**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


____________________





**FORM
      10-QSB**


**QUARTERLY
      REPORT**





Pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of 1934


____________________





For
      the
      Quarter Period Ended


**June
      30, 2005**


**_______________________**





**Nanobac
      Pharmaceuticals, Incorporated**


(Exact
      name of registrant as specified in its charter)




**Florida**
            **0-24696**
            **59-3248917**(State
                or Other Jurisdiction of Incorporation)
            (Commission
                File Number)
            (I.R.S.
                Employer Identification Number)


**2727
      W. Dr. Martin Luther King Jr. Blvd, Suite 850, Tampa, Florida
      33607**


(Address
      of Principal Executive Office) (Zip Code)





**(813)
      264-2241**


(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 a shorter period that the registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days.




Yes
      [X]
      No [  ]





Indicate
      by check mark whether the Registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Act):




Yes
      [  ] No [X]




The
      number of shares issued and outstanding of the Registrant’s Common Stock, no par
      value, as of August 8, 2005 was 189,006,760.










**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**








**PART
      I - FINANCIAL INFORMATION**


**Item
                1:**
            **Financial
                Statements**Condensed
                Consolidated Balance Sheets as of June 30, 2005 (unaudited) and December
                31, 2004
            3Condensed
                Consolidated Statements of Operations for the three and six Month
                ended
                June 30, 2005 (unaudited)
            4Condensed
                Consolidated Statements of Changes in Stockholders' Equity for the
                period
                ended June 30, 2005 (unaudited)
            5Condensed
                Consolidated Statements of Cash Flows for the three and six months
                ended
                June 30, 2005 (unaudited)
            6Notes
                to the Condensed Consolidated Financial Statements
            7**Item
                2:**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations**
            15**Item
                3:**
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            31**Item
                4:**
            **Controls
                and Procedures**
            31**PART
                II - OTHER INFORMATION****Item
                1:**
            **Legal
                Proceedings**
            32**Item
                2:**
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**
            33**Item
                3:**
            **Defaults
                Upon Senior Securities**
            34**Item
                4:**
            **Submission
                of Matters to a Vote of Security Holders**
            34**Item
                5:**
            **Other
                Information**
            34**Item
                6:**
            **Exhibits**
            34






-2-


NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES




CONDENSED
      CONSOLIDATED


BALANCE
      SHEETS





(UNAUDITED)


(Unaudited)June
                  30, 2005
              
              December
                  31, 2004**ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              23,323
              
              $
              17,908Account
                  receivable
              
              
              6,053
              
              
              3,395Inventory
              
              
              73,355
              
              
              70,571Prepaid
                  expenses
              
              
              34,382
              
              
              23,649Total
                  current assets
              
              
              137,113
              
              
              115,523**FIXED
                  ASSETS,**less
                  accumulated depreciationof$106,844
              
              
              134,743
              
              
              124,995**OTHER
                  ASSETS**Security
                  deposits
              
              
              20,785
              
              
              68,054Intangible
                  assets, less accumulated amortizationof$1,186,161
              
              
              5,406,882
              
              
              5,760,342Goodwill
              
              
              3,615,393
              
              
              3,615,393**Total
                  other assets**
              
              
              9,043,060
              
              
              9,443,789**TOTAL
                  ASSETS**
              
              $
              9,314,916
              
              $
              9,684,307**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              423,310
              
              $
              645,491Accrued
                  compensation
              
              
              337,972
              
              
              50,611Accrued
                  expenses
              
              
              218,422
              
              
              335,861Short-term
                  note payable
              
              
              51,603
              
              
              62,379Other
                  liabilities
              
              
              10,633
              
              
              16,423Stockholder
                  loans
              
              
              1,469,123
              
              
              194,068**Total
                  current liabilities**
              
              
              2,511,063
              
              
              1,304,833**LONG-TERM
                  LIABILITIES**Accrued
                  compensation
              
              
              --
              
              
              350,000Stock
                  settlement liability
              
              
              2,864,904
              
              
              1,918,630**Total
                  liabilities**
              
              
              5,375,967
              
              
              3,573,463**COMMITMENTS
                  AND CONTINGENCY (Note 9)**
              
              
              --
              
              
              --**STOCKHOLDERS'
                  EQUITY**Common
                  stock, no par value, 250,000,000 shares authorized,189,006,760
                  shares issued and outstanding at March 31, 2005and
                  187,240,093 shares issued and outstanding atDecember
                  31, 2004
              
              
              16,307,050
              
              
              16,296,550Preferred
                  stock, no par value, 1,000,000 shares authorized,no
                  shares issued and outstanding
              
              
              --
              
              
              --Additional
                  paid-in capital
              
              
              3,508,955
              
              
              3,539,328Accumulated
                  deficit
              
              
              (15,871,254
              )
              
              (13,693,198
              )Accumulated
                  other comprehensive loss
              
              
              (5,802
              )
              
              (31,836
              )**Total
                  stockholders' equity**
              
              
              3,938,949
              
              
              6,110,844**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              9,314,916
              
              $
              9,684,307


The
      accompanying notes are an integral part of
      these
      financial statements.













-3-


NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED


STATEMENTS
      OF OPERATIONS





(UNAUDITED)


Three
                    Months
                
                Three
                    Months
                
                Six
                    Months
                
                Six
                    Monthsended
                
                ended
                
                ended
                
                endedJune
                    30, 2005
                
                June
                    30, 2004
                
                June
                    30, 2005
                
                June
                    30, 2004**REVENUE**
                
                $
                167,988
                
                $
                73,564
                
                $
                319,853
                
                $
                105,949**COST
                    OF REVENUE**
                
                
                58,461
                
                
                13,616
                
                
                102,299
                
                
                20,805**GROSS
                    PROFIT**
                
                
                109,527
                
                
                59,948
                
                
                217,554
                
                
                85,144**OPERATING
                    EXPENSES**Sales,
                    general and administrative
                
                
                234,152
                
                
                508,837
                
                
                509,938
                
                
                3,893,262Research
                    and development
                
                
                283,547
                
                
                637,841
                
                
                694,841
                
                
                1,266,166Depreciation
                    and amortization
                
                
                189,474
                
                
                210,426
                
                
                377,726
                
                
                368,539**Total
                    Operating Expenses**
                
                
                707,173
                
                
                1,357,104
                
                
                1,582,505
                
                
                5,527,967**OPERATING
                    LOSS**
                
                
                (597,646
                )
                
                (1,297,156
                )
                
                (1,364,951
                )
                
                (5,442,823
                )**OTHER
                    INCOME (EXPENSES)**Interest
                    expense
                
                
                (17,321
                )
                
                (85,751
                )
                
                (22,514
                )
                
                (168,718
                )Derivative
                    loss
                
                
                (368,750
                )
                
                --
                
                
                (746,274
                )
                
                --Other,
                    net
                
                
                (28,802
                )
                
                (1,331
                )
                
                (44,317
                )
                
                5,330**LOSS
                    FROM CONTINUING OPERATIONS****BEFORE
                    INCOME TAXES**
                
                
                (1,012,519
                )
                
                (1,384,238
                )
                
                (2,178,056
                )
                
                (5,606,211
                )**PROVISION
                    FOR INCOME TAXES**
                
                
                --
                
                
                --
                
                
                --
                
                
                --**LOSS
                    FROM CONTINUING OPERATIONS**
                
                
                (1,012,519
                )
                
                (1,384,238
                )
                
                (2,178,056
                )
                
                (5,606,211
                )**DISCONTINUED
                    OPERATIONS:**Loss
                    from discontinued operations(no
                    applicable income taxes)
                
                
                --
                
                
                --
                
                
                --
                
                
                (57,268
                )**NET
                    LOSS**
                
                $
                (1,012,519
                )
                $
                (1,384,238
                )
                $
                (2,178,056
                )
                $
                (5,663,479
                )**LOSS
                    PER COMMON SHARE****(BASIC
                    AND DILUTED):**Continuing
                    operations
                
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.04
                )Discontinued
                    operations
                
                
                0.00
                
                
                0.00
                
                
                0.00
                
                
                0.00Net
                    loss
                
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.04
                )**WEIGHTED
                    AVERAGE NUMBER OF****COMMON
                    SHARES OUTSTANDING**Basic
                    and Diluted
                
                
                189,006,759
                
                
                144,517,285
                
                
                188,700,715
                
                
                140,683,537
 The
        accompanying notes are an integral part of
        these
        financial statements.










-4-


NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED


STATEMENT
      OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)


(UNAUDITED)


**Accumulated****Additional**
              
              
              
              **Other**
              
              **Other****Common**
              
              **Stock**
              
              **Paid-in**
              
              **Accumulated**
              
              **Comprehensive**
              
              **Comprehensive****Shares**
              
              **Value**
              
              **Capital**
              
              **Deficit**
              
              **Loss**
              
              **Loss**
              
              **Total****Balance,
                  December 31, 2004**
              
              
              **187,240,093**
              
              **$**
              **16,296,550**
              
              **$**
              **3,539,328**
              
              **$**
              **(13,693,198**
              **)**
              
              
              
              **$**
              **(31,836**
              **)**
              **$**
              **6,110,844**Stock
                  issued for services
              
              
              100,000
              
              
              10,500
              
              
              --
              
              
              --
              
              
              
              
              
              --
              
              
              10,500Sale
                  of common stock
              
              
              1,666,667
              
              
              -
              
              
              (30,373
              )
              
              --
              
              
              
              
              
              --
              
              
              (30,373
              )Comprehensive
                  loss:Net
                  loss
              
              
              --
              
              
              --
              
              
              --
              
              
              (2,178,056
              )
              $
              (2,178,056
              )
              
              --
              
              
              (2,178,056
              )Foreign
                  currency translationadjustment
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              26,034
              
              
              26,034
              
              
              26,034Comprehensive
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,152,022
              )**Balance,
                  June 30, 2005**
              
              
              **189,006,760**
              
              **$**
              **16,307,050**
              
              **$**
              **3,508,955**
              
              **$**
              **(15,871,254**
              **)**
              
              
              
              **$**
              **(5,802**
              **)**
              **$**
              **3,938,949**
 The
      accompanying notes are an integral part of
      these
      financial statements.










