UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the
quarterly period ended: June
30, 2015
or
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the
transition period from
to
Commission File Number: 000-49901
NATURALNANO, INC.
(Exact name of registrant as specified in
its charter)
Nevada |
|
87-0646435 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
763 Linden Ave Rochester NY |
|
14625 |
(Address of principal executive offices) |
|
(Zip Code) |
585-267-4848
(Registrant’s telephone number, including
area code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
x No ¨
Indicate by checkmark if the registrant
has submitted electronically and posted on its Website, if any, every Interactive Date File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes
x No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer |
¨ |
|
Accelerated filer |
¨ |
Non-accelerated filer |
¨ |
|
Smaller reporting company |
x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No x
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date:
2,093,502 as of August 14, 2015
Table of Contents
Item 1. Financial Statements
NATURALNANO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
June 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
| |
| |
| | | |
| | |
Assets | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | - | | |
$ | - | |
Accounts Receivable | |
| 23,735 | | |
| 5,036 | |
Inventory, net of reserve of $16,000 and $0, respectively | |
| 165,967 | | |
| 231,764 | |
Prepaid expenses and other current assets | |
| 7,040 | | |
| 73,140 | |
Total current assets | |
| 196,742 | | |
| 309,940 | |
| |
| | | |
| | |
Total Assets | |
$ | 196,742 | | |
$ | 309,940 | |
| |
| | | |
| | |
Liabilities and Stockholders' Deficiency | |
| | | |
| | |
Liabilities | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Notes payable (Note 2) | |
$ | 1,595,944 | | |
$ | 1,534,946 | |
Accounts payable | |
| 532,134 | | |
| 572,128 | |
Accrued expenses | |
| 93,744 | | |
| 97,095 | |
Accrued interest | |
| 371,565 | | |
| 239,937 | |
Accrued payroll | |
| 1,127,448 | | |
| 1,068,448 | |
Registration rights liability | |
| 12,324 | | |
| 12,324 | |
Derivative liabilities | |
| 471,584 | | |
| 387,721 | |
Total current liabilities | |
| 4,204,743 | | |
| 3,912,599 | |
| |
| | | |
| | |
Total Liabilities | |
| 4,204,743 | | |
| 3,912,599 | |
| |
| | | |
| | |
Rights to reserved common shares (Note 2) | |
| 220,795 | | |
| 559,289 | |
Preferred Stock - $.001 par value, 10 million shares authorized | |
| | | |
| | |
Series B - 5,000 shares issued and outstanding with an
aggregate liquidation preference of $10 | |
| 1,729 | | |
| 2,131 | |
Commitments and contingencies | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders' Deficiency | |
| | | |
| | |
Common Stock - $.001 par value 800,000,000 authorized
with 2,093,502 shares issued and outstanding | |
| 2,094 | | |
| 2,094 | |
Series D - issued and outstanding 100 shares | |
| - | | |
| - | |
Additional paid in capital | |
| 21,896,109 | | |
| 21,454,431 | |
Accumulated deficit | |
| (26,128,728 | ) | |
| (25,620,604 | ) |
Total stockholders' deficiency | |
| (4,230,525 | ) | |
| (4,164,079 | ) |
Total liabilities and stockholders' deficiency | |
$ | 196,742 | | |
$ | 309,940 | |
See notes to condensed consolidated financial
statements
NATURALNANO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
| |
For
the three months ended | | |
For
the six months ended | |
| |
June
30, | | |
June
30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Income: | |
| | | |
| | | |
| | | |
| | |
Revenue | |
$ | 74,405 | | |
$ | 42,534 | | |
$ | 189,490 | | |
$ | 46,174 | |
Cost
of goods sold | |
| 50,619 | | |
| 8,149 | | |
| 78,027 | | |
| 8,634 | |
Gross
Profit | |
| 23,786 | | |
| 34,385 | | |
| 111,463 | | |
| 37,540 | |
| |
| | | |
| | | |
| | | |
| | |
Operating
expenses: | |
| | | |
| | | |
| | | |
| | |
Research
and development | |
| 1,072 | | |
| 12,259 | | |
| 4,356 | | |
| 22,994 | |
Selling,
general and administrative | |
| 114,532 | | |
| 92,595 | | |
| 304,858 | | |
| 186,740 | |
Stock
based compensation attributed to warrant grants | |
| 41,676 | | |
| 105,501 | | |
| 102,782 | | |
| 105,501 | |
| |
| 157,280 | | |
| 210,355 | | |
| 411,996 | | |
| 315,235 | |
| |
| | | |
| | | |
| | | |
| | |
Loss
from operations | |
| (133,494 | ) | |
| (175,970 | ) | |
| (300,533 | ) | |
| (277,695 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other
income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest
expense | |
| (66,533 | ) | |
| (96,717 | ) | |
| (131,628 | ) | |
| (192,264 | ) |
Net
loss on derivative liability | |
| (230,140 | ) | |
| (363,801 | ) | |
| (83,863 | ) | |
| (390,109 | ) |
Net
gain on extinguishment and modification of debt | |
| - | | |
| 3,747,273 | | |
| 7,900 | | |
| 3,707,273 | |
Other
income (expense) | |
| (296,673 | ) | |
| 3,286,755 | | |
| (207,591 | ) | |
| 3,124,900 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
(Loss)
income before income taxes | |
| (430,167 | ) | |
| 3,110,785 | | |
| (508,124 | ) | |
| 2,847,205 | |
Income
taxes | |
| - | | |
| - | | |
| - | | |
| - | |
Consolidated
net (loss) income | |
$ | (430,167 | ) | |
$ | 3,110,785 | | |
$ | (508,124 | ) | |
$ | 2,847,205 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss)
income per common share - basic | |
$ | (0.21 | ) | |
$ | 1.56 | | |
$ | (0.24 | ) | |
$ | 1.45 | |
(Loss)
income per common share - diluted | |
$ | na | | |
$ | 0.82 | | |
$ | na | | |
$ | 0.76 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average
shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 2,093,502 | | |
| 1,991,580 | | |
| 2,093,502 | | |
| 1,964,571 | |
| |
| | | |
| | | |
| | | |
| | |
Fully
diluted | |
| - | | |
| 3,775,673 | | |
| - | | |
| 3,748,664 | |
See notes to condensed consolidated financial
statements
NATURALNANO, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
For the six months ended June 30, 2015
(Unaudited)
| |
| | |
| | |
Series D | | |
Additional | | |
| | |
| |
| |
Common Stock | | |
Preferred
Stock | | |
Paid in | | |
Accumulated | | |
Stockholders' | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficiency | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance at December 31, 2014 | |
| 2,093,502 | | |
$ | 2,094 | | |
| 100 | | |
$ | - | | |
$ | 21,454,431 | | |
$ | (25,620,604 | ) | |
$ | (4,164,079 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Change in value of Series
B preferred shares | |
| - | | |
| - | | |
| - | | |
| - | | |
| 402 | | |
| - | | |
| 402 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Warrants issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| 102,782 | | |
| - | | |
| 102,782 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Change in value of rights
to common shares | |
| - | | |
| - | | |
| - | | |
| - | | |
| 338,494 | | |
| - | | |
| 338,494 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the six
months ended June 30, 2015 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (508,124 | ) | |
| (508,124 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at June 30,
2015 | |
| 2,093,502 | | |
$ | 2,094 | | |
| 100 | | |
$ | - | | |
$ | 21,896,109 | | |
$ | (26,128,728 | ) | |
$ | (4,230,525 | ) |
See notes to condensed consolidated financial
statements
NATURALNANO, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
| |
For the six months ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
Cash flows from operating activities: | |
| | | |
| | |
Consolidated net (loss) income | |
$ | (508,124 | ) | |
$ | 2,847,205 | |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | |
| | | |
| | |
Net gain on extinguishment and modification of debt | |
| (7,900 | ) | |
| (3,707,273 | ) |
Change in fair value of derivative liabilities | |
| 83,863 | | |
| 390,109 | |
Issuance of warrants for services | |
| 102,782 | | |
| 105,501 | |
Provision for excess inventory | |
| (16,000 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Decrease (increase) in accounts receivable | |
| (18,699 | ) | |
| 14,806 | |
Decrease in inventory | |
| 81,797 | | |
| 115 | |
Decrease (increase) in prepaid expenses and other current assets | |
| 66,100 | | |
| (5,000 | ) |
Increase in accounts payable and accrued expenses | |
| 155,181 | | |
| 205,719 | |
Net cash used in operating activities | |
| (61,000 | ) | |
| (148,818 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Receivable from MJ Enterprises | |
| - | | |
| (200,000 | ) |
Net cash used in investing activities | |
| - | | |
| (200,000 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from senior secured promissory notes | |
| 61,000 | | |
| 649,000 | |
Payment on extinguishment of debt | |
| - | | |
| (300,000 | ) |
Net cash provided by financing activities | |
| 61,000 | | |
| 349,000 | |
| |
| | | |
| | |
Increase in cash | |
| - | | |
| 182 | |
Cash at beginning of period | |
| - | | |
| - | |
Cash at end of period | |
$ | - | | |
$ | 182 | |
See notes to condensed consolidated financial
statements
NaturalNano, Inc.
