**Back
          to Table of Contents**
 **Index
          to Financial Statements**





**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      DC 20549





**FORM
      10-KSB/A**







( Mark
      One)


x
            Annual
                Report under Section 13 or 15 (d) of The Securities Exchange Act
                of 1934


For
      the
      fiscal year ended December 31, 2005 or





o
            Transition
                Report under Section 14 or 15 (d) of The Securities Exchange Act
                of
                1934


For
      the
      transition period from _________ to __________.





**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.
                Employerof
                incorporation)
            
            
            
            Identification
                No.)





**150
      Lucius Gordon Drive, Suite 115**


**West
      Henrietta, New York 14586**


(Address
      of principal executive offices) ****


**(585) 214-8005**


(Registrant’s
      telephone number, including area code)




Securities
      registered under Section 12 (b) of the Exchange Act: None





Securities
      registered under Section 12 (g) of the Exchange Act: Common Stock, $0.001 par
      value.





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act:  _____





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15 (d) of the Exchange Act during the past twelve months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days Yes x No o





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





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





State
      issuer’s revenues for its most recent fiscal year: $500





The
      aggregate market value of the voting and non-common voting equity held by
      non-affiliates computed by reference to the average bid and asked price of
      such
      common equity, as of February 15, 2006 was $86,161,790.





The
      number of outstanding shares of the registrant’s Common Stock, $0.001 par value,
      as of February 15, 2006 was 121,074,740 shares.





DOCUMENTS
      INCORPORATED BY REFERENCE





Not
      applicable





Transitional
      Small Business Disclosure Format: Yes o No x







**Back
          to Table of Contents**
 **Index
          to Financial
          Statements**


**TABLE
      OF CONTENTS**




PageEXPLANATORY
                COMMENT
            1**PART
                I**Item
                1.
            Description
                of Business
            2Item
                2.
            Description
                of Property
            8Item
                3.
            Legal
                Proceedings
            9Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            9**PART
                II**Item
                  5.
            Market
                  for Common Equity, Related Stockholder Matters and Small BusinessIssuer Purchases of Equity Securities
            9Item
                6.
            Plan
                of Operation
            10Item
                7.
            Financial
                Statements
            13Item
                  8.
            Changes
                  in and Disagreements with Accountants on Accounting andFinancial
                  Disclosure
            14Item
                8A.
            Controls
                and Procedures
            14Item
                8B.
            Other
                Information
            14**PART
                III**Item
                  9.
            Directors,
                  Executive Officers, Promoters and Control Persons;Compliance with
                  Section 16(a) of the Exchange Act
            14Item
                10.
            Executive
                Compensation
            19Item
                  11.
            Security
                  Ownership of Certain Beneficial Owners and Managementand Related
                  Stockholder Matters
            21Item
                12.
            Certain
                Relationships and Related
                Transactions
            22Item
                13.
            Exhibits
            23Item
                14.
            Principal
                Accountant Fees and Services
            24**SIGNATURES**
            25






-i-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**EXPLANATORY
      NOTE**





**We
      are filing this Amendment to our Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 2005 (a) to reflect, on the cover page, the corrected
      aggregate market value of the outstanding shares of our equity securities held
      by non-affiliates, (b) to add to the Schedule of Beneficial Owners information
      regarding two beneficial owners of greater than 5% of our outstanding common
      stock and (c) to make certain changes to our financial statements including
      (i)
      expansion and clarification of certain footnotes, (ii) changes to the Statement
      of Operations and other statements to reflect a recalculation of the value
      of
      certain stock options and warrants and (iii) changes to the Statement of Cash
      Flows to reflect certain non-cash items.**





**CAUTIONARY
      STATEMENT REGARDING**


**FORWARD-LOOKING
      STATEMENTS**





This
      annual report on Form 10-KSB/A and other reports that we file with the SEC
      contain statements that are considered forward-looking statements.
      Forward-looking statements give the Company’s current expectations, plans,
      objectives, assumptions or forecasts of future events. All statements other
      than
      statements of current or historical fact contained in this annual report,
      including statements regarding the Company’s 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
      are based on the Company’s current plans and are subject to risks and
      uncertainties, and as such the Company’s actual future activities and results of
      operations may be materially different from those set forth in the forward
      looking statements. Any or all of the forward-looking statements in this annual
      report may turn out to be inaccurate and as such, you should not place undue
      reliance on these forward-looking statements. The Company has based these
      forward-looking statements largely on its current expectations and projections
      about future events and financial trends that it believes may affect its
      financial condition, results of operations, business strategy and financial
      needs. The forward-looking statements can be affected by inaccurate assumptions
      or by known or unknown risks, uncertainties and assumptions due to a number
      of
      factors, including:




·
            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. All subsequent written and oral forward-looking
      statements attributable to the Company or persons acting on its behalf are
      expressly qualified in their entirety by the cautionary statements contained
      in
      this annual report.




-1-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**ITEM
      1. DESCRIPTION OF BUSINESS**





**Company
      Business**





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 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.





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.




The
      Company’s current focus is directed toward research, development, production and
      marketing of material and proprietary technologies in the following
      fields:





1.
            Developing
                an intellectual property portfolio with state-of-the-art, proprietary
                processes for extracting and separating halloysite nanotubes from
                halloysite clay.




2.
            Developing
                commercial applications for halloysite nanotubes, specifically for
                the
                following application areas:




·
            Material
                additives for polymers, plastics and composites,·
            Radio
                frequency shielding and control,


·
            Cosmetics
                and odor masking,·
            Absorbent
                materials,


·
            Electronics,·
            Agricultural,
                and


·
            Drug
                delivery.




3.
            Engaging
                in business alliances with other organizations to bring our nanoscale
                materials to market.





**Projected
      Milestones for the Period through December 2006**





The
      Company will focus on the following operational objectives and milestones during
      the next twelve months:





1.
            **Intellectual
                Property Asset Development**a.
            Continue
                patent applications for separation and application technologies for
                naturally occurring nanomaterialsb.
            License-in
              complementary technologies from third
              parties




2.
            **Halloysite
                nanotube processing technology**a.
            Continue
                evaluation of processing alternatives for commercial
                scaleb.
            Create
              designs for pilot processing system






-2-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




3.
            **Sample
                material availability**a.
            Ship
                samples to third parties for evaluation and for research
                purposes





4.
            **Engage
                with research organizations to reduce patent-pending and licensed
                IP to
                practice in the following categories**:a.
            Separation
                and classification of halloysite nanotubesb.
            Additives
              for composite plastics and polymersc.
            Cosmeceutical
              applicationsd.
            Electronics
              applications




5.
            **Establish
                strategic partners and enter into joint development relationships
                with the
                intent to license our
                technology.**





**Products
      and Technology**





Halloysite
      Nanotube (“HNT TM ”)
      Extraction and Classification





The
      Company has proprietary technology related to the extraction of halloysite
      nanotubes from minimally processed halloysite clay that is typically provided
      by
      a halloysite mining company, such as Atlas Mining Company. Halloysite clays
      differ in the concentration and physical characteristics of tubular material
      content. NaturalNano’s technologies are important for realizing the benefits of
      the nanotubular material. Classification of the halloysite nanotubes is
      necessary for determining the loading potential of unfilled halloysite nanotubes
      and determination of the resulting release characteristics of filled halloysite
      nanotubes. Many of the technologies related to extraction and classification
      of
      halloysite nanotubes are patent-pending and we expect to continue research
      in
      these areas which may lead to additional patent applications in the
      future.





Halloysite
      Nanotube Functionalization





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 a variety of unique processing methods, formulations
      and other surface treatment technologies. Some of these proprietary technologies
      are protected by trade secrets.





Various
      treatments can be made to the halloysite nanotubes to prepare them for use
      in a
      wide range of specific applications. Examples of these treatments include
      coating the outer surfaces of the nanotubes, metalizing outer and/or inner
      surfaces of the nanotubes, loading or filling the nanotubes with active
      ingredients for precise controlled release, and use of complementary
      technologies for further encapsulating single or multiple functionalized
      halloysite nanotubes. Each of these functionalization approaches may provide
      benefits across the multiple industries that the Company’s technologies address.
      Combining these technologies presents prospective customers with the potential
      for deriving specific application solutions from
      utilizing these technologies. The table below presents a high-level overview
      of
      the technologies and market segments that may benefit. Not every technology
      shown is applicable to every market, but this illustrates the overview of
      technologies and markets.




-3-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




HNTTMExtraction
            HNTTMClassification
            Outer
                Surface Treatments
            Outer
                Surface Metalization
            Inner
                Surface Coatings
            Inner
                Surface Metalization
            Active
                Ingredient Loading
            Encapsulation
                of Single or Multiple Functionalized HNTTMsPolymers,
                Plastics, CompositesRadio
                Frequency ShieldingCosmeticsOdor
                maskingAbsorbent
                materialsElectronicsAgricultureDrug
                Delivery





The
      Company provides technologies and services for functionalizing halloysite
      nanotubes for use in a wide range of applications. Functionalization of these
      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 material 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 a variety of unique processing methods, formulations
      and other surface treatment technologies.





**Licensing
      Strategy**





Our
      strategy is to license our technologies to companies, segmented by technology
      type and market segment. In some cases, we may also offer critical components,
      functionalized materials, and/or other capabilities needed to put our
      innovations into practice.





