q6302009_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:		June 30, 2009

or

o	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.)
15 Schoen Place, Pittsford NY		14534
(Address of principal executive offices)		(Zip Code)

	585-267-4848
(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 o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	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 o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 73,682,045 as of September 11, 2009.

Table of Contents


PART I—FINANCIAL INFORMATION			1
	Item 1.	Financial Statements.
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statement of Operations	2
		Condensed Consolidated Statement of Stockholders Equity (Deficiency)	3
		Condensed Consolidated Statement of Cash Flows	4
		Notes to Condensed Consolidated Financial Statements	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
		Note Regarding Forward-Looking Statements	12

	Item 4T.	Controls and Procedures.	20

PART II—OTHER INFORMATION			21

	Item 1.	Legal Proceedings.	21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	21
	Item 3.	Defaults Upon Senior Securities.	21
	Item 4.	Submission of Matters to a Vote of Security Holders.	21
	Item 5.	Other Information.	21
	Item 6.	Exhibits.	22

SIGNATURES			27

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2009 (Unaudited)			December 31, 2008
Assets
Current assets:
Cash and cash equivalents	$	543		$	1,148
Halloysite and Pleximer inventory		20,227			20,209
Other current assets		96,043			184,992
Total current assets		116,813			206,349
Non-current assets:
Deferred financing costs, net		110,322			196,411
Property and equipment, net		373,127			443,103
Total non-current assets		483,449			639,514
Total Assets	$	600,262		$	845,863
Liabilities and Stockholders’ Deficiency
Liabilities
Current liabilities:
Accounts payable	$	571,442		$	641,288
Accrued payroll		457,935			480,453
Accrued expenses		462,533			309,048
Capital lease obligations		33,491			62,536
Patent license obligation		400,000			400,000
Deferred revenue		70,000			80,000
Derivative liability		96,489			—
Registration rights liability		82,489			82,489
Due to related parties		70,584			66,875
8% Senior secured promissory note		191,126			—
8% Senior secured convertible notes, net of discount $420,029 and $999,895, respectively		3,381,471			2,811,605
Total current liabilities		5,817,560			4,934,294
Non-current liabilities:
Capital lease obligations		—			3,719
Deferred tax liability		81,945			150,189
Derivative liability		15,020			—
Other long term liabilities		43,000			45,050
Total Liabilities		5,957,525			5,133,252
Commitments and Contingencies
Stockholders’ Equity (Deficiency)
Preferred Stock - $.001 par value, 10 million shares authorized
Seried B - issued and outstanding 750,000 with an aggregate liquidation preference of $1,500		750			750
Seried C - issued and outstanding 4,250,000 with an aggregate liquidation preference value of $8,500		4,250			4,250
Common Stock - $.001 par value 5 billion authorized, issued and outstanding 69,682,045 and 67,007,045, respectively		69,682			67,007
Additional paid in capital		18,209,151			18,705,365
Accumulated deficit		(23,641,096	)		(23,064,761	)
Total stockholders’ deficiency		(5,357,263	)		(4,287,389	)
Total liabilities and stockholders’ deficiency	$	600,262		$	845,863

See notes to condensed consolidated financial statements

- 1 -

NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

	For the three months ended						For the six months ended						From inception:
	June 30,						June 30,						December 22, 2004
	2009			2008			2009			2008			to June 30,
													2009
Income:

Revenue	$	35,858		$	123,975		$	67,233		$	126,925		$	369,827
Cost of goods sold		13,486			41,311			14,960			42,754			103,516
Gross profit	$	22,372		$	82,664		$	52,273		$	84,171		$	266,311
Operating expenses:
Research and development (a)		78,836			304,504			142,056			940,474			6,263,045
General and administrative (a)		112,295			466,669			131,069			827,822			9,510,285
Loss on asset impairment		-			-			-			-			573,910
Write down of prepaid inventory		-			-			-			-			249,650
		191,131			771,173			273,125			1,768,296			16,596,890

Loss from Operations		(168,759	)		(688,509	)		(220,852	)		(1,684,125	)		(16,330,579	)

Other income (expense):
Interest (expense) income, net		(362,681	)		(737,080	)		(828,749	)		(1,324,967	)		(5,009,805	)
Gain on forgiveness of debt		-			-			83,667			-			83,667
Net gain on derivative liability		452,872			-			461,270			-			461,270
Income from cooperative research project		-			-			-			-			180,000
Gain (loss) on warrant		-			-			-			-			326,250
Financing fees		-			-			-			-			(3,280,228	)
		90,191			(737,080	)		(283,812	)		(1,324,967	)		(7,238,846	)
Net loss	$	(78,568	)	$	(1,425,589	)	$	(504,664	)	$	(3,009,092	)	$	(23,569,425	)

Loss per common share - basic and diluted	$	-		$	(0.01	)	$	(0.01	)	$	(0.02	)

Weighted average shares outstanding		68,316,386			126,229,721			67,698,481			124,811,615

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

- Research and development expense of $0 and ($28,538) for the three and six months ended June 30, 2009, respectively, and $23,437 and $288,205 for the three and six months ended June 30, 2008 resprectively.

- General and Administration expense of $0 and ($45,512) for the three and six months ended June 30, 2009, respectively, and $66,547 and $273,287 for the three and six months ended June 30, 2008 respectively.

See notes to condensed consolidated financial statements

- 2 -

NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

(unaudited)

														Deficit Accumulated in Development Stage			Stockholders’ Equity (Deficiency)
	Common Stock						Preferred Stock				Additional Paid-in Capital
	Shares			Amount			Shares		Amount		Additional Paid-in Capital
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	)
Allocation of proceeds to warrants												3,213,600						3,213,600
Fair market value of warrant issued to purcahse:
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												840,464						840,464
Beneficial conversion feature of debt, net of taxes												324,811						324,811
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
$0.02 per share		200,000			200							3,800						4,000
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	)					—
Shares issued on debt conversion		2,200,000			2,200							8,800						11,000
Net loss for the year ended 12/31/08															(5,667,486	)		(5,667,486	)
Balance at December 31, 2008		67,007,045		$	67,007			5,000,000	$	5,000	$	18,705,365		$	(23,064,761	)	$	(4,287,389	)
Vesting of stock options granted												(74,050	)					(74,050	)
Beneficial conversion feature of debt, net of taxes												68,244						68,244
Issuance of common stock as interest payment:
$0.05 per share		675,000			675							2,700						3,375
Shares issued on debt conversion		2,000,000			2,000							8,000						10,000
Cumulative effect of adoption of accounting for instruments indexed to an entity’s common stock as of 1/1/2009												(501,108	)		(71,671	)		(572,779	)
Net loss for the six months ended 6/30/09															(504,664	)		(504,664	)
Balance at June 30, 2009		69,682,045		$	69,682			5,000,000	$	5,000	$	18,209,151		$	(23,641,096	)	$	(5,357,263	)