For the six months ended June 30, 2015
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. |
PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES |
Interim Financial Statements
The condensed consolidated financial statements
as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 are unaudited. However, in the opinion of management of
the Company, these condensed consolidated financial statements reflect all material adjustments, consisting solely of normal recurring
adjustments, necessary to present fairly the consolidated financial position and results of operations for such interim periods.
The results of operations for the interim periods presented are not necessarily indicative of the results to be obtained for a
full year. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X
for smaller reporting companies. Accordingly, these condensed consolidated financial statements do not include all of
the information required by U.S. generally accepted accounting principles for complete financial statements. These
unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
Liquidity and Going Concern
Going Concern – The accompanying
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss for the six months
ended June 30, 2015 of approximately $508,000, had negative working capital of approximately $4,008,000 and a stockholders’
deficiency of approximately $4,231,000 at June 30, 2015. Since inception the Company’s growth has been funded through a combination
of convertible and non-convertible debt from private investors and from cash advances from its former parent Technology Innovations,
LLC. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable
period of time. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to
meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately to
attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not include
any adjustments that might result from the uncertainty.
As of June 30, 2015, the Company continued
to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lenders waivers and maturity
extensions received from the lenders.
Basis of Consolidation
The condensed consolidated financial statements
include the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its
wholly owned subsidiaries NaturalNano Research, Inc. (“NN Research”) a Delaware corporation. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Description of the Business
Nanotechnology
The Company, located in Rochester, New
York, is engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers
and other industrial and consumer products by taking advantage of technology advances developed in-house. The Company’s current
activities are directed toward research, development, production and marketing of its proprietary technologies relating to the
treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for cosmetics,
health and beauty products and polymers, plastics and composites.
ViralProtec
In the fourth quarter of 2014, the Company
announced the new business line, ViralProtec, (www.viralprotec.com) a division of NaturalNano. ViralProtec, is a reseller for healthcare
personal protective equipment (PPE) and ancillary supplies. Our mission is to provide personal protective equipment for caregivers for
infectious patient care that meet or exceed CDC and WHO guidelines. ViralProtec was created in response of the public concern
and publicity surrounding the risk to caregivers and other responders created by the Ebola virus. The Company will maintain inventory
on hand for customers to order complete protection kits from a single source instead multiple sources.
Estimates
The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates
and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results
could differ materially from these estimates. On an ongoing basis, we evaluate such estimates. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making
judgments about the carrying values of assets and liabilities.
Fair Value of Financial Instruments
Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
· |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
· |
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. |
|
· |
Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. |
A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The carrying amounts reported in the balance sheet of cash, accounts receivable, inventory, prepaid assets, accounts payable and
accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair
value of notes payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s
derivative liability was determined utilizing Level 3 inputs.
Derivative Financial Instruments
The Company does not use derivative instruments
to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine
if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at
each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative
financial instruments, the Company estimated the total enterprise value based upon trending the firm value from December 2006 to
June 2015 considering company specific factors including the changes in forward estimated revenues and market factors, market multiples
for comparable companies, and the Company’s market share price, all equally weighted. Once the enterprise value was
determined an option pricing model was used to allocate the enterprise value to the individual derivative securities in the Company’s
capital structure. The classification of derivative instruments, including whether such instruments should be recorded as
liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required
within twelve months of the balance sheet date.
Reclassifications
Certain prior year amounts have been reclassified
to conform to the current year presentation.
Income Taxes
The Company accounts for income taxes in
accordance with FASB ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for
the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement
of deferred income tax items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets
being reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest
related to unrecognized tax benefits in income tax expense. Income tax expense was $0 for the three and six month periods ending
June 30, 2015 and 2014.
Loss Per Share
Loss per common share is computed by dividing
net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss
per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during
the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss
per share as their effect is anti-dilutive based on the net loss incurred.
As of June 30, 2015 and 2014 there were
25,940,237 and 3,751,729 shares, respectively, underlying preferred stock, convertible debt, outstanding options and warrants that
could potentially dilute future earnings. In addition to these potentially dilutive shares as of June 30, 2015 were an additional
6,666,667 reserved shares underlying the July 23, 2014 Exchange and Right to Shares Agreement with Cape One Master Fund II LLP
further described in Note 2 below.
These potentially dilutive shares
have been limited by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of
the dilutive instruments such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such
instruments shall be limited to ensure that following such conversion the total number of shares of Common Stock then beneficially
owned by the holder does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock. The Company does
not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments.
Recent Accounting Pronouncements
FASB ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU requires
inventory within the scope of the guidance be measured at the lower of cost or net realizable value. FASB ASU 2015-11 is
effective for annual and interim periods beginning after December 15, 2016, with prospective application required. Early
adoption is permitted. The Company is evaluating the potential impact of this ASU on the condensed consolidated financial
statements.
Notes payable consisted of the following:
Notes Payable | |
June 30, 2015 | | |
December 31, 2014 | |
Senior Secured Convertible Notes | |
$ | 441,988 | | |
$ | 441,988 | |
Senior Secured Promissory Notes | |
| 398,938 | | |
| 398,938 | |
2014-2015 Convertible Promissory Notes | |
| 755,018 | | |
| 694,020 | |
| |
$ | 1,595,944 | | |
$ | 1,534,946 | |
Senior Secured Convertible Notes and
Senior Secured Promissory Notes
As of June 30, 2015 and December 31, 2014
Notes payable on the balance sheets includes $840,926 for senior secured convertible and non-convertible senior secured promissory
notes. The conversion rate for principal and accrued interest on Senior Secured Convertible Notes is 75% of the lowest
volume weighted average price (VWAP) of the Company’s common stock for the 1, 5 or 10 days immediately prior to the conversion.
As further described below, the Company has defaulted on certain provisions of the notes. The Company has obtained a waiver of
default on the outstanding principal through November 30, 2015. As a condition of this forbearance the interest rate on certain
of these notes has been increased to 18%.
2014-2015 Convertible Promissory Notes
During six months ended June 30, 2015,
the Company entered into two Senior Secured Convertible Promissory Notes aggregating $61,000. The 2014-2015 Senior Secured Promissory
Notes are secured by, among other things, (i) the continuing security interest in certain assets of the Company pursuant to the
terms of the Initial Notes dated March 7, 2007, (ii) the Pledge Agreement, as defined in the Initial Notes, and (iii) the Patent
Security Agreement, dated as of March 6, 2007. The proceeds from the 2014-2015 Senior Secured Promissory Notes are available for
general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The
Company has obtained a waiver of default on the outstanding principal through November 30, 2015. As a condition of this forbearance
the interest rate on certain of these notes has been increased to 18%.
On February 15, 2015, the Company granted
300,000 warrants to the Company’s board members with an exercise price of $0.10 per share and on May 30, 2015, the Company
granted 375,000 warrants to the Company’s board members and one consultant with an exercise price of $0.05 per share. The
2014-2015 Convertible Promissory Notes were convertible into shares at $0.30 per share subject to adjustment in the event of lower
price issuances, subject to customary exceptions. Based on the Company’s issuance of warrants described above, the conversion
price on these debt obligations were modified to $0.5 per share.
