UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                     For The Fiscal Year Ended June 30, 2006

                                       Or

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                        Commission File Number: 001-16703
                                                ---------

                             NOVA BIOGENETICS, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)

            Delaware                                    04-3656563
 -------------------------------           ------------------------------------
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
 Incorporation or Organization)

             8601 Dunwoody Place, Atlanta, Georgia            30350
            ----------------------------------------        ----------
            (Address of Principal Executive Offices)        (Zip Code)

                                 (770) 650-6508
                 -----------------------------------------------
                 Issuer's telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock,
                                                             par value $.0001

Check whether the Issuer filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No.

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

State Registrant's revenues for its most recent fiscal year: $221,248

The number of shares outstanding of each of the Registrant's classes of common
stock, as of October 12, 2006 is 14,819,815 shares, all of one class, $.0001 par
value per share. Of this number, 9,283,630 shares having an aggregate market
value of $1,114,036 based on the closing price of Registrant's common stock of
$0.12 on June, 30, 2006 as quoted on the Over-the-Counter Bulletin Board
("OTCBB") were held by non-affiliates of the Registrant.

*Affiliates for the purpose of this item refers to the Registrant's officers and
directors and/or any persons or firms (excluding those brokerage firms and/or
clearing houses and/or depository companies holding Registrant's securities as
record holders only for their respective clienteles' beneficial interest) owing
5% or more of the Registrant's common stock, both of record and beneficially.

<PAGE>

                   ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.

                         Yes [ ] No [ ] NOT APPLICABLE

                       DOCUMENTS INCORPORATED BY REFERENCE

The following documents are herewith incorporated by reference: None

Transitional Small Business Disclosure Format

                                 [ ] Yes [X] No


                                TABLE OF CONTENTS

PART I.........................................................................1

   Item 1.  Description Of Business............................................1

   Item 2.  Description Of Property...........................................16

   Item 3.  Legal Proceedings.................................................17

   Item 4.  Submission Of Matters To A Vote Of Security Holders...............18

PART II.......................................................................19

   Item 5.  Market For Common Equity, Related Stockholder Matters And
            Small Business Issuer Purchases Of Equity Securities..............19

   Item 6.  Management's Discussion And Analysis Or Plan Of Operation.........20

   Item 7.  Financial Statements..............................................22

   Item 8.  Changes in and Disagreements With Accountants on Accounting
            and Financial Disclosure..........................................22

   Item 8A. Controls and Procedures...........................................22

   Item 8B. Other Information.................................................22

PART III......................................................................23

   Item 9.  Directors And Executive Officers Of The Registrant................23

   Item 10. Executive Compensation............................................24

   Item 11. Security Ownership Of Certain Beneficial Owners And Management
            And Related Stockholder Matters ..................................25

   Item 12. Certain Relationships And Related Transactions....................26

   Item 13. Exhibits, List And Reports On Form 8-K............................26

   Item 14. Principal Accountant Fees And Services............................27

Signatures....................................................................28

CERTIFICATIONS.....................................................EX 31 & EX 32

<PAGE>

                                     PART I

ITEM 1.  Business

         Nova BioGenetics, Inc., (Nova), is a Georgia (USA) based, publicly
traded corporation (NVBG). The Company historically has engaged in research and
development, patent maintenance requirements, patent licensing and sub-licensing
opportunities, regulatory compliance issues and related activities associated
with bulk sales of its industrial, institutional and retail products and related
product programs. Most program/retail sales, however, are primarily achieved
through the efforts of sub-registrants; these sub-registrants incorporate Nova's
unique products with their existing products creating new product branding
opportunities. Nova is currently selling and marketing antimicrobial products in
addition to a variety of other specialty chemicals.

         Many of these products provide long-term killing action of
microorganisms responsible for cross contamination and viral contamination,
along with inhibiting and controlling the growth of over 100 (one hundred)
viral, bacteria, fungi and yeast organisms. The Company manufactures
alternatives to conventional antimicrobial agents such as sanitizers,
disinfectants, bleaches, biocides and preservatives. The Company has received
from the Environmental Protection Agency clearance for its active water-based
antimicrobial to be used in a wide variety of materials and products.

         Nova currently operates in two distinct business segments:

(1) Antimicrobial and biostatic products for use within the Manufacturer's Use
Products (MUP), retail, and institutional markets are sold through Nova
BioGenetics, Inc. or its subsidiary, Nova Specialty Chemical, Inc. It should be
noted this business segment experienced limited sales during this past fiscal
year. The loss of multiple large volume sales opportunities for Nova as a whole,
including its European office, is due, in the Company's opinion, to the negative
association related to various litigation issues. The Company is determined to
successfully resolve these legal challenges as soon as practically possible.

         Providing Nova's shareholders the opportunity to experience increased
shareholder value is the Company's top priority, and to accomplish that goal,
Nova believes it has generated an excellent proactive plan. In an effort to move
forward with the intent of reversing or eliminating the negative damage Nova has
experienced, the Company recently completed an energized restructuring of its
business model. This innovative sales program is scheduled to launch during the
first two quarters of 2007.

(2) Biopharmaceutical antibiotic and antiviral products will be marketed through
Nova's subsidiary, Nova BioPharmaceutical, Inc. The biopharmaceutical division
is a longer-term undertaking. Considerable work has been completed and further
work will continue to be conducted, as appropriate. This business segment will
incorporate Nova's products to develop and commercialize new antibiotics,
antivirals and/or derivatives directed at the well recognized, essential
resistance of microorganisms to anti-infective agents worldwide. The Company's
proposed antibiotic and antiviral products suite will expand its portfolio and
enhance its role within different markets. The antibiotic and antiviral products
will be a highly specialized suite and is referred to as "Antibiotic Resistance
Technology" otherwise known as "ART".

                                       1
<PAGE>

                             ANTIMICROBIAL BUSINESS

         Nova BioGenetics, Inc.'s primary focus is to exploit its unique product
line to become the leader in antimicrobials and biocides for consumer, Original
Equipment Manufacturing, industrial, institutional, environmental services, and
medical device markets. Nova products are an easily applied reactive coating
that modifies surfaces of all types, by creating an invisible covalent bond
between surfaces and a variety of chemical agents. Through the cross linking
technology, these antimicrobial properties and other chemical agents can impart
many performance-enhancing characteristics, such as residual antimicrobial
activity, removal of surface-borne and air-borne allergens which may cause
respiratory discomfort or asthma, infection resistance, anti-inflammation,
lubricity and drug delivery onto many surfaces without changing the dimensions
or physical properties of the modified surfaces.

         Nova BioGenetics, Inc. believes that its antimicrobial technology have
properties that make its products significantly more durable, effective and
safer than currently available conventional antimicrobials, non-antibiotics,
preservatives or biocides. The Company also believes that certain manufacturers
who utilize its products will be able to significantly improve the performance
of their products and in some situations differentiate their products in a
highly competitive marketplace.

Consumer Products

         Nova BioGenetics, Inc. believes that significant opportunities for
revenue generation continue to exist in the mass-market retail outlets including
supermarkets, mass merchandisers, drug outlets, home improvement centers, and
selected chain specialty retailers. Household cleaners and odor eliminator
products represent a retail market value in supermarkets alone of over $2
billion per year.

Nova Branded Products

         The Company intends to develop, produce, sell, and market distinct
products under the Nova name as well as other brand names to be trademarked. The
Company has plans to begin shipping its products into initial test markets
within the next twelve months. The Company intends to appoint representatives
throughout the United States and abroad to market its unique blend of products
primarily under various Nova brand names. New products are being developed for
use on clothing and other in-home surfaces that will provide sanitation and
residual protection from the growth of microorganisms. The Company plans to
distribute these products through supermarkets and other selected outlets.

Private Label Products

         As new products are developed some will be made available for private
label distribution, particularly those that make non-pesticidal claims. In
addition, private label opportunities will be extended into other retail
channels such as mass merchandisers. The expansion of private label sales will
only be executed in situations where both the anticipated volume and pricing are
such that positive profitability is available.

Value Added Products

         Utilization of Nova BioGenetic's products in leading consumer goods
offered by other organizations represents potentially lucrative licensing
revenues for the Company. The unique attributes of Nova technology permit
incorporation into existing products as a value-added ingredient that imparts
anti-microbial properties to the base product.

         Consumer goods categories that offer significant potential include
household cleaners, gloves, feminine hygiene, laundry and fabric care as well as
deodorants and body washes. Many other products that benefit from an
anti-microbial claim will be added in the future as research and development
progresses.

                                       2
<PAGE>

         Marketing programs for value-added products will be designed to support
the global branding strategy of Nova. The Company intends to pursue licensing
agreements with manufacturers that the Company anticipates will contain a
marketing portion that outlines the requirements that each joint product will
bear a notification of "Protected By Nova (branded name)" or other similar
awareness building program. This extension of the Company's trademarks into
categories, products, and geographies will enhance the long term branding
campaign. However, no assurance can be given by the Company at the present time
that such a program will be launched, or that if launched, will be successful.

Industrial and Institutional Markets (I&I)

         The Company intends to follow a path taken by many other proprietary
chemical manufacturers and has targeted leading industrial and institutional
products companies that currently formulate and market to this industry.

         The Institutional & Industrial Division business strategy could be
profitable based upon accretive acquisitions and organic growth. The execution
of both strategies simultaneously will provide accelerated growth within the
Institutional and Industrial market segments.

         Simultaneously with the acquisition strategy, the Institutional &
Industrial Division will offer selected Nova products to other I&I companies.
This action will occur on a restricted basis, primarily with products that do
not require E.P.A. registration.

         The marketing of Nova products with the Institutional & Industrial
segments will be consistent with the other divisions of Nova. All products that
contain any of Nova's technology will be clearly labeled. Advertising for the
Company and its products will consist of traditional media, printed material in
high distribution trade journals, direct mail, and active, visible participation
in all appropriate industry conventions.

Specialty Chemical Companies

         Nova is currently engaged in testing multiple applications using Nova's
technology with leading manufacturers, many of whom are Fortune 500 companies.
The Company is committed to a value-add strategy to have our antimicrobial
products incorporated into the products of these leading manufacturers. It is
Nova's intention to produce co-branded products in the future.

         The Company intends to enter into agreements with specialty chemical
companies to achieve national distribution. Nova believes there will be
significant volume in these agreements that will drive substantial revenue and
licensing growth.

         New products are to be developed for sale to the industrial and
institutional markets and will be submitted for regulatory approval. No
assurances can be given that EPA approvals will be obtained and in what time
frame.

Future Filings

         The Company plans to seek approval on a variety of end use products
with disinfectant and sanitization properties. Over the next several years, when
adequately capitalized, the Company intends to seek EPA and FDA food contact
approvals for Nova products as preservatives in FDA regulated products,
including cosmetic articles, such as skin creams; hair treatment products, for
example shampoos, and a variety of other products requiring regulatory
approvals. However, no assurances can be given that the Company will be
successful in commercializing any of these products or will receive any of the
required regulatory approvals.