-5-


NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED


STATEMENTS
      OF CASH FLOWS


(UNAUDITED)


Six
                  Months
              
              Six
                  Monthsended
              
              endedJune
                  30, 2005
              
              June
                  30, 2004**CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  Loss
              
              $
              (2,178,056
              )
              $
              (5,663,479
              )Adjustments
                  to reconcile net loss to cashflows
                  from operating activities:Depreciation
                  and amortization
              
              
              377,726
              
              
              368,539Derivative
                  loss
              
              
              746,274
              
              
              --Charges
                  from common stock issuances
              
              
              10,500
              
              
              2,562,750Interest
                  expense added to stockholder loan
              
              
              20,663
              
              
              167,262Net
                  (increase) decrease in assets:Accounts
                  receivable
              
              
              (2,658
              )
              
              (8,434
              )Inventory
              
              
              (2,784
              )
              
              606Other
                  assets
              
              
              35,894
              
              
              (1,005
              )Net
                  increase (decrease) in liabilities:Accounts
                  payable
              
              
              (222,181
              )
              
              390,083Accrued
                  compensation
              
              
              (62,639
              )
              
              319,549Accrued
                  expenses
              
              
              (117,439
              )
              
              49,910Deferred
                  revenue
              
              
              (5,790
              )
              
              14,138Total
                  adjustments
              
              
              777,566
              
              
              3,863,398**Net
                  cash flows from operating activities**
              
              
              (1,400,490
              )
              
              (1,800,081
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisition
                  of fixed assets
              
              
              (37,766
              )
              
              (28,650
              )Cash
                  received from exercise of stock option in subsidiary
              
              
              0
              
              
              200,000**Net
                  cash flows from investing activities**
              
              
              (37,766
              )
              
              171,350**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from issuance of common stock andstock
                  subscription agreements, net of expenses
              
              
              169,627
              
              
              --Proceeds
                  from stockholder loans, net
              
              
              1,254,392
              
              
              1,617,701Proceeds
                  (payments) of notes payable, net
              
              
              (10,776
              )
              
              (16,400
              )**Net
                  cash flows from financing activities**
              
              
              1,413,243
              
              
              1,601,301**Effect
                  of exchange rate changes**
              
              
              30,428
              
              
              4,835Net
                  change in cash
              
              
              5,415
              
              
              (22,595
              )Cash
                  balance, beginning of period
              
              $
              17,908
              
              
              49,755**Cash
                  balance, end of period**
              
              $
              23,323
              
              $
              27,160**Supplemental
                  disclosures of cash flow information:**Cash
                  paid for interest expense
              
              $
              1,851
              
              $
              1,456**Supplemental
                  schedule of non-cash investing and financing
                  activities:**Common
                  stock issued in acquisition
              
              $
              --
              
              $
              5,737,500Capital
                  contribution associated with sale of subsidiary to
                  affiliateReduction
                  in stockholder loan
              
              $
              --
              
              $
              250,000Assumption
                  of accounts payable and accrued expenses
              
              $
              --
              
              $
              499,327
 The
      accompanying notes are an integral part of
      these
      financial statements.










-6-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**








**1** . **Nature
      of operations and summary of significant accounting
      polices**





**Nature
      of business**





Nanobac
      Pharmaceuticals, Incorporated and subsidiaries, ("Nanobac”, the "Company", or
      "NNBP") trades under the symbol "NNBP."





NNBP’s
      primary business is the study and development of therapeutic and diagnostic
      technologies related to nanobacterium sanguineum (“Nanobacteria”). Nanobacteria
      are believed to be small, slowly growing nano-particles that can be found in
      human blood, kidney stones and arterial wall plaques.





**Basis
      of Presentation**





In
      the
      opinion of management, the accompanying financial statements include all
      adjustments, consisting only of normal recurring items, necessary for their
      fair
      presentation in conformity with generally accepted accounting principles. The
      results of operations for the six months ended June 30, 2005 are not necessarily
      indicative of the results for a full year.





The
      financial statements for the period ended June 30, 2005 and notes thereto should
      be read in conjunction with the financial statements and notes thereto for
      the
      year ended December 31, 2004 for the Company as filed in the annual report
      on
      Form 10-KSB, which information is included herein by reference.





**Liquidity
      and Management Plans**





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has incurred recurring losses
      and
      has a working capital deficiency at June 30, 2005. The Company is dependent
      on
      continued financing from outside investors including additional shareholder
      loans. All of these matters raise substantial doubt about the ability of the
      Company to continue as a going concern. Management believes that the Company
      will need to raise additional capital in order to launch new clinical trials,
      fund research and development for new treatment areas, and general working
      capital requirements. Capital may be raised through further sales of equity
      securities, which may result in dilution of the position of current
      shareholders.





There
      can
      be no assurances that NNBP will be successful in obtaining debt or equity
      financing in order to achieve its financial objectives and continue as a going
      concern. The financial statements do not include any adjustments to the carrying
      amount of assets and the amounts and classifications of liabilities that might
      result from an adverse outcome of this uncertainty.








-7-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**





**1** . **Nature
      of operations and summary of significant accounting polices
      (continued)**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries. All material intercompany transactions and balances
      have been eliminated in consolidation.




**Revenue
      Recognition**





Revenue
      is recognized when the Company’s products are shipped and title has passed or
      when diagnostic results are provided to the customer. Revenue is recorded net
      of
      reserves for estimated discounts and incentives.





**Use
      of estimates**





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





**Financial
      instruments**





The
      carrying value of the Company’s financial instruments, including cash, accounts
      receivable, accounts payable, short-term note payable, stockholder loans and
      stock settlement liability approximate their fair market values.





**Inventory**





Inventory
      is stated at the lower of cost or market. Cost is determined in a manner which
      approximates the first-in, first-out (FIFO) method. Inventory consists of raw
      materials for currently marketed products and materials and processing costs
      for
      antibodies and antigens used in our Finland laboratory. Inventory is shown
      net
      of applicable reserves and allowances. Shipping costs are expensed as incurred
      and are included in cost of revenue.














-8-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**





**1.
      Nature of operations and summary of significant accounting polices
      (continued)**





**Fixed
      Assets**





Fixed
      assets consist of furniture, fixtures, computers and lab equipment and are
      recorded at cost. Fixed assets are depreciated using the straight-line method
      over the estimated useful lives of three to seven years.





**Intangible
      assets and goodwill**





Intangible
      assets are recorded at cost, less accumulated amortization. Amortization of
      intangible assets is provided over the following estimated useful lives on
      a
      straight-line basis:


Patents
            
            
            12
                yearsProduct
                rights
            
            
            5
                years





In
      accordance with Statement of Financial Accounting Standards No. 142, “Goodwill
      and Other Intangible Assets” (“SFAS No. 142”), and Statement of Financial
      Accounting Standards, No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets” (“SFAS No. 144”), the Company reviews its non-amortizable
      long-lived assets, including intangible assets and goodwill for impairment
      annually, or sooner whenever events or changes in circumstances indicate the
      carrying amounts of such assets may not be recoverable. Other depreciable or
      amortizable assets are reviewed when indications of impairment exist.





**Research
      and development expenses**





Research
      and development expenses are comprised of the following types of costs incurred
      in performing R&D activities: salaries and benefits, allocated overhead and
      occupancy costs, research studies, clinical trial and related clinical
      manufacturing costs, contract services, and other outside costs. Research and
      development costs are expensed as incurred.





**Income
      taxes**





The
      Company records its federal and state tax liability in accordance with Financial
      Accounting Standards Board Statement No. 109 “Accounting for Income Taxes”.
      Deferred taxes are recorded for temporary differences between the recognition
      of
      income and expenses for tax and financial reporting purposes, using current
      tax
      rates. Deferred assets and liabilities represent the future tax consequences
      of
      those differences, which will either be taxable or deductible when the assets
      and liabilities are recovered or settled.











-9-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**





**1.
      Nature of operations and summary of significant accounting polices
      (continued)**





**Derivative
      financial instruments**




The
      Company accounts for derivative financial instruments indexed to and potentially
      settled in, its own stock in accordance with Emerging Issues Task Force 00-19,
      which provides that if the number of shares deliverable in a transaction be
      indeterminable, that said shares be presented as a liability in the balance
      sheet.  Further, the liability is to be measured at fair value until
      such
      time as the obligation is settled.  The shares issued in connection
      with
      the 2004 and 2005 Subscription Agreement transactions discussed in Note 4 are
      derivative transactions and as such have been presented in the accompanying
      balance sheets as liabilities and in the accompanying statements of operations
      as derivative loss.  The derivative loss represents the difference in
      the
      share value as issued and the value of said shares at the balance
      sheet date based on the trading value of the stock at
      June 30,
      2005. At
      settlement, accumulated derivative losses will be charged to retained earnings
      as a constructive dividend.