Subordinated Secured Convertible Note
and Exchange and Right to Shares Agreement – Cape One Master Fund II LP
On July 23, 2014, the Company and Cape One Master Fund II LLP agreed to exchange the Subordinated Secured
Convertible Note and related accrued and unpaid interest totaling a combined $379,624 in exchange for 6,666,667 reserved shares
of the Company’s common stock. The Company and Cape One agreed that a beneficial ownership limitation of 4.99% shall be maintained
at all times as to the number of the shares of the common stock outstanding immediately after giving effect to the issuance of
the common stock issuable under this agreement. Cape One also agreed to a Lockup provision in the agreement that specifies that
Cape One will not sell, transfer or hypothecate any of the reserved shares until Alpha Capital Anstalt has received $3,500,000
from the proceeds of sales of shares obtained upon conversion of notes issued by the Company and held by Alpha as of the date of
this agreement. Upon expiration of the Lockup period, Cape One shall be allowed to sell the lesser of (i) 5% of the daily trading
volume of the Company’s common stock or, (ii) 10% of the reserved shares in any calendar month.
The Company estimated the total enterprise
value based upon a combination of the trending of the firm value from December 2006 to June 2015, market comparables and the market
value of the Company’s stock considering company specific factors including the changes in forward estimated revenues and
market factors. Once the enterprise value was determined an option pricing model was used to allocate the enterprise value to these
6,666,667 share rights and other securities in the Company’s capital structure. The fair value of these 6,666,667 share rights
was estimated at $220,795 as of June 30, 2015 based on the excess of the value of the instruments settled over the estimated fair
market value of the share rights granted. The change in fair market value of this rights liability (of $338,494 since December
31, 2014) has been reflected in Additional Paid In Capital. As a result of the Company not having sufficient authorized shares
to satisfy the issuance of these 6,666,667 share rights, conversion of all outstanding convertible debt, convertible preferred
stock, warrants and options, the value of these share rights has been presented in temporary equity classification on the balance
sheets.
During the six month period ended June
30, 2014, the Company entered into forbearance agreements with Cape One which extended the due dates of certain outstanding notes
and accrued interest. As consideration for this forbearance, the lender increased its principal balance outstanding
by $40,000. This amount was added to the principal balance of the Initial Notes and the Company recognized a loss on modification
of debt of $40,000 in the six month period ended June 30, 2014.
Payoff Agreement with Platinum Long
Term Growth IV, LLC and Merit Consulting LLC
On June 26, 2014, the Company entered
into a Payoff Agreement with two of its lenders (collectively referred to as “the holders”) where the holders agreed
to surrender their outstanding promissory notes and debentures in the aggregate principal amount of $3,256,399 plus all accrued
and unpaid interest amounting to $592,414 in consideration for an aggregate payment of $300,000. As further consideration, one
of the lenders agreed to return its 2,587,674 shares of Series C Preferred Stock for cancellation. The Company reversed $70,165
in registration rights liabilities in connection with this Payoff Agreement. Effective upon the consummation of this Payoff Agreement,
the Company had no further obligation to the holders pursuant to the terms of the preferred stock and the notes as defined in
the Payoff Agreement. As a result of this Payoff Agreement, the Company recognized a gain on extinguishment of debt during the
second quarter of 2014 in the amount of $3,747,273.
Bitcoin Promissory Notes
The Company established its subsidiary,
Bitcoin Bidder, Inc. in June, 2014 for the sole purpose of bidding on bitcoins which had been seized by the FBI and were
sold at auction June 27, 2014. In connection with this, the Company issued notes aggregating $2,150,000 under a Securities
Purchase Agreement. Bitcoin Bidder, Inc. was not successful at the auction and $1,950,000 in borrowings was repaid to the
lenders on June 30, 2014. The remaining $200,000 was repaid to the lenders in July, 2014 without any penalty or interest charges
to NaturalNano. The Company dissolved Bitcoin Bidder, Inc. in 2014.
The Company's reportable segments are strategic
business units that offer different products and services. The Company’s reportable segments are organized, managed and internally
reported separately because each business requires different technology and marketing strategies. The Company currently has two
operating segments, Nanotechnology and ViralProtec.
The accounting policies of the segments
are the same as those described in the summary of significant accounting policies of the Company. The Company accounts
for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. The
Company relies on intersegment cooperation and management does not represent that these segments, if operated independently, would
report the results contained herein. For purposes of determining segment loss, corporate overhead is primarily included
in Nanotechnology, other than direct expense of ViralProtec.
A summary of the two segments is as follows:
| Nanotechnology | Research, development, production and marketing of its proprietary technologies
relating to the treatment and separation of nanotubes from halloysite clay and the development of related commercial applications
for cosmetics, health and beauty products and polymers, plastics and composites. |
| ViralProtec | Distributor and reseller of personal protective equipment and supplies to
protect medical workers from infection and contagious incidents. |
Information concerning the Company’s
operations by reportable segment for the three and six months ended June 30, 2015 and 2014 are as follows:
| |
Nanotechnology | | |
ViralProtec | | |
Consolidated | |
| |
For the three months ended | | |
For the three months ended | | |
For the three months ended | |
| |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 39,454 | | |
$ | 42,534 | | |
$ | 34,951 | | |
| - | | |
$ | 74,405 | | |
$ | 42,534 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
$ | (121,987 | ) | |
$ | (175,970 | ) | |
$ | (11,507 | ) | |
| - | | |
$ | (133,494 | ) | |
$ | (175,970 | ) |
Interest expense | |
| (66,533 | ) | |
| (96,717 | ) | |
| - | | |
| - | | |
| (66,533 | ) | |
| (96,717 | ) |
Net loss on derivative liabilities | |
| (230,140 | ) | |
| (363,801 | ) | |
| - | | |
| - | | |
| (230,140 | ) | |
| (363,801 | ) |
Gain on forgiveness and
modification of debt | |
| - | | |
| 3,747,273 | | |
| - | | |
| - | | |
| - | | |
| 3,747,273 | |
Net income (loss) | |
$ | (418,660 | ) | |
$ | 3,110,785 | | |
$ | (11,507 | ) | |
| - | | |
$ | (430,167 | ) | |
$ | 3,110,785 | |
| |
Nanotechnology | | |
ViralProtec | | |
Consolidated | |
| |
For the six months ended | | |
For the six months ended | | |
For the six months ended | |
| |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 107,281 | | |
$ | 46,174 | | |
$ | 82,209 | | |
| - | | |
$ | 189,490 | | |
$ | 46,174 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
(Loss) income from operations | |
$ | (319,696 | ) | |
$ | (277,695 | ) | |
$ | 19,163 | | |
| - | | |
$ | (300,533 | ) | |
$ | (277,695 | ) |
Interest expense | |
| (131,628 | ) | |
| (192,264 | ) | |
| - | | |
| - | | |
| (131,628 | ) | |
| (192,264 | ) |
Net loss on derivative liabilities | |
| (83,863 | ) | |
| (390,109 | ) | |
| - | | |
| - | | |
| (83,863 | ) | |
| (390,109 | ) |
Gain on forgiveness and
modification of debt | |
| 7,900 | | |
| 3,707,273 | | |
| - | | |
| - | | |
| 7,900 | | |
| 3,707,273 | |
Net income (loss) | |
$ | (527,287 | ) | |
$ | 2,847,205 | | |
$ | 19,163 | | |
| - | | |
$ | (508,124 | ) | |
$ | 2,847,205 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Assets | |
$ | 31,449 | | |
$ | 433,753 | | |
$ | 165,293 | | |
| - | | |
$ | 196,742 | | |
$ | 433,753 | |
Geographic Areas – The Company
had no long-lived assets in any country other than the United States for any period presented. The Company had $10,200 in sales
outside of the United States in the six month ended June 30, 2015.
