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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><strong>UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION</strong></font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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        DC 20549</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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        <div>&#160;</div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
        REPORT</strong></font></div>
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        TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Date
        of report (date of earliest event reported):</strong></font></div>
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        2005</strong></font></div>
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        Inc.</strong></font></div>
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        name of registrant as specified in its charter)</font></div>
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              <td align="left" valign="bottom" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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              <td align="left" valign="bottom" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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              <td align="left" valign="bottom" width="4%">
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              <td align="left" valign="bottom" width="22%">
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              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>87-0646435</strong></font></div>
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              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                  or other jurisdiction </font></div>
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                  File No.) </font></div>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(I.R.S.
                  Employer</font></div>
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              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                  incorporation) </font></div>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="4%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td valign="top" width="22%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Identification
                  No.)</font></div>
              </td>
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              <td valign="top" width="22%">&#160;</td>
              <td align="left" valign="bottom" width="4%">&#160;</td>
              <td valign="top" width="22%">&#160;</td>
              <td align="left" valign="bottom" width="4%">&#160;</td>
              <td valign="top" width="22%">&#160;</td>
            </tr>

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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>150
        Lucius Gordon Drive, Suite 115</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>West
        Henrietta, New York 14586</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
        of principal executive offices)</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cementitious
        Materials, Inc.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>19
        East 200 South, Suite #1080</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Salt
        Lake City, Utah 84111</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(Former
        name, or former address, if changed since last report)</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(585)&#160;214-8005</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant&#8217;s
        telephone number, including area code)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
        the
        appropriate box below if the Form 8-K filing is intended to simultaneously
        satisfy the filing obligation of the registrant under any of the following
        provisions (see General Instruction A.2. below): </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Written
        communications pursuant to Rule&#160;425 under the Securities Act (17 CFR
        230.425) </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Soliciting material pursuant to Rule&#160;14a-12 under the Exchange Act
        (17 CFR
        240.14a-12) </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Pre-commencement communications pursuant to Rule&#160;14d-2(b) under the
        Exchange Act (17 CFR 240.14d-2(b)) </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">o</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        Pre-commencement communications pursuant to Rule&#160;13e-4(c) under the
        Exchange Act (17 CFR 240.13e-4(c)) </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><a name="toc"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>TABLE
        OF CONTENTS</u></strong></font></a></div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td align="left" colspan="5" valign="middle" width="10%" style="BORDER-BOTTOM: #000000 thin solid">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page</font></div>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Numbers</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">&#160;</td>
              <td align="left" colspan="5" valign="middle" width="10%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#000"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;2.01
                  Completion of Acquisition of Assets</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#001"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Part
                  I</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#002"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Part
                  II</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">24</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#003"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Part
                  III</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#004"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;3.02
                  Unregistered Sale of Equity Securities</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#005"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;4.01
                  Changes in Registrant&#8217;s Certifying Accountant</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#006"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;5.01
                  Changes in Control of Registrant</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#007"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;5.02
                  Departure of Directors or Principal Officers; Election of Directors;
                  Appointment of Principal Officers</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#008"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;5.03
                  Amendments to Articles of Incorporation or Bylaws</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#009"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;5.06
                  Change in Shell Company Status</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">30</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#010"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item&#160;9.01
                  Financial Statements and Exhibits</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#011"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Signatures</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" colspan="4" valign="middle" width="90%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibits</font></a></div>
              </td>
              <td align="left" colspan="5" valign="middle" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-2-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong><a href="#toc">Table
            of
            Contents</a></strong></font></div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>As
        used in this Current Report on Form 8-K, unless the context otherwise requires,
        the terms &#8220;we,&#8221;&#8220;us,&#8221;&#8220;NaturalNano,&#8221; and &#8220;the Company,&#8221; refer to NaturalNano,
        Inc., a Nevada corporation formerly known as Cementitious Materials, Inc.,
        together with its subsidiaries.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;&#160;&#160;&#160;&#160;&#160;
        This Information Statement and other reports that we file with the SEC contain
        certain forward-looking statements that involve risks and uncertainties relating
        to, among other things, the closing of the Merger transaction and our future
        financial performance or future events. Forward-looking statements give
        management&#8217;s current expectations, plans, objectives, assumptions or forecasts
        of future events. All statements other than statements of current or historical
        fact contained in this Information Statement, including statements regarding
        our
        future financial position, business strategy, budgets, projected costs and
        plans
        and objectives of management for future operations, are forward-looking
        statements. In some cases, you can identify forward-looking statements by
        terminology such as
&#8220;anticipate,&#8221;&#8220;estimate,&#8221;&#8220;plans,&#8221;&#8220;potential,&#8221;&#8220;projects,&#8221;&#8220;ongoing,&#8221;&#8220;expects,&#8221;&#8220;management
        believes,&#8221;&#8220;we believe,&#8221;&#8220;we intend,&#8221; and similar expressions. These statements
        involve estimates, assumptions and uncertainties that could cause actual
        results
        to differ materially from the results set forth in the information statement.
        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:</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;<em>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</em></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>continued
                  development of our technology;</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt">&#160;</td>
              <td>&#160;</td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;<em>&#160;</em></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>dependence
                  on key personnel;</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt">&#160;</td>
              <td>&#160;</td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;<em>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;</em></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>competitive
                  factors;</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt">&#160;</td>
              <td>&#160;</td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;<em>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;</em></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>the
                  operation of our business; and</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt">&#160;</td>
              <td>&#160;</td>
            </tr>

        </table>
      </div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;<em><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;&#160;</em></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>general
                  economic conditions.</em></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>These
        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 statements 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.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="000"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;2.01
        Completion of Acquisition of Assets.</strong></font></a></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        November&#160;29, 2005, pursuant to an Agreement and Plan of Merger, dated
        as of
        September&#160;26, 2005 (the &#8220;Merger Agreement&#8221;) by and among Cementitious
        Materials, Inc., a Nevada corporation, (the &#8220;Company&#8221;), Cementitious
        Acquisitions, Inc., a Nevada corporation and wholly-owned subsidiary of the
        Company (&#8220;Merger Sub&#8221;), and NaturalNano, Inc., a Delaware corporation now known
        as NaturalNano Research, Inc. (&#8220;NN Research&#8221;), Merger Sub was merged with and
        into NN Research, with NN Research surviving as a wholly-owned subsidiary
        of the
        Company (the &#8220;Merger&#8221;). Immediately following the Merger, the Company changed
        its name to &#8220;NaturalNano, Inc.&#8221; Pursuant to the Merger Agreement, we issued
        44,919,378 shares of our authorized but previously unissued common stock
        to the
        stockholders of NN Research in exchange for all of the issued and outstanding
        common stock of NN Research and an additional 10,469,600 shares of our
        authorized but previously unissued common stock in consideration for the
        conversion of certain outstanding NN Research convertible debt. We also issued
        options and warrants for the purchase of an aggregate of 7,200,000 shares
        of our
        common stock to the holders of outstanding NN Research options and warrants,
        in
        consideration of the cancellation of such options and warrants.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-3-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        the shares issued to NN Research&#8217;s stockholders and note holders in the Merger
        represent a controlling interest in the Company, the transaction was accounted
        for as a recapitalization, and NN Research is considered the acquirer for
        accounting purposes. All of the historical financial statements which are
        attached to this report through the date of the recapitalization are those
        of NN
        Research. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
        following the effective time of the Merger, all of our directors prior to
        the
        completion of the Merger resigned, and the Company&#8217;s board of directors was
        reconstituted to consist of the following five directors: Steven Katz, Ross
        B.
        Kenzie, John F. Lanzafame, Michael Riedlinger and Michael L. Weiner, all
        of whom
        (other than Mr. Riedlinger) were formerly directors of NN Research. More
        complete biographical information concerning each of these directors is set
        forth below in the section entitled &#8220;Executive Officers and Directors&#8221; in this
        Report. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Approximately
        but no earlier than 60&#160;days after the filing date of this Report,
        we intend
        to register with the SEC on Form S-8 the shares of the Company&#8217;s common stock
        issuable upon exercise of options under the NaturalNano, Inc. 2005 Incentive
        Stock Plan issued pursuant to the Merger Agreement. Under obligations assumed
        by
        the Company in connection with the Merger, we also intend to register with
        the
        SEC on Form SB-2 certain of the shares of the Company&#8217;s common stock issued to
        former stockholders and note holders of NN Research, and certain shares issuable
        upon exercise of warrants issued pursuant to the Merger Agreement to the
        holder
        of NN Research warrants outstanding at the time of the Merger. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        were a
&#8220;shell company&#8221; (as such term is defined in Rule&#160;12b-2 under the Securities
        Exchange Act of 1934, as amended (17 CFR 240.12b-2)) immediately before the
        change in control effected by the Merger. Accordingly, we set forth below
        the
        information that would be required if we were filing a general form for
        registration of securities on Form 10-SB (17 CFR 249.210b) under the Exchange
        Act, reflecting our common stock, which is the only class of our securities
        subject to the reporting requirements of Section&#160;13 (15 U.S.C. 78m)
        or
        Section 15(d) (15 U.S.C. 78o(d)) of the Exchange Act upon consummation of
        the
        change in control, with such information reflecting the Company and our
        securities upon consummation of the Merger.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Part
        I</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>BUSINESS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Overview</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company is a development stage entity whose primary business is processing,
        developing and commercializing naturally occurring nanoscale materials. The
        business is currently directed toward research, development, production and
        marketing of material and proprietary technologies in the following
        fields:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1.)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Developing
        a
        state-of-the-art, proprietary process for extracting and separating halloysite
        nanotubes from halloysite clay;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2.)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Developing
        commercial applications for halloysite nanotubes, specifically for the following
        application areas;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">material
        additives for polymers, plastics, and composites;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cosmetics
        and other personal care products;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">absorbent
        materials; and </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">pharmaceuticals
        and medical device additives;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">&#160;

          <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3.)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Engaging
            in
            business alliances with other organizations to bring our nanoscale materials
            to
            market.</font></div>
          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Products
        and Technology</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company provides halloysite nanotubes along with technologies and services
        for
        functionalizing these aluminosilicate nanotubes for use in a wide range of
        applications. Functionalization of the halloysite nanotubes is done by applying
        proprietary processes to fill or &#8220;load&#8221; the tubules with differing materials and
        compounds; or to enable diffusion of the tubules in a given chemical mixture;
        for specific purposes&#8212;such as an extended release of fragrances. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        resulting materials produced using these proprietary processes is either
        a fine
        powder or a &#8220;slurry,&#8221; which is a powder suspended in a liquid. The use of
        powders or slurries depends on specific customer requirements and use in
        their
        manufacturing processes. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Proprietary
        technologies include processing methods, formulations, and specific surface
        treatments that enable the halloysite nanotubes to be functionalized and
        used in
        a wide range of applications. The Company has rights to patented technologies
        as
        well as patents pending for processing methods, formulations and other surface
        treatment technologies. Some proprietary technologies are protected by trade
        secrets. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Projected
        Milestones for the Period through December 2006</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        the 2006 operating cycle, the Company will continue to focus on the following
        operational objectives and milestones:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Continued
        Intellectual Property Asset Development</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Continue
        patent applications for separation technologies and applications for naturally
        occurring nanomaterials</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">License-in
        complementary technologies from third-parties</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Halloysite
        nanotube processing technology</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Continue
        investigation of processing alternatives for commercial scale</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Create
        designs for pilot processing system</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Sample
        material availability</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">First
        sample availability of processed halloysite for shipment to a third
        party</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shipment
        of first samples to third parties for evaluation for research-use
        only</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Engagement
                  with research organizations to reduce patent-pending and licensed
                  IP to
                  practice in the following categories</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Separation
        and classification of halloysite nanotubes</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additives
        for composite plastics and polymers</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cosmeceutical
        applications</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Electronics
        applications</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Close
        strategic partners and initial orders for our processed halloysite and licenses
        for our technology.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Product
        Sales and Distribution Approach</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company intends to develop an internal direct sales and distribution network
        for
        delivery of products and licensed processes with prospective customers. At
        the
        present time, this approach is considered to be a key element of our overall
        strategy in the qualification of potential applications and opportunities
        with
        customers. As individual market segments are developed through this direct
        sales
        approach, the Company may consider the use of alternate sales and distribution
        methods.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Competition</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        addition to a wide range of material additives that are currently being used
        in
        the industries targeted by the Company, the current nanomaterials market
        consists of approximately 200 companies globally, providing a wide variety
        of
        metal oxides and inorganic compounds. The Company expects that its future
        product offerings will provide new capabilities and anticipated superior
        performance compared to existing materials. Benefits from the use of novel
        nanomaterials may permit us to differentiate our product offerings from
        potential competitors. However, many of our current and prospective competitors
        are larger and have greater financial resources, which could create significant
        competitive advantages for those companies</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Within
        each of the targeted markets and product applications, the Company faces
        current
        and potential competition from many advanced material, encapsulation and
        chemical companies, suppliers of traditional materials and the in-house
        capabilities of several of its potential customers. With respect to larger
        producers of nanomaterials, while some of these producers do not currently
        offer
        competitive products, these companies have greater financial and technical
        resources, larger research and development staffs and greater manufacturing
        and
        marketing capabilities and could soon begin to compete directly against the
        Company. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Raw
        Materials</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company has purchased from Atlas Mining Company a supply of halloysite clay,
        which the Company believes will be sufficient to meet the Company&#8217;s research and
        development needs for at least one year. Atlas Mining Company operates what
        is
        generally considered to be the largest commercial halloysite mine in the
        United
        States. The Company has identified other halloysite sources that it believes
        are
        suitable as alternate suppliers of raw materials, and the Company does not
        believe that it will be dependent upon Atlas Mining Company for the sole
        supply
        of raw materials. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Patents,
        Trademarks and Licenses</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company has applied for patents on its processes and technologies and expects
        to
        continue filing more patent applications related to processes, new compositions
        of matter, and specific applications for use of the functionalized materials.
        The Company utilizes trademark protection for its current and anticipated
        products. Some technologies used by the Company have been licensed in from
        third-parties. These third parties include the majority stockholder of the
        Company, Technology Innovations, LLC, as well as an independent research
        laboratory. The Company expects to continue licensing-in processes and
        technologies that contribute to the further commercialization of naturally
        occurring nanomaterials.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Government
        Regulation</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        are
        subject to governmental regulation much like many other companies. There
        are
        still relatively few laws or regulations specifically addressing nanotechnology.
        As a result, the manner in which existing laws and regulations should be
        applied
        to nanotechnology in general, and how they relate to our business in particular,
        is unclear in many cases. We expect new laws and regulations to be adopted
        that
        may be directly applicable to our activities. Any existing or new legislation
        applicable to us could expose us to substantial liability, including significant
        expenses necessary to comply with such laws and regulations and could dampen
        the
        growth in the use of nanotechnology in general.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Estimate
        of Research and Development Expenses</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        estimate that spending for the twelve month period ending December 31, 2006
        for
        research and development related projects, including related capital
        investments, will be approximately $ 1,250,000.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Number
        of Total Employees and Full-Time Employees</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        of
        November 29, 2005 the Company had seven full-time employees and one part
        time
        employee.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SUMMARY
        SELECTED HISTORICAL FINANCIAL DATA</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table sets forth selected historical financial data for NN Research,
        the accounting acquiror in the Merger. The statement of operations data for
        the
        year ended December 31, 2004 and the balance sheet data as of December 31,
        2004
        are derived from our audited financial statements. The statement of operations
        data for the nine months ended September 30, 2005, and the balance sheet
        data as
        of September 30, 2005 are derived from our unaudited financial statements
        which
        include all adjustments, consisting only of normal recurring adjustments
        and
        accruals, that the Company considers necessary for a fair presentation of
        its
        financial position and results of operations for these periods. We commenced
        business operations in December 2004 and there are no financial data for
        any
        periods prior to December 22, 2004. Interim operating results for the nine
        months ended September 30, 2005 are not necessarily indicative of the results
        that may be expected for the entire fiscal year ended December 31, 2005 or
        any
        future period. The following selected financial data should be read in
        conjunction with the financial statements and the notes thereto included
        herewith.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Statement
        of Operations Data for NaturalNano, Inc. (now known as NaturalNano Research,
        Inc.):</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
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              <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Nine
                  Months Ended </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>September
                  30, 2005</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Period
                  from Inception </strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December&#160;22,
                  2004 </strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>through
                  </strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                  31, 2004</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Revenues</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="11%">&#160;</td>
              <td align="left" valign="bottom" width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="11%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Expenses:</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
                  and development</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">293,492</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
                  and administrative</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,597,065</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,336</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Loss
                  from operations</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,890,557</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7,336</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
                  (income) expense:</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
                  expense net</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,511</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Investment
                  income</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(120,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">&#160;&#160;&#160;&#160;
                &#160;&#160;&#160; </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                  other (income) expense</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(118,489</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                  loss </font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,772,068</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7,336</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Loss
                  per share</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(0.18</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(.000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted
                  average number of shares outstanding</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-7-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Balance
        Sheet Data:</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #000000 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September
                  30,</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December
                  31,</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(unaudited)</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Current
                  assets</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,972,368</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Working
                  capital (deficiency)</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,590,667</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">92,664</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                  assets</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,301,714</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                  liabilities</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,598,035</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,336</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                  stockholders&#8217; equity (deficiency)</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,296,321</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">92,664</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PLAN
        OF OPERATIONS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>General</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following information should be read in conjunction with the September 30,
        2005
        financial statements and notes thereto appearing elsewhere in this Report
        on
        Form 8K.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company is a development stage company and is expected to remain so for at
        least
        the next twelve months. Our primary mission is to develop and exploit
        technologies in the area of nanotechnology, specifically focusing on naturally
        occurring nanoscale materials. Our strategy is to patent these processes
        and
        application technologies and subsequently license the associated patents
        to
        relevant industries including: polymers, plastics and composites, cosmetics
        and
        personal care products and medical and pharmaceutical device additives and
        coatings. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        believe that the commercial applications that will result from our research
        are
        patentable and will result in significant licensing potential across a wide
        range of industries. Our researchers have identified more than 200 applications
        within these industries as potential development opportunities which are
        subject
        to pending patents and issued patents under licensing agreements.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company&#8217;s near term goal is focused on core technology development and
        application processes utilizing halloysite nanotubes. We expect to identify
        and
        develop other naturally occurring nanoscale materials in future research
        programs.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Processing
        and Manufacturing</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NaturalNano
        has defined the anticipated end product as either a dry powder or colloidal
        suspension of nanotubes which may be sold in different configurations -
        metallized or not, unloaded or loaded with any one of a number of different
        active agents for different applications. Different applications and marketing
        partners would require different product configurations, and will need to
        be
        assessed individually.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        future manufacturing operations would begin with raw or minimally processed
        material we have received from the halloysite mine, sourced in the United
        States
        from Atlas Mining&#8217;s Dragon Mine in Utah. We would further process this material
        to extract nanotubes from the surrounding minerals present in halloysite
        clay
        and then further classify the nanotubes by size. This refined and classified
        material would then be shipped to customers in the form of a dry powder or
        a
        slurry mixture. The customer&#8217;s specific requirements will determine the final
        form of delivery.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-8-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NaturalNano
        can add further value to the refined and classified nanotubes by either adding
        material to the surface of the nanotubes or loading within the hollow openings
        of the nanotubes. The resulting intermediary materials can then be shipped
        to
        customers for use in their manufacturing processes.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
        powders or suspensions will be designed as an intermediate component of a
        finished consumer product. Typically, these materials would be incorporated
        with
        other components to produce the finished product that our marketing partner
        would sell, for instance providing a controlled release agent or a strengthening
        agent to be added to the partners existing materials / products. The Company
        will evaluate and select suitable manufacturing partners in each of the targeted
        industry segments. We will work with each manufacturing partner to build
        the
        expertise to provide the materials, in the various required
        configurations.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patents
        and Intellectual Property </strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company&#8217;s intellectual property portfolio currently contains five patent
        applications with several additional patent applications in process. The
        Company
        has exclusive licenses, within certain fields of use, under&#160;four additional
        pending patent applications and licenses to eight additional patents. Over
        200
        applications for halloysite have been identified to date and are covered
        in our
        pending patents. As research and development continues, NaturalNano intends
        to
        aggressively seek patent protection for new developments and technologies
        in the
        United States and in strategic foreign markets, in addition to licensing-in
        patents to augment our development opportunities.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
        and Development</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        the next twelve months the Company&#8217;s research and development focus will be in
        the following areas:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></td>
              <td align="left">
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Collaboration
                  with potential customers in major market segments to demonstrate
                  proof of
                  principle for specific industry
                  applications.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></td>
              <td align="left">
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Establishment
                  of a Research Lab to produce sample products for customers in the
                  various
                  industries identified above, at a competitive
                  cost.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></td>
              <td align="left">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Establishment
                  of a pilot production program to extract, separate and categorize
                  naturally occurring nanotubes found within halloysite clay, which
                  will
                  provide the basis for our future development of commercial scale
                  production facilities.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        the twelve month period ending December 31, 2006, the Company expects to
        spend
        approximately $250,000 for capital investments relating to the setup of the
        Research Lab. The Company is currently in the process of evaluating leased
        space
        available in the Rochester, New York area to establish this combined research
        facility.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
        and Development related expenditures for the twelve month period ending December
        31, 2006, which will include salaries for employees, fees for collaborative
        research agreements and lab testing materials, will approximate $1,000,000.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Strategic
        Relationships</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Leveraging
        strategic relationships is vital to our mission. These relationships will
        help
        us to validate our technology, develop extraction and separation processes,
        offer insight into additional application opportunities, and develop future
        sales channels, among other things. The Company has entered into cooperative
        research and development agreements with three nationally recognized
        universities and an independent laboratory to jointly test and further develop
        core technologies and commercial applications for naturally occurring nanoscale
        materials. We will continue to seek partnering relationships with research
        facilities around the world as we focus on developing new nanotechnology
        solution applications.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-9-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        have
        entered into numerous non-disclosure agreements with prospective business
        partners and have discussed with these entities the potential for strategic
        relationships that could result in joint development and licensing agreements.
        This partnering of ideas and the joint development of applications has proven
        to
        be successful in accelerating our development of new processes and product
        opportunities and will continue to be pursued by the Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        May
        25, 2005 NN Research signed a joint research agreement with Nanolution, LLC
        (a
        wholly owned subsidiary of Biophan Technologies, Inc.) to pursue the development
        of a new drug delivery application utilizing naturally occurring halloysite
        nanotechnologies. In connection with this agreement, the Company and Nanolution
        have agreed that all medical uses and inventions arising from these efforts
        will
        be owned by Nanolution and all purification processes and non-medical
        applications will be owned by the Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Investor
        Relations</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company intends to regularly communicate and re-enforce our brand awareness
        and
        corporate strategies in order to keep our shareholders, the investment community
        and our strategic partners informed regarding our progress in achieving our
        stated milestones and related discoveries. We believe our efforts to achieve
        widespread press exposure will help raise the scientific and investment
        community&#8217;s awareness of the science of nanotechnology&#160; and increase the
        recognition of NaturalNano, Inc. as an innovative company. In this regard,
        the
        Company has engaged various professional firms to actively assist and advise
        in
        establishing public relations and investor relations strategies.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Employees</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        of
        November 29, 2005 the Company employed seven full-time employees and one
        part-time employee. We anticipate the addition of another full-time employee
        within the next twelve months. Our evaluation of human resource needs has
        resulted in our use of experienced part-time consultants in the areas of
        product
        and business development in lieu of immediate full-time hiring for certain
        positions. The Company also has a number of consulting PhD and post doctoral
        level scientists and engineers available to assist in various extraction
        and
        classification of halloysite nanotubes and on other application related research
        projects. All of our employees have signed confidentiality agreements and
        we
        have non-complete agreements in place with our key employees.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cash
        and Financing Activities</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: -27pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company&#8217;s source of cash since inception has been from inter-company advances
        from our principal stockholder, Technology Innovations, LLC, and from the
        issuance of $4,156,000 in Convertible Bridge Notes. The Convertible Bridge
        Notes
        included a mandatory conversion feature that resulted in the issuance of
        10,469,600 shares of the Company&#8217;s common stock coincident with the consummation
        of the Merger on November 29, 2005.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        March
        31, 2005 NN Research issued a warrant to SBI USA, LLC, granting SBI the right
        to
        purchase 2,250,000 shares of NN Research common stock at an exercise price
        of
        $.23 per share. On November 29, 2005, in connection with the Merger, that
        warrant was cancelled and the Company issued to SBI a warrant in identical
        form
        entitling SBI to purchase 2,250,000 shares of our common stock at an exercise
        price of $.23 per share. This warrant expires on March 31, 2006. Our cash
        forecast for the period ending December 31, 2006 assumes receipt of $517,500
        in
        proceeds resulting from the exercise of this warrant during the first quarter
        of
        2006. SBI has not indicated whether it intends to exercise the warrant in
        whole
        or in part or at all and there can be no assurance that we will receive any
        of
        such proceeds.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-10-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        estimated cash available and projected cash outflows for the twelve month
        period
        ending December 31, 2006 are as follows:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div align="right">
          <table cellpadding="0" cellspacing="0" width="95%">

              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%">&#160;</td>
                <td width="2%">&#160;</td>
                <td align="left" valign="bottom" width="1%">&#160;</td>
                <td align="right" valign="bottom" width="11%">&#160;</td>
                <td align="left" valign="bottom" width="1%">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
                    on hand at September 30, 2005</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                </td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,698,330</font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ffffff">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
                    proceeds assumed from exercise of stock warrants</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">517,500</font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">LESS:
                    Estimated cash projected to be used in operations during the
                    fourth
                    quarter of 2005</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(775,000</font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ffffff solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Projected
                    cash available for 2006 operations</strong></font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>$</strong></font></div>
                </td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2,440,830</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
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              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Projected
                    cash uses for 2006 operations</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>:</strong></font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
                    and product development expenses</font></div>
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                <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                </td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,000,000</font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ffffff">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Investment
                    in Research Lab</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">250,000
                    </font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
                    and administrative expenses including: </font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ffffff solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">administrative
                    salaries and benefits, office expenses, rent expense, legal and
                    accounting, marketing and investor relations</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,700,000
                    </font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="70%" style="BORDER-BOTTOM: #ccffcc solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Total
                    estimated cash outflows for next twelve months</strong></font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>$</strong></font></div>
                </td>
                <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2,950,000</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="70%">&#160;</td>
                <td width="2%">&#160;</td>
                <td align="left" valign="bottom" width="1%">&#160;</td>
                <td align="right" valign="bottom" width="11%">&#160;</td>
                <td align="left" valign="bottom" width="1%">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        the
        Company continues to grow its intellectual property portfolio and to identify
        and invest in the commercial research and development of naturally occurring
        nanoscale materials, additional cash flow funding will be required.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company will continually evaluate all funding options including additional
        offerings of its securities to private and institutional investors and other
        credit facilities as they become available.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISK
        FACTORS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>You
        should carefully consider, among other potential risks, the following risk
        factors as well as all other information set forth or referred to in this
        Report
        before purchasing shares of our common stock. Investing in our common stock
        involves a high degree of risk. If any of the following events or outcomes
        actually occurs, our business operating results and financial condition would
        likely suffer. As a result, the trading price of our common stock could decline,
        and you may lose all or part of the money you paid to purchase our common
        stock.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Risks
        Related to our Business</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Neither
        NN Research nor Cementitious Materials has recorded revenues or an operating
        profit since inception; continuing losses may exhaust our capital resources
        and
        force us to discontinue operations.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
        its
        inception in December 2004 through September 30, 2005, NN Research has incurred
        cumulative losses of approximately $1,779,404. Cementitious Materials has
        incurred cumulative losses of approximately $416,039 since it&#8217;s inception at
        July 31, 1987. We cannot assure you that we will achieve profitability in
        the
        immediate future or at any time.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>NN
        Research has had a significant working capital deficit, which makes it more
        difficult to obtain capital necessary for its business and which may have
        an
        adverse effect on our future business.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        of
        September 30, 2005, NN Research had a working capital deficit of approximately
        $1,590,667. As a result of the Merger, an aggregate of $4,256,000 of outstanding
        debt was converted on November 29, 2005 into 10,469,600 shares of our common
        stock. Giving effect to such conversion and to the other Merger transactions,
        we
        had, on a pro forma basis, a working capital surplus of $2,471,759 as of
        September 30, 2005.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-11-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>If
        the Company cannot achieve commercial application of our nanoscale materials,
        we
        may not achieve profitability.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company must develop commercial applications for halloysite nanotubes, which
        it
        intends to do primarily by collaborating with market leaders in each potential
        field of use. If we fail to establish such collaborative relationships or
        if we
        are unable to develop sufficiently attractive commercial uses for our nanoscale
        materials or if we are unable to produce these materials at a competitive
        cost,
        we may not achieve profitability. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>The
        industry in which we operate is highly competitive and has relatively low
        barriers to entry. Increased competition could result in margin erosion,
        which
        would make profitability even more difficult to achieve and
        sustain.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        addition to the wide range of material additives that are currently being
        used
        in the industries being targeted by the Company, the current nanomaterials
        market includes at least 200 companies globally, offering a wide variety
        of
        metal oxides and inorganic compounds. Many existing and potential competitors
        have greater financial resources and are likely to command a larger market
        share, which may enable them to establish a stronger competitive position
        than
        we have, in part through greater marketing opportunities. If we fail to address
        competitive developments quickly and effectively, we may not be able to remain
        a
        viable entity.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Our
        business could be negatively affected by any adverse economic developments
        in
        the advanced materials industry and/or the economy in general.
</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company depends on the demand for the application of our technology and
        nanoscale materials and our business is susceptible to downturns in the advanced
        materials industry and the economy in general. Any significant downturn in
        the
        market or in general economic conditions would likely hurt our business.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>If
        the Company fails to keep up with changes affecting its technology and the
        markets that we will ultimately service, we will become less competitive,
        adversely affecting future financial performance.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        order
        to remain competitive and serve its customers effectively, NaturalNano must
        respond on a timely and cost-efficient basis to changes in technology, industry
        standards and procedures and customer preferences. The Company needs to
        continuously develop new technology and products and services to address
        new
        developments. In some cases these changes may be significant and the cost
        to
        comply with these changes may be substantial. We cannot assure you that we
        will
        be able to adapt to any changes in the future or that we will have the financial
        resources to keep up with changes in the marketplace. Also, the cost of adapting
        our technology, products and services may have a material and adverse effect
        on
        our operating results.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Our
        future success depends on retaining our existing key employees and hiring
        and
        assimilating new key employees. The loss of key employees or the inability
        to
        attract new key employees could limit our ability to execute our growth
        strategy, resulting in lost sales and a slower rate of
        growth.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        success depends in part on our ability to retain key employees including
        our
        executive officers. Although following the Merger we expect to have employment
        agreements with our executives, each executive can terminate his or her
        agreement at any time. Also, we do not currently carry "key man" insurance
        on
        our executives but intend to&#160;obtain it in the near future. It would
        be
        difficult for us to replace any one of these individuals. In addition, as
        we
        grow we may need to hire additional key personnel. We may not be able to
        identify and attract high quality employees or successfully assimilate new
        employees into our existing management structure.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-12-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Our
        growth strategy assumes that we may possibly make future targeted strategic
        acquisitions. A future acquisition may disrupt our business, dilute stockholder
        value or distract management&#8217;s attention from
        operations.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
        the Company can develop our present technology or newly acquired technology
        into
        marketable products, our ability to generate revenue may be hindered and
        our
        ability to achieve profitability will be slow and difficult. A possible strategy
        is to acquire new technology or products through targeted strategic
        acquisitions. If we attempt and fail to execute on this strategy, our revenues
        may not increase and our ability to achieve significant profitability will
        be
        delayed. Prior to this time, our ability to make strategic acquisitions has
        been
        hampered by our limited capital resources and the lack of a public market
        for
        its stock.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        may
        not be able to identify any appropriate targets or acquire them on reasonable
        terms. Even if we make strategic acquisitions, we may not be able to integrate
        these technologies, products and/or businesses into our existing operations
        in a
        cost-effective and efficient manner.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>We
        may be unable to protect our intellectual property adequately or cost
        effectively, which may cause us to lose market share or reduce
        prices.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        future success depends significantly on our ability to protect and preserve
        our
        proprietary rights related to our technology and resulting products. We cannot
        assure you that we will be able to prevent third parties from using our
        intellectual property rights and technology without our authorization. Although
        the Company has filed for several patents and intends to pursue aggressively
        efforts to obtain patent protection for its technology, we will also rely
        on
        trade secrets, common law trademark rights and trademark registrations, as
        well
        as confidentiality and work for hire, development, assignment and license
        agreements with employees, consultants, third party developers, licensees
        and
        customers. However, these measures afford only limited protection and may
        be
        flawed or inadequate. Also, enforcing intellectual property rights could
        be
        costly and time-consuming and could distract management&#8217;s attention from
        operating business matters.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>The
        Company&#8217;s intellectual property may infringe on the rights of others, resulting
        in costly litigation.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        recent
        years, there has been significant litigation in the United States involving
        patents and other intellectual property rights. In particular, there has
        been an
        increase in the filing of suits alleging infringement of intellectual property
        rights, which pressure defendants into entering settlement arrangements quickly
        to dispose of such suits, regardless of their merits. Other companies or
        individuals may allege that we infringe on their intellectual property rights.
        Litigation, particularly in the area of intellectual property rights, is
        costly
        and the outcome is inherently uncertain. In the event of an adverse result,
        we
        could be liable for substantial damages and we may be forced to discontinue
        our
        use of the subject matter in question or obtain a license to use those rights
        or
        develop non-infringing alternatives. Any of these results would increase
        our
        cash expenditures, adversely affecting our financial condition.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>We
        may not be able to manage our growth effectively, which could adversely affect
        our operations and financial performance.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        ability to manage and operate our business as we execute our development
        and
        growth strategy will require effective planning. Significant rapid growth
        could
        strain our internal resources, and other problems that could adversely affect
        our financial performance. We expect that our efforts to grow will place
        a
        significant strain on our personnel, management systems, infrastructure and
        other resources. Our ability to manage future growth effectively will also
        require us to successfully attract, train, motivate, retain and manage new
        employees and continue to update and improve our operational, financial and
        management controls and procedures. If we do not manage our growth effectively,
        our operations could be adversely affected, resulting in slower growth and
        a
        failure to achieve or sustain profitability.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-13-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Risks
        Related to Our Common Stock</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Shares
        of our common stock may be subject to price volatility and illiquidity because
        our shares may continue to be thinly traded and may never become eligible
        for
        trading on Nasdaq or a national securities exchange.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Although
        a trading market for our common stock exists, the trading volume has
        historically been insignificant, and an active trading market for our common
        stock may never develop. There currently is no analyst coverage of our business.
        Very few shares of our common stock are currently freely tradable, and the
        amount of shares in our public &#8220;float&#8221; will continue to be limited, due to the
        applicability of resale restrictions under applicable securities laws on
        shares
        issued to the former shareholders of NN Research and the fact that significant
        portions of our outstanding shares are held by our officers, directors or
        major
        shareholders. As a result of the thin trading market for our common stock,
        and
        the lack of analyst coverage, the market price for our shares may continue
        to
        fluctuate significantly, and will likely be more volatile than the stock
        market
        as a whole. There may be a limited demand for shares of our common stock
        due to
        the reluctance or inability of certain investors to buy stocks quoted for
        trading on the OTC Bulletin Board (OTCBB), lack of analyst coverage of our
        common stock, and a negative perception by investors of stocks traded on
        the
        OTCBB; as a result, even if prices appear favorable, there may not be sufficient
        demand in order to complete a shareholder&#8217;s sell order. Without an active public
        trading market or broader public ownership, shares of our common stock are
        likely to be less liquid than the stock of most public companies, and any
        of our
        shareholders who attempt to sell their shares in any significant volumes
        may not
        be able to do so at all, or without depressing the publicly quoted bid prices
        for our shares. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        addition, while we may at some point be able to meet the requirements necessary
        for our common stock to be listed on one of the Nasdaq stock markets or on
        a
        national securities exchange, we cannot assure you that we will ever achieve
        a
        listing of our common stock on Nasdaq or on a national securities exchange.
        Initial listing on one of the Nasdaq markets or one of the national securities
        exchanges is subject to a variety of requirements, including minimum trading
        price and minimum public &#8220;float&#8221; requirements, and could also be affected by the
        general skepticism of such markets concerning companies that are the result
        of
        mergers with inactive publicly-held companies. There are also continuing
        eligibility requirements for companies listed on public trading markets.
        If we
        are unable to satisfy the initial or continuing eligibility requirements
        of any
        such market, then our stock may not be listed or could be delisted. This
        could
        result in a lower trading price for our common stock and may limit your ability
        to sell your shares, any of which could result in you losing some or all
        of your
        investments. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Future
        sales of shares of our common stock may decrease the price for such
        shares.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        November&#160;29, 2006, the one-year holding period requirement under
        Rule&#160;144 expires on the common stock issued to former shareholders
        of NN
        Research in connection with the Merger, unless we achieve registration of
        part
        or all of those shares before this date. As a result, a large number of shares
        of our common stock will be eligible for resale on the open market, at that
        time
        many without any restrictions as to size or frequency of such sales. Actual
        sales, or the prospect of sales by our shareholders, may have a negative
        effect
        on the market price of the shares of our common stock.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        also
        intend to register certain shares of our common stock that are subject to
        outstanding warrants and stock options, or reserved for issuance under our
        stock
        option plan. Once such shares are registered, they can be freely sold in
        the
        public market upon exercise of the warrants or options. If any of our
        shareholders either individually or in the aggregate cause a large number
        of
        securities to be sold in the public market, or if the market perceives that
        these holders intend to sell a large number of securities, such sales or
        anticipated sales could result in a substantial reduction in the trading
        price
        of shares of our common stock and could also impede our ability to raise
        future
        capital. Sales of a substantial number of shares of our common stock in the
        public markets, or the perception that these sales may occur, could cause
        the
        market price of our common stock to decline and could materially impair our
        ability to raise capital through the sale of additional equity securities.
        In
        addition to the 60,380,020</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>&#160;</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
        of
        our common stock actually issued and outstanding, there will be another
        9,250,000 shares of common stock reserved for future issuance as
        follows:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,950,000
                  shares issuable upon exercise of outstanding options under our
                  2005
                  Incentive Stock Plan; </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,250,000
                  shares issuable upon exercise of outstanding stock purchase warrants;
                  and</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td style="WIDTH: 36pt">
                  </td>
                  <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font></td>
                  <td align="left">
                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,050,000
                      shares reserved for issuance in the future under our 2005 Incentive
                      Stock
                      Plan.</font></div>
                  </td>
                </tr>