See notes to condensed consolidated financial statements

- 3 -

NATURALNANO, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

							From inception: December 22, 2004 to June 30, 2009
	For the six months ended June 30
	2009			2008
Cash flows from operating activities:
Net loss	$	(504,664	)	$	(3,009,092	)	$	(23,569,425	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		76,576			124,224			591,862
Amortization of discount on convertible notes		579,866			812,326			3,402,471
Amortization of deferred financing costs		89,774			191,888			738,481
Vesting of stock options		(74,050	)		561,492			4,919,461
Non-cash gain on forgiveness of debt		83,667						83,667
Fair value adjustment of derivative liabilities		(461,270	)					(461,270	)
Issuance of warrants for services					3,709			3,369,945
Issuance of stock for services					70,170			157,378
Issuance of stock for interest		3,375			346,507			349,883
Forgiveness of interest expensed								42,016
Change in value of registration rights agreement								12,128
Loss on asset impairments								573,909
Receipt of and gain on Atlas Mining warrant								(506,250	)
Loss (gain) on asset disposal								69,292
Deferred rent					5,420			9,034
Changes in operating assets and liabilities:
(Increase) decrease in inventory		(18	)		8,256			(20,227	)
(Increase) decrease in other current assets		88,949			3,810			(96,043	)
(Decrease) increase in accounts payable, accrued payroll and accrued expenses		(22,546	)		406,224			1,578,345
(Decrease) increase in deferred revenue		(10,000	)		157,500			70,000
(Decrease) increase in other liability		(2,050	)		(3,000	)		33,966
Net cash used in operating activities		(152,391	)		(320,566	)		(8,651,377	)
Cash flows from investing activities:
Purchase of property and equipment		(6,600	)		(76,322	)		(568,982	)
Proceeds from sale of property and equipment								3,128
Purchase of license								(200,000	)
Proceeds from sale of Atlas Mining warrant								506,250
Net cash (used in) provided by investing activities		(6,600	)		(76,322	)		(259,604	)
Cash flows from financing activities:
Proceeds from convertible notes								7,881,000
Proceeds from promissory notes		191,126						191,126
Advances on related party line of credit					200,000			900,000
Advances from related parties		3,709			108,578			1,307,270
Repayment of amounts due to related parties					(23,532	)		(1,149,102	)
Repayment of capital lease obligations		(32,764	)		(43,652	)		(145,246	)
Payment of registration rights damages								(63,539	)
Deferred financing costs		(3,685	)					(184,285	)
Issuance (redemption)of common stock								99,000
Proceeds from exercise of stock options								75,300
Net cash provided by financing activities		158,386			241,394			8,911,524
Increase (decrease) in cash and cash equivalents		(605	)		(155,494	)		543
Cash and cash equivalents at beginning of period		1,148			404,940			—
Cash and cash equivalents at end of period	$	543		$	249,446		$	543

Supplemental disclosure of cash flow information:
Cash paid for interest during the period				$	5,529		$	143,556
Schedule of non-cash investing and financing activities:
Allocation of proceeds from discount on notes payable and warrant grants							$	3,688,600
Issuance of warrants in partial payment of financing costs				$	6,490		$	507,508
Note issued in consideration of deferred financing costs							$	97,500
Registration rights liability							$	82,489
Common stock issued for:
Principal payment on convertible notes	$	10,000					$	4,177,000
Services							$	293,702
Capital lease obligations				$	24,765		$	178,737
Gain on extinguishment of debt by shareholder							$	1,029,600
Accrual for purchase of Navy License							$	450,000
Acquisition of license settled through issuance of common stock (net of $100,000 cash)							$	290,000
Common stock returned and cancelled for:
Cancellation of license agreement							$	(84,000	)
Issuance of warrants							$	69,303

See notes to condensed consolidated financial statements

- 4 -

NaturalNano, Inc.

For the six months ended June 30, 2009 and 2008

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The condensed consolidated financial statements as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 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. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to From 10-Q and Rule 8-03 of Regulation S-X for smaller reporting companies. Accordingly, these financial statements do not include all of the information required by U.S. generally accepted accounting principles for complete financial statements. 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-K for the fiscal year ended December 31, 2008. Certain prior period amounts have been reclassified to be consistent with current period presentation.

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

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure. These financial statements have not been updated for subsequent events occurring after September 14, 2009.

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 (the “Company”), located in Pittsford, New York, is a development stage company engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers and other industrial and consumer products by taking advantage of technology 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 

	●	cosmetic and personal care items,

	●	 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 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 consolidated financial statements, the Company incurred a net loss for the six months ended June 30, 2009 of $504,664 and had negative working capital of $5,700,747 and a stockholders’ deficiency of $23,641,096 at June 30, 2009. Since inception the Company’s growth has been funded through combination of convertible debt from private investors and from cash advances from its former parent Technology Innovations, LLC. 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 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.

- 5 -

During the first and second quarter of 2009, the Company entered several 8% Senior Secured Promissory Notes for an aggregate borrowing of $191,126. These notes are referred to as the “2009 Promissory Notes.” The proceeds from the 2009 Promissory Notes were provided for general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The outstanding principal and all accrued and unpaid interest is due and payable in full on June 30, 2009. The Company paid $137,469 in outstanding principal on the 2009 Promissory Notes in July 2009. The remaining principal $53,657 remains outstanding. The Company has received waivers of default relating to this debt through October 31, 2009.

Management is actively assessing the Company’s operating structure with the objective to reduce ongoing expenses, increasing sources of revenue and is negotiating the terms of additional debt or equity financing. 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.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the condensed consolidated statement of operations. For stock based derivative financial instruments, the Company uses the Black-Scholes option valuation model, adjusted for management’s assessment of the probability of exercise, to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

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 dilutive preferred stock, convertible 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. There were 1,018,152,755 and 63,659,404 potentially dilutive shares underlying convertible debt, outstanding options and warrants which would have been considered in the calculation for June 30, 2009and 2008, respectively, if the Company had generated earnings in the period.

Tax Rebate from the State of New York

In July 2009, the Company received a QETC Facilities, Operations, and Training tax rebate ("QETC rebate") from the State of New York in the amount of $253,000, related to the tax year ending December 31, 2008. This amount will be recorded as a reduction in general and administrative expenses in the third quarter. The 2009 Notes, described in Note 2, guarantee certain principal repayment upon the receipt of these proceeds.

Fair Value of Financial Instruments

Statements of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, revolving note payable and capital leases. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Company's capitalized lease obligations and revolving note payable is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying value approximates the fair value of these debt instruments as of June 30, 2009.

