrower under the Note or the Warrant, including, without limitation, reasonable attorneys' fees and expenses, whether or not litigation is commenced.

9.THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THAT STATE’S CONFLICT OF LAW PRINCIPLES.

10. All communications and notices hereunder shall be in writing and given as provided in the Warrant.

11. Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in that state, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Note or the Security Agreement, or for recognition or enforcement of any judgment, and Borrower hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by applicable law, in such Federal court. Borrower, and by accepting this Note, Lender, agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Note shall affect any right that Lender may otherwise have to bring any action or proceeding relating to this Note against Borrower, or any of its property, in the courts of any jurisdiction.

Exhibit10.29

12. Borrower, and by accepting this Note, Lender, hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Note or the Warrant in any court referred to in the preceding paragraph hereof. Borrower, and by accepting this Note, Lender, hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

13. Borrower, and by accepting this Note, Lender, irrevocably consents to service of process in the manner provided herein. Nothing herein will affect the right of Borrower to serve process in any other manner permitted by 1nw.

14. BORROWER, AND BY ACCEPTING THIS NOTE, LENDER, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE. BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. AND (B) ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ACCEPT THIS NOTE AND ENTER INTO THE NOTE AND SECURITY AGREEMENT TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS AGREED UPON, THE WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH.

Dated as of June 6, 2008	NATURALNANO, INC.
	By:	/s/ Kent A. Tapper
	Name:	Kent A. Tapper
	Title:	CFO

EX-4

Exhibit 4.19

NaturalNano, Inc. 2008 Incentive

Stock Plan

Exhibit 4.19

TABLE OF CONTENTS

Page

Article 1. Establishment, Objectives, and Duration 1

Article 2. Definitions 1

Article 3. Administration 4

Article 4. Shares Subject to the Plan and Maximum Awards 4

Article 5. Eligibility and Participation 5

Article 6. Stock Options 6

Article 7. Stock Appreciation Rights 7

Article 8. Restricted Stock 8

Article 9. Performance Units and Performance Shares 9

Article 10. Performance Measures 10

Article 11. Rights of Participants 10

Article 12. Termination of Employment/Directorship 10

Article 13. Change in Control 11

Article 14. Amendment, Modification, and Termination 11

Article 15. Withholding 12

Article 16. Successors 12

Article 17. General Provisions 12

Article 1. Establishment, Objectives, and Duration

1.1Establishment of the Plan. NaturalNano, Inc., a Nevadacorporation (the “Company”), hereby adopts the “NaturalNano, Inc. 2008 Incentive Stock Plan” (hereinafter referred to as the “Plan”), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares and Performance Units.

1.2Objectives of the Plan. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those of the Company’s stockholders, to provide Participants with an incentive for excellence in individual performance, and to promote teamwork among Participants.

The Plan is further intended to provide flexibility to the Company and its Subsidiaries in their ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company’s success and to allow Participants to share in that success.

1.3Duration of the Plan. The Plan shall remain in effect, subject to the right of the Committee to amend or terminate the Plan at any time pursuant to Article 14 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions. However, in no event may an Award of an Incentive Stock Option be granted under the Plan on or after the tenth (10^th) anniversary of the Effective Date.

Article 2. Definitions

Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:

2.1“Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares or Performance Units.

2.2“Award Agreement” means a written or electronic agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan.

2.3“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

2.4 “Board” or “Board of Directors” means the Board of Directors of the Company.

2.5 “Change in Control” shall be deemed to have occurred under any one or more of the following conditions:

i. if, within one year of any merger, consolidation, sale of a substantial part of the Company’s assets, or contested election, or any combination of the foregoing transactions (a “Transaction”), the persons who were directors of the Company immediately before the Transaction shall cease to constitute a majority of the Board of Directors (x) of the Company or (y) of any successor to the Company, or (z) if the Company becomes a subsidiary of or is merged into or consolidated with another corporation, of such corporation (the Company shall be deemed a subsidiary of such other corporation if such other corporation owns or controls, directly or indirectly, a majority of the combined voting power of the outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors (“Voting Stock”));