Our
      licensing strategy is to segment the market as finely as possible to maximize
      the royalty revenue achievable by our technology. The table above reveals a
      high-level overview of the potential licensing space for our technologies.
      Our
      technologies are shown across the top of the table, and potential markets are
      indicated on the left side of the table. Each empty box in the table is a
      potential licensing space, indicating a technology/product intersection. Not
      every technology shown is pertinent for every market, but this reveals a
      high-level overview of our market segmentation strategy.





We
      believe royalty rates, which would be either a direct royalty for technologies
      utilized by the manufacturer to produce products utilizing our technologies
      or
      as premium amounts in actual materials provided to a customer, are critical
      to
      the determination of our future potential revenue.





Our
      upfront negotiations with each customer will determine royalty rates for each
      market segment. Royalty rates are dependent upon the strength of our patent
      coverage, the strength of the market advantage provided by
      our
      technology, the availability of other technology options to solve a particular
      problem, as well as whether or not we grant an exclusive or non-exclusive
      license. We believe it is very important to demonstrate the value that we add
      to
      the product, and how that added value will improve our customer’s position in
      the market, to achieve an acceptable royalty rate.




-4-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





In
      situations where we possess several solutions to a problem, we expect that
      the
      customer will evaluate all of our technology options to determine which solution
      is best and whether or not it should license all of our solutions. Those
      solutions that are not licensed exclusively might be licensed-in by a
      competitor, who can then claim a comparable advantage. Broader license grants
      and stronger intellectual property positions can result in higher royalty rates.
      To achieve higher potential royalty rates, resulting in the best long-term
      benefit to our shareholders. We are aggressively patenting and acquiring
      technology solutions in the multiple markets in which we are
      active.





For
      each
      potential customer with whom we enter into discussions, we identify which market
      segments they are interested in and which technologies they wish to license.
      We
      generally wish to see a commitment to ship a product within a certain time
      frame, certain annual minimum commitments, minimum royalty payments, milestone
      payments and an attractive royalty rate or material sale price, if the customer
      requirements dictate providing materials with an implicit license fee per unit
      of material weight.





The
      degree of exclusivity is also a key parameter in determining achievable license
      terms and royalty rates; however, the decision to license exclusively or
      non-exclusively is dependent upon multiple factors. Ultimately, our strategy
      related to exclusive versus non-exclusive licensing will be determined by market
      segment, and will be dependent upon market need, market fragmentation,
      competitive advantage market position and financial incentives offered by the
      potential licensees. For example, while giving one company a non-exclusive
      license, there remains the possibility for a second company to negotiate a
      "co-exclusive" license.





**Markets**





The
      Company has technologies that can provide benefits to many industry segments.
      Specific industries where management believes halloysite nanotubes may enhance
      products through controlled and extended release of active ingredients or
      through other treatments provided on the surfaces of the tubes
      include:





·
            Polymers,
                plastics and composites·
            Cosmetics
                and cosmeceuticals


·
            Household
                products·
            Electronics


·
            Agricultural
                products·
            Drug
                delivery technologies





We
      anticipate that we will license our technology to one or more development
      partners who would be responsible for developing commercial products, obtaining
      necessary approvals, manufacturing, marketing and distributing the products.
      Our
      search for development partners is global; however, we cannot presently identify
      or predict the precise target markets, distribution methods or other marketing
      efforts of our potential development partners.





The
      potential market for technologies which we have under development is large.
      As
      examples, the total estimated North American market for polymers and plastics,
      as presented by the American Plastics Council, is approximately $300 billion
      in
      annual revenues; drug delivery technologies is estimated to be a U.S. $40
      billion market. Additionally, the projected growth of the nanotechnology market
      has been forecasted
      by the National Science Foundation to grow from approximately $25 billion in
      2006 to $1 trillion by 2015.




-5-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**Strategic
      Partnerships**





Leveraging
      strategic relationships is vital to our mission. These relationships will help
      us to validate and expand 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 several nationally
      recognized universities and with 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 and commercial product suppliers around the world
      as we
      focus on developing new nanotechnology solution applications.





We
      have
      entered into nondisclosure 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.) (“Nanolution”) 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 and separately marketed by Nanolution. All purification
      processes and non-medical applications will be owned by
      NaturalNano.





**Sales
      and Marketing**





The
      Company intends to develop an internal direct sales group for future licensing
      and delivery of products and related production processes with prospective
      customers. At the present time, this is considered to be an important 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.





We
      are
      collaborating jointly on sales, marketing and distribution with the Nanolution
      division of Biophan, which holds the worldwide exclusive rights to market the
      medical applications of halloysite. Biophan has been instrumental in the
      Company’s founding as well as in the development of the separation and
      characterization of nanotubes for use in numerous potential medical applications
      including: extended drug delivery and release and actively controlled release
      based on electromagnetic activation of coatings on the halloysite tubes which
      would allow the potential for the non-invasive activation of drug release from
      medical devices. An artificial hip, for example, which encounters wear and
      gets
      inflamed in an elderly patient several years after the implant, may be able
      to
      use pre-coated halloysite tubes with an anti-inflammatory agent to release
      drugs
      upon the activation of a specific EMF shield, and thus avoid potential
      complications, the discomfort of injection drugs and the possible use of
      anti-inflammatory drugs. Both the Company and Biophan see exciting medical
      uses
      for halloysite tubes. Nanolution’s preliminary discussions with medical device
      and pharmaceutical companies have indicated interest in these concept
      capabilities and we are proceeding to develop proof of principle prototypes
      for
      testing and evaluation.




**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.




-6-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





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
      products that directly compete with NaturalNano, 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.




**Patents
      and Trademarks**





The
      Company has the rights to twenty issued or pending patents related to its
      processes and technologies and expects to continually invest in the growth
      of
      its intellectual property portfolio through in-house development of unique
      concepts and processes and third party licensing and joint research programs.
      This investment in intellectual property will include the filing of patent
      applications in the areas of material processing, 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
      including the Company’s majority stockholder, Technology Innovations, LLC.
      NaturalNano expects to continue licensing-in processes and technologies that
      contribute to the further commercialization of naturally occurring
      nanomaterials.





**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 the coming period. Atlas Mining Company operates what
      is
      generally considered to be the largest commercial halloysite mine in the United
      States. NaturalNano has identified other halloysite sources that we believe
      are
      suitable as alternate suppliers of raw materials, and as such, we will not
      be
      solely dependent upon Atlas Mining Company for the supply of raw materials.





**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.





**Employees**





The
      Company currently employs six full-time employees and one part-time employee.
      We
      anticipate the addition of several full-time employees within the next twelve
      months in connection with the expansion of our technical knowledge of these
      novel nanomaterials. Our evaluation of human resource needs often results in
      our
      use of experienced part-time consultants in various functional areas in lieu
      of
      the immediate hiring of full-time employees.





The
      Company has at its disposal a number of consulting PhD and postdoctoral level
      scientists and engineers to assist in the extraction and classification
      processes for halloysite nanotubes and on other applications relating to our
      current research projects. All of our employees have signed confidentiality
      agreements and we have non-compete agreements in place with our key
      employees.




-7-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**Executive
      Officers of the Registrant**





See
      Part
      III, Item 9 of this Report for information about Executive Officers of the
      Company.





**Cementitious
      Materials, Inc.**





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, 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, we changed our name to “NaturalNano, Inc.” As
      a result of the Merger, we ceased being a shell company.




Pursuant
      to the Merger Agreement, we issued 89,838,756 split adjusted shares of our
      authorized but previously unissued common stock to the stockholders of NN
      Research in exchange for the 20,000,000 issued and outstanding common stock
      of
      NN Research. An additional 20,939,200 split adjusted shares of our authorized
      but previously unissued common stock were issued 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 14,400,000 split
      adjusted 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.




Because
      the shares issued to NN Research’s stockholders and note holders in the Merger
      represented a controlling interest in the Company, the transaction was accounted
      for as a recapitalization, and NN Research was 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 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.





**Available
      Information**





The
      Company’s internet address is http:// www.naturalnano.com .
      The
      Company’s filings with the Securities and Exchange Commission (“SEC”), including
      its annual report on Form 10-KSB, quarterly reports on Form 10-QSB, current
      reports on Form 8-K and amendments to those reports, filed or furnished pursuant
      to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are accessible
      free of charge at http://www.naturalnano.com as soon
      as reasonably practicable after the Company electronically files such material
      with, or furnishes it to, the SEC. Alternatively, such reports may be accessed
      at the internet address of the SEC, which is http://www.sec.gov .
      Also,
      the public may read and copy any materials that the Company files with the
      SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington, D.C.
      20549. The public may obtain information on the operation of the Public
      Reference Room by calling the SEC at 1-800-SEC-0330.





**ITEM
      2. DESCRIPTION OF PROPERTY**





We
      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
      $4,193 for the use of 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).





In
      January 2006, we signed a two-year lease for approximately 2000 square feet
      of
      laboratory space in Rochester, New York. This agreement includes a one-year
      renewal option that expires on January 31, 2009. The annual base rent under
      this
      agreement is $30,000 plus a pro rata share of the operating expenses for each
      of
      the first two years and increases to $31,500 for the optional renewal year.
      We
      believe that these facilities will be adequate for our anticipated needs through
      the respective lease terms.




-8-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





We
      believe that appropriate insurance coverage is in place and effective for these
      facilities and related business needs.