Recently Adopted Accounting Pronouncements

Effective January 1, 2009, the Company adopted the provisions of The Emerging Issues Task Force (“EITF”) EITF 07-05, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock. EITF 07-05 applies to any free-standing financial instruments or embedded features that have the characteristics of a derivative, as defined by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. The adoption of EITF 07-05 had a material impact on our consolidated financial position and results of operations as the Company has financial instruments with the characteristics which meet the definition of a derivative instrument in accordance with the provisions of this pronouncement. See Note 3 for additional disclosure regarding the adoption of EITF 07-05.

Recent Accounting Pronouncements

Management does not believe that other recently issued, but not yet effective, accounting standards if currently adopted, would have a material effect on the accompanying financial statements.

In April 2009, the FASB issued FSP No. 107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial Instruments (FSP 107-1 and APB 28-1), which require disclosures about fair value of financial instruments for interim reporting periods. This guidance is effective for reporting periods ending after June 15, 2009. The adoption of FSP No. 107-1 and APB 28-1 during the second quarter of 2009 did not have a material impact on the consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS No. 165"), to incorporate accounting guidance that originated in auditing standards into the body of authoriative literature issued by the FASB. SFAS No. 165 requires the evaluation of subsequent events through the date the financial statements are issued or are available for issue and the disclosure of the date through which June 15, 2009. The Company adopted the requirements of SFAS No. 165 for the period ending June 30, 2009. The adoption of SFAS No. 165 did not have a significant impact on our consolidated financial position, results of operations or cash flows. See Note 1 - Organization and Operations of the Company.

In June 2009, the FASB issued FAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” FAS 168 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Cooperative does not expect the adoption of FAS 168 to have an impact on the Company’s results of operations, financial condition or cash flows.

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2. DEBT AGREEMENTS

8% Senior Secured Promissory Notes

During the first and second quarter of 2009, the Company entered into several 8% Senior Secured Promissory Notes for an aggregate borrowing of $191,126. These notes are referred to as the “2009 Promissory Notes.” The proceeds from the 2009 Promissory Notes were provided for general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The outstanding principal and all accrued and unpaid interest was due and payable in full on June 30, 2009. The Company paid $137,469 in outstanding principal on the 2009 Promissory Notes in July 2009. The remaining principal of $53,657 remains outstanding. The Company has received waivers of defaults relating to this debt through October 31, 2009.

8% Senior Secured Convertible Debt

As of on June 30, 2009 the consolidated balance sheet reflects a current liability of $3,381,471 for Senior Secured Convertible debt net of $420,029 of discount. The notes are convertible into shares of common stock at the price of $0.005 per share, which will be adjusted if there are future issuances of common stock at a price less than this conversion price. These notes have been classified as a current liability based on the January 2010 maturity and due to the Company’s default on certain provisions of the agreement including those related to the payment of interest and the registration rights agreement. The Company has received a signed forbearance agreement related to these default provisions through December 31, 2009.

During the three and six months ended June 30, 2009, the Company received Notices of Conversion from Longview Special Financing Inc. resulting in the conversion and issuance of an of 500,000 and 1,500,000 shares of common stock, respectively, in payment of $2,500 and $7,500 in outstanding principal on the 8% Senior Secured Convertible notes. Subsequent to June 30, 2009 an additional $20,000 in outstanding principal was converted into 4,000,000 shares of common stock.

The discount on these notes will be amortized using a straight line method and classified as interest during the term of the Notes through the period ending January 31, 2010. The Company has determined the use of the straight-line method for the amortization of the discount 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.

As of December 31, 2008 the Company has a deferred income tax liability of $150,189 which consists of the tax effect of the difference in the basis between GAAP and tax purposes for the beneficial conversion feature in connection with the Notes entered into during 2008 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. Accordingly, during the six months ended June 30, 2009 the Company recorded a reduction of $68,244 to Deferred Tax Liabilities and a corresponding charge to Additional Paid in Capital in connection with the tax attributes associated with the amortization of this beneficial conversion feature.

Registration Rights Agreement

On March 7, 2007, the Company entered into a Registration Rights Agreement with the Agent and the other investors, pursuant to which the Company agreed to prepare and file within 60 days of the March 7, 2007 agreement, a registration statement for resale under the Securities Act of 1933, the common stock issuable upon the exercise of the Warrants, in payment of interest on, or upon conversion of, the Notes. The Company further agreed to use its best efforts to cause the Registration Statement to be declared effective 120 days following the March 7, 2007 agreement date, or within 150 days if the Company receives a comment letter from the SEC, and to maintain such Registration Statement for the two year period following this date. This agreement allows for liquidated damages based on a daily amount of 0.0333% of the principal amount of the notes relating to the common stock issuable upon conversion of the Notes included in the Registration Statement.

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The lender has the option to settle the liquidated damages in common stock valued at the average price for the five days prior to the end of a payment period. As of the fourth quarter of 2008, the registration statement had not updated with the requisite SEC filings and as such, the Company was in default of this provision of the Registration Rights Agreement. The lenders have provided the Company a forbearance agreement related to this default through October 31, 2009.

3. DERIVATIVE LIABILITY

In June 2008, the FASB finalized Emerging Issues Task Force (“EITF”) 07-05, “Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock,” which was adopted effective January 1, 2009. Under EITF 07-05, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company evaluated their instruments as described below.

The Company issued warrants to Platinum Advisors LLC in 2007 as consideration for due diligence services in connection with the Loan and Security Agreement as described in Note 2 above. In connection with these services, the Company has outstanding warrants for the purchase of 162,093,910 shares of the Company’s common stock at $0.005 per share. These warrants contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.) None of these warrants have been exercised since the date of issuance.

In addition, the Company issued a warrant agreement to Technology Innovations LLC (“TI”) in August 2008, described in Note 4. The warrant was determined not to have a fixed settlement provision as the exercise price will fluctuate based upon the number of shares fully diluted outstanding.

The convertible debt contains anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.)

The Company included these anti-dilution provisions in order to protect the warrant and debt holders from the potential dilution associated with future financings. In accordance with EITF 07-05, the warrants and debt conversion feature have been recognized as a derivative instrument and have been re-characterized as derivative liabilities. SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) requires that the fair value of these liabilities be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

The derivative liabilities were valued using the Black-Scholes option valuation model with the following assumptions on the following dates, adjusted based on probability of various scenarios for each instrument:


	June 30, 2009			January 1, 2009
Platinum Advisors warrants:
Risk-free interest rate		1.76	%		1.13	%
Expected volatility		283	%		242	%
Expected life (in years)		1.75			2.17
Expected dividend yield		—			—

	June 30, 2009			January 1, 2009
Technology Innovations warrants:
Risk-free interest rate		1.76	%		1.13	%
Expected volatility		283	%		2.42	%
Expected life (in years)		1.75			2.13
Expected dividend yield		—			—

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	June 30, 2009			January 1, 2009
Debt conversion feature:
Risk-free interest rate		1.76	%		1.13	%
Expected volatility		283	%		242	%
Expected life (in years)		.58			1.08
Expected dividend yield		—			—

The risk-free interest rate was based on rates established by the U.S. treasury yield. The Company’s expected volatility was based on the volatility of the Company’s stock price using a look-back basis. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based upon the fact the Company has not historically paid dividends and does not expect to pay dividends in the future.