ii. if, as a result of a Transaction, the Company does not survive as an entity, or its shares are changed into the shares of another corporation unless the stockholders of the Company immediately prior to the Transaction own a majority of the outstanding shares of such other corporation immediately following the Transaction;

iii. if any Person becomes, after the date this Plan is adopted, a beneficial owner directly or indirectly of securities of the Company representing 50% or more of the combined voting power of the Company’s Voting Stock;

iv. the dissolution or liquidation of the Company is approved by its stockholders; or

v. if the members of the Board as of the date this Plan is adopted (the “Incumbent Board”) cease to represent at least two-thirds of the Board; provided, that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by at least two-thirds of the members comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement in

which such person is named as a nominee for director without objection to such nomination) shall be, for purposes of this paragraph (v), treated as though such person were a member of the Incumbent Board.

2.6 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.7“Committee” means the committee appointed from time to time by the Company’s Board of Directors to administer the Plan. The full Board of Directors, in its discretion, may act as the Committee under the Plan, whether or not a Committee has been appointed, and shall do so with respect to grants of Awards to non-employee Directors. The Committee may delegate to one or more members of the Committee or officers of the Company, individually or acting as a committee, any portion of its authority, except as otherwise expressly provided in the Plan. In the event of a delegation to a member of the Committee, officer or a committee thereof, the term “Committee” as used herein shall include the member of the Committee, officer or committee with respect to the delegated authority. Notwithstanding any such delegation of authority, the Committee comprised of members of the Board of Directors and appointed by the Board of Directors shall retain overall responsibility for the operation of the Plan.

2.8“Company” means NaturalNano Inc., a Nevada corporation, together will all subsidiaries thereof, and any successor thereto as provided in Article 16 hereof.

2.9“Covered Employee” means a Participant who, as of the date of vesting and/or payout of an Award, or the date the Company or any of its Subsidiaries is entitled to a tax deduction as a result of the Award, as applicable, is one of the group of “covered employees,” as defined in the regulations promulgated under Code Section 162(m), or any successor statute.

2.10“Director” means any individual who is a member of the Board of Directors of the Company; provided, however, that any Director who is employed by the Company shall be treated as an Employee under the Plan.

2.11“Disability” shall mean a condition whereby the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical impairment which can be expected to result in death or which is or can be expected to last for a continuous period of not less than twelve months, all as verified by a physician acceptable to, or selected by, the Company.

2.12 “Effective Date” shall have the meaning ascribed to such term in Section 1.1 hereof.

2.13 “Employee” means any employee of the Company or its Subsidiaries.

2.14“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

2.15“Fair Market Value” as of any date and in respect of any Share means the then most recent closing price of a Share reported by the exchange or other trading system on which Shares are primarily traded or, if deemed appropriate by the Committee for any reason, the fair market value of Shares shall be as determined by the Committee in such other manner as it may deem appropriate. In no event shall the fair market value of any Share be less than its par value.

2.16“Incentive Stock Option” or “ISO” means an option to purchase Shares granted under Article 6 hereof and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422.

2.17“Insider” shall mean an individual who is, on the relevant date, an executive officer, director or ten percent (10%) beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act.

2.18“Key Employee” shall mean an individual as defined in Code Section 416(i) without regard to paragraph (5) thereof) of the Company.

2.19“Non-Employee Director” shall mean any member of the Board of who is not an employee of the Company or a member of the immediate family of an employee of the Company.

2.20“Nonqualified Stock Option” or “NQSO” means an option to purchase Shares granted under Article 6 hereof that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.

2.21 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

2.22 “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

2.23“Participant” means an Employee, Director or consultant who has been selected to receive an Award or who has an outstanding Award granted under the Plan.

2.24“Performance-Based Exception” means the performance-based exception from the tax deductibility limitations of Code Section 162(m).

2.25 “Performance Share” means an Award granted to a Participant, as described in Article 9 hereof.

2.26 “Performance Unit” means an Award granted to a Participant, as described in Article 9 hereof.