**ITEM
      3. 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.





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





On
      September 23, 2005, in connection with the Merger, the holders of what then
      represented approximately 87% of our outstanding common stock, acting by written
      consent without a meeting of stockholders, approved an amendment to our Articles
      of Incorporation and the adoption of an incentive stock plan. We delivered
      to
      our stockholders a report on Schedule 14c describing the actions taken. The
      report was filed with the SEC on November 8, 2005 and is incorporated herein
      by
      reference.





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





**Market
      Information**





Our
      common stock is listed on the OTC Bulletin Board under the symbol NNAN. Because
      our shares had traded only on a limited and sporadic basis prior to the Merger,
      there is no meaningful history of reported trades in the public market before
      that date and we therefore have not included a price history of our trades
      prior
      to November 29, 2005. During the period from November 29, 2005 through December
      31, 2005, the high and low share price, on a split adjusted basis, has ranged
      from $0.625 to $1.07, respectively. These quotations reflect inter-dealer
      prices, without mark-up, mark-down or commission, and may not represent actual
      transactions.





Prior
      to
      the Merger, our stock was listed on the OTC Bulletin Board under the symbol
      “CTTM.”





As
      of
      December 31, 2005, we had 121,074,740 split adjusted shares of our common stock
      outstanding which were held by approximately 170 shareholders of
      record.





**Dividend
      Policy**





We
      have
      never paid any cash dividends and have no plans to do so in the foreseeable
      future. Our future dividend policy will be determined by our Board of Directors
      and will depend upon a number of factors, including our financial condition
      and
      performance, our cash needs and expansion plans, income tax consequences and
      the
      restrictions that applicable laws and other arrangements then impose.





**Recent
      Sales of Unregistered Securities**





In
      connection with the Merger we issued an aggregate of 110,777,956 split adjusted
      shares of common stock on November 29, 2005. 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 4,500,000 (post split) shares of our common stock in exchange for
      a
      warrant for the purchase of an identical number of shares of NN Research common
      stock. The warrant issuance was made in reliance on an exemption from
      registration under the Securities Act of 1933 pursuant to Section 4(2) of that
      Act.





On
      February 2, 2006 we issued an aggregate of 314,700 post-split shares of our
      common stock to three entities in transactions exempt from the registration
      requirements of the Securities Act of 1933 pursuant to Section 4 (2) of such
      Act. We issued 40,000 post-split shares to High Technology of Rochester, Inc.,
      our landlord, in consideration for certain leasehold improvements to our office
      facilities. We issued 74,700 post-split shares to Medienimpuls GmbH as payment
      for consulting services valued at $14,940. We issued 200,000
      post-split shares to Ambit Corporation in connection with the license of certain
      patented technology in the field of electronic shielding.




-9-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**ITEM
      6. PLAN OF OPERATION**





**General**





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 focus is to patent these processes
      and application technologies and 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.





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**





In
      some
      instances, a prospective customer may require that NaturalNano provide them
      with
      functionalized HNT TM s
      as
      additives to their end products. In these cases, we anticipate that the
      functionalized HNT TM s
      would
      be provided as either a dry powder of colloidal suspension of nanotubes which
      may have additional materials as coatings or fillings. As examples, the
      HNT TM s
      may be
      metallized or not, unloaded or loaded with any one of a number of active agents
      for different applications. Different end-use applications and marketing
      partners would require different product configurations and will need to be
      assessed individually.





When
      required, our future manufacturing would likely begin with raw or minimally
      processed halloysite material. We would further process this material to extract
      nanotubes from the surrounding minerals present in halloysite clay and then
      further classify the nanotubes. This refined and classified material could
      then
      be shipped to customers or a designated toll manufacturing facility in the
      form
      of a dry powder or slurry mixture. The customer’s specific requirements will
      determine the final form of delivery.





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 or products. If requested
      by a customer, the Company will evaluate and select suitable manufacturing
      partners in each of the targeted industry segments. We would then 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 the rights to
      twenty issued and pending patents including several exclusively licensed within
      defined fields of use. Included in this total are four pending applications
      under license from the Company’s majority shareholder Technology Innovations,
      LLC. Over 200 applications for halloysite have been identified to date and
      are
      covered in these 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.




-10-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**Research
      and Development**





During
      the next twelve months the Company’s research and development focus will be in
      the following areas:





o
            Collaboration
                with potential customers in major market segments to demonstrate
                proof of
                principle for specific industry
                applications.





o
            Establishment
                of a research lab to produce unique processes and products at a
                competitive cost.





o
            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.





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 $1,040,000.





**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.





**Financing
      Activities**





The
      Company’s source of cash since inception has been from the issuance of
      $4,156,000 in Convertible Bridge Notes and from inter-company advances from
      our
      principal stockholder, Technology Innovations, LLC. The Convertible Bridge
      Notes
      included a mandatory conversion feature that resulted in the issuance of
      20,939,200 post split 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, (“SBI”) granting SBI the
      right to purchase 4,500,000 post split shares of NN Research common stock at
      an
      exercise price of $.115 per share. On November 29, 2005, in connection with
      the
      Merger, the rights and obligations relating to the warrant were assumed by
      NaturalNano Inc. During 2005, the original expiration date of this warrant
      was
      extended for an additional twelve months and now expires on March 31, 2007.




-11-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





The
      estimated cash available and projected cash outflows for the twelve-month period
      ending December 31, 2006 are as follows:


**Cash
                on hand at December 31, 2005**
            
            **$**
            **1,718,365**Projected
                cash uses for 2006 operations**:**Research
                and product development expenses
            
            $
            1,040,000Research
                lab assets and licensing investments
            
            
            330,000General
                and administrative expenses, includingadministrative
                salaries and benefits, office expenses, rent expense,legal
                and accounting, marketing and investor relations
            
            
            2,030,000**Total
                estimated cash outflows for****the
                twelve-months ending December 31, 2006**
            
            **$**
            **3,400,000**





NaturalNano
      has generated only nominal revenues to date, resulting from the sale of sample
      products, and is not expected to have significant recurring revenues in the
      near
      future. The Company’s ability to continue in business is dependent on obtaining
      sufficient financing to continue the advancement of our strategic objectives.
      We
      will continually evaluate all funding options including additional offerings
      of
      our securities to private and institutional investors and other credit
      facilities during the coming twelve months and in the future, as they become
      available.




-12-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**ITEM
      7. FINANCIAL STATEMENTS**





**NATURALNANO,
      INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005**





**CONTENTS**





**FOR
                THE YEAR ENDED DECEMBER 31, 2005**Report
                of Independent Registered Public Accounting
                Firm
            F-1Consolidated
                Balance Sheet at December 31, 2005 and
                2004
            F-2Consolidated
                Statement of Operations for the year ended
                December 31, 2005 and
              for
                the period from December 22, 2004 (inception) to December
                31, 2004 and
              the
                cumulative period from December 22, 2004 (inception) to
                December 31, 2005
            F-3Consolidated
                Statement of Stockholders’ Equity for the year
                ended December 31, 2005 and
              for
                the period from December 22, 2004 (inception) to December
                31, 2004 and
              the
                cumulative period from December 22, 2004 (inception) to
                December 31, 2005
            F-4Consolidated
                Statement of Cash Flows for the year ended
                December 31, 2005 and
              for
                the period from December 22, 2004 (inception) to December
                31, 2004 and
              the
                cumulative period from December 22, 2004 (inception) to
                December 31, 2005
            F-5Notes
                to Consolidated Financial Statements
            F-6
                - F-14








-13-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**





To
      the
      Board of Directors


NaturalNano,
      Inc.




We
      have
      audited the accompanying consolidated balance sheets of NaturalNano, Inc. (a
      development stage company) (an entity controlled by Technology Innovations,
      LLC)
      as of December 31, 2005 and 2004, and the related consolidated statements of
      operations, stockholders’ equity and cash flows for the year ended December 31,
      2005 and for the period from December 22, 2004 (inception) to December 31,
      2004
      and the cumulative amounts from inception to December 31, 2005. These financial
      statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with 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 audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of NaturalNano, Inc. as of
      December 31, 2005 and 2004 and the results of its operations and its cash flows
      for the year ended December 31, 2005 and for the period from December 22, 2004
      (inception) to December 31, 2004 and the cumulative amounts from inception
      to
      December 31, 2005 in conformity with United States generally accepted accounting
      principles.




**/s/
      GOLDSTEIN GOLUB KESSLER LLP**


New
      York,
      New York





February
      8, 2006




F-1
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**CONSOLIDATED
      BALANCE SHEET**




**December
                31,**
            
            **December
                31,****2005**
            
            **2004****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            1,718,365Prepaid
                halloysite materials
            
            
            249,650
            
            $
            125,000Other
                current assets
            
            
            34,704Due
                from related parties
            
            
            40,748Total
                current assets
            
            
            2,043,467
            
            
            125,000Atlas
                Mining warrant
            
            
            270,000Capitalized
                License
            
            
            314,000Property
                and equipment, net
            
            
            34,752Total
                Assets
            
            $
            2,662,219
            
            $
            125,000**Liabilities
                and Stockholders' Equity****Liabilities**Current
                liabilities:Accounts
                payable
            
            $
            24,093Accrued
                payroll
            
            
            73,164Accrued
                expenses
            
            
            238,316Due
                to related parties
            
            
            
            
            $
            32,336Total
                current liabilities
            
            
            335,573
            
            
            32,336Other
                liability
            
            
            28,500Total
                Liabilities
            
            
            364,073
            
            
            32,336**Stockholders’
                Equity**Preferred
                Stock - no par value,10,000,000
                shares authorized, no shares issuedCommon
                stock - $.001 par valueAuthorized
                200,000,000 shares (a)Issued
                and outstanding 121,074,740 and 20,000,000 shares, respectively
            
            
            121,075
            
            
            20,000Additional
                paid in capital (a)
            
            
            4,901,714
            
            
            80,000Deficit
                accumulated in the development stage
            
            
            (2,724,643
            )
            
            (7,336
            )Total
                stockholders' equity
            
            
            2,298,146
            
            
            92,664Total
                liabilities and stockholders' equity
            
            $
            2,662,219
            
            $
            125,000





(a)
            Retroactively
                adjusted to reflect the recapitalization on November 29, 2005 and
the
                two-for-one stock split on February 8,
                2006.