            </table>
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-14-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Our
        stock price may be volatile, and you may lose some or all of your
        investment.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        trading prices of the stock of companies listed on the OTCBB, have been highly
        volatile. Accordingly, the trading price of our common stock is likely to
        be
        subject to wide fluctuations. Factors affecting the trading price of our
        common
        stock may include, among other things: </font></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="3%">&#160;</td>
              <td align="left" valign="top" width="2%">&#160;</td>
              <td align="left" valign="top" width="1%">&#160;</td>
              <td align="left" valign="top" width="66%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="2%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#8226;</strong></font></div>
              </td>
              <td align="left" valign="top" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="66%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">variations
                  in our operating results;</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td align="left" valign="middle" width="1%">&#160;</td>
              <td align="left" valign="middle" width="66%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="2%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#8226;</strong></font></div>
              </td>
              <td align="left" valign="top" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="66%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">announcements
                  of technological innovations, new services or service enhancements,
                  or
                  significant agreements, by us or by our competitors;</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td align="left" valign="middle" width="1%">&#160;</td>
              <td align="left" valign="middle" width="66%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="2%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#8226;</strong></font></div>
              </td>
              <td align="left" valign="top" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="66%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">recruitment
                  or departure of key personnel;</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td align="left" valign="middle" width="1%">&#160;</td>
              <td align="left" valign="middle" width="66%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="2%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#8226;</strong></font></div>
              </td>
              <td align="left" valign="top" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="66%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                  in estimates of our operating results, or changes in recommendations
                  by
                  any securities analysts that may follow us;</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td align="left" valign="middle" width="1%">&#160;</td>
              <td align="left" valign="middle" width="66%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="2%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#8226;</strong></font></div>
              </td>
              <td align="left" valign="top" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="66%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">sales
                  of our common stock, particularly sales by officers, directors
                  and
                  significant shareholders; or</font></div>
              </td>
            </tr>
            <tr>
              <td align="left" valign="middle" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="middle" width="2%">&#160;</td>
              <td align="left" valign="middle" width="1%">&#160;</td>
              <td align="left" valign="middle" width="66%">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="top" width="3%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="2%">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#8226;</strong></font></div>
              </td>
              <td align="left" valign="top" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="top" width="66%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">conditions
                  in our industry, the industries of our customers and the economy
                  as a
                  whole.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Our
        stock may be subject to regulation as a &#8220;penny stock&#8221;, which could severely
        limit the liquidity of your securities.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        common stock may be subject to regulation as a &#8220;penny stock,&#8221; which generally
        includes stocks traded on the OTCBB that have a market price of less than
        $5.00
        per share. If shares of our common stock continue to trade for less than
        $5.00
        per share, they would be subject to Rule&#160;15g-9 under the Exchange
        Act
        which, among other things, requires that broker/dealers satisfy special sales
        practice requirements, including making individualized written suitability
        determinations, providing disclosure explaining the nature and risks of the
        penny stock market, receiving a purchaser&#8217;s written consent prior to any
        transaction and waiting two days before effecting the transaction. Such
        requirements could severely limit the liquidity of your securities.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Mergers
        of the type we just completed are often heavily scrutinized by the SEC and
        we
        may encounter difficulties or delays in obtaining future regulatory
        approvals.</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 45pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Historically,
        the SEC and NASD have not generally favored transactions in which a
        privately-held company merges into a largely inactive company with publicly
        traded stock, and there is a significant risk that we may encounter difficulties
        in obtaining the regulatory approvals necessary to conduct future financing
        or
        acquisition transactions, or to eventually achieve a listing of shares on
        one of
        the Nasdaq stock markets or on national securities exchange. On June 29,
        2005,
        the SEC adopted rules dealing with private company mergers into dormant or
        inactive public companies. As a result, it is likely that we will be scrutinized
        carefully by the SEC and possibly by the National Association of Securities
        Dealers or Nasdaq, which could result in difficulties or delays in achieving
        SEC
        clearance of any future registration statements or other SEC filings that
        we may
        pursue, in attracting NASD-member broker-dealers to serve as market-makers
        in
        our stock, or in achieving admission to one of the Nasdaq stock markets or
        any
        other national securities market. As a consequence, our financial condition
        and
        the value and liquidity of your shares may be negatively impacted. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Being
        a public company will increase administrative costs, which could result in
        lower
        net income, and make it more difficult for us to attract and retain key
        personnel.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 9pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        a
        public company, we incur significant legal, accounting and other expenses
        that
        NN Research did not incur as a private company. The Sarbanes-Oxley Act of
        2002,
        as well as new rules subsequently implemented by the SEC, have required changes
        in corporate governance practices of public companies. We expect that these
        new
        rules and regulations will increase our legal and financial compliance costs
        and
        make some activities more time consuming. These new rules and regulations
        could
        also make it more difficult for us to attract and retain qualified executive
        officers and qualified members of our Board of Directors, particularly to
        serve
        on our audit committee.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-15-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>We
        do not anticipate paying dividends in the foreseeable future. This could
        make
        our stock less attractive to potential investors.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        anticipate that we will retain all future earnings and other cash resources
        for
        the future operation and development of our business and we do not intend
        to
        declare or pay any cash dividends in the foreseeable future. Any future payment
        of cash dividends will be at the discretion of our Board of Directors after
        taking into account many factors, including our operating results, financial
        condition and capital requirements. Corporations that pay dividends may be
        viewed as a better investment than corporations that do not.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>The
        authorization and issuance of preferred stock may prevent or discourage a
        change
        in our management. </em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        amended Articles of Incorporation will authorize the Board of Directors to
        issue
        up to 10,000,000 shares of preferred stock without stockholder approval.
        Such
        shares will have terms, conditions, rights, preferences and designations
        as the
        Board may determine. The rights of the holders of our common stock will be
        subject to, and may be adversely affected by, the rights of the holders of
        any
        preferred stock that may be issued in the future. The issuance of preferred
        stock, while providing desirable flexibility in connection with possible
        acquisitions and other corporate purposes, could have the effect of discouraging
        a person from acquiring a majority of our outstanding common stock.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>It
        may be difficult for a third party to acquire us, and this could depress
        our
        stock price.</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Nevada
        corporate law includes provisions that could delay, defer or prevent a change
        in
        control of our company or our management. These provisions could discourage
        information contests and make it more difficult for you and other stockholders
        to elect directors and take other corporate actions. As a result, these
        provisions could limit the price that investors are willing to pay in the
        future
        for shares of our common stock. For example:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 81pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">without
                  prior stockholder approval, the Board of Directors has the authority
                  to
                  issue one or more classes of preferred stock with rights senior
                  to those
                  of common stock and to determine the rights, privileges and inference
                  of
                  that preferred stock; </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 81pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">there
                  is no cumulative voting in the election of directors, which would
                  otherwise allow less than a majority of stockholders to elect director
                  candidates; and</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 81pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">stockholders
                  cannot call a special meeting of
                  stockholders.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DESCRIPTION
          OF PROPERTY</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
          currently conduct our primary business operations using office space rented
          from
          Lennox Tech Enterprise Center in West Henrietta, New York. We pay a monthly
          fee
          of $4,047 for the use of this office space under a lease expiring May 31,
          2008
          (subject to our right to terminate any time after May 31, 2006 upon 90
          days&#8217;
          notice). We are planning to lease laboratory facilities as needed to expand
          the
          capabilities and facilities of subcontractors and government laboratories,
          where
          we plan to conduct the bulk of our research under contracts and cooperative
          research and development agreements. We believe that suitable space is
          available
          in the greater Rochester, New York area at competitive rates. Our management
          believes that our properties are adequately covered by insurance.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-16-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table sets forth certain information as of November&#160;29,
        2005 with
        respect to the beneficial ownership of our common stock by each stockholder
        known by us to be the beneficial owner of more than 5% of our common stock
        and
        by each of our directors and executive officers and by all of the directors
        and
        executive officers as a group. Unless otherwise indicated, the address of
        each
        of the persons listed below is </font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>c</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sub>o</sub></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        NaturalNano, Inc., 150 Lucius Gordon Drive, Suite 115, West Henrietta, NY
        14586.
        Unless otherwise indicated in the footnotes, shares are owned of record and
        beneficially by the named person. For purposes of the following table, a
        person
        is deemed to be the beneficial owner of any shares of common stock (a) over
        which the person has or shares, directly or indirectly, voting or investment
        power, or (b) of which the person has a right to acquire beneficial ownership
        at
        any time within 60 days after November&#160;29, 2005. &#8220;Voting power&#8221; is the
        power to vote or direct the voting of shares and &#8220;investment power&#8221; includes the
        power to dispose or direct the disposition of shares. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="bottom" width="65%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name
                  and Address</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>of
                  Beneficial Owner</strong></font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
                  of Shares</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Beneficially
                  Owned </strong></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup><strong>(1)</strong></sup></font></div>
              </td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Percent
                  of Class</strong></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(2)</sup></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="12%">&#160;</td>
              <td align="left" valign="bottom" width="4%">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="12%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><u><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Directors
                  and Executive Officers</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></u></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Steven
                  Katz</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
              </td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ross
                  B. Kenzie</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,962,624</font></div>
              </td>
              <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(3)</sup></font></div>
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              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">54.4</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John
                  F. Lanzafame</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">116,667</font></div>
              </td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  L. Weiner</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33,029,430</font></div>
              </td>
              <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(3)</sup></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53.6</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  Riedlinger</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">500,000</font></div>
              </td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kathleen
                  Browne</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150,000</font></div>
              </td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sarah
                  Cooper</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
              </td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                  Directors and Executive Officers as a group </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7
                  persons)</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33,996,097</font></div>
              </td>
              <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(3)</sup></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">55.1</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><u><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Other
                  5% Beneficial Owners</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></u></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Technology
                  Innovations, LLC </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">150
                  Lucius Gordon Drive, Suite 215</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">West
                  Henrietta, NY 14586</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="top" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,962,763</font></div>
              </td>
              <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>(4)</sup></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="top" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">54.4</font></div>
              </td>
              <td align="left" valign="top" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="65%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="4%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <hr style="COLOR: #000000" align="left" noshade size="1" width="15%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less
                  than 1%</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
                  as may be set forth below, the persons named in the table have
                  sole voting
                  and investment power with respect to all shares shown as beneficially
                  owned by them. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Applicable
                  percentage of ownership is based on 60,380,020 shares outstanding
                  immediately following the Merger, together with applicable options
                  for
                  such stockholder. Shares subject to options currently exercisable
                  or
                  exercisable within 60 days after the effective time of the Merger
                  are
                  included in the number of shares beneficially owned and are deemed
                  outstanding for purposes of computing the percentage ownership
                  of the
                  person holding such options, but are not deemed outstanding for
                  computing
                  the percentage of any other stockholder.
</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                  32,962,763 shares held by or issuable to, Technology Innovations,
                  LLC, of
                  which Messrs. Kenzie and Weiner are members and managers. Each
                  of Mr.
                  Kenzie and Mr. Weiner disclaims beneficial ownership of the shares
                  held by
                  Technology Innovations, LLC except to the extent of his beneficial
                  ownership of a membership interest in Technology Innovations,
                  LLC.</font></div>
              </td>
            </tr>

        </table>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font size="2">4)</font></td>
              <td align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                250,000 shares issuable pursuant to currently exercisable
                options.</font></td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div>&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-17-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXECUTIVE
        OFFICERS AND DIRECTORS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table shows information about our executive officers and directors
        as
        of November&#160;29, 2005: </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div align="left">
        <table border="1" cellpadding="5" cellspacing="1" width="100%">

            <tr bgcolor="#ffffff">
              <td valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Age</strong></font></div>
              </td>
              <td valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Position</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Steven
                  Katz</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">56</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ross
                  B. Kenzie</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">73</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John
                  F. Lanzafame </font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">37</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  L. Weiner</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">57</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  Riedlinger</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">47</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President
                  and Director</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kathleen
                  Browne</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Financial Officer, Treasurer and Secretary </font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="29%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sarah
                  Cooper</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">28</font></div>
              </td>
              <td align="left" valign="top" width="36%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                  Technology Officer</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        business experience of each of the persons listed above during the past five
        years is as follows:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Steven
        Katz </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">is
        President of Steven Katz &amp; Associates, Inc., a technology-based management
        consulting firm specializing in strategic planning, corporate development,
        new
        product planning, technology licensing, and structuring and securing various
        forms of financing since 1982. From January 2000 until October 2001, Mr.
        Katz
        was President and Chief Operating Officer of Senesco Technologies, Inc.,
        a
        public company engaged in the development of proprietary genes with application
        to agro-biotechnology. From 1983 to 1984 he was the co-founder and Executive
        Vice President of S.K.Y. Polymers, Inc., a biomaterials company. Prior to
        S.K.Y.
        Polymers, Inc., Mr. Katz was Vice President and General Manager of a non-banking
        division of Citicorp. From 1976 to 1980 he held various senior management
        positions at National Patent Development Corporation, including President
        of
        three subsidiaries. Prior positions were with Revlon, Inc. (1975) and Price
        Waterhouse &amp; Co. (1969 to 1974). Mr. Katz received a Bachelor of Business
        Administration degree in Accounting from the City College of New York in
        1969.
        He is a member of the Boards of Directors of two publicly held corporations,
        USA
        Technologies, Inc. and Biophan Technologies, Inc. and of several private
        companies.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Ross
        B. Kenzie </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">currently
        serves on the boards of several companies including the publicly
        held</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rand
        Capital Corporation and Biophan Technologies Inc. as well as many
        entrepreneurial ventures that are privately held, including Biomed Solutions
        LLC
        and Technology Innovations, LLC. Mr. Kenzie is a former Chairman and Chief
        Executive Officer of Goldome Bank, from which he retired in June 1989. He
        was
        previously Executive Vice President of Merrill Lynch &amp; Co., in the New York
        worldwide headquarters, and is a former member of the Merrill Lynch &amp; Co.
        Board of Directors. He is a former Director of the Federal Home Loan Bank
        of New
        York ( from 1984 to 1988) and served on the boards of the National Council
        of
        Savings Institutions (from 1982 to 1986), the Federal Reserve Bank of New
        York,
        Buffalo Branch (from 1985 to 1987), and the Savings Banks Association of
        New
        York State (from 1984 to 1987). Mr. Kenzie was a Director of Millard Fillmore
        Hospitals (from 1982 to 1995) and is currently Past Chairman Emeritus. He
        served
        on the Board of the Kaleida Health, Education and Research Foundation (from
        1998
        to 2000) and is currently on its Investment Committee. He was Director of
        the
        Health Systems Agency of Western New York (from 1988 to 1991), and was a
        member
        of the College Council of the State University College at Buffalo (from 1981
        to
        1998) and served as Chairman. He was a Director of the College&#8217;s Foundation and
        a member of its Finance Committee (from 1984 to 1998) and is currently on
        its
        Investment Committee. He served on the Council of the Burchfield-Penney Art
        Center (from 1990 to 2001) and the Albright Knox Art Gallery (from 1983 to
        1985). He is also a member of the Board, and the Chairman of the Investment
        Committee of the State University at Buffalo Foundation.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-18-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>John
        Lanzafame </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">is
        Vice
        President for Business Development of Biophan Technologies, Inc. He has fifteen
        years experience in the medical device industry, with a background that includes
        a bachelors degree in chemical engineering and a masters degree in industrial
        engineering.&#160; Until early 2004, Mr. Lanzafame was employed by STS
        Biopolymers, Inc., a privately held medical device company that marketed
        high
        performance polymer-based coatings for the medical device industry, including
        drug eluting surfaces for devices such as coronary stents and indwelling
        catheters.&#160; Mr. Lanzafame held a variety of positions with STS Biopolymers,
        including positions in research, product development, and sales and marketing,
        ultimately leading to his assuming the position of President of STS Biopolymers
        beginning in 2003.&#160; In 2004, Mr. Lanzafame left STS Biopolymers following
        sale of the company to Angiotech Pharmaceuticals, and is currently Vice
        President, Business Development for Biophan, and President of Nanolution,
        Biophan&#8217;s drug delivery division.&#160; This newly formed division was created
        to leverage new discoveries in the field of nanotechnology for the purposes
        of
        targeted drug delivery and highly controlled drug elution from medical devices.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Michael
        L. Weiner</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        is
        President, Chief Executive Officer and co-founder of Biophan Technologies,
        Inc.
        He began his career at Xerox Corporation in 1975, where he served in a variety
        of capacities in sales and marketing, including manager of software market
        expansion and manager of sales compensation planning. In 1982, he received
        the
        President&#8217;s award, the top honor at Xerox for an invention benefiting a major
        product line. In 1985, Mr. Weiner founded Microlytics, a Xerox spin-off company
        which developed technology from the Xerox Palo Alto Research Center into
        a suite
        of products, including the award winning Word Finder Thesaurus, with licenses
        out to over 150 companies, including Apple, Microsoft, and Sony. Microlytics
        was
        acquired by a merger with a public company in 1990, which Mr. Weiner then
        headed
        up through 1993. In February 1999, Mr. Weiner founded Technology Innovations,
        LLC, to develop intellectual property assets. In August 2000, Technology
        Innovations, LLC created a subsidiary, Biomed Solutions, LLC, to pursue certain
        biomedical and nanotechnology opportunities, investing in embryonic-to-seed
        stage innovations which generate new ventures and/or licenses. Mr. Weiner
        is the
        CEO and a director of Biophan Technologies, Inc., a medical research and
        development company located in West Henrietta, New York engaged in providing
        technology to enable implantable medical devices and interventional devices
        to
        be used safely and effectively in conjunction with Magnetic Resonance Imaging
        (MRI), since December 2000. Mr. Weiner serves on the Boards of Biophan
        Technologies, Inc., Biomed Solutions, LLC, Technology Innovations, LLC, Stem
        Capture, Inc., OncoVista, Inc., Myotech, LLC, TE Bio, LLC, and Nanoset, LLC,.
        Mr. Weiner holds seventeen U.S. patents.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Michael
        Riedlinger</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        became
        President of NaturalNano in December 2004. Prior to joining NaturalNano,
        he was,
        from 2002 to 2005, President of Technology Sales and Licensing Services,
        a firm
        specializing in business development for organizations that seek new sources
        of
        revenue from licensing or selling their technical innovations to others.
        Mr.
        Riedlinger continues to provide limited consulting services to Biophan
        Technologies, Inc. relative to licensing and technical development projects
        in
        connection with this former role. From 2000 to 2002, Mr. Riedlinger was Chief
        Executive Officer of Vitalwork, Inc., an organizational development company
        focused on training and corporate culture change for the telecommunications
        industry. From 1995 to 2000, Mr. Riedlinger was Director of Sales and Marketing
        at Metamor Software Solutions, a computer programming services division of
        Metamor Worldwide with offices in over 20 countries. From 1993 to 1995 he
        was
        Vice President of QSoft Solutions, a provider of quality management software
        and
        information to major corporations in North America. From 1986 to 1993, Mr.
        Riedlinger held several positions, including OEM Products Director and Director
        of Strategic Planning at Microlytics, Inc. Mr. Riedlinger has a MBA from
        the
        University of Rochester and a BFA from the Rochester Institute of
        Technology.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Kathleen
        Browne</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        became
        Chief Financial Officer of NaturalNano in July 2005. For the four years prior
        to
        joining NaturalNano, Ms. Browne was the Corporate Controller and Chief
        Accountant of Paychex, Inc., a payroll service provider in Rochester, New
        York.
        During the period 1996-2000, she served as the Vice President and Corporate
        Controller of W.R. Grace, a worldwide specialty chemicals manufacturer located
        in Boca Raton, Florida. From 1992-1996, Ms. Browne served in various financial
        positions for Bausch &amp; Lomb in Rochester, New York. From 1977 to 1992, Ms.
        Browne was with the Rochester, New York office of Price Waterhouse. Ms. Browne
        holds a Bachelor of Science degree from St. John Fisher College.&#160;
        She is a
        member of the American Institute of Certified Accountants and the New York
        State
        Society of CPAs.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Sarah
        Cooper</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        has been
        Chief Technology Officer of NaturalNano since December 2004. Ms. Cooper has
        an
        extensive background in nanotechnology and material science. Trained as a
        chemical engineer, she was, prior to joining NaturalNano, a research fellow
        at
        NASA Ames Center for Nanotechnology, studying the fundamental properties
        of
        carbon nanotubes and other nanomaterials. Ms. Cooper is also a consultant
        to
        Biophan Technologies, Inc. for that company&#8217;s bio-thermal battery project. While
        on sabbatical from NASA in 2003, Ms. Cooper attended NJIT&#8217;s BioMEMS Summer
        Institute to study the potential of BioMEMS as an integration platform to
        scale
        nano-sized components into practical devices. Before going to NASA, she
        conducted research at Los Alamos National Lab and IDEXX Laboratories. Ms.
        Cooper
        received her BS in chemical engineering from Brown University in 2000, and
        is
        currently finishing a PhD in Materials Physics at the University of Sydney,
        expanding on her work at NASA on nanoengineered thermoelectric materials.
        Ms.
        Cooper has authored numerous scientific and professional journal
        articles.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Potential
        Conflict of Interests</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Two
        members of our Board of Directors, Michael L. Weiner and Ross B. Kenzie,
        are
        managers and significant equity holders of Technology Innovations, LLC, which
        owns approximately 54.4% of our outstanding common stock. Messrs. Weiner
        and
        Kenzie and Technology Innovations are also significant equity holders of
        Biomed
        Systems LLC, a company engaged in the business of identifying and acquiring
        for
        exploitation technologies in the biomedical field. Further, Mr. Weiner is
        on the
        board of Nanoset, LLC, an entity owned in part by Biomed Solutions, which
        is
        engaged in the development of nanomagnetic particle coatings. Messrs. Weiner
        and
        Kenzie and a third member of our Board, Steven Katz, are also on the Board
        of,
        and Mr. Weiner and a fourth member of our Board, John Lanzafame, are executive
        officers of, Biophan Technologies, Inc., a company with whose wholly-owned
        subsidiary, Nanolution, LLC, we have a joint research and development agreement
        for the development of drug delivery and medical applications utilizing
        nanotechnology discoveries.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
        to
        joining NN Research, our President, Michael Riedlinger, advised Biophan
        Technologies on licensing and technological development projects as an
        independent consultant. He has continued to provide such services to Biophan
        Technologies, and the cost of 20% of his base compensation is borne by Biophan
        Technologies. Our Chief Technology Officer, Sarah Cooper, also provides services
        to Biophan Technologies, and 50% of the cost of her base salary is borne
        by
        Biophan Technologies. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Because
        of the nature of our business and the business of these other entities, the
        relationships of all of the members of our Board of Directors with these
        other
        entities may give rise to conflicts of interest with respect to certain matters
        affecting us. Potential conflicts may not be resolved in a manner that is
        favorable to us. We believe it is not possible to predict the precise
        circumstances under which future potential conflicts may arise and therefore
        intend to address potential conflicts on a case-by-case basis. Under Nevada
        law,
        directors have a fiduciary duty to act in good faith and with a view to the
        best
        interests of the corporation.</font></div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-20-</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
        Board and Committees of the Board</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        standing committees of the Board are the Audit Committee and the Compensation
        Committee. The Board does not currently have a nominating committee and has
        not
        established any specific procedure for selecting candidates for director.
        However, directors are currently nominated by a majority vote of the Board.
        There is also no established procedure for shareholder communications with
        members of the Board or the Board as a whole. However, shareholders may
        communicate with the investor relations department of the Company, and such
        communications are either responded to immediately or are referred to the
        president or chief financial officer of the Company for a response. The Board
        intends to form a nominating and corporate governance committee during the
        2006
        fiscal year. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Audit
        Committee</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Audit
        Committee is currently composed of Messrs. Katz (Chairman) , and Kenzie.
        The
        responsibilities of the Audit Committee will be more fully set forth in the
        Audit Committee Charter which the Board intends to adopt prior to the 2006
        Annual Meeting. When adopted, the Audit Committee Charter will be posted
        on our
        website at </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><u>www.naturalnano.com</u></em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        and
        shall include provisions governing the appointment, retention, compensation
        and
        oversight of, the work of the independent accountants, who report to, and
        are
        directly accountable to, the Committee. The Audit Committee reviews with
        the
        independent accountants the results of the audit engagement, approves
        professional services provided by the accountants including the scope of
        non-audit services, if any, and reviews the adequacy of our internal accounting
        controls. The Board has determined that Messrs. Katz and Kenzie meet the
        qualifications as &#8220;audit committee financial experts&#8221;. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Compensation
        Committee</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
        </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Compensation Committee is composed of Messrs Kenzie (Chairman), Weiner and
        Katz.
        The responsibilities of the Compensation Committee will be more fully set
        forth
        in the Compensation Committee Charter which the Board intends to adopt prior
        to
        the 2006 Annual Meeting. When adopted, the Compensation Committee Charter
        will
        be posted on our website at </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><u>www.naturalnano.com</u></em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        and
        shall include provisions governing the review of the Company&#8217;s compensation
        policies and the establishment of executive officer compensation, and the
        administration of the Company&#8217;s Stock Option Plan. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Compensation
        of the Board</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Directors
        who are employees of the Company do not receive additional compensation for
        serving on the Board or its committees. Non-employee directors, for their
        services as directors, are paid an annual cash fee of $8,000. In addition,
        non-employee directors are also eligible to receive an option grant for up
        to
        50,000 shares of our common stock at each annual stockholders meeting. All
        directors are reimbursed for their reasonable expenses incurred in attending
        Board meetings. Steven Katz receives an additional $3,000 per year for serving
        as Chairman of the Audit Committee. Otherwise, no additional compensation
        is
        paid to directors for serving as members of committees of the
        Board.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company maintains directors and officers liability insurance.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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          </div>
        </div>
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      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXECUTIVE
        COMPENSATION</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NN
        Research was incorporated on December 22, 2004 and did not have any employees
        for the fiscal year ended December 31, 2004. Set forth below is information
        relating to the current compensation of the Company&#8217;s executive officers, stated
        on an annualized basis. The date on which each officer&#8217;s employment commenced is
        set forth opposite his or her name. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -46.8pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SUMMARY
        COMPENSATION TABLE</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
      <div align="left">
        <table border="1" cellpadding="5" cellspacing="1" width="100%">