2.27“Period of Restriction” means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, pursuant to the Restricted Stock Award Agreement, as provided in Article 8 hereof.

2.28“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof and the rules promulgated thereunder, including a “group” as defined in Section 13(d) thereof and the rules promulgated.

2.29 “Restricted Stock” means an Award granted to a Participant pursuant to Article 8 hereof.

2.30 “Shares” means shares of the Company’s common stock, par value $.0001 per share.

2.31“Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to the terms of Article 7 hereof.

2.32“Subsidiary” means any corporation, partnership, joint venture, or other entity in which the Company, directly or indirectly, has a majority voting interest. With respect to Incentive Stock Options, “Subsidiary” means any entity, domestic or foreign, whether or not such entity now exists or is hereafter organized or acquired by the Company or by a Subsidiary that is a “subsidiary corporation” within the meaning of Code Section 424(d) and the rules thereunder.

2.33“Ten Percent Shareholder” means an employee who at the time an ISO is granted owns Shares possessing more than ten percent of the total combined voting power of all classes of Shares of the Company or any Subsidiary, within the meaning of Code Section 422.

Article 3. Administration

3.1General. Subject to the terms and conditions of the Plan, the Plan shall be administered by the Committee. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. The Committee shall have the authority to delegate administrative duties to officers of the Company. For purposes of making Awards intended to qualify for the Performance Based Exception under Code Section 162(m), to the extent required under such Code Section, the Committee shall be comprised solely of two or more individuals who are “outside directors”, as that term is defined in Code Section 162(m) and the regulations thereunder.

3.2Authority of the Committee. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions hereof, the Committee shall have full power to select Employees, Directors and consultants who shall be offered the opportunity to participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and amend the terms and conditions of any outstanding Award as provided in the Plan. Further, the Committee shall make all other determinations that it deems necessary or advisable for the administration of the Plan. As permitted by law and the terms of the Plan, the Committee may delegate its authority herein. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award granted hereunder.

3.3Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Directors, Employees, Participants, and their estates and beneficiaries, unless changed by the Board.

Article 4. Shares Subject to the Plan and Maximum Awards

4.1Number of Shares Available for Grants. Subject to adjustment as provided in Section 4.2 hereof, the number of Shares hereby reserved for issuance to Participants under the Plan shall be eight hundred million (800,000,000). Any Shares covered by an Award (or portion of an Award) granted under the Plan which is forfeited or canceled or expires shall be deemed not to have been delivered for purposes of determining the maximum number of Shares available for delivery under the Plan. Shares may be authorized, unissued shares or Treasury shares. The Committee shall determine the appropriate methodology for calculating the number of Shares issued pursuant to the Plan.

The following limitations shall apply to the grant of any Award to a Participant in a fiscal year:

(a) Stock Options: The maximum aggregate number of Shares that may be granted in the form of Stock Options pursuant to Awards granted in any one fiscal year to any one Participant shall be 70,000,000.

(b) SARs: The maximum aggregate number of Shares that may be granted in the form of Stock Appreciation Rights pursuant to Awards granted in any one fiscal year to any one Participant shall be 70,00,000.

(c) Restricted Stock: The maximum aggregate of Shares that may be granted with respect to Awards of Restricted Stock granted in any one fiscal year to any one Participant shall be 70,000,000.

(d) Performance Shares/Performance Units Awards: The maximum aggregate grant with respect to Awards of Performance Shares made in any one fiscal year to any one Participant shall be equal to the Fair Market Value of 25,000,000 Shares (measured on the date of grant); the maximum aggregate amount awarded with respect to Performance Units to any one Participant in any one fiscal year may not exceed $1,000,000.

4.2Adjustments in Authorized Shares. Upon a change in corporate capitalization, such as a stock split, stock dividend or a corporate transaction, such as any merger, consolidation, combination, exchange of shares or the like, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, (i) the number and class of Shares reserved for issuance to Participants under the Plan, (ii) the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, and (iii) the Award limits set forth in Section 4.1, shall be proportionately adjusted in such manner as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights.