Major Customers – During the
six months ended June 30, 2015, the Company derived 56% of total revenue from one Nanotechnology customer and 20% from two ViralProtec
customers. During the six months ended June 30, 2014, the Company derived 94% of total revenue from one Nanotechnology customer.
For stock based derivative financial
instruments, the Company estimated the total enterprise value based upon a combination of the trending of the firm value from December
2006 to June 2015, market comparables, and the market value of the Company’s stock, considering company specific factors
including the changes in forward estimated revenues and market factors. Once the enterprise value was determined an
option pricing model was used to allocate the enterprise value to the individual derivative and other securities in the Company’s
capital structure. The classification of derivative instruments, including whether such instruments should be recorded
as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in
the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required
within twelve months of the balance sheet date.
The Company’s derivative liabilities
as of June 30, 2015 and December 31, 2014 are as follows:
|
· |
The debt conversion feature embedded in the various Convertible Promissory Notes which contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.) |
|
|
|
|
· |
Derivative liabilities related to outstanding warrants and options due to the Company having insufficient authorized shares to satisfy the exercise or conversion of all outstanding instruments as of June 30, 2015 and December 31, 2014. |
The fair value of the derivative liabilities as of June 30,
2015 and December 31, 2014 are as follows:
| |
June 30, 2015 | | |
December 31, 2014 | |
Note conversion feature liabilities | |
$ | 470,806 | | |
$ | 375,949 | |
Warrant liability | |
| 778 | | |
| 11,772 | |
Total | |
$ | 471,584 | | |
$ | 387,721 | |
The change in the fair value of the derivative
liability of $230,140 and $83,863 was recognized as a loss on change in derivative liability in the statement of operations for
the three and six months ended June 30, 2015, respectively. A change in fair value of the derivative liability of $363,801 and
$390,109 was recognized as a loss for the three and six months ended June 30, 2014, respectively. Significant fluctuations in the
variables used in calculating the value of the Company’s derivative liabilities could have significant impact on the fair
market valuation.
As of June 30, 2015 the Company was authorized
to issue up to 800,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Authorized Common Stock: In 2013
the Company received a unanimous written consent in lieu of a meeting from the members of the Board of Directors and a written
consent from the Series D stockholder to amend its articles of incorporation to increase the Company’s authorized common
shares to 800,000,000 common shares. As of June 30, 2015 there were 26,742,964 shares underlying preferred stock, convertible debt,
outstanding options and warrants that could potentially dilute future earnings. In addition to these potentially dilutive shares
were an additional 6,666,667 reserved shares underlying the July 23, 2014 Exchange and Right to Shares Agreement with Cape One
Master Fund II LLP further described in Note 2. The Company does not have sufficient authorized shares to satisfy conversion of
all the potentially dilutive instruments.
Preferred Stock Issuances
The Series B Convertible Preferred Stock
is convertible into 160 shares of the Company’s common stock and votes on an as-converted basis (with each share having 160
votes). The Series B designation limits the holders’ rights to convert its Convertible Preferred Stock, and the aggregate
voting powers, to no more than 4.99% of the votes attributable to the total outstanding common shares. As a result of the
Company not having sufficient authorized shares to satisfy the conversion of all outstanding convertible debt, share rights, convertible
preferred stock, warrants and options, the Series B preferred shares have been moved into temporary equity classification on the
balance sheet.
Warrants Grants
The Company has issued warrants to purchase
shares of its common stock to certain consultants and debt holders. As of June 30, 2015 and December 31, 2014 there were common
stock warrants outstanding to purchase an aggregate of 1,217,941 and 545,294 shares of common stock, respectively, pursuant to
the warrant grant agreements.
On February 15, 2015, the Company
granted a total of 300,000 warrants to the Company’s board members. These warrants, included in the summary below, grant
the right to purchase one share of common stock at an exercise price of $0.10 per share. The warrants were fully vested as of the
grant date and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined using
the Black-Scholes model and was measured on the date of grant at $61,106. An expected volatility assumption of 140%
was used based on the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest rate
of 1.62% which was derived from the U.S. treasury yields on the date of grant. The market price of the Company’s
common stock on the grant date was $0.22 per share. The expiration date used in the valuation model aligns with the
warrant life of five years as indicated in the agreements. The dividend yield was assumed to be zero.
On May 30, 2015, the Company granted a total of 375,000 warrants to the Company’s board members
and one consultant. These warrants, included in the summary below, grant the right to purchase one share of common stock at an
exercise price of $0.05 per share. The warrants were fully vested as of the grant date and contain a cashless exercise provision.
The fair value of the warrants on the date of grant was determined using the Black-Scholes model and was measured on the date of
grant at $41,676. An expected volatility assumption of 140% was used based on the volatility of the Company’s
stock price utilizing a look-back basis and the risk-free interest rate of 1.49% which was derived from the U.S. treasury yields
on the date of grant. The market price of the Company’s common stock on the grant date was $0.12 per share. The
expiration date used in the valuation model aligns with the warrant life of five years as indicated in the agreements. The
dividend yield was assumed to be zero.
A summary of the outstanding warrants
is presented below:
| |
Shares | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Life-years | |
| |
| | | |
| | | |
| | |
Outstanding at January 1, 2015 | |
| 545,294 | | |
$ | 4.26 | | |
| 2.24 | |
Granted | |
| 675,000 | | |
| 0.07 | | |
| | |
Expired | |
| (2,353 | ) | |
| 102.00 | | |
| | |
Warrants outstanding at June 30, 2015 | |
| 1,217,941 | | |
$ | 0.35 | | |
| 4.63 | |
Warrants exercisable at June 30, 2015 | |
| 1,217,941 | | |
$ | 0.35 | | |
| 4.63 | |
A summary of the status of the outstanding incentive stock plans
is presented below:
| |
Shares | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Life-years | |
| |
| | | |
| | | |
| | |
Options outstanding at January 1, 2015 | |
| 2,363 | | |
$ | 921.00 | | |
| 3.53 | |
Options expired unexercised first quarter | |
| (907 | ) | |
| | | |
| | |
Options outstanding at June 30, 2015 | |
| 1,456 | | |
$ | 1,578.00 | | |
| 1.19 | |
Options exercisable at June 30, 2015 | |
| 1,456 | | |
$ | 1,578.00 | | |
| 1.19 | |
All compensation costs for the above options
have been previously recognized in operations. As of June 30, 2015, the aggregate intrinsic value of the stock options outstanding
and exercisable was $0. There were no option grants made in the six month periods ended June 30, 2015 and 2014.
On December 19, 2014, the Company filed
a Certificate of Amendment to its Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of
Nevada, to effect a 1-for-300 reverse stock split of its common stock, or the Reverse Stock Split. This action had previously been
approved by the Company’s Board of Directors on November 4, 2014. As a result of the Reverse Stock Split, every three hundred
shares of the Company’s pre-reverse split common stock were combined and reclassified into one share of its common stock.
No fractional shares were issued in connections with the Reverse Stock Split. Stockholders who would have been entitled to receive
a fractional share in connection with the Reverse Stock Split received one whole share. The par value and other terms of the common
stock were not affected by the Reverse Stock Split.
The Company’s common stock began
trading at its post-Reverse Stock Split price at the beginning of trading on December 22, 2014.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q and
other reports that we file with the SEC contain statements that are considered forward-looking statements that involve risks and
uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. In some cases,
you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,”
“potential,” “projects,” “continuing,” “ongoing,” “expects,” “management
believes,” “we believe,” “we intend” and similar expressions. Such forward looking statements include
statements addressing operating performance, events or developments that the Company expects or anticipates will occur in the future,
including statements relating to revenue realization, revenue growth, earnings, earnings per share, or similar projections. These
statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed
for the reasons described in this report. You should not place undue reliance on these forward-looking statements.