            <tr>
              <td colspan="2" valign="top" width="32%" style="BORDER-BOTTOM: #808080 thin solid">&#160;</td>
              <td colspan="2" valign="top" width="28%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Annual
                  Compensation</font></div>
              </td>
              <td colspan="2" valign="top" width="28%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Awards</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="bottom" width="20%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name
                  / Position</font></div>
              </td>
              <td valign="bottom" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payroll
                  Start Date</font></div>
              </td>
              <td valign="bottom" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross
                  Salary</font></div>
              </td>
              <td valign="bottom" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Eligible
                  Bonus</font></div>
              </td>
              <td valign="bottom" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restricted
                  Awards</font></div>
              </td>
              <td valign="bottom" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Securities
                  Options / SAR</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="20%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  Riedlinger/President</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1/1/05</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$135,000</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$30,000</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,500,000</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="20%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Kathleen
                  Browne/CFO</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7/1/05</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$135,000</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$20,000</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">400,000</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="20%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sarah
                  Cooper/CTO</font></div>
              </td>
              <td valign="top" width="12%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10/1/05</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$110,000</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$7,000</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">300,000</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Employment
        Contracts and Termination of Employment and Change-in-Control
        Arrangements</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
        of
        the Company&#8217;s executive officers was offered employment in a letter which set
        forth his or her compensation and provides that employment may be terminated
        at
        any time by either the Company or the executive officer upon 90 days&#8217; notice or
        by the Company immediately for cause or upon the executive officer&#8217;s death or
        disability. There are no arrangements between the Company and any of its
        executive officers for severance pay or for any payments or other compensation
        upon a change in control of the Company. All of our executives have signed
        confidentiality agreements and we have non-complete agreements in place with
        the
        Company's President and CTO.&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CERTAIN
        RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Registration
        Rights Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>and
        Other Registration Obligations</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NN
        Research entered into a certain Registration Rights Agreement on December
        22,
        2004 with Technology Innovations LLC, our principal stockholder which holds
        32,962,763 shares of our common stock,. We assumed NN Research&#8217;s obligations
        under the Registration Rights Agreement in connection with the Merger. Under
        the
        Registration Rights Agreement, we are required to use our reasonable best
        efforts to prepare and file with the SEC, and to cause to be declared effective,
        a registration statement on an appropriate form pursuant to the Securities
        Act
        of 1933 to permit the offer and resale by Technology Innovations, LLC of
        the
        shares held by it. We are obligated to keep such registration statement
        effective for a period of one year after it first becomes effective. All
        expenses incident to the performance of our obligations under the Registration
        Rights Agreement, including all registration fees and expenses, will be borne
        by
        the Company. The Registration Rights Agreement is filed herewith as Exhibit
        4.3
        and the foregoing description is qualified in its entirety by reference to
        such
        Exhibit.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        connection with the Merger, on November 29, 2005, we issued to SBI USA, LLC
        a
        warrant for the purchase of 2,250,000 shares of our common stock, in exchange
        for a warrant which had been issued to SBI by NN Research and which were
        cancelled pursuant to the Merger Agreement. Under the warrant, if we determine
        to register any shares of our common stock under the Securities Act of 1933
        in
        connection with a public offering of our common stock (other than under an
        employee benefit plan or in connection with a merger or similar transaction),
        we
        are required to include in such registration any shares of our common stock
        issuable to SBI under the warrant (or in certain other specified transactions).
        We have agreed to bear all expenses incurred by us or by SBI in connection
        with
        such registration. The warrant is filed herewith as Exhibit 4.5 and the
        foregoing description is qualified in its entirety by reference to such
        Exhibit.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-22-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        the
        Subscription Agreement pursuant to which NN Research issued the Convertible
        Notes that were converted, at the effective time of the Merger, into an
        aggregate of 10,469,600 shares of our common stock, NN Research agreed to
        use
        its best efforts to include the securities issued upon conversion of such
        Convertible Notes in any registration statement filed by NN Research under
        the
        Securities Act of 1933 in connection with a public offering of its common
        stock
        (other than under an employee benefit plan or in connection with a merger
        or
        similar transaction) for its own account or for the account of others. In
        the
        Merger Agreement, we assumed the obligations of NN Research with respect
        to such
        registration rights. All expenses incident to the performance of our
        obligations, including all registration fees and expenses, will be borne
        by the
        Company. The form of Subscription Agreement is filed herewith as Exhibit
        4.4 and
        the foregoing description is qualified in its entirety by reference to such
        Exhibit. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Joint
        Research Agreement</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        May
        25, 2005, NN Research entered into a joint research agreement with Nanolution,
        LLC to pursue the development of a new drug delivery application utilizing
        naturally occurring halloysite nanotechnologies. One of our directors, John
        Lanzafame, is President of Nanolution. Nanolution is a wholly-owned subsidiary
        of Biophan Technologies, Inc. and three of our directors (Messrs. Katz, Kenzie
        and Weiner) are directors of Biophan Technologies; Messrs. Lanzafame and
        Weiner
        are executive officers of Biophan Technologies. Under the joint research
        agreement, all medical uses and inventions arising from these efforts will
        be
        owned by Nanolution and all purification processes and non-medical applications
        will be owned by the Company. The joint research agreement is filed herewith
        as
        Exhibit 10.2 and the foregoing description is qualified in its entirety by
        reference to such Exhibit.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License
        Agreement</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        April
        27, 2005, Technology Innovations, LLC granted NN Research an exclusive,
        world-wide license, with right to sublicense, to use certain specified patent
        rights of Technology Innovations (the &#8220;Patent Rights&#8221;) as well as Technology
        Innovation&#8217; research and development information, unpatented inventions,
        know-how, trade secrets, and technical data in the</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">development,
        manufacture, use and sale of non-medical products employing halloysite
        microtubule processes, structures, compositions and applications. NN Research
        is
        required to make royalty payments to Technology Innovations based on the
        net
        sales of products utilizing the licensed technology and on the receipt of
        fees
        for the sublicensing of such technology. The license will expire upon the
        expiration or abandonment of the Patent Rights, but may be terminated earlier
        by
        Technology Innovations for (i) non-payment of royalties or other breach by
        NN
        Research of its obligations under the License Agreement or (ii) the failure
        of
        NN Research or any sublicense to make any sale of a product utilizing the
        licensed technology within five years after the effective date of the License
        Agreement. Technology Innovations is our principal stockholder and the holder
        of
        approximately 54% of our outstanding common stock. Two of our directors (Messrs.
        Kenzie and Weiner) are members and managers of Technology Innovations.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DES</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RIPTION
        OF SECURITIES</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following description of our capital stock is only a summary. It is subject
        in
        all respects to applicable Nevada law and to the provisions of our articles
        of
        incorporation and bylaws, as amended from time to time, copies of which have
        been or will be filed with the SEC. Please refer to these documents for more
        complete information. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Authorized
        Capital Stock</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Common
        Stock</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        are
        authorized to issue up to 100,000,000 shares of common stock with a par value
        of
        $0.001 per share. As of November&#160;29, 2005, there were 60,380,020 shares
        of
        our common stock issued and outstanding. All shares of common stock have
        equal
        rights and privileges with respect to voting, liquidation and dividend rights.
        Each share of common stock entitles the holder thereof to (a) one non-cumulative
        vote for each share held of record on all matters submitted to a vote of
        the
        stockholders; (b) to participate equally and to receive any and all such
        dividends as may be declared by the Board of Directors; and (c) to participate
        pro rata in any distribution of assets available for distribution upon
        liquidation. Holders of our common stock have no preemptive rights to acquire
        additional shares of common stock or any other securities. The common stock
        is
        not subject to redemption and carries no subscription or conversion
        rights.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-23-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Preferred
        Stock</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="002"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        are
        authorized to issue up to 10,000,000 shares of common stock with a par value
        of
        $0.001 per share. There are currently no shares of our preferred stock issued
        or
        outstanding. The Board of Directors has the flexibility to set new classes,
        series, and other terms and conditions of the preferred shares. Preferred
        shares
        may be issued from time to time in one or more series at the discretion of
        our
        Board of Directors. The Board has the authority to establish the number of
        shares to be included in each such series, and to fix the designation, powers,
        preferences and rights of the shares of each such series and the qualifications,
        limitations and restrictions thereof.</font></a></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Preferred
        shares may be issued in the future by the Board without further stockholder
        approval, for such purposes as the board deems in the best interest of our
        company, including future stock splits and split-ups, stock dividends, equity
        financings and issuances for acquisitions and business combinations. In
        addition, such authorized but unissued common and preferred shares could
        be used
        by the Board of Directors for defensive purposes against a hostile takeover
        attempt, including (by way of example) the private placement of shares or
        the
        granting of options to purchase shares to persons or entities sympathetic
        to, or
        contractually bound to support, management. We have no such present arrangement
        or understanding with any person. Further, the common and preferred shares
        may
        be reserved for issuance upon exercise of stock purchase rights designed
        to
        deter hostile takeovers, commonly known as a "poison pill". </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        flexibility granted to the board in specifying the rights and preferences
        of
        various series of preferred stock could similarly be used in designing classes
        of preferred stock which could act as an effective deterrent or defensive
        tool
        in a takeover situation including the creation of voting and other impediments
        which might frustrate persons attempting to gain control of our company.
        Such
        uses of authorized and unissued stock might make any takeover attempt more
        difficult and could deprive stockholders of the ability to realize above
        present
        market premiums, which often accompany such takeover attempts. There are
        currently no shares of preferred stock outstanding and we do not have any
        present intention of issuing any such shares in the immediate
        future.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PART
        II</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STOCK
        PRICE AND DIVIDEND INFORMATION; RELATED STOCKHOLDER MATTERS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stock
        Price</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        common stock is currently traded on the OTCBB as NaturalNano, Inc. under
        the
        symbol &#8220;NNAN.&#8221; Prior to December 1, 2005, our stock traded as Cementitious
        Materials, Inc. under the symbol &#8220;CTTM.&#8221; Because our </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
        have traded only on a limited and sporadic basis, there is no meaningful
        history
        of reported trades in the public&#160;market and we therefore do not include
        a
        price history of our shares. The market price of our common stock fluctuates.
        We
        encourage you to obtain current market price information for our common stock.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Holders</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        number of record holders of our common stock as of November&#160;29, 2005,
        was
        176; this number does not include an indeterminate number of shareholders
        whose
        shares are held by brokers in street name.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-24-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dividends</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        have
        never declared or paid any cash dividends on any class of our common stock.
        We
        currently intend to retain any future earnings to fund the development and
        growth of our business and currently do not anticipate paying cash dividends
        in
        the foreseeable future. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EQUITY
        COMPENSATION PLAN INFORMATION</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table shows information about securities authorized for issuance
        under
        our equity compensation plans as of November&#160;29, 2005: </font></div>
      <div>
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
                    of <strong>Securities</strong></strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
                    of</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>remaining
                    for future</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Securities
                    to</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Weighted-</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>issuance
                    under equity</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>be
                    issued upon</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>average
                    exercise</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>compensation
                    plans</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>exercise
                    of</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>price
                    of</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(excluding
                    securities</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>outstanding
                    options,</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>outstanding</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: medium none">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><strong><font size="2">reflected
                    in column
                    (a))</font></strong></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: #000000 thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(a)</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                <td colspan="2" valign="bottom" width="15%" style="BORDER-BOTTOM: #000000 thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(b)</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                <td align="left" colspan="2" valign="bottom" width="18%" style="BORDER-BOTTOM: #000000 thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(c)</strong></font></div>
                </td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equity
                    compensation plans approved by security holders</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,950,000</font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                </td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.10</font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                </td>
                <td align="right" valign="bottom" width="17%" style="BORDER-BOTTOM: #ccffcc"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,050,000</font></td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: #ffffff solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equity
                    compensation plans not approved by security holders</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: #000000 thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">none</font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                </td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: #000000 thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8211;</font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">
                </td>
                <td align="right" valign="bottom" width="17%" style="BORDER-BOTTOM: #000000 thin solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">none</font></td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: #ccffcc solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total</font></div>
                </td>
                <td width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 double">&#160;</td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,950,000</font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                </td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: #000000 double">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.10</font></div>
                </td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 double">
                </td>
                <td align="right" valign="bottom" width="17%" style="BORDER-BOTTOM: #000000 double"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,050,000</font></td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="bottom" width="45%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="right" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="right" valign="bottom" width="17%" style="BORDER-BOTTOM: medium none">&#160;</td>
                <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
              </tr>

          </table>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NATURALNANO,
        INC. 2005 INCENTIVE STOCK PLAN</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following is a brief summary of the NaturalNano, Inc. 2005 Incentive Stock
        Plan,
        a copy of which is filed herewith as Exhibit 4.1. The following summary is
        qualified in its entirety by reference to such Exhibit.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Types
        of Awards</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        incentive stock plan provides for the grant of non-statutory stock options,
        restricted stock, restricted stock units, stock appreciation rights, incentive
        stock options intended to qualify under Section 422 of the Internal Revenue
        Code
        of 1986, as amended (the &#8220;Code&#8221;) and other stock-based awards. No more than 50%
        of the total number of shares of common stock covered by the incentive stock
        plan may be issued pursuant to awards that are not options or stock appreciation
        rights.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Incentive
        Stock Options and Non-statutory Stock Options</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Optionees receive the right to purchase a specified number of shares of common
        stock at a specified option price and subject to such other terms and conditions
        as are specified in connection with the option grant. Options may not be
        granted
        at an exercise price less than the fair market value of the common stock
        on the
        date of grant. Options may not be granted for a term in excess of ten years.
        Outstanding options may not be amended to provide an exercise price per share
        which is lower than the then current exercise price per share of such
        outstanding options. The Board of Directors may not cancel any outstanding
        options and grant in substitution for such options new options under the
        incentive stock plan covering the same or a different number of shares of
        common
        stock and having an exercise price per share lower than the then current
        exercise price per share of the cancelled options. The Board of Directors
        will,
        however, have the power to amend stock options to convert them into stock
        appreciation rights and make other amendments to options, provided that the
        optionee must consent to such action unless the board determines that the
        action
        would not materially and adversely affect the optionee.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-25-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Restricted
        Stock and Restricted Stock Unit Awards</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Restricted stock awards entitle recipients to acquire shares of common stock,
        subject to our right to repurchase all or part of such shares from the recipient
        in the event that the conditions specified in the applicable award are not
        satisfied prior to the end of the applicable restriction period established
        for
        such award. Restricted stock unit awards entitle the recipient to receive
        shares
        of common stock to be delivered in the future subject to such terms and
        conditions on the delivery of the shares as the Board of Directors may
        determine. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restricted
        stock and restricted stock unit awards granted under the incentive stock
        plan
        may vest (a) solely on the basis of passage of time, (b) solely based on
        achievement of specified performance criteria or (c) upon the passage of
        time,
        subject to accelerated vesting if specified performance criteria are met.
        The
        Board of Directors may determine, at the time of grant, that restricted stock
        or
        restricted stock unit award being made to an officer will vest solely upon
        achievement of specified performance criteria designed to qualify for deduction
        under Section 162(m) of the Code. The performance criteria for each restricted
        stock or restricted stock unit award intended to so qualify for purposes
        of
        Section 162(m) of the Code will be based on one or more of the following
        measures: sales, earnings per share, return on net assets, return on equity,
        and
        customer service levels.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
        as
        noted below, (a) restricted stock and restricted stock units that vest solely
        on
        the basis of passage of time may vest no faster than ratably over three years;
        and (b) restricted stock and restricted stock units that vest based on
        achievement of specified performance criteria, or provide for accelerated
        vesting based upon achievement of specified performance criteria, may not
        vest
        earlier than the first anniversary of the date of grant. These vesting
        restrictions do not apply to restricted stock and restricted stock unit awards
        collectively with respect to up to 5% of the total number of shares of common
        stock covered by the incentive stock plan. In addition, the Board of Directors
        may make exceptions to the vesting limitations described above in the event
        of
        the recipient&#8217;s death, a change in control or other extraordinary circumstances
        specified in the incentive stock plan. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Stock
        Appreciation Rights</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        A stock
        appreciation right, or SAR, is an award entitling the holder on exercise
        to
        receive, at the election of the Board of Directors, an amount in cash or
        common
        stock or a combination thereof determined in whole or in part by reference
        to
        appreciation, from and after the date of grant, in the fair market value
        of a
        share of common stock. SARs may be based solely on appreciation in the fair
        market value of common stock or on a comparison of such appreciation with
        some
        other measure of market growth such as (but not limited to) appreciation
        in a
        recognized market index. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Other
        Stock-Based Awards</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Under
        the incentive stock plan, the Board of Directors has the right to grant other
        awards of common stock or awards otherwise based upon common stock or other
        property, including without limitation rights to purchase shares of common
        stock, having such terms and conditions as the board may determine.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Eligibility
        to Receive Awards</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employees,
        officers, directors, consultants, advisors and other service providers are
        eligible to be granted awards under the incentive stock plan. The maximum
        number
        of shares with respect to which awards may be granted to any participant
        under
        the incentive stock plan may not exceed 5 million shares per calendar
        year.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Administration</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        incentive stock plan is administered by the Board of Directors. The board
        has
        the authority to adopt, amend and repeal the administrative rules, guidelines
        and practices relating to the incentive stock plan and to interpret the plan&#8217;s
        provisions. The board may also delegate authority under the incentive stock
        plan
        to a committee of the Board of Directors. The board may also delegate authority
        under the incentive stock plan to one or more officers, except that the board
        will fix the terms of the awards to be granted by such officers and the maximum
        number of shares subject to awards that the officers may grant. No officer
        will
        be authorized to grant awards to himself or herself.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-26-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subject
        to any applicable delegation by the Board of Directors and any applicable
        limitations contained in the incentive stock plan, the Board of Directors
        selects the recipients of awards and determines:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  number of shares of common stock covered by options and the dates
                  upon
                  which such options become
                  exercisable;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  exercise price of options, which may not be less than 100% of the
                  fair
                  market value of common stock;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  duration of options, which may not exceed 10
                  years;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  terms of stock appreciation rights and the dates or conditions
                  upon which
                  such stock appreciation rights become
                  exercisable;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                  number of shares of common stock subject to any restricted stock,
                  restricted stock unit or other stock-based awards and the terms
                  and
                  conditions of such awards, including, if applicable, conditions
                  for
                  repurchase, issue price and repurchase
                  price.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        are
        required to make appropriate adjustments or substitutions in connection with
        the
        incentive stock plan and any outstanding awards to reflect stock splits,
        stock
        dividends, recapitalizations, spin-offs and other similar changes in
        capitalization to the extent the Board of Directors deems such adjustment
        or
        substitution to be necessary and appropriate. The incentive stock plan also
        contains provisions addressing the consequences of any &#8220;reorganization event,&#8221;
        which is defined as:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
                  Merger or consolidation of with or into another entity as a result
                  of
                  which all of the common stock is converted into or exchanged for
                  the right
                  to receive cash, securities or other property;
                  or</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
                  exchange of all of common stock for cash, securities or other property
                  pursuant to a share exchange transaction.
</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
        any
        award expires or is terminated, surrendered or canceled without having being
        fully exercised, is forfeited in whole or in part, or results in any common
        stock not being issued because (a) the award is settled for cash, or (b)
        shares
        are used to satisfy the exercise price or tax withholding obligation, the
        unused
        shares of common stock covered by such award will again be available for
        grant
        under the incentive stock plan, subject, however, in the case of incentive
        stock
        options, to any limitations under the Code. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Termination
        or Amendment</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
        award
        may be made under the incentive stock plan after the completion of ten years
        from the date on which the plan is approved by our stockholders, but awards
        previously granted may extend beyond that date. The Board of Directors may
        at
        any time amend, suspend or terminate the incentive stock plan, except that
        no
        award designated as subject to Section 162(m) of the Code by the Board of
        Directors after the date of such amendment shall become exercisable, realizable
        or vested, to the extent such amendment was required to grant such award,
        unless
        and until such amendment shall have been approved by our stockholders. In
        addition, without the approval of our stockholders, no amendment
        may:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">increase
                  the number of shares authorized under the incentive stock
                  plan;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">materially
                  increase the benefits provided under the incentive stock
                  plan;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">materially
                  expand the class of participants eligible to participate in the
                  incentive
                  stock plan;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">expand
                  the types of awards provided under the incentive stock plan;
                  or</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td style="WIDTH: 36pt">
              </td>
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">make
                  any other changes which require stockholder approval under the
                  rules of
                  the national securities market on which the shares of common stock
                  are
                  quoted.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-27-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
        award
        may be made that is conditioned on the approval of our stockholders of any
        amendment to the incentive stock plan. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Federal
        Income Tax Consequences</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following generally summarizes the United States federal income tax consequences
        that generally will arise with respect to awards granted under the incentive
        stock plan. This summary is based on the tax laws in effect as of the date
        of
        this Information Statement. Changes to these laws could alter the tax
        consequences described below. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Incentive
        Stock Options</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        A
        participant will not have income upon the grant of an incentive stock option.
        Also, except as described below, a participant will not have income upon
        exercise of an incentive stock option if the participant has been employed
        by
        our company, NaturalNano, or any other 50% or more-owned corporate subsidiary
        at
        all times beginning with the option grant date and ending three months before
        the date the participant exercises the option. If the participant has not
        been
        so employed during that time, then the participant will be taxed as described
        below under &#8220;Nonstatutory Stock Options.&#8221; The exercise of an incentive stock
        option may subject the participant to the alternative minimum tax.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
        participant will have income upon the sale of the stock acquired under an
        incentive stock option at a profit if sales proceeds exceed the exercise
        price.
        The type of income will depend on when the participant sells the stock. If
        a
        participant sells the stock more than two years after the option was granted
        and
        more than one year after the option was exercised, then all of the profit
        will
        be long-term capital gain. If a participant sells the stock prior to satisfying
        these waiting periods, then the participant will have engaged in a disqualifying
        disposition and a portion of the profit will be ordinary income and a portion
        may be capital gain. This capital gain will be long-term if the participant
        has
        held the stock for more than one year and otherwise will be short-term. If
        a
        participant sells the stock at a loss (sales proceeds are less than the exercise
        price), then the loss will be a capital loss. This capital loss will be
        long-term if the participant held the stock for more than one year and otherwise
        will be short-term. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Nonstatutory
        Stock Options</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        A
        participant will not have income upon the grant of a nonstatutory stock option.
        A participant will have compensation income upon the exercise of a nonstatutory
        stock option equal to the value of the stock on the day the participant
        exercised the option less the exercise price. Upon sale of the stock, the
        participant will have capital gain or loss equal to the difference between
        the
        sales proceeds and the value of the stock on the day the option was exercised.
        This capital gain or loss will be long-term if the participant has held the
        stock for more than one year and otherwise will be short-term. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Restricted
        Stock</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        A
        participant will not have income upon the grant of restricted stock unless
        an
        election under Section 83(b) of the Code is made within 30 days of the date
        of
        grant. If a timely 83(b) election is made, then a participant will have
        compensation income equal to the value of the stock less the purchase price.
        When the stock is sold, the participant will have capital gain or loss equal
        to
        the difference between the sales proceeds and the value of the stock on the
        date
        of grant. If the participant does not make an 83(b) election, then when the
        stock vests the participant will have compensation income equal to the value
        of
        the stock on the vesting date less the purchase price. When the stock is
        sold,
        the participant will have capital gain or loss equal to the sales proceeds
        less
        the value of the stock on the vesting date. Any capital gain or loss will
        be
        long-term if the participant held the stock for more than one year from the
        vesting date and otherwise will be short-term. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Restricted
        Stock Units</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        A
        participant will have income from a restricted stock unit equal to the
        difference of the fair market value of the stock on the date of delivery
        of the
        stock less the purchase price. A participant is not permitted to make a Section
        83(b) election for a restricted stock unit. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Stock
        Appreciation Rights and Other Stock-Based Awards</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        The tax
        consequences associated with stock appreciation rights and any other stock-based
        awards granted under the incentive stock plan will vary depending on the
        specific terms of such award. Among the relevant factors are whether or not
        the
        award has a readily ascertainable fair market value, whether or not the award
        is
        subject to forfeiture provisions or restrictions on transfer, the nature
        of the
        property to be received by the participant under the award and the participant&#8217;s
        holding period and tax basis for the award or underlying common stock.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Tax
        Consequences to Us. </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        will be no tax consequences to us except that we will be entitled to a deduction
        when a participant has compensation income. Any such deduction will be subject
        to the limitations of Section 162(m) of the Code.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-28-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LEGAL
        PROCEEDINGS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        are
        no material pending legal proceedings to which we are a party or to which
        any of
        our property is subject and, to the best of our knowledge, no such actions
        against us are contemplated or threatened.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RECENT
        SALES OF UNREGISTERED SECURITIES</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        November&#160;29, 2005, we issued an aggregate of 55,388,978 shares of
        our
        common stock in the Merger. The shares were issued in a private transaction
        to
        59 persons that were the former stockholders and note holders of NN Research.
        We
        also issued, pursuant to the Merger Agreement, a warrant for the purchase
        of
        2,250,000 shares of our common stock to one investor, in exchange for a warrant
        for the purchase of an identical number of shares of NN Research common stock
        that was cancelled in the Merger. The issuances were made in reliance on
        an
        exemption from registration under the Securities Act of 1933 pursuant to
        Section
        4(2) of that Act</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INDEMNIFICATION
        OF DIRECTORS AND OFFICERS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        articles of incorporation provide that no director or officer shall have
        any
        liability to the company if the person acted in good faith and with the same
        degree of care and skill as prudent person in similar circumstances.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        articles of incorporation and bylaws provide that we will indemnify our
        directors and officers and may indemnify our employees or agents to the fullest
        extent permitted by law against liabilities and expenses incurred in connection
        with litigation in which they may be involved because of their offices. However,
        nothing in our articles of incorporation or bylaws protects or indemnifies
        a
        director, officer, employee or agent against any liability to which he would
        otherwise be subject by reason of willful misfeasance, bad faith, gross
        negligence or reckless disregard of the duties involved in the conduct of
        his or
        her office. To the extent that a director has been successful in defense
        of any
        proceeding, the Nevada Revised Business Corporations Act provides that he
        or she
        shall be indemnified against reasonable expenses incurred in connection with
        the
        proceeding. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PART
        F/S</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
        Item&#160;9.01: Financial Statements and Exhibits below. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="003"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PART
        III</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
        Item&#160;9.01: Financial Statements and Exhibits below. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="004"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;3.02
        Unregistered Sale of Equity Securities.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">&#160;</div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        November&#160;29, 2005, effective upon the closing of the Merger, we issued
        55,388,978 shares of our common stock to the former stockholders and note
        holders of NN Research. In connection with the Merger, we also issued a warrant
        to SBI USA, LLC, the holder of an outstanding warrant for the purchase of
        NN
        Research common stock. Reference is made to the disclosure set forth under
        Item&#160;2.01 of this Current Report on Form 8-K which is incorporated
        herein
        by reference.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-29-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="005"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;4.01
        Changes in Registrant&#8217;s Certifying Accountant.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        November&#160;29, 2005, after the closing of the Merger, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">HJ
&amp;
        Associates, LLC, Certified Public Accountants (&#8220;HJ&#8221;), resigned as our
        independent certifying accountants, effective November 29, 2005. The termination
        of our relationship with HJ was unanimously accepted by the Audit Committee
        of
        our Board of Directors on November 29, 2005. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">HJ&#8217;s
        audit report to our financial statements for the years ended December 31,
        2004
        and 2003, includes a modification expressing substantial doubt as to the
        Company's ability to continue as a going concern because we had not established
        an ongoing source of revenues sufficient to cover our operating costs. Our
        ability to continue as a going concern is dependent on obtaining adequate
        capital to fund future operating losses until we become profitable. The audit
        report contains no other adverse opinion, disclaimer of opinion or modification
        as to uncertainty, audit scope or accounting principle. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font id="TAB1" style="MARGIN-LEFT: 18pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        connection with its audit for the last two fiscal years and the interim periods
        until the date of termination, there have been no disagreements with HJ on
        any
        matter of accounting principles or practices, financial statement disclosure,
        or
        auditing scope or procedures which, if not resolved to the satisfaction of
        HJ,
        would have caused it to make reference to the subject matter of the disagreement
        in connection in its report on the financial statements. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        our two most recent fiscal years and through November 29</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        2005</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        there
        have been no reportable events as set forth in Regulation S-B, Item
        304(a)(1)(iv). We have provided HJ with a copy of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form&#160;8-K</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and
        requested that it furnish us with a letter addressed to the Securities and
        Exchange Commission stating whether or not HJ agrees with the above statements.
        A copy of the letter provided to us by HJ in response to this request is
        filed
        as Exhibit 16.1 to this Form 8-K. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Also
        on
        November 29, 2005, the Audit Committee unanimously approved a resolution
        to
        engage </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Goldstein
        Golub Kessler LLP</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        Certified Public </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accountants
        (&#8220;GGK&#8221;)</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        to
        become our new independent certifying accountants. Prior to the Merger, GGK
        had
        served as the independent certifying accountants of NN Research from its
        inception. From the date of inception of NN Research and through November
        29,
        2005, we have not consulted with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GGK</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        regarding:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;the
        application of accounting principles to a specified transaction, either
        completed or proposed, or the type of audit opinion that might be rendered
        on
        our financial statements, and no written report or oral advice was provided
        to
        us by concluding there was an important factor to be considered by us in
        reaching a decision as to an accounting, auditing or financial reporting
        issue;
        or </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;any
        matter
        that was the subject of a disagreement, as that term is defined in Item
        304(a)(1)(iv) of Regulation S-B and the related instructions thereto, or
        a
        reportable event, as set forth in Item 304(a)(1)(iv) of Regulation
        S-B.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="006"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;5.01
        Changes in Control of Registrant.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
        is made to the disclosure set forth under Item&#160;2.01 of this Current
        Report
        on Form 8-K, which disclosure is incorporated herein by reference. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="007"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;5.02
        Departure of Directors or Principal Officers; Election of Directors; Appointment
        of Principal Officers.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        connection with the closing of the Merger, all of the Company&#8217;s incumbent
        officers and directors resigned as of November&#160;29, 2005, the effective
        date
        of the Merger. On November 29, 2005, the following persons were elected to
        our
        Board of Directors: Steven Katz, Ross B. Kenzie, John F. Lanzafame, Michael
        Riedlinger and Michael L. Weiner. Also, on November 29, 2005, the following
        persons were elected to the offices indicated after their names: Michael
        Riedlinger (President), Kathleen A. Browne (Chief Financial Officer, Treasurer
        and Secretary), and Sarah Cooper (Chief Technology Officer). Reference is
        made
        to the disclosure set forth under Item 2.01 of this Current Report on Form
        8-K,
        which disclosure is incorporated herein by reference.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="008"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;5.03
          Amendments to Articles of Incorporation or Bylaws</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          November&#160;29, 2005, we amended our articles of incorporation, (i)
          to change
          of our name from Cementitious Materials, Inc. to NaturalNano, Inc. and
          (ii) to
          increase our authorized capitalization to 100,000,000 shares of common
          stock and
          10,000,000 shares of preferred stock. A copy of the Certificate of Amendment
          to
          our Articles of Incorporation is filed as Exhibit 3.2 to this Report and
          the
          foregoing description of the amendment is qualified in its entirety by
          reference
          to such Exhibit.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font size="2">On
          December 5, 2005, we filed Restated Articles of
          Incorporation. The Restated Articles restated our corporate charter to
          reflect
          all prior amendments, but did not effect any further amendment. A copy
          of our
          Restated Articles of Incorporation is filed as Exhibit 3.1 to this Report
          on
          Form 8-K.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="009"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;5.06
          Change in Shell Company Status</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
          is made to the disclosure set forth under Item&#160;2.01 and Item&#160;5.01
          of
          this Current Report on Form 8-K, which disclosure is incorporated herein
          by
          reference. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="center">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-30-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="3">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="left">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item&#160;9.01
        Financial Statements and Exhibits.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Financial
                  statements of businesses acquired. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
        Financial Statements beginning at Page F-1</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                  forma financial information.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
        Unaudited Pro Forma Condensed Financial Statements of NaturalNano, Inc. filed
        herewith as Exhibit 99.1. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibits.
                  </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="left">
        <table border="1" cellpadding="5" cellspacing="1" width="100%">