                                       3
<PAGE>

Research and Development

         The Company's technologies are in aqueous reactive silanes and
antimicrobial products. Combinations of both technologies are producing
compounds with new properties and are setting new standards. The Company
intends to produce new product releases in the near future. Research on silane
based and non-silane based antimicrobial will expand application of
antimicrobial Company products from pesticides to medications and treatments to
preventive care. Research on silane based durable products will provide the
applicator with the opportunity to give surfaces new desired properties.

         Future development efforts are anticipated to focus on development of
antimicrobial products for medical applications, specifically, human and animal
skin treatments, new formaldehyde-free product preservatives, agricultural and
food antimicrobial and new active ingredients and formulations useful in the
markets currently providing antimicrobial products. Products range from
antimicrobial absorbents to cleaning solutions and disinfectants and household
products. Products in this category include materials treated by the
manufacturer, for example socks, shower curtains and carpets. Product
development in this category is anticipated on a market-need basis in
collaboration with the manufacturers. In addition, a number of new applications
based on the uniqueness of the Company's products are anticipated. There can be
no assurance that the Company will be successful in developing these or other
products.

         Antimicrobial Biobarriers: Burn Care/Synthetic Skin. Commonly, the
greater the skin damage, the greater the risk of infection. The skin damage and
the risk of infection are especially serious in burn victims. To this day,
proper treatment of burn patients remains a challenge to the healthcare
professional. In addition to direct wound application, the Company believes that
the Company's technology may, under certain conditions, be appropriate for
application to skin grafts, either manufactured or harvested from cadavers and
most importantly, animal collagen matrixes. Collagen matrix based products are
frequently applied graft materials. In addition to their importance as skin
grafts, their chemical composition is such that a very favorable bonding with
the Company's antimicrobial products and the graft may be possible. The Company
believes that the unique properties of the Company's primary technology may, in
the future and under certain circumstances, allow certain products based upon
its technology to form a bound protective layer that allows the grafted skin to
breathe and transport liquids, but reduce and/or prohibit the entry of
microorganisms.

         Integration of the Company's products and research in the future may
lead to new skin treatment products that the Company believes may provide
effective skin condition treatment. Adverse skin conditions caused by microbes
may be susceptible to treatment by the Company's products. However, no
assurances can be given that the Company will be successful in commercializing
any of these products or will receive any of the required regulatory approvals.

         Transplant/Medical Device Treatments. A common problem in the
transplant of organs or artificial implants is rejection by the receiving body's
immune system. The rejection is often based on the recognition of the implant as
a foreign body. This recognition is affected by the surface of the implant.
Silane treatment of implants changes the surface of the implant. The treatment
can be durable or temporary. One approach in the future may be to chemically
bond currently available anti-rejection medication to the silane. This
application will require FDA approval prior to clinical testing and commercial
introduction. However, no assurances can be given that the Company will be
successful in commercializing any of these products or will receive any of the
required regulatory approvals.

                                       4
<PAGE>

         Cleaning and Maintenance Products. The residual activity of the Company
products provides protection to many surfaces. Application of the products is
primarily to clean surfaces. Integration of the Company products into new
cleaning products may lead to new products providing protection to surfaces and
equipment while cleaning. These new cleaning and maintenance products will be
developed for industrial and institutional applications, for example, hospitals,
food processing plants and commercial cleaning and consumer applications, for
example, bathroom, carpet and kitchen cleaning. However, no assurances can be
given that the Company will be successful in commercializing any of these
products.

Background / History

         Nova is the result of its own extensive and costly technology
formulation and development, including trials, supporting data and
documentation. The process has been a lengthy and gradual one. The Company has
through its European office created global alliances, product awareness and
simultaneous testing of other chemistries for compatibility with our technology.

         The over-riding objective has always been to take the Company's
products worldwide by the most effective means. Nova intends to launch its
global expansion strategy when properly capitalized. The Company is committed to
meeting its contractual obligations worldwide; the establishment of a global
Nova infrastructure will now allow it to support anticipated global contracts
with other multinationals and wholesalers operating internationally.

         Since early 2005 Nova has had a presence in Europe and the Middle East
through its European Master Licensee, Eco Group International Ltd, which was
acquired by Nova in June 2005. Nova BioGenetic's in Europe provides a strong
platform for the Company's planned expansion into those regions. Dubai has been
selected as the future Regional Headquarters for the Middle East.

Global Umbrella

         As part of the implementation of the global strategy, strategic
marketing and sales packages have been compiled and specific domains of
responsibilities have been clearly defined. Considerable preparatory work,
regarding global industries and markets, has been completed. The Company has
identified 50 world leading companies requiring the application of our
technology, many of which have already been approached. The response to our
products has been very positive and the remaining targeted companies will be
approached in due course. In Europe and other key regions, several Master
Wholesalers have been established and have networks in all parts of the world.

         Nova product formulation is the foundation on which a global alliance
of companies can be formed. By working alongside each other, Nova, together with
its clients, marketing partners and wholesalers are able to share their
collective intellectual knowledge and to pool resources to best effect. This
creates the ability to integrate technologies, to create new chemistries and
products and to open up global markets quickly and cost-effectively.

         By sharing existing global customer-bases, large sales teams and other
pooled resources, penetration of global markets becomes automatic for all
companies working under the umbrella of the alliance. As new chemistries and
products are developed, they too can be brought to market rapidly and at minimal
cost and effort through the ever-growing network.

Applications and Benefits

Products

         Nova's antimicrobial products incorporate molecularly-bonded
antimicrobial agents in a wide range of applications, e.g., industrial, medical,
commercial and healthcare use, synthetic, woven and non-woven textile products,
fibers, fabrics, liquids, cleaning products for general households, sealants,
adhesives, stains, caulking compounds, coating systems and numerous other
surface materials.

                                       5
<PAGE>

         This technology is not only effective against a broad spectrum of
micro-organisms, including certain viruses, mold, mildew, fungi, yeasts and gram
(+) and gram (-) bacteria, but also permanently bonds molecularly to all
surfaces to form a new antimicrobial surface which is durable. It will not wash
off or dissipate into the air and does not exhibit loss of activity over the
normal life of the surface which has been treated. The Nova line of products
contains no heavy metals, tin, lead, mercury or formaldehyde and is virtually
non-toxic.

         Nova offers a systems process that allows for a variety of commercial
and industrial applications. Nova's technology provides a long-term effective
control of micro-organisms that are commonly associated with human and building
health problems. The antimicrobial agent is non-migratory; it does not leach,
gas or volatize. It stops and controls mold and mildew odors, soiling, staining
and deterioration. It controls the growth of micro-organisms in order to prolong
the life of the product.

         The antimicrobial agent permanently bonds to surfaces to form a new
antimicrobial surface which is durable and which does not exhibit loss of
activity over the normal life of the treated surface. Unlike other
antimicrobials, Nova's does not allow or cause microbial adaptation or
resistance, is effective for use in solving microbial contamination problems and
possesses unique features and advantages over conventional antibacterial agents.

         Unlike other antimicrobial materials, the Nova product line has never
been shown to allow or cause microbial adaptation, resistance, diffusion or
migration. It is significantly different from conventional sanitizers,
disinfectants, bleaches or biocides which, themselves, contaminate the
environment with undesirable chemicals. Some of the differences are in its
chemical nature and in its effectiveness, durability and safety.

         This technology has a unique advantage over all previously known
methods and applications in that the antimicrobial component material is bonded
to the surface. Micro-organisms are then destroyed by simple contact with the
surface. Nova's antimicrobial technology can be bonded to almost any solid
surface such as metal, wood, siliceous material, plastic or organic materials.

         In comparison to most other biocides, it is effective against
single-celled organisms. Since it does not dissipate, it minimizes or eliminates
the potential for micro-organisms to adapt or build up tolerance, or to become
resistant. It acts by rupturing the cell membrane, not by poisoning the cell. By
contrast, all other antimicrobials, sanitizers and disinfectants are designed to
diffuse and be absorbed. Once absorbed, they act by poisoning the
micro-organisms or causing fatal mutations. However, as they diffuse, they lose
strength and adaptation can and usually does occur.

         Conventional biocides are designed to volatize and be absorbed by
organisms. Nova's antimicrobial, however, is a durable, broad spectrum
antimicrobial that chemically bonds to and, literally, becomes part of the
application surface. Treated surfaces remain active for a minimum of a least
three months. It acts only when micro-organisms come into direct contact with
it. Since the antimicrobial is not absorbed by organisms but remains a part of
each application surface, in effect it transforms conventional surfaces and
materials into active antimicrobial surfaces which will remain effective for
extended periods and which will result in a significant reduction of air-borne
microbial contaminants.

Competitive Position

         Nova's technology and products exhibit revolutionary, highly potent
activity with virtually no toxicity, unlike any other products and/or methods
currently in use. Nova's antimicrobial products demonstrate chemical action
drastically different from the conventional mechanism of action exhibited by
contemporary antimicrobials and disinfectants. Nova's unique technology provides
an unparalleled opportunity for market penetration in most industries.

                                       6
<PAGE>

Product Development

         At the heart of Nova's success is its ongoing commitment to an
extensive R&D program. This guarantees the successful development and
introduction of new products, enhancement of existing products and the
adaptation of products to yet new applications and wider markets. Nova will
continue to evolve and expand its technology platform and is developing the next
generation of chemistries and products.

Manufacturing, Blending and Distribution

         The manufacturing of the chemistries has been outsourced in North
America. Super-concentrate base chemistry is then shipped to designated
blenders. This safeguards the integrity of the manufacturing and blending
process.

         Blending has been outsourced as well for Europe. Additional UK blending
facilities and a pan-European distribution capability are available through a
specific UK leading independent chemical distributor and operates solely in the
UK and Ireland. The alliance includes key facilities in the USA, Asia and
Germany.

         Nova can provide bulk blending and distribution support when the
Company moves to large-scale European production. If required, a further UK
manufacturing capability has been negotiated. In Sweden we also have blending
and distribution facilities available, as required. This provides a local
platform into Scandinavia, the Baltic States and Russia in addition to other
European countries.

         By these means we have contingency coverage and volume capacity across
Europe. North America and Europe both have their own in-house chemists and
laboratory facilities, which enable us to augment our in-house testing and
technical support for our customers worldwide.

Intellectual Property

         From the outset it has been Nova's policy to pursue and secure various
technologies and to protect the unique and novel chemistries that are
commercially important to its business. The Company's current existing
technology cover 163 different compounds. New patent licenses or patent
applications, if and when awarded, typically have a twenty (20) year effective
term.

Markets

Introduction

         Specific markets have been identified as the priority focus for Nova's
marketing and sales operations. Within selected industries we have listed those
leading companies that either already are, or will become, our primary targets.
Key industries are as follows:

Building Materials Industry Profile

         One of the largest target markets for Nova is the worldwide
construction industry. Used as an additive, Nova dramatically enhances many
traditional building materials, including cement, grout, plaster, caulk,
adhesives and joint compounds. When integrated into concrete, for example, it
inhibits microbial growth, thereby dramatically enhancing the durability,
strength and longevity of the finished product. It also prevents deterioration
of the concrete by inhibiting the growth of bacteria, fungi and molds.