You should be aware that our actual results
could differ materially from those contained in the forward-looking statements due to a number of factors such as:
|
· |
the ability to raise capital to fund our operations until we generate adequate cash flow internally; |
|
· |
the terms and timing of product sales and licensing agreements; |
|
· |
our ability to enter into strategic partnering and joint development agreements; |
|
· |
our ability to competitively market our controlled release and filled tube products; |
|
· |
the successful implementation of research and development programs; |
|
· |
our ability to attract and retain key personnel; |
|
· |
general market conditions. |
Our actual results may differ materially
from management’s expectations. The following discussion and analysis should be read in conjunction with our financial statements
included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily
continue in the future, or that any conclusion reached herein will necessarily be indicative of actual operating performance in
the future. Such discussion represents only the best present assessment of our management.
The forward-looking statements speak only
as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation
to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements.
The Company
NaturalNano (the “Company”),
located in Rochester, New York, operates in two business segments, the Nanotechnology and ViralProtec as described below.
Nanotechnology
The Company, located in Rochester, New
York, is engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers
and other industrial and consumer products by taking advantage of technology advances developed in-house. The Company’s current
activities are directed toward research, development, production and marketing of its proprietary technologies relating to the
treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for cosmetics,
health and beauty products and polymers, plastics and composites.
ViralProtec
On November 5, 2014 the Company announced
the new business line, ViralProtec, (www.viralprotec.com) a division of NaturalNano. ViralProtec, is a reseller for Ebola personal
protective equipment (PPE) and ancillary supplies. Our mission is to provide personal protective equipment for caregivers for
infectious patient care that meet or exceed CDC and WHO guidelines. ViralProtec was created in response of the public concern
and publicity surrounding the risk to caregivers and other responders created by the Ebola virus. The Company will maintain inventory
on hand for customers to order complete protection kits from a single source instead multiple sources.
NaturalNano is domiciled in the state of
Nevada as a result of the merger with Cementitious Materials, Inc., (“CMI”), which was completed on November 29, 2005.
Liquidity
Going Concern – The accompanying
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss for the six months
ended June 30, 2015 of approximately $508,000, had negative working capital of approximately $4,008,000 and a stockholders’
deficiency of approximately $4,231,000 at June 30, 2015. Since inception the Company’s growth has been funded through a combination
of convertible and non-convertible debt from private investors and from cash advances from its former parent Technology Innovations,
LLC. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable
period of time. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to
meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately to
attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not include
any adjustments that might result from the uncertainty.
As of June 30, 2015 the Company owed approximately
$1,968,000 to lenders in the form of notes payable and accrued interest. Much of this debt is convertible into the Company’s
common stock at terms beneficial to the lenders compared to the market price of the Company’s common stock. The Company continues
to rely on these lenders to provide additional loans to cover Company expenses and to provide forbearance agreements extending
the due dates of the various notes. As of June 30, 2015, the Company continued to require waivers for debt covenant violations
and extensions of maturity dates. Certain of these lenders have increased the interest rate on the debt to 18% during the forbearance
period. The lenders have extended the scheduled maturity date of the underlying debt to November 30, 2015.
Operating activities
Net cash used in operating activities in
the six months ended June 30, 2015 and 2014 was $61,000 and $148,818, respectively. The net loss generated in the six month ended
June 30, 2015 was $508,124 compared to net income of $2,847,205 in the six month ended June 30, 2014. Included in the
net income for the six months ended June 30, 2014 is $3,747,273 from a non-cash gain on extinguishment of debt. The Company continues
to actively monitor spending and cash outflows in an effort to reduce costs until continuing revenue sources are developed. The
Company also evaluates opportunities to reduce expenses and improve its liquidity position. We expect that total consolidated spending
in 2015 will be comparable to the prior year spending levels, although we will continue to invest in product and commercialization
efforts as our cash position and liquidity allow.
Total non-cash adjustments to reconcile
the net loss (income) to the cash used in operations aggregated a net reduction of $162,745 in the six months ended June 30, 2015
compared to net reduction of $3,211,663 in the six months ended June 30, 2014. The change in these non-cash items reflect the non-cash
gain on extinguishment of debt and the change in the fair value of warrant and derivative liabilities.
Investing activities
There were no investing activities during
the six months ended June 30, 2015.
During the six months ended June 30, 2014,
the Company entered into a purchase agreement to acquire all the issued and outstanding membership interest in MJ Enterprises (“MJE”).
In connection with this purchase agreement, the Company advanced $200,000 to MJE. The Company decided during the first quarter
of 2014 not to pursue this acquisition. The $200,000 advance was due and payable from MJE on June 30, 2014. The Company does not
believe this amount will be collected from MJE. During 2014, the Company provided a reserve of $200,000 on the potential non-recovery
of the full amount due from MJE.
Financing Activities
Net cash provided from financing activities
in the six months ended June 30, 2015 and 2014 was $61,000 and $349,000, respectively. The cash flows from financing activities
in 2015 include the receipt of $61,000 in new borrowing in connection with the 2015 Convertible promissory notes. The cash flows
from financing activities in 2014 reflect a receipt of $300,000 in new borrowing in connection with the Payoff Agreement with Platinum
Long Term Growth IV LLC (“PLTG”) and Merit Advisors LLC (“Merit”). Additionally, other promissory notes
aggregating $349,000 were received for operating purposes in the six months period ended June 30, 2014. The Payoff Agreement required
$300,000 in cash disbursed to settle the remaining liabilities with PLTG and Merit.
Critical Accounting Policies and Estimates
Refer to the Company’s
December 31, 2014 report on Form 10K for a complete discussion of the critical accounting policies which have not changed during
the six months ended June 30, 2015.
FASB ASU 2015-11, Inventory (Topic
330): Simplifying the Measurement of Inventory. This ASU requires inventory within the scope of the guidance be measured
at the lower of cost or net realizable value. FASB ASU 2015-11 is effective for annual and interim periods beginning after
December 15, 2016, with prospective application required. Early adoption is permitted. The Company is evaluating the
potential impact of this ASU on the condensed consolidated financial statements.
Comparison of Statement of Operations
for the three months ended June 30, 2015 and 2014
| |
For the three months ended | | |
| |
| |
June 30, | | |
Variance | |
Revenue, Cost of Goods, and Gross Profit | |
2015 | | |
2014 | | |
Increase | |
Revenue: | |
| | | |
| | | |
| | |
Nanotechnology | |
$ | 39,454 | | |
$ | 42,534 | | |
$ | (3,080 | ) |
ViralProtec | |
| 34,951 | | |
| - | | |
| 34,591 | |
| |
| | | |
| | | |
| | |
Cost of goods: | |
| | | |
| | | |
| | |
Nanotechnology | |
| 4,161 | | |
| 8,149 | | |
| (3,988 | ) |
ViralProtec | |
| 46,458 | | |
| - | | |
| 46,458 | |
| |
| | | |
| | | |
| | |
Consolidated Gross Margin | |
$ | 23,786 | | |
$ | 34,385 | | |
$ | (10,599 | ) |
Gross Margin % | |
| 32 | % | |
| 81 | % | |
| | |
Revenue and Gross Profit
During the three months ended June 30,
2015 and 2014, the Company recorded $74,405 and $42,534, respectively in revenue. Gross profit of $23,786 and $34,385 resulted
in a profit margin of 32% and 81% of sales for these periods, respectively. During the three month period ended June 30, 2015,
the Nanotechnology segment generated a gross profit of 89% and the ViralProtec segment generated a loss on gross margin of 33%.
The ViralProtec margin loss is attributed to a provision for potential excess inventory of $16,000 recorded during the second quarter
of 2015. Excluding the impact of this charge, the ViralProtec segment margin would have been 78%. Management continues to actively
monitor and assess inventory units on hand compared with projected customer sales.
In the fourth quarter of 2014, the Company
announced the new business line, ViralProtec, a reseller for healthcare personal protective equipment (PPE) and ancillary supplies.
There were no revenues, cost of goods or gross margin generated during the six months ended June 30, 2014 from the ViralProtec
segment.
The Company expects that it will continue
to experience notable variations in gross margins with its business as it continues to introduce and develop new products and related
applications. The Company expects that competitive pricing will be a continuing challenge as new products are developed and introduced
and product acceptance and the Company’s production reputation develops.