EITF 07-05 was implemented in the first quarter of 2009 and is reported as a cumulative effect of a change in accounting principle. As a result, the cumulative effect on the accounting for the warrants was as follows:


Derivative Instrument	Decrease in Additional Paid-in-Capital		Increase(decrease) in Accumulated Deficit			January 1, 2009 Derivative Liability		June 30, 2009 Derivative Liability
Platinum Advisors warrants	$	501,018	$	(447,817	)	$	53,201	$	13,777
TI warrants		—		5,151		$	5,151	$	1,243
Debt conversion feature		—		514,427		$	514,427	$	96,489
Total	$	501,018	$	71,761		$	572,779	$	111,509

The Platinum Advisor warrants were originally recorded on January 1, 2009 at $501,018, their relative fair value on the date of grant, as an increase to additional paid-in-capital. Charges to Accumulated Deficit include $71,761 in gains resulting from the decrease in the fair value of the derivative liabilities through December 31, 2008. As of the date of implementation of this accounting standard, the derivative liability amount reflected the fair value of each derivative instrument as of the January 1, 2009. The derivative liability associated with the debt conversion feature has been classified as short term as the associated debt matures January 30, 2010. The Platinum Advisor and TI warrants classified as derivative liabilities mature in 2011 and accordingly are presented as long term liabilities. During the three and six month periods ended June 30, 2009, the Company recognized $452,872 and $8,398 in net gains, respectively, relating to the changes in fair market value for these derivative liabilities, subsequent to the date of adoption.

Fair Value Measurement

Valuation Hierarchy

FAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The derivative liabilities are measured at fair value using certain quoted market prices and estimated factors such as volatility and probability and are classified within Level 3 of the valuation hierarchy. The following table provides a roll forward of the liabilities carried at fair value measured using significant unobservable inputs (level 3).


Fair value at adoption – 1/1/2009	$	572,779
Gain recognized in Q1 2009		(8,398	)
Gain recognized in Q2 2009		(452,872	)
Fair value – 6/30/2009	$	111,509

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4. WARRANT AGREEMENT WITH TECHNOLOGY INNOVATIONS, LLC

Prior to September 26, 2008, 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. TI founded NaturalNano, Inc., a Delaware corporation on December 22, 2004.

On August 1, 2008 $900,000 of principal outstanding to TI, along with $129,600 of accrued and unpaid interest, was satisfied in exchange for a warrant resulting in a gain on extinguishment of liabilities with a shareholder recorded as an increase in additional-paid-in-capital. Under the warrant agreement, TI may purchase up to that number of shares that would give TI a beneficial ownership of not more than 4.99% of the Company. If the purchase occurred 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. Based on the terms of the warrant conversion agreement TI has the right to purchase up to 83,069,771 shares at an exercise price of $0.0237 per share as of June 30, 2009.

5. CREDITOR CONCESSIONS

During the first quarter of 2009, the Company entered into five agreements with certain vendors to settle accounts payable that were outstanding as of December 31, 2008 for amounts less than the liability that was recorded in the accompanying balance sheet. As a result of these agreements liabilities of $137,052 were satisfied for revised payment terms of $53,385. The resulting vendor concessions of $83,667 have been treated as a gain in the first quarter of 2009 which is the period that the agreements were reached.

6. STOCKHOLDERS EQUITY

As of June 30, 2009 the Company was authorized to issue up to 5,000,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of June 30, 2009, the Company had 69,682,045 shares of common stock issued and outstanding and 5,000,000 shares of preferred stock outstanding.

During the first six months of 2009 and in accordance with the convertible note agreement, the Company received several Notices of Conversion from Longview Special Financing Inc. which resulted in the issuance of 2,000,000 shares of common stock at $0.005 per share in payment of $10,000 on the outstanding principal on the 8% Senior Secured Convertible Notes. In accordance with the terms and conditions of this agreement 2,000,000 common shares were issued to Longview during the six months ended June 30, 2009.

During the three month period ended June 30, 2009, the Company issued 675,000 shares of common stock at $0.005 per share reflecting a payment of $3,375 on the outstanding accrued interest earned by Platinum Long Term Growth on the 8% Senior Secured Convertible Notes.

The Company has issued warrants to purchase shares of its common stock to certain consultants and debt holders. As of June 30, 2009 there were common stock warrants outstanding to purchase an aggregate 162,534,651 shares of common stock respectively (excluding the shares available under the Technology Innovations LLC warrant which is described in Note 4) pursuant to various warrant grant agreements.

7. INCENTIVE STOCK PLANS

Under the Company’s 2005 Incentive Stock Plan (the “2005 Plan”), the Amended and Restated 2007 Incentive Stock Plan (the “2007 Plan”) and the 2008 Incentive Stock Plan (the”2008 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 shares of common stock underlying the plans are reserved by the Company from its authorized, but not issued common stock. Such shares are issued by the Company upon exercise by any option holder pursuant to any grant of such shares.

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The Plans are authorized to grant awards as follows: the 2005 Plan is authorized to grant up to 14 million share unit awards, the 2007 Plan is authorized to grant up to 17 million share unit awards, and the 2008 Plan is authorized to grant up to 800 million unit share awards.

A summary of the option activity for the three months ended June 30, 2009 is presented below:


	Shares		Weighted Average Exercise Price		Weighted Average Remaining Life-years

Outstanding at January 1, 2009		22,033,166		$0.19		6.15
Granted		0
Exercised		0
Cancelled or forfeited		9,109,833		$0.12
Options outstanding at June 30, 2009		12,923,333		$0.21		6.45

Options exercisable at June 30, 2009		12,923,333		$0.21		6.45

8. CONTINGENCIES

Legal Proceedings

On March 24, 2009 the Company received a demand notice from an attorney representing a group of certain former employees of the Company, including but not limited to the Company’s former President and Chief Financial Officer, demanding immediate payment of $331,265 for certain deferred compensation, severance and vacation benefits. Each of the former employees cited in the demand notice, as well as other former employees, had executed written agreements during 2008 that allowed the Company to defer certain of these compensation payments. The Company is evaluating the components of this demand notice and is working to respond to this demand. Due to the Company’s current cash and liquidity position discussed above and the current evaluation of the items in the demand notice, the timing of future payment of these outstanding amounts in uncertain. The Company has accrued for earned and unused vacation benefits and deferred payroll costs for amounts electively deferred by these and other former employees in the amount of $480,453 as of December 31, 2008, which includes $261,265 of the total amount demanded by the employees included in the demand notice.