See
      notes
      to financial statements




F-2
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**NATURALNANO,
      INC.**


(A
      Development Stage Company)


**CONSOLIDATED
      STATEMENT OF OPERATIONS**




For
                the twelve
              months
            
            From
                inception**December
                22,**
              **2004**
            
            From
                inception**December
                22,**
              **2004**ending
            
            through
            
            through**December
                31,**
              **2005**
            
            **December
                31,**
              **2004**
            
            **December
                31**
              **2005****Income:**Sample
                revenue
            
            $
            500
            
            
            
            
            $
            500**Operating
                expenses:**Research
                and development (a)
            
            
            566,019
            
            $
            5,000
            
            
            571,019General
                and administrative (b)
            
            
            2,255,923
            
            
            2,336
            
            
            2,258,2592,821,942
            
            
            7,336
            
            
            2,829,278**Loss
                from Operations**
            
            
            (2,821,442
            )
            
            (7,336
            )
            
            (2,828,778
            )**Other
                income:**Interest
                income, net
            
            
            14,135
            
            
            
            
            
            14,135Investment
                income
            
            
            90,000
            
            
            
            
            
            90,000104,135
            
            
            
            
            
            104,135**Net
                loss**
            
            
            ($2,717,307
            )
            
            ($
                7,336
            )
            
            ($2,724,643
            )**Loss
                per common share - basic and diluted (c)**
            
            
            ($
                0.03
            )
            
            ($
                0.00
            )**Weighted
                average shares outstanding (c)**
            
            
            101,575,332
            
            
            20,000,000





(a)
      Research and development expense includes options issued as stock-based
      compensation of $74,417.


(b)
      General and administrative expense includes options issued as stock-based
      compensation of $138,437.


(c)
      Retroactively adjusted to reflect the two-for-one stock split on February
      8, 2006.





See
      notes
      to financial statements




F-3
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**NATURALNANO,
        INC.**
 (A
        Development Stage Company)


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’
EQUITY**


**Period
      from December 22, 2004 (inception) to December 31, 2005**





**Deficit****Accumulated****Common
                Stock**
            
            **Additional**
            
            **During
                the****Shares
                (a)**
            
            **Amount
                (a)**
            
            **Paid-in**
              **Capital
                (a)**
            
            **Development**
              **Stage**
            
            **Stockholders’**
              **Equity****December
                22, 2004**20,000,000
                shares issued forcash
                @ $.005 per share
            
            
            20,000,000
            
            $
            20,000
            
            $
            80,000
            
            
            
            
            $
            100,000Net
                loss from inception through December 31, 2004
            
            
            
            
            
            
            
            
            
            
            
            ($
                7,336
            )
            
            (7,336
            )**Balance
                at December 31, 2004**
            
            
            20,000,000
            
            
            20,000
            
            
            80,000
            
            
            (7,336
            )
            
            92,664Warrant
                issued for 4,500,000 sharesof
                common stock for services
            
            
            
            
            
            
            
            
            291,595
            
            
            
            
            
            291,595Grant
                of common stock forservices
                @ $0.20 per share
            
            
            74,700
            
            
            75
            
            
            14,865
            
            
            
            
            
            14,940Grant
                of common stock forservices
                @ $0.835 per share
            
            
            40,000
            
            
            40
            
            
            33,360
            
            
            
            
            
            33,400Grant
                of common stock for acquisitionof
                license @ $1.07 per share
            
            
            200,000
            
            
            200
            
            
            213,800
            
            
            
            
            
            214,000Vesting
                of 3,473,332 stock optionsfor
                services@
                $0.05 per share
            
            
            
            
            
            
            
            
            192,916
            
            
            
            
            
            192,916@
                $0.4125 per share
            
            
            
            
            
            
            
            
            19,938
            
            
            
            
            
            19,938Shares
                issued pursuant to convertibleBridge
                notes on November 29, 2005
            
            
            20,939,200
            
            
            20,939
            
            
            4,135,061
            
            
            
            
            
            4,156,000Recapitalization
                onNovember
                29, 2005
            
            
            79,820,840
            
            
            79,821
            
            
            (79,821
            )
            
            
            
            
            0Net
                loss for twelve monthsending
                December 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            (2,717,307
            )
            
            (2,717,307
            )**Balance
                at December 31, 2005**
            
            
            121,074,740
            
            $
            121,075
            
            $
            4,901,714
            
            
            ($
                2,724,643
            )
            $
            2,298,146





(a)
            Retroactively
                adjusted to reflect the following;


(i)
            the
                two-for-one stock split effective February 8, 2006
                and


(ii)
            the
                effect of the recapitalization on November 29,
                2005.





See
      notes
      to financial statements




F-4
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)


**CONSOLIDATED
      STATEMENT OF CASH FLOWS**





For
                the twelve
              months
            
            From
                inception**December
                22,**
              **2004**
            
            From
                inception**December
                22,**
              **2004**ending
            
            through
            
            through**December
                31,**
              **2005**
            
            **December
                31,**
              **2004**
            
            **December
                31,**
              **2005****Cash
                flows from operating activities:**Net
                loss
            
            
            ($2,717,307
            )
            
            ($7,336
            )
            
            ($2,724,643
            )Adjustments
                to reconcile net loss to net cashused
                in operating activities:Depreciation
            
            
            4,748
            
            
            
            
            
            4,748Issuance
                of warrant for services
            
            
            291,595
            
            
            
            
            
            291,595Issuance
                of common stock for services
            
            
            48,340
            
            
            
            
            
            48,340Grant
                of stock options for services
            
            
            212,854
            
            
            
            
            
            212,854Change
                in market value of Atlas Mining warrant
            
            
            (90,000
            )
            
            
            
            
            (90,000
            )Changes
                in operating assets and liabilities:(Increase)
                in prepaid halloysite materials
            
            
            (124,650
            )
            
            (125,000
            )
            
            (249,650
            )(Increase)
                in other current assets
            
            
            (34,704
            )
            
            
            
            
            (34,704
            )Increase
                in accounts payable, accruedpayroll
                and accrued expenses
            
            
            155,573
            
            
            
            
            
            155,573Increase
                in other liability
            
            
            28,500
            
            
            
            
            
            28,500**Net
                cash used in operating activities**
            
            
            (2,225,051
            )
            
            (132,336
            )
            
            (2,357,387
            )**Net
                cash used in investing activities**Purchase
                of property and equipment
            
            
            (39,500
            )
            
            
            
            
            (39,500
            )Purchase
                of license
            
            
            (100,000
            )
            
            
            
            
            (100,000
            )**Net
                cash used in investing activities**
            
            
            (139,500
            )
            
            
            
            
            (139,500
            )**Cash
                flows from financing activities:**Advances
                from related parties
            
            
            409,451
            
            
            32,336
            
            
            441,787Repayment
                of advances from related parties
            
            
            (482,535
            )
            
            
            
            
            (482,535
            )Issuance
                of convertible notes
            
            
            4,156,000
            
            
            
            
            
            4,156,000Issuance
                of common stock
            
            
            
            
            
            100,000
            
            
            100,000**Net
                cash provided by financing activities**
            
            
            4,082,916
            
            
            132,336
            
            
            4,215,252**Change
                in cash and cash equivalents and****balance
                at end of period**
            
            $
            1,718,365
            
            
            0
            
            $
            1,718,365**Non-cash
                investing activities:**Common
                shares issued for Convertible notes
            
            $
            4,156,000
            
            
            
            
            $
            4,156,000Acquisition
                of Atlas Mining warrantthrough
                Accrued expense
            
            $
            180,000
            
            
            
            
            $
            180,000Acquisition
                of license through Commonstock
                net of $100,000 cash
            
            $
            214,000
            
            
            
            
            $
            214,000






See
      notes
      to financial statements




F-5
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**NATURALNANO,
        INC.**
 (A
        Development Stage Company)


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**







**1.**
            **PRINCIPAL
                BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING
                POLICIES**





**Basis
      of Consolidation**





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





**Description
      of the Business**





NaturalNano
      (the “Company”), located in 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.





NaturalNano
      is in the development stage and is expected to remain so for at least the next
      twelve months. The Company has generated only nominal revenue, resulting from
      the sale of sample products, since its inception and is not expected to have
      any
      significant recurring revenues in the near future. The Company’s ability to
      continue in business is dependent upon obtaining sufficient financing or
      attaining profitable operations.