**Accumulated
      other comprehensive loss**





Accumulated
      other comprehensive loss at June 30, 2005 consists entirely of cumulative
      foreign currency translation adjustments. Accumulated other comprehensive loss
      has no applicable income tax effect.





**Net
      loss per share**





Net
      loss
      per share represents the net loss attributable to common stockholders divided
      by
      the weighted average number of common shares outstanding during the period.
      The
      effect of incremental shares from common stock equivalents is not included
      in
      the calculation of net loss per share as the inclusion of such common stock
      equivalents would be anti-dilutive. Accordingly, fully dilutive shares
      outstanding equal basic shares outstanding as of and for the periods ended
      June
      30, 2005 and 2004.





**Reclassifications**





Certain
      prior year amounts have been reclassified to conform to the current year
      presentation.








-10-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**





**2.
      Acquisitions**





**Nanobac
      OY**





Nanobac
      OY is a Finnish company that performs similar nanobacterial research to that
      of
      the Company. On November 11, 2003, NNBP completed the acquisition of 65% of
      Nanobac OY when a final cash payment was made and the Company exercised the
      conversion option in acquired convertible promissory notes.




During
      January through March 2004, NNBP acquired the remaining 35% of Nanobac OY from
      two individuals who are currently employees of the Company (“OY Minority
      Shareholders”). The purchase price was (a) 5 million shares of NNBP’s common
      stock, (b) 5 million warrants convertible into NNBP’s common stock at $.005 per
      share and (c) cash consideration of 15,000 Euros. Total consideration to the
      OY
      Minority Stockholders is valued at $4.3 million.




The
      total
      consideration to date for OY is $5.1 million, which included (a) cash payments;
      (b) the fair value of NNBP common stock issued; and (c) direct transaction
      costs. The
      following table summarizes the estimated fair values of the assets acquired
      and
      liabilities assumed as of the acquisition date:


Current
                assets
            
            $
            37,534Fixed
                assets
            
            
            29,286Identifiable
                intangible assets
            
            
            5,243,048Other
                assets
            
            
            4,731Current
                liabilities
            
            
            (11,884
            )Advances
                from Nanobac
            
            
            (228,119
            )$
            5,074,596





Acquired
      identifiable intangible assets consist of patents for the detection and
      treatment of Nanobacteria. The
      allocation of the purchase price was based, in part, on third-party valuations
      of the fair values of identifiable intangible assets. Amortization
      of this asset commenced as of the acquisition date.




In
      addition, as part of the above agreement, the OY Minority Shareholders agreed
      to
      employment agreements with NNBP. These agreements included $500,000 of signing
      bonuses of which $150,000 was paid in 2004 and the remaining $350,000 (earned
      upon certain triggering events that occurred in 2004) is payable two years
      from
      the agreement dates (January and March 2006) and is included in current
      liabilities at June 30, 2005.







-11-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**








**2.
      Acquisitions (continued)**





**Proforma**





The
      following unaudited table compares NNBP's reported operating results to pro
      forma information prepared on the basis that the acquisitions had taken place
      at
      the beginning of the period for the six months ended June 30, 2004:





As
                ReportedRevenue
            
            $
            105,949Net
                loss
            
            $
            (5,663,479
            )Basic
                loss per share
            
            $
            (0.04
            )Diluted
                loss per share
            
            $
            (0.04
            )ProformaRevenue
            
            $
            105,949Net
                loss
            
            $
            (5,692,485
            )Basic
                loss per share
            
            $
            (0.04
            )Diluted
                loss per share
            
            $
            (0.04
            )





In
      management's opinion, the unaudited pro forma combined results of operations
      are
      not indicative of the actual results that would have occurred had the
      acquisitions been consummated at the beginning of each period presented or
      of
      future operations of the combined companies under the ownership and management
      of NNBP.





**3.
      Income taxes**





NNBP
      has
      accumulated a net operating loss carryforward of approximately $10.5 million
      for
      income tax purposes, which can be used to offset future taxable income through
      2025.


Estimated
                future tax benefit
            
            $
            4,112,000Valuation
                allowance
            
            
            (4,112,000
            )Estimated
                future tax benefit
            
            $
            --






-12-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**





**4.
      Stockholders' deficit**





**Common
      stock:**





From
      August 2004 through February 2005, the Company entered into Subscription
      Agreements with three unaffiliated investors. Under the terms of the
      Subscription Agreements, the Company received cash of $852,500 (net of $122,500
      of expenses) through June 30, 2005. The Company is to receive additional cash
      of
      approximately $800,000 (net of expenses) within five days of registering the
      common shares and warrants issued as a result of the Subscription Agreements.
      The number of common shares to be issued is equal to the amount received divided
      by the lesser of $.12 or 52% of the average closing bid price of the Company’s
      common stock on the five trading days immediately prior to the date on which
      the
      registration statement is declared effective (“Fixed Price”). In addition, the
      Subscription Agreements provide for the issuance of warrants equal to the number
      of common shares issued. Fifty percent (50%) of the warrants are exercisable
      at
      110% of the Fixed Price and the remaining 50% of the warrants are exercisable
      at
      150% of the Fixed Price. Unexercised warrants will expire December 31, 2008.
      The
      Company has agreed to use its best efforts to promptly register the common
      shares and warrants.





During
      December 2004, the Company entered into a Subscription Agreement with an
      affiliate of the Company’s Chief Executive Officer. Under the terms of the
      Subscription Agreement, the Company received cash of $500,000 during the year
      ended December 31, 2004. The Company is to receive additional cash of $500,000
      within five days of registering the common shares and warrants issued as a
      result of the Subscription Agreement. All other terms of the Subscription
      Agreement are substantially the same as the Subscription Agreements to the
      unaffiliated investors described in the preceding paragraph. This amount is
      classified as Stock Settlement Liability at June 30, 2005.





As
      a
      result of the above Subscription Agreements, the Company has issued 12,291,667
      shares of common shares, which represents the minimum number of shares to be
      issued under the Subscription Agreements in exchange for cash received through
      June 30, 2005. If the price of the Company’s stock is less than $0.23 per share
      when the Company’s registration statement is declared effective, the Company
      will be required to issue additional shares under the above Subscription
      Agreements equal to a price of 52% of the average closing bid price of the
      Company’s common stock on the five trading days immediately prior to the date on
      which the registration statement is declared effective. The ultimate number
      of
      shares to be issued is indeterminate as the number of shares is dependent on
      NNBP’s closing bid price when a registration statement is declared effective. As
      a result, the $1,475,000 of cash received under the Subscription Agreements
      through June 30, 2005 is classified as Stock Settlement Liability at June 30,
      2005.




At
      June
      30, 2005 the Company measured the value of the shares to be issued under the
      Subscription Agreements based on the Company’s closing bid price at June 30,
      2005 compared to the actual shares issued. As a result of this measurement,
      an
      additional $746,274 Stock Settlement Liability was recorded for the six month
      period ended June 30, 2005 with a charge to derivative loss in the statements
      of
      operations.







-13-


**NANOBAC
      PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2005**


**(UNAUDITED)**








**4.
      Stockholders' deficit (continued)**





**Warrants:**





As
      of
      June 30, 2005, in connection with the OY acquisition, 5,000,000 warrants were
      outstanding with an exercise price of $.005 per common share and an expiration
      date of August 31, 2009 (see Note 2).





At
      the
      finalization of the Subscription Agreements described above, management
      estimates between 18 million to 44 million warrants will be issued with an
      estimated weighted average exercise price of $.05 to $.16 per common share
      and
      an expiration date of five years from the date of issuance. The ultimate number
      of warrants to be issued and the related exercise price is indeterminate as
      the
      number of shares is dependent on NNBP’s closing bid price when a registration
      statement is declared effective.





**6.
      Related Party Transactions:**





Stockholder
      Loan





An
      affiliate of the Chief Executive Officer has loaned NNBP approximately $1.5
      million as of June 30, 2005. These loans bear interest at the rate of 5% per
      annum and are due on demand. Interest expense for the above loans for the six
      months ended June 30, 2005 was approximately $21,000.











-14-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations**





**Business**





Nanobac
      Pharmaceuticals, Incorporated and its subsidiaries (which may be referred to
      as
“Nanobac”, “the Company”, “NNBP”, “we”, “us”, or “our”) is a research-based
      lifescience company.




Our
      research is focused on investigating the role of Nanobacterium sanguineum,
      (“Nanobacteria”) in human diseases. Researchers at Nanobac have discovered a
      novel nano-sized particle that we believe is responsible for many diseases
      associated with soft tissue calcification or plaque. While calcification is
      a
      normal process for building healthy bones and teeth, calcification also plays
      a
      role in other conditions related to diseases, such as strokes and heart attacks.
      We believe that blood-borne nanobacteria forms slow-growing calcified colonies
      in arteries and organs, much as coral reefs are formed. Calcification of blood
      vessels typically involves the heart’s coronary arteries in atherosclerosis. It
      also occurs in arteries more generally throughout the body in arteriosclerosis,
      or hardening of the arteries. Kidney stones are calcifications within the
      urinary tracts. In addition, pathologic or soft tissue calcifications are
      observed in many other diseases such as, prostatitis (a painful inflammation
      of
      the prostate gland), and Polycystic Kidney Disease (growths of cysts in the
      kidneys). Research has shown the presence of Nanobacteria in the parts of the
      body affected by these diseases.