Operating Expenses
Management continues to assess the Company's
operating structure to control expenses across all categories of the business. Such evaluations will continue with the intent to
invest in research and development programs and product development in 2015 as our cash position and liquidity allows. No assurance
can be given that future investment or debt financing will develop thereby resulting in improved cash inflow or liquidity for the
Company.
| |
For the three months ended | | |
Variance | |
| |
June 30, | | |
Increase | |
Research and Development | |
2015 | | |
2014 | | |
(decrease) | |
Salaries and benefits | |
$ | 1,072 | | |
$ | - | | |
$ | 1,072 | |
Rents & Utilities | |
| - | | |
| 8,240 | | |
| (8,240 | ) |
Supplies and other | |
| - | | |
| 4,019 | | |
| (4,019 | ) |
| |
$ | 1,072 | | |
$ | 12,259 | | |
$ | (11,187 | ) |
Total research and development expenses
incurred in the three months ended June 30, 2015 and 2014, respectively were $1,072 and $12,259, respectively. The Company did
not spend on Nanotechnology research programs during the three months ended June 30, 2015. Since the introduction of the ViralProtec
business in the fourth quarter of 2014, the Company has directed is efforts and spending in the development this segment’s
customer base and product offering. The Company intends to invest in product research for the Nanotechnology segment in future
periods as cash flow opportunities allow.
| |
For the three months ended | | |
Variance | |
| |
June 30, | | |
increase | |
General and Administrative | |
2015 | | |
2014 | | |
(decrease) | |
Salary & Benefits | |
$ | 48,605 | | |
$ | 35,919 | | |
$ | 12,686 | |
Legal and Professional Fees | |
| 13,123 | | |
| 24,938 | | |
| (11,815 | ) |
Investor Relations | |
| 18,036 | | |
| - | | |
| 18,036 | |
Consulting Services | |
| 7,956 | | |
| 5,306 | | |
| 2,650 | |
Rent and utilities | |
| 9,159 | | |
| 3,300 | | |
| 5,859 | |
Insurance | |
| 954 | | |
| 2,985 | | |
| (2,031 | ) |
Shareholder and Board | |
| 12,329 | | |
| 7,983 | | |
| 4,346 | |
Supplies and other | |
| 4,370 | | |
| 12,164 | | |
| (7,794 | ) |
General and administrative excluding stock based compensation | |
$ | 114,532 | | |
$ | 92,595 | | |
$ | 21,937 | |
| |
| | | |
| | | |
| | |
Stock based compensation related to warrants | |
$ | 41,676 | | |
$ | 105,501 | | |
$ | (63,825 | ) |
| |
| | | |
| | | |
| | |
Total general and administrative | |
$ | 156,208 | | |
$ | 198,096 | | |
$ | (41,888 | ) |
Total general and administrative expense,
excluding stock compensation cost resulting from the grants of warrants, for the three months ended June 30, 2015 was $114,532
as compared to $92,595 for the three months ended June 30, 2014.
Salaries and benefits increased in 2015
over costs incurred in 2014 reflecting part time staff hired in connection with the ViralProtec business established in the fourth
quarter of 2014. Legal and professional services decreased by $11,815 since 2014 reflecting costs incurred in 2014 related to alternative
business structures, as well as debt extinguishments, advances and the expansion of business categories. In the fourth quarter
of 2014, the Company executed an agreement with ZA Capital LLC to provide $100,000 in strategic consulting services and public
relations for the six months period from October 2014 through April 2015.
During the second quarter of 2015, the
Company granted a total of 375,000 warrants to the Company’s board members and to an outside consultant. These warrants grant
the right to purchase one share of common stock at an exercise price of $0.05 per share. The warrants were fully vested as of the
grant date and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined using
the Black-Scholes model and was measured on the various dates of grant at $41,676. An expected volatility assumption
of 140% has been used based on the volatility of the Company’s stock price utilizing a look-back basis and the risk-free
interest rate of 1.49% and was derived from the U.S. treasury yields on the dates of grant. The market price of the
Company’s common stock on the grant was $0.12 per share. The expiration date used in the valuation model aligns
with the warrant life of five years as indicated in the agreements. The dividend yield was assumed to be zero.
Management will continue to actively monitor
the Company's operating structure for the purpose of controlling expenses across all categories of the business. We expect that
spending for 2015 general and administrative expenses will be comparable to the 2014 actual expenses incurred, although investments
in marketing and sales will be a priority if the Company’s cash and liquidity position improves. No assurance can be given
that future investment or debt financing will develop thereby resulting in improved cash inflow or liquidity for the Company.
Interest and Other Income (expense),
net
Other income (expense) for the three months
ended June 30, 2015 was a net expense of $296,673 compared a net income of $3,286,755 for the three months ended June 30, 2014.
Interest expense includes the
interest on the senior and subordinated convertible and non-convertible promissory notes. The Company incurred $66,533 and
$96,717 in interest expense for the three month periods ended June 30, 2015 and 2014, respectively. The reduction in 2015
expense reflects new borrowings and the settlement of certain debt instruments in connection with the extinguishment of debt
during the second quarter of 2014 as described below.
The Company regularly received forbearance
agreements from lenders due to the Company being in default of loan requirements. From time to time the lenders, as consideration
for the forbearance agreements, add amounts to the principal of the outstanding notes. These amounts are recorded as losses on
modification of debt in the income statement. On June 26, 2014, the Company entered into a Payoff Agreement with two of its lenders
(collectively referred to as “the holders”) where the holders agreed to surrender their outstanding promissory notes
and debentures in the aggregate principal amount of $3,256,399 plus all accrued and unpaid interest amounting to $592,414 in consideration
for an aggregate payment of $300,000. As further consideration, one of the lenders agreed to return its 2,587,674 shares of Series
C Preferred Stock for cancellation. The Company reversed $70,165 in registration rights liabilities in connection with this Payoff
Agreement. Effective upon the consummation of this Payoff Agreement, the Company had no further obligation to the holders pursuant
to the terms of the preferred stock and the notes as defined in the Payoff Agreement. As a result of this Payoff Agreement, the
Company recognized a gain on extinguishment of debt during the second quarter of 2014 in the amount of $3,747,273. Also during
2014, the Company recorded an expense of $40,000 in connection with debt modifications related to forbearance agreements. The Company
entered into various agreements with certain vendors to settle accounts payable that were outstanding for amounts less than the
liability that was recorded in the accompanying balance sheets. These vendor concessions have been treated as gains in the period
that the underlying agreements were reached.
Consolidated net (loss) income for
the three months ended June 30, 2015 and 2014
During the three months ended June 30,
2015, the Company recorded a consolidated net loss of $430,167. Gross margin of $23,786 was primarily generated by the Nanotechnology
segment and also reflects a $16,000 provision for potentially excess inventory on-hand associated with the ViralProtec segment.
Operating expenses totaled $157,280 including $41,676 in stock based compensation for warrants granted during the quarter. Other
expense of $296,673 reflects interest expense on the various notes outstanding of approximately $1.6 million and a loss on the
change in market value of $230,140 on the derivative liabilities attributed to these financing arrangements.
During the three months ended June 30,
2014, the Company recorded a consolidated net income of $3,110,785. Gross margin of $34,385 was primarily by the Nanotechnology
segment. Selling, general and administrative expenses totaled $210,355 including $105,501 in stock based compensation for warrants
granted during the quarter. Other income of $3,286,755 reflects interest expense on the various notes outstanding of approximately
$1.7 million and a loss on the change in market value of $363,807 on the derivative liabilities attributed to these financing arrangements.
During the three months ended June 30, 2014 the Company recognized a gain on the extinguishment and modification of debt in the
amount of $3,747,273 primarily attributed to the Payoff Agreement with Platinum Long Term Growth IV, LLC and Merit Consulting LLC.