                                       7
<PAGE>

         Nova's technology is also cleared throughout the United States for
usage in both residential and commercial structures, and especially in confined
or enclosed spaces which would make the usage of other toxic chemicals
impractical and ultimately prohibitive. Our level of expertise and number of
specialists and contacts throughout the remediation, protection and restoration
markets are numerous. In addition to our Nova range of products, we also provide
a growing number of other unique products that complete the portfolio we offer
to the evolving construction industry.

Paints and Coatings Industry Profile

         The specialized chemical industry is under intense, worldwide pressure
to produce safer and more effective alternatives to the traditional biocides
being sold today. The proliferation of microbial growth, combined with
paint-and-coating specific problems, including clear coat finishes and
`pinholing,' is fueling the growing interest in antimicrobial solutions. Nova
has developed joint-research partnerships with two global market leaders in
order to capitalize on this expanding market. This framework of cooperation and
unrestricted access to joint findings, in addition to our strict adherence to
new legislation, including the Biocidal Products Directive (BPD) in Europe,
ensures that we can integrate cutting-edge technology into existing systems,
throughout the world.

Textile Industry Profile

         The textile industry has long recognized the overwhelming potential of
successfully integrating antimicrobial technology into the production and
manufacturing of textiles including wool, cotton, blended and synthetic fibers.
By being cross-platform compatible, the Nova antimicrobial technology can be
imparted seamlessly into these materials to provide protection against wear,
bacterial growth and odor. By offering the ability to brand garments with a
recognized Nova tag, the added value and perceived worth of these garments in
the eye of the consumer is greatly enhanced.

Carpet / Flooring Industry Profile

         Carpeting constitutes a major environmental surface for both
residential and commercial establishments. By its construction and use,
carpeting provides an ideal habitat for a large variety of micro-organisms, some
of which not only produce putrid and mildew odors, but also contribute to
unsightly defacement and deterioration of carpet components themselves. In
addition, the micro-organisms often produce infections or allergic conditions in
human beings.

         In institutions all floor coverings, textile as well as hard surfaces,
need to undergo periodic housekeeping to maintain a hygienic and aesthetic
appearance. For this reason, antimicrobial additives should be used as a part of
the cleaning procedures. Nova has a long history of effectiveness on flooring
material; benefits include exceptional antistatic properties. We are currently
working with a major European carpet manufacturer, who is looking to use our
technology during the manufacturing process.

Marine Industry Profile

         Nova products protect ships, ferries, yachts, boats, containers,
marinas, offices and other marine areas. Benefits include health and hygiene
protection in close-living conditions and prevention of external fouling, an
ongoing problem and significant cost to the owner. External fixtures, ranging
from hulls, ropes, masts, sails, handrails, life-jackets, lifeboats and deck
areas, are protected and the effects of salt-corrosion and other damage from
weathering are minimized. Nova antimicrobial treatment of all fabrics, furniture
and fittings, together with walls and floors, prevents damage from
micro-organisms and thereby increases the life of all the items appreciably.

                                       8
<PAGE>

         In Europe, extensive marine work has been conducted along the Adriatic,
Mediterranean and Atlantic coasts (in particular Spain, Portugal, Italy,
Slovenia and the UK). We have premium products under development for the marine
industry.

JanSan Industry Profile

         The combined revenue generated annually by industrial contract and
domestic cleaning companies in North America is staggering; the figure for the
UK alone exceeds (pound)12bn. Many additives once deemed safe and/or acceptable
by various worldwide sanctioning agencies, including the Environmental
Protection Agency (EPA), are in the process of being banned. Published `white
papers' in the United States and EU legislation are the catalysts driving the
sweeping change throughout these massive markets. The need for registered and
approved antimicrobial technology to replace the blacklisted chemicals is now
imperative. We have written programs and are creating product ranges for hotels,
gymnasia, spas and other areas of the leisure industry.

Commercial Laundry Industry Profile

         We have expertise in the commercial laundry industry and are working on
various products, suitable for either initial or ongoing washes. Benefits
include: prevention of cross-contamination risk; reduced electricity and other
major cost-savings, including reduced equipment maintenance and downtime;
softener; ant-corrosive and anti-static properties, UV protection, together with
extended life of sheets, uniforms, drapes and other items. We are working
closely with several hospital suppliers in UK and have recently completed
specific trials on their behalf, the results of which have been outstanding.

Air Filtration Systems & HVAC Industry Profile

         An estimated 90% of antimicrobial contamination is generated by
environmental sources. Increased scrutiny is being leveled at manufacturers of
integral components needed for a preemptive solution, such as air filtration and
HVAC systems, filters, duct work, cooling tower containers and drains. Consumer
demand is outpacing supply in a majority of the world, and the common consensus
is that antimicrobial, permanently-bonded agents are the preferred solution. The
ability to pre-treat almost all of these components is what makes the Nova
solution viable, cost-effective and easily implemented.

         There is a wealth of existing data which directly pinpoints
antimicrobial technology as being the only system to deal with these potential
health hazards primarily at the source of their introduction into both
commercial and residential environments.

Health Industry Profile

         In recent years, the emergence of chemical and antibiotic resistant
strains of bacteria (MRSA, VRSA, VRE and others) within high-risk environments
has caused major problems for Health Services worldwide due to hospital acquired
infections. Nova has developed a unique, fully integrated system of cleaning and
surface preparation, protected by an environmentally balanced antimicrobial
surface coating, which provides active protection against airborne and surface
microbial contamination.

         In addition, Nova can provide unique air filtration protection and
greatly enhanced air quality. Programs have been written and successful MRSA and
hospital trials have been completed. We are working with two global suppliers
and manufacturers to the health industry on a wide range of products and
services that will protect staff, patients and visitors at hospitals and other
health-related locations, including doctors' and dentists' surgeries.

                                       9
<PAGE>

Marketing and Sales

         Nova's route to market is simple and cost-effective. Our unique
products offer selected, leading companies with many new business opportunities.
In turn, this allows us to sell into large global markets on the back of these
companies' extensive customer-bases. The process will accelerate as each global
contract comes into play and the level of awareness of Nova and its proprietary
products increases.

Stepped Process

         Our marketing strategy is to demonstrate to clients how we can improve
their products, give them the market edge and improve their profits and market
share. We also offer global sharing of expertise, knowledge, contacts and
customer bases.

         Our marketing and sales strategy is based upon a process that is a
series of steps that create awareness and interest in our technology and
products so that the potential client is fully receptive by the sales stage of
the program. The steps are:

      o  Research an industry and categorize potential clients within that
         industry;

      o  Research the compatibility of chemistries;

      o  Identify how our technology can be integrated into existing products
         and create new, leading-edge products for clients;

      o  Create a bespoke presentation showing the marketing, sales and business
         strategy, together with the full product range and marketing material
         for individual clients;

      o  Having raised the interest level, highlight the benefits and business
         opportunity;

      o  Finalize the sale.

         This is the process that the Company will train all sales and/or
account managers involved in Nova marketing and sales and becomes a system that
can be replicated in each Nova region. The process is continually refined as
feedback is received from our customers and our own sales force.

         In addition, the process includes the provision of a package that
clients themselves can adopt to increase their market share and profitability.

Customers

Nova's customers fall into 3 categories:

      o  Multi-nationals / global companies;
      o  Wholesalers - both national and international;
      o  Smaller national companies.

Multi-nationals / Global Companies
----------------------------------

         The Company has been working with multinational manufacturing companies
both in North America and Europe. Global contracts will be co-ordinated through
Head Office and will subsequently be subdivided into regional sales and
manufacturing contracts. This will ensure continuity of supply and guaranteed
quality of products for customers around the world. A significantly large number
of internationally recognized companies are now evaluating our technology and
its potential applications across a diverse range of industries.

                                       10
<PAGE>

Wholesalers

         It is estimated there are as many as 200,000 wholesalers in Europe. Due
to the number of chemicals and products being taken off the market as a result
of new EU legislation (Biocidal Products Directive {BPD} and other directives),
wholesalers are actively seeking alternatives. The diverse applications of Nova
products are leading wholesalers to increasingly look in our direction.
Wholesalers provide a ready-made network of customers and a comparatively fast
route to market.

Nova BioGenetic's Global strategy

         The Nova global strategy is focused on harnessing our collective
intelligence and avoiding any unnecessary duplication of cost or effort. Each
region will contribute what it does best and will automatically benefit from all
global contracts. Other benefits will include being part of a global
infrastructure, lower production costs, shared ownership of all intellectual
property and immediate access to new licensed technologies and products. This
shall enhance Nova's overall earning power and share value.

Regions

Nova's global strategy is based upon four regions:

   o  THE AMERICAS     o  EUROPE     o  THE MIDDLE EAST     o  ASIA-PACIFIC

         The objective is to build quickly upon the existing platforms in North
America and Europe before moving into the Middle East. Once the infrastructure
is in place in Dubai, it will act as the essential fall-back position for the
Corporate Headquarters, should anything untoward happen in Atlanta. Until Dubai
has been established and is able to blend products, Europe will provide the
manufacturing and distribution capability for both the Middle East and
Asia-Pacific.

North America

The Head Office in Atlanta will provide all regions with:

      o  central administration and policy;
      o  R&D leading to new product and technology development;
      o  corporate training;
      o  technology, legal and essential approvals cover;
      o  global sales and marketing material;
      o  media and other public relations services;
      o  website facilities.

Europe

         In the UK, a senior management team with strong contacts within a vast
network of companies both in Europe and the Middle-East is in place. The
European team adds considerable talent, skill and experience in building and
running large organizations. More importantly, it is well versed and comfortable
with current uses and applications of antimicrobial products in various markets.

         Laboratory facilities as well as banking, legal and other professional
services are also available. Inventory has been shipped to the UK where in-house
blending and product trials continue to be successful. Samples have been
distributed and tested throughout Europe and elsewhere (for example, Morocco,
Pakistan, India and Singapore).

         Product ranges affiliated to the Nova technology have been identified
and are being prepared for leading European companies in specific markets such
as leisure, health, building materials, air filtration, remediation, paint,
coatings and hygiene.

                                       11
<PAGE>

Dubai

         The case for establishing a presence in Dubai is overwhelming. Not only
is Dubai at the historical crossroads of East - West trade, but it is also
positioned to become the centre of global business over the next decade.

         We have visited the three Free Zones established at Sharjah Airport,
Dubai International Airport and Jebel Ali Port. At each location we viewed
office units, warehouses / light industrial units, shared business facilities
and land sites. All the Zones offer outstanding facilities; in the light of our
particular requirements, Jebel Ali Port is the best option and it is currently
planned to lease an office / warehouse / blending facility there in early 2006.
There are many advantages to setting up business in a Free Zone.

Asia-Pacific

         Asia-Pacific is a distinct geographical territory; Europe will provide
cover for this region until Dubai is up-and-running.

Biopharmeuticals Division

         Nova's biopharmaceuticals' division is engaged in the discovery,
development, and commercialization of new therapeutic agents that treat life
threatening infectious diseases. Nova's biopharmaceuticals division's pipeline
is based on various technologies, used as a broad base for applications with
existing antibiotic compounds. Attaching certain technology with antibiotic
compounds is intended to facilitate potential disruption of bacterial agents.