            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
                  Number</strong></font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement
                  and Plan of Merger among NaturalNano, Inc., Cementitious Materials,
                  Inc.
                  and Cementitious Acquisitions, Inc. </font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>1</sup></font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restated
                  Articles of Incorporation*<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;</font>&#160;</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
                  of Amendment of Articles of Incorporation*</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.3</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By-laws
                  </font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>2</sup></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1
                  #</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NaturalNano,
                  Inc. 2005 Incentive Stock Plan </font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><sup>3</sup></font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2
                  #</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                  of Non-Qualified Stock Option Agreement *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registration
                  Rights Agreement dated as of December 22, 2004 between NaturalNano,
                  Inc.
                  and Technology Innovations, LLC *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                  of Subscription Agreement for the Purchase of Convertible Notes
                  of
                  NaturalNano, Inc. *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
                  issued to SBI USA, LLC *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">License
                  Agreement between Technology Innovations, LLC and NaturalNano,
                  Inc. dated
                  as of April 27, 2005 (filed in redacted form pursuant to a request
                  for
                  confidential treatment filed separately with the Securities and
                  Exchange
                  Commission) *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Joint
                  Research Agreement between Nanolution, LLC and NaturalNano Inc.
                  dated as
                  of May 25, 2005 *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3
                  #</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                  Letter of Michael Riedlinger and Amendment No. 1 thereto
                  *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4
                  #</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                  Letter of Kathleen A. Browne and Amendment No. 1 thereto
                  *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5
                  #</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                  Letter of Sarah Cooper *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Letter
                  on Change in Certifying Accountant *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subsidiaries
                  *</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consent
                  of Goldstein Golub Kessler LLP</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                  Certified Public </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accountants*</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="17%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</font></div>
              </td>
              <td align="left" valign="top" width="57%" style="BORDER-BOTTOM: #808080 thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unaudited
                  Pro Forma Condensed Financial Statements of NaturalNano,
                  Inc.*</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>&#160;</div>
        <div>
          <hr style="COLOR: #000000" align="left" noshade size="1" width="15%">
        </div>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Filed
                  herewith</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">#</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">May
                  be deemed a compensatory plan or
                  arrangement</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                  by reference to Exhibit 2.1 to Current Report on Form 8-K dated
                  September
                  26, 2005</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                  by reference to Exhibit 3.2 to Form 10-SB filed July 3,
                  2002</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></td>
              <td align="left">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                  by reference to Appendix C to Information Statement on Schedule
                  14C filed
                  November 8, 2005</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="center">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-31-</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="left">
            </div>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><a name="011"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURES</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a></div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;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 hereunto
        duly authorized. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr valign="top" bgcolor="#ffffff">
              <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NATURALNANO,
                INC.</strong></font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dated:&#160;
                December 5, 2005</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:&#160;&#160;</font></td>
              <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/&#160;Michael
                Riedlinger</font></td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="2"><font style="FONT-FAMILY: Times New Roman" size="1">&#160;</font></td>
              <td align="left">
                <hr style="COLOR: #000000" align="left" noshade size="2" width="80%">
              </td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td>
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  Riedlinger</font></div>
                <div><font size="2">President</font></div>
              </td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="2">&#160;</td>
              <td>&#160;</td>
            </tr>
            <tr valign="top" bgcolor="#ffffff">
              <td colspan="3" width="0">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div>&#160;</div>
        <div>&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">-32-</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</strong></font></div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
            the
            Board of Directors</font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NaturalNano
            Inc.</font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
            have
            audited the accompanying balance sheet of NaturalNano Inc. (a development
            stage
            company) (an entity controlled by Technology Innovations, LLC) as of
            December
            31, 2004, and the related statements of operations, stockholder&#8217;s equity and
            cash flows for the period from December 22, 2004 (inception) to December
            31,
            2004. These financial statements are the responsibility of the Company's
            management. Our responsibility is to express an opinion on these financial
            statements based on our audit.</font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
            conducted our audit in accordance with the standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            financial
            statements are free of material misstatement. An audit includes examining,
            on a
            test basis, evidence supporting the amounts and disclosures in the financial
            statements. An audit also includes assessing the accounting principles
            used and
            significant estimates made by management, as well as evaluating the overall
            financial statement presentation. We believe that our audit provides
            a
            reasonable basis for our opinion.</font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
            our
            opinion, the financial statements referred to above present fairly, in
            all
            material respects, the financial position of NaturalNano Inc. as of December
            31,
            2004 and the results of its operations and its cash flows for the period
            from
            December 22, 2004 to December 31, 2004 in conformity with United States
            generally accepted accounting principles.</font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>/s/
            GOLDSTEIN GOLUB KESSLER LLP</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
            York,
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          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">August
            15, 2005, except for Note 12,</font></div>
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            to
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          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
          <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
            <div id="FTR">
              <div id="GLFTR" style="WIDTH: 100%" align="left">
              </div>
            </div>
            <div id="PN" style="PAGE-BREAK-AFTER: always">
              <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-1</font></div>
              <div style="WIDTH: 100%; TEXT-ALIGN: center">
                <hr style="COLOR: black" noshade size="3">
              </div>
            </div>
            <div id="HDR">
              <div id="GLHDR" style="WIDTH: 100%" align="right">
              </div>
            </div>
          </div>
        </div>
        <div>&#160;</div>
        <div>
          <div>
            <div>
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td colspan="9" valign="top" width="82%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
                        Inc.</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td colspan="9" valign="top" width="82%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
                        Development Stage Company)</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td align="right" colspan="9" valign="top" width="82%">&#160;</td>
                  </tr>
                  <tr>
                    <td align="right" colspan="9" valign="top" width="82%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>BALANCE
                        SHEET</strong></font></div>
                    </td>
                  </tr>

              </table>
            </div>
            <div>&#160;</div>
            <div>
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>September
                        30,</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                        31,</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2005</strong></font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2004</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(UNAUDITED)</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;&#160;&#160;&#160;&#160;
</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Assets</strong></font></td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Current
                      assets:</font></td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
                        and cash equivalents</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
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                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,698,330</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prepaid
                        assets</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">250,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
                        current assets</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">24,038</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                        current assets</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,972,368</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Property
                        and equipment, net</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29,346</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Investments</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">300,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                        assets</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,301,714</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Liabilities
                        and Stockholder's Equity (Deficiency)</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Liabilities
                        </strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Current
                        liabilities:</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accounts
                        Payable </font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">119,338</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accrued
                        Payroll </font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">112,604</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accrued
                        Expenses</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">175,093</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Due
                        to Related Parties</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Convertible
                        Bridge Notes</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,156,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">&#160;&#160;&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                        current liabilities</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,563,035</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
                        Liability</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">&#160;&#160;&#160;&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                        Liabilties</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,598,035</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stockholder's
                        Equity (Deficiency)</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Common
                        stock - $.01 par value:</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Authorized
                        30,000,000 shares</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Issued
                        and outstanding 10,000,000 shares</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additional
                        Paid In Capital</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">383,083</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deficit
                        accumulated in the development stage</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,779,404</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                        stockholder's equity (deficiency)</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,296,321</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">92,664</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="71%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
                        liabilities and stockholder's equity (deficiency)</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,301,714</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">125,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%">&#160;</td>
                    <td width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="11%">&#160;</td>
                    <td align="left" valign="bottom" width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="11%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="71%">&#160;</td>
                    <td width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="11%">&#160;</td>
                    <td align="left" valign="bottom" width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="11%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                  </tr>

              </table>
            </div>
          </div>
        </div>
        <div>
          <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
            notes
            to financial statements</font></div>
        </div>
        <div>&#160;</div>
        <div>&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-2</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div>
        <div>&#160;</div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div>
            <div>
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td colspan="8" valign="top" width="76%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
                        Inc.</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td colspan="8" valign="top" width="76%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
                        Development Stage Company)</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td align="right" colspan="8" valign="top" width="76%">&#160;</td>
                  </tr>
                  <tr>
                    <td align="right" colspan="8" valign="top" width="76%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STATEMENT
                        OF OPERATIONS</strong></font></div>
                    </td>
                  </tr>

              </table>
            </div>
            <div>&#160;</div>
            <div>
              <div align="left">
                <table cellpadding="0" cellspacing="0" width="100%">

                    <tr>
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
                          inception</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    </tr>
                    <tr>
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                          the nine months</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
                          inception</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                          22, 2004</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    </tr>
                    <tr>
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ending</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                          22, 2004</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">through</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    </tr>
                    <tr>
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>September
                          30, 2005</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">through</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>September
                          30, 2005</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    </tr>
                    <tr>
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black thin solid">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNAUDITED</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black thin solid">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                          31, 2004</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black thin solid">
                        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNAUDITED</strong></font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    </tr>
                    <tr>
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Operating
                          expenses:</strong></font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
                          and development (see note "a")</font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                      </td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">293,492</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                      </td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,000</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                      </td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">298,492</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
                          and administrative (see note "b")</font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,597,065
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,336
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,599,401
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,890,557
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7,336
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,897,893
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
                          (income) expense:</strong></font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
                          expense,net</font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,511
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1,511
                          </font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Investment
                          income</font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(120,000</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">&#160;&#160;&#160;&#160;
                        &#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(120,000</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(118,489</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(118,489</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                          loss</strong></font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($1,772,068</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($7,336</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($1,779,404</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Loss
                          per common share - basic and diluted</strong></font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($0.18</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($0.00</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                      </td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    </tr>
                    <tr bgcolor="#ffffff">
                      <td valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    </tr>
                    <tr bgcolor="#ccffcc">
                      <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                        <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Weighted
                          average shares outstanding</strong></font></div>
                      </td>
                      <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                        <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
                      </td>
                      <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                      <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                      <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    </tr>

                </table>
              </div>
              <div>&#160;</div>
              <div>
                <div>
                  <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                      <tr valign="top" style="LINE-HEIGHT: 1.25">
                        <td align="left" style="WIDTH: 27pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></td>
                        <td align="left">
                          <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
                            and development expenses include stock based compensation
                            of
                            $17,500.</font></div>
                        </td>
                      </tr>

                  </table>
                </div>
              </div>
              <div>
                <div>
                  <div>
                    <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                        <tr valign="top" style="LINE-HEIGHT: 1.25">
                          <td align="left" style="WIDTH: 27pt">
                            <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></div>
                          </td>
                          <td align="left">
                            <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
                              and administrative expense includes stock based compensation
                              of
                              $140,583.</font></div>
                          </td>
                        </tr>

                    </table>
                  </div>
                  <div>
                    <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                        <tr valign="top" style="LINE-HEIGHT: 1.25">
                          <td align="left" style="WIDTH: 27pt">&#160;</td>
                          <td align="left">&#160;</td>
                        </tr>

                    </table>
                  </div>
                  <div>
                    <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                        <tr valign="top" style="LINE-HEIGHT: 1.25">
                          <td align="left" style="WIDTH: 27pt">&#160;</td>
                          <td align="left">&#160;</td>
                        </tr>

                    </table>
                  </div>
                </div>
              </div>
              <div>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
                  notes
                  to financial statements</font></div>
              </div>
            </div>
          </div><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-3</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div>
            <div>
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td colspan="8" valign="top" width="78%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
                        Inc.</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td colspan="8" valign="top" width="78%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
                        Development Stage Company)</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td colspan="8" valign="top" width="78%">&#160;</td>
                  </tr>
                  <tr>
                    <td colspan="8" valign="top" width="78%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STATEMENT
                        OF STOCKHOLDER'S EQUITY (DEFICIENCY)</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td colspan="8" valign="top" width="78%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Period
                        from December 22, 2004 (inception) to September 30,
                        2005</strong></font></div>
                    </td>
                  </tr>

              </table>
            </div>
            <div>&#160;</div>
            <div>
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td valign="bottom" width="43%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Deficit
                        Accumulated</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="43%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Additional</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>during
                        the </strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stockholder's</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="right" colspan="5" valign="bottom" width="21%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Common
                        Stock</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Paid-in</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Development</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Equity</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Shares</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Amount</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Capital</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stage</strong></font></div>
                    </td>
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                    <td align="right" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: black thin solid">
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
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                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                        22, 2004 </strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000
                        shares issued for cash $.01 per share</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff solid">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                        loss from inception through December 31, 2004</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">&#160;
                      &#160;&#160; &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">&#160;
                      &#160;&#160; &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">&#160;
                      &#160;&#160; &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($7,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Balance
                        at December 31, 2004</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(7,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">92,664
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Unaudited:</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
                        issued for 2,250,000 shares of common stock for services
                        received</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">225,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">225,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Grant
                        of 1,580,830 stock options for services </font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">158,083
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">158,083
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff solid">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                        loss for nine months ending September 30, 2005</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">&#160;
                      &#160;&#160; &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">&#160;
                      &#160;&#160; &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,772,068</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #000000 thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,772,068</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Balance
                        at September 30, 2005</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">383,083</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="9%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                    <td align="right" valign="bottom" width="9%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="9%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="9%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="9%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="9%">&#160;</td>
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            notes
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        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
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          <div id="HDR">
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div>
            <div>
              <table cellpadding="0" cellspacing="0" width="100%">

                  <tr>
                    <td colspan="10" valign="top" width="85%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
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                  </tr>
                  <tr>
                    <td colspan="10" valign="top" width="85%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
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                  <tr>
                    <td valign="top" width="3%">&#160;</td>
                    <td valign="top" width="6%">&#160;</td>
                    <td valign="top" width="6%">&#160;</td>
                    <td valign="top" width="19%">&#160;</td>
                    <td valign="top" width="6%">&#160;</td>
                    <td valign="top" width="13%">&#160;</td>
                    <td valign="top" width="4%">&#160;</td>
                    <td valign="top" width="12%">&#160;</td>
                    <td valign="top" width="4%">&#160;</td>
                    <td valign="top" width="12%">&#160;</td>
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                  <tr>
                    <td colspan="10" valign="top" width="85%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STATEMENT
                        OF CASH FLOWS</strong></font></div>
                    </td>
                  </tr>
                  <tr>
                    <td colspan="10" valign="top" width="85%">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNAUDITED</font></div>
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            <div>&#160;</div>
            <div align="left">
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                  <tr>
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
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                        inception</font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                        the nine months</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
                        inception</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                        22, 2004</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                        22, 2004</strong></font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">through</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="47%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>September
                        30, 2005</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">through</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: medium none">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: medium none">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>September
                        30, 2005</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: medium none">&#160;</td>
                  </tr>
                  <tr>
                    <td valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNAUDITED</strong></font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                        31, 2004</strong></font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: black thin solid">
                      <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNAUDITED</strong></font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cash
                      flows from operating activities:</strong></font></td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" colspan="2" valign="bottom" width="14%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                        loss</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($1,772,068</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($7,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($1,779,404</font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
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                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Adjustments
                        to reconcile net loss to net cash used in operating
                        activities:</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Depreciation</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,574
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,574
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Issuance
                        of warrant for services</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">225,000
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">225,000
                        </font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Grant
                        of stock options for services</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">158,083
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">158,083
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Change
                        in market value of Atlas warrant</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(120,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(120,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Receipt
                        of Atlas Mining warrant</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(180,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(180,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Changes
                        in operating assets and liabilities:</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Increase
                        ) in Prepaid assets</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(125,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(125,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(250,000</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Increase)
                        in Other current assets</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(24,038</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(24,038</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Increase
                        in Accounts Payable, Accrued </font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payroll
                        and Accrued Expenses</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">407,035
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">407,035
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Increase
                        in Other Liabilities</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35,000
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">&#160;&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35,000
                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                        cash used in operating activities</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,393,414</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(132,336</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1,525,750</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                        cash used in investing activity - </strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Purchase
                        of property and equipment</font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(31,920</font></div>
                    </td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(31,920</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                    </td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cash
                        flows from financing activities:</strong></font></div>
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
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                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32,336
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
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                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Repayment
                        of Advances from Related Parties</font></div>
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                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(427,637</font></div>
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                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(427,637</font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
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                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Issuance
                        of Convertible Notes</font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4,156,000
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">
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                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Issuance
                        of Common Stock</font></div>
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                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">&#160;&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">100,000
                        </font></div>
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                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
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                        </font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black thin solid">
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                        </font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #000000 thin solid">&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #000000 thin solid">&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #000000 thin solid">&#160;&#160;&#160;
                      &#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
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                  <tr bgcolor="#ccffcc">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Change
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                        period</strong></font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,698,330</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                    </td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,698,330</font></div>
                    </td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                      <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Non-cash
                        investing activity:</strong></font></div>
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                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ccffcc solid">
                      <div style="MARGIN-LEFT: 18pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Receipt
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                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
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                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">180,000</font></div>
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                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
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                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: black double">
                      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">180,000</font></div>
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                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc solid">&#160;</td>
                  </tr>
                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%" style="BORDER-BOTTOM: #ffffff">
                    </td>
                    <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="right" valign="bottom" width="13%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                    <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
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                  <tr bgcolor="#ffffff">
                    <td align="left" valign="bottom" width="47%">&#160;</td>
                    <td width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="13%">&#160;</td>
                    <td align="left" valign="bottom" width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="13%">&#160;</td>
                    <td align="left" valign="bottom" width="2%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
                    <td align="right" valign="bottom" width="13%">&#160;</td>
                    <td align="left" valign="bottom" width="1%">&#160;</td>
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          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
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          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
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          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
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        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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                <tr valign="top" style="LINE-HEIGHT: 1.25">
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                  <td>&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table cellpadding="0" cellspacing="0" id="list" width="100%">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="right" style="WIDTH: 36pt">&#160;</td>
                  <td>&#160;</td>
                </tr>

            </table>
          </div>
          <div>
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                      BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
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          balance sheet as of September 30, 2005 and the statement of operations,
          stockholders&#8217; equity (deficiency) and cash flows for the nine month period ended
          September 30, 2005 and the period from December 22, 2004 (inception) to
          September 30, 2005 have been prepared by NaturalNano, Inc. (&#8220;the Company&#8221;) and
          are unaudited. In the opinion of management, all adjustments (consisting
          of
          normal recurring adjustments) necessary to present fairly the financial
          position
          at September 30, 2005 and the results of operations and cash flows for
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          periods ended September 30, 2005 have been included. The results of operations
          for the interim periods presented herein are not necessarily indicative
          of the
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          Company was incorporated under the laws of the State of Delaware on December
          22,
          2004 and as a result of the merger with Cementitious Materials, Inc. (described
          in Note 12 below) changed its domicile to Nevada on November 29, 2005.
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          Company, located in West Henrietta, New York, is a development stage company
          engaged in the discovery, refinement and commercialization of naturally
          occurring nanoscale materials. The Company&#8217;s current activities are directed
          toward research, development, production and marketing of its proprietary
          technologies relating to the extraction and separation of nanotubes from
          halloysite clay and the development of related commercial applications
          for:</font></div>
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          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

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                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">material
                      additives for polymers, plastics and
                      composites</font></div>
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                </tr>

            </table>
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              <tr valign="top" style="LINE-HEIGHT: 1.25">
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                <td>&#160;</td>
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          </table>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

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                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cosmetics
                      and other personal care
                      products</font></div>
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                </tr>

            </table>
          </div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="right" style="WIDTH: 108pt">&#160;</td>
                <td>&#160;</td>
              </tr>

          </table>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
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                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">absorbent
                      materials and</font></div>
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                </tr>

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        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="right" style="WIDTH: 108pt">&#160;</td>
                <td>&#160;</td>
              </tr>

          </table>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
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                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">pharmaceutical
                      and medical device additives.</font></div>
                  </td>
                </tr>

            </table>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company is in the development stage and is expected to remain so for at
          least
          the next twelve months. The Company has not generated any revenues since
          its
          inception nor is it expected to do so in the near future. The Company&#8217;s ability
          to continue in business is dependent upon obtaining sufficient financing
          or
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            </div>
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            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
            <div style="WIDTH: 100%" align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -9.35pt" align="left">&#160;</div>
            </div>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
          Inc.</strong></font><br></div>
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          Development Stage Company)</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
          related to the nine month period ending September 30, 2005 is
          unaudited</strong></font></div>
        <div align="center">
          <table bgcolor="#ffffff" cellpadding="0" cellspacing="0" width="100%">

              <tr bgcolor="#ffffff">
                <td width="50%">&#160;</td>
                <td width="50%">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td width="50%">&#160;</td>
                <td width="50%">&#160;</td>
              </tr>

          </table>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cash
          Equivalents</strong></font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash
          equivalents consist of money market securities with a maturity of three
          months
          or less when purchased. Cash equivalents are stated at cost plus accrued
          interest, which approximates market value.</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Concentration
          of Credit Risk</strong></font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company maintains cash in bank deposit accounts which, at times, exceed
          federally insured limits. The Company has not experienced any losses on
          these
          accounts.</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
          &amp; Development</strong></font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Research
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          Capital assets acquired in support of research and development are capitalized
          and depreciated over their estimated useful life and related depreciation
          expense is included in research and development expense. </font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Property
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Property
          and equipment, at cost, consists of the following:</font></div>
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          <div align="left">
            <table cellpadding="0" cellspacing="0" width="65%">

                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="30%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Useful
                      Life</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="30%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Furniture
                      &amp; Office Equipment</font></div>
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                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16,655</font></div>
                  </td>
                  <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5
                      years</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="30%" style="BORDER-BOTTOM: #ffffff solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Computers
                      and Software</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,265</font></div>
                  </td>
                  <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3
                      years</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="30%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31,920</font></div>
                  </td>
                  <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="30%" style="BORDER-BOTTOM: #ffffff solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less:
                      Accumulated Depreciation</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2,574</font></div>
                  </td>
                  <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="30%" style="BORDER-BOTTOM: #ccffcc solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Property
                      and equipment, net</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
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                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">29,346</font></div>
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                  <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc thin solid">&#160;</td>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Depreciation
          of property and equipment is provided on a straight-line basis over the
          estimated useful lives of the related assets.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Costs
          of
          internally developed intellectual property rights with indeterminate lives
          are
          expensed as incurred.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Deferred
          Taxes</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deferred
          tax assets and liabilities are recognized for future tax consequences
          attributable to differences between the financial statement carrying amounts
          of
          existing assets and liabilities and their respective tax bases. Deferred
          tax
          assets and liabilities are measured using enacted rates expected to apply
          when
          the differences are expected to be realized. A valuation allowance is recognized
          if it is anticipated that some or all of the deferred tax asset may not
          be
          realized.</font></div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-7</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
            <div style="WIDTH: 100%" align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -9.35pt" align="left">&#160;</div>
            </div>
          </div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
          Inc.</strong></font><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
          Development Stage Company)</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
          TO FINANCIAL STATEMENTS</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
          related to the nine month period ending September 30, 2005 is
          unaudited</strong></font></div>
        <div align="center">
          <table bgcolor="#ffffff" cellpadding="0" cellspacing="0" width="100%">

              <tr bgcolor="#ffffff">
                <td width="50%">&#160;</td>
                <td width="50%">&#160;</td>
              </tr>
              <tr bgcolor="#ffffff">
                <td width="50%">&#160;</td>
                <td width="50%">&#160;</td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Loss
          Per Share</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 options and warrants outstanding
          during
          the period. Shares to be issued upon the exercise of the outstanding options
          and
          warrants are not included in the computation of diluted loss per share
          as their
          effect is anti-dilutive. There were 7,200,000 shares underlying outstanding
          options, warrants and 10,469,600 shares resulting from convertible debt
          which
          have been excluded from the calculation at September 30, 2005.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Estimates</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          preparation of financial statements in conformity with generally accepted
          accounting principles requires the use of estimates by management. Actual
          results could differ from these estimates.</font></div>
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        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stock
          Options</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company has elected to apply Accounting Principles Board (&#8220;APB&#8221;) Opinion No. 25,
          Accounting for Stock Issued to Employees, and related interpretations in
          accounting for its stock options issued to employees (intrinsic value)
          and has
          adopted the disclosure-only provisions of Statement of Financial Accounting
          Standards (&#8220;SFAS&#8221;) No. 123, Accounting for Stock-Based Compensation. Had the
          Company elected to recognize compensation cost based on the fair value
          of the
          options granted at the grant date as prescribed by SFAS No. 123, the Company&#8217;s
          net loss and loss per common share for the nine month period ending September
          30, 2005 would have been as follows:</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div align="left">
            <table border="0" cellpadding="0" cellspacing="0" width="65%">

                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                  <td align="right" valign="bottom" width="11%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                      loss- as reported</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($
                      1,772,068</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ffffff">
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                    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deduct:
                      Total stock-based employee compensation expense determined
                      under
                      fair-value-based method for all awards, net of related tax
                      effects</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(
                      110,335</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ffffff solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                      Forma net loss </font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #000000 thin solid">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #000000 thin solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($
                      1,882,403</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff solid">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Basic
                      and diluted loss per share -as reported</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($0.18</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Basic
                      and diluted loss per share - pro forma </font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">($0.19</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></div>
                  </td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                  <td align="right" valign="bottom" width="11%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                </tr>

            </table>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company&#8217;s Board of Directors estimated the fair market value of the stock
          options at $0.10 per share on the date of grant.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-8</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
            <div style="WIDTH: 100%" align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -9.35pt" align="left">&#160;</div>
            </div>
          </div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
            Inc.</strong></font><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
            Development Stage Company)</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
            TO FINANCIAL STATEMENTS</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
            related to the nine month period ending September 30, 2005 is
            unaudited</strong></font></div>
          <div align="center">
            <table bgcolor="#ffffff" cellpadding="0" cellspacing="0" width="100%">

                <tr bgcolor="#ffffff">
                  <td width="50%">&#160;</td>
                  <td width="50%">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td width="50%">&#160;</td>
                  <td width="50%">&#160;</td>
                </tr>

            </table>
          </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Recent
          Accounting Pronouncements</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
          December 2004, the FASB issued SFAS No. 123 (revised 2004),&#8221;Share-Based
          Payment&#8221;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;SFAS
          No.
          123R&#8221;), which replaces SFAS No. 123 and supersedes APB No. 25. SFAS No. 123R
          requires that compensation cost relating to share-based payment transactions
          be
          recognized in financial statements based on alternative fair value models.
          The
          pronouncement requires that the cost of share-based compensation be measured
          based on the fair value of the equity or liability instruments issued.
          Per APB
          No. 25, compensation expense was recognized only to the extent the fair
          value of
          common stock exceeded the stock option exercise price at the measurement
          date.
          The pro forma disclosures previously permitted under SFAS No. 123 will
          no longer
          be an alternative to financial statement recognition. SFAS No.123R requires
          the
          benefits of tax deductions in excess </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
          recognized compensation cost be reported as a financing cash flow item.
          </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          SEC
          delayed the effective date for implementation of SFAS No. 123R to the first
          fiscal year beginning after June 15, 2005. The Company will adopt SFAS
          No. 123R
          effective January 1, 2006. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
          does not believe that any other recently issued, but not yet effective,
          accounting standards if currently adopted would have a material effect
          on the
          accompanying financial statements.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
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          <table cellpadding="0" cellspacing="0" id="list" width="100%">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
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                <td>
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>COOPERATIVE
                    RESEARCH AGREEMENTS</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company has cooperative research and development agreements with two
          universities and an independent laboratory to jointly test and further
          develop
          commercial applications for naturally occurring nanomaterials. These agreements
          generally cover shared research personnel and facilities for a period of
          twelve
          to twenty four months with termination provisions requiring 30 days advance
          written notice. These agreements are subject to confidentiality clauses
          and
          include provisions relating to the ownership and the right to use any jointly
          developed intellectual property. Minimum future payments required under
          these
          agreements are as follows:</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div align="left">
            <table border="0" cellpadding="0" cellspacing="0" width="65%">

                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                  <td align="right" valign="bottom" width="11%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                      the quarter ending December 31, 2005</font></div>
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                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">43,000</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                  <td align="right" valign="bottom" width="11%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                      the year ending December 31, 2006</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">43,000</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>

            </table>
          </div>
        </div>
        <div>&#160;</div>
        <div>&#160;</div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-9</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
            <div style="WIDTH: 100%" align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -9.35pt" align="left">&#160;</div>
            </div>
          </div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
            Inc.</strong></font><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
            Development Stage Company)</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
            TO FINANCIAL STATEMENTS</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
            related to the nine month period ending September 30, 2005 is
            unaudited</strong></font></div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div>
            <table cellpadding="0" cellspacing="0" id="list" width="100%">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="right" style="WIDTH: 36pt">&#160;</td>
                  <td>&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table cellpadding="0" cellspacing="0" id="list" width="100%">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="right" style="WIDTH: 36pt">&#160;</td>
                  <td>&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table cellpadding="0" cellspacing="0" id="list" width="100%">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="right" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>3.&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;</strong></font></td>
                  <td>
                    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RELATED
                      PARTY RESEARCH
                      AGREEMENT</strong></font></div>
                  </td>
                </tr>

            </table>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          May
          25, 2005, the Company entered into a joint research agreement with Nanolution,
          LLC, a wholly owned subsidiary of Biophan Technologies, Inc. Biophan
          Technologies, Inc. is related to the Company&#8217;s majority shareholder, Technology
          Innovations, LLC, through common ownership. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
          agreement covers the exchange of ideas in support of a new drug delivery
          capability. The Company has secured the mineral rights and is developing
          the
          separation capabilities needed to support this drug delivery application.
          The
          term of this agreement shall continue until the desired technology becomes
          commercially viable or until mutually terminated by both parties.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
          medical uses and inventions that arise as a result of this agreement will
          be
          owned by Nanolution, LLC and all purification processes for raw halloysite
          and
          non-medical applications will be owned by the Company.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <table cellpadding="0" cellspacing="0" id="list" width="100%">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="right" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>4.&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;&#160;</strong></font></td>
                <td>
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LICENSE
                    AGREEMENT WITH TECHNOLOGY INNOVATIONS,
                    LLC.</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          April
          27, 2005 the Company entered into an exclusive, field of use limited license
          agreement (&#8220;License Agreement&#8221;) with its majority shareholder, Technology
          Innovations, LLC. This agreement grants the Company an exclusive, world-wide
          license, to make, use and sell the products developed under these patents.
          The
          License Agreement covers several patent applications and provisional patents
          owned by Technology Innovations that will expire at various future dates.
          The
          Company also has the right to grant sublicenses to third parties under
          the
          agreement.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Future
          minimum royalty payments of $6,250 per quarter are required under the terms
          of
          this agreement, commencing in the calendar quarter that the first patent
          is
          issued. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
        <div>
          <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.</strong></font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>TRANSACTIONS
                    WITH ATLAS MINING COMPANY</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          December 29, 2004 the Company contracted with Atlas Mining Company (OTC
          BB:
          ALMI) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
          Utah
          for the purchase of 500 tons of processed halloysite nanotubes. In connection
          with this agreement, the Company agreed to the following scheduled payments
          to
          Atlas Mining payable through their designated distributor:</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$125,000
          paid on December 29, 2004,</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$125,000
          paid on June 29, 2005, and</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$100,000
          payable upon commercial shipments made in excess of $250,000.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-10</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
            Inc.</strong></font><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
            Development Stage Company)</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
            TO FINANCIAL STATEMENTS</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
            related to the nine month period ending September 30, 2005 is
            unaudited</strong></font></div>
          <div align="center">
            <table bgcolor="#ffffff" cellpadding="0" cellspacing="0" width="100%">

                <tr bgcolor="#ffffff">
                  <td width="33.33%">&#160;</td>
                  <td width="33.33%">&#160;</td>
                  <td width="33.33%">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td width="33.33%">&#160;</td>
                  <td width="33.33%">&#160;</td>
                  <td width="33.33%">&#160;</td>
                </tr>