4.3Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.2 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided that (i) no such adjustment shall be authorized if, and to the extent that, such adjustment would result in an accounting charge for any affected outstanding Awards in accordance with Financial Accounting Standard No. 123R (Accounting for Share Based Compensation) or (ii) unless the Committee determines otherwise at the time such adjustment is considered, no such adjustment shall be authorized to the extent inconsistent with the Plan’s or any Award’s meeting the requirements of Section 162(m) of the Code, as from time to time amended.

Article 5. Eligibility and Participation

5.1Eligibility. Persons eligible to participate in this Plan include all Employees, Directors and consultants of the Company and its Subsidiaries.

5.2Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, Directors and consultants, those to whom Awards shall be granted and shall determine the nature and amount of each Award, provided that Incentive Stock Options shall only be awarded to Employees of the Company or its Subsidiaries.

5.3 Stock Options for Non-Employee Directors

(a)                            Subject to the provisions of Section 5.3(d), each person who, subsequent to the Effective Date, is for the first time elected or appointed to the Board and who qualifies, at such time, as a Non-Employee Director, shall automatically be granted a Nonqualified Stock Option to purchase 2,500,000 shares of Common Stock, effective as of the date of his or her election or appointment to the Board on the terms and conditions set forth in the Plan, at an option price per share equal to the Fair Market Value of a share of Common Stock on the date of grant or, if the date of the grant is not a business day on which the Fair Market Value can be determined, on the last business day preceding the date of grant on which the Fair Market Value can be determined.

(b) Subject to the provisions of Section 5.3(d), each Non-Employee Director who is re-elected as a director at an annual meeting of stockholders shall be granted an additional Nonqualified Stock Option to purchase 2,500,000 shares of Common Stock, on the terms and conditions set forth in the Plan, at an option price per share equal to the Fair Market Value of a share of Common Stock on the date of such annual meeting.

(c) All Options granted to Non-Employee Directors pursuant to this Section 5.3 shall vest and become fully exercisable on the date of the first annual meeting of stockholders occurring after the end of the fiscal year of the Company during which such Option was granted. All Options granted to Non-Employee Directors pursuant to this Section 5.3 shall expire on the tenth (10^th) anniversary of the date of grant, subject to earlier termination as provided in Article 12.

(d) Non-Qualified Stock Options may be granted to a person pursuant to this Section 5.3 only if, and to the extent that, such person does not automatically receive Non-Qualified Stock Options to purchase 2,500,000 shares of Common Stock under the Company’s 2008 Incentive Stock Plan upon his or her election or re-election as a Non-Employee Director.

Article 6. Stock Options

6.1Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee.

6.2Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan.

6.3Option Price. The Option Price for each grant of an Option under this Plan shall be as determined by the Committee; provided, however, the per-share exercise price shall not be less than the Fair Market Value of the Shares on the date of grant.

The Option Price for each Option shall equal the Fair Market Value of the Shares at the time such option is granted. If an ISO is granted to a Ten Percent Shareholder the Option Price shall be at least 110 percent of the Fair Market Value of the stock subject to the ISO.

6.4Duration of Options. Except as otherwise provided in this Plan, each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant, provided that an ISO must expire no later than the tenth (10th) anniversary of the date the ISO was granted. However, in the case of an ISO granted to a Ten Percent Shareholder, the ISO by its terms shall not be exercisable after the expiration of five years from the date such ISO is granted.

6.5Exercise of Options. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.

6.6Payment. Options shall be exercised by the delivery of a written, electronic or telephonic notice of exercise to the Company or its designated agent, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment of the Option Price for the Shares.

Upon the exercise of any Option, the Option Price for the Shares being purchased pursuant to the Option shall be payable to the Company in full either: (a) in cash or its equivalent; or(b) subject to the Committee’s approval, by delivery of previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares that are delivered must have been held by the Participant for at least six (6) months prior to their delivery to satisfy the Option Price); or (c) by a combination of (a) and (b); or (d) by any other method approved by the Committee in its sole discretion. Unless otherwise determined by the Committee, the delivery of previously acquired Shares may be done through attestation. No fractional shares may be tendered or accepted in payment of the Option Price.