         In particular, Nova's biopharmaceutical mission is to provide solutions
to the major therapeutic dilemma of growing bacterial resistance to antibiotics
in the present worldwide marketplace. It will use its technology to develop a
suite of new antibiotics and antibiotic derivative products. Nova Biogenetics'
antibiotic product suite will fall under "Antibiotic Resistance Technology,"
otherwise referred to as "ART"

Product Differentiation/Competitive Advantage

         Nova's broad line of specialized antibiotic products has the potential
of disrupting the cell membrane of targeted microorganisms, thus killing them.
Presently, generic antibiotic formulations act by diffusing the targeted
organism cells and providing the optimal environment for cellular activity to
take over and combat the infection. Nova's compounds have the potential to
actually kill the targeted organism, significantly enhancing existing generic
antibiotic agents.

         In addition, Nova possesses the competitive advantage of providing a
product platform that can create longevity in the drugs that it produces, by
delivering antibiotics that are less susceptible to adaptation or mutation. Much
has been learned about the "ART" platform, adding to the volume of microbiologic
information available, thus shortening the timeline for development and
minimizing the research associated with creating a viable core platform from
which to work.

Product Research & Development Pipeline

         Nova views bacterial resistance as a major hurdle in effective
therapeutic interventions for a significant number of infectious disease
processes. This is ever apparent in the clinical practice, where physicians and
other healthcare providers are constantly exposed to a number of new antibiotics
being offered by pharmaceutical manufacturers, while familiar antibiotic therapy
continues to be limited. In both cases, bacterial resistance and the broad
spectrum of use are identified as the reasons for the introduction of the new
and improved products.

         Nova intends to file patents to secure the intellectual property of the
compounds and effective molecules Nova will utilize in its pipeline.

                                       12
<PAGE>

The Market for Antibacterial Products

         The worldwide sales of prescription antibiotics exceed $23 billion
(Biotechnology Industry Association). Antibiotics represent the second largest
therapeutic category in terms of pharmaceutical sales. While there are more than
100 different antibiotics from more than 30 different classes, approved for use
in humans, a select few antibiotics and classes garner the majority of use. Most
of the leading products are broad spectrum, with only a few reserved for
targeted or restricted use. While the overall market continues to grow at a rate
of 6.5% annually, as antibiotics are increasingly used in combination to combat
resistant bacteria, a few new classes of antibiotics have been introduced during
the past twenty years.

Explanation of Antibiotic Resistance

(Source: United States Food and Drug Administration)

         Disease-causing microbes that have become resistant to drug therapy are
an increasing public health concern. Tuberculosis, gonorrhea, malaria, and
childhood ear infections are just a few of the diseases that have become hard to
treat with conventional antibiotic drugs. Part of the problem is bacteria and
other microorganisms that cause infections are remarkably resilient and can
develop ways to survive drugs meant to kill or weaken them. This antibiotic
resistance, also known as antimicrobial resistance or drug resistance is due
largely to the increasing use of antibiotics. Other facts:

      o  Though food-producing animals are given antibiotic drugs for important
         therapeutic, disease prevention or production reasons, these drugs have
         the downside of potentially causing microbes to become resistant to
         drugs used to treat human illnesses, ultimately making some human
         ailments harder to treat.

      o  About 70 percent of bacteria that cause infections in hospitals are
         resistant to at least one of the drugs most commonly used to treat
         infections.

      o  Some organisms are resistant to all approved antibiotics and must be
         treated with experimental and potentially toxic drugs.

      o  Research has shown antibiotics are given to patients more often than
         the recommended guidelines set by federal and other healthcare
         organizations. For example, patients sometimes ask their doctors for
         antibiotics for a cold, cough, or the flu, all of which are viral and
         do not respond to antibiotics. In addition, patients who are prescribed
         antibiotics do not take the full dosing regimen, thus contributing to
         resistance.

      o  Unless antibiotic resistance problems are detected as they emerge, and
         actions are taken to contain them, the world could be faced with
         previously treatable diseases that have become once again untreatable,
         as in the pre antibiotics era.

Commercial Strategy
-------------------

         Nova is committed to developing its biopharmaceutical division and
intends to be at the forefront of the therapeutic developments, focused on
overcoming bacterial resistance to antibiotics.

         Nova's commercial strategy is to partner with established
pharmaceutical companies in the major antibacterial markets; while retaining
rights to antibiotics based upon certain technology the Company will seek to
develop and commercialize independently.

                                       13
<PAGE>

Antibiotic Resistance Technology (ART)

         The widespread and uncontrolled use of antibiotics, both for human
consumption and animal feed, has encouraged the development of drug resistance
in a variety of pathogenic microorganisms. These microorganisms employ
resistance mechanisms, which include the modification of the antibiotic
structure, mutagenesis of key amino acids in the macromolecular targets of
specific chemotherapeutics, or drug efflux from the cell, among others. These
three main mechanisms have been identified in resistance profiles for systems
involved in protein biosynthesis, nucleic acid replication, and bacterial cell
wall generation.

         Most antibiotics, presently used in humans, are natural products
manufactured by different species of bacteria or fungi to be employed in their
own survival -- for example, to kill other microbes in times of overpopulation.
In a natural environment, such as soil, bacteria exchange genetic information
(such as resistance genes) with great facility and lack of species specificity,
thus allowing molecular determinants of resistance to be passed on to other
microbes with great ease.

         Such resistance-development methodologies fall into three main
categories: (i) inactivation of the antibiotic by modification of its active
chemical moiety; (ii) specific modification of the macromolecular target, i.e.,
by mutagenesis of key residues, and (iii) promotion of antibiotic efflux from
the cell. Today, the emergence of bacterial strains, which display resistance to
a variety of drugs (multiple drug resistant; MDR), is the major cause of failure
of treatment of infections worldwide. Methicillin-resistant Staphylococcus
aureus (MRSA) strains already require vancomycin as the last resort for
treatment, and Streptococcus pneumoniae strains, which no longer respond to
vancomycin, have already been identified. Multi-drug resistant Mycobaterium
tuberculosis is another example of an emerging infectious disease with
world-wide significance.

         Nova's biopharmaceutical solution to emerging antibiotic resistance in
microorganisms will use the application of its technology to develop a suite of
new antibiotics and / or antibiotic derivatives. Nova Biogenetics' antibiotic
product suite will fall under "Antibiotic Resistance Technology," otherwise
referred to as "ART".

RISK FACTORS

         Any investment in our common stock involves a significant degree of
risk. You should not invest in our common stock unless you can afford to lose
your entire investment. You should consider carefully the following risk factors
and other information in this Form 10-KSB before deciding whether to invest in
our common stock. We have only a limited operating history and have not operated
profitably since commencement of operations. Our operations have never been
profitable. We have incurred net losses since inception through June 30, 2006 of
$4,657,316 and it is expected that we will continue to incur operating losses in
the future. For the fiscal year ended June 30, 2006, we generated revenues of
$221,248 and had a net loss of $1,669,353.

         There is no assurance that we will operate profitably in the future.
Our independent auditors have added an explanatory paragraph to their audit
opinion, issued in connection with our financial statements, which states that
our ability to continue as a going concern is uncertain due to our continued
operating losses, the excess of our liabilities over our assets and uncertain
conditions we face in our day-to-day operations.

         Our financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Our future revenues are
unpredictable. As a result of our limited operating history and the highly
competitive market in which we compete, we are unable to accurately forecast our
revenues.

                                       14
<PAGE>

         Revenues and operating results generally depend on the volume of,
timing of and ability to fulfill services, and competitive conditions, which are
difficult to forecast. We may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to our planned expenditures would have an
immediate adverse effect on our business, prospects, financial condition and
results of operations. We will need to raise additional funds to provide
sufficient working capital to continue our operations. If we are unable to raise
additional capital, our results of operations will be materially adversely
affected. As described above, the report of our independent auditors for fiscal
2005 contains a qualification as to our ability to continue as a going concern.
We will need to raise additional capital or our ability to continue our
operations, implement our business strategy and to generate any significant
revenues will be adversely affected. The amount of additional capital we require
is based upon a number of factors, including the level of our continuing
revenues and costs associated with the marketing of our services. Even if we
raise additional capital, we cannot guarantee that we will ever generate any
significant revenues or report profitable operations. In addition, our business
plan may change or unforeseen events may occur which require us to raise
additional funds. We do not presently have any agreements or understanding with
third parties which will enable us to raise additional capital. Given our
relatively small size, history of losses and overall weakness in the capital
markets, we are unsure as to our ability to raise additional working capital.
Even if we locate a source willing to invest in our company, additional funds
may not be available on terms acceptable to us or when we need such funds. The
unavailability of additional funds when needed is likely to have a material
adverse effect on us. If adequate funds are not available to satisfy short-term
or long-term requirements, our management will be required to consider a variety
of other options including curtailing the development and growth of the services
we propose to offer, as well as other cost cutting actions, including suspending
all or a portion of our activities.

         If we raise additional capital through the issuance of debt, this will
result in increased interest expense. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of
Nova BioGenetics Inc held by existing shareholders will be reduced and those
shareholders may experience significant dilution. In addition, new securities
may contain certain rights, preferences or privileges that are senior to those
of our common stock. There can be no assurance that acceptable financing can be
obtained on suitable terms, if at all. Our inability to raise the additional
funds need will have a material adverse affect on our results of operations in
future periods.

         Fluctuations in our operating results may adversely affect our stock
price and purchasers of our shares of common stock may lose all or a portion of
their investment. Historically, there has been volatility in the market price
for our common stock, although no active or established trading market exists.
Our quarterly operating results, changes in general conditions in the economy,
the financial markets or the marketing industry, or other developments affecting
us or our competitors, could cause the market price of our common stock to
fluctuate substantially. We expect to experience significant fluctuations in our
future quarterly operating results due to a variety of factors.

FACTORS THAT MAY ADVERSELY AFFECT OUR QUARTERLY OPERATING RESULTS INCLUDE

         The announcement or introduction of new services and products by us and
our competitors; - our ability to retain existing clients and attract new
clients at a steady rate, and maintain client satisfaction - the amount and
timing of operating costs and capital expenditures relating to expansion of our
business and operations; - increased government regulation; and - general
economic conditions and economic conditions specific to the biotech industry. As
a result of these factors, in one or more future quarters, our operating results
may fall below the expectations of securities analysts and investors. In this

                                       15
<PAGE>

event, the market price of our common stock would likely be materially adversely
affected. In addition, the stock market in general and the market prices for
biotech related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of those companies.
These broad market and industry fluctuations may adversely affect the price of
our common stock, regardless of our operating performance. If we lose our key
personnel or are unable to attract and retain additional personnel, our ability
to compete would be harmed. We are highly dependent on our management, in
particular Dr. Kevin Smith, our CEO. We are parties to employment agreements
with these individuals, if for any reason we should be deprived of their
services our business would be adversely affected until we could find a suitable
replacement. In addition, in order to pursue our product development, marketing
and commercialization plans, we will need to hire additional qualified personnel
with expertise in sales and marketing, and finance. Attracting and retaining
qualified personnel will be critical to our success, and competition for
qualified personnel is intense. We may not be able to attract and retain
personnel on acceptable terms given the competition for such personnel among
technology and biotech companies, and universities. Our inability to attract and
retain qualified personnel could harm our business and our ability to compete.