            </table>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
          additional consideration, the Company will pay 10% of the resale cash proceeds
          received from unaffiliated third parties, in instances where the purchase
          price
          is in excess of $700 per ton up to a maximum of $2,000 per ton. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Payments
          made by the Company in accordance with this agreement are presented as
          prepaid
          expenses and will be recorded as inventory upon receipt and will be recognized
          as expense in the period the nanotubules are used in the development of
          proprietary applications and processes or as customer shipments are
          made.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          January 28, 2005 the Company was issued a two year warrant for the right
          to
          acquire 750,000 shares of Atlas Mining common stock at $.40 per share.
          This
          warrant expires two years from the original issue date which will be January
          28,
          2007. Neither the warrant nor the shares of common stock issuable upon
          exercise
          have been registered under the Securities Act of 1933 and as such, are
          not
          readily available for sale or transfer in the public markets. The fair
          value of
          this asset on January 28, 2005 and at September 30, 2005 was estimated
          at
          $180,000 and $300,000, respectively. The warrant has been recorded as a
          non-current asset at January 28, 2005 with an offsetting liability included
          in
          accrued expenses. The liability is being amortized over the two year period
          commencing January 28, 2005 and reflects the Company&#8217;s commitment to future
          research and development efforts which are expected to benefit both the
          Company
          and Atlas Mining. At September 30, 2005, the remaining liability, included
          in
          accrued expenses, is $112,500. The difference of $67,500 has been offset
          against
          research and development expenses in the accompanying statements of
          operations.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
          September 30, 2005, the warrant was marked-to-market with changes in fair
          market
          value recorded as other investment income. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
        <div>
          <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6.</strong></font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INCOME
                    TAXES</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
          of
          September 30, 2005, the Company had a net operating loss carryforward,
          for
          federal income tax purposes, of approximately $1,779,000. The Company recorded
          a
          deferred income tax asset for the tax effect of the net operating loss
          carryforward of approximately $605,000. In recognition of the uncertainty
          regarding the ultimate amount of income tax benefits to be derived, the
          Company
          has recorded a full valuation allowance at September 30, 2005.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-11</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
            <div style="WIDTH: 100%" align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -9.35pt" align="left">&#160;</div>
            </div>
          </div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
            Inc.</strong></font><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
            Development Stage Company)</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
            TO FINANCIAL STATEMENTS</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
            related to the nine month period ending September 30, 2005 is
            unaudited</strong></font></div>
        </div>
        <div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt">&#160;</td>
                  <td align="left">&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt">&#160;</td>
                  <td align="left">&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>7.</strong></font></td>
                  <td align="left">
                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STOCKHOLDER&#8217;S
                      EQUITY</strong></font></div>
                  </td>
                </tr>

            </table>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          November 29, 2005, in connection with the recapitalization and merger (see
          Note
          12) with Cementitious Materials, Inc. (&#8220;Cementitious&#8221;), all outstanding options
          were canceled, and employees and consultants were granted options of
          NaturalNano, Inc. (formerly named Cementitious Materials, Inc.). The pro
          forma
          disclosure in Note 1 is presented for the options outstanding prior to
          the
          recapitalization. The original options were not modified to accelerate
          vesting
          or extend the term of the new options.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company received $225,000 in financial consulting services from SBI USA,
          LLC for
          which payment was satisfied through the issuance of 2,250,000 common stock
          warrants. These warrants have an exercise price of $0.23 per share, were
          fully
          vested as of the March 31, 2005 issuance date and have an expiration date
          of
          March 31, 2006. The consulting expenses relating to this warrant are included
          in
          general and administrative expenses in the accompanying statements of
          operations. None of these warrants had been exercised as September 30,
          2005.
          Neither these warrants nor the common stock issuable upon exercise of the
          warrants, have been registered under the Securities Act of 1933 and therefore
          these warrants are considered &#8220;restricted assets&#8221; within the meaning of Rule 144
          of the Securities Act of 1933.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div>
          <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.</strong></font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STOCK-BASED
                    COMPENSATION PLAN</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
          Company has a stock option plan (the &#8220;Plan&#8221;) which provides for the granting of
          nonqualified or incentive stock options (&#8220;ISO&#8221;) to officers, key employees,
          non-employee directors and consultants. The Plan authorizes the granting
          of
          options to acquire up to 7,000,000 common shares. ISO grants under the
          Plan are
          exercisable at the market value of the Company&#8217;s stock on the date of the grant.
          Nonqualified options under the Plan are exercisable at amounts determined
          by the
          Board. All options under the Plan are exercisable at times as determined
          by the
          Board, not to exceed 10 years from the date of grant. Additionally, the
          Plan
          provides for the granting of restricted stock to officers and key
          employees.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
          the period ending September 30, 2005 the Company&#8217;s Board of Directors granted
          stock options </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">at
          fair
          market value, which was estimated by the Board of Directors at $0.10 per
          share
          on the date of the grant, to purchase 4,950,000 shares of the Company&#8217;s common
          stock at $0.10 per share. Included in these actions were option grants
          to
          purchase 2,243,333 shares of the Company&#8217;s common stock issued to non-employees.
          The fair value of the stock options granted to non-employees has been recorded
          as expense of $158,083 in the accompanying statements of
          operations.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
          were 2,408,332 outstanding option grants exercisable as of September 30,
          2005.</font></div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-12</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
            <div style="WIDTH: 100%" align="left">
              <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -9.35pt" align="left">&#160;</div>
            </div>
          </div>
        </div>
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
            Inc.</strong></font><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
            Development Stage Company)</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
            TO FINANCIAL STATEMENTS</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
            related to the nine month period ending September 30, 2005 is
            unaudited</strong></font></div>
        </div>
        <div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt">&#160;</td>
                  <td align="left">&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt">&#160;</td>
                  <td align="left">&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>9.</strong></font></td>
                  <td align="left">
                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CONVERTIBLE
                      BRIDGE NOTES</strong></font></div>
                  </td>
                </tr>

            </table>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
          of
          September 30, 2005, the Company had issued and outstanding $4,156,000 in
          secured
          Convertible Bridge Notes (the &#8220;Notes&#8221;) to be used for general working capital
          purposes. These notes included a mandatory conversion feature whereby $800,000
          in debt would be converted into 2,079,600 shares of Cementitious common
          stock
          and $3,356,000 in debt would be converted into 8,390,000 shares of Cementitious
          common stock in connection with the Cementitious Materials, Inc. merger
          further
          described in note 12 below. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
          a
          result of the merger on November 29, 2005, all of these Notes were converted
          into 10,469,600 shares of Cementitious common stock. The Notes included
          an
          accrued interest provision of 8% per annum, generally beginning six months
          after
          the date of issuance. No interest will be accrued or paid on this notes
          since
          all of this outstanding debt was satisfied with the conversion into common
          stock
          coincident with the planned merger with Cementitious. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div>
          <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>10.</strong></font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LEASE
                    OBLIGATION</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          May
          13, 2005, the Company entered into an operating lease agreement for office
          space
          expiring May 31, 2008. At any time after May 31, 2006, the Company may
          terminate
          the lease upon ninety days prior written notice to the landlord. Following
          are
          the minimum future payments under this lease:</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div align="left">
            <table border="0" cellpadding="0" cellspacing="0" width="60%">

                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                  <td align="right" valign="bottom" width="11%">&#160;</td>
                  <td align="left" valign="bottom" width="1%">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                      the quarter ending December 31, 2005</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12,579</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                      each of the years ending December 31:</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2006</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">53,807</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2007</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">59,369</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                </tr>
                <tr bgcolor="#ccffcc">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2008</font></div>
                  </td>
                  <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
                  </td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35,938</font></div>
                  </td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
                </tr>
                <tr bgcolor="#ffffff">
                  <td align="left" valign="bottom" width="40%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                  <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
                </tr>

            </table>
          </div>
        </div>
        <div>
          <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

              <tr valign="top" style="LINE-HEIGHT: 1.25">
                <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>11.</strong></font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LINE
                    OF CREDIT AND PROMISSORY NOTE WITH TECHNOLOGY
                    INNOVATIONS</strong></font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          December 29, 2004 the Company entered into a Line of Credit Agreement and
          a
          Promissory Note with its former parent company, Technology Innovations,
          LLC.
          This Line of Credit allows for borrowings of up to $500,000 for working
          capital
          purposes and bears an interest rate of 8% per annum. This agreement extends
          through December 31, 2005 at which time the outstanding balance, including
          all
          interest accrued, shall be repaid in full. As of September 30, 2005 there
          were
          no outstanding borrowings under this agreement.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN" style="PAGE-BREAK-AFTER: always">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-13</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="3">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NaturalNano,
            Inc.</strong></font><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
            Development Stage Company)</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>NOTES
            TO FINANCIAL STATEMENTS</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Information
            related to the nine month period ending September 30, 2005 is
            unaudited</strong></font></div>
        </div>
        <div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt">&#160;</td>
                  <td align="left">&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt">&#160;</td>
                  <td align="left">&#160;</td>
                </tr>

            </table>
          </div>
          <div>
            <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

                <tr valign="top" style="LINE-HEIGHT: 1.25">
                  <td align="left" style="WIDTH: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>12.</strong></font></td>
                  <td align="left">
                    <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SUBSEQUENT
                      EVENTS</strong></font></div>
                  </td>
                </tr>

            </table>
          </div>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Merger
          with Cementitious Materials, Inc.</em></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          November 29, 2005, the Company completed the previously announced merger
          with
          Cementitious Materials, Inc. Under the merger agreement, the Company merged
          into
          a newly formed subsidiary of Cementitious with NaturalNano, Inc. being
          the
          surviving entity.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: -27pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
          connection with the merger, Technology Innovations, LLC, the Company&#8217;s majority
          stockholder exchanged each of its outstanding shares for 4.4919378 shares
          of
          Cementitious stock for an aggregate of 44,919,378 shares of Cementitious.
          Each
          of the Company&#8217;s previously outstanding options and warrants were replaced with
          the same number of options and warrants of Cementitious with rights to
          acquire
          this common stock at economic and contractual terms consistent with the
          rights
          as defined in the original NaturalNano option and warrant agreements. The
          Convertible Bridge Notes outstanding on November 29, 2005 were converted
          into
          10,469,600 shares of Cementitious common shares as prescribed in the original
          debt agreements (see note 9).</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">F-14</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div align="left">
          <table border="1" cellpadding="5" cellspacing="1" width="100%">