Our
      objective is to gain a better understanding of the role Nanobacteria plays
      in
      diseases associated with soft tissue calcification (or the build up of calcified
      deposits within the body), and to develop new methods to detect and treat
      diseases associated with nanobacterial infection. At the same time, we intend
      to
      expand the sales of our Dietary Supplements and In Vitro Diagnostic products.
      Our business is comprised of three areas:


·
              Dietary
                  Supplements


·
              In
                  Vitro Diagnostics


·
            Bio-Medical
                Research - Pharmaceutical Drug
                Discovery





We
      believe these three areas will fuel each other. Our research will lead to a
      better understanding of Nanobacteria and its role in disease. This in turn
      will
      enable us to develop better diagnostic tests to detect the presence of
      Nanobacteria. The development of new and more effective methods to diagnose
      nanobacterial infection and diseases involving pathologic calcification should
      increase the demand for our dietary supplements and for new drugs that we may
      bring to the market alone or in partnership. Likewise, as more effective
      therapies come to market, diagnostic test ordering tends to increase.





While
      there remains significant work ahead, we are encouraged by the progress being
      made in the study of Nanobacteria and the increasing level of acceptance in
      the
      medical community that there may be a relationship between the nano-particles
      we
      call Nanobacteria and the progression of certain diseases involving pathologic
      calcification. Our continuing research and development efforts, along with
      our
      efforts in obtaining recognition by various regulatory agencies (e.g. the FDA
      and similar agencies throughout the world), will require significant additional
      amounts of financing over the next several years.











-15-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**




***Current
      Developments*** -
      Our
      revenue grew for the quarter ended June 30, 2005 by 11% compared to the quarter
      ended March 31, 2005 to mark our fifth consecutive quarter of double digit
      revenue growth compared to the prior quarter. In addition, our operating loss
      decreased to $598,000 for the quarter ended June 30, 2005 compared to $767,000
      for the quarter ended March 31, 2005 and $1.3 million for the quarter ended
      June
      30, 2004. Since June 30, 2004, our operating loss has steadily decreased as
      revenues have increased and we have reduced expenses. While we will continue
      to
      prioritize cost controls, we will likely need to increase research and marketing
      expenditures to achieve significant future revenue growth and future
      profitability. Even with these additional expenditures, there is no assurance
      that we will be able to actually grow our revenue sufficiently to cover our
      expenses.





Recently
      we signed a collaborative agreement with the University of California, San
      Francisco (UCSF), and NASA’s Johnson Space Center, to study kidney stone
      formation. The multi-disciplinary team will apply the same type of
      instrumentation used to analyze moon rocks and particles collected from space
      to
      analyze mineralized particles and stones collected from kidney stone patients.




***Intellectual
      Property -*** We
      are
      attempting to protect the intellectual property rights of our discoveries
      including our treatment therapies and our diagnostic methods by obtaining
      patents. We currently have one issued patent and multiple patent applications
      for treatment therapies including the combination of EDTA and tetracycline
      to
      treat nanobacteria infections and the formula mix and treatment regimen for
      Nanobac Supplements, We also have one issued patent and multiple patent
      applications related to our diagnostic products We are attempting to further
      protect our intellectual property rights by obtaining additional patents in
      unique areas of research with respect to the role of Nanobacteria in pathologic
      calcification. These efforts are ongoing and will require significant additional
      infusions of financing to complete. It is also anticipated that additional
      patents will be sought in the future as our research and development efforts
      yield new discoveries.




***Change
      of Name -*** During
      April 2004, we announced a name change from Nanobac Pharmaceuticals,
      Incorporated to Nanobac Life Sciences, Inc. to become effective upon approval
      by
      the shareholders.






-16-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**




**Results
      of Operations**




The
      following table presents the percentage of period-over-period dollar change
      for
      the line items in our Condensed Consolidated Statements of Operations for the
      three and six month periods ended June 30, 2005 and 2004. These comparisons
      of
      financial results are not necessarily indicative of future results.





**Three
                months ended**
            
            **Six
                months ended June**2005
            
            2004
            
            %
                Change
            
            2005
            
            2004
            
            %
                ChangeRevenue
            
            $
            167,988
            
            $
            73,564
            
            
            128
            %
            $
            319,853
            
            $
            105,949
            
            
            202
            %Cost
                of revenue
            
            
            58,461
            
            
            13,616
            
            
            329
            %
            
            102,299
            
            
            20,805
            
            
            392
            %Gross
                Profit
            
            
            109,527
            
            
            59,948
            
            
            83
            %
            
            217,554
            
            
            85,144
            
            
            156
            %Gross
                Profit percentage
            
            
            65
            %
            
            81
            %
            
            
            
            
            68
            %
            
            80
            %Selling,
                general and administrative
            
            
            234,152
            
            
            508,837
            
            
            -54
            %
            
            509,938
            
            
            3,893,262
            
            
            -87
            %Research
                and development
            
            
            283,547
            
            
            637,841
            
            
            -56
            %
            
            694,841
            
            
            1,266,166
            
            
            -45
            %Depreciation
                and amortization
            
            
            189,474
            
            
            210,426
            
            
            -10
            %
            
            377,726
            
            
            368,539
            
            
            2
            %Operating
                loss
            
            
            (597,646
            )
            
            (1,297,156
            )
            
            -54
            %
            
            (1,364,951
            )
            
            (5,442,823
            )
            
            -75
            %Other
                income (Expense)
            
            
            (414,873
            )
            
            (87,082
            )
            
            376
            %
            
            (813,105
            )
            
            (163,388
            )
            
            398
            %Loss
                from continuing operations
            
            
            (1,012,519
            )
            
            (1,384,238
            )
            
            -27
            %
            
            (2,178,056
            )
            
            (5,606,211
            )
            
            -61
            %Discontinued
                Operations
            
            
            0
            
            
            0
            
            
            
            
            
            0
            
            
            (57,268
            )
            
            -100
            %Net
                loss
            
            
            ($1,012,519
            )
            
            ($1,384,238
            )
            
            -27
            %
            
            ($2,178,056
            )
            
            ($5,663,479
            )
            
            -62
            %






-17-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Revenue**





Revenue
      for the three and six months ended June 30, 2005 and 2004 is summarized as
      follows:





**Quarter
                ended June**
            
            **Six
                months ended June**2005
            
            2004
            
            2005
            
            2004Nanobac
                Supplement
            
            $
            137,185
            
            $
            25,211
            
            $
            262,313
            
            $
            25,211License
                revenue
            
            
            0
            
            
            29,925
            
            
            0
            
            
            46,800Diagnostic
                Products
            
            
            30,803
            
            
            18,428
            
            
            57,540
            
            
            33,938$
            167,988
            
            $
            73,564
            
            $
            319,853
            
            $
            105,949





During
      February 2004, we initiated the license of a new product to a third party.
      Effective June 2004, the above license agreement was cancelled and we initiated
      sales of this product directly to customers under the name of Nanobac
      Supplement. Since the introduction of our new product, our revenue has increased
      on a quarterly basis as follows:


Quarter
                1 - 2004
            
            $
            32,385Quarter
                2 - 2004
            
            $
            73,564Quarter
                3 - 2004
            
            $
            118,141Quarter
                4 - 2004
            
            $
            134,271Quarter
                1 - 2005
            
            $
            151,865Quarter
                2 - 2005
            
            $
            167,988





We
      intend
      to continue to expand our sales through increased marketing efforts,
      accelerating our research and developing new products for better patient
      acceptance





**Cost
      of revenue**





Cost
      of
      revenue consists of direct materials, testing services (for diagnostic products)
      and shipping. As a percentage of revenue, cost of revenue was 35% and 32%,
      respectively for the three and six months ended June 30, 2005 compared to
      approximately 20% for the three and six months ended June 30, 2004. The lower
      cost of revenue in 2004 was due to the 2004 license revenue having no direct
      costs. During June 2004, this licensing agreement was terminated and we
      initiated sales of Nanobac Supplement directly to customers, which has resulted
      in higher revenue and cost of revenue.





**Gross
      Profit**





Gross
      profit as a percentage of revenue was 65% and 68%, respectively for the three
      and six months ended June 30, 2005 compared to approximately 80% for the three
      and six months ended June 30, 2004. The decrease in gross profit percentage
      is
      attributable to the 2004 license revenue having no costs.







-18-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**








**Selling,
      General and Administrative**





Approximately
      two-thirds of selling, general and administrative (“SG&A”) expenses are
      comprised of payroll, travel and professional fees. The majority of professional
      fees are related to public company expenses for audit, legal and investor
      relations. Other significant SG&A expenses include facility rental and
      insurance.





SG&A
      expenses are summarized as follows:





**Three
                months ended**
            
            **Six
                months ended June**2005
            
            2004
            
            2005
            
            2004Charges
                for stock issuance
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            2,562,750Other
                SG&A
            
            
            234,152
            
            
            508,837
            
            
            509,938
            
            
            1,330,512Total
                SG&A
            
            $
            234,152
            
            $
            508,837
            
            $
            509,938
            
            $
            3,893,262





SG&A
      expenses decreased approximately $275,000 for the three months ended June 30,
      2005 compared to the three months ended June 30, 2004. In particular, payroll
      expenses were reduced by approximately $72,000, professional fees were reduced
      by approximately $69,000 and travel expenses were reduced $75,000 for the three
      months ended June 30, 2005 compared to the same period in 2004.