         We do not intend to pay dividends. We have never paid any dividends on
our common stock and it is unlikely that we will pay any dividends in the
foreseeable future due to our anticipated substantial cash requirements for
future operations. We anticipate using any proceeds of investments in us and any
earnings received from operations for the marketing, development and expansion
of our proposed business, for operating capital and for corporate development
and expansion activities.

         Our common stock is regulated as a "penny stock" by the Securities and
Exchange Commission. We are subject to additional regulation by the Securities
and Exchange Commission under its rules regulating broker-dealer practices in
connection with transactions in "penny stocks." This type of regulation may
reduce the level of trading activity or your ability to sell the common stock.
Penny stocks generally are equity securities with a price of less than $4.00
that are not registered on certain national securities exchanges or quoted on
the NASDAQ Stock Market.

         The penny stock rules require a broker-dealer, prior to a transaction
in a regulated penny stock, to deliver a standardized risk disclosure document
that provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer must also provide information
concerning his compensation for the penny stock purchase, current prices of the
penny stock, and a special written determination that the penny stock is a
suitable investment for the purchaser.

         The market for our common stock is poorly developed. Purchasers of our
securities should anticipate a thin and volatile market. Investors that purchase
our common stock may not be able to sell their securities. Our common stock is
currently quoted on the OTCBB. There are many days when our common stock does
not trade at all. The spread between the quoted bid and ask prices is usually
great. As a result of the thinly traded nature of our common stock and lack of
market support by brokers or dealers, purchasers of our shares may have great
difficulty in liquidating their investments.

ITEM 2.  DESCRIPTION OF PROPERTY

We are located in the Northridge 400 Business Park at 8601 Dunwoody Place, Suite
338 Atlanta, Georgia 30350. The office contains approximately 3200 square feet
and is currently under a five year lease through May 2008. In accordance with
the terms of the Company's lease agreement commencing on June 30, 2005 and
expiring on May 31, 2008, the Company's monthly payment obligation is
approximately $2,700. The lease agreement is subject to an annual rent
escalation of approximately three percent. See also footnote to audited
financial statements.

                                       16
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

The following is a list of law suits in which Nova BioGenetics, Inc. or Nova
Specialty Chemicals, Inc. is presently involved.

Nova Biogenetics has a pending judgment in the amount of $42,000 from CFO On
Call, the former accountant for Nova's predecessor Healthcare Network Solutions,
Inc. The Company continues to contest this action vigorously.

Nova Specialty Chemicals, Inc. vs. Microbe Guard, Inc. State Court of Fulton
County Civil Action File Number: 2005-vs-086702-G, Suit filed 8/30/2005

This suit was dismissed and was to be refiled. Legal counsel is deciding whether
to incorporate this claim into the suit with Emory University and Microbe Guard,
Inc. vs. Nova BioGenetics, Inc. et. al. United States District Court, Northern
District of Georgia Civil Action File Number 1-06-CV-0141-JEC, Suit filed
1/20/06, as a counter-claim or to re-file in the State Court in Fulton County.
No decision has been made at this time.

Microbe Guard, Inc. vs. Nova Specialty Chemicals, Inc. et. al. Minnesota State
Fourth Judicial District Court Civil Action File Number: 27-CV-06-633, Suit
filed 12/21/2005

This suit was filed by Microbe Guard alleging breach of contract because Nova
has refused to continue to sell its EPA registered products to Microbe Guard.
Nova's position is there is no written or verbal agreement between Nova and
Microbe Guard. Additionally, Nova has never directly conducted business in
Minnesota and is therefore not subject to the jurisdiction of the Minnesota
Court. This suit is pending pre-trial motions and discovery.

International Biochemical Industries, Inc. a/k/a BioShield (Bankruptcy)
Adversary Proceedings by Chapter 7 Trustee Herbert C. Broadfoot II vs. Nova
BioGenetics, Inc. United States Bankruptcy Court, Northern District of Georgia
Case Number 04-92814-JB, Suit Filed 1/17/06

This suit was filed by the Trustee to determine if sufficient consideration was
provided by Nova to the Debtor for the transfer and exchange of one half of the
rights in the various patents owned by the debtor and sold to Nova. The suit was
filed by the Trustee in order to preserve his possible claim, in light of a
deadline imposed by the Court. It is Nova's position that more than sufficient
consideration was provided to the debtor including but not limited to the
payment of maintenance fees and the transfer of Nova stock to the debtor, all of
which occurred approximately two years before the debtor filed for bankruptcy
protection. Nova and the trustee have agreed the ownership issue of all assets
in question in this law suit will be resolved at the time the trustee auctions
the assets of International Biochemical Industries on December 13, 2006.

Kenneth E. Banwart, William Bush, et. al. vs. Nova BioGenetics, Inc. et. al.
Superior Court of Fulton County, Civil Action File No. 2006-CV-120503, filed
July 31, 2006.

This is a claim filed by a few shareholders who previously sought to become
members of the board of directors of the corporation. The plaintiffs have
alleged discrepancies or failure to disclose information regarding former
corporate officer Tim Moses in the Private Offering Memorandum in 2004. Nova's
position is there were no discrepancies or failure to disclose any information
regarding former corporate officer Tim Moses. Nova has asserted an additional
affirmative defense under Georgia law which requires the filing of a timely
complaint by investors to rescind their investment after learning of alleged
misrepresentations, see (Liberty v. Storage Trust Properties, L.P., 267 Ga
App.905,910 (2004) and Buckley v. Turner heritage Homes, 248 Ga. App
793,795(2001)).

                                       17
<PAGE>

Emory University and Microbe Guard, Inc. v. Nova BioGenetics, Inc. and Timothy
C. Moses, Civil Action No. 1:06-cv-141-TWT, U.S. District Court, Northern
District of Georgia, Atlanta Division ("the Action").

The Action alleges that products made and sold by Nova infringe patents owned by
Emory University and allegedly licensed to Microbe Guard, Inc. Nova retained
Sanford J. Asman, Esq., a licensed patent attorney with 35 years of patent
(filing and litigation) experience to defend the suit. After Mr. Asman examined
the original complaint, filed on January 20, 2006, he corresponded with the
attorneys representing the plaintiffs who then voluntarily dismissed, with
prejudice, one count of the complaint involving one of the three patents.
Plaintiffs then filed a First Amended Complaint which alleged infringement of
only the remaining two patents. Nova responded to the First Amended Complaint by
filing a motion to dismiss and a motion to disqualify the plaintiffs' law firm.
In response to that filing, plaintiffs filed a motion seeking leave to file a
Second Amended Complaint, which motion was granted by the court, which denied
Nova's motions to dismiss the First Amended Complaint, in view of the corrective
pleading by plaintiffs in their Second Amended Complaint. Based on the fact that
none of the attorneys who took part in the prosecution of the applications which
resulted in the issuance of the remaining two patents in suit would be taking
part in the litigation (only one of whom remains with plaintiffs' law firm, the
two others having departed), the court denied Nova's motion to disqualify
plaintiffs' law firm. Plaintiffs have now filed their Second Amended Complaint,
and Nova will respond within the time permitted.

At this time management of Nova is responding by vigorously contesting that Nova
is infringing either of the two remaining patents in suit.

As it is quite early in the proceedings, in that the plaintiffs have only
recently filed their Second Amended Complaint, to which Nova has not yet had to
respond, no discovery has yet taken place. Based on representations by Nova, it
is Mr. Asman's understanding that Nova is not manufacturing or selling any
products which infringe either of the two patents in suit. Consequently, there
presently appears to be minimal, if any, exposure in this litigation.

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

None

                                       18
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
         BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

         Our common stock is quoted on the OTCBB. It was approved for quotation
on the OTCBB on January 4, 2002 originally under the symbol HNWS and after the
completion of the reverse acquisition in March 2003 has traded since August,
2003 as NVBG.

         The following table sets forth, for the periods indicated, the range of
high and low bid prices on the dates indicted for the Registrant's securities
indicated below for each full quarterly period within the two most recent fiscal
years (if applicable) and any subsequent interim period for which financial
statements are included and/or required to be included.

 Fiscal Year ended June 30, 2005       (1) Quarterly Common Stock Price Ranges
 -------------------------------        ---------------------------------------
 Quarter     Quarter Ended                     High                Low
 -------     -------------                     ----                ---
 1st         September  30, 2004               $0.22               $0.22
 2nd         December 31, 2004                 $0.22               $0.20
 3rd         March 31, 2005                    $1.90               $0.85
 4th         June 30, 2005                     $1.25               $1.15

 Fiscal Year ended June 30, 2006       (1) Quarterly Common Stock Price Ranges
 -------------------------------        ---------------------------------------
 Quarter     Quarter Ended                     High                Low
 -------     -------------                     ----                ---
 1st         September  30, 2005               $1.68               $0.67
 2nd         December 31, 2005                 $0.93               $0.50
 3rd         March 31, 2006                    $0.75               $0.21
 4th         June 30, 2006                     $0.30               $0.10
__________
(1) The existence of limited or sporadic quotations should not of itself be
deemed to constitute an "established public trading market." All prices
indicated are as reported to the Registrant by broker-dealer(s) making a market
in its common stock in the Over-The-Counter Bulletin Board. During the indicated
periods of time, the Registrant's common stock was not traded or quoted on any
automated quotation system other than as indicated herein. The market quotes
indicated reflect inter-dealer prices without retail mark-up, mark-down or
commission and do not necessarily represent actual transactions.

HOLDERS

As of the close of business on October 12, 2006, there were 200 stockholders of
record of the Registrant's Common Stock and 14,819,815 shares issued and
outstanding.

DIVIDEND POLICY

We have never paid cash dividends on our common stock. We intend to keep future
earnings, if any, to finance the expansion of our business. We do not anticipate
that any cash dividends will be paid in the foreseeable future.

During fiscal year ended June 30, 2006, the Company did not purchase any of its
equity securities.

                                       19
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE
RELATED NOTES INCLUDED IN THIS FORM 10-KSB. THIS REPORT OF FORM 10-KSB CONTAINS
FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS
AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS.
THESE FORWARD-LOOKING STATEMENTS INCLUDE ALL STATEMENTS THAT ARE NOT STATEMENTS
OF HISTORICAL FACT. YOU CAN IDENTIFY THESE STATEMENTS BY OUR USE OF WORDS SUCH
AS "MAY", "EXPECT", "BELIEVE", "ANTICIPATE", "INTEND", "COULD", "ESTIMATE",
"CONTINUE", "PLANS", OR THEIR NEGATIVES OR COGNATES. SOME OF THESE STATEMENTS
INCLUDE DISCUSSIONS REGARDING OUR FUTURE BUSINESS STRATEGY AND OUR ABILITY TO
GENERATE REVENUE, INCOME AND CASH FLOW. WE WISH TO CAUTION THE READER THAT ALL
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-KSB ARE ONLY ESTIMATES AND
PREDICTIONS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
AS A RESULT OF RISKS FACING US OR ACTUAL EVENTS DIFFERING FROM ASSUMPTIONS
UNDERLYING SUCH FORWARD-LOOKING STATEMENTS. SOME FACTORS THAT COULD AFFECT OUR
RESULTS INCLUDE THOSE THAT WE DISCUSS IN THIS SECTION AS WELL AS ELSEWHERE IN
THIS FORM 10-KSB. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. WE WILL NOT UPDATE THESE
FORWARD-LOOKING STATEMENTS UNLESS THE SECURITIES LAWS AND REGULATIONS REQUIRE US
TO DO SO.