              <tr>
                <td colspan="3" valign="top" width="100%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
                    INDEX</strong></font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
                    Number</strong></font></div>
                </td>
                <td valign="bottom" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement
                    and Plan of Merger among NaturalNano, Inc., Cementitious Materials,
                    Inc.
                    and Cementitious Acquisitions, Inc. </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
                    of Incorporation and Amendments Thereto </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
                    of Amendment of Articles of Incorporation </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.3</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By-laws
                    </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NaturalNano,
                    Inc. 2005 Incentive Stock Plan </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                    of Non-Qualified Stock Option Agreement </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Registration
                    Rights Agreement dated as of December 22, 2004 between NaturalNano,
                    Inc.
                    and Technology Innovations, LLC </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                    of Subscription Agreement for the Purchase of Convertible Notes
                    of
                    NaturalNano, Inc.</font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
                    issued to SBI USA, LLC </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">License
                    Agreement between Technology Innovations, LLC and NaturalNano,
                    Inc. dated
                    as of April 27, 2005 (filed in redacted form pursuant to a request
                    for
                    confidential treatment filed separately with the Securities and
                    Exchange
                    Commission) </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Joint
                    Research Agreement between Nanolution, LLC and NaturalNano Inc.
                    dated as
                    of May 25, 2005 </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3
                    </font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                    Letter of Michael Riedlinger and Amendment No. 1 thereto
                    </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4
                    </font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                    Letter of Kathleen A. Browne and Amendment No. 1 thereto
                    </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5
                    </font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                    Letter of Sarah Cooper </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Letter
                    on Change in Certifying Accountant </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subsidiaries
                    </font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consent
                    of Goldstein Golub Kessler LLP, Certified Public Accountants
                    </font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="10%" style="BORDER-BOTTOM: medium none">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</font></div>
                </td>
                <td align="left" valign="top" width="80%" style="BORDER-BOTTOM: medium none">
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{"company-data": {"conformed-name": "CEMENTITIOUS MATERIALS INC", "cik": "0000863895", "assigned-sic": "6770", "irs-number": "870646435", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-49901", "film-number": "051245162"}, "business-address": {"street1": "56 WEST 400 S SUITE 220", "city": "SALT LAKE CITY", "state": "UT", "zip": "84101", "phone": "8013223401"}, "former-company": {"former-conformed-name": "OCEAN EXPRESS LINES INC", "date-changed": "19900529"}}
UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
        DC 20549
Form 8-K
CURRENT
        REPORT
PURSUANT
        TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934
Date
        of report (date of earliest event reported):
November 29,
        2005
NaturalNano,
        Inc.
(Exact
        name of registrant as specified in its charter)
Nevada
000-49901
87-0646435
(State
                  or other jurisdiction
(Commission
                  File No.)
(I.R.S.
                  Employer
of
                  incorporation)
Identification
                  No.)
150
        Lucius Gordon Drive, Suite 115
West
        Henrietta, New York 14586
(Address
        of principal executive offices)
Cementitious
        Materials, Inc.
19
        East 200 South, Suite #1080
Salt
        Lake City, Utah 84111
(Former
        name, or former address, if changed since last report)
(585) 214-8005
(Registrant's
        telephone number, including area code)
Check
        the
        appropriate box below if the Form 8-K filing is intended to simultaneously
        satisfy the filing obligation of the registrant under any of the following
        provisions (see General Instruction A.2. below):
o
Written
        communications pursuant to Rule 425 under the Securities Act (17 CFR
        230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
        (17 CFR
        240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the
        Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the
        Exchange Act (17 CFR 240.13e-4(c))
TABLE
        OF CONTENTS
Page
Numbers
Item 2.01
                  Completion of Acquisition of Assets
3
Part
                  I
4
Part
                  II
24
Part
                  III
29
Item 3.02
                  Unregistered Sale of Equity Securities
29
Item 4.01
                  Changes in Registrant's Certifying Accountant
30
Item 5.01
                  Changes in Control of Registrant
30
Item 5.02
                  Departure of Directors or Principal Officers; Election of Directors;
                  Appointment of Principal Officers
30
Item 5.03
                  Amendments to Articles of Incorporation or Bylaws
30
Item 5.06
                  Change in Shell Company Status
30
Item 9.01
                  Financial Statements and Exhibits
31
Signatures
32
Exhibits
33
-2-
Table
            of
            Contents
As
        used in this Current Report on Form 8-K, unless the context otherwise requires,
        the terms "we,""us,""NaturalNano," and "the Company," refer to NaturalNano,
        Inc., a Nevada corporation formerly known as Cementitious Materials, Inc.,
        together with its subsidiaries.
This Information Statement and other reports that we file with the SEC contain
        certain forward-looking statements that involve risks and uncertainties relating
        to, among other things, the closing of the Merger transaction and our future
        financial performance or future events. Forward-looking statements give
        management's current expectations, plans, objectives, assumptions or forecasts
        of future events. All statements other than statements of current or historical
        fact contained in this Information Statement, including statements regarding
        our
        future financial position, business strategy, budgets, projected costs and
        plans
        and objectives of management for future operations, are forward-looking
        statements. In some cases, you can identify forward-looking statements by
        terminology such as
"anticipate,""estimate,""plans,""potential,""projects,""ongoing,""expects,""management
        believes,""we believe,""we intend," and similar expressions. These statements
        involve estimates, assumptions and uncertainties that could cause actual
        results
        to differ materially from the results set forth in the information statement.
        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:
·
continued
                  development of our technology;
·
dependence
                  on key personnel;
·
competitive
                  factors;
·
the
                  operation of our business; and
·
general
                  economic conditions.
These
        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 statements 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.
Item 2.01
        Completion of Acquisition of Assets.
On
        November 29, 2005, pursuant to an Agreement and Plan of Merger, dated
        as of
        September 26, 2005 (the "Merger Agreement") by and among Cementitious
        Materials, Inc., a Nevada corporation, (the "Company"), Cementitious
        Acquisitions, Inc., a Nevada corporation and wholly-owned subsidiary of the
        Company ("Merger Sub"), and NaturalNano, Inc., a Delaware corporation now known
        as NaturalNano Research, Inc. ("NN Research"), Merger Sub was merged with and
        into NN Research, with NN Research surviving as a wholly-owned subsidiary
        of the
        Company (the "Merger"). Immediately following the Merger, the Company changed
        its name to "NaturalNano, Inc." Pursuant to the Merger Agreement, we issued
        44,919,378 shares of our authorized but previously unissued common stock
        to the
        stockholders of NN Research in exchange for all of the issued and outstanding
        common stock of NN Research and an additional 10,469,600 shares of our
        authorized but previously unissued common stock in consideration for the
        conversion of certain outstanding NN Research convertible debt. We also issued
        options and warrants for the purchase of an aggregate of 7,200,000 shares
        of our
        common stock to the holders of outstanding NN Research options and warrants,
        in
        consideration of the cancellation of such options and warrants.
-3-
Because
        the shares issued to NN Research's stockholders and note holders in the Merger
        represent a controlling interest in the Company, the transaction was accounted
        for as a recapitalization, and NN Research is considered the acquirer for
        accounting purposes. All of the historical financial statements which are
        attached to this report through the date of the recapitalization are those
        of NN
        Research.
Immediately
        following the effective time of the Merger, all of our directors prior to
        the
        completion of the Merger resigned, and the Company's board of directors was
        reconstituted to consist of the following five directors: Steven Katz, Ross
        B.
        Kenzie, John F. Lanzafame, Michael Riedlinger and Michael L. Weiner, all
        of whom
        (other than Mr. Riedlinger) were formerly directors of NN Research. More
        complete biographical information concerning each of these directors is set
        forth below in the section entitled "Executive Officers and Directors" in this
        Report.
Approximately
        but no earlier than 60 days after the filing date of this Report,
        we intend
        to register with the SEC on Form S-8 the shares of the Company's common stock
        issuable upon exercise of options under the NaturalNano, Inc. 2005 Incentive
        Stock Plan issued pursuant to the Merger Agreement. Under obligations assumed
        by
        the Company in connection with the Merger, we also intend to register with
        the
        SEC on Form SB-2 certain of the shares of the Company's common stock issued to
        former stockholders and note holders of NN Research, and certain shares issuable
        upon exercise of warrants issued pursuant to the Merger Agreement to the
        holder
        of NN Research warrants outstanding at the time of the Merger.
We
        were a
"shell company" (as such term is defined in Rule 12b-2 under the Securities
        Exchange Act of 1934, as amended (17 CFR 240.12b-2)) immediately before the
        change in control effected by the Merger. Accordingly, we set forth below
        the
        information that would be required if we were filing a general form for
        registration of securities on Form 10-SB (17 CFR 249.210b) under the Exchange
        Act, reflecting our common stock, which is the only class of our securities
        subject to the reporting requirements of Section 13 (15 U.S.C. 78m)
        or
        Section 15(d) (15 U.S.C. 78o(d)) of the Exchange Act upon consummation of
        the
        change in control, with such information reflecting the Company and our
        securities upon consummation of the Merger.
Part
        I
BUSINESS
Overview
The
        Company is a development stage entity whose primary business is processing,
        developing and commercializing naturally occurring nanoscale materials. The
        business is currently directed toward research, development, production and
        marketing of material and proprietary technologies in the following
        fields:
(1.)
Developing
        a
        state-of-the-art, proprietary process for extracting and separating halloysite
        nanotubes from halloysite clay;
(2.)
Developing
        commercial applications for halloysite nanotubes, specifically for the following
        application areas;
(i)
material
        additives for polymers, plastics, and composites;
(ii)
cosmetics
        and other personal care products;
(iii)
absorbent
        materials; and
(iv)
pharmaceuticals
        and medical device additives;
(3.)
Engaging
            in
            business alliances with other organizations to bring our nanoscale materials
            to
            market.
-4-
Products
        and Technology
The
        Company provides halloysite nanotubes along with technologies and services
        for
        functionalizing these aluminosilicate nanotubes for use in a wide range of
        applications. Functionalization of the halloysite nanotubes is done by applying
        proprietary processes to fill or "load" the tubules with differing materials and
        compounds; or to enable diffusion of the tubules in a given chemical mixture;
        for specific purposes—such as an extended release of fragrances.
The
        resulting materials produced using these proprietary processes is either
        a fine
        powder or a "slurry," which is a powder suspended in a liquid. The use of
        powders or slurries depends on specific customer requirements and use in
        their
        manufacturing processes.
Proprietary
        technologies include processing methods, formulations, and specific surface
        treatments that enable the halloysite nanotubes to be functionalized and
        used in
        a wide range of applications. The Company has rights to patented technologies
        as
        well as patents pending for processing methods, formulations and other surface
        treatment technologies. Some proprietary technologies are protected by trade
        secrets.
Projected
        Milestones for the Period through December 2006
During
        the 2006 operating cycle, the Company will continue to focus on the following
        operational objectives and milestones:
1.
Continued
        Intellectual Property Asset Development
a.
Continue
        patent applications for separation technologies and applications for naturally
        occurring nanomaterials
b.
License-in
        complementary technologies from third-parties
2.
Halloysite
        nanotube processing technology
a.
Continue
        investigation of processing alternatives for commercial scale
b.
Create
        designs for pilot processing system
3.
Sample
        material availability
a.
First
        sample availability of processed halloysite for shipment to a third
        party
b.
Shipment
        of first samples to third parties for evaluation for research-use
        only
4.
Engagement
                  with research organizations to reduce patent-pending and licensed
                  IP to
                  practice in the following categories
:
a.
Separation
        and classification of halloysite nanotubes
b.
Additives
        for composite plastics and polymers
c.
Cosmeceutical
        applications
d.
Electronics
        applications
5.
Close
        strategic partners and initial orders for our processed halloysite and licenses
        for our technology.
-5-
Product
        Sales and Distribution Approach
The
        Company intends to develop an internal direct sales and distribution network
        for
        delivery of products and licensed processes with prospective customers. At
        the
        present time, this approach is considered to be a key element of our overall
        strategy in the qualification of potential applications and opportunities
        with
        customers. As individual market segments are developed through this direct
        sales
        approach, the Company may consider the use of alternate sales and distribution
        methods.
Competition
In
        addition to a wide range of material additives that are currently being used
        in
        the industries targeted by the Company, the current nanomaterials market
        consists of approximately 200 companies globally, providing a wide variety
        of
        metal oxides and inorganic compounds. The Company expects that its future
        product offerings will provide new capabilities and anticipated superior
        performance compared to existing materials. Benefits from the use of novel
        nanomaterials may permit us to differentiate our product offerings from
        potential competitors. However, many of our current and prospective competitors
        are larger and have greater financial resources, which could create significant
        competitive advantages for those companies
Within
        each of the targeted markets and product applications, the Company faces
        current
        and potential competition from many advanced material, encapsulation and
        chemical companies, suppliers of traditional materials and the in-house
        capabilities of several of its potential customers. With respect to larger
        producers of nanomaterials, while some of these producers do not currently
        offer
        competitive products, these companies have greater financial and technical
        resources, larger research and development staffs and greater manufacturing
        and
        marketing capabilities and could soon begin to compete directly against the
        Company.
Raw
        Materials
The
        Company has purchased from Atlas Mining Company a supply of halloysite clay,
        which the Company believes will be sufficient to meet the Company's research and
        development needs for at least one year. Atlas Mining Company operates what
        is
        generally considered to be the largest commercial halloysite mine in the
        United
        States. The Company has identified other halloysite sources that it believes
        are
        suitable as alternate suppliers of raw materials, and the Company does not
        believe that it will be dependent upon Atlas Mining Company for the sole
        supply
        of raw materials.
Patents,
        Trademarks and Licenses
The
        Company has applied for patents on its processes and technologies and expects
        to
        continue filing more patent applications related to processes, new compositions
        of matter, and specific applications for use of the functionalized materials.
        The Company utilizes trademark protection for its current and anticipated
        products. Some technologies used by the Company have been licensed in from
        third-parties. These third parties include the majority stockholder of the
        Company, Technology Innovations, LLC, as well as an independent research
        laboratory. The Company expects to continue licensing-in processes and
        technologies that contribute to the further commercialization of naturally
        occurring nanomaterials.
Government
        Regulation
We
        are
        subject to governmental regulation much like many other companies. There
        are
        still relatively few laws or regulations specifically addressing nanotechnology.
        As a result, the manner in which existing laws and regulations should be
        applied
        to nanotechnology in general, and how they relate to our business in particular,
        is unclear in many cases. We expect new laws and regulations to be adopted
        that
        may be directly applicable to our activities. Any existing or new legislation
        applicable to us could expose us to substantial liability, including significant
        expenses necessary to comply with such laws and regulations and could dampen
        the
        growth in the use of nanotechnology in general.
-6-
Estimate
        of Research and Development Expenses
We
        estimate that spending for the twelve month period ending December 31, 2006
        for
        research and development related projects, including related capital
        investments, will be approximately $ 1,250,000.
Number
        of Total Employees and Full-Time Employees
As
        of
        November 29, 2005 the Company had seven full-time employees and one part
        time
        employee.
SUMMARY
        SELECTED HISTORICAL FINANCIAL DATA
The
        following table sets forth selected historical financial data for NN Research,
        the accounting acquiror in the Merger. The statement of operations data for
        the
        year ended December 31, 2004 and the balance sheet data as of December 31,
        2004
        are derived from our audited financial statements. The statement of operations
        data for the nine months ended September 30, 2005, and the balance sheet
        data as
        of September 30, 2005 are derived from our unaudited financial statements
        which
        include all adjustments, consisting only of normal recurring adjustments
        and
        accruals, that the Company considers necessary for a fair presentation of
        its
        financial position and results of operations for these periods. We commenced
        business operations in December 2004 and there are no financial data for
        any
        periods prior to December 22, 2004. Interim operating results for the nine
        months ended September 30, 2005 are not necessarily indicative of the results
        that may be expected for the entire fiscal year ended December 31, 2005 or
        any
        future period. The following selected financial data should be read in
        conjunction with the financial statements and the notes thereto included
        herewith.
Statement
        of Operations Data for NaturalNano, Inc. (now known as NaturalNano Research,
        Inc.):
Nine
                  Months Ended
September
                  30, 2005
Period
                  from Inception
December 22,
                  2004
through
December
                  31, 2004
Revenues
$
—
$
—
Expenses:
Research
                  and development
293,492
5,000
General
                  and administrative
1,597,065
2,336
Loss
                  from operations
1,890,557
7,336
Other
                  (income) expense:
Interest
                  expense net
1,511
Investment
                  income
(120,000
)
Total
                  other (income) expense
(118,489
)
Net
                  loss
$
(1,772,068
)
$
(7,336
)
Loss
                  per share
$
(0.18
)
$
(.000
)
Weighted
                  average number of shares outstanding
10,000,000
10,000,000
-7-
Balance
        Sheet Data:
September
                  30,
2005
December
                  31,
2004
(unaudited)
Current
                  assets
$
2,972,368
$
125,000
Working
                  capital (deficiency)
$
(1,590,667
)
$
92,664
Total
                  assets
$
3,301,714
$
125,000
Total
                  liabilities
$
4,598,035
$
32,336
Total
                  stockholders' equity (deficiency)
$
(1,296,321
)
$
92,664
PLAN
        OF OPERATIONS
General
The
        following information should be read in conjunction with the September 30,
        2005
        financial statements and notes thereto appearing elsewhere in this Report
        on
        Form 8K.
The
        Company is a development stage company and is expected to remain so for at
        least
        the next twelve months. Our primary mission is to develop and exploit
        technologies in the area of nanotechnology, specifically focusing on naturally
        occurring nanoscale materials. Our strategy is to patent these processes
        and
        application technologies and subsequently license the associated patents
        to
        relevant industries including: polymers, plastics and composites, cosmetics
        and
        personal care products and medical and pharmaceutical device additives and
        coatings.
We
        believe that the commercial applications that will result from our research
        are
        patentable and will result in significant licensing potential across a wide
        range of industries. Our researchers have identified more than 200 applications
        within these industries as potential development opportunities which are
        subject
        to pending patents and issued patents under licensing agreements.
The
        Company's near term goal is focused on core technology development and
        application processes utilizing halloysite nanotubes. We expect to identify
        and
        develop other naturally occurring nanoscale materials in future research
        programs.
Processing
        and Manufacturing
NaturalNano
        has defined the anticipated end product as either a dry powder or colloidal
        suspension of nanotubes which may be sold in different configurations -
        metallized or not, unloaded or loaded with any one of a number of different
        active agents for different applications. Different applications and marketing
        partners would require different product configurations, and will need to
        be
        assessed individually.
Our
        future manufacturing operations would begin with raw or minimally processed
        material we have received from the halloysite mine, sourced in the United
        States
        from Atlas Mining's Dragon Mine in Utah. We would further process this material
        to extract nanotubes from the surrounding minerals present in halloysite
        clay
        and then further classify the nanotubes by size. This refined and classified
        material would then be shipped to customers in the form of a dry powder or
        a
        slurry mixture. The customer's specific requirements will determine the final
        form of delivery.
-8-
NaturalNano
        can add further value to the refined and classified nanotubes by either adding
        material to the surface of the nanotubes or loading within the hollow openings
        of the nanotubes. The resulting intermediary materials can then be shipped
        to
        customers for use in their manufacturing processes.
These
        powders or suspensions will be designed as an intermediate component of a
        finished consumer product. Typically, these materials would be incorporated
        with
        other components to produce the finished product that our marketing partner
        would sell, for instance providing a controlled release agent or a strengthening
        agent to be added to the partners existing materials / products. The Company
        will evaluate and select suitable manufacturing partners in each of the targeted
        industry segments. We will work with each manufacturing partner to build
        the
        expertise to provide the materials, in the various required
        configurations.
Patents
        and Intellectual Property
The
        Company's intellectual property portfolio currently contains five patent
        applications with several additional patent applications in process. The
        Company
        has exclusive licenses, within certain fields of use, under four additional
        pending patent applications and licenses to eight additional patents. Over
        200
        applications for halloysite have been identified to date and are covered
        in our
        pending patents. As research and development continues, NaturalNano intends
        to
        aggressively seek patent protection for new developments and technologies
        in the
        United States and in strategic foreign markets, in addition to licensing-in
        patents to augment our development opportunities.
Research
        and Development
During
        the next twelve months the Company's research and development focus will be in
        the following areas:
·
Collaboration
                  with potential customers in major market segments to demonstrate
                  proof of
                  principle for specific industry
                  applications.
·
Establishment
                  of a Research Lab to produce sample products for customers in the
                  various
                  industries identified above, at a competitive
                  cost.
·
Establishment
                  of a pilot production program to extract, separate and categorize
                  naturally occurring nanotubes found within halloysite clay, which
                  will
                  provide the basis for our future development of commercial scale
                  production facilities.
During
        the twelve month period ending December 31, 2006, the Company expects to
        spend
        approximately $250,000 for capital investments relating to the setup of the
        Research Lab. The Company is currently in the process of evaluating leased
        space
        available in the Rochester, New York area to establish this combined research
        facility.
Research
        and Development related expenditures for the twelve month period ending December
        31, 2006, which will include salaries for employees, fees for collaborative
        research agreements and lab testing materials, will approximate $1,000,000.
Strategic
        Relationships
Leveraging
        strategic relationships is vital to our mission. These relationships will
        help
        us to validate our technology, develop extraction and separation processes,
        offer insight into additional application opportunities, and develop future
        sales channels, among other things. The Company has entered into cooperative
        research and development agreements with three nationally recognized
        universities and an independent laboratory to jointly test and further develop
        core technologies and commercial applications for naturally occurring nanoscale
        materials. We will continue to seek partnering relationships with research
        facilities around the world as we focus on developing new nanotechnology
        solution applications.
-9-
We
        have
        entered into numerous non-disclosure agreements with prospective business
        partners and have discussed with these entities the potential for strategic
        relationships that could result in joint development and licensing agreements.
        This partnering of ideas and the joint development of applications has proven
        to
        be successful in accelerating our development of new processes and product
        opportunities and will continue to be pursued by the Company.
On
        May
        25, 2005 NN Research signed a joint research agreement with Nanolution, LLC
        (a
        wholly owned subsidiary of Biophan Technologies, Inc.) to pursue the development
        of a new drug delivery application utilizing naturally occurring halloysite
        nanotechnologies. In connection with this agreement, the Company and Nanolution
        have agreed that all medical uses and inventions arising from these efforts
        will
        be owned by Nanolution and all purification processes and non-medical
        applications will be owned by the Company.
Investor
        Relations
The
        Company intends to regularly communicate and re-enforce our brand awareness
        and
        corporate strategies in order to keep our shareholders, the investment community
        and our strategic partners informed regarding our progress in achieving our
        stated milestones and related discoveries. We believe our efforts to achieve
        widespread press exposure will help raise the scientific and investment
        community's awareness of the science of nanotechnology  and increase the
        recognition of NaturalNano, Inc. as an innovative company. In this regard,
        the
        Company has engaged various professional firms to actively assist and advise
        in
        establishing public relations and investor relations strategies.
Employees
As
        of
        November 29, 2005 the Company employed seven full-time employees and one
        part-time employee. We anticipate the addition of another full-time employee
        within the next twelve months. Our evaluation of human resource needs has
        resulted in our use of experienced part-time consultants in the areas of
        product
        and business development in lieu of immediate full-time hiring for certain
        positions. The Company also has a number of consulting PhD and post doctoral
        level scientists and engineers available to assist in various extraction
        and
        classification of halloysite nanotubes and on other application related research
        projects. All of our employees have signed confidentiality agreements and
        we
        have non-complete agreements in place with our key employees.
Cash
        and Financing Activities
The
        Company's source of cash since inception has been from inter-company advances
        from our principal stockholder, Technology Innovations, LLC, and from the
        issuance of $4,156,000 in Convertible Bridge Notes. The Convertible Bridge
        Notes
        included a mandatory conversion feature that resulted in the issuance of
        10,469,600 shares of the Company's common stock coincident with the consummation
        of the Merger on November 29, 2005.
On
        March
        31, 2005 NN Research issued a warrant to SBI USA, LLC, granting SBI the right
        to
        purchase 2,250,000 shares of NN Research common stock at an exercise price
        of
        $.23 per share. On November 29, 2005, in connection with the Merger, that
        warrant was cancelled and the Company issued to SBI a warrant in identical
        form
        entitling SBI to purchase 2,250,000 shares of our common stock at an exercise
        price of $.23 per share. This warrant expires on March 31, 2006. Our cash
        forecast for the period ending December 31, 2006 assumes receipt of $517,500
        in
        proceeds resulting from the exercise of this warrant during the first quarter
        of
        2006. SBI has not indicated whether it intends to exercise the warrant in
        whole
        or in part or at all and there can be no assurance that we will receive any
        of
        such proceeds.
-10-
The
        estimated cash available and projected cash outflows for the twelve month
        period
        ending December 31, 2006 are as follows:
Cash
                    on hand at September 30, 2005
$
2,698,330
Cash
                    proceeds assumed from exercise of stock warrants
517,500
LESS:
                    Estimated cash projected to be used in operations during the
                    fourth
                    quarter of 2005
(775,000
)
Projected
                    cash available for 2006 operations
$
2,440,830
Projected
                    cash uses for 2006 operations
:
Research
                    and product development expenses
$
1,000,000
Investment
                    in Research Lab
250,000
General
                    and administrative expenses including:
administrative
                    salaries and benefits, office expenses, rent expense, legal and
                    accounting, marketing and investor relations
1,700,000
Total
                    estimated cash outflows for next twelve months
$
2,950,000
As
        the
        Company continues to grow its intellectual property portfolio and to identify
        and invest in the commercial research and development of naturally occurring
        nanoscale materials, additional cash flow funding will be required.
The
        Company will continually evaluate all funding options including additional
        offerings of its securities to private and institutional investors and other
        credit facilities as they become available.
RISK
        FACTORS
You
        should carefully consider, among other potential risks, the following risk
        factors as well as all other information set forth or referred to in this
        Report
        before purchasing shares of our common stock. Investing in our common stock
        involves a high degree of risk. If any of the following events or outcomes
        actually occurs, our business operating results and financial condition would
        likely suffer. As a result, the trading price of our common stock could decline,
        and you may lose all or part of the money you paid to purchase our common
        stock.
Risks
        Related to our Business
Neither
        NN Research nor Cementitious Materials has recorded revenues or an operating
        profit since inception; continuing losses may exhaust our capital resources
        and
        force us to discontinue operations.
From
        its
        inception in December 2004 through September 30, 2005, NN Research has incurred
        cumulative losses of approximately $1,779,404. Cementitious Materials has
        incurred cumulative losses of approximately $416,039 since it's inception at
        July 31, 1987. We cannot assure you that we will achieve profitability in
        the
        immediate future or at any time.
NN
        Research has had a significant working capital deficit, which makes it more
        difficult to obtain capital necessary for its business and which may have
        an
        adverse effect on our future business.
As
        of
        September 30, 2005, NN Research had a working capital deficit of approximately
        $1,590,667. As a result of the Merger, an aggregate of $4,256,000 of outstanding
        debt was converted on November 29, 2005 into 10,469,600 shares of our common
        stock. Giving effect to such conversion and to the other Merger transactions,
        we
        had, on a pro forma basis, a working capital surplus of $2,471,759 as of
        September 30, 2005.
-11-
If
        the Company cannot achieve commercial application of our nanoscale materials,
        we
        may not achieve profitability.
The
        Company must develop commercial applications for halloysite nanotubes, which
        it
        intends to do primarily by collaborating with market leaders in each potential
        field of use. If we fail to establish such collaborative relationships or
        if we
        are unable to develop sufficiently attractive commercial uses for our nanoscale
        materials or if we are unable to produce these materials at a competitive
        cost,
        we may not achieve profitability.
The
        industry in which we operate is highly competitive and has relatively low
        barriers to entry. Increased competition could result in margin erosion,
        which
        would make profitability even more difficult to achieve and
        sustain.
In
        addition to the wide range of material additives that are currently being
        used
        in the industries being targeted by the Company, the current nanomaterials
        market includes at least 200 companies globally, offering a wide variety
        of
        metal oxides and inorganic compounds. Many existing and potential competitors
        have greater financial resources and are likely to command a larger market
        share, which may enable them to establish a stronger competitive position
        than
        we have, in part through greater marketing opportunities. If we fail to address
        competitive developments quickly and effectively, we may not be able to remain
        a
        viable entity.
Our
        business could be negatively affected by any adverse economic developments
        in
        the advanced materials industry and/or the economy in general.
The
        Company depends on the demand for the application of our technology and
        nanoscale materials and our business is susceptible to downturns in the advanced
        materials industry and the economy in general. Any significant downturn in
        the
        market or in general economic conditions would likely hurt our business.
If
        the Company fails to keep up with changes affecting its technology and the
        markets that we will ultimately service, we will become less competitive,
        adversely affecting future financial performance.
In
        order
        to remain competitive and serve its customers effectively, NaturalNano must
        respond on a timely and cost-efficient basis to changes in technology, industry
        standards and procedures and customer preferences. The Company needs to
        continuously develop new technology and products and services to address
        new
        developments. In some cases these changes may be significant and the cost
        to
        comply with these changes may be substantial. We cannot assure you that we
        will
        be able to adapt to any changes in the future or that we will have the financial
        resources to keep up with changes in the marketplace. Also, the cost of adapting
        our technology, products and services may have a material and adverse effect
        on
        our operating results.
Our
        future success depends on retaining our existing key employees and hiring
        and
        assimilating new key employees. The loss of key employees or the inability
        to
        attract new key employees could limit our ability to execute our growth
        strategy, resulting in lost sales and a slower rate of
        growth.
Our
        success depends in part on our ability to retain key employees including
        our
        executive officers. Although following the Merger we expect to have employment
        agreements with our executives, each executive can terminate his or her
        agreement at any time. Also, we do not currently carry "key man" insurance
        on
        our executives but intend to obtain it in the near future. It would
        be
        difficult for us to replace any one of these individuals. In addition, as
        we
        grow we may need to hire additional key personnel. We may not be able to
        identify and attract high quality employees or successfully assimilate new
        employees into our existing management structure.
-12-
Our
        growth strategy assumes that we may possibly make future targeted strategic
        acquisitions. A future acquisition may disrupt our business, dilute stockholder
        value or distract management's attention from
        operations.
Unless
        the Company can develop our present technology or newly acquired technology
        into
        marketable products, our ability to generate revenue may be hindered and
        our
        ability to achieve profitability will be slow and difficult. A possible strategy
        is to acquire new technology or products through targeted strategic
        acquisitions. If we attempt and fail to execute on this strategy, our revenues
        may not increase and our ability to achieve significant profitability will
        be
        delayed. Prior to this time, our ability to make strategic acquisitions has
        been
        hampered by our limited capital resources and the lack of a public market
        for
        its stock.
We
        may
        not be able to identify any appropriate targets or acquire them on reasonable
        terms. Even if we make strategic acquisitions, we may not be able to integrate
        these technologies, products and/or businesses into our existing operations
        in a
        cost-effective and efficient manner.
We
        may be unable to protect our intellectual property adequately or cost
        effectively, which may cause us to lose market share or reduce
        prices.
Our
        future success depends significantly on our ability to protect and preserve
        our
        proprietary rights related to our technology and resulting products. We cannot
        assure you that we will be able to prevent third parties from using our
        intellectual property rights and technology without our authorization. Although
        the Company has filed for several patents and intends to pursue aggressively
        efforts to obtain patent protection for its technology, we will also rely
        on
        trade secrets, common law trademark rights and trademark registrations, as
        well
        as confidentiality and work for hire, development, assignment and license
        agreements with employees, consultants, third party developers, licensees
        and
        customers. However, these measures afford only limited protection and may
        be
        flawed or inadequate. Also, enforcing intellectual property rights could
        be
        costly and time-consuming and could distract management's attention from
        operating business matters.
The
        Company's intellectual property may infringe on the rights of others, resulting
        in costly litigation.
In
        recent
        years, there has been significant litigation in the United States involving
        patents and other intellectual property rights. In particular, there has
        been an
        increase in the filing of suits alleging infringement of intellectual property
        rights, which pressure defendants into entering settlement arrangements quickly
        to dispose of such suits, regardless of their merits. Other companies or
        individuals may allege that we infringe on their intellectual property rights.
        Litigation, particularly in the area of intellectual property rights, is
        costly
        and the outcome is inherently uncertain. In the event of an adverse result,
        we
        could be liable for substantial damages and we may be forced to discontinue
        our
        use of the subject matter in question or obtain a license to use those rights
        or
        develop non-infringing alternatives. Any of these results would increase
        our
        cash expenditures, adversely affecting our financial condition.
We
        may not be able to manage our growth effectively, which could adversely affect
        our operations and financial performance.
The
        ability to manage and operate our business as we execute our development
        and
        growth strategy will require effective planning. Significant rapid growth
        could
        strain our internal resources, and other problems that could adversely affect
        our financial performance. We expect that our efforts to grow will place
        a
        significant strain on our personnel, management systems, infrastructure and
        other resources. Our ability to manage future growth effectively will also
        require us to successfully attract, train, motivate, retain and manage new
        employees and continue to update and improve our operational, financial and
        management controls and procedures. If we do not manage our growth effectively,
        our operations could be adversely affected, resulting in slower growth and
        a
        failure to achieve or sustain profitability.
-13-
Risks
        Related to Our Common Stock
Shares
        of our common stock may be subject to price volatility and illiquidity because
        our shares may continue to be thinly traded and may never become eligible
        for
        trading on Nasdaq or a national securities exchange.
Although
        a trading market for our common stock exists, the trading volume has
        historically been insignificant, and an active trading market for our common
        stock may never develop. There currently is no analyst coverage of our business.
        Very few shares of our common stock are currently freely tradable, and the
        amount of shares in our public "float" will continue to be limited, due to the
        applicability of resale restrictions under applicable securities laws on
        shares
        issued to the former shareholders of NN Research and the fact that significant
        portions of our outstanding shares are held by our officers, directors or
        major
        shareholders. As a result of the thin trading market for our common stock,
        and
        the lack of analyst coverage, the market price for our shares may continue
        to
        fluctuate significantly, and will likely be more volatile than the stock
        market
        as a whole. There may be a limited demand for shares of our common stock
        due to
        the reluctance or inability of certain investors to buy stocks quoted for
        trading on the OTC Bulletin Board (OTCBB), lack of analyst coverage of our
        common stock, and a negative perception by investors of stocks traded on
        the
        OTCBB; as a result, even if prices appear favorable, there may not be sufficient
        demand in order to complete a shareholder's sell order. Without an active public
        trading market or broader public ownership, shares of our common stock are
        likely to be less liquid than the stock of most public companies, and any
        of our
        shareholders who attempt to sell their shares in any significant volumes
        may not
        be able to do so at all, or without depressing the publicly quoted bid prices
        for our shares.
In
        addition, while we may at some point be able to meet the requirements necessary
        for our common stock to be listed on one of the Nasdaq stock markets or on
        a
        national securities exchange, we cannot assure you that we will ever achieve
        a
        listing of our common stock on Nasdaq or on a national securities exchange.
        Initial listing on one of the Nasdaq markets or one of the national securities
        exchanges is subject to a variety of requirements, including minimum trading
        price and minimum public "float" requirements, and could also be affected by the
        general skepticism of such markets concerning companies that are the result
        of
        mergers with inactive publicly-held companies. There are also continuing
        eligibility requirements for companies listed on public trading markets.
        If we
        are unable to satisfy the initial or continuing eligibility requirements
        of any
        such market, then our stock may not be listed or could be delisted. This
        could
        result in a lower trading price for our common stock and may limit your ability
        to sell your shares, any of which could result in you losing some or all
        of your
        investments.
Future
        sales of shares of our common stock may decrease the price for such
        shares.
On
        November 29, 2006, the one-year holding period requirement under
        Rule 144 expires on the common stock issued to former shareholders
        of NN
        Research in connection with the Merger, unless we achieve registration of
        part
        or all of those shares before this date. As a result, a large number of shares
        of our common stock will be eligible for resale on the open market, at that
        time
        many without any restrictions as to size or frequency of such sales. Actual
        sales, or the prospect of sales by our shareholders, may have a negative
        effect
        on the market price of the shares of our common stock.
We
        also
        intend to register certain shares of our common stock that are subject to
        outstanding warrants and stock options, or reserved for issuance under our
        stock
        option plan. Once such shares are registered, they can be freely sold in
        the
        public market upon exercise of the warrants or options. If any of our
        shareholders either individually or in the aggregate cause a large number
        of
        securities to be sold in the public market, or if the market perceives that
        these holders intend to sell a large number of securities, such sales or
        anticipated sales could result in a substantial reduction in the trading
        price
        of shares of our common stock and could also impede our ability to raise
        future
        capital. Sales of a substantial number of shares of our common stock in the
        public markets, or the perception that these sales may occur, could cause
        the
        market price of our common stock to decline and could materially impair our
        ability to raise capital through the sale of additional equity securities.
        In
        addition to the 60,380,020
shares
        of
        our common stock actually issued and outstanding, there will be another
        9,250,000 shares of common stock reserved for future issuance as
        follows:
(i)
4,950,000
                  shares issuable upon exercise of outstanding options under our
                  2005
                  Incentive Stock Plan;
(ii)
2,250,000
                  shares issuable upon exercise of outstanding stock purchase warrants;
                  and
(iii)
2,050,000
                      shares reserved for issuance in the future under our 2005 Incentive
                      Stock
                      Plan.
-14-
Our
        stock price may be volatile, and you may lose some or all of your
        investment.
The
        trading prices of the stock of companies listed on the OTCBB, have been highly
        volatile. Accordingly, the trading price of our common stock is likely to
        be
        subject to wide fluctuations. Factors affecting the trading price of our