SG&A
      expenses for the six months ended June 30, 2004 include a $2.6 million charge
      for stock issued as part of the Plan of Reorganization as confirmed by the
      Bankruptcy Court. Other SG&A expenses decreased approximately $821,000 for
      the six months ended June 30, 2005 compared to the six months ended June 30,
      2004. In particular, payroll expenses were reduced by approximately $102,000,
      professional fees were reduced by approximately $438,000 and travel expenses
      were reduced $213,000 for the six months ended June 30, 2005 compared to the
      same period in 2004.





The
      reduction in SG&A expenses is consistent with the results for the prior
      three quarters as management has made a significant effort to reduce the level
      of SG&A expenses.








-19-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Research
      and Development**





For
      the
      six months ended June 30, 2005 and 2004 research and development (“R&D)
      expenses consisted of the following types of expenses:




Six
                months ended June 302005
            
            2004U.S.
                Payroll and medical directors
            
            
            53
            %
            
            49
            %Finland
                payroll and laboratory
            
            
            25
            %
            
            16
            %Research
                studies
            
            
            6
            %
            
            26
            %Other
            
            
            16
            %
            
            9
            %100
            %
            
            100
            %





Other
      R&D expenses include professional fees related to development of patents and
      other office expenses.





R&D
      expenses for the three and six months ended June 30, 2005 decreased
      approximately $354,000 and $571,000, respectively compared to the three and
      six
      months ended June 30, 2004.


This
      decrease is due to a reduction in the use of outside medical directors and
      due
      to no significant outside research studies being conducted during the three
      and
      six months ended June 30, 2005. We have continued to perform significant
      research with our existing staffs in our Kuopio and NASA laboratories.





We
      anticipate increasing R&D expenses during the next several months.





**Depreciation
      and amortization**





Approximately
      95% of depreciation and amortization are related to the amortization of Product
      Rights and Patents acquired in the June 2003 acquisition of LABS and the
      November 2003 acquisition of OY.





**Operating
      Loss**





The
      operating loss was reduced by more than 50% as the loss improved to $597,000
      for
      the three months ended June 30, 2005 compared to $1.3 million for the three
      months ended June 30, 2004. The reduction of the operating loss by over one
      half
      was partially attributable to growing revenue which resulted in additional
      gross
      profit of $50,000 for the three months ended June 30, 2005 compared to the
      three
      months ended June 30, 2004. More significantly, SG&A and R&D expenses
      were reduced over 50% each or $275,000 and $354,000, respectively for the three
      months ended June 30, 2005 compared to the three months ended June 30, 2004.
      As
      noted above, SG&A expense reductions were primarily due to decreases in
      payroll, travel and professional fees, while R&D expense reductions were
      primarily due to reduced medical director fees and the lack of outside research
      studies.






-20-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Operating
      Loss (continued)**





The
      operating loss for the six months ended June 30, 2005 improved to $1.4 million
      compared to $5.4 million for the six months ended June 30, 2004. The majority
      of
      this improvement was related to the $2.6 million charge for stock issued for
      the
      six months ended June 30, 2004. Excluding this $2.6 million charge, the
      operating loss was $2.9 million for the six months ended June 30, 2004 compared
      to $1.4 million for the six months ended June 30, 2005. The reduction of the
      operating loss by over one half was partially attributable to increased revenue
      and gross profit combined with significant reductions in SG&A and R&D.





**Other
      income (Expense)**





Other
      income for the three months ended June 30, 2005 and 2004 is summarized as
      follows:





**Three
                months ended**
            
            **Six
                months ended June**2005
            
            2004
            
            2005
            
            2004Interest
              expenseStockholder
                loan
            
            
            ($16,768
            )
            
            ($84,762
            )
            
            ($20,663
            )
            
            ($167,262
            )Other
            
            
            (553
            )
            
            (989
            )
            
            (1,851
            )
            
            (1,456
            )Derivative
                loss
            
            
            (368,750
            )
            
            0
            
            
            (746,274
            )
            
            0Foreign
                exchange gain (loss)
            
            
            (25,415
            )
            
            (1,180
            )
            
            (36,132
            )
            
            5,127Other,
                net
            
            
            (3,387
            )
            
            (151
            )
            
            (8,185
            )
            
            203Total
            
            
            ($414,873
            )
            
            ($87,082
            )
            
            ($813,105
            )
            
            ($163,388
            )





The
      shares issued in connection with the 2004 and 2005 Subscription Agreement
      transactions are derivative transactions and as such have been presented in
      the
      accompanying balance sheets as stock settlement liabilities. The derivative
      loss
      represents the difference in the share value as issued and the value
      of
      said shares at the balance sheet date based on the trading
      value
      of the stock at June 30, 2005.  The stock settlement liabilities are
      expected to be satisfied with the issuance of Nanobac common stock. Accordingly,
      the accumulated derivative losses have not been funded with cash and are not
      expected to be funded with cash. At settlement, accumulated derivative losses
      will be charged to retained earnings as a constructive dividend.





Foreign
      currency gain results from exchange rate changes between the U.S. dollar and
      the
      Euro on intercompany advances between our U.S. subsidiary and our Finland
      subsidiary. We recognized a loss for the three and six months ended June 30,
      2005 due to the significant devaluation of the Euro to the dollar over the
      past
      three months.











-21-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Net
      Loss**





We
      are
      experiencing significant losses as we conduct research and development related
      to nanobacteria and launch our products and services. We believe it will take
      significant time before we will earn meaningful revenue to offset our expenses
      and there is no assurance that we will be able to accomplish this goal. As
      a
      result of the losses, we are dependent on affiliates of our CEO and other
      investors to provide sufficient cash sources to fund our operations.





**Liquidity
      and Capital Resources**





Since
      the
      United States Bankruptcy Court confirmed a plan of reorganization that allowed
      the Company to emerge from Chapter 11 during calendar 2002, the Company has
      financed its activities primarily through loans made by entities affiliated
      with
      our current Chief Executive Officer (referred to herein as “the Affiliated
      Entities”). These loans were made as funding was needed and were extremely
      advantageous to the Company in that the amounts were funded as the Company
      needed financial infusions and allowed the Company to avoid the costs and
      distractions of attempting to raise these amounts from unrelated parties. It
      is
      unrealistic to believe that unrelated parties would have offered terms as
      generous as those obtained from the Affiliated Entities, and it is also unlikely
      that any financing could have been obtained under any terms without the
      financing of the Affiliated Entities. From time to time the Affiliated Entities
      have agreed to allow a portion of the loan balances to be converted into shares
      of the Company’s common stock. There is no obligation on the part of the
      Affiliated Entities to make additional loans to the Company. The Affiliated
      Entities are also under no obligation to convert any portion of the loan
      balances owed to it into additional shares of the Company’s stock.





As
      of
      June 30, 2005, we had total assets of $9.3 million of which only $137,000 were
      current assets. At June 30, 2005, we had total current liabilities of $2.5
      million and a working capital deficit of $2.4 million.





Net
      cash
      used in operations for the six months ended June 30, 2005 was $1.4 million.
      The
      negative cash flow from operations reflects the $2.2 million net loss for the
      period plus payment of $408,000 of current liabilities offset by the non-cash
      charges of $378,000 for depreciation and amortization and $746,000 for
      derivative losses.





Net
      cash
      used by investing activities for the six months ended June 30, 2005 was $38,000
      for the purchase of fixed assets.





Net
      cash
      provided by financing activities for the six months ended June 30, 2005 was
      $1.4
      million, which is attributable to stockholder loans of $1.3 million and common
      stock subscriptions of $200,000 less expenses of $30,000.





As
      noted
      above, cash from stockholder loans and capital contributions financed our net
      loss and reduction of current liabilities. We are dependent on raising
      additional funding necessary to implement our business plan. Should we not
      be
      successful in raising cash from our CEO and other investors, we are unlikely
      to
      continue as a going concern.








-22-


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations (continued)**





**Critical
      accounting policies**





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





**Forward
      Looking Statements**





Our
      disclosure and analysis in this Form 10-QSB contains some forward-looking
      statements, within the meaning of the Private Securities Litigation Reform
      Act
      of 1995 (“the Act”), that set forth anticipated results based on our plans and
      assumptions. From time to time, we also provide forward-looking statements
      in
      other materials we release to the public as well as oral forward-looking
      statements. Such statements give our current expectations or forecasts of future
      events; they do not relate strictly to historical and current facts. We have
      tried wherever possible to identify such statements by using words such as
      “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”, “believe”,
“will” and similar expressions in connection with any discussion of future
      operating or financial performance.