Unless otherwise determined by the Committee, cashless exercises are permitted pursuant to Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law.

Subject to any governing rules or regulations, as soon as practicable after receipt of notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant’s name, Share certificates in an appropriate amount based upon the number of Shares purchased pursuant to the Option(s).

Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.

6.7Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.

6.8Nontransferability of Options.

(a) Incentive Stock Options. No ISO granted under the Plan may be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during such Participant’s lifetime only by such Participant.

(b) Nonqualified Stock Options. Except as otherwise provided in the applicable Award Agreement, no NQSO may be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in the applicable Award Agreement, all NQSOs granted to a Participant shall be exercisable during such Participant’s lifetime only by such Participant.

6.9Special Limitation on Grants of Incentive Stock Options. No ISO shall be granted to an Employee under the Plan or any other ISO plan of the Company or its Subsidiaries to purchase Shares as to which the aggregate Fair Market Value (determined as of the date of grant) of the Shares which first become exercisable by the Employee in any calendar year exceeds $100,000. To the extent an Option initially designated as an ISO exceeds the value limit of this Section 6.9 or otherwise fails to satisfy the requirements applicable to ISOs, it shall be deemed a NQSO and shall otherwise remain in full force and effect.

Article 7. Stock Appreciation Rights

7.1Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee.

Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.

The grant price of a SAR shall equal the Fair Market Value of a Share on the date of grant.

7.2SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.

7.3Term of SARs. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion.

7.4Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.

7.6Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(a) The amount by which the Fair Market Value of a Share on the date of exercise exceeds the grant price of the SAR; by

(b) The number of Shares with respect to which the SAR is exercised.

The payment upon SAR exercise shall be in Shares. Any Shares delivered in payment shall be deemed to have a value equal to the Fair Market Value on the date of exercise of the SAR.

7.7Nontransferability of SARs. Except as otherwise provided in a Participant’s Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, all SARs granted to a Participant under the Plan shall be exercisable during such Participant’s lifetime only by such Participant.

Article 8. Restricted Stock

8.1Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Participants in such amounts as the Committee shall determine.

8.2Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

8.3Transferability. Except as provided in the Award Agreement, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Award Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during such Participant’s lifetime and prior to the end of the Period of Restriction only to such Participant.

8.4Other Restrictions. The Committee may impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable federal or state securities laws.

To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied.

Except as otherwise provided in the Award Agreement, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction.

8.5Voting Rights. If the Committee so determines, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction.

8.6Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder (whether or not the Company holds the certificate(s) representing such Shares) may, if the Committee so determines, be credited with dividends paid with respect to the underlying Shares while they are so held. The Committee may apply any restrictions to the dividends that the Committee deems appropriate. Without limiting the generality of the preceding sentence, if the grant or vesting of Restricted Shares granted to a Covered Employee is designed to comply with the requirements of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate to the payment of dividends declared with respect to such Restricted Shares, such that the dividends and/or the Restricted Shares maintain eligibility for the Performance-Based Exception.

Article 9. Performance Units and Performance Shares

9.1Grant of Performance Units/Shares Awards. Subject to the terms of the Plan, Performance Units and/or Performance Shares Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.

9.2Award Agreement. At the Committee’s discretion, each grant of Performance Units/Shares Awards may be evidenced by an Award Agreement that shall specify the initial value, the duration of the Award, the performance measures, if any, applicable to the Award, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan.

9.3Value of Performance Units/Shares Awards. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares Awards that will be paid out to the Participant. For purposes of this Article 9, the time period during which the performance goals must be met shall be called a “Performance Period.”

9.4Earning of Performance Units/Shares Awards. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares Awards shall be entitled to receive a payout based on the number and value of Performance Units/Shares Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

9.5Form and Timing of Payment of Performance Units/Shares Awards. Payment of earned Performance Units/Shares Awards shall be as determined by the Committee and, if applicable, as evidenced in the related Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Shares Awards in the form of cash or in Shares (or in a combination thereof) that have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares Awards at the close of the applicable Performance Period. Such Shares may be delivered subject to any restrictions deemed appropriate by the Committee. No fractional shares will be issued. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award or the resolutions establishing the Award.