        common
        stock may include, among other things:
•
variations
                  in our operating results;
•
announcements
                  of technological innovations, new services or service enhancements,
                  or
                  significant agreements, by us or by our competitors;
•
recruitment
                  or departure of key personnel;
•
changes
                  in estimates of our operating results, or changes in recommendations
                  by
                  any securities analysts that may follow us;
•
sales
                  of our common stock, particularly sales by officers, directors
                  and
                  significant shareholders; or
•
conditions
                  in our industry, the industries of our customers and the economy
                  as a
                  whole.
Our
        stock may be subject to regulation as a "penny stock", which could severely
        limit the liquidity of your securities.
Our
        common stock may be subject to regulation as a "penny stock," which generally
        includes stocks traded on the OTCBB that have a market price of less than
        $5.00
        per share. If shares of our common stock continue to trade for less than
        $5.00
        per share, they would be subject to Rule 15g-9 under the Exchange
        Act
        which, among other things, requires that broker/dealers satisfy special sales
        practice requirements, including making individualized written suitability
        determinations, providing disclosure explaining the nature and risks of the
        penny stock market, receiving a purchaser's written consent prior to any
        transaction and waiting two days before effecting the transaction. Such
        requirements could severely limit the liquidity of your securities.
Mergers
        of the type we just completed are often heavily scrutinized by the SEC and
        we
        may encounter difficulties or delays in obtaining future regulatory
        approvals.
Historically,
        the SEC and NASD have not generally favored transactions in which a
        privately-held company merges into a largely inactive company with publicly
        traded stock, and there is a significant risk that we may encounter difficulties
        in obtaining the regulatory approvals necessary to conduct future financing
        or
        acquisition transactions, or to eventually achieve a listing of shares on
        one of
        the Nasdaq stock markets or on national securities exchange. On June 29,
        2005,
        the SEC adopted rules dealing with private company mergers into dormant or
        inactive public companies. As a result, it is likely that we will be scrutinized
        carefully by the SEC and possibly by the National Association of Securities
        Dealers or Nasdaq, which could result in difficulties or delays in achieving
        SEC
        clearance of any future registration statements or other SEC filings that
        we may
        pursue, in attracting NASD-member broker-dealers to serve as market-makers
        in
        our stock, or in achieving admission to one of the Nasdaq stock markets or
        any
        other national securities market. As a consequence, our financial condition
        and
        the value and liquidity of your shares may be negatively impacted.
Being
        a public company will increase administrative costs, which could result in
        lower
        net income, and make it more difficult for us to attract and retain key
        personnel.
As
        a
        public company, we incur significant legal, accounting and other expenses
        that
        NN Research did not incur as a private company. The Sarbanes-Oxley Act of
        2002,
        as well as new rules subsequently implemented by the SEC, have required changes
        in corporate governance practices of public companies. We expect that these
        new
        rules and regulations will increase our legal and financial compliance costs
        and
        make some activities more time consuming. These new rules and regulations
        could
        also make it more difficult for us to attract and retain qualified executive
        officers and qualified members of our Board of Directors, particularly to
        serve
        on our audit committee.
-15-
We
        do not anticipate paying dividends in the foreseeable future. This could
        make
        our stock less attractive to potential investors.
We
        anticipate that we will retain all future earnings and other cash resources
        for
        the future operation and development of our business and we do not intend
        to
        declare or pay any cash dividends in the foreseeable future. Any future payment
        of cash dividends will be at the discretion of our Board of Directors after
        taking into account many factors, including our operating results, financial
        condition and capital requirements. Corporations that pay dividends may be
        viewed as a better investment than corporations that do not.
The
        authorization and issuance of preferred stock may prevent or discourage a
        change
        in our management.
Our
        amended Articles of Incorporation will authorize the Board of Directors to
        issue
        up to 10,000,000 shares of preferred stock without stockholder approval.
        Such
        shares will have terms, conditions, rights, preferences and designations
        as the
        Board may determine. The rights of the holders of our common stock will be
        subject to, and may be adversely affected by, the rights of the holders of
        any
        preferred stock that may be issued in the future. The issuance of preferred
        stock, while providing desirable flexibility in connection with possible
        acquisitions and other corporate purposes, could have the effect of discouraging
        a person from acquiring a majority of our outstanding common stock.
It
        may be difficult for a third party to acquire us, and this could depress
        our
        stock price.
Nevada
        corporate law includes provisions that could delay, defer or prevent a change
        in
        control of our company or our management. These provisions could discourage
        information contests and make it more difficult for you and other stockholders
        to elect directors and take other corporate actions. As a result, these
        provisions could limit the price that investors are willing to pay in the
        future
        for shares of our common stock. For example:
(i)
without
                  prior stockholder approval, the Board of Directors has the authority
                  to
                  issue one or more classes of preferred stock with rights senior
                  to those
                  of common stock and to determine the rights, privileges and inference
                  of
                  that preferred stock;
(ii)
there
                  is no cumulative voting in the election of directors, which would
                  otherwise allow less than a majority of stockholders to elect director
                  candidates; and
(iii)
stockholders
                  cannot call a special meeting of
                  stockholders.
DESCRIPTION
          OF PROPERTY
We
          currently conduct our primary business operations using office space rented
          from
          Lennox Tech Enterprise Center in West Henrietta, New York. We pay a monthly
          fee
          of $4,047 for the use of this office space under a lease expiring May 31,
          2008
          (subject to our right to terminate any time after May 31, 2006 upon 90
          days'
          notice). We are planning to lease laboratory facilities as needed to expand
          the
          capabilities and facilities of subcontractors and government laboratories,
          where
          we plan to conduct the bulk of our research under contracts and cooperative
          research and development agreements. We believe that suitable space is
          available
          in the greater Rochester, New York area at competitive rates. Our management
          believes that our properties are adequately covered by insurance.
-16-
SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
        following table sets forth certain information as of November 29,
        2005 with
        respect to the beneficial ownership of our common stock by each stockholder
        known by us to be the beneficial owner of more than 5% of our common stock
        and
        by each of our directors and executive officers and by all of the directors
        and
        executive officers as a group. Unless otherwise indicated, the address of
        each
        of the persons listed below is
c
/
o
NaturalNano, Inc., 150 Lucius Gordon Drive, Suite 115, West Henrietta, NY
        14586.
        Unless otherwise indicated in the footnotes, shares are owned of record and
        beneficially by the named person. For purposes of the following table, a
        person
        is deemed to be the beneficial owner of any shares of common stock (a) over
        which the person has or shares, directly or indirectly, voting or investment
        power, or (b) of which the person has a right to acquire beneficial ownership
        at
        any time within 60 days after November 29, 2005. "Voting power" is the
        power to vote or direct the voting of shares and "investment power" includes the
        power to dispose or direct the disposition of shares.
Name
                  and Address
of
                  Beneficial Owner
Number
                  of Shares
Beneficially
                  Owned
(1)
Percent
                  of Class
(2)
Directors
                  and Executive Officers
:
Steven
                  Katz
100,000
*
Ross
                  B. Kenzie
32,962,624
(3)
54.4
%
John
                  F. Lanzafame
116,667
*
Michael
                  L. Weiner
33,029,430
(3)
53.6
%
Michael
                  Riedlinger
500,000
*
Kathleen
                  Browne
150,000
*
Sarah
                  Cooper
100,000
*
All
                  Directors and Executive Officers as a group
(7
                  persons)
33,996,097
(3)
55.1
%
Other
                  5% Beneficial Owners
:
Technology
                  Innovations, LLC
150
                  Lucius Gordon Drive, Suite 215
West
                  Henrietta, NY 14586
32,962,763
(4)
54.4
%
*
Less
                  than 1%
1)
Except
                  as may be set forth below, the persons named in the table have
                  sole voting
                  and investment power with respect to all shares shown as beneficially
                  owned by them.
2)
Applicable
                  percentage of ownership is based on 60,380,020 shares outstanding
                  immediately following the Merger, together with applicable options
                  for
                  such stockholder. Shares subject to options currently exercisable
                  or
                  exercisable within 60 days after the effective time of the Merger
                  are
                  included in the number of shares beneficially owned and are deemed
                  outstanding for purposes of computing the percentage ownership
                  of the
                  person holding such options, but are not deemed outstanding for
                  computing
                  the percentage of any other stockholder.
3)
Includes
                  32,962,763 shares held by or issuable to, Technology Innovations,
                  LLC, of
                  which Messrs. Kenzie and Weiner are members and managers. Each
                  of Mr.
                  Kenzie and Mr. Weiner disclaims beneficial ownership of the shares
                  held by
                  Technology Innovations, LLC except to the extent of his beneficial
                  ownership of a membership interest in Technology Innovations,
                  LLC.
4)
Includes
                250,000 shares issuable pursuant to currently exercisable
                options.
-17-
EXECUTIVE
        OFFICERS AND DIRECTORS
The
        following table shows information about our executive officers and directors
        as
        of November 29, 2005:
Name
Age
Position
Steven
                  Katz
56
Director
Ross
                  B. Kenzie
73
Director
John
                  F. Lanzafame
37
Director
Michael
                  L. Weiner
57
Director
Michael
                  Riedlinger
47
President
                  and Director
Kathleen
                  Browne
50
Chief
                  Financial Officer, Treasurer and Secretary
Sarah
                  Cooper
28
Chief
                  Technology Officer
The
        business experience of each of the persons listed above during the past five
        years is as follows:
Steven
        Katz
is
        President of Steven Katz & Associates, Inc., a technology-based management
        consulting firm specializing in strategic planning, corporate development,
        new
        product planning, technology licensing, and structuring and securing various
        forms of financing since 1982. From January 2000 until October 2001, Mr.
        Katz
        was President and Chief Operating Officer of Senesco Technologies, Inc.,
        a
        public company engaged in the development of proprietary genes with application
        to agro-biotechnology. From 1983 to 1984 he was the co-founder and Executive
        Vice President of S.K.Y. Polymers, Inc., a biomaterials company. Prior to
        S.K.Y.
        Polymers, Inc., Mr. Katz was Vice President and General Manager of a non-banking
        division of Citicorp. From 1976 to 1980 he held various senior management
        positions at National Patent Development Corporation, including President
        of
        three subsidiaries. Prior positions were with Revlon, Inc. (1975) and Price
        Waterhouse & Co. (1969 to 1974). Mr. Katz received a Bachelor of Business
        Administration degree in Accounting from the City College of New York in
        1969.
        He is a member of the Boards of Directors of two publicly held corporations,
        USA
        Technologies, Inc. and Biophan Technologies, Inc. and of several private
        companies.
Ross
        B. Kenzie
currently
        serves on the boards of several companies including the publicly
        held
Rand
        Capital Corporation and Biophan Technologies Inc. as well as many
        entrepreneurial ventures that are privately held, including Biomed Solutions
        LLC
        and Technology Innovations, LLC. Mr. Kenzie is a former Chairman and Chief
        Executive Officer of Goldome Bank, from which he retired in June 1989. He
        was
        previously Executive Vice President of Merrill Lynch & Co., in the New York
        worldwide headquarters, and is a former member of the Merrill Lynch & Co.
        Board of Directors. He is a former Director of the Federal Home Loan Bank
        of New
        York ( from 1984 to 1988) and served on the boards of the National Council
        of
        Savings Institutions (from 1982 to 1986), the Federal Reserve Bank of New
        York,
        Buffalo Branch (from 1985 to 1987), and the Savings Banks Association of
        New
        York State (from 1984 to 1987). Mr. Kenzie was a Director of Millard Fillmore
        Hospitals (from 1982 to 1995) and is currently Past Chairman Emeritus. He
        served
        on the Board of the Kaleida Health, Education and Research Foundation (from
        1998
        to 2000) and is currently on its Investment Committee. He was Director of
        the
        Health Systems Agency of Western New York (from 1988 to 1991), and was a
        member
        of the College Council of the State University College at Buffalo (from 1981
        to
        1998) and served as Chairman. He was a Director of the College's Foundation and
        a member of its Finance Committee (from 1984 to 1998) and is currently on
        its
        Investment Committee. He served on the Council of the Burchfield-Penney Art
        Center (from 1990 to 2001) and the Albright Knox Art Gallery (from 1983 to
        1985). He is also a member of the Board, and the Chairman of the Investment
        Committee of the State University at Buffalo Foundation.
-18-
John
        Lanzafame
is
        Vice
        President for Business Development of Biophan Technologies, Inc. He has fifteen
        years experience in the medical device industry, with a background that includes
        a bachelors degree in chemical engineering and a masters degree in industrial
        engineering.  Until early 2004, Mr. Lanzafame was employed by STS
        Biopolymers, Inc., a privately held medical device company that marketed
        high
        performance polymer-based coatings for the medical device industry, including
        drug eluting surfaces for devices such as coronary stents and indwelling
        catheters.  Mr. Lanzafame held a variety of positions with STS Biopolymers,
        including positions in research, product development, and sales and marketing,
        ultimately leading to his assuming the position of President of STS Biopolymers
        beginning in 2003.  In 2004, Mr. Lanzafame left STS Biopolymers following
        sale of the company to Angiotech Pharmaceuticals, and is currently Vice
        President, Business Development for Biophan, and President of Nanolution,
        Biophan's drug delivery division.  This newly formed division was created
        to leverage new discoveries in the field of nanotechnology for the purposes
        of
        targeted drug delivery and highly controlled drug elution from medical devices.
Michael
        L. Weiner
is
        President, Chief Executive Officer and co-founder of Biophan Technologies,
        Inc.
        He began his career at Xerox Corporation in 1975, where he served in a variety
        of capacities in sales and marketing, including manager of software market
        expansion and manager of sales compensation planning. In 1982, he received
        the
        President's award, the top honor at Xerox for an invention benefiting a major
        product line. In 1985, Mr. Weiner founded Microlytics, a Xerox spin-off company
        which developed technology from the Xerox Palo Alto Research Center into
        a suite
        of products, including the award winning Word Finder Thesaurus, with licenses
        out to over 150 companies, including Apple, Microsoft, and Sony. Microlytics
        was
        acquired by a merger with a public company in 1990, which Mr. Weiner then
        headed
        up through 1993. In February 1999, Mr. Weiner founded Technology Innovations,
        LLC, to develop intellectual property assets. In August 2000, Technology
        Innovations, LLC created a subsidiary, Biomed Solutions, LLC, to pursue certain
        biomedical and nanotechnology opportunities, investing in embryonic-to-seed
        stage innovations which generate new ventures and/or licenses. Mr. Weiner
        is the
        CEO and a director of Biophan Technologies, Inc., a medical research and
        development company located in West Henrietta, New York engaged in providing
        technology to enable implantable medical devices and interventional devices
        to
        be used safely and effectively in conjunction with Magnetic Resonance Imaging
        (MRI), since December 2000. Mr. Weiner serves on the Boards of Biophan
        Technologies, Inc., Biomed Solutions, LLC, Technology Innovations, LLC, Stem
        Capture, Inc., OncoVista, Inc., Myotech, LLC, TE Bio, LLC, and Nanoset, LLC,.
        Mr. Weiner holds seventeen U.S. patents.
Michael
        Riedlinger
became
        President of NaturalNano in December 2004. Prior to joining NaturalNano,
        he was,
        from 2002 to 2005, President of Technology Sales and Licensing Services,
        a firm
        specializing in business development for organizations that seek new sources
        of
        revenue from licensing or selling their technical innovations to others.
        Mr.
        Riedlinger continues to provide limited consulting services to Biophan
        Technologies, Inc. relative to licensing and technical development projects
        in
        connection with this former role. From 2000 to 2002, Mr. Riedlinger was Chief
        Executive Officer of Vitalwork, Inc., an organizational development company
        focused on training and corporate culture change for the telecommunications
        industry. From 1995 to 2000, Mr. Riedlinger was Director of Sales and Marketing
        at Metamor Software Solutions, a computer programming services division of
        Metamor Worldwide with offices in over 20 countries. From 1993 to 1995 he
        was
        Vice President of QSoft Solutions, a provider of quality management software
        and
        information to major corporations in North America. From 1986 to 1993, Mr.
        Riedlinger held several positions, including OEM Products Director and Director
        of Strategic Planning at Microlytics, Inc. Mr. Riedlinger has a MBA from
        the
        University of Rochester and a BFA from the Rochester Institute of
        Technology.
-19-
Kathleen
        Browne
became
        Chief Financial Officer of NaturalNano in July 2005. For the four years prior
        to
        joining NaturalNano, Ms. Browne was the Corporate Controller and Chief
        Accountant of Paychex, Inc., a payroll service provider in Rochester, New
        York.
        During the period 1996-2000, she served as the Vice President and Corporate
        Controller of W.R. Grace, a worldwide specialty chemicals manufacturer located
        in Boca Raton, Florida. From 1992-1996, Ms. Browne served in various financial
        positions for Bausch & Lomb in Rochester, New York. From 1977 to 1992, Ms.
        Browne was with the Rochester, New York office of Price Waterhouse. Ms. Browne
        holds a Bachelor of Science degree from St. John Fisher College. 
        She is a
        member of the American Institute of Certified Accountants and the New York
        State
        Society of CPAs.
Sarah
        Cooper
has been
        Chief Technology Officer of NaturalNano since December 2004. Ms. Cooper has
        an
        extensive background in nanotechnology and material science. Trained as a
        chemical engineer, she was, prior to joining NaturalNano, a research fellow
        at
        NASA Ames Center for Nanotechnology, studying the fundamental properties
        of
        carbon nanotubes and other nanomaterials. Ms. Cooper is also a consultant
        to
        Biophan Technologies, Inc. for that company's bio-thermal battery project. While
        on sabbatical from NASA in 2003, Ms. Cooper attended NJIT's BioMEMS Summer
        Institute to study the potential of BioMEMS as an integration platform to
        scale
        nano-sized components into practical devices. Before going to NASA, she
        conducted research at Los Alamos National Lab and IDEXX Laboratories. Ms.
        Cooper
        received her BS in chemical engineering from Brown University in 2000, and
        is
        currently finishing a PhD in Materials Physics at the University of Sydney,
        expanding on her work at NASA on nanoengineered thermoelectric materials.
        Ms.
        Cooper has authored numerous scientific and professional journal
        articles.
Potential
        Conflict of Interests
Two
        members of our Board of Directors, Michael L. Weiner and Ross B. Kenzie,
        are
        managers and significant equity holders of Technology Innovations, LLC, which
        owns approximately 54.4% of our outstanding common stock. Messrs. Weiner
        and
        Kenzie and Technology Innovations are also significant equity holders of
        Biomed
        Systems LLC, a company engaged in the business of identifying and acquiring
        for
        exploitation technologies in the biomedical field. Further, Mr. Weiner is
        on the
        board of Nanoset, LLC, an entity owned in part by Biomed Solutions, which
        is
        engaged in the development of nanomagnetic particle coatings. Messrs. Weiner
        and
        Kenzie and a third member of our Board, Steven Katz, are also on the Board
        of,
        and Mr. Weiner and a fourth member of our Board, John Lanzafame, are executive
        officers of, Biophan Technologies, Inc., a company with whose wholly-owned
        subsidiary, Nanolution, LLC, we have a joint research and development agreement
        for the development of drug delivery and medical applications utilizing
        nanotechnology discoveries.
Prior
        to
        joining NN Research, our President, Michael Riedlinger, advised Biophan
        Technologies on licensing and technological development projects as an
        independent consultant. He has continued to provide such services to Biophan
        Technologies, and the cost of 20% of his base compensation is borne by Biophan
        Technologies. Our Chief Technology Officer, Sarah Cooper, also provides services
        to Biophan Technologies, and 50% of the cost of her base salary is borne
        by
        Biophan Technologies.
Because
        of the nature of our business and the business of these other entities, the
        relationships of all of the members of our Board of Directors with these
        other
        entities may give rise to conflicts of interest with respect to certain matters
        affecting us. Potential conflicts may not be resolved in a manner that is
        favorable to us. We believe it is not possible to predict the precise
        circumstances under which future potential conflicts may arise and therefore
        intend to address potential conflicts on a case-by-case basis. Under Nevada
        law,
        directors have a fiduciary duty to act in good faith and with a view to the
        best
        interests of the corporation.
-20-
The
        Board and Committees of the Board
The
        standing committees of the Board are the Audit Committee and the Compensation
        Committee. The Board does not currently have a nominating committee and has
        not
        established any specific procedure for selecting candidates for director.
        However, directors are currently nominated by a majority vote of the Board.
        There is also no established procedure for shareholder communications with
        members of the Board or the Board as a whole. However, shareholders may
        communicate with the investor relations department of the Company, and such
        communications are either responded to immediately or are referred to the
        president or chief financial officer of the Company for a response. The Board
        intends to form a nominating and corporate governance committee during the
        2006
        fiscal year.
Audit
        Committee
.
The
        Audit
        Committee is currently composed of Messrs. Katz (Chairman) , and Kenzie.
        The
        responsibilities of the Audit Committee will be more fully set forth in the
        Audit Committee Charter which the Board intends to adopt prior to the 2006
        Annual Meeting. When adopted, the Audit Committee Charter will be posted
        on our
        website at
www.naturalnano.com
,
        and
        shall include provisions governing the appointment, retention, compensation
        and
        oversight of, the work of the independent accountants, who report to, and
        are
        directly accountable to, the Committee. The Audit Committee reviews with
        the
        independent accountants the results of the audit engagement, approves
        professional services provided by the accountants including the scope of
        non-audit services, if any, and reviews the adequacy of our internal accounting
        controls. The Board has determined that Messrs. Katz and Kenzie meet the
        qualifications as "audit committee financial experts".
Compensation
        Committee
.
The
        Compensation Committee is composed of Messrs Kenzie (Chairman), Weiner and
        Katz.
        The responsibilities of the Compensation Committee will be more fully set
        forth
        in the Compensation Committee Charter which the Board intends to adopt prior
        to
        the 2006 Annual Meeting. When adopted, the Compensation Committee Charter
        will
        be posted on our website at
www.naturalnano.com
,
        and
        shall include provisions governing the review of the Company's compensation
        policies and the establishment of executive officer compensation, and the
        administration of the Company's Stock Option Plan.
Compensation
        of the Board
Directors
        who are employees of the Company do not receive additional compensation for
        serving on the Board or its committees. Non-employee directors, for their
        services as directors, are paid an annual cash fee of $8,000. In addition,
        non-employee directors are also eligible to receive an option grant for up
        to
        50,000 shares of our common stock at each annual stockholders meeting. All
        directors are reimbursed for their reasonable expenses incurred in attending
        Board meetings. Steven Katz receives an additional $3,000 per year for serving
        as Chairman of the Audit Committee. Otherwise, no additional compensation
        is
        paid to directors for serving as members of committees of the
        Board.
The
        Company maintains directors and officers liability insurance.
-21-
EXECUTIVE
        COMPENSATION
NN
        Research was incorporated on December 22, 2004 and did not have any employees
        for the fiscal year ended December 31, 2004. Set forth below is information
        relating to the current compensation of the Company's executive officers, stated
        on an annualized basis. The date on which each officer's employment commenced is
        set forth opposite his or her name.
SUMMARY
        COMPENSATION TABLE
Annual
                  Compensation
Awards
Name
                  / Position
Payroll
                  Start Date
Gross
                  Salary
Eligible
                  Bonus
Restricted
                  Awards
Securities
                  Options / SAR
Michael
                  Riedlinger/President
1/1/05
$135,000
$30,000
None
1,500,000
Kathleen
                  Browne/CFO
7/1/05
$135,000
$20,000
None
400,000
Sarah
                  Cooper/CTO
10/1/05
$110,000
$7,000
None
300,000
Employment
        Contracts and Termination of Employment and Change-in-Control
        Arrangements
Each
        of
        the Company's executive officers was offered employment in a letter which set
        forth his or her compensation and provides that employment may be terminated
        at
        any time by either the Company or the executive officer upon 90 days' notice or
        by the Company immediately for cause or upon the executive officer's death or
        disability. There are no arrangements between the Company and any of its
        executive officers for severance pay or for any payments or other compensation
        upon a change in control of the Company. All of our executives have signed
        confidentiality agreements and we have non-complete agreements in place with
        the
        Company's President and CTO.
CERTAIN
        RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Registration
        Rights Agreement
and
        Other Registration Obligations
NN
        Research entered into a certain Registration Rights Agreement on December
        22,
        2004 with Technology Innovations LLC, our principal stockholder which holds
        32,962,763 shares of our common stock,. We assumed NN Research's obligations
        under the Registration Rights Agreement in connection with the Merger. Under
        the
        Registration Rights Agreement, we are required to use our reasonable best
        efforts to prepare and file with the SEC, and to cause to be declared effective,
        a registration statement on an appropriate form pursuant to the Securities
        Act
        of 1933 to permit the offer and resale by Technology Innovations, LLC of
        the
        shares held by it. We are obligated to keep such registration statement
        effective for a period of one year after it first becomes effective. All
        expenses incident to the performance of our obligations under the Registration
        Rights Agreement, including all registration fees and expenses, will be borne
        by
        the Company. The Registration Rights Agreement is filed herewith as Exhibit
        4.3
        and the foregoing description is qualified in its entirety by reference to
        such
        Exhibit.
In
        connection with the Merger, on November 29, 2005, we issued to SBI USA, LLC
        a
        warrant for the purchase of 2,250,000 shares of our common stock, in exchange
        for a warrant which had been issued to SBI by NN Research and which were
        cancelled pursuant to the Merger Agreement. Under the warrant, if we determine
        to register any shares of our common stock under the Securities Act of 1933
        in
        connection with a public offering of our common stock (other than under an
        employee benefit plan or in connection with a merger or similar transaction),
        we
        are required to include in such registration any shares of our common stock
        issuable to SBI under the warrant (or in certain other specified transactions).
        We have agreed to bear all expenses incurred by us or by SBI in connection
        with
        such registration. The warrant is filed herewith as Exhibit 4.5 and the
        foregoing description is qualified in its entirety by reference to such
        Exhibit.
-22-
In
        the
        Subscription Agreement pursuant to which NN Research issued the Convertible
        Notes that were converted, at the effective time of the Merger, into an
        aggregate of 10,469,600 shares of our common stock, NN Research agreed to
        use
        its best efforts to include the securities issued upon conversion of such
        Convertible Notes in any registration statement filed by NN Research under
        the
        Securities Act of 1933 in connection with a public offering of its common
        stock
        (other than under an employee benefit plan or in connection with a merger
        or
        similar transaction) for its own account or for the account of others. In
        the
        Merger Agreement, we assumed the obligations of NN Research with respect
        to such
        registration rights. All expenses incident to the performance of our
        obligations, including all registration fees and expenses, will be borne
        by the
        Company. The form of Subscription Agreement is filed herewith as Exhibit
        4.4 and
        the foregoing description is qualified in its entirety by reference to such
        Exhibit.
Joint
        Research Agreement
On
        May
        25, 2005, NN Research entered into a joint research agreement with Nanolution,
        LLC to pursue the development of a new drug delivery application utilizing
        naturally occurring halloysite nanotechnologies. One of our directors, John
        Lanzafame, is President of Nanolution. Nanolution is a wholly-owned subsidiary
        of Biophan Technologies, Inc. and three of our directors (Messrs. Katz, Kenzie
        and Weiner) are directors of Biophan Technologies; Messrs. Lanzafame and
        Weiner
        are executive officers of Biophan Technologies. Under the joint research
        agreement, all medical uses and inventions arising from these efforts will
        be
        owned by Nanolution and all purification processes and non-medical applications
        will be owned by the Company. The joint research agreement is filed herewith
        as
        Exhibit 10.2 and the foregoing description is qualified in its entirety by
        reference to such Exhibit.
License
        Agreement
On
        April
        27, 2005, Technology Innovations, LLC granted NN Research an exclusive,
        world-wide license, with right to sublicense, to use certain specified patent
        rights of Technology Innovations (the "Patent Rights") as well as Technology
        Innovation' research and development information, unpatented inventions,
        know-how, trade secrets, and technical data in the
development,
        manufacture, use and sale of non-medical products employing halloysite
        microtubule processes, structures, compositions and applications. NN Research
        is
        required to make royalty payments to Technology Innovations based on the
        net
        sales of products utilizing the licensed technology and on the receipt of
        fees
        for the sublicensing of such technology. The license will expire upon the
        expiration or abandonment of the Patent Rights, but may be terminated earlier
        by
        Technology Innovations for (i) non-payment of royalties or other breach by
        NN
        Research of its obligations under the License Agreement or (ii) the failure
        of
        NN Research or any sublicense to make any sale of a product utilizing the
        licensed technology within five years after the effective date of the License
        Agreement. Technology Innovations is our principal stockholder and the holder
        of
        approximately 54% of our outstanding common stock. Two of our directors (Messrs.
        Kenzie and Weiner) are members and managers of Technology Innovations.
DES
C
RIPTION
        OF SECURITIES
The
        following description of our capital stock is only a summary. It is subject
        in
        all respects to applicable Nevada law and to the provisions of our articles
        of
        incorporation and bylaws, as amended from time to time, copies of which have
        been or will be filed with the SEC. Please refer to these documents for more
        complete information.
Authorized
        Capital Stock
Common
        Stock
We
        are
        authorized to issue up to 100,000,000 shares of common stock with a par value
        of
        $0.001 per share. As of November 29, 2005, there were 60,380,020 shares
        of
        our common stock issued and outstanding. All shares of common stock have
        equal
        rights and privileges with respect to voting, liquidation and dividend rights.
        Each share of common stock entitles the holder thereof to (a) one non-cumulative
        vote for each share held of record on all matters submitted to a vote of
        the
        stockholders; (b) to participate equally and to receive any and all such
        dividends as may be declared by the Board of Directors; and (c) to participate
        pro rata in any distribution of assets available for distribution upon
        liquidation. Holders of our common stock have no preemptive rights to acquire
        additional shares of common stock or any other securities. The common stock
        is
        not subject to redemption and carries no subscription or conversion
        rights.
-23-
Preferred
        Stock
We
        are
        authorized to issue up to 10,000,000 shares of common stock with a par value
        of
        $0.001 per share. There are currently no shares of our preferred stock issued
        or
        outstanding. The Board of Directors has the flexibility to set new classes,
        series, and other terms and conditions of the preferred shares. Preferred
        shares
        may be issued from time to time in one or more series at the discretion of
        our
        Board of Directors. The Board has the authority to establish the number of
        shares to be included in each such series, and to fix the designation, powers,
        preferences and rights of the shares of each such series and the qualifications,
        limitations and restrictions thereof.
Preferred
        shares may be issued in the future by the Board without further stockholder
        approval, for such purposes as the board deems in the best interest of our
        company, including future stock splits and split-ups, stock dividends, equity
        financings and issuances for acquisitions and business combinations. In
        addition, such authorized but unissued common and preferred shares could
        be used
        by the Board of Directors for defensive purposes against a hostile takeover
        attempt, including (by way of example) the private placement of shares or
        the
        granting of options to purchase shares to persons or entities sympathetic
        to, or
        contractually bound to support, management. We have no such present arrangement
        or understanding with any person. Further, the common and preferred shares
        may
        be reserved for issuance upon exercise of stock purchase rights designed
        to
        deter hostile takeovers, commonly known as a "poison pill".
The
        flexibility granted to the board in specifying the rights and preferences
        of
        various series of preferred stock could similarly be used in designing classes
        of preferred stock which could act as an effective deterrent or defensive
        tool
        in a takeover situation including the creation of voting and other impediments
        which might frustrate persons attempting to gain control of our company.
        Such
        uses of authorized and unissued stock might make any takeover attempt more
        difficult and could deprive stockholders of the ability to realize above
        present
        market premiums, which often accompany such takeover attempts. There are
        currently no shares of preferred stock outstanding and we do not have any
        present intention of issuing any such shares in the immediate
        future.
PART
        II
STOCK
        PRICE AND DIVIDEND INFORMATION; RELATED STOCKHOLDER MATTERS
Stock
        Price
Our
        common stock is currently traded on the OTCBB as NaturalNano, Inc. under
        the
        symbol "NNAN." Prior to December 1, 2005, our stock traded as Cementitious
        Materials, Inc. under the symbol "CTTM." Because our
shares
        have traded only on a limited and sporadic basis, there is no meaningful
        history
        of reported trades in the public market and we therefore do not include
        a
        price history of our shares. The market price of our common stock fluctuates.
        We
        encourage you to obtain current market price information for our common stock.
Holders
The
        number of record holders of our common stock as of November 29, 2005,
        was
        176; this number does not include an indeterminate number of shareholders
        whose
        shares are held by brokers in street name.
-24-
Dividends
We
        have
        never declared or paid any cash dividends on any class of our common stock.
        We
        currently intend to retain any future earnings to fund the development and
        growth of our business and currently do not anticipate paying cash dividends
        in
        the foreseeable future.
EQUITY
        COMPENSATION PLAN INFORMATION
The
        following table shows information about securities authorized for issuance
        under
        our equity compensation plans as of November 29, 2005:
Number
                    of
Securities
Number
                    of
remaining
                    for future
Securities
                    to
Weighted-
issuance
                    under equity
be
                    issued upon
average
                    exercise
compensation
                    plans
exercise
                    of
price
                    of
(excluding
                    securities
outstanding
                    options,
outstanding
reflected
                    in column
                    (a))
(a)
(b)
(c)
Equity
                    compensation plans approved by security holders
4,950,000
$
.10
2,050,000
Equity
                    compensation plans not approved by security holders
none
$
–
none
Total
4,950,000
$
.10
2,050,000
NATURALNANO,
        INC. 2005 INCENTIVE STOCK PLAN
The
        following is a brief summary of the NaturalNano, Inc. 2005 Incentive Stock
        Plan,
        a copy of which is filed herewith as Exhibit 4.1. The following summary is
        qualified in its entirety by reference to such Exhibit.
Types
        of Awards
The
        incentive stock plan provides for the grant of non-statutory stock options,
        restricted stock, restricted stock units, stock appreciation rights, incentive
        stock options intended to qualify under Section 422 of the Internal Revenue
        Code
        of 1986, as amended (the "Code") and other stock-based awards. No more than 50%
        of the total number of shares of common stock covered by the incentive stock
        plan may be issued pursuant to awards that are not options or stock appreciation
        rights.
Incentive
        Stock Options and Non-statutory Stock Options
.
        Optionees receive the right to purchase a specified number of shares of common
        stock at a specified option price and subject to such other terms and conditions
        as are specified in connection with the option grant. Options may not be
        granted
        at an exercise price less than the fair market value of the common stock
        on the
        date of grant. Options may not be granted for a term in excess of ten years.
        Outstanding options may not be amended to provide an exercise price per share
        which is lower than the then current exercise price per share of such
        outstanding options. The Board of Directors may not cancel any outstanding
        options and grant in substitution for such options new options under the
        incentive stock plan covering the same or a different number of shares of
        common
        stock and having an exercise price per share lower than the then current
        exercise price per share of the cancelled options. The Board of Directors
        will,
        however, have the power to amend stock options to convert them into stock
        appreciation rights and make other amendments to options, provided that the
        optionee must consent to such action unless the board determines that the
        action
        would not materially and adversely affect the optionee.
-25-
Restricted
        Stock and Restricted Stock Unit Awards
.
        Restricted stock awards entitle recipients to acquire shares of common stock,
        subject to our right to repurchase all or part of such shares from the recipient
        in the event that the conditions specified in the applicable award are not
        satisfied prior to the end of the applicable restriction period established
        for
        such award. Restricted stock unit awards entitle the recipient to receive
        shares
        of common stock to be delivered in the future subject to such terms and
        conditions on the delivery of the shares as the Board of Directors may
        determine.
Restricted
        stock and restricted stock unit awards granted under the incentive stock
        plan
        may vest (a) solely on the basis of passage of time, (b) solely based on
        achievement of specified performance criteria or (c) upon the passage of
        time,
        subject to accelerated vesting if specified performance criteria are met.
        The
        Board of Directors may determine, at the time of grant, that restricted stock
        or
        restricted stock unit award being made to an officer will vest solely upon
        achievement of specified performance criteria designed to qualify for deduction
        under Section 162(m) of the Code. The performance criteria for each restricted
        stock or restricted stock unit award intended to so qualify for purposes
        of
        Section 162(m) of the Code will be based on one or more of the following
        measures: sales, earnings per share, return on net assets, return on equity,
        and
        customer service levels.
Except
        as
        noted below, (a) restricted stock and restricted stock units that vest solely
        on
        the basis of passage of time may vest no faster than ratably over three years;
        and (b) restricted stock and restricted stock units that vest based on
        achievement of specified performance criteria, or provide for accelerated
        vesting based upon achievement of specified performance criteria, may not
        vest
        earlier than the first anniversary of the date of grant. These vesting
        restrictions do not apply to restricted stock and restricted stock unit awards
        collectively with respect to up to 5% of the total number of shares of common
        stock covered by the incentive stock plan. In addition, the Board of Directors
        may make exceptions to the vesting limitations described above in the event
        of
        the recipient's death, a change in control or other extraordinary circumstances
        specified in the incentive stock plan.
Stock
        Appreciation Rights
.
        A stock
        appreciation right, or SAR, is an award entitling the holder on exercise
        to
        receive, at the election of the Board of Directors, an amount in cash or
        common
        stock or a combination thereof determined in whole or in part by reference
        to
        appreciation, from and after the date of grant, in the fair market value
        of a
        share of common stock. SARs may be based solely on appreciation in the fair
        market value of common stock or on a comparison of such appreciation with
        some
        other measure of market growth such as (but not limited to) appreciation
        in a
        recognized market index.
Other
        Stock-Based Awards
.
        Under
        the incentive stock plan, the Board of Directors has the right to grant other
        awards of common stock or awards otherwise based upon common stock or other
        property, including without limitation rights to purchase shares of common
        stock, having such terms and conditions as the board may determine.
Eligibility
        to Receive Awards
Employees,
        officers, directors, consultants, advisors and other service providers are
        eligible to be granted awards under the incentive stock plan. The maximum
        number
        of shares with respect to which awards may be granted to any participant
        under
        the incentive stock plan may not exceed 5 million shares per calendar
        year.
Administration
The
        incentive stock plan is administered by the Board of Directors. The board
        has
        the authority to adopt, amend and repeal the administrative rules, guidelines
        and practices relating to the incentive stock plan and to interpret the plan's
        provisions. The board may also delegate authority under the incentive stock
        plan
        to a committee of the Board of Directors. The board may also delegate authority
        under the incentive stock plan to one or more officers, except that the board
        will fix the terms of the awards to be granted by such officers and the maximum
        number of shares subject to awards that the officers may grant. No officer
        will
        be authorized to grant awards to himself or herself.
-26-
Subject
        to any applicable delegation by the Board of Directors and any applicable
        limitations contained in the incentive stock plan, the Board of Directors
        selects the recipients of awards and determines:
(i)
the
                  number of shares of common stock covered by options and the dates
                  upon
                  which such options become
                  exercisable;
(ii)
the
                  exercise price of options, which may not be less than 100% of the
                  fair
                  market value of common stock;
(iii)
the
                  duration of options, which may not exceed 10
                  years;
(iv)
the
                  terms of stock appreciation rights and the dates or conditions
                  upon which
                  such stock appreciation rights become
                  exercisable;
(v)
the
                  number of shares of common stock subject to any restricted stock,
                  restricted stock unit or other stock-based awards and the terms
                  and
                  conditions of such awards, including, if applicable, conditions
                  for
                  repurchase, issue price and repurchase
                  price.
We
        are
        required to make appropriate adjustments or substitutions in connection with
        the
        incentive stock plan and any outstanding awards to reflect stock splits,
        stock
        dividends, recapitalizations, spin-offs and other similar changes in
        capitalization to the extent the Board of Directors deems such adjustment
        or
        substitution to be necessary and appropriate. The incentive stock plan also
        contains provisions addressing the consequences of any "reorganization event,"
        which is defined as:
(i)
any
                  Merger or consolidation of with or into another entity as a result
                  of
                  which all of the common stock is converted into or exchanged for
                  the right
                  to receive cash, securities or other property;
                  or
(ii)
any
                  exchange of all of common stock for cash, securities or other property
                  pursuant to a share exchange transaction.
If
        any
        award expires or is terminated, surrendered or canceled without having being
        fully exercised, is forfeited in whole or in part, or results in any common
        stock not being issued because (a) the award is settled for cash, or (b)
        shares
        are used to satisfy the exercise price or tax withholding obligation, the
        unused
        shares of common stock covered by such award will again be available for