In
      light
      of the important factors that can materially affect results, including those
      set
      forth above and elsewhere in this report, the inclusion of forward-looking
      information herein should not be regarded as a representation by us or any
      other
      person that our objectives or plans will be achieved. We may encounter
      competitive, technological, financial and business challenges making it more
      difficult than expected to continue to market our products and services;
      competitive conditions within our industry may change adversely; we may be
      unable to retain existing key management and research personnel; our forecasts
      may not accurately anticipate market demand; and there may be other material
      adverse changes in our operations or business. Certain important factors
      affecting the forward looking statements made herein include, but are not
      limited to (i) accurately forecasting capital expenditures; (ii) obtaining
      new
      sources of external financing; (iii) serving as the nexus for nanobacteria
      research and (iv) conducting successful clinical trials supporting Dr.
      Kajander’s theories that the human body does not recognize nanobacteria as
      harmful, and accordingly, nanobacteria could be the cause of pathological
      disease causing calcification found in multiple diseases. Assumptions relating
      to budgeting, marketing, product development and other management decisions
      are
      subjective in many respects and thus susceptible to interpretations and periodic
      revisions based on actual experience and business developments, the impact
      of
      which may cause the Company to alter its capital expenditure or other budgets,
      which may in turn affect the Company's financial position and results of
      operations.





**Risk
      Factors**





**Trends,
      Risks and Uncertainties**





We
      have
      sought to identify what we believe to be the most significant risks to our
      business. However, we cannot predict whether, or to what extent, any of such
      risks may be realized nor can we guarantee that we have identified all possible
      risks that might arise. You should not consider the risks and assumptions
      identified in this report to be a complete discussion of all potential risks
      and
      uncertainties affecting the Company. Investors should carefully consider all
      risk factors before making an investment decision with respect to our Common
      Stock.







-23-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Risk
      Factors (continued)**





**Cautionary
      Factors that may affect Future Results**





We
      provide the following cautionary discussion of risks, uncertainties and possible
      inaccurate assumptions relevant to our business and our products. These are
      factors that we think could cause our actual results to differ materially from
      expected results. Other factors besides those listed here could adversely affect
      us.





**We
      require additional financing in order to continue in business as a going
      concern, the availability of which is uncertain. We may be forced by business
      and economic conditions to accept financing terms which will require us to
      issue
      our securities at a discount, which could result in further dilution to our
      existing stockholders.**




As
      discussed under the heading, "Management's Discussion and Analysis - Liquidity
      and Capital Resources," we require additional financing to fund our operations.
      There can be no assurance that additional financing will be available to us
      when
      needed or, if available, that it can be obtained on commercially reasonable
      terms. In addition, any additional equity financing may involve substantial
      dilution to our stockholders. If we fail to raise sufficient financing to meet
      our immediate cash needs, we will be forced to scale down or perhaps even cease
      the operation of our business, which may result in the loss of some or all
      of
      your investment in our common stock.




In
      addition, in seeking debt or equity private placement financing, we may be
      forced by business and economic conditions to accept terms which will require
      us
      to issue our securities at a discount from the prevailing market price or face
      amount, which could result in further dilution to our existing
      stockholders.




**Liquidity
      and Working Capital Risks; Need for Additional Capital to Finance** **Growth
      and Capital Requirements**





Throughout
      2005 and 2004, affiliates of our Chief Executive Officer have provided a
      significant portion of our capital needs through loans and capital
      contributions. While these affiliates continue to provide for the majority
      of
      our cash requirements, they are under no obligation to continue such financing
      and/or strategic guidance. In the event these affiliates should discontinue
      their support, we may have difficulty in continuing our operations. In such
      an
      event, shareholders could lose their investment in its entirety. Historically,
      these affiliates have provided capital to us on a demand debt basis after which
      they may agree to convert debt into shares of our common stock. If, in the
      future we require additional funds, these affiliates might contribute some
      or
      all of our requirements. We anticipate that as a part of any such loan, these
      affiliates would have rights to convert into additional shares of our common
      stock. In such an event and to the degree of which we require these affiliates’
      support, shareholders may experience dilution. At present, we do not maintain
      key man insurance for our CEO.





In
      addition to the financial support we may receive from affiliates of our CEO,
      we
      may continue to seek to raise capital from public or private equity or debt
      sources to provide working capital to meet our general and administrative costs
      until net revenues make the business self-sustaining. We cannot guarantee that
      we will be able to raise any such capital on terms acceptable to us or at all.
      Such financing may be upon terms that are dilutive or potentially dilutive
      to
      our stockholders. If alternative sources of financing are required, but are
      insufficient or unavailable, we will be required to modify our growth and
      operating plans in accordance with the extent of available funding.






-24-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Risk
      Factors (continued)**





**We
      have a history of operating losses and fluctuating operating results, which
      raise substantial doubt about our ability to continue as a going
      concern.**




Since
      inception through June 30, 2005, we have incurred aggregate losses of $15.9
      million. There is no assurance that we will operate profitably or will generate
      positive cash flow in the future. In addition, our operating results in the
      future may be subject to significant fluctuations due to many factors not within
      our control, such as the unpredictability of when customers will order products,
      the size of customers' orders, the demand for our products, and the level of
      competition and general economic conditions.




Although
      we are confident that revenues will increase, we also expect an increase in
      research and development costs and operating costs. Consequently, we expect
      to
      incur operating losses and negative cash flow until our products gain market
      acceptance sufficient to generate a commercially viable and sustainable level
      of
      sales, and/or additional products are developed and commercially released and
      sales of such products made so that we are operating in a profitable manner.




**Potential
      Incorrect Conclusions on the Detection and Eradication of
      Nanobacteria**





Most
      of
      our future revenue is based on our ability to detect and eradicate Nanobacteria.
      If it is ultimately proved that our diagnostic methodologies and treatment
      regimens as covered by our patents are ineffective or based upon incorrect
      scientific conclusions, our existing patents and product lines may lose most
      or
      all of their value. Further, if we are unsuccessful in leveraging our diagnostic
      and therapeutic products to detect and treat nanobacterial diseases, we may
      not
      generate sufficient revenue to offset our expenses.





**Development
      and Commercialization of Pharmaceutical and Nurtraceutical
      Products**





Pharmaceutical
      and nutraceutical research and development is highly speculative and involves
      a
      high and significant degree of risk.  The marketability of any product
      developed by us will be affected by numerous factors beyond our control,
      including:





·
            the
                discovery of unexpected toxicities or lack of sufficient efficacy
                of
                products which make them unattractive or unsuitable for human
                use;


·
              preliminary
                  results as seen in animal and/or limited human testing may not
                  be
                  substantiated in larger controlled clinical
                  trials;


·
            manufacturing
                costs or other factors may make manufacturing of products impractical
                and
                non-competitive;


·
              proprietary
                  rights of third parties or competing products or technologies may
                  preclude
                  commercialization; and


·
            requisite
                regulatory approvals for the commercial distribution of products
                may not
                be obtained.





Other
      factors may become apparent during the course of research, up-scaling or
      manufacturing which may result in the discontinuation of research and other
      critical projects.







-25-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Risk
      Factors (continued)**





**Acceptance
      of Products in the Marketplace is Uncertain** .





Our
      future financial performance will depend, at least in part, upon the
      introduction and customer acceptance of our proposed treatments and products.
      Our treatments and products may not achieve market acceptance, and such adverse
      marketing results could materially harm the Company.





**Limited
      Operating History Anticipated Losses; Uncertainty of Future
      Results**





We
      have a
      limited operating history upon which an evaluation of our Company and our
      prospects can be based. Our prospects must be evaluated with a view to the
      risks
      encountered by companies in early stages of development, particularly in light
      of the uncertainties relating to the new and evolving lifescience research
      which
      we intend to develop and market, and the acceptance of our business model.
      We
      will be incurring costs to: (i) perform research studies to prove the
      effectiveness of our pharmaceutical products, (ii) further develop and market
      our products; (iii) establish distribution relationships; and (iv) build an
      organization. To the extent that such expenses are not subsequently followed
      by
      commensurate revenues, our business, results of operations and financial
      condition will be materially adversely affected. We, therefore, cannot insure
      that we will be able to immediately generate sufficient revenues. We expect
      negative cash flow from operations to continue for at least the next 12 months
      as we continue to develop and market our business. If cash generated by
      operations is insufficient to satisfy our liquidity, we may be required to
      sell
      additional equity or debt securities. The sale of additional equity or
      convertible debt securities would result in additional dilution to our
      stockholders. Our initial operations may not be profitable, since time will
      be
      required to build our business to the point that our revenues will be sufficient
      to cover our total operating costs and expenses. Our reaching a sufficient
      level
      of sales revenues will depend upon a large number of factors, including
      availability of sufficient working capital, the number of customers we are
      able
      to attract and the costs of continuing development of our product
      line.





**Federal
      Food and Drug Administration**





Some
      or
      all of our products may be governed by rules and regulations established by
      the
      United States Food and Drug Administration (“FDA”). Changes in FDA regulations
      and the enforcement thereof may affect our lifescience business. Furthermore,
      we
      may not be successful in filing and obtaining approval of our 510K or PMA
      filings with the FDA for our Nano-Capture Antigen and Nano-Sero IgG ELISA
      assays.





**Data
      Obtained Through Clinical Trials** .





Data
      obtained from pre-clinical studies and clinical trials do not necessarily
      predict results that will be obtained from later pre-clinical studies and
      clinical trials. Moreover, pre-clinical and clinical data is susceptible to
      varying interpretations, which could delay, limit or prevent regulatory
      approval. A number of companies in the pharmaceutical industry have suffered
      significant setbacks in advanced clinical trials, even after experiencing
      promising results in earlier trials. The failure to adequately demonstrate
      the
      safety and/or effectiveness of an intended product under development could
      delay
      or prevent regulatory clearance of the potential drug or treatment, resulting
      in
      delays to commercialization, and could materially harm the
      business.