We have received certain other demands from venders for payment of outstanding balances, all of which have been included as a liability in the accompanying balance sheet.

9. SERIES C AMENDMENT

On September 3, 2009, the Company filed an amendment to the Certificate of Designation of Rights, Preferences, Designations, Qualifications and Limitations of the Series C Preferred Stock with the Secretary of State of the State of Nevada at the request of the holder of the Series C Preferred Stock, Platinum Long Term Growth IV. The purpose of the amendment was to remove the right of the holder of the Series C shares to appoint a director to the Company. Platinum Long Term Growth desires to remain a passive investor in the Company and does not want to exercise any control over the business of the Company. However, they remain a majority shareholder of the Company. As of the date of the agreement, the Series C Director is removed and serves only as a director deemed elected by the holders of the common stock and continues to serve in this capacity until the next annual meeting of stockholders is scheduled. No other changes were made to the original terms of that September 29, 2008 agreement.

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Item 2.

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

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q and other reports that we file with the SEC contain statements that are considered 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. Such forward looking statements include statements addressing operating performance, events or developments that the Company expects or anticipates will occur in the future, including statements relating to revenue realization, revenue growth, earnings, earnings per share, or similar projections. These statements estimates 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 materially from management’s expectations. The following discussion 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 in the future, or that any conclusion reached herein will necessarily be indicative of actual operating performance 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.

General

Since inception, December 22, 2004 the Company has been and in 2009 we will continue to be, a development stage company. Our primary mission is to develop and exploit technologies in the area of advanced materials science, with a special emphasis on additives to polymers and other industrial and consumer products, taking advantage of technological advances we have developed in-house and licensed from third parties. These technologies include a specific focus on nanoscale materials using modifications to tubular and spherical materials found in clay. Our strategy is to develop patentable processes and technologies related to these nanoscale materials and to develop products in the polymers and plastics industries as well as the composites, cosmetics, household products and agrichemical industries. Our near-term goal is to commercialize our core technology and application processes utilizing nanotubes.

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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 and Capital Resources

During the first and second quarter of 2009, the Company entered into several 8% Senior Secured Promissory Notes for an aggregate borrowing of $191,126. These notes are referred to as the “2009 Promissory Notes.” The proceeds from the 2009 Promissory Notes were provided for general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The outstanding principal and all accrued and unpaid interest is due and payable in full on June 30, 2009. The Company paid $137,469 in outstanding principal on the 2009 Promissory Notes in July 2009. Therefore $53,657 remains outstanding. The proceeds of $253,000 from the QETC rebate were used to pay $137,469 in outstanding principal, as required in this debt agreement. The Company has received waivers of defaults relating to the remaining outstanding principal balance of $53,657 extending through October 31, 2009.

Operating activities

Net cash used in operating activities during the six months ended June 30, 2009 and 2008 was $152,391 and $320,566, respectively. The net loss generated in the first half of 2009 of $504,664 reflects a reduction of $2,504,428 when compared to the net loss incurred during the first half of 2008.

Total adjustments to reconcile net loss for the six months ended June 30, 2009 to cash used in operations (the total of depreciation, amortization, vesting of stock options, non-cash gain on debt forgiveness, fair value adjustment of derivative instruments, deferred income and issuances of warrants and stock) was $1,818,473 lower in 2009 than in the comparable period in 2008. Reductions in depreciation and amortization expense noted in 2009 reflect asset impairment charges taken in the fourth quarter of 2008. The Company realized lower amortization expense on debt discount and deferred financing costs during the first half of 2009 compared with the prior year as a result of the extension of the amortization period to January 31, 2010 coincident with the financing received in the third quarter of 2008. The 2009 decrease in non-cash items also includes a credit during the first half of 2009 for stock option costs due to an increase in forfeitures and cancellations for previously granted unvested stock options resulting from to the employee turnover experienced in the first half of 2009. During the first quarter of 2009, the Company reduced outstanding liabilities through negotiation with certain of its vendors, resulting in a net gain on forgiveness of debt in the amount of $83,667. The current year also reflects a fair value adjustment of $461,270 to the carrying value of derivative liabilities for which there was no comparable activity in 2008. The Company adopted the accounting prescribed under EITF 07-05 in the first quarter of 2009 which relates to the accounting for financial instruments that are potentially settled in the entity’s own common stock (See Note 2.)

The decrease in the net loss for the six months ended June 30, 2009 reflects lower net revenues as well as reduced spending in the first half of 2009. The Company continues to evaluate opportunities to reduce expenses and improve its liquidity position. The Company expects that all spending categories will be reduced throughout 2009, although it will continue to make efforts to invest in product and commercialization efforts as our cash position and liquidity allow.

Investing activities

Net cash used in investing activities in the six months ended June 30, 2009 and 2008 was $6,600 and $76,322, respectively. During the first quarter of 2009, the Company bought out certain leased equipment used in its research and development lab. Leasehold improvements of $76,322 made in 2008 related primarily to investments in the Company’s production and laboratory facility.

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Financing Activities

Net cash provided from financing activities in the six months ended June 30, 2009 and 2008 was $158,386 and $241,394, respectively. The cash flows from financing activities in the half of 2009 reflect the receipt of $191,126 in proceeds from the 8% senior secured promissory notes. During 2009, we also received cash advances of $3,709 from affiliated entities for shared services agreements compared to $108,578 in 2008 representing a reduction in services used by us.

During the six months ended June 30, 2009 and 2008, we made capital lease payments of $32,764 and $43,652, respectively.

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.

Instruments Indexed to an Entity’s Own Stock

Revenue Recognition

The Company has earned nominal operating revenue since inception (December 22, 2004). This revenue was generated from funded development and the delivery of Pleximer and sample products specifically formulated for customer applications and as such has been reported as operating revenue for financial reporting purposes. The Company earns and recognizes such revenue to the extent such development activities are completed or when the shipment of the sample products has occurred and when no further performance obligation exists.

Share Based Payments

The Company accounts for stock option awards granted under the Plans in accordance with Statement of Financial Accounting Standard No. 123 (revised 2004), “Share-Based Payment”, (“SFAS 123(R)”). Under SFAS 123R, compensation expense related to stock based payments are recorded over the requisite service period based on the grant date fair value of the awards. The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.

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The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of EITF 96-18, “Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and EITF 00-18, “Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement

Deferred Taxes

Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes” (“SFAS 109”) requires that a valuation allowance be established when management determines that it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company evaluates the realizability of its net deferred tax assets on an annual basis and any additional valuation allowances are provided or released, as necessary. Since the Company has had cumulative losses in recent years, the accounting guidance suggests that we should not look to future earnings to support the realizability of the net deferred tax asset. As a result, as of the years ended December 31, 2008 and 2007, the Company has recorded a valuation allowance to reduce its gross deferred tax assets to zero in accordance with SFAS 109. In addition, as of December 31, 2008 the Company recorded a deferred tax liability of $150,189, which consists of the tax effect of the difference in the basis between GAAP and tax purposes for the beneficial conversion feature. In connection with the Notes entered into during 2008 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. See Note 6 for further analysis.