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





**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.





**Liquidity**





As
      shown
      in the accompanying financial statements, the Company has incurred a loss from
      operations and negative cash flows from operations. During 2005, the Company’s
      growth was funded through a combination of convertible debt from private
      investors and cash advances from its majority stockholder Technology
      Innovations, LLC. The Company expects that it will need to raise additional
      capital to accomplish its business objectives in 2006. 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. There can be no assurance as to the availability or
      terms
      upon which such financing alternatives might be available.




F-6
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**








**Research
      and 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.





**Intangible
      Assets**





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





**Property
      and Equipment**





Property
      and equipment, at cost, consists of the following:




Useful
                LifeFurniture
                and office equipment
            
            $
            26,079
            
            
            5
                yearsComputers
                and software
            
            
            13,421
            
            
            3
                years39,500Less
                accumulated depreciation
            
            
            (4,748
            )Property
                and equipment, net
            
            $
            34,752




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.





**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 14,310,000 shares underlying outstanding
      options and warrants which have been excluded from the calculation at December
      31, 2005.




F-7
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**NATURALNANO,
        INC.**
 (A
        Development Stage Company)
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 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
      Split**





On
      January 27, 2006, the Company, pursuant to a resolution of its Board of
      Directors acting under Section 78.207 of the Nevada General Corporation law,
      filed a Certificate of Change to its Restated Articles of Incorporation to
      increase the number of authorized shares of our common stock, par value $0.001
      per share, from 100 million shares to 200 million shares. This correspondingly
      increased the number of issued and outstanding shares of its common shares
      held
      by each stockholder of record as of February 8, 2006, the effective date of
      the
      Certificate of Change. The $0.001 par value was not changed as a result of
      this
      action.




In
      conjunction with this resolution, the Board has authorized a two-for-one stock
      split of common stock affected in the form of a stock dividend to holders of
      record on February 8, 2006. Accordingly, all references to numbers of shares
      and
      to per share information in the consolidated financial statements have been
      adjusted to reflect the stock split on a retroactive basis.





**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 twelve-month period ending December
      31, 2005 would have been as follows:





**Net
                loss as reported**
            
            
            ($2,717,307
            )Deduct:
                Total stock-based employee compensationexpense
                determined under fair-value-based methodfor
                all awards, net of related tax effects
            
            
            (
                221,699
            )**Pro
                Forma net loss**
            
            
            ($2,939,006
            )Basic
                and diluted loss per share as reported
            
            
            ($0.03
            )Basic
                and diluted loss per share pro forma
            
            
            ($0.03
            )





The
      Company’s assumptions used to calculate the fair values of options re-issued as
      a result of the merger with Cementitious Materials, Inc. (“Cementitious”), which
      occurred on November 29, 2005, were as follows: (i) risk-free interest rate
      of
      4.578%, (ii) expected life of the options of 4.9 years, (iii) expected stock
      price volatility of 90.48%, and (iv) expected dividends of zero.




F-8
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**





**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 table above reflects the estimated impact that such a
        change
        in accounting treatment would have had on our net loss and loss per common
        share
        if the accounting pronouncement had been in effect during the year ended
        December 31, 2005. As of December 31, 2005, unvested compensation cost for
        stock
        options previously issued to employees was approximately $994,500 and will
        be
        recognized in future years 2006-2008. The unvested cost of stock options
        previously issued to non-employees was approximately $218,700 as of December
        31,
        2005 and will be revalued quarterly and charged to operations as the vesting
        occurs, which is when the required performance by the non-employees is
        complete.




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 three
      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 year ending December 31, 2006
            
            $
            62,569




**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. (“BTI”). BTI is
      related to the Company’s majority stockholder, Technology Innovations, LLC,
      through common ownership. This agreement covers the exchange of ideas in support
      of a new drug delivery capability. NaturalNano has secured the rights to
      non-medical applications 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.




F-9
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**




**4.**
            **AGREEMENTS
                WITH TECHNOLOGY INNOVATIONS,
                LLC**





Technology
      Innovations, LLC (“TI”) is our majority stockholder with a beneficial ownership
      of 53.8% of our outstanding common stock as of December 31, 2005. TI is a New
      York limited liability corporation established in 1999 to develop intellectual
      property assets.





TI
      founded NaturalNano, Inc., a Delaware corporation on December 22, 2004, with
      an
      initial cash contribution of $100,000 for all the outstanding shares of common
      stock. On July 1, 2005, the Company granted 1 million stock options to TI with
      an exercise price of $0.05 per share. This exercise price reflects the estimated
      fair market value of these options on the date of grant as determined by the
      Company’s Board of Directors. This option grant has a ten-year term and as such
      expires on July 1, 2015. Under the vesting schedule, the options vest one-half
      on the date of grant and the balance on the first anniversary of the
      grant.





On
      April
      27, 2005, the Company entered into an exclusive, field of use limited license
      agreement (the “License Agreement”) with its majority stockholder, 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 LLC 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.





On
      December 29, 2004 the Company entered into a Line of Credit Agreement and a
      Promissory Note with its majority stockholder, Technology Innovations, LLC.
      This
      Line of Credit allowed for borrowings of up to $500,000 for working capital
      purposes and included an interest rate of 8% per annum. This agreement expired
      on December 31, 2005.


During
        the first quarter of 2005, TI paid $10,400 in fees for licensing and business
        strategy consultations, to a firm owned by the Company’s president. During
        fiscal 2005, our President and our Chief Technology Officer provided technical
        consultations to an affiliate, Biophan Technologies, Inc. (“Biophan”). Biophan
        is an entity related to TI through common ownership. In connection with these
        consulting services, Biophan reimbursed the Company $16,500 and $5,077 for
        these
        services respectively which represented the cost of the salary and benefits
        for
        the proportionate time spent consulting.




**5.**
            **LICENSE
                AGREEMENT**





On
      December 31, 2005, the Company entered into a licensing agreement for the rights
      to a patented technology in the field of electronics shielding. This license
      agreement calls for royalties and revenue sharing upon NaturalNano’s sale of
      licensed products utilizing this technology or in instances of sublicense
      agreements. The license agreement includes $12,500 in minimum quarterly royalty
      payments beginning in the first quarter of 2010, annual reporting of progress
      made on product development and various confidentiality elements. This agreement
      shall remain in effect until the expiration date of the last-to-expire related
      patent that is cited in the agreement, which is currently projected to be in
      fiscal year 2014.





In
      consideration for the rights granted to NaturalNano under this agreement, the
      Company paid $100,000 in cash and issued 200,000 shares of common stock valued
      at $1.07 per share upon execution of this agreement. If during the eight-month
      period ending August 31, 2006, the licensor
      has not realized at least $150,000
      in net consideration from the sale of these shares, the licensor shall have
      the
      right to payment by the Company for any shortfall.




F-10
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**





The
      license was recorded as a non-current asset at December 31, 2005 and will be
      amortized on a straight line basis over an estimated useful life of nine years
      ending in fiscal year 2014. The related amortization expense for this license
      agreement is $34,900 annually for each twelve-month period beginning in fiscal
      2006. Future royalty payments resulting from this agreement will be expensed
      as
      incurred.




**6.**
            **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.
      The Company paid $250,000 to a designated distributor of Atlas Mining with
      an
      additional $100,000 payable when commercial shipments in excess of $250,000
      are
      achieved. As additional consideration, NaturalNano 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.





The
      December 31, 2005 balance sheet reflects $249,650 in prepaid halloysite to
      be
      delivered in future periods for the Company’s use in our research programs and
      for customer evaluation. The Company believes this prepaid commitment from
      Atlas
      Mining for the future delivery of processed halloysite nanotubes will be
      satisfied in the next twelve months. Payments made by the Company in accordance
      with this agreement are presented as prepaid expenses and will be recorded
      as
      inventory upon receipt of the processed nanotubes. Research and development
      expenses are recognized in the period the nanotubules are used in the
      development of proprietary applications and processes and cost of goods sold
      will be charged as customer shipments are made.





On
      January 28, 2005, NaturalNano 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. The Company accounts for this warrant as a free-standing derivative and,
      accordingly, has recorded the warrant as an asset at its fair market value.
      The
      Company recognizes all changes in fair market value in its statement of
      operations. The fair value of this asset on January 28, 2005 and at December
      31,
      2005 was estimated at $180,000 and $270,000, respectively. The warrant was
      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 performance of future research
      and development efforts which are expected to benefit both NaturalNano and
      Atlas
      Mining. During 2005, $90,000 of this liability has been offset against research
      and development expenses in the accompanying statements of operations. At
      December 31, 2005, the remaining liability, included in accrued expenses, is
      $90,000.





The
      fair
      value of the Atlas Mining warrant has been measured using the Black-Scholes
      valuation model on January 28, 2005 and December 31, 2005 and was estimated
      at
      $180,000 and $270,000, respectively. The Black-Scholes assumptions used in
      estimating fair market value of the warrant at each of these dates are as
      follows:





January
                28, 2005
            December
                31, 2005Risk-free
                interest rate
            3.2%
            4.3%Expected
                life of the warrant-days
            730
            393Expected
                stock price volatility
            115%
            86%Expected
                dividends
            Zero
            Zero






F-11
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**




At
      December 31, 2005, the warrant was marked-to-market at $270,000 with the change
      in fair market value recorded as investment income.





**7.**
            **INCOME
                TAXES**





As
      of
      December 31, 2005, the Company had a net operating loss carryforward, for
      federal income tax purposes, of approximately $2,724,600. The Company recorded
      a
      deferred income tax asset for the tax effect of the net operating loss
      carryforward of approximately $926,400. 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 December 31, 2005.