The following discussion and analysis should be read in conjunction with the
financial statements and notes appearing elsewhere in this report. We were
incorporated under the laws of the State of Delaware on April 23, 2001. Through
March 2003, we completed a reverse acquisition with Healthcare Network Solution.
In August the name of the Company was changed to Nova Biogenetics and the stock
symbol was changed in August, 2003 to NVBG. On June 30, 2005, the company
acquired a U.K.-based company with a broad range of experience in sales and
marketing of antimicrobials and specialty chemicals in Europe and the
Middle-East. This acquisition represents the harbinger necessary for the
introduction to a large global market for the company to have the ability to
service future global contracts in the coming year.

Following is our discussion of the relevant items affecting results of
operations for the years ended June 30, 2006 and 2005.

REVENUES. Net Revenues generated during the year ended June 30, 2006 were
$221,248, a 54% decrease compared to $482,679 for the year ended June 30, 2005.
The decrease is mainly due to the acquisition of Eco Group in Europe on June 30,
2005. Eco Group was previously a customer buying product from the Company until
they were acquired. This in turn decreased revenues from outside customers.
Furthermore, management has concentrated on potential contracts with some large
customers in both the United States and the United Kingdom.

COST OF SALES. Cost of sales consist of products purchased from our suppliers.
Cost of sales for the year ended June 30, 2006, were $34,469, a 26% increase
compared to $27,304 for the year ended June 30, 2005. The increase is due to
increased costs of raw materials as well as adjustments made to our inventory
asset to value it at the lower of cost or market.

SALARIES AND CONSULTING EXPENSES. Salaries and consulting expenses were $479,619
for the year ended June 30, 2006, compared to $204,760 for the year ended June
30, 2005, representing a 134% increase. Salaries and consulting expenses consist
of salaried and hourly employees including staff used for our research services,
our technical development staff, marketing staff and office personnel. The
increase is mainly due to the acquisition of Eco Group on June 30, 2005 which
contributed increased infrastructure and staffing in the United Kingdom. Also,
due to cash constraints, certain employees and consultants were issued common
stock of the company for services provided. Furthermore, we continue to ramp up
our technical development for the upcoming year.

                                       20
<PAGE>

PROFESSIONAL FEES. For the year ended June 30, 2006, the Company incurred
professional fees of $279,297, a 62% increase compared to $172,484 for the year
ended June 30, 2005. The increase is primarily related to legal fees associated
with our acquisition of Eco Group in the U.K. as well as legal and accounting
fees relating to our financial statement audits and SEC filings. Furthermore,
due to cash constraints, common stock of the company was issued to pay for legal
services received.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the year ended June 30, 2006,
we incurred selling, general and administrative expenses of $1,031,619 as
compared to $1,274,019 for the year ended June 30, 2005 which represents a 19%
decrease. The decrease was due to the efforts by management in keeping costs to
a minimum. We expect selling, general and administrative expenses to increase in
the future as we continue the implementation of our business plan and expansion
of operations, including increased travel due to our sales efforts, as well as
an increase in personnel to offset growth of our major customer requirement for
technical support.

OTHER INCOME/EXPENSES. The Company had net other expenses of $65,597 for the
year ended June 30, 2006 compared to $744,045 for the year ended June 30, 2005.
The decrease is mainly the result of the loss on impairment of goodwill in the
amount of $720,211 which was realized during the year ended June 30, 2005. Other
expenses consist of interest expense on notes payable and other liabilities.
Other income in this category consists of rental income for the use of the
Companies lab.

As a result of the factors discussed above, we reported a net loss of $1,669,353
or $(0.14) per share for the year ended June 30, 2006 as compared to a net loss
of $1,939,933 or $(0.22) per share for the year ended June 30, 2005.

The trends in the antimicrobial industry are finally moving towards non-leaching
antimicrobial technologies, primarily due to the Biocidial Product directives in
the European Union. This has changed the company's focus towards longer term
agreements, while at the same time has increased our sales lead time from
anywhere between six months and two years. The goal of this objective is to
strengthen our long term sustainable sales to build a solid foundation for the
future.

The $2 billion annual United States disinfectant and antimicrobial chemical
market is expected to grow five (5) percent annually through 2009 (Freedonia
Market Research). International industry trends continue to move towards
non-leaching, non-toxic microbiostatic technologies that do not result in the
creation of antibiotic resistant bacteria (European Biocidal Product Directive).
In 2006 Nova licensed recently formulated patent pending antimicrobial
technology that meet stringent international demands for non-leaching,
non-toxic, highly concentrated, cost-effective antimicrobial products. Nova's
European office began receiving sales in April for the company's higher
concentrated product that is sold by the ton (2,000 lbs); the company is
negotiating licensing of its innovative patent pending technologies with
international distribution networks. International licensing agreements and fees
will facilitate rapid international deployment to capture new markets. A
previous Supply Agreement between Nova, a construction industry company, and
Palmer Holland for construction sales was terminated on April,7 2006. After
completion of international licensing, Nova will release new licensed technology
into the US market. Long term licensing agreements continue to be Nova's
strategic focus. The goal is gaining long term sustainable sales to build a
solid foundation for future growth.

                                       21
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2006, the Company's primary source of liquidity consisted of
$64,179 in cash and cash equivalents. The Company holds most of its cash
reserves in accounts with local financial institutions. At June 30, 2006, we had
a stockholders' deficit of $1,408,404. Since our inception, the Company has
generated an accumulated deficit of $4,657,316. Net cash used in operations
during the fiscal year ended June 30, 2006 was $1,030,718 and was attributable
to our loss from operations of $1,603,756. Net cash provided by financing
activities for the fiscal year ended June 30, 2006 was $489,311. Additionally,
We may not have sufficient cash flow from operations to sufficiently meet all of
our cash requirements for the next 12 months absent additional capital raising
activities or growth of revenue sources. At this time, however, we have no
agreements or understandings with any third parities regarding additional
capital, and we cannot guarantee that we will be successful in obtaining capital
upon terms acceptable to us, if at all. Our failure to secure necessary
financing would have a material adverse effect on our financial condition and
results of operations.

ITEM 7.  FINANCIAL STATEMENTS

The financial statements required by this report are included, commencing on
page F-1.

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

None.

ITEM 8A. CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of our chief
executive officer and chief accounting officer, conducted an evaluation of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934 (the "Exchange Act") Rules 13a-14(c)). Based on their evaluation, our
chief executive officer and chief accounting officer have concluded that as of
the Evaluation Date, our disclosure controls and procedures are effective to
ensure that all material information required to be filed in this Annual Report
on Form 10-KSB has been made known to them in a timely fashion.

There have been no significant changes (including corrective actions with regard
to significant deficiencies or material weaknesses) in our internal controls or
in other factors that could significantly affect these controls subsequent to
the Evaluation Date set forth above.

ITEM 8B. OTHER INFORMATION

See Footnote to audited financial statements.

                                       22
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our current directors and executive officers are as follows. Our directors serve
until the next annual meeting of our stockholders and our officers hold their
positions at the pleasure of the board of directors, subject to the terms of
their employment agreements which are described elsewhere herein There is no
arrangement or understanding between our directors and officers and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.

    NAME                 AGE      POSITION

Dr. Kevin Smith          48       CEO,President, Director
Mr. Robert McMahon       49       Executive Vice President
Ms. Shelley Moses        48       Secretary/Treasurer, Director
Mr. William Crook        54       Managing Director/Europe

Dr. Smith has served as CEO and President as well as a member of the Board of
Directors since the Company's inception. He enriches the company with his 20+
years of experience in both the private and academic sectors of the fields of
Preventive and Occupational Medicine. He has trained at Yale University, the
University of Iowa, and is pursuing his PhD at the Karlinski Institute in
Stockholm, Sweden. Dr. Smith has served as Medical Director for HealthSouth in
Georgia and has held multiple board seats for many publicly traded companies.
Currently, he is affiliated with Emory University as an associate professor in
the School of Public Health and as a professor in the School of Nursing at
Kennesaw State University. Dr. Smith presently owns an expanding number of
clinics in the Atlanta area; and recently, he proudly served our country abroad
as a Medical Officer (Major) in the United States Army Reserves in the effort as
part of the Operation Iraqi Freedom. His role at Nova BioGenetics continues to
encompass his interests in assisting in expanding the implementation of the
company's global strategy and defining the vision of the company's
biopharmaceutical division

Prior to joining Nova in 2005, Mr. McMahon was President for Bio-Tek Industries,
Inc. Bio-Tek was a specialty chemical ISO compliant manufacturing company, which
included the human and animal health markets. Having started in quality
assurance, he quickly advanced to executive level positioning as a result of his
ability to understand not only microbiologically the mechanics of specialty
chemical products but also how to implement effective marketing strategies for
specialty chemical product sales. Mr. McMahon's background also includes having
managed laboratories that performed EPA and FDA testing for Microbac Labs in
Boston and Atlanta. As a member of the American Chemical Society, Mr. McMahon
holds a BS in Cell Biology from the University of Massachusetts and an MBA in
Entrepreneurship from Kennesaw State University.

Ms. Moses brings a wealth of experience to the Company and the board of
directors that dates back over twenty years and originates from her day to day
involvement of having owned and managed several small companies. Further, she
provides over a decade of experience in the antimicrobial and biostatic industry
and controls a solid working knowledge of the antimicrobial market and Nova
products line. Since joining Nova as a full time employee, Ms. Moses has played
an instrumental role in assembling a team of dedicated and determined
individuals, who manage the Nova North American and European offices. Assisting
with the management of operations of the Company's affairs on a daily basis, Ms.
Moses' efforts also include providing corporate vision, guidance on the
implementation of global strategy and the ability to offer limited technical
assistance when needed. She is deeply involved with ongoing product and
technology development enhancements within the Research and Development area.
Having attended the University of West Georgia, Ms. Moses enjoys reading,
traveling, gardening and spending time with her family.

                                       23
<PAGE>

Bill Crook brings a life-time of commercial knowledge and expertise to Nova
BioGenetics. His career includes over 20 years' Group Managing Director
experience, during which he has built up a series of successful Groups in the
United Kingdom with business interests worldwide. During the past 12 years he
has been at the forefront of European best practices in eco-hygiene, protection
and restoration. His experience includes five years' market research and trials,
often involving innovative antimicrobial applications and programmes devised
personally by him. A colleague of Tim Moses since 2001, he has played a part,
either directly or indirectly, in the development of the Nova business strategy
over a prolonged period. More recently, he has created a network of UK-based
companies that is now ready to take the Nova technology to a range of markets
globally. A lifelong student of business and current affairs, his other
interests include martial arts, sport, travel and reading.