As of June 30, 2009 the Company had a deferred income tax liability of $81,945, 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 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.

Comparison of Statement of Operations for the three months ended June 30, 2009 and 2008

Revenue and Gross Profit

During the three months ended June 30, 2009 and 2008, the Company recorded $35,858 and $123,975, respectively in revenue from shipments of halloysite product samples. The related cost of goods sold was $13,486 and $41,311 for the sample shipments completed in the second quarter of each year. Gross margin of $22,372 and $82,644 was realized for the quarters ended June 30, 2009 and 2008, respectively. Realized margin percentages can and have varied significantly among sample shipments. The realized gross margin is highly dependent on the attributes and specialized refining procedures prescribed by each customer requesting the samples as well as by the industry and end product envisioned by the customer.

The Company recognizes revenues through the sales and shipment of samples of Pleximer product, halloysite processing, as well as funding for development of specific applications for our proprietary halloysite technologies in consumer products and other industries.

Operating Expenses

Total research and development expenses for the three months ended June 30, 2009 was $78,836 as compared to $304,504 for the three months ended March 31, 2008. The decrease in spending on research and development reflects the staff and officer resignations in the fourth quarter of 2008. Since the first quarter of 2009, management has been focused on the evaluation of current technology developed and available for market introduction and the assessment of related market opportunities. These conditions resulted in notably reduced expenses for staff salaries and consultant expenses during the first and second quarters of 2009. This staff turnover also resulted in credits in the first quarter of 2009 for unvested stock option forfeited during the period.

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	For the three months ended June 30,					Variance increase (decrease)
Research and Development	2009		2008			Variance increase (decrease)
Salaries & benefits	$	—	$	138,312		$	(138,313	)
Stock option compensation		—		23,437			(23,437	)
Consulting services		1,354		40,163			(38,809	)
Patent costs		38,470		76,609			(38,139	)
Depreciation		28,590		24,700			3,890
Rent & utilities		7,335		21,717			(14,382	)
Allocation to cost of goods sold		—		(38,010	)		38,010
All other		3,087		17,575			(14,488	)
	$	78,836	$	304,504		$	(225,668	)

Total general and administrative expenses for the three months ended June 30, 2009 was $112,295 as compared to $466,669 for the three months ended June 30, 2008. The decrease in spending on general and administrative expenses reflects the staff and officer resignations in the first quarter of 2009. The sole officer of the Company earned compensation during the second quarter of 2009 which has been accrued as of June 30, 2009. No stock option expenses or credits occurred in the second quarter as all outstanding options were vested in prior periods. During the fourth quarter of 2008 and continuing into the second quarter of 2009, management implemented cost reductions. Management will continue to actively assess the Company’s operating structure with the objective to reduce ongoing expenses, increase sources of revenue. During the fourth quarter of 2008, the Company recognized asset impairment to its carrying value of its intangible assets, and as a result the amortization expense in 2009 is notably lower than the amounts recognized in 2008.


	For the three months ended June 30,				Variance increase (decrease)
General and Administrative	2009		2008		Variance increase (decrease)

Salaries & benefits	$	31,380	$	156, 566	$	(125,186	)
Consulting services		12,556		16,518		(3,962	)
Stock option compensation		—		66,547		(66,547	)
Legal & professional fees		14,568		100,000		(85,432	)
Depreciation & amortization of intangible assets		9,843		33,288		(23,445	)
Insurance expense		2,751		12,612		(9,861	)
Shareholder expense		7,548		4,447		3,101
State tax		17,251		88		17,163
All other		16,398		76,603		(60,205	)
	$	112,295	$	466,669	$	(354,374	)

Other (Expense) Income

Other expense consists of interest expense on convertible and promissory notes outstanding and other debt related financing and amortization expenses considered components of interest expense for financial reporting.

As described in Note 2 to the condensed consolidated financial statements, interest expense includes the amortization of the debt discount, interest on the 8% Senior Secured Convertible Notes, amortization of related financing costs and the registration rights obligation – of which are associated with the Initial and New Notes issuance on March 7, 2007 and September 29, 2008. Interest costs resulting from capital lease obligations and the 2009 8% Senior Secured Promissory Notes are also included in Other Expense.

On August 1, 2008 in connection of a new financing agreement, TI agreed to cancel and forgive all principal, interest, fees and expenses accrued pursuant it Line of Credit Agreement with the Company (Note 4) thereby resulting in a reduction in interest expense in the first quarter of 2009 when compared to the prior year quarter.

Interest was earned on cash balances held at certain financial institutions during the three months ended March 31, 2008. The decrease in interest income earned reflects the decline in cash on-hand during the first quarter of 2009.

- 16 -

	For the three months ended June 30,						Variance increase (decrease)
Other (Expense) Income	2009			2008			Variance increase (decrease)
Amortization of debt discount	$	(236,943	)	$	(406,163	)	$	169,220
Interest to 8% senior convertible and promissory notes		(79,802	)		(211,116	)		131,314
Amortization of financing costs		(45,135	)		(95,944	)		50,809
Interest to TI note		—			(17,951	)		17,951
Interest on financed receivables		—			(3,709	)		3,709
Interest paid on capital leases		(801	)		(2,834	)		2,033
Interest earned on cash		—			637			(637	)
	$	(362,681	)	$	(737,080	)	$	374,399

During the first quarter of 2009 and in accordance with EITF 07-05, certain warrants and the embedded conversion of feature associated with the 8% convertible debt were recognized as a derivative instruments and as such were re-characterized as derivative liabilities. SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) requires that the fair value of these liabilities be re-measured at the end of every reporting period with the change in value reported in the statement of operations. The re-measurement of these derivative liabilities resulted in a credit of $452,872 during the first quarter of 2009.

Comparison of Statement of Operations for the six months ended June 30, 2009 and 2008

Revenue and Gross Profit

During the six months ended June 30, 2009 and 2008, the Company recorded $67,233 and $126,925, respectively in revenue from shipments of halloysite product samples. The related cost of goods sold was $14,960 and $42,754 for the sample shipments completed in the quarter. Gross margin of $ 52,273 and $84,171 was realized for the six month period ended June 30,, 2009 and 2008, respectively. Realized margin percentages can and have varied significantly among sample shipments. The realized gross margin is highly dependent on the attributes and specialized refining procedures prescribed by each customer requesting the samples as well as by the industry and end product envisioned by the customer.