**8.**
            **STOCKHOLDERS’
                EQUITY**





On
      November 29, 2005, the Company completed a recapitalization as a result of
      the
      reverse merger with Cementitious Materials, Inc. (a public shell company).
      Under
      the merger agreement, the Company merged into a newly formed subsidiary of
      Cementitious with NaturalNano, Inc. being the surviving entity. The components
      of the recapitalization are presented below.


Common
                Shares
              
              Common
                Stock
              
              Additional
                Paid
                  In Capital
              
              Accumulated
                Deficit
              
              Stockholders’
                EquityCMI
                  equity outstanding at November 29, 2005
              
              
              9,982,084
              
              $
              9,982
              
              $
              357,483
              
              
              ($367,465
              )
              
              0Cancellation
                  of NN shares as of November 29, 2005
              
              
              (20,000,000
              )
              
              (20,000
              )
              
              (80,000
              )
              
              
              
              
              (100,000
              )Issuance
                  of new shares to NN stockholders
              
              
              89,838,756
              
              
              89,839
              
              
              10,161
              
              
              
              
              
              100,000Elimination
                  of CMI accumulated deficit
              
              
              
              
              
              
              
              
              (367,465
              )
              
              367,465
              
              
              0Recapitalization
              
              
              79,820,840
              
              $
              79,821
              
              
              ($79,821
              )
              
              0
              
              
              0





In
      connection with the merger, Technology Innovations, LLC, the Company’s majority
      stockholder exchanged each of its outstanding shares for 4.492 shares of
      Cementitious stock for an aggregate of 89,838,756 shares. Each of the Company’s
      previously outstanding options and warrants were cancelled and replaced with
      the
      same number of options and warrants of Cementitious with rights to acquire
      common stock at economic and contractual terms consistent with the rights as
      defined in the original NaturalNano option
      and warrant agreements. The original options were not modified to accelerate
      vesting or extend the term of the new options.





As
      a
      result of the merger, the Company also issued 20,939,200 shares of common stock
      in accordance with the convertible bridge notes at a conversion price of $0.20
      per share. The per share conversion price of $0.20 was the estimated fair market
      value of the common stock on the date this convertible debt was issued, as
      determined by the Company’s Board of Directors. The closing market price per
      common share on November 29, 2005 was $0.625.





The
      Company received $225,000 in financial consulting services from SBI USA, LLC
      for
      which payment was satisfied through the issuance of 4,500,000 common stock
      warrants. These warrants have an exercise price of $0.115 per share were fully
      vested as of the March 31, 2005 issuance date and had an original expiration
      date of March 31, 2006. On December 19, 2005, the Board of Directors extended
      the expiration date of this instrument to March 31, 2007. As
      a result, the Company recorded $66,595 as an incremental cost for these services
      reflecting the estimated fair market value associated with the term extension,
      as calculated using the Black-Scholes valuation method. The assumptions used
      in
      this valuation were as follows:
      (i) risk-free interest rate of 4.49%, (ii) expiration date of the warrant of
      March 31, 2007, (iii) expected volatility of 113.2%, and (iv) expected dividends
      of zero.




F-12
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**





The
      consulting expenses relating to these warrants were provided during the first
      quarter of 2005 and have been included in general and administrative expenses
      in
      the accompanying statements of operations. None of these warrants had been
      exercised as of December 31, 2005. Neither these warrants nor the common stock
      issuable upon exercise of the warrants, have been registered under the
      Securities Act of 1933.





**9.**
            **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 14,000,000 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
      2005, the Company’s Board of Directors granted stock options at fair market
      value, which was estimated by the Board of Directors at $0.05 per share on
      the
      date of the grant, to purchase 9,900,000 shares of the Company’s common stock at
      $0.05 per share. These stock options were re-issued, in connection with the
      merger with Cementitious on November 29, 2005, without modification to the
      original terms and conditions. The weighted-average fair value of the re-issued
      options on November 29, 2005, determined using the Black- Scholes valuation
      method was $0.4125 per option. During 2005, a total of 90,000 shares previously
      issued option grants were forfeited resulting in 9,810,000 options outstanding
      December 31, 2005 with 4,940,000 options exercisable as of the end of the year.





During
      2005, the Company granted 4,436,666 stock options to non-employees, including
      30,000 options to each member of our Scientific Advisory Board and one million
      to our majority stockholder Technology Innovations, LLC. The grant to Technology
      Innovations was made on July 1, 2005 at an estimated fair market value of $0.05
      per share (as estimated by our Board of Directors on that date) with half of
      the
      options vesting at the date of grant and the balance on the first anniversary
      of
      the grant and includes an expiration date ten years from the date of grant.





A
      total
      of 3,473,332 of these non-employee option grants were vested as of December
      31,
      2005. The fair value of the stock options granted to non-employees has been
      recorded as expense of $212,854 in the accompanying statement of operations.
      The
      fair market value of non-employee options was estimated by the Board of
      Directors for grants made prior to the merger and determined utilizing the
      Black-Scholes valuation
      method for all grants made subsequent to the merger. The Black-Scholes valuation
      method was used to update the fair market value of these options at each
      subsequent vesting date.




**10.**
              **CONVERTIBLE
                  BRIDGE NOTES**
 As
          a
          result of the merger on November 29, 2005, $4,156,000 in Convertible Bridge
          Notes (the “Notes”) were converted into 20,939,200 shares of the Company’s
          common stock. These notes included a mandatory conversion feature whereby
          $800,000 in debt was converted into 4,159,200 common shares and $3,356,000 in
          debt
          was converted into 16,780,000 shares of common stock in connection with
          the
          Cementitious Materials, Inc. merger which was completed on November 29,
          2005.


F-13
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**NATURALNANO,
      INC.**


(A
      Development Stage Company)




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2005**




The
      Notes
      included an accrued interest provision of 8% per annum, generally beginning
      six
      months after the
      date
      of issuance. No interest was accrued or paid on these notes since all of this
      outstanding debt was satisfied with the conversion into common stock coincident
      with the merger.




**11.**
            **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. On January
      17,
      2006, the Company entered into an operating lease agreement, expiring in 2009,
      for approximately 2000 square feet in connection with the establishment of
      a
      research lab in Rochester, New York. The Company is also responsible for a
      pro
      rata allocation of the operating costs of this facility, to be assessed annually
      by the landlord. Following are the minimum future payments under these lease
      agreements:





For
                each of the years ending December 31:2006
            
            $
            83,8072007
            
            
            89,3692008
            
            
            57,372$
            230,548






F-14
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





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





Not
      applicable.





**ITEM
      8A. CONTROLS AND PROCEDURES**





Based
      on
      their evaluation as of the end of the period covered by this amendedannual report on Form 10-KSB/A, our principal executive officer and
      principal financial officer, with the participation and assistance of our
      management, concluded that our disclosure controls and procedures, as defined
      in
      Rule 13a-15(e) promulgated under the Securities Exchange Act of 1924, were
      effective in design and operation. There have been no changes in our system
      of
      internal control over financial reporting in connection with the evaluation
      by
      our principal executive officer and principal financial officer during the
      period since December 31, 2005 through the date of the filing of this amended
      Form 10-KSB/A that have materially affected, or are reasonably likely to
      materially affect, our internal control over financial reporting.





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.





**ITEM
      8B. OTHER INFORMATION**




Not
      applicable.





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





The
      following table shows information about our executive officers and directors
      as
      of December 31, 2005:





**Name**
            **Age**
            **Position**Steven
                Katz
            57
            DirectorRoss
                B. Kenzie
            74
            DirectorJohn
                F. Lanzafame
            37
            DirectorMichael
                L. Weiner
            57
            DirectorMichael
                D. Riedlinger
            48
            President
                and DirectorKathleen
                A. Browne
            50
            Chief
                Financial Officer, Treasurer and SecretarySarah
                M. 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 health care and
      technology-based management consulting firm specializing in strategic planning,
      corporate development, new product planning, technology licensing, and
      structuring and securing various forms of financing. Mr. Katz has been President
      of Steven Katz & Associates, Inc. since 1982. From January 2000 to October
      2001 Mr. Katz was President, Chief Operating Officer and a director of Senesco
      Technologies, Inc., an American Stock Exchange listed company engaged in the
      identification and development of proprietary gene technology with application
      to human, animal and plant systems. From 1983 to 1984 he was a co-founder and
      Executive Vice President of S.K.Y. Polymers, Inc., a bio-materials company.
      Prior to this, Mr. Katz was Vice President and General Manager of a non-banking
      division of Citicorp. From 1976 to 1981 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 Bachelors of Business Administration degree in Accounting
      from the City College of New York in 1969. He is presently a member of the
      Board
      of Directors of Biophan Technologies, Inc., Health Systems Solutions, Inc.,
      Nanoscience Technologies, Inc., USA Technologies, Inc., and Vivid Learning
      Systems, Inc. as well as several private companies.




-14-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





***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.




***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 bachelor’s degree in chemical engineering and a master’s 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.




-15-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


***Michael
      D. 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.





***Kathleen
      A. 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 from 1996 to 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 Public
      Accountants and the New York State Society of CPAs.