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table The table below sets forth information relating to
the compensation paid by us during the past two fiscal years to: (i) the
President and Chief Executive Officer; and (ii) each other executive officer who
earned more than $100,000 during Fiscal 2005 and 2006 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
                                       Annual Compensation                       Long Term
                                -------------------------------   -----------------------------------
                                Fiscal                              Other Annual       Restricted
Name and Principal Position      Year    Salary ($)   Bonus ($)   Compensation ($)   Stock Awards ($)
---------------------------      ----    ----------   ---------   ----------------   ----------------
<S>                              <C>      <C>          <C>              <C>           <C>
*Dr. Kevin Smith (CEO)           2006     $ -0-        $ -0-            $ -0-         $ -0-

Mr. Robert McMahon (EVP)         2006     $85K         $ -0-            $ 10K         $ -0-

Mr. William Crook (E/Dir/Europe) 2006     $133K        $ -0-            $ -0-         $ -0-

**Ms. Shelley Moses (Sec/Tres)   2006     $120K        $ -0-            $ -0-         $ -0-
</TABLE>
__________
*  Dr. Kevin Smith has fore barred his salary for all of 2006
** Ms. Shelley Moses salary is based on accrual and receives S-8 options in lieu
   of cash salary

OPTION/SAR GRANTS IN LAST FISCAL YEAR

Stock Option Plan pursuant to March 20, 2006 Board of Directors approval, we
adopted our 2006 Non-Statutory Stock Option Plan ("Plan") whereby we reserved
for issuance up to 2,000,000 shares of our common stock. In February 2006 we
filed a registration statement on Form S-8 registering the shares of common
stock issuable upon the exercise of options granted under the Plan. The
principal terms of the Plan are summarized below but it is not intended to be a
complete description thereof and such summary is qualified in its entirety by
the actual text of the Plan.

                                       24
<PAGE>

The purpose of the Plan is to provide our directors, officers and employees of,
consultants, attorneys and advisors with additional incentives by increasing
their ownership interest in our company. Directors, officers and other employees
of our company are eligible to participate in the Plan. The Plan provides for
the issuance of non-incentive options (NSOs) only, which are not intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code, as amended. Our Board of Directors or a Compensation
Committee (once established) administers the Plan with the discretion generally
to determine the terms of any option grant, including the number of option
shares, exercise price, term, vesting schedule and the post-termination exercise
period. Notwithstanding this discretion (i) the term of any option may not
exceed 10 years and (ii) an option will terminate as follows: (a) if such
termination is on account of termination of employment for any reason other than
death, without cause, such options shall terminate one year thereafter; (b) if
such termination is on account of death, such options shall terminate 15 months
thereafter; and (c) if such termination is for cause (as determined by the Board
of Directors and/or Compensation Committee), such options shall terminate
immediately. Unless otherwise determined by the Board of Directors or
Compensation Committee, the exercise price per share of common stock subject to
an option shall be equal to no less than 10% of the fair market value of the
common stock on the date such option is granted. No NSO shall be assignable or
otherwise transferable except by will or the laws of descent and distribution or
except as permitted in accordance with SEC Release No.33-7646 as effective April
7, 1999. The Plan may be amended, altered, suspended, discontinued or terminated
by the Board of Directors without further stockholder approval, unless such
approval is required by law or regulation or under the rules of the stock
exchange or automated quotation system on which the common stock is then listed
or quoted. Thus, stockholder approval will not necessarily be required for
amendments which might increase the cost of the Plan or broaden eligibility
except that no amendment or alteration to the Plan shall be made without the
approval of stockholders which would (a) increase the total number of shares
reserved for the purposes of the Plan or decrease the NSO price (except as
provided in paragraph 9 of the Plan) or change the classes of persons eligible
to participate in the Plan or (b) extend the NSO period or (c) materially
increase the benefits accruing to Plan participants or (d) materially modify
Plan participation eligibility requirements or (e) extend the expiration date of
the Plan. Unless otherwise indicated the Plan will remain in effect until
terminated by the Board of Directors.

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

The following table sets forth certain information regarding beneficial
ownership of the common stock as of October 12, 2006 (except where otherwise
noted) with respect to: (i) each person known by the Registrant to be the
beneficial owner of more than five (5%) percent of the outstanding shares of
common stock; (ii) each director of the Registrant; (iii) the Registrant's
executive officers; and (iv) all officers and directors of the Registrant as a
group. Except as indicated in the footnotes to the table, all of such shares of
common stock are owned with sole voting and investment power. The title of class
of all securities indicated below is common stock with $.0001 par value per
share.

                                       25
<PAGE>

Name and Address of             (2) Number of Shares   (3) Percentage of Shares
Beneficial Owner                 Beneficially Owned      Beneficially Owned
-------------------             --------------------   ------------------------
International Biochemical
 Industries Inc.
8725 Rosewell Road
Atlanta, Georgia 30327             (3)    997,561                6.73%

Domus Trust Fund
5525 New Wellington Close
Atlanta, Georgia 30327             (4)    202,248                1.36%

M5 Trust Funds I and II
405 North Errol Court
Atlanta, Georgia 30327             (5)  2,715,869               18.33%

Timothy C. Moses
405 North Errol Court
Atlanta, Georgia 30350             (6)    529,383                3.60%

Kevin Smith
5525 New Wellington Close
Atlanta, Georgia 30327             (8)    741,124                5.00%

Shelley S. Moses
405 North Errol Ct, NW
Atlanta, Georgia  30327            (9)    350,000                2.36%

All Officers and Directors as
 a Group (6 persons)               (10) 5,536,185               37.36%

Represents less than 38% of the 14,819,815 shares outstanding as of October 12,
2006.
__________
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of the
Common Stock beneficially owned by them. A person is deemed to be the beneficial
owner of securities which may be acquired by such person within 60 days from the
date indicated above upon the exercise of options, warrants or convertible
securities. Each beneficial owner's percentage of ownership is determined by
assuming that options, warrants or convertible securities that are held by such
person (not those held by any other person) and which are exercisable within 60
days of the date indicated above, have been exercised.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See footnote in the audited financial statements

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits

31.1     Certification of Chief Executive Officer

31.2     Certification of Principle Financial Officer

32.1     Certification of Chief Executive Officer

32.2     Certification of Principle Financial Officer

                                       26
<PAGE>

(b) Reports on 8-K

Incorporated herein by reference to the comparable exhibits filed with
Registrant's Form 8-K is reflected below:

05/01/06    see filing ref.# 001-1670306796329
10/28/05    see filing ref.# 001-16703051164123
07/12/05    see filing ref.# 001-1670305950633

(c) SB-2 filing

02/10/06    see filing ref.#  333-13063106595566
Footnote:  Amended form for registration of SB-2 filing (SB-2/A)

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

1. AUDIT FEES

         The aggregate fees billed for the fiscal year ended June 30, 2006, for
professional services rendered by Bouwhuis, Morrill & Company, for the audit of
the Registrant's annual financial statements or services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for the fiscal year ended 2006 were approximately $53,010.

2. AUDIT RELATED FEES

         The aggregate fees billed for the fiscal year ended June 30, 2006, for
assurance and related services by Bouwhuis, Morrill & Company, that are
reasonably related to the performance of the audit of the Registrant's financial
statements for the fiscal year ended 2006 were approximately $-0-.

3. TAX FEES

         The aggregate fees billed for the fiscal year ended June 30, 2006, for
professional services rendered by Bouwhuis, Morrill & Company for tax
compliance, tax advice and tax planning for the fiscal year ended 2006 were
$-0-.

4. ALL OTHER FEES

         The aggregate fees billed for the fiscal year ended June 30, 2006, for
products and services provided by Bouwhuis, Morrill & Company other than those
services reported above, for the fiscal year ended 2006 were $-0-.


                                       27
<PAGE>

                                   SIGNATURES

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

                                        NOVA BIOGENETICS, INC.
                                        (Registrant)

                                        /s/ Dr. Kevin Smith
                                        -------------------
                                        Dr. Kevin Smith

                                        Date:  October 13, 2006

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

      Signatures                      Titles                         Dates
      ----------                      ------                         -----

/s/ Dr. Kevin Smith
-------------------         Chairman, Chief Executive
Dr. Kevin Smith             Officer and President               October 13, 2006


/s/ Chene Gardner
-----------------
Chene Gardner               Acting CFO                          October 13, 2006


                                       28
<PAGE>

                     NOVA BIOGENETICS, INC AND SUBSIDIARIES

                 Consolidated Financial Statements for the Years
                          Ended June 30, 2006 and 2005
                      and Report of Independent Registered
                             Public Accounting Firm


                                    CONTENTS


Report of Independent Registered Public Accounting Firm......................F-2

Consolidated Balance Sheet...................................................F-3

Consolidated Statements of Operations........................................F-4

Consolidated Statements of Stockholders' Deficit.............................F-5

Consolidated Statements of Cash Flows........................................F-6

Notes to the Consolidated Financial Statements...............................F-7


                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Nova BioGenetics, Inc. and Subsidiaries
Atlanta, Georgia

We have audited the accompanying consolidated balance sheet of Nova BioGenetics,
Inc. and Subsidiaries as of June 30, 2006 and the related consolidated
statements of operations, stockholders' deficit and cash flows for the years
ended June 30, 2006 and 2005. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Nova
BioGenetics, Inc. and Subsidiaries as of June 30, 2006 and the consolidated
results of their operations and their cash flows for the years ended June 30,
2006 and 2005 in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 13 to
the consolidated financial statements, the Company has negative working capital,
negative cash flows from operations and recurring operating losses which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 13. These
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


Bouwhuis, Morrill & Company, LLC
Layton, Utah
October 6, 2006

                                       F-2
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheet

                                     ASSETS
                                     ------
                                                                      June 30,
                                                                       2006
                                                                    -----------
CURRENT ASSETS

  Cash and cash equivalents ....................................    $    64,179
  Accounts receivable, net (Note 2) ............................         19,637
  Inventory ....................................................         35,538
                                                                    -----------

   Total Current Assets ........................................        119,354
                                                                    -----------

PROPERTY AND EQUIPMENT - NET (Note 2) ..........................         21,407
                                                                    -----------

OTHER ASSETS

  Deposits .....................................................          3,475
                                                                    -----------

   Total Other Assets ..........................................          3,475
                                                                    -----------

   TOTAL ASSETS ................................................    $   144,236
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------

CURRENT LIABILITIES

  Bank overdraft (Note 2) ......................................    $    15,381
  Accounts payable and accrued expenses ........................        525,101
  Escrow payable (Note 5) ......................................        199,500
  Due to related parties (Note 4) ..............................        158,021
  Notes payable ................................................         50,000
  Notes and loans payable - related party ......................        604,637
                                                                    -----------

   Total Current Liabilities ...................................      1,552,640
                                                                    -----------

STOCKHOLDERS' DEFICIT

  Common stock, $0.0001 par value; 50,000,000 shares
   authorized, 13,239,815 shares issued and outstanding ........          1,324
  Additional paid-in capital ...................................      3,252,039
  Accumulated deficit ..........................................     (4,657,316)
  Foreign currency translation adjustment ......................         (4,451)
                                                                    -----------