Operating Expenses

Total research and development expenses for the six months ended June 30, 2009 was $142,056 as compared to $940,474 for the six months ended June 30, 2008. The decrease in spending on research and development reflects the staff and officer resignations in the fourth quarter of 2008. This staff turnover also resulted in credits for stock option vesting during the period. During the first half of 2009, the Company has been focused on the evaluation of current technology developed and available for market introduction and the assessment of related market opportunities. These conditions resulted in no salary or consultant related expenses during this first quarter of 2009.


	For the six months ended June 30,						Variance increase (decrease)
Research and Development	2009			2008			Variance increase (decrease)
Salaries & Benefits		—		$	301,063		$	(301,063	)
Stock option compensation	$	(28,538	)		288,205			(316,743	)
Consulting Services		1,354			120,987			(119,633	)
Patent Costs		78,521			124,470			(45,949	)
Depreciation		56,865			49,400			7,465
Rent & Utilities		23,526			42,301			(18,775	)
Allocation to cost of goods sold		—			(38,010	)		38,010
All other		10,328			52,058			(41,730	)
	$	142,056		$	940,474		$	(798,418	)

- 17 -

Total general and administrative expenses for the six months ended June 30, 2009 was $131,069 as compared to $827,822 for the six months ended June 30, 2008. The decrease in spending on general and administrative expenses reflects the staff and officer resignations in the first quarter of 2009. The sole officer of the Company earned compensation during the second quarter of 2009 which has been accrued and unpaid as of June 30, 2009. This staff turnover also resulted in credits for stock option vesting during the period. During the fourth quarter of 2008 and continuing into the first half of 2009, management implemented ongoing cost reductions. Management will continue to actively assess the Company’s operating structure with the objective to reduce ongoing expenses, increase sources of revenue. During the quarter of 2009 the Company received $14,865 in amended state income tax refunds for the years 2005, 2006 and 2007; and upon receipt of these refunds the Company recorded the amount as a reduction to general and administrative expenses. During the first quarter of 2008, the Company received a QETC Facilities, Operations and Training tax rebate in the amount of $257,000 from the State of New York. Upon receipt of this rebate, the Company recorded the amount as a reduction to general and administrative expenses. During the fourth quarter of 2008, the Company recognized asset impairment to its carrying value of its intangible assets, and as a result the amortization expense in 2009 is notably lower than the amounts recognized in 2008.


	For the six months ended June 30,						Variance increase (decrease)
General and Administrative	2009			2008			Variance increase (decrease)

Salaries & Benefits	$	31,380		$	288,834		$	(257,454	)
Consulting services		20,260			23,018			(2,758	)
Stock option compensation		(45,512	)		273,287			(318,799	)
Legal & Professional fees		53,087			210,200			(157,113	)
Depreciation & amortization of intangible assets		19,710			66,576			(46,866	)
Insurance expense		11,277			25,107			(13,830	)
Shareholder expense		12,358			9,876			2,482
State tax		3,571			(241,242	)		244,813
All other		24,938			172,166			(147,228	)
	$	131,069		$	827,822		$	(696,753	)

Other (Expense) Income

Interest was earned on cash balances held at certain financial institutions during the six months ended March 31, 2008. The decrease in interest income earned reflects the decline in cash on-hand during the first half of 2009.


	For the six months ended June 30,						Variance increase (decrease)
Other (Expense) Income	2009			2008			Variance increase (decrease)
Amortization of debt discount	$	(579,866	)	$	(812,326	)	$	232,460
Interest to 8% senior convertible and promissory notes		(156,749	)		(278,811	)		(122,062	)
Amortization of financing costs		(89,774	)		(191,888	)		102,114
Interest to TI note		—			(35,901	)		35,901
Interest paid on capital leases		(2,360	)		(5,529	)		3,169
Interest on financed receivables		—			(3,709	)		3,709
Interest earned on cash		—			3,197			(3,197	)
	$	(828,749	)	$	(1,324,967	)	$	496,218

- 18 -

- 19 -

ITEM 4T - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining effective disclosure controls and procedures. Our Chief Executive Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the CEO as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, and in light of the material weaknesses in our internal control over financial reporting that are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 this officer has concluded that our disclosure controls and procedures were not effective. The material weaknesses consist of an insufficient complement of qualified accounting personnel and controls associated with segregation of duties and ineffective controls associated with identifying and accounting for complex and non-routine transactions in accordance with U.S. generally accepted accounting principles.

During the fourth quarter of 2008 and the first and second quarters of 2009 the Company experienced the resignations in the positions of controller, Chief Financial Officer and Chief Executive Officer. These roles were filled in the first quarter of 2009 by part time and contract staffing. Coincident with the Company’s Form 10Q for the quarter ended March 31, 2009; the Company’s then Chief Financial Officer resigned and has not been replaced. To address the material weaknesses the Company performed additional analyses and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Notwithstanding these material weaknesses, management believes that the financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, result of operations and cash flows for the periods presented.

There can be no assurance, however, that our disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

Changes in Internal Control Over Financial Reporting

An evaluation was performed under the supervision of the Company’s CEO, as required under Exchange Act Rule 13a-15(d) and 15d-15(d), of whether any change in the Company’s internal control over financial reporting occurred during the fiscal quarter ended June 30, 2009. Based on that evaluation, the Company’s CEO concluded that no changes in our internal control over financial reporting occurred during the second quarter of 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

- 20 -

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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

On the following dates, the Company issued shares of common stock in connection with a Notice of Conversion received from Longview Special Financing, Inc. as specified under the terms and conditions of the 8% Senior Secured Convertible Debt . These shares were converted at $0.005 per share reflecting satisfaction of $2,500 in principal payments on the outstanding notes:


	March 19, 2009 - 500,000 shares in satisfaction of $2,500 in principal payments
	May 13, 2009 - 250,000 shares in satisfaction of $1,250 in principal payments
	May 20, 2009 - 250,000 shares in satisfaction of $1,250 in principal payments
	June 23, 2009 - 500,000 shares in satisfaction of $2,500 in principal payments
	June 30, 2009 - 500,000 shares in satisfaction of $2,500 in principal payments

On April 24, 2009, the Company issued 675,000 shares of common stock in connection with a Notice of Conversion received from Platinum Long Term Growth as specified under the terms and conditions of the 8% Senior Secured Convertible Debt . These shares were converted at $0.005 per share reflecting satisfaction of $3,375 in interest payments on the outstanding notes.

On July 13, 2009 the Company issued 2,000,000 shares of common stock in connection with a Notice of Conversion received from Longview Special Financing, Inc. as specified under the terms and conditions of the 8% Senior Secured Convertible Debt . These shares were converted at $0.005 per share reflecting satisfaction of $10,000 in principal payments on the outstanding notes.

On July 14, 2009 the Company issued 2,000,000 shares of common stock in connection with a Notice of Conversion received from Longview Special Financing, Inc. as specified under the terms and conditions of the 8% Senior Secured Convertible Debt . These shares were converted at $0.005 per share reflecting satisfaction of $10,000 in principal payments on the outstanding notes

Item 3. Defaults upon Senior Securities.