-26-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Risk
      Factors (continued)**





**Competitors
      in the Nutraceutical and Pharmaceutical Industry May Develop Competing
      Technologies**





We
      have a
      number of competitors, some of whom are better able to commercialize their
      products, which could render our products obsolete or uncompetitive prior to
      recovering our expenses. We anticipate that we will face increased competition
      in the future as new products enter the market and advanced technologies become
      available.





**Regulations
      may Inhibit our Ability to Sell Nanobac Supplements**





Codex
      is
      a joint body comprising government representatives
      and non-governmental organizations, jointly managed by the United
      Nation's (U.N.) Food and Agriculture Organization (FAO) and the World
      Health Organization (WHO) of the U.N. The Codex Committee on Nutrition and
      Foods
      for Special Dietary Uses (CCNFSDU) has been attempting to develop international
      guidelines for vitamins and minerals since 1991. In November 2004, these
      guidelines were finalized and a vote to ratify will take place in July,
      2005.




There
      is
      a school of thought within the dietary supplement community that
      buying vitamins and other dietary supplements will be severely limited
      by
      this CODEX. Passage of the above guidelines may inhibit our ability
      to sell
      Nanobac Supplement outside of the United States. We do not believe that the
      passage will impact United State revenue as the U.S. draft position states
      that
      "The United States supports consumer choice and access to dietary supplements
      that are safe and are labelled in a truthful and non-misleading manner." 
      Further, the CODEX Draft notes that the Codex Guidelines for Vitamin and Mineral
      Supplements will not adversely affect the availability of safe and truthfully
      labelled supplement products in the U.S. marketplace or to U.S. consumers.
      If
      our interpretation is not correct passage of the international guidelines may
      inhibit the sales of Nanobac Supplement inside and outside of the United States





**Risk
      of Third Party Lawsuits** .





We
      are
      exposed to potential product liability risks that are inherent in the testing,
      manufacturing and marketing of pharmaceutical products. We cannot assure
      potential investors that such claims will not be asserted against the Company.
      A
      successful liability claim or series of claims brought against us could have
      a
      material adverse effect on our financial condition. In addition, we may be
      sued
      by third parties who claim that our products and treatments infringe upon the
      intellectual property rights of others or that we have misappropriated trade
      secrets of others. This risk is exacerbated by the fact that the validity and
      breadth of claims covered in medical technology patents and the breadth and
      scope of trade secret protection involve complex legal and factual questions
      for
      which important legal principles are unresolved. Any litigation or claims
      against us, whether or not valid, could result in substantial costs, could
      place
      a significant strain on our financial resources, and could harm our
      reputation.






-27-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Risk
      Factors (continued)**





**Government
      Regulation**





Healthcare
      in general and the pharmaceuticals industry in particular are highly regulated
      markets, subject to both federal and a multitude of state regulations and
      guidelines. The majority of our business is still in clinical research
      applications and is governed by the medical community. There can be no assurance
      that changes to state or federal laws will not materially restrict our ability
      to sell our products or develop new product lines.





**Intellectual
      Property Rights**





We
      have a
      family of patents encompassing the detection and eradication of nanobacteria.
      There are risks inherent in any intellectual property rights in that they may
      be
      challenged as being invalid or not original. Additionally, other parties may
      abuse such intellectual rights, causing the Company to defend its rights.





**Dependency
      upon Key Technical and Scientific Personnel Who May Terminate Employment at
      Any
      Time** . ****





Our
      success will depend to a significant degree upon the continued services of
      key
      technical and scientific personnel, including but not limited to E. Olavi
      Kajander, MD, PhD. In addition, our success may depend on our ability to attract
      and retain other highly skilled personnel. Competition for qualified personnel
      is intense, and the process of hiring and integrating such qualified personnel
      is often lengthy. We may be unable to recruit personnel on a timely basis,
      if at
      all. All of the Company’s management and other employees may voluntarily
      terminate their employment with us at any time. The loss of the services of
      key
      personnel, or the inability to attract and retain additional qualified
      personnel, could result in delays to development, loss of sales, and/or
      diversion of management resources that could have a material adverse affect
      on
      the Company.





**Competition**





The
      markets in which we compete include successful and well-capitalized competitors
      that vary in size and scope. Principal competitors include Pfizer, Merck and
      other pharmaceutical companies having unique treatments for cardiovascular
      disease. All of these competitors are more established, benefit from greater
      name recognition and have substantially greater resources than us. Moreover,
      we
      could face additional competition as other established and emerging companies
      enter the market and new products and technologies are introduced. Increased
      competition could result in price reductions, fewer customer subscriptions,
      reduced gross margins and loss of market share, any of which could materially
      adversely affect our business, financial condition and operating results. In
      addition, current and potential competitors may make strategic acquisitions
      or
      establish cooperative relationships among themselves or with third-parties,
      thereby increasing the ability of their products to address the needs of our
      prospective consumers. While we believe we can differentiate our product from
      these current and future competitors, focusing on the products' functionality,
      flexibility, adaptability and features, there can be no assurance that we will
      be able to compete successfully against current and future competitors. The
      failure to effectively compete would have a material adverse effect upon our
      business, financial condition and operating results.








-28-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Risk
      Factors (continued)**





**Lack
      of Independent Directors**





We
      cannot
      guarantee our Board of Directors will have a majority of independent directors
      in the future. In the absence of a majority of independent directors, our
      executive officers, who are also principal stockholders and directors, could
      establish policies and enter into transactions without independent review and
      approval thereof. This could present the potential for a conflict of interest
      between the Company’s stockholders and the controlling officers and/or
      directors.





**Limitation
      of Liability and Indemnification of Officers and Directors**





Our
      officers and directors are required to exercise good faith and high integrity
      in
      our management affairs. Our Articles of Incorporation and By Laws provide,
      however, that our officers and directors shall have no liability to our
      shareholders for losses sustained or liabilities incurred which arise from
      any
      transaction in their respective managerial capacities unless they violated
      their
      duty of loyalty, did not act in good faith, engaged in intentional misconduct
      or
      knowingly violated the law, approved an improper dividend or stock repurchase,
      or derived an improper benefit from the transaction. Our Articles and By-Laws
      also provide for the indemnification by us of the officers and directors against
      any losses or liabilities they may incur as a result of the manner in which
      they
      operate our business or conduct the internal affairs, provided that in
      connection with these activities they act in good faith and in a manner they
      reasonably believe to be in, or not opposed to, the best interests of the
      Company, and their conduct does not constitute gross negligence, misconduct
      or
      breach of fiduciary obligations.





**Continued
      Control by Current Officers and Directors**





The
      present officers and directors control approximately 50% of the outstanding
      shares of Common Stock, and are in a position to elect all of our Directors
      and
      otherwise control the Company, including, without limitation, authorizing the
      sale of equity or debt securities of the Company, the appointment of officers,
      and the determination of officer's salaries. Shareholders have no cumulative
      voting rights.





-29-


**Item
      2: Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations (continued)**





**Limited
      Market Due To Penny Stock**


NNBP's
      stock differs from many stocks, in that it is a "penny stock." The Securities
      and Exchange Commission has adopted a number of rules to regulate penny stocks.
      These rules include, but are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3,
      15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934,
      as
      amended. Because our securities constitute penny stock within the meaning of
      the
      rules, the rules would apply to us and our securities. The rules may further
      affect the ability of owners of our stock to sell their securities in any market
      that may develop for them. There may be a limited market for penny stocks,
      due
      to the regulatory burdens on broker-dealers. The market among dealers may not
      be
      active. Investors in penny stock often are unable to sell stock back to the
      dealer that sold them the stock. The mark-ups or commissions charged by the
      broker-dealers may be greater than any profit a seller may make. Because of
      large dealer spreads, investors may be unable to sell the stock immediately
      back
      to the dealer at the same price the dealer sold the stock to the investor.
      In
      some cases, the stock may fall quickly in value. Investors may be unable to
      reap
      any profit from any sale of the stock, if they can sell it at all. Stockholders
      should be aware that, according to the Securities and Exchange Commission
      Release No. 34- 29093, the market for penny stocks has suffered in recent years
      from patterns of fraud and abuse. These patterns include: - Control of the
      market for the security by one or a few broker-dealers that are often related
      to
      the promoter or issuer; - Manipulation of prices through prearranged matching
      of
      purchases and sales and false and misleading press releases; - "Boiler room"
      practices involving high pressure sales tactics and unrealistic price
      projections by inexperienced sales persons; - Excessive and undisclosed bid-ask
      differentials and markups by selling broker-dealers; and - The wholesale dumping
      of the same securities by promoters and broker- dealers after prices have been
      manipulated to a desired level, along with the inevitable collapse of those
      prices with consequent investor losses. Furthermore, the penny stock designation
      may adversely affect the development of any public market for NNBP's shares
      of
      common stock or, if such a market develops, its continuation. Broker-dealers
      are
      required to personally determine whether an investment in penny stock is
      suitable for customers. Penny stocks are securities (i) with a price of less
      than five dollars per share; (ii) that are not traded on a "recognized" national
      exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation
      system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv)
      of
      an issuer with net tangible assets less than $2,000,000 (if the issuer has
      been
      in continuous operation for at least three years) or $5,000,000 (if in
      continuous operation for less than three years), or with average annual revenues
      of less than $6,000,000 for the last three years. Section 15(g) of the Exchange
      Act, and Rule 15g-2 of the Commission require broker-dealers dealing in penny
      stocks to provide potential investors with a document disclosing the risks
      of
      penny stocks and to obtain a manually signed and dated written receipt of the
      document before effecting any transaction in a penny stock for the investor's
      account. Potential investors in NNBP's common stock are urged to obtain and
      read
      such disclosure carefully before purchasing any shares that are deemed to be
      "penny stock." Rule 15g-9 of the Commission requires broker-dealers in penny
      stocks to approve the account of any investor for transactions in such stocks
      before selling any penny stock to that investor. This procedure requires the
      broker-dealer to (i) obtain from the investor information concerning his or
      her
      financial situation, investment experience and investment objectives; (ii)
      reasonably determine, based on that information, that transactions in penny
      stocks are suitable for the investor and that the investor has sufficient
      knowledge and experience as to be reasonably capable of evaluating the risks
      of
      penny stock transactions; (iii) provide the investor with a written statement
      setting forth the basis on which the broker-dealer made the determination in
      (ii) above; and (iv) receive a signed and dated copy of such statement from
      the
      investor, confirming that it accurately reflects the investor's financial
      situation, investment experience and investment objectives. Compliance with
      these requirements
      may make it more difficult for NNBP's stockholders to resell their shares to
      third parties or to otherwise dispose of them.