Unless otherwise provided by the Committee, Participants holding Performance Units/Shares shall be entitled to receive dividend units with respect to dividends declared with respect to the Shares represented by such Performance Units/Shares. Such dividends may be subject to the same accrual, forfeiture, and payout restrictions as apply to dividends earned with respect to Shares of Restricted Stock, as set forth in Section 8.6 hereof, as determined by the Committee.

9.6Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Performance Units/Shares Awards may not be sold, transferred, pledged, assigned, encumbered, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

Article 10. Performance Measures

Unless and until the Committee proposes for shareholder vote and the Company’s shareholders approve a change in the general performance measures set forth in this Article 10, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Covered Employees that are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among:

(a) Earnings per share;

(b) Net income (before or after taxes);

(c) Cash flow (including, but not limited to, operating cash flow and free cash flow);

(d) Gross revenues;

(e) Gross margins;

(f) EBITDA; and

(g) Any of the above measures compared to peer or other companies.

Performance measures may be set either at the corporate level, subsidiary level, division level, or business unit level.

Awards that are designed to qualify for the Performance-Based Exception, and that are held by Covered Employees, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward).

If applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval.

Article 11. Rights of Participants

11.1Employment. Nothing in the Plan shall confer upon any Participant any right to continue in the Company’s or its Subsidiaries’ employ, or as a Director, or interfere with or limit in any way the right of the Company or its Subsidiaries to terminate any Participant’s employment or directorship at any time.

11.2Participation. No Employee, Director or consultant shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

11.3Rights as a Stockholder. Except as provided in Sections 8.5, 8.6 and 9.5 or in applicable Award Agreement consistent with such Sections, a Participant shall have none of the rights of a shareholder with respect to shares of Common Stock covered by any Award until the Participant becomes the record holder of such Shares, or the Period of Restriction has expired, as applicable.

Article 12. Termination of Employment/Directorship

Upon termination of the Participant’s employment or directorship for any reason other than Disability or death, an Award granted to the Participant may be exercised by the Participant or permitted transferee at any time on or prior to the earlier of the expiration date of the Award or the expiration of three (3) months after the date of termination but only if, and to the extent that, the Participant was entitled to exercise the Award at the date of termination. All Awards or any portion thereof not yet vested or exercisable or whose Period of Restriction has not expired as of the date of termination (other than a termination by reason of Disability or death) shall terminate and be forfeited immediately on the date of termination. If the employment or directorship of a Participant terminates by reason of the Participant’s Disability or death, all Awards or any portion thereof not yet vested or exercisable or whose Period of Restriction has not expired as of the date of a Participant’s Disability or death shall become immediately vested and/or exercisable on the date of termination due to Disability or death. If the employment or directorship of a Participant terminates by reason of the Participant’s Disability or death, the Participant (or, if appropriate, the Participant’s legal representative or permitted transferee) may exercise such Participant’s rights under any outstanding Award at any time on or prior to the earlier of the expiration date of the Award or the expiration of six months after the date of Disability or death.

Unless otherwise determined by the Committee, an authorized leave of absence pursuant to a written agreement or other leave entitling an Employee to reemployment in a comparable position by law or rule shall not constitute a termination

of employment for purposes of the Plan unless the Employee does not return at or before the end of the authorized leave or within the period for which re-employment is guaranteed by law or rule. For purposes of this Article, a “termination” includes an event which causes a Participant to lose his eligibility to participate in the Plan (e.g., an individual is employed by a company that ceases to be a Subsidiary). In the case of a consultant, the meaning of “termination” or “termination of employment” includes the date that the individual ceases to provide services to the Company or its Subsidiaries. In the case of a nonemployee director, the meaning of “termination” includes the date that the individual ceases to be a director of the Company or its Subsidiaries.