On September 8, 2009 the Company entered into Forbearance Agreements with Platinum Long Term Growth LLC, Platinum Advisors LLC and Longview Special Finance Inc. (collectively referred to as “the Lenders “ ). These Forbearance Agreements reflect the Company’s default on various terms and conditions under the Company’s 8% Senior Secured Notes due March 6, 2009 and January 31, 2010 as well as to the Registration Rights Agreement entered into by the Company on March 7, 2007. The lenders agreed to forbear from demanding payments defined in these agreements until October 31, 2009 (unless extended by the Lenders in their discretion.)

Also on September 8, 2009 the Company entered into Forbearance Agreements with Platinum Long Term Growth LLC, Platinum Advisors LLC and Longview Special Finance Inc. (collectively referred to as “the Lenders “ ) relating to the Company’s default on payment on June 30, 2009 of the outstanding balance on the 8% Senior secured promissory notes in the amount of $191,126. The lenders agreed to forbear from demanding payments defined in this agreement until October 31, 2009 (unless extended by the Lenders in their discretion.)

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

None.

Item 5. Other Information.

On September [3], 2009, the Company filed an amendment to the Certificate of Designation of Rights, Preferences, Designations, Qualifications and Limitations of the Series C Preferred Stock with the Secretary of State of the State of Nevada. The purpose of the amendment was to remove the right of the holder of the Series C shares to appoint a director to the Company. The holder of the Series C desires to remain a passive investor in the Company and does not want to exercise any control over the business of the Company.

- 21 -

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	Amendment to the Ceritifcate of Designation of Of Rights, Preferences, Designations, Qualifications And Limitations Of The Series C Preferred Stock, a copy of which is filed herewith.	*

4.20	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)

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)

- 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	*

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)

- 23 -

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)

10.42	Series C Amendment.	**

10.43	Letter Agreement dated April 8, 2009 with Longview Special Finance Inc. regarding their forbearance with respect to the $500,000 8% Senior Secured Promissory Note due March 6, 2009, the $20,000 8% Senior Secured Promissory Note due March 6, 2009, the $30,000 Senior Secured Promissory Note due January 31, 2010, and the $25,500 Senior Secured Promissory Note due January 31, 2010	*

10.44	Letter Agreement dated April 8, 2009 with Platinum Advisors LLC regarding their forbearance with respect to the $97,500 8% Senior Secured Promissory Note due March 6, 2009, to Platinum Advisors LLC.	*

10.45	Letter Agreement dated April 8, 2009 with Platinum Long Term Growth IV, LLC regarding their forbearance with respect to $2,750,000 8% Senior Secured Promissory Note due March 6, 2009, the $150,000 8% Senior Secured Promissory Note due March 6, 2009, the $190,000 Senior Secured Promissory Note due January 31, 2010, the $59,500 Senior Secured Promissory Note due January 31, 2010.	*

10.46	Letter Agreement dated May 20, 2009 with Platinum Long Term Growth IV, LLC regarding their forbearance with respect to $2,750,000 8% Senior Secured Promissory Note due March 6, 2009, the $150,000 8% Senior Secured Promissory Note due March 6, 2009, the $190,000 Senior Secured Promissory Note due January 31, 2010, the $59,500 Senior Secured Promissory Note due January 31, 2010.	*

10.47	Letter Agreement dated May 20, 2009 with Platinum Advisors LLC regarding their forbearance with respect to $97,500 8% Senior Secured Promissory Note due March 6, 2009.	*

10.48	Letter Agreement dated May 20, 2009 with Longview Special Finance Inc. regarding their forbearance with respect to $500,000 8% Senior Secured Promissory Note due March 6, 2009, the $20,000 8% Senior Secured Promissory Note due March 6, 2009, the $30,000 Senior Secured Promissory Note due January 31, 2010, the $25,500 Senior Secured Promissory Note due January 31, 2010.	*

10.49	8% Senior Secured Promissory Note dated as of April 3, 2009 in the original principal amount of $34,750 issued by NaturalNano, Inc. and NaturalNano Research, Inc. to Longview Special Finance Inc.	*

10.50	8% Senior Secured Promissory Note dated as of April 3, 2009 in the original principal amount of $136,375.98 issued by NaturalNano, Inc. and NaturalNano Research, Inc. to Platinum Long Term Growth IV, LLC.	*

10.51	8% Senior Secured Promissory Note dated as of April 17, 2009 in the original principal amount of $5,000 issued by NaturalNano, Inc. and NaturalNano Research, Inc. to Platinum Long Term Growth IV, LLC.	*

- 24 -

10.52	8% Senior Secured Promissory Note dated as of May 12, 2009 in the original principal amount of $15,000 issued by NaturalNano, Inc. and NaturalNano Research, Inc. to Platinum Long Term Growth IV, LLC.	*

10.53	Letter Agreement dated August 31, 2009 with Platinum Long Term Growth IV, LLC regarding their forbearance with respect to $2,750,000 8% Senior Secured Promissory Note due March 6, 2009, the $150,000 8% Senior Secured Promissory Note due March 6, 2009, the $190,000 Senior Secured Promissory Note due January 31, 2010, the $59,500 Senior Secured Promissory Note due January 31, 2010.	**

10.54	Letter Agreement dated August 31, 2009 with Platinum Advisors LLC regarding their forbearance with respect to $97,500 8% Senior Secured Promissory Note due March 6, 2009.	**

10.55	Letter Agreement dated August 31, 2009 with Longview Special Finance Inc. regarding their forbearance with respect to $500,000 8% Senior Secured Promissory Note due March 6, 2009, the $20,000 8% Senior Secured Promissory Note due March 6, 2009, the $30,000 Senior Secured Promissory Note due January 31, 2010, the $25,500 Senior Secured Promissory Note due January 31, 2010.	**

10.56	Letter Agreement dated August 18, 2009 with Platinum Long Term Growth IV, LLC regarding their forebearance with respect to the 8% Senior Secured promissory notes due June 30, 2009.	**

10.57	Letter Agreement dated August 18, 2009 with Longview Special Finance Inc. regarding their forebearance with respect to the 8% Senior Secured promissory notes due June 30, 2009.	**

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	*

32.1	Certification of principal executive 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 Exhibit 4.1 to Current Report on Form 8-K filed October 3, 2008.

2.2		Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed October 3, 2008.

2.3		Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 3, 2008.

2.4		Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed October 3, 2008.

2.5		Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed October 3, 2008.

2.6		Incorporated by reference to Exhibit 10.4 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

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

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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

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

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SIGNATURES

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


		NaturalNano, Inc.

Date:	September 14, 2009	/s/ James Wemett
		James Wemett
		President and Director

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