        grant
        under the incentive stock plan, subject, however, in the case of incentive
        stock
        options, to any limitations under the Code.
Termination
        or Amendment
No
        award
        may be made under the incentive stock plan after the completion of ten years
        from the date on which the plan is approved by our stockholders, but awards
        previously granted may extend beyond that date. The Board of Directors may
        at
        any time amend, suspend or terminate the incentive stock plan, except that
        no
        award designated as subject to Section 162(m) of the Code by the Board of
        Directors after the date of such amendment shall become exercisable, realizable
        or vested, to the extent such amendment was required to grant such award,
        unless
        and until such amendment shall have been approved by our stockholders. In
        addition, without the approval of our stockholders, no amendment
        may:
(i)
increase
                  the number of shares authorized under the incentive stock
                  plan;
(ii)
materially
                  increase the benefits provided under the incentive stock
                  plan;
(iii)
materially
                  expand the class of participants eligible to participate in the
                  incentive
                  stock plan;
(iv)
expand
                  the types of awards provided under the incentive stock plan;
                  or
(v)
make
                  any other changes which require stockholder approval under the
                  rules of
                  the national securities market on which the shares of common stock
                  are
                  quoted.
-27-
No
        award
        may be made that is conditioned on the approval of our stockholders of any
        amendment to the incentive stock plan.
Federal
        Income Tax Consequences
The
        following generally summarizes the United States federal income tax consequences
        that generally will arise with respect to awards granted under the incentive
        stock plan. This summary is based on the tax laws in effect as of the date
        of
        this Information Statement. Changes to these laws could alter the tax
        consequences described below.
Incentive
        Stock Options
.
        A
        participant will not have income upon the grant of an incentive stock option.
        Also, except as described below, a participant will not have income upon
        exercise of an incentive stock option if the participant has been employed
        by
        our company, NaturalNano, or any other 50% or more-owned corporate subsidiary
        at
        all times beginning with the option grant date and ending three months before
        the date the participant exercises the option. If the participant has not
        been
        so employed during that time, then the participant will be taxed as described
        below under "Nonstatutory Stock Options." The exercise of an incentive stock
        option may subject the participant to the alternative minimum tax.
A
        participant will have income upon the sale of the stock acquired under an
        incentive stock option at a profit if sales proceeds exceed the exercise
        price.
        The type of income will depend on when the participant sells the stock. If
        a
        participant sells the stock more than two years after the option was granted
        and
        more than one year after the option was exercised, then all of the profit
        will
        be long-term capital gain. If a participant sells the stock prior to satisfying
        these waiting periods, then the participant will have engaged in a disqualifying
        disposition and a portion of the profit will be ordinary income and a portion
        may be capital gain. This capital gain will be long-term if the participant
        has
        held the stock for more than one year and otherwise will be short-term. If
        a
        participant sells the stock at a loss (sales proceeds are less than the exercise
        price), then the loss will be a capital loss. This capital loss will be
        long-term if the participant held the stock for more than one year and otherwise
        will be short-term.
Nonstatutory
        Stock Options
.
        A
        participant will not have income upon the grant of a nonstatutory stock option.
        A participant will have compensation income upon the exercise of a nonstatutory
        stock option equal to the value of the stock on the day the participant
        exercised the option less the exercise price. Upon sale of the stock, the
        participant will have capital gain or loss equal to the difference between
        the
        sales proceeds and the value of the stock on the day the option was exercised.
        This capital gain or loss will be long-term if the participant has held the
        stock for more than one year and otherwise will be short-term.
Restricted
        Stock
.
        A
        participant will not have income upon the grant of restricted stock unless
        an
        election under Section 83(b) of the Code is made within 30 days of the date
        of
        grant. If a timely 83(b) election is made, then a participant will have
        compensation income equal to the value of the stock less the purchase price.
        When the stock is sold, the participant will have capital gain or loss equal
        to
        the difference between the sales proceeds and the value of the stock on the
        date
        of grant. If the participant does not make an 83(b) election, then when the
        stock vests the participant will have compensation income equal to the value
        of
        the stock on the vesting date less the purchase price. When the stock is
        sold,
        the participant will have capital gain or loss equal to the sales proceeds
        less
        the value of the stock on the vesting date. Any capital gain or loss will
        be
        long-term if the participant held the stock for more than one year from the
        vesting date and otherwise will be short-term.
Restricted
        Stock Units
.
        A
        participant will have income from a restricted stock unit equal to the
        difference of the fair market value of the stock on the date of delivery
        of the
        stock less the purchase price. A participant is not permitted to make a Section
        83(b) election for a restricted stock unit.
Stock
        Appreciation Rights and Other Stock-Based Awards
.
        The tax
        consequences associated with stock appreciation rights and any other stock-based
        awards granted under the incentive stock plan will vary depending on the
        specific terms of such award. Among the relevant factors are whether or not
        the
        award has a readily ascertainable fair market value, whether or not the award
        is
        subject to forfeiture provisions or restrictions on transfer, the nature
        of the
        property to be received by the participant under the award and the participant's
        holding period and tax basis for the award or underlying common stock.
Tax
        Consequences to Us.
There
        will be no tax consequences to us except that we will be entitled to a deduction
        when a participant has compensation income. Any such deduction will be subject
        to the limitations of Section 162(m) of the Code.
-28-
LEGAL
        PROCEEDINGS
There
        are
        no material pending legal proceedings to which we are a party or to which
        any of
        our property is subject and, to the best of our knowledge, no such actions
        against us are contemplated or threatened.
RECENT
        SALES OF UNREGISTERED SECURITIES
On
        November 29, 2005, we issued an aggregate of 55,388,978 shares of
        our
        common stock in the Merger. The shares were issued in a private transaction
        to
        59 persons that were the former stockholders and note holders of NN Research.
        We
        also issued, pursuant to the Merger Agreement, a warrant for the purchase
        of
        2,250,000 shares of our common stock to one investor, in exchange for a warrant
        for the purchase of an identical number of shares of NN Research common stock
        that was cancelled in the Merger. The issuances were made in reliance on
        an
        exemption from registration under the Securities Act of 1933 pursuant to
        Section
        4(2) of that Act
INDEMNIFICATION
        OF DIRECTORS AND OFFICERS
Our
        articles of incorporation provide that no director or officer shall have
        any
        liability to the company if the person acted in good faith and with the same
        degree of care and skill as prudent person in similar circumstances.
Our
        articles of incorporation and bylaws provide that we will indemnify our
        directors and officers and may indemnify our employees or agents to the fullest
        extent permitted by law against liabilities and expenses incurred in connection
        with litigation in which they may be involved because of their offices. However,
        nothing in our articles of incorporation or bylaws protects or indemnifies
        a
        director, officer, employee or agent against any liability to which he would
        otherwise be subject by reason of willful misfeasance, bad faith, gross
        negligence or reckless disregard of the duties involved in the conduct of
        his or
        her office. To the extent that a director has been successful in defense
        of any
        proceeding, the Nevada Revised Business Corporations Act provides that he
        or she
        shall be indemnified against reasonable expenses incurred in connection with
        the
        proceeding.
PART
        F/S
See
        Item 9.01: Financial Statements and Exhibits below.
PART
        III
See
        Item 9.01: Financial Statements and Exhibits below.
Item 3.02
        Unregistered Sale of Equity Securities.
On
        November 29, 2005, effective upon the closing of the Merger, we issued
        55,388,978 shares of our common stock to the former stockholders and note
        holders of NN Research. In connection with the Merger, we also issued a warrant
        to SBI USA, LLC, the holder of an outstanding warrant for the purchase of
        NN
        Research common stock. Reference is made to the disclosure set forth under
        Item 2.01 of this Current Report on Form 8-K which is incorporated
        herein
        by reference.
-29-
Item 4.01
        Changes in Registrant's Certifying Accountant.
(a)
On
        November 29, 2005, after the closing of the Merger,
HJ
&
        Associates, LLC, Certified Public Accountants ("HJ"), resigned as our
        independent certifying accountants, effective November 29, 2005. The termination
        of our relationship with HJ was unanimously accepted by the Audit Committee
        of
        our Board of Directors on November 29, 2005.
HJ's
        audit report to our financial statements for the years ended December 31,
        2004
        and 2003, includes a modification expressing substantial doubt as to the
        Company's ability to continue as a going concern because we had not established
        an ongoing source of revenues sufficient to cover our operating costs. Our
        ability to continue as a going concern is dependent on obtaining adequate
        capital to fund future operating losses until we become profitable. The audit
        report contains no other adverse opinion, disclaimer of opinion or modification
        as to uncertainty, audit scope or accounting principle.
In
        connection with its audit for the last two fiscal years and the interim periods
        until the date of termination, there have been no disagreements with HJ on
        any
        matter of accounting principles or practices, financial statement disclosure,
        or
        auditing scope or procedures which, if not resolved to the satisfaction of
        HJ,
        would have caused it to make reference to the subject matter of the disagreement
        in connection in its report on the financial statements.
During
        our two most recent fiscal years and through November 29
,
        2005
there
        have been no reportable events as set forth in Regulation S-B, Item
        304(a)(1)(iv). We have provided HJ with a copy of this
Form 8-K
and
        requested that it furnish us with a letter addressed to the Securities and
        Exchange Commission stating whether or not HJ agrees with the above statements.
        A copy of the letter provided to us by HJ in response to this request is
        filed
        as Exhibit 16.1 to this Form 8-K.
(b)
Also
        on
        November 29, 2005, the Audit Committee unanimously approved a resolution
        to
        engage
Goldstein
        Golub Kessler LLP
,
        Certified Public
Accountants
        ("GGK")
,
to
        become our new independent certifying accountants. Prior to the Merger, GGK
        had
        served as the independent certifying accountants of NN Research from its
        inception. From the date of inception of NN Research and through November
        29,
        2005, we have not consulted with
GGK
regarding:
(i)
the
        application of accounting principles to a specified transaction, either
        completed or proposed, or the type of audit opinion that might be rendered
        on
        our financial statements, and no written report or oral advice was provided
        to
        us by concluding there was an important factor to be considered by us in
        reaching a decision as to an accounting, auditing or financial reporting
        issue;
        or
(ii)
any
        matter
        that was the subject of a disagreement, as that term is defined in Item
        304(a)(1)(iv) of Regulation S-B and the related instructions thereto, or
        a
        reportable event, as set forth in Item 304(a)(1)(iv) of Regulation
        S-B.
Item 5.01
        Changes in Control of Registrant.
Reference
        is made to the disclosure set forth under Item 2.01 of this Current
        Report
        on Form 8-K, which disclosure is incorporated herein by reference.
Item 5.02
        Departure of Directors or Principal Officers; Election of Directors; Appointment
        of Principal Officers.
In
        connection with the closing of the Merger, all of the Company's incumbent
        officers and directors resigned as of November 29, 2005, the effective
        date
        of the Merger. On November 29, 2005, the following persons were elected to
        our
        Board of Directors: Steven Katz, Ross B. Kenzie, John F. Lanzafame, Michael
        Riedlinger and Michael L. Weiner. Also, on November 29, 2005, the following
        persons were elected to the offices indicated after their names: Michael
        Riedlinger (President), Kathleen A. Browne (Chief Financial Officer, Treasurer
        and Secretary), and Sarah Cooper (Chief Technology Officer). Reference is
        made
        to the disclosure set forth under Item 2.01 of this Current Report on Form
        8-K,
        which disclosure is incorporated herein by reference.
Item 5.03
          Amendments to Articles of Incorporation or Bylaws
On
          November 29, 2005, we amended our articles of incorporation, (i)
          to change
          of our name from Cementitious Materials, Inc. to NaturalNano, Inc. and
          (ii) to
          increase our authorized capitalization to 100,000,000 shares of common
          stock and
          10,000,000 shares of preferred stock. A copy of the Certificate of Amendment
          to
          our Articles of Incorporation is filed as Exhibit 3.2 to this Report and
          the
          foregoing description of the amendment is qualified in its entirety by
          reference
          to such Exhibit.
On
          December 5, 2005, we filed Restated Articles of
          Incorporation. The Restated Articles restated our corporate charter to
          reflect
          all prior amendments, but did not effect any further amendment. A copy
          of our
          Restated Articles of Incorporation is filed as Exhibit 3.1 to this Report
          on
          Form 8-K.
Item 5.06
          Change in Shell Company Status
Reference
          is made to the disclosure set forth under Item 2.01 and Item 5.01
          of
          this Current Report on Form 8-K, which disclosure is incorporated herein
          by
          reference.
-30-
Item 9.01
        Financial Statements and Exhibits.
(a)
Financial
                  statements of businesses acquired.
See
        Financial Statements beginning at Page F-1
(b)
Pro
                  forma financial information.
See
        Unaudited Pro Forma Condensed Financial Statements of NaturalNano, Inc. filed
        herewith as Exhibit 99.1.
(d)
Exhibits.
Exhibit
                  Number
Description
2.1
Agreement
                  and Plan of Merger among NaturalNano, Inc., Cementitious Materials,
                  Inc.
                  and Cementitious Acquisitions, Inc.
1
3.1
Restated
                  Articles of Incorporation*
3.2
Certificate
                  of Amendment of Articles of Incorporation*
3.3
By-laws
2
4.1
                  #
NaturalNano,
                  Inc. 2005 Incentive Stock Plan
3
4.2
                  #
Form
                  of Non-Qualified Stock Option Agreement *
4.3
Registration
                  Rights Agreement dated as of December 22, 2004 between NaturalNano,
                  Inc.
                  and Technology Innovations, LLC *
4.4
Form
                  of Subscription Agreement for the Purchase of Convertible Notes
                  of
                  NaturalNano, Inc. *
4.5
Warrant
                  issued to SBI USA, LLC *
10.1
License
                  Agreement between Technology Innovations, LLC and NaturalNano,
                  Inc. dated
                  as of April 27, 2005 (filed in redacted form pursuant to a request
                  for
                  confidential treatment filed separately with the Securities and
                  Exchange
                  Commission) *
10.2
Joint
                  Research Agreement between Nanolution, LLC and NaturalNano Inc.
                  dated as
                  of May 25, 2005 *
10.3
                  #
Employment
                  Letter of Michael Riedlinger and Amendment No. 1 thereto
                  *
10.4
                  #
Employment
                  Letter of Kathleen A. Browne and Amendment No. 1 thereto
                  *
10.5
                  #
Employment
                  Letter of Sarah Cooper *
16.1
Letter
                  on Change in Certifying Accountant *
21.1
Subsidiaries
                  *
23.1
Consent
                  of Goldstein Golub Kessler LLP
,
                  Certified Public
Accountants*
99.1
Unaudited
                  Pro Forma Condensed Financial Statements of NaturalNano,
                  Inc.*
*
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 dated
                  September
                  26, 2005
2.
Incorporated
                  by reference to Exhibit 3.2 to Form 10-SB filed July 3,
                  2002
3.
Incorporated
                  by reference to Appendix C to Information Statement on Schedule
                  14C filed
                  November 8, 2005
-31-
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 hereunto
        duly authorized.
NATURALNANO,
                INC.
Dated: 
                December 5, 2005
By:
/s/ Michael
                Riedlinger
Michael
                  Riedlinger
President
-32-
REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
            the
            Board of Directors
NaturalNano
            Inc.
We
            have
            audited the accompanying balance sheet of NaturalNano Inc. (a development
            stage
            company) (an entity controlled by Technology Innovations, LLC) as of
            December
            31, 2004, and the related statements of operations, stockholder's equity and
            cash flows for the period from December 22, 2004 (inception) to December
            31,
            2004. These financial statements are the responsibility of the Company's
            management. Our responsibility is to express an opinion on these financial
            statements based on our audit.
We
            conducted our audit in accordance with the standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            financial
            statements are free of material misstatement. An audit includes examining,
            on a
            test basis, evidence supporting the amounts and disclosures in the financial
            statements. An audit also includes assessing the accounting principles
            used and
            significant estimates made by management, as well as evaluating the overall
            financial statement presentation. We believe that our audit provides
            a
            reasonable basis for our opinion.
In
            our
            opinion, the financial statements referred to above present fairly, in
            all
            material respects, the financial position of NaturalNano Inc. as of December
            31,
            2004 and the results of its operations and its cash flows for the period
            from
            December 22, 2004 to December 31, 2004 in conformity with United States
            generally accepted accounting principles.
/s/
            GOLDSTEIN GOLUB KESSLER LLP
New
            York,
            New York
August
            15, 2005, except for Note 12,
as
            to
            which the date is November 29, 2005
F-1
NaturalNano,
                        Inc.
(A
                        Development Stage Company)
BALANCE
                        SHEET
September
                        30,
December
                        31,
2005
2004
(UNAUDITED)
Assets
Current
                      assets:
Cash
                        and cash equivalents
$
2,698,330
Prepaid
                        assets
250,000
$
125,000
Other
                        current assets
24,038
Total
                        current assets
2,972,368
125,000
Property
                        and equipment, net
29,346
Investments
300,000
Total
                        assets
$
3,301,714
$
125,000
Liabilities
                        and Stockholder's Equity (Deficiency)
Liabilities
Current
                        liabilities:
Accounts
                        Payable
$
119,338
Accrued
                        Payroll
112,604
Accrued
                        Expenses
175,093
Due
                        to Related Parties
$
32,336
Convertible
                        Bridge Notes
4,156,000
Total
                        current liabilities
4,563,035
32,336
Other
                        Liability
35,000
Total
                        Liabilties
4,598,035
32,336
Stockholder's
                        Equity (Deficiency)
Common
                        stock - $.01 par value:
Authorized
                        30,000,000 shares
Issued
                        and outstanding 10,000,000 shares
100,000
100,000
Additional
                        Paid In Capital
383,083
Deficit
                        accumulated in the development stage
(1,779,404
)
(7,336
)
Total
                        stockholder's equity (deficiency)
(1,296,321
)
92,664
Total
                        liabilities and stockholder's equity (deficiency)
$
3,301,714
$
125,000
See
            notes
            to financial statements
F-2
NaturalNano,
                        Inc.
(A
                        Development Stage Company)
STATEMENT
                        OF OPERATIONS
From
                          inception
For
                          the nine months
From
                          inception
December
                          22, 2004
ending
December
                          22, 2004
through
September
                          30, 2005
through
September
                          30, 2005
UNAUDITED
December
                          31, 2004
UNAUDITED
Operating
                          expenses:
Research
                          and development (see note "a")
$
293,492
$
5,000
$
298,492
General
                          and administrative (see note "b")
1,597,065
2,336
1,599,401
1,890,557
7,336
1,897,893
Other
                          (income) expense:
Interest
                          expense,net
1,511
1,511
Investment
                          income
(120,000
)
(120,000
)
(118,489
)
(118,489
)
Net
                          loss
($1,772,068
)
($7,336
)
($1,779,404
)
Loss
                          per common share - basic and diluted
($0.18
)
($0.00
)
Weighted
                          average shares outstanding
10,000,000
10,000,000
(a)
Research
                            and development expenses include stock based compensation
                            of
                            $17,500.
(b)
General
                              and administrative expense includes stock based compensation
                              of
                              $140,583.
See
                  notes
                  to financial statements
F-3
NaturalNano,
                        Inc.
(A
                        Development Stage Company)
STATEMENT
                        OF STOCKHOLDER'S EQUITY (DEFICIENCY)
Period
                        from December 22, 2004 (inception) to September 30,
                        2005
Deficit
                        Accumulated
Additional
during
                        the
Stockholder's
Common
                        Stock
Paid-in
Development
Equity
Shares
Amount
Capital
Stage
(Deficiency)
December
                        22, 2004
10,000,000
                        shares issued for cash $.01 per share
10,000,000
$
100,000
$
100,000
Net
                        loss from inception through December 31, 2004
($7,336
)
(7,336
)
Balance
                        at December 31, 2004
10,000,000
100,000
(7,336
)
92,664
Unaudited:
Warrant
                        issued for 2,250,000 shares of common stock for services
                        received
$
225,000
225,000
Grant
                        of 1,580,830 stock options for services
158,083
158,083
Net
                        loss for nine months ending September 30, 2005
(1,772,068
)
(1,772,068
)
Balance
                        at September 30, 2005
10,000,000
$
100,000
$
383,083
($1,779,404
)
($1,296,321
)
See
            notes
            to financial statements
F-4
NaturalNano,
                        Inc.
(A
                        Development Stage Company)
STATEMENT
                        OF CASH FLOWS
UNAUDITED
From
                        inception
For
                        the nine months
From
                        inception
December
                        22, 2004
ending
December
                        22, 2004
through
September
                        30, 2005
through
September
                        30, 2005
UNAUDITED
December
                        31, 2004
UNAUDITED
Cash
                      flows from operating activities:
Net
                        loss
($1,772,068
)
($7,336
)
($1,779,404
)
Adjustments
                        to reconcile net loss to net cash used in operating
                        activities:
Depreciation
2,574
2,574
Issuance
                        of warrant for services
225,000
225,000
Grant
                        of stock options for services
158,083
158,083
Change
                        in market value of Atlas warrant
(120,000
)
(120,000
)
Receipt
                        of Atlas Mining warrant
(180,000
)
(180,000
)
Changes
                        in operating assets and liabilities:
(Increase
                        ) in Prepaid assets
(125,000
)
(125,000
)
(250,000
)
(Increase)
                        in Other current assets
(24,038
)
(24,038
)
Increase
                        in Accounts Payable, Accrued
Payroll
                        and Accrued Expenses
407,035
407,035
Increase
                        in Other Liabilities
35,000
35,000
Net
                        cash used in operating activities
(1,393,414
)
(132,336
)
(1,525,750
)
Net
                        cash used in investing activity -
Purchase
                        of property and equipment
(31,920
)
(31,920
)
Cash
                        flows from financing activities:
Advances
                        from Related Parties
395,301
32,336
427,637
Repayment
                        of Advances from Related Parties
(427,637
)
(427,637
)
Issuance
                        of Convertible Notes
4,156,000
4,156,000
Issuance
                        of Common Stock
100,000
100,000
Net
                        cash provided by financing activities
4,123,664
132,336
4,256,000
Change
                        in cash and cash equivalents and balance at end of
                        period
$
2,698,330
$
0
$
2,698,330
Non-cash
                        investing activity:
Receipt
                        of Atlas Mining warrant
$
180,000
$
180,000
See
            notes
            to financial statements
F-5
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
1.
PRINCIPAL
                      BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
:
Financial
          Statements
The
          balance sheet as of September 30, 2005 and the statement of operations,
          stockholders' equity (deficiency) and cash flows for the nine month period ended
          September 30, 2005 and the period from December 22, 2004 (inception) to
          September 30, 2005 have been prepared by NaturalNano, Inc. ("the Company") and
          are unaudited. In the opinion of management, all adjustments (consisting
          of
          normal recurring adjustments) necessary to present fairly the financial
          position
          at September 30, 2005 and the results of operations and cash flows for
          the
          periods ended September 30, 2005 have been included. The results of operations
          for the interim periods presented herein are not necessarily indicative
          of the
          results to be expected for the entire fiscal year.
Description
          of the Business
The
          Company was incorporated under the laws of the State of Delaware on December
          22,
          2004 and as a result of the merger with Cementitious Materials, Inc. (described
          in Note 12 below) changed its domicile to Nevada on November 29, 2005.
The
          Company, located in West Henrietta, New York, is a development stage company
          engaged in the discovery, refinement and commercialization of naturally
          occurring nanoscale materials. The Company's current activities are directed
          toward research, development, production and marketing of its proprietary
          technologies relating to the extraction and separation of nanotubes from
          halloysite clay and the development of related commercial applications
          for:
·
material
                      additives for polymers, plastics and
                      composites
·
cosmetics
                      and other personal care
                      products
·
absorbent
                      materials and
·
pharmaceutical
                      and medical device additives.
The
          Company is in the development stage and is expected to remain so for at
          least
          the next twelve months. The Company has not generated any revenues since
          its
          inception nor is it expected to do so in the near future. The Company's ability
          to continue in business is dependent upon obtaining sufficient financing
          or
          attaining profitable operations.
F-6
NaturalNano,
          Inc.
(A
          Development Stage Company)
NOTES
          TO FINANCIAL STATEMENTS
Information
          related to the nine month period ending September 30, 2005 is
          unaudited
Cash
          Equivalents
Cash
          equivalents consist of money market securities with a maturity of three
          months
          or less when purchased. Cash equivalents are stated at cost plus accrued
          interest, which approximates market value.
Concentration
          of Credit Risk
The
          Company maintains cash in bank deposit accounts which, at times, exceed
          federally insured limits. The Company has not experienced any losses on
          these
          accounts.
Research
          & Development
Research
          and development costs are expensed in the period the expenditures are incurred.
          Capital assets acquired in support of research and development are capitalized
          and depreciated over their estimated useful life and related depreciation
          expense is included in research and development expense.
Property
          and Equipment
Property
          and equipment, at cost, consists of the following:
Useful
                      Life
Furniture
                      & Office Equipment
$
16,655
5
                      years
Computers
                      and Software
15,265
3
                      years
31,920
Less:
                      Accumulated Depreciation
(2,574
)
Property
                      and equipment, net
$
29,346
Depreciation
          of property and equipment is provided on a straight-line basis over the
          estimated useful lives of the related assets.
Costs
          of
          internally developed intellectual property rights with indeterminate lives
          are
          expensed as incurred.
Deferred
          Taxes
Deferred
          tax assets and liabilities are recognized for future tax consequences
          attributable to differences between the financial statement carrying amounts
          of
          existing assets and liabilities and their respective tax bases. Deferred
          tax
          assets and liabilities are measured using enacted rates expected to apply
          when
          the differences are expected to be realized. A valuation allowance is recognized
          if it is anticipated that some or all of the deferred tax asset may not
          be
          realized.
F-7
NaturalNano,
          Inc.
(A
          Development Stage Company)
NOTES
          TO FINANCIAL STATEMENTS
Information
          related to the nine month period ending September 30, 2005 is
          unaudited
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 options and warrants outstanding
          during
          the period. Shares to be issued upon the exercise of the outstanding options
          and
          warrants are not included in the computation of diluted loss per share
          as their
          effect is anti-dilutive. There were 7,200,000 shares underlying outstanding
          options, warrants and 10,469,600 shares resulting from convertible debt
          which
          have been excluded from the calculation at September 30, 2005.
Estimates
The
          preparation of financial statements in conformity with generally accepted
          accounting principles requires the use of estimates by management. Actual
          results could differ from these estimates.
Stock
          Options
The
          Company has elected to apply Accounting Principles Board ("APB") Opinion No. 25,
          Accounting for Stock Issued to Employees, and related interpretations in
          accounting for its stock options issued to employees (intrinsic value)
          and has
          adopted the disclosure-only provisions of Statement of Financial Accounting
          Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. Had the
          Company elected to recognize compensation cost based on the fair value
          of the
          options granted at the grant date as prescribed by SFAS No. 123, the Company's
          net loss and loss per common share for the nine month period ending September
          30, 2005 would have been as follows:
Net
                      loss- as reported
($
                      1,772,068
)
Deduct:
                      Total stock-based employee compensation expense determined
                      under
                      fair-value-based method for all awards, net of related tax
                      effects
(
                      110,335
)
Pro
                      Forma net loss
($
                      1,882,403
)
Basic
                      and diluted loss per share -as reported
($0.18
)
Basic
                      and diluted loss per share - pro forma
($0.19
)
The
          Company's Board of Directors estimated the fair market value of the stock
          options at $0.10 per share on the date of grant.
F-8
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
Recent
          Accounting Pronouncements
In
          December 2004, the FASB issued SFAS No. 123 (revised 2004),"Share-Based
          Payment"
"SFAS
          No.
          123R"), which replaces SFAS No. 123 and supersedes APB No. 25. SFAS No. 123R
          requires that compensation cost relating to share-based payment transactions
          be
          recognized in financial statements based on alternative fair value models.
          The
          pronouncement requires that the cost of share-based compensation be measured
          based on the fair value of the equity or liability instruments issued.
          Per APB
          No. 25, compensation expense was recognized only to the extent the fair
          value of
          common stock exceeded the stock option exercise price at the measurement
          date.
          The pro forma disclosures previously permitted under SFAS No. 123 will
          no longer
          be an alternative to financial statement recognition. SFAS No.123R requires
          the
          benefits of tax deductions in excess
of
          recognized compensation cost be reported as a financing cash flow item.
The
          SEC
          delayed the effective date for implementation of SFAS No. 123R to the first
          fiscal year beginning after June 15, 2005. The Company will adopt SFAS
          No. 123R
          effective January 1, 2006.
Management
          does not believe that any other recently issued, but not yet effective,
          accounting standards if currently adopted would have a material effect
          on the
          accompanying financial statements.
2.
COOPERATIVE
                    RESEARCH AGREEMENTS
The
          Company has cooperative research and development agreements with two
          universities and an independent laboratory to jointly test and further
          develop
          commercial applications for naturally occurring nanomaterials. These agreements
          generally cover shared research personnel and facilities for a period of
          twelve
          to twenty four months with termination provisions requiring 30 days advance
          written notice. These agreements are subject to confidentiality clauses
          and
          include provisions relating to the ownership and the right to use any jointly
          developed intellectual property. Minimum future payments required under
          these
          agreements are as follows:
For
                      the quarter ending December 31, 2005
$
43,000
For
                      the year ending December 31, 2006
$
43,000
F-9
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
3.
RELATED
                      PARTY RESEARCH
                      AGREEMENT
On
          May
          25, 2005, the Company entered into a joint research agreement with Nanolution,
          LLC, a wholly owned subsidiary of Biophan Technologies, Inc. Biophan
          Technologies, Inc. is related to the Company's majority shareholder, Technology
          Innovations, LLC, through common ownership.
This
          agreement covers the exchange of ideas in support of a new drug delivery
          capability. The Company has secured the mineral rights and is developing
          the
          separation capabilities needed to support this drug delivery application.
          The
          term of this agreement shall continue until the desired technology becomes
          commercially viable or until mutually terminated by both parties.
All
          medical uses and inventions that arise as a result of this agreement will
          be
          owned by Nanolution, LLC and all purification processes for raw halloysite
          and
          non-medical applications will be owned by the Company.
4.
LICENSE
                    AGREEMENT WITH TECHNOLOGY INNOVATIONS,
                    LLC.
On
          April
          27, 2005 the Company entered into an exclusive, field of use limited license
          agreement ("License Agreement") with its majority shareholder, Technology
          Innovations, LLC. This agreement grants the Company an exclusive, world-wide
          license, to make, use and sell the products developed under these patents.
          The
          License Agreement covers several patent applications and provisional patents
          owned by Technology Innovations that will expire at various future dates.
          The
          Company also has the right to grant sublicenses to third parties under
          the
          agreement.
Future
          minimum royalty payments of $6,250 per quarter are required under the terms
          of
          this agreement, commencing in the calendar quarter that the first patent
          is
          issued.
5.
TRANSACTIONS
                    WITH ATLAS MINING COMPANY
On
          December 29, 2004 the Company contracted with Atlas Mining Company (OTC
          BB:
          ALMI)
in
          Utah
          for the purchase of 500 tons of processed halloysite nanotubes. In connection
          with this agreement, the Company agreed to the following scheduled payments
          to
          Atlas Mining payable through their designated distributor:
$125,000
          paid on December 29, 2004,
$125,000
          paid on June 29, 2005, and
$100,000
          payable upon commercial shipments made in excess of $250,000.
F-10
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
As
          additional consideration, the Company will pay 10% of the resale cash proceeds
          received from unaffiliated third parties, in instances where the purchase
          price
          is in excess of $700 per ton up to a maximum of $2,000 per ton.
Payments
          made by the Company in accordance with this agreement are presented as
          prepaid
          expenses and will be recorded as inventory upon receipt and will be recognized
          as expense in the period the nanotubules are used in the development of
          proprietary applications and processes or as customer shipments are
          made.
On
          January 28, 2005 the Company was issued a two year warrant for the right
          to
          acquire 750,000 shares of Atlas Mining common stock at $.40 per share.
          This
          warrant expires two years from the original issue date which will be January
          28,
          2007. Neither the warrant nor the shares of common stock issuable upon
          exercise
          have been registered under the Securities Act of 1933 and as such, are
          not
          readily available for sale or transfer in the public markets. The fair
          value of
          this asset on January 28, 2005 and at September 30, 2005 was estimated
          at
          $180,000 and $300,000, respectively. The warrant has been recorded as a
          non-current asset at January 28, 2005 with an offsetting liability included
          in
          accrued expenses. The liability is being amortized over the two year period
          commencing January 28, 2005 and reflects the Company's commitment to future
          research and development efforts which are expected to benefit both the
          Company
          and Atlas Mining. At September 30, 2005, the remaining liability, included
          in
          accrued expenses, is $112,500. The difference of $67,500 has been offset
          against
          research and development expenses in the accompanying statements of
          operations.
At
          September 30, 2005, the warrant was marked-to-market with changes in fair
          market
          value recorded as other investment income.
6.
INCOME
                    TAXES
As
          of
          September 30, 2005, the Company had a net operating loss carryforward,
          for
          federal income tax purposes, of approximately $1,779,000. The Company recorded
          a
          deferred income tax asset for the tax effect of the net operating loss
          carryforward of approximately $605,000. In recognition of the uncertainty
          regarding the ultimate amount of income tax benefits to be derived, the
          Company
          has recorded a full valuation allowance at September 30, 2005.
F-11
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
7.
STOCKHOLDER'S
                      EQUITY
On
          November 29, 2005, in connection with the recapitalization and merger (see
          Note
          12) with Cementitious Materials, Inc. ("Cementitious"), all outstanding options
          were canceled, and employees and consultants were granted options of
          NaturalNano, Inc. (formerly named Cementitious Materials, Inc.). The pro
          forma
          disclosure in Note 1 is presented for the options outstanding prior to
          the
          recapitalization. The original options were not modified to accelerate
          vesting
          or extend the term of the new options.
The
          Company received $225,000 in financial consulting services from SBI USA,
          LLC for
          which payment was satisfied through the issuance of 2,250,000 common stock
          warrants. These warrants have an exercise price of $0.23 per share, were
          fully
          vested as of the March 31, 2005 issuance date and have an expiration date
          of
          March 31, 2006. The consulting expenses relating to this warrant are included
          in
          general and administrative expenses in the accompanying statements of
          operations. None of these warrants had been exercised as September 30,
          2005.
          Neither these warrants nor the common stock issuable upon exercise of the
          warrants, have been registered under the Securities Act of 1933 and therefore
          these warrants are considered "restricted assets" within the meaning of Rule 144
          of the Securities Act of 1933.
8.
STOCK-BASED
                    COMPENSATION PLAN
The
          Company has a stock option plan (the "Plan") which provides for the granting of
          nonqualified or incentive stock options ("ISO") to officers, key employees,
          non-employee directors and consultants. The Plan authorizes the granting
          of
          options to acquire up to 7,000,000 common shares. ISO grants under the
          Plan are
          exercisable at the market value of the Company's stock on the date of the grant.
          Nonqualified options under the Plan are exercisable at amounts determined
          by the
          Board. All options under the Plan are exercisable at times as determined
          by the
          Board, not to exceed 10 years from the date of grant. Additionally, the
          Plan
          provides for the granting of restricted stock to officers and key
          employees.
During
          the period ending September 30, 2005 the Company's Board of Directors granted
          stock options
at
          fair
          market value, which was estimated by the Board of Directors at $0.10 per
          share
          on the date of the grant, to purchase 4,950,000 shares of the Company's common
          stock at $0.10 per share. Included in these actions were option grants
          to
          purchase 2,243,333 shares of the Company's common stock issued to non-employees.
          The fair value of the stock options granted to non-employees has been recorded
          as expense of $158,083 in the accompanying statements of
          operations.
There
          were 2,408,332 outstanding option grants exercisable as of September 30,
          2005.
F-12
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
9.
CONVERTIBLE
                      BRIDGE NOTES
As
          of
          September 30, 2005, the Company had issued and outstanding $4,156,000 in
          secured
          Convertible Bridge Notes (the "Notes") to be used for general working capital
          purposes. These notes included a mandatory conversion feature whereby $800,000
          in debt would be converted into 2,079,600 shares of Cementitious common
          stock
          and $3,356,000 in debt would be converted into 8,390,000 shares of Cementitious
          common stock in connection with the Cementitious Materials, Inc. merger
          further
          described in note 12 below.
As
          a
          result of the merger on November 29, 2005, all of these Notes were converted
          into 10,469,600 shares of Cementitious common stock. The Notes included
          an
          accrued interest provision of 8% per annum, generally beginning six months
          after
          the date of issuance. No interest will be accrued or paid on this notes
          since
          all of this outstanding debt was satisfied with the conversion into common
          stock
          coincident with the planned merger with Cementitious.
10.
LEASE
                    OBLIGATION
On
          May
          13, 2005, the Company entered into an operating lease agreement for office
          space
          expiring May 31, 2008. At any time after May 31, 2006, the Company may
          terminate
          the lease upon ninety days prior written notice to the landlord. Following
          are
          the minimum future payments under this lease:
For
                      the quarter ending December 31, 2005
$
12,579
For
                      each of the years ending December 31:
2006
$
53,807
2007
$
59,369
2008
$
35,938
11.
LINE
                    OF CREDIT AND PROMISSORY NOTE WITH TECHNOLOGY
                    INNOVATIONS
On
          December 29, 2004 the Company entered into a Line of Credit Agreement and
          a
          Promissory Note with its former parent company, Technology Innovations,
          LLC.
          This Line of Credit allows for borrowings of up to $500,000 for working
          capital
          purposes and bears an interest rate of 8% per annum. This agreement extends
          through December 31, 2005 at which time the outstanding balance, including
          all
          interest accrued, shall be repaid in full. As of September 30, 2005 there
          were
          no outstanding borrowings under this agreement.
F-13
NaturalNano,
            Inc.
(A
            Development Stage Company)
NOTES
            TO FINANCIAL STATEMENTS
Information
            related to the nine month period ending September 30, 2005 is
            unaudited
12.
SUBSEQUENT
                      EVENTS
Merger
          with Cementitious Materials, Inc.
On
          November 29, 2005, the Company completed the previously announced merger
          with
          Cementitious Materials, Inc. Under the merger agreement, the Company merged
          into
          a newly formed subsidiary of Cementitious with NaturalNano, Inc. being
          the
          surviving entity.
In
          connection with the merger, Technology Innovations, LLC, the Company's majority
          stockholder exchanged each of its outstanding shares for 4.4919378 shares
          of
          Cementitious stock for an aggregate of 44,919,378 shares of Cementitious.
          Each
          of the Company's previously outstanding options and warrants were replaced with
          the same number of options and warrants of Cementitious with rights to
          acquire
          this common stock at economic and contractual terms consistent with the
          rights
          as defined in the original NaturalNano option and warrant agreements. The
          Convertible Bridge Notes outstanding on November 29, 2005 were converted
          into
          10,469,600 shares of Cementitious common shares as prescribed in the original
          debt agreements (see note 9).
F-14
EXHIBIT
                    INDEX
Exhibit
                    Number
Description
2.1
Agreement
                    and Plan of Merger among NaturalNano, Inc., Cementitious Materials,
                    Inc.
                    and Cementitious Acquisitions, Inc.
3.1
Articles
                    of Incorporation and Amendments Thereto
3.2
Certificate
                    of Amendment of Articles of Incorporation
3.3
By-laws
4.1
NaturalNano,
                    Inc. 2005 Incentive Stock Plan
4.2
Form
                    of Non-Qualified Stock Option Agreement
4.3
Registration
                    Rights Agreement dated as of December 22, 2004 between NaturalNano,
                    Inc.
                    and Technology Innovations, LLC
4.4
Form
                    of Subscription Agreement for the Purchase of Convertible Notes
                    of
                    NaturalNano, Inc.
4.5
Warrant
                    issued to SBI USA, LLC
10.1
License
                    Agreement between Technology Innovations, LLC and NaturalNano,
                    Inc. dated
                    as of April 27, 2005 (filed in redacted form pursuant to a request
                    for
                    confidential treatment filed separately with the Securities and
                    Exchange
                    Commission)
10.2
Joint
                    Research Agreement between Nanolution, LLC and NaturalNano Inc.
                    dated as
                    of May 25, 2005
10.3
Employment
                    Letter of Michael Riedlinger and Amendment No. 1 thereto
10.4
Employment
                    Letter of Kathleen A. Browne and Amendment No. 1 thereto
10.5
Employment
                    Letter of Sarah Cooper
16.1
Letter
                    on Change in Certifying Accountant
21.1
Subsidiaries
23.1
Consent
                    of Goldstein Golub Kessler LLP, Certified Public Accountants
99.1
Unaudited
                    Pro Forma Condensed Financial Statements of NaturalNano, Inc.
33