Notwithstanding the foregoing, the Committee has the authority to prescribe different rules that apply upon the termination of employment of a particular Participant, which shall be memorialized in the Participant’s original or amended Award Agreement or similar document.

An Award that remains unexercised after the latest date it could have been exercised under any of the foregoing provisions or under the terms of the Award shall be forfeited.

Article 13. Change in Control

In the event of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchange or trading system, or unless the Committee shall otherwise specify in the Award Agreement all then unvested grants under the Plan shall be deemed to be fully vested and the Board, in its sole discretion, may:

(a) elect to terminate Options or SARs in exchange for a cash payment equal to the amount by which the Fair Market Value of the Shares subject to such Option or SAR to the extent the Option or SAR has vested exceeds the exercise price with respect to such Shares;

(b) elect to terminate Options or SARs provided that each Participant is first notified of and given the opportunity to exercise his/her vested Options or SARs for a specified period of time (of not less than 15 days) from the date of notification and before the Option or SAR is terminated;

(c) permit Awards to be assumed by a new parent corporation or a successor corporation (or its parent) and replaced with a comparable Award of the parent corporation or successor corporation (or its parent);

(d) amend an Award Agreement or take such other action with respect to an Award that it deems appropriate; or

(e) implement any combination of the foregoing.

Article 14. Amendment, Modification, and Termination

14.1Amendment, Modification, and Termination. Subject to the terms of the Plan, the Board may at any time and from time to time, alter, amend, suspend, or terminate the Plan in whole or in part.

14.2Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.

14.3Shareholder Approval Required for Certain Amendments. Shareholder approval will be required for any amendment of the Plan that does any of the following: (a) increases the maximum number of Shares subject to the Plan; (b) changes the designation of the class of persons eligible to receive ISOs under the Plan; or (c) modifies the Plan in a manner that requires shareholder approval under applicable law or the rules of a stock exchange or trading system on which Shares are traded.

Article 15. Withholding

The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy any applicable taxes (including social security or social charges), domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. The Participant may satisfy, totally or in part, such Participant’s obligations pursuant to this Section 15 by electing to have Shares withheld, to redeliver Shares acquired under an Award, or to deliver previously owned Shares that have been held for at least six (6) months, provided that the election is made in writing on or prior to (i) the date of exercise, in the case of Options and SARs, (ii) the date of payment, in the case of Performance Units/Shares, and (iii) the expiration of the Period of Restriction in the case of Restricted Stock. Any election made under this Section 15 may be disapproved by the Committee at any time in its sole discretion. If an election is disapproved by the Committee, the Participant must satisfy his obligations pursuant to this paragraph in cash.

Article 16. Successors

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, through merger, consolidation, or otherwise, of all or substantially all of the business, stock and/or assets of the Company.

Article 17. General Provisions

17.1Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.

17.2Severability. If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

17.3Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

17.4Securities Law Compliance. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act, unless determined otherwise by the Board. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board.

17.5Listing. The Company may use reasonable endeavors to register Shares issued pursuant to Awards with the United States Securities and Exchange Commission or to effect compliance with the registration, qualification, and listing requirements of any state or foreign securities laws, stock exchange, or trading system.

17.6Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

17.7No Additional Rights. Neither the Award nor any benefits arising under this Plan shall constitute part of an employment contract between the Participant and the Company or any Subsidiary, and accordingly, subject to Section 14.2, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company for severance payments.

17.8Noncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange or trading system.

17.9Governing Law. The Plan and each Award Agreement shall be governed by the laws of Nevada, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts whose jurisdiction covers Nevada, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.

17.10 Compliance with Code Section 409A. No Award that is subject to Section 409A of the Code shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. Notwithstanding any provision in the Plan to the contrary, with respect to any Award subject to Section 409A, distributions on account of a separation from service may not be made to Key Employees before the date which is six (6) months after the date of separation from service (or, if earlier, the date of death of the employee).

Dated as of September 9, 2008 NaturalNano, Inc.

By: /s/ Cathy Fleischer

Cathy A. Fleischer

President

Date of Shareholder Approval: October 27, 2008