On June 26, 2014, the Company entered into a Payoff Agreement with two of its lenders (collectively referred to as “the holders”)
where the holders agreed to surrender their outstanding promissory notes and debentures in the aggregate principal amount of $3,256,399
plus all accrued and unpaid interest amounting to $592,414 in consideration for an aggregate payment of $300,000. As further consideration,
one of the lenders agreed to return its 2,587,674 shares of Series C Preferred Stock for cancellation. The Company reversed $70,165
in registration rights liabilities in connection with this Payoff Agreement. Effective upon the consummation of this Payoff Agreement,
the Company had no further obligation to the holders pursuant to the terms of the preferred stock and the notes as defined in the
Payoff Agreement. As a result of this Payoff Agreement, the Company recognized a gain on extinguishment of debt during the second
quarter of 2014 in the amount of $3,747,273.
Comparison of Statement of Operations
for the six months ended June 30, 2015 and 2014
| |
For the six months ended | | |
| |
| |
June 30, | | |
Variance | |
Revenue, Cost of Goods, and Gross Profit | |
2015 | | |
2014 | | |
Increase | |
Revenue: | |
| | | |
| | | |
| | |
Nanotechnology | |
$ | 107,281 | | |
$ | 46,174 | | |
$ | 61,107 | |
ViralProtec | |
| 82,209 | | |
| - | | |
| 82,209 | |
| |
| | | |
| | | |
| | |
Cost of goods: | |
| | | |
| | | |
| | |
Nanotechnology | |
| 14,981 | | |
| 8,634 | | |
| 6,347 | |
ViralProtec | |
| 63,046 | | |
| - | | |
| 63,046 | |
| |
| | | |
| | | |
| | |
Consolidated Gross Margin | |
$ | 111,463 | | |
$ | 37,540 | | |
$ | 80,695 | |
Gross Margin % | |
| 59 | % | |
| 81 | % | |
| | |
Revenue and Gross Profit
During the six months ended June 30, 2015
and 2014, the Company recorded $189,490 and $46,174, respectively in revenue. Gross profit of $111,463 and $37,540 resulted in
a profit margin of 59% and 81% of sales for these periods, respectively. During the six month period ended June 30, 2015, the Nanotechnology
segment generated a gross profit of 86% and the ViralProtec segment generated a gross profit of 23%. The ViralProtec gross margin
was negatively affected in the period by a provision for potential excess inventory of $16,000 recorded during the second quarter
of 2015. Excluding the impact of this charge, the ViralProtec segment margin would have been 43%. Management continues to actively
monitor and assess inventory units on hand compared with projected customer sales.
In the fourth quarter of 2014, the Company
announced the new business line, ViralProtec, a reseller for healthcare personal protective equipment (PPE) and ancillary supplies.
There were no revenues, cost of goods or gross margin generated during the six months ended June 30, 2014 from the ViralProtec
segment.
The Company expects that it will continue
to experience notable variations in gross margins with its business as it continues to introduce and develop new products and related
applications. The Company expects that competitive pricing will be a continuing challenge as new products are developed and introduced
and product acceptance and the Company’s production reputation develops.
Operating Expenses
Management continues to assess the Company's
operating structure to control expenses across all categories of the business. Such evaluations will continue with the intent to
invest in research and development programs and product development in 2015 as our cash position and liquidity allows. No assurance
can be given that future investment or debt financing will develop thereby resulting in improved cash inflow or liquidity for the
Company.
| |
For the six months ended | | |
Variance | |
| |
June 30, | | |
Increase | |
Research and Development | |
2015 | | |
2014 | | |
(decrease) | |
Salaries and benefits | |
$ | 4,356 | | |
$ | 8,620 | | |
$ | (4,264 | ) |
Rents & Utilities | |
| - | | |
| 9,990 | | |
| (9,990 | ) |
Supplies and other | |
| - | | |
| 4,384 | | |
| (4,384 | ) |
| |
$ | 4,356 | | |
$ | 22,994 | | |
$ | (18,638 | ) |
Total research and development expenses
incurred in 2015 and 2014, respectively were $4,356 to $22,994. The Company minimized its spending on Nanotechnology research
programs during the six months ended June 30, 2015. Since the introduction of the ViralProtec business in the fourth quarter of
2014, the Company has directed is efforts and spending in the development this segment’s customer base and product offering.
The Company intends to invest in product research for the Nanotechnology segment in future periods as cash flow opportunities
allow.
| |
For the six months ended | | |
Variance | |
| |
June 30, | | |
increase | |
General and Administrative | |
2015 | | |
2014 | | |
(decrease) | |
Salary & Benefits | |
$ | 107,899 | | |
$ | 84,342 | | |
$ | 23,557 | |
Legal and Professional Fees | |
| 61,656 | | |
| 42,536 | | |
| 19,120 | |
Investor Relations | |
| 69,804 | | |
| - | | |
| 69,804 | |
Consulting Services | |
| 13,528 | | |
| 14,429 | | |
| (901 | ) |
Rent and utilities | |
| 18,655 | | |
| 8,540 | | |
| 10,115 | |
Insurance | |
| 2,848 | | |
| 2,985 | | |
| (137 | ) |
Shareholder and Board | |
| 15,610 | | |
| 17,050 | | |
| (1,440 | ) |
Supplies and other | |
| 14,858 | | |
| 16,858 | | |
| (2,000 | ) |
General and administrative excluding stock based compensation | |
$ | 304,858 | | |
$ | 186,740 | | |
$ | 118,118 | |
| |
| | | |
| | | |
| | |
Stock based compensation related to warrants | |
$ | 102,782 | | |
$ | 105,501 | | |
$ | (2,719 | ) |
| |
| | | |
| | | |
| | |
Total general and administrative | |
$ | 407,640 | | |
$ | 292,241 | | |
$ | 115,399 | |
Total general and administrative expense,
excluding stock compensation cost resulting from the grants of warrants, for the six months ended June 30, 2015 was $304,858 as
compared to $186,740 for the six months ended June 30, 2014.
Salaries and benefits increased in 2015
over costs incurred in 2014 reflecting part time staff hired in connection with the ViralProtec business established in the fourth
quarter of 2014. In the fourth quarter of 2014, the Company executed an agreement with ZA Capital LLC to provide $100,000 in strategic
consulting services and public relations for the six months period from October 2014 through April 2015.
During the six months ended June 30, 2015,
the Company granted a total of 675,000 warrants to the Company’s board members and a consultant. These warrants grant the
right to purchase one share of common stock at an exercise prices of $0.05 and $0.10 per share. The warrants were fully vested
as of the grant date and contain cashless exercise provisions. The fair value of the warrants on the dates of grant were determined
using the Black-Scholes model and were measured on the dates of grant aggregating $102,782. An expected volatility assumption
of 140% was used based on the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest
rates of 1.49% and 1.62% were derived from the U.S. treasury yields on the dates of grant. The market price of the Company’s
common stock on the grant dates were $0.22 and $0.12 per share on the respective grant dates. The expiration date used
in the valuation model aligns with the warrant life of five years as indicated in the agreements. The dividend yield
was assumed to be zero.
Management continues to actively monitor
the Company's operating structure for the purpose of controlling expenses across all categories of the business. We expect that
spending for 2015 general and administrative expenses will be comparable to the 2014 actual expenses incurred, although investments
in marketing and sales will be a priority if the Company’s cash and liquidity position improves. No assurance can be given
that future investment or debt financing will develop thereby resulting in improved cash inflow or liquidity for the Company.
Interest and Other (Expense) Income,
net
Other (expense) income for the six months
ended June 30, 2015 was a net expense of $207,591 compared to net income of $3,124,900 for the six months ended June 30, 2014.
Interest expense includes the interest
on the senior and subordinated convertible and non-convertible promissory notes. The Company incurred $131,628 and $192,264 in
interest expense for the six month periods ended June 30, 2015 and 2014, respectively. The reduction in 2015 expense reflects new
borrowings and the settlement of certain debt instruments in connection with the extinguishment of debt during the second quarter
of 2014.
During the six months ended June 30, 2015,
the Company entered into various agreements with certain vendors to settle accounts payable that were outstanding. As a result
of these agreements, liabilities of $8,000 were relieved resulting in a gain of $7,900 on forgiveness of debt. These vendor concessions
have been treated as gains in the period that the underlying agreement was reached.