***Sarah
      M. 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
      Conflicts of Interest**





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 53.8% of our outstanding common stock. Messrs. Weiner and
      Kenzie and Technology Innovations are also significant equity holders of Biomed
      Solutions 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 certain licensing and technological development projects as
      an
      independent consultant. During 2005, Mr. Riedlinger provided services estimated
      at $16,500 for consulting on these projects; the Company received reimbursement
      from Biophan for this same amount prior to year-end. Our
      Chief Technology Officer, Sarah Cooper, also provides ongoing consulting
      services to Biophan Technologies. During 2005, the Company received $5,077
      as
      reimbursement for these services.




-16-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


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.





**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 specific procedures 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.





***Audit
      Committee*** *.* The
      Audit
      Committee is currently composed of Messrs. Katz (Chairman), and Kenzie. The
      responsibilities of the Audit Committee are more fully set forth in the Audit
      Committee Charter which the Board adopted in December 2005. The Audit Committee
      Charter has been posted on our website at *www.naturalnano.com* .
      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 are more fully set
      forth in the Compensation Committee Charter which the Board adopted in December
      2005. The Compensation Committee Charter has been posted on our website at *www.naturalnano.com* .





**Compensation
      of the Board**





Directors
      who are also our employees 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 fee of $8,000. Mr. Katz receives an additional
      $5,000 annually for serving as the Chairman of the Audit Committee. Otherwise,
      no additional compensation is paid to any director for serving as a member
      of
      any committee of the Board. In addition, non-employee directors receive option
      grants under our stock option plan. All directors are reimbursed for their
      reasonable expenses incurred in attending all board meetings. We maintain
      directors and officers liability insurance.





**Code
      of Ethics**




The
      Company has adopted a Code of Ethics for Senior Executive and Financial Officer
      that is applicable to our principal executive officer and principal financial
      officer and can be viewed on our website *www.naturalnano.com* .





**Limitation
      on Liability and 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 a 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.




-17-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**Scientific
      Advisory Board**





The
      Company’s Scientific Advisory Board is a significant source of technical and
      scientific expertise and is an integral part of the NaturalNano team. The
      advisory board’s purpose is to inform and guide our management on relevant
      nanotechnology research, development, validation and evaluation in the global
      marketplace. The advisory board includes experts in a broad range of scientific
      disciplines including materials science, nanocomposites, plastics and polymers,
      cosmetics, pharmaceutical, and other related nanotechnologies.





The
      members of our Scientific Advisory Board serve without fixed cash compensation
      but are each entitled to receive 30,000 stock options (on a post split basis)
      that are subject to vesting as follows: 10,000 options vesting on December
      31,
      2005 and 20,000 options vesting on December 31, 2006 provided that the option
      holder remains on the Scientific Advisory Board through these vesting dates.





The
      members of the NaturalNano Scientific Advisory Board are:





Robert
      Corkery, Ph.D., YKI, Ytkemiska Institute AB-Institute for Surface Chemistry,
      Stockholm


Dr.
      Corkery is globally recognized as a key physical chemistry and materials science
      problem solver. He
      has
      been granted patents in nanozeolite chemical technology and porous materials
      technology with four patents pending in materials science technology. Dr.
      Corkery is the Area Manager for Nanostructured Materials at the YKI, Institute
      for Surface Chemistry in Stockholm, Sweden, one of the leading surface chemistry
      institutes in the world. Dr. Corkery’s research is aimed at technical
      understanding and breakthrough, new materials discovery and industrial
      innovation in the areas of nano- and bio-nanotechnologies. He was formerly
      a
      research scientist with The Procter & Gamble Company and was leader of the
      company’s corporate colloid laboratory and was responsible for developing
      nanostructure, biomembrane and complex fluid technologies. Dr. Corkery received
      his Bachelor of Science degree in Geology and Geophysics from the Australian
      National University as well as his Ph.D. in Physical and Materials Science
      where
      he was devoted entirely to nanotech and included extensive experimental and
      theoretical work on nanostructured clays, including halloysite. Dr. Corkery
      carried out postdoctoral research at the Australian National University as
      well
      as at the University of Lund in Sweden.





Emmanuel
      P. Giannelis, Ph.D., Cornell University


Dr.
      Giannelis is internationally recognized as a pioneer and one of the leading
      experts in polymer nanocomposites. He is the Walter R. Reed Professor of
      Engineering and Director of Materials Science and Engineering at Cornell
      University. He is also a member of the Fields of Chemistry and Chemical Biology
      and Chemical and Biomolecular Engineering at Cornell. His research interests
      range from synthesis of new nanostructured materials to characterization and
      property evaluation and include polymer nanocomposites, nanocomposite
      electrolytes, nanobiohybrids and nanofluids. Dr. Giannelis has served on the
      editorial boards of *Chemistry
      of Materials* and *Macromolecules* and
      currently serves on the editorial boards of *Polymer*
      and *Small* .
      He is
      the author or co-author of over 135 papers and 9 patents and is listed as one
      of
      the top 25 cited authors on Nanotechnology and a Highly-Cited Author in
      Materials Science by Thompson Scientific (formerly Thompson ISI), an information
      provider to researchers and scholars. He received a Bachelor of Science degree
      in Chemistry from the University of Athens, Greece and a PhD in Inorganic
      Chemistry from Michigan State University.




-18-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





Raymond
      Kurzweil, Kurzweil Technologies, Inc.


Dr.
      Kurzweil has been described as “the restless genius” by the *Wall
      Street Journal* and “the
      ultimate thinking machine” by *Forbes.* In
      addition, *Inc.* magazine
      recently ranked him #8 among entrepreneurs in the United States calling him
      the
“rightful heir to Thomas Edison,” and PBS included Dr. Kurzweil as one of 16
“revolutionaries who made America.” Dr. Kurzweil is the recipient of the
      $500,000 MIT-Lemelson Prize, the world's largest prize for innovation. In 1999,
      he received the National Medal of Technology, the United States’ highest honor
      in technology. In 2002, he was inducted into the National Inventor's Hall of
      Fame established by the US Patent Office. As one of the leading inventors of
      our
      time, Dr. Kurzweil has worked in such areas as music synthesis, speech and
      character recognition, reading technology, virtual reality and cybernetic art.
      He was the principal developer of the first omni-font optical character
      recognition, the first print-to-speech reading machine for the blind, the first
      CCD flat-bed scanner, the first text-to-speech synthesizer, the first music
      synthesizer capable of recreating the grand piano and other orchestral
      instruments, and the first commercially marketed large-vocabulary speech
      recognition.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1937, as amended (the “Exchange Act”)
      requires our executive officers and directors and persons who own more than
      ten
      percent of our common stock to file reports of ownership and changes in
      ownership with the SEC. Such executive officers, directors and greater than
      ten
      percent stockholders are also required by SEC rules to furnish us with copies
      of
      all Section 16(a) forms they file. Based on information supplied to the Company
      and filings made with the SEC, the Company believes that during the fiscal
      year
      ended December 31, 2005, all Section 16(a) filing requirements applicable to
      its
      Directors, officers, and greater than ten percent beneficial owners were
      complied with.





**ITEM
      10. EXECUTIVE COMPENSATION**





NN
      Research was incorporated on December 22, 2004 and did not have any employees
      for the fiscal year ended December 31, 2004. The table set forth below
      summarizes the compensation paid to our named executive officers during 2005.





**SUMMARY
      COMPENSATION TABLE**





Annual
                Compensation
            Long
                Term CompensationName
                / Position
            Year
            Salary
            Bonus
            Restricted
              Stock
              Awards
            Securities
              Underlying
              Options
                / SAR
              (post
                split)Michael
                D. Riedlinger
              President
            2005
            $122,007
            $10,000
            none
            3,000,000Kathleen
                A. Browne
              CFO
            2005
            $85,489*
            none
            none
            800,000Sarah
                M. Cooper
              CTO
            2005
            $40,580*
            $7,000
            none
            600,000Edward
                F. Cowle
              Former
                CEO
            2005
            $6,425*
            none
            none
            none




*
        reflects employment for a partial year




Columnar
      information required by Item 402(a) (2) of Regulation SB has been omitted for
      categories where there has been no compensation awarded to, or paid to, the
      named executive officers required to be reported in the table during fiscal
      years 2003 through 2005.




-19-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**Stock
      Options**




On
      September 23, 2005, the Board of Directors adopted the NaturalNano, Inc. 2005
      Stock Incentive Plan (“the Plan.”) The Plan provides for incentive and
      non-qualified stock options to employees, the grant of non-qualified options
      to
      selected consultants and to directors and advisory board members. The Plan
      is
      administered by the Compensation Committee of the Board of Directors and
      authorizes the grant of 14,000,000 post split shares. The Compensation Committee
      determines the employees and consultants who participate under the Plan, the
      terms and conditions of options, the option price, the vesting schedule of
      options and other terms and conditions of the options granted pursuant thereto.
      As of December 31, 2005 the Company had granted 9,900,000 (post-split) shares
      of
      common stock under the option plan and 9,810,000 were outstanding.