-30-


**Item
      3: Quantitative and Qualitative Disclosures About Market
      Risk**





While
      most of our operations are conducted in the United States, we also operate
      a
      laboratory in Kuopio Finland. We face two risks related to foreign currency
      exchange: translation risk and transaction risk. Amounts invested in our Finland
      operations are translated into US Dollars at the exchange rates in effect at
      the
      balance sheet date. Since the functional currency of our Finland subsidiary
      is
      the local currency, foreign currency translation of the balance sheet is
      reflected as a component of stockholders’ equity and does not impact operating
      results.





Our
      Finland subsidiary collects revenue and pays expenses in Euros, mitigating
      transaction risk. Revenues and expenses in Euros translate into varying amounts
      of US Dollars depending upon whether the US Dollar weakens or strengthens
      against the Euro. Therefore, changes in exchange rates may negatively affect
      the
      Company’s consolidated revenues and expenses (as expressed in US Dollars) from
      foreign operations.





Currency
      transaction gains or losses are incurred on our US Subsidiary’s intercompany
      advance to our Finland Subsidiary. We recognize a gain on the intercompany
      advance as the US Dollar weakens against the Euro and we recognize a loss when
      the US Dollar strengthens against the Euro.





The
      Company has not entered into a material amount of foreign currency forward
      exchange contracts or other derivative financial instruments to hedge the
      effects of adverse fluctuations in foreign currency exchange rates.





**Item
      4: Controls and Procedures**





***Disclosure
      controls and procedures***





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer, we have evaluated the effectiveness of the design and
      operation of our disclosure controls and procedures within 90 days of the filing
      date of this report, and, based on this evaluation, our Chief Executive Officer
      has concluded that these controls and procedures are effective.





Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports we
      file
      or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission's rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed by us in the reports that we file under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive officer and principal financial officer, as appropriate to allow
      timely decisions regarding required disclosure.








-31-


**Item
      4: Controls and Procedures (continued)**





***Section
      404 of the Sarbanes-Oxley Act of 2002***




Section
      404 of the Sarbanes-Oxley Act of 2002 requires our report on Form 10-KSB for
      2006 to include a report of management on internal control over financial
      reporting. Internal control over financial reporting, as defined under these
      rules, is a process designed 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.




In
      our
      report, we will be required, among other things, to assess the effectiveness
      of
      our internal control over financial reporting. The report must also disclose
      any
      material weaknesses in internal control over financial reporting identified
      by
      management, and if there are any material weaknesses, we must conclude that
      our
      internal control over financial reporting was not effective. A material
      weakness, under the applicable rules, is a control deficiency, or combination
      of
      control deficiencies, that results in more than a remote likelihood that a
      material misstatement of the annual or interim financial statements will not
      be
      prevented or detected.




In
      conducting our ongoing assessment of its internal control over financial
      reporting to prepare for compliance with the requirements under Section 404
      of the Sarbanes-Oxley Act, we have identified a lack of segregation of duties
      to
      be a potential material weakness in internal controls. Lack of segregation
      of
      duties is inherent to our company due to the small number of employees. Our
      assessment is still in process to determine if this situation is actually a
      material weakness or if there are any other material weaknesses.





***Changes
      in internal controls***





There
      were no significant changes in our internal controls or in other factors that
      could significantly affect these controls subsequent to the date of their
      evaluation.





**PART
      II - OTHER INFORMATION**





**Item
      1: Legal Proceedings**





We
      know
      of no material, active or pending legal proceedings against us, nor are we
      involved as a plaintiff in any material proceedings or pending litigation.
      There
      are no proceedings in which any of our directors, officers or affiliates, or
      any
      registered or beneficial shareholders are an adverse party or have a material
      interest adverse to us.






-32-


**Item
      2: Unregistered Sales of Equity Securities and Use of
      Proceeds**





From
      August 2004 through February 2005, we executed Subscription Agreements with
      three unaffiliated investors and one affiliated investor. These investors paid
      us 50% of the subscription price at execution and the remaining 50% is due
      within five days from the date that a registration statement is declared
      effective for the common shares that are being issued. In exchange for the
      cash
      consideration, we are to issue these investors shares of our common stock equal
      to the amount paid divided by the lesser of (a) $0.12 or (b) fifty-two percent
      of the average closing bid price for our common stock for the five days
      immediately prior to the date on which a registration statement is declared
      effective (“The Fixed Price”). In addition, each of these investors will receive
      an equivalent number of warrants with expiration dates of five years from the
      date of issuance. One half of these warrants will be priced at 110% of the
      Fixed
      Price and the remainder will be priced at 150% of the Fixed Price. The minimum
      number of shares and warrants that will be issued under these Subscription
      Agreements (assuming a Fixed Price of $0.12 per share) is as
      follows:


Numberof
                  Shares
              
              Per
                  Share
              
              ProceedsCommon
                  Stock:Unaffiliated
                  Investors
              
              
              16,250,000
              
              $
              0.12
              
              $
              1,950,000Affiliates
              
              
              8,333,333
              
              $
              0.12
              
              $
              1,000,00024,583,333
              
              
              
              
              $
              2,950,000
  Number
              
              Exerciseof
                  Warrants
              
              PriceWarrants:Unaffiliated
                  Investors
              
              
              8,125,000
              
              $
              0.13Unaffiliated
                  Investors
              
              
              8,125,000
              
              $
              0.18Affiliates
              
              
              4,166,667
              
              $
              0.13Affiliates
              
              
              4,166,666
              
              $
              0.1824,583,333





As
      of
      June 30, 2005, 12,297,667 shares had been issued under the above Subscription
      Agreements. The actual number of shares and warrants that ultimately will be
      issued under these Subscription Agreements may be substantially higher due
      to
      the variability of the Fixed Price. Based on our recent traded price of $0.06
      to
      $0.10 per share, over twice as many shares and warrants would be issued as
      described above. Further, if the Fixed Price is less than $0.09 per share,
      we do
      not have sufficient authorized shares to issue the common stock and warrants
      required under the above subscription agreements. Our shareholders need to
      approve any increase in our authorized shares.





Each
      of
      these investors received their shares in reliance upon Section 4(2) of the
      Securities Act of 1933, because each of the holders was knowledgeable,
      sophisticated and had access to comprehensive information about us. At all
      relevant times we were a reporting company under the Securities Exchange Act
      of
      1934 and there was readily available adequate current public information with
      respect to the Company.





A
      success
      fee was awarded to a broker for completing the transaction to one of the above
      unaffiliated investors in the form of 5-year warrants equal to 20% of the value
      of the transaction. These warrants have exercise prices equal to $0.16 to $0.22
      per share for transactions completed to date. Future warrants issued under
      this
      agreement will have an exercise price equal to NNBP’s stock price on the date of
      closing. We estimate that approximately 2.2 million warrants will be issued
      to
      this broker.








-33-


**Item
      3: Defaults upon Senior Securities**





None.





**Item
      4: Submission of Matters to a Vote of Security Holders**





None.





**Item
      5: Other Information**





None





**Item
      6: Exhibits and Reports on Form 8-K**





(a)
            The
                following exhibits are filed as part of this
                report:





Exhibit
      31.1 - Certification to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief
      Executive Officer





Exhibit
      31.2 - Certification to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief
      Financial 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 - Chief Executive
      Officer





Exhibit
      32.2 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to
      Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Financial
      Officer




(b)
              Reports
                  on Form 8-K





None











-34-


**SIGNATURES**




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





**NANOBACK
                PHARMACEUTICALS, INCORPORATED**Date: August
                8, 2005
              By:
              /s/ John
                D. StantonJohn
                  D. Stanton
                Chief Executive
                  Officer







-35-


**Nanobac
      Pharmaceuticals, Incorporated**








**EXHIBIT
      INDEX**





EXHIBIT
              NUMBER
            
            DESCRIPTION
            
            PAGE31.1
            
            Certification
                to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive
                Officer
            
            3731.2
            
            Certification
                to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial
                Officer
            
            3832.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 -Chief Executive Officer
            
            3932.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 -Chief Financial Officer
            
            40







-36-