The Company regularly received forbearance
agreements from lenders due to the Company being in default of loan requirements. From time to time the lenders, as consideration
for the forbearance agreements, add amounts to the principal of the outstanding notes. These amounts are recorded as losses on
modification of debt in the income statement. On June 26, 2014, the Company entered into a Payoff Agreement with two of its lenders
(collectively referred to as “the holders”) where the holders agreed to surrender their outstanding promissory notes
and debentures in the aggregate principal amount of $3,256,399 plus all accrued and unpaid interest amounting to $592,414 in consideration
for an aggregate payment of $300,000. As further consideration, one of the lenders agreed to return its 2,587,674 shares of Series
C Preferred Stock for cancellation. The Company reversed $70,165 in registration rights liabilities in connection with this Payoff
Agreement. Effective upon the consummation of this Payoff Agreement, the Company had no further obligation to the holders pursuant
to the terms of the preferred stock and the notes as defined in the Payoff Agreement. As a result of this Payoff Agreement, the
Company recognized a gain on extinguishment of debt during the second quarter of 2014 in the amount of $3,747,273. Also during
2014, the Company recorded an expense of $40,000 in connection with debt modifications related to forbearance agreements. The Company
entered into various agreements with certain vendors to settle accounts payable that were outstanding for amounts less than the
liability that was recorded in the accompanying balance sheets. These vendor concessions have been treated as gains in the period
that the underlying agreements were reached.
Consolidated net (loss) income for
the six months ended June 30, 2015 and 2014
During the six months ended June 30, 2015,
the Company recorded a consolidated net loss of $508,124. Total gross margin of $111,463 was generated by positive margins from
both of the Company’s operating segments. This margin reflects a $16,000 provision for potentially excess inventory on-hand
associated with the ViralProtec segment. Operating expenses totaled $411,996 including $102,782 in stock based compensation for
warrants granted during the quarter. Other expense of $207,591 reflects interest expense on the various notes outstanding of approximately
$1.6 million and a loss on the change in market value of $86,863 on the derivative liabilities attributed to these financing arrangements.
During the six months ended June 30, 2014,
the Company recorded a consolidated net income of $2,847,205. Gross margin of $37,540 solely from the Nanotechnology segment. Selling,
general and administrative expenses totaled $315,235 including $105,501 in stock based compensation for warrants granted during
the quarter. Other income of $3,124,900 reflects interest expense on the various notes outstanding of approximately $1.7 million
and a loss on the change in market value of $390,109 on the derivative liabilities attributed to these financing arrangements.
During the six months ended June 30, 2014 the Company recognized a gain on the extinguishment and modification of debt in the amount
of $3,707,273 primarily attributed to the Payoff Agreement with Platinum Long Term Growth IV, LLC and Merit Consulting LLC. On
June 26, 2014, the Company entered into a Payoff Agreement with two of its lenders (collectively referred to as “the holders”)
where the holders agreed to surrender their outstanding promissory notes and debentures in the aggregate principal amount of $3,256,399
plus all accrued and unpaid interest amounting to $592,414 in consideration for an aggregate payment of $300,000. As further consideration,
one of the lenders agreed to return its 2,587,674 shares of Series C Preferred Stock for cancellation. The Company reversed $70,165
in registration rights liabilities in connection with this Payoff Agreement. Effective upon the consummation of this Payoff Agreement,
the Company had no further obligation to the holders pursuant to the terms of the preferred stock and the notes as defined in the
Payoff Agreement. As a result of this Payoff Agreement, the Company recognized a gain on extinguishment of debt during the second
quarter of 2014 in the amount of $3,747,273.
Item 4. - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management is responsible
for establishing and maintaining effective disclosure controls and procedures. Our Chief Executive Officer has evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) as of the end of the period covered by this report to provide reasonable assurance
that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated
to management, including the CEO as appropriate, to allow timely decisions regarding required disclosure.
Based on this evaluation, and in light
of the material weaknesses in our internal control over financial reporting that are discussed in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2014 our Chief Executive Officer has concluded that our disclosure controls and procedures
were not effective. The material weaknesses consist of an insufficient complement of qualified accounting personnel and controls
associated with segregation of duties and ineffective controls associated with identifying and accounting for complex and non-routine
transactions in accordance with U.S. generally accepted accounting principles.
The Company did not maintain a sufficient
complement of qualified accounting personnel and controls associated with the segregation of duties were ineffective. Notwithstanding
these material weaknesses, management believes that the financial statements included in this Quarterly Report on Form 10-Q fairly
present, in all material respects, our financial condition, result of operations and cash flows for the periods presented.
There can be no assurance, however, that
our disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries
to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to
the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable,
not absolute, assurance of achieving their control objectives.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control
over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART II—OTHER
INFORMATION
Item 1. Legal Proceedings
There have been no material developments
to the legal proceeding disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None
Item 3. Defaults Upon Senior Securities
The Company entered into Forbearance Agreements
with Alpha Capital Anstalt, Marlin Capital Investments and Bull Hunter LLC effective on January 1, 2015 and March 5, 2015, and
June 30, 2015 relating to the Company’s default on various terms and conditions
with borrowing agreements. The lenders agreed to not take any action or exercise or move to enforce any rights or remedies provided
for in the various loan documents or otherwise available to it, under law or equity, due to the events of default under the existing
Senior Secured Convertible and Promissory Notes until November 30, 2015. The lenders increased the interest rate on certain of
these debt agreements to 18% during the forbearance period.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit No. | |
Description |
| |
|
| |
|
10.189 | |
Forbearance Agreement effective June 30, 2015 between Alpha Capital Anstalt and NaturalNano, Inc. and NaturalNano Research, Inc. | |
* |
| |
| |
|
10.190 | |
Forbearance Agreement effective June 30, 2015 between Marlin Capital Investments LLC and NaturalNano, Inc. and NaturalNano Research, Inc. | |
* |
| |
| |
|
10.191 | |
Forbearance Agreement effective June 30, 2015 between Bull Hunter LLC and NaturalNano, Inc. and NaturalNano Research, Inc. | |
* |
| |
| |
|
31.1 | |
Certification of principal executive officer and principal accounting officer pursuant to section 302(a) of the Sarbanes-Oxley Act of 2002 | |
* |
| |
| |
|
32.1 | |
Certification of principal executive officer and principal accounting officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 | |
* |
| |
| |
|
101 | |
Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Stockholders’ Deficiency, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements | |
* |
| |
| |
|
101.INS | |
XBRL Instance Document | |
* |
101.SCH | |
XBRL Taxonomy Extension Schema Document | |
* |
101CAL | |
XBRL Taxonomy Extension Calculation Linkbase Document | |
* |
101.DEF | |
XBRL Taxonomy Extension Definition Linkbase Document | |
* |
101.LAB | |
XBRL Taxonomy Extension Label Linkbase Document | |
* |
101.PRE | |
XBRL Taxonomy Extension Presentation Linkbase Document | |
* |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
NaturalNano, Inc. |
|
|
|
|
Date: |
August 14, 2015 |
|
/s/ James Wemett |
|
|
|
James Wemett |
|
|
|
President and Director |
|
|
|
(Principal Executive, Financial and Accounting Officer) |
Exhibit 10.189
Exhibit 10.190
Exhibit 10.191
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY
ACT OF 2002
I, James Wemett, certify that:
1. I
have reviewed this annual report on Form 10Q of NaturalNano, Inc. (the “registrant”) for the three months ended June
30, 2015;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and
have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5.
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: August
14, 2015
/s/ James Wemett |
|
James Wemett |
|
President |
|
(Principal Executive Officer, Financial and Accounting Officer) |
|
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
The undersigned, James Wemett, Acting President,
and Chief Executive Officer, of NaturalNano, Inc. (the “Company”) certifies, under the standards set forth and solely
for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
our knowledge, the Annual Report on Form 10-Q of the Company for the six months ended June 30, 2015 fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in
all material respects, the financial condition and results of operations of the Company.
Dated: August 14, 2015
/s/ James Wemett |
|
James Wemett |
|
President |
|
(Principal Executive, financial and Accounting Officer) |
|
A signed original of this written statement
required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.