The
      following table summarizes information concerning stock options, presented
      on a
      post-split basis, granted to the named executive officers during the last fiscal
      year ended December 31, 2005:





Name
            
            Number
                of
              securities
                underlying options/SARs granted (#)
            
            Percent
                of total options/SARs granted to
              employees
                in
              fiscal
                year
            
            Exercise
                or
              base
                price ($/Share)
            
            Expiration
              DateMichael
                D. Riedlinger
            
            
            3,000,000
            
            
            64.33
            %
            $
            0.05
            
            
            3/1/2015Kathleen
                A. Browne
            
            
            800,000
            
            
            17.16
            %
            $
            0.05
            
            
            7/1/2015Sarah
                M. Cooper
            
            
            600,000
            
            
            12.87
            %
            $
            0.05
            
            
            3/1-10/1/2015Edward
                F. Cowle
            
            
            0
            
            
            0





No
      named
      executive officer exercised options in the fiscal year ended December 31, 2005.
      The following table presents the number and values of exercisable and
      unexercisable options presented on a post-split basis, at December 31,
      2005:





Name
            
            Shares
                acquired
              on
                exercise
            
            Value
                realized
            
            Number
                of Securities underlying unexercised options/SARs at
              FY-end
                (#)
              Exercisable/Unexercisable
            
            Value
                of unexercised in-the-money options/SARs at FY-end ($)
              Exercisable/UnexercisableMichael
                D. Riedlinger
            
            
            none
            
            
            —
            
            
            1,000,000/2,000,000
            
            $
            1,020,000/$2,040,000Kathleen
                A. Browne
            
            
            none
            
            
            —
            
            
            266,666/533,334
            
            $
            271,999/$544,001Sarah
                M. Cooper
            
            
            none
            
            
            —
            
            
            200,000/400,000
            
            $
            204,000/$408,000Edward
                F. Cowle
            
            
            none
            
            
            —
            
            
            none
            
            
            none






-20-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS**





The
      following table sets forth certain information as of February 15, 2006 with
      respect to 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 below is c/o NaturalNano, Inc., 150 Lucius Gordon Drive, Suite 115,
      West
      Henrietta, New York 14586. Unless otherwise indicated in the footnotes, shares
      are owned of record and beneficially by the 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 February 15, 2006. “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 (5)
            
            
            200,000
            
            
            *Ross
                B. Kenzie
            
            
            0
            
            
            0
            %John
                F. Lanzafame (5)
            
            
            366,668
            
            
            *Michael
                L. Weiner (3), (5)
            
            
            65,692,194
            
            
            53.9
            %Michael
                D. Riedlinger (5)
            
            
            2,000,000
            
            
            1.6
            %Kathleen
                A. Browne (5)
            
            
            366,652
            
            
            *Sarah
                M. Cooper (5)
            
            
            400,000
            
            
            *All
                Directors and Executive Officers as a group (7 persons)
            
            
            69,025,514
            
            
            55.2
            %*Other
                5% Beneficial Owners*:Technology
                Innovations, LLC (4), (5)
              150
                Lucius Gordon Drive, Suite 117West
                Henrietta, NY 14586
            
            
            65,425,526
            
            
            53.8
            %Jeffrey
                Smith
              3564
                Thorndale Road
              Pasadena,
                CA 91107
            
            
            10,997,584
            
            
            9.1
            %NanoVentures,
                LLC
              P.O.
                Box 268
              Derby,
                NY 14047
            
            
            9,185,000
            
            
            7.6
            %





*
            Less
                than 1%1)
            All
                shares presented reflect the two-for-one stock distribution effective
                on
                February 8, 2006.
              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 121,074,740 shares outstanding
                together with applicable options for such stockholder.
              Shares
                subject to options currently exercisable or exercisable within 60
                days 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
                64,925,526 shares and 500,000 options held by or issuable to Technology
                Innovations, LLC, of which Mr. Weiner is a member and
                manager.
              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
                500,000 shares issuable pursuant to currently exercisable
                options.


5)
              Includes
                  shares that may be acquired upon exercise of stock options, which
                  are
                  exercisable on or prior to May 16, 2006. The shares beneficially
                  owned
                  include: Mr. Katz - 200,000 shares; Mr. Lanzafame - 266,668 shares;
                  Mr.
                  Weiner - 266,668 shares; Mr. Riedlinger - 2,000,000 shares; Ms.
                  Browne -
                  366,652 shares; Ms. Cooper - 400,000 shares; all Directors and
                  Officers as
                  a group - 3,499,988 shares and Technology Innovations, LLC - 500,000
                  shares.






-21-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED
      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
      64,925,526 post split 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 4,500,000 post split shares of our common stock,
      in
      exchange for a warrant which had been issued to SBI by NN Research and which
      was
      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.




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 20,939,200 post split 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 the Subscription Agreement is filed herewith as Exhibit
      4.4
      and the foregoing description is qualified in its entirety by reference to
      such
      Exhibit.




-22-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**ITEM
      13. EXHIBITS**





**NaturalNano,
      Inc.**


(A
      Development Stage Company)




**EXHIBIT
                INDEX****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 (2)3.2
            Certificate
                of Change to Articles of Incorporation (3)3.3
            By
                laws (4)4.1
            NaturalNano,
                Inc. 2005 Incentive Stock Plan (5)4.2
            Form
                of Non-Qualified Stock Option Agreement (2)4.3
            Registration
                Rights Agreement dated as of December 22, 2004 between NaturalNano,
                Inc.
                and Technology Innovations, LLC (2)4.4
            Form
                of Subscription Agreement for the Purchase of Convertible Notes of
                NaturalNano, Inc. (2)4.5
            Warrant
                issued to SBI USA, LLC (6)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) (2)10.2
            Joint
                Research Agreement between Nanolution, LLC and NaturalNano Inc. dated
                as
                of May 25, 2005 (2)10.3
            Employment
                Letter of Michael Riedlinger and Amendment No. 1 thereto #
                (2)10.4
            Employment
                Letter of Kathleen A. Browne and Amendment No. 1 thereto #
                (2)10.5
            Employment
                Letter of Sarah Cooper # (2)10.6
            Line
                of Credit Agreement dated as of December 29, 2004 between NaturalNano,
                Inc. and Technology Innovations, LLC (6)14.1
            Code
                of ethics for CEO and senior financial officer (6)21.1
            Subsidiaries
                (6)31.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) *31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) *32.1
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
                *32.2
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C Section 1350
                *







*
            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 similarly numbered Exhibit to Current Report on Form
                8-K
                dated November 29, 2005


3.
            Incorporated
                by reference to Exhibit 3.1 to Current Report on Form 8-K dated January
                27, 2006


4.
            Incorporated
                by reference to Exhibit 3.2 to Form 10-SB filed July
                2002


5.
            Incorporated
                by reference to Appendix C to Information Statement on Schedule 14C
                filed
                November 29, 2005


6.
            Incorporated
                by reference to similarly numbered Exhibit to Annual Report on form
                10-KSB
                for the fiscal year ended December 31, 2005, filed February 15,
                2006.






-23-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND
      SERVICES**





Our
      accountant is Goldstein Golub Kessler LLP (the “Firm”) which had a continuing
      relationship with American Express Tax and Business Services Inc. (“TBS”) from
      which it leased auditing staff who were full-time, permanent employees of TBS
      and through which its partners provided non-audit services. Subsequent to
      September 30, 2005, this relationship ceased and the firm established a similar
      relationship with RSM McGladrey, Inc. (RSM). The Firm has no full time employees
      and therefore, none of the audit services performed for us were provided by
      permanent full-time employees of the Firm. The Firm manages and supervises
      the
      audit and audit staff, and is exclusively responsible for the opinion rendered
      in connection with its examination.





1)
            Audit
                Fees





The
      aggregate fees billed by Goldstein Golub Kessler LLP for professional services
      rendered for the audit of the Company’s annual financial statements for the
      period from inception through December 31, 2005 and for the quarterly report
      included on Form 8K dated November 29, 2005 was $60,546.





2)
            Audit-Related
                Fees





The
      Company did not engage its principal accountants to provide assurance and
      related services during the last two fiscal years.





3)
            Tax
                Fees





The
      Company did not engage its principal accountants to provide tax compliance,
      tax
      advice and tax planning services during the last two fiscal years.





4)
            All
                Other Fees





The
      Company did not engage its principal accountants to render services to the
      Company during the last two fiscal years, other than reported
      above.





5)
            Pre-Approval
                Policies and Procedures





In
      accordance with its charter, the Audit Committee is required to approve all
      audit and non-audit services provided by the independent auditors and shall
      not
      engage the independent auditors to perform the specific non-audit services
      prescribed by law or regulation.




-24-
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




NATURALNANO,
                INC.Dated: 
                June 26, 2006
            By:
            \s\
                Michael D. RiedlingerName:
                Michael D. RiedlingerTitle:President




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Signature
            
            Title
            
            Date\s\
                Michael D. Riedlinger
            
            President
                and Director
            
            June
                26, 2006Michael
                D. Riedlinger
            
            (Principal
                Executive Officer)\s\
                Kathleen A. Browne
            
            Chief
                Financial Officer, Secretary and Treasurer
            
            June
                26, 2006Kathleen
                A. Browne
            
            (Principal
                Financial Officer andPrincipal
                Accounting Officer)\s\
                Steven Katz
            
            Director
            
            June
                26, 2006Steven
                Katz\s\
                Ross Kenzie
            
            Director
            
            June
                26, 2006Ross
                Kenzie\s\
                John Lanzafame
            
            Director
            
            June
                26, 2006John
                Lanzafame\s\
                Sharell L. Mikesell Ph.D.
            
            Director
            
            June
                26, 2006Sharell
                L. Mikesell Ph.D.\s\
                Michael L. Weiner
            
            Director
            
            June
                26, 2006Michael
                L. Weiner






-25-