   Total Stockholders' Deficit .................................     (1,408,404)
                                                                    -----------

   TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT .................    $   144,236
                                                                    ===========

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

                                       F-3
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                        For the Years Ended
                                                             June 30,
                                                  -----------------------------
                                                      2006             2005
                                                  ------------     ------------

NET SALES ....................................    $    221,248     $    482,679

COST OF SALES ................................          34,469           27,304
                                                  ------------     ------------

GROSS MARGIN .................................         186,779          455,375
                                                  ------------     ------------

OPERATING EXPENSES

  Salaries and consulting ....................         479,619          204,760
  Professional fees ..........................         279,297          172,484
  Selling, general and administrative ........       1,031,619        1,274,019
                                                  ------------     ------------

   Total Operating Expenses ..................       1,790,535        1,651,263
                                                  ------------     ------------

LOSS FROM OPERATIONS .........................      (1,603,756)      (1,195,888)
                                                  ------------     ------------

OTHER INCOME (EXPENSES)

  Other income ...............................          12,000                -
  Gain on sale of assets .....................               -           28,844
  Litigation loss ............................         (26,260)               -
  Loss on impairment of goodwill .............               -         (720,211)
  Interest expense ...........................         (51,337)         (52,678)
                                                  ------------     ------------

   Total Other Income (Expenses) .............         (65,597)        (744,045)
                                                  ------------     ------------

LOSS BEFORE INCOME TAXES .....................      (1,669,353)      (1,939,933)

INCOME TAX EXPENSE ...........................               -                -
                                                  ------------     ------------

NET LOSS .....................................    $ (1,669,353)    $ (1,939,933)
                                                  ============     ============

BASIC AND DILUTED:
  Net loss per common share ..................    $      (0.14)    $      (0.22)
                                                  ============     ============

  Weighted average shares outstanding ........      12,160,153        8,763,955
                                                  ============     ============

OTHER COMPREHENSIVE INCOME

NET LOSS .....................................    $ (1,669,353)    $ (1,939,933)

  Foreign currency translation adjustment ....          (4,451)               -
                                                  ------------     ------------

COMPREHENSIVE LOSS ...........................    $ (1,673,804)    $ (1,939,933)
                                                  ============     ============

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

                                       F-4
<PAGE>
<TABLE>
                             NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                        Consolidated Statements of Stockholders' Deficit
                           For the Years Ended June 30, 2006 and 2005
<CAPTION>
                                                                                     Foreign
                                    Common Stock         Additional                  Currency
                              ------------------------    Paid-in     Accumulated   Translation
                                 Shares       Amount      Capital       Deficit     Adjustment
                              -----------  -----------  -----------   -----------   -----------
<S>                           <C>          <C>          <C>           <C>           <C>
Balance, June 30, 2004 .....    7,351,272  $       735  $    42,641   $(1,048,030)  $         -

Common stock issued for cash    1,660,000          166      829,834             -             -

Common stock issued for
 services rendered .........    1,130,000          113      295,387             -             -

Common stock issued for the
 acquisition of subsidiary .      966,500           97      966,403             -             -

Net loss for the year
 ended June 30, 2005 .......            -            -            -    (1,939,933)            -
                              -----------  -----------  -----------   -----------   -----------

Balance, June 30, 2005 .....   11,107,772        1,111    2,134,265    (2,987,963)            -

Common stock issued for cash      581,362           58      459,221             -             -

Stock offering costs .......            -            -      (40,000)            -             -

Common stock issued for
 services rendered .........       90,000            9       98,991             -             -

Commons stock issued for
 accrued salaries & labor ..      670,681           67      402,341             -             -

Exercise of stock options ..      790,000           79      197,221             -             -

Foreign currency translation            -            -            -             -        (4,451)

Net loss for the year
 ended June 30, 2006 .......            -            -            -    (1,669,353)            -
                              -----------  -----------  -----------   -----------   -----------

Balance, June 30, 2006 .....   13,239,815  $     1,324  $ 3,252,039   $(4,657,316)  $    (4,451)
                              ===========  ===========  ===========   ===========   ===========

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

                                              F-5
</TABLE>
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows


                                                          For the Year Ended
                                                               June 30,
                                                      -------------------------
                                                          2006          2005
                                                      -----------   -----------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss ...........................................  $(1,669,353)  $(1,939,933)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Depreciation .....................................        7,331         2,018
  Bad debt provision ...............................       20,782        55,540
  Common stock issued for services .................       99,000       295,500
  Cashless exercise of stock options for services ..      197,300             -
  Gain on settlement of debt .......................            -       (28,844)
  Loss on impairment of goodwill ...................            -       720,211
Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable .......        9,530       (56,234)
  (Increase) decrease in inventory .................        8,174       (22,207)
  (Increase) decrease in deposits ..................        1,033           (33)
  Increase in due to related parties ...............       12,629             -
  Increase in accounts payable and accrued expenses       398,794       312,884
                                                      -----------   -----------

   Net Cash Used in Operating Activities ...........     (914,780)     (661,098)
                                                      -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchases of property and equipment ..............       (2,079)      (22,156)
  Cash received from acquisition of subsidiary .....            -       216,028
                                                      -----------   -----------

   Net Cash Provided (Used) by Investing Activities        (2,079)      193,872
                                                      -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Increase in bank overdraft .......................       15,381             -
  Proceeds from notes payable ......................       50,000             -
  Proceeds from notes/loans payable - related party       122,208        22,131
  Payments on notes/loans payable - related party ..       (7,975)            -
  Net proceeds from issuance of common stock .......      419,279       830,000
                                                      -----------   -----------

   Net Cash Provided by Financing Activities .......  $   598,893   $   852,131
                                                      -----------   -----------

EFFECT OF FOREIGN CURRENCY
 TRANSLATION ADJUSTMENT ............................       (4,451)            -
                                                      -----------   -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  $  (322,417)  $   384,905

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .......      386,596         1,691
                                                      -----------   -----------

CASH AND CASH EQUIVALENTS, END OF YEAR .............  $    64,179   $   386,596
                                                      ===========   ===========
                                                                    (Continued)
                                       F-6A
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Continued)

                                                          For the Year Ended
                                                               June 30,
                                                      -------------------------
                                                          2006          2005
                                                      -----------   -----------
SUPPLEMENTAL CASH FLOW INFORMATION

  Cash Payments For:

  Interest .........................................  $         -   $     3,293
  Income taxes .....................................  $         -   $         -

Non Cash Investing and Financing Activities:

  Common stock issued for services .................  $    99,000   $   295,500
  Common stock issued for accrued payroll ..........  $   402,408   $         -
  Common stock issued for the acquisition of
   subsidiary ......................................  $         -   $   966,500


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

                                       F-6B
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

         Nova BioGenetics, Inc. (the "Company") was originally incorporated
         under the laws of the State of Delaware on April 23, 2001, under the
         name of Healthcare Network Solutions, Inc. ("HNS"). Through November
         2001, the Company was a 52% owned subsidiary of BioShield Technologies,
         Inc. ("BTSI"); BTSI having acted as incorporator and having initially
         been the sole shareholder of the Company. During December 2001,
         3,646,579 of the Company's shares owned by BTSI (approximately 24% of
         all then issued and outstanding shares) were spun-off to BTSI's
         shareholders on a one for ten basis with BTSI retaining 4,453,421
         shares (approximately 28% of all then issued and outstanding shares).

         Nova BioGenetics, Inc. ("Nova") was originally incorporated on July 22,
         2002, under the laws of the State of Delaware. On March 19, 2003, Nova
         BioGenetics, Inc. ("Nova") was acquired by HNS, for 31,253,904
         pre-split shares of HNS stock (the "Exchange"). The Exchange was
         completed pursuant to the Agreement and Plan of Reorganization between
         Nova and HNS. The Exchange has been accounted for as a reverse
         acquisition under the purchase method for business combinations. The
         reorganization was accounted for as a recapitalization of Nova because
         the shareholders of Nova controlled the Company immediately after the
         acquisition. Therefore, Nova is treated as the acquiring entity.
         Accordingly there was no adjustment to the carrying value of the assets
         or liabilities of Nova. The Company is the acquiring entity for legal
         purposes and Nova is the surviving entity for accounting purposes. On
         July 11, 2003, The Company merged its two entities into a single
         corporation under the name Nova BioGenetics, Inc.

         Nova reincorporated in the State of Delaware on January 16, 2002. Nova
         is a biochemical company headquartered in Atlanta, Georgia that is
         engaged in the discovery, development, and commercialization of
         antibiotic and antimicrobial agents for use in the industrial and
         pharmaceutical sectors.

         Subsidiaries During the year ended June 30, 2004, the Company
         incorporated two new subsidiaries, Nova Specialty Chemicals, Inc. and
         Nova BioPharmaceuticals, Inc. Both subsidiaries are owned 100% by the
         Company.

         Nova Specialty Chemicals, Inc. ("NSCI") was incorporated under the laws
         of the State of Delaware on January 30, 2004, for the purpose of
         researching and developing chemicals and compounds to be used in
         industrial applications.

         Nova BioPharmaceuticals, Inc. ("NBPI") was incorporated under the laws
         of the State of Delaware on January 30, 2004, for the purpose of
         researching and developing chemicals and compounds to be used in the
         pharmaceuticals industry. NBPI has not had any significant operations
         to date.

         Eco Group International Limited ("ECO") was incorporated under the laws
         of England and Wales on November 21, 2003. ECO was acquired on June 30,
         2005 in a stock transaction whereby 966,500 shares of Nova BioGenetics'
         common stock was exchanged for all of the issued and outstanding shares
         of ECO. ECO was acquired for the purpose of marketing Nova BioGenetics'
         products in Europe and the surrounding regions.

                                       F-7
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

         This summary of significant accounting policies of the Company is
         presented to assist in understanding the Company's consolidated
         financial statements. The consolidated financial statements and notes
         are representations of the Company's management who are responsible for
         their integrity and objectivity. These accounting policies conform to
         accounting principles generally accepted in the United States of
         America and have been consistently applied in the preparation of the
         consolidated financial statements. The following policies are
         considered to be significant:

         a. Accounting Method

         The Company recognizes income and expenses based on the accrual method
         of accounting. Accordingly, revenues are recognized when earned and
         expenses are recognized when incurred. The Company has elected a June
         30 year-end.

         b. Cash and Cash Equivalents

         Cash equivalents are generally comprised of certain highly liquid
         investments with original maturities of less than three months.

         c. Use of Estimates in the Preparation of Consolidated Financial
         Statements

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

         d. Revenue Recognition Policy

         Revenue is recognized upon delivery of goods where the sales price is
         fixed or determinable and collectibility is reasonably assured. Revenue
         is not recognized until persuasive evidence of an arrangement exists.
         Advance customer payments are recorded as deferred revenue until such
         time as they are recognized.

         e. Allowance for Doubtful Accounts

         Accounts receivable are recorded net of the allowance for doubtful
         accounts. The Company generally offers 30-day credit terms on sales to
         its customers and requires no collateral. The Company maintains an
         allowance for doubtful accounts which is determined based on a number
         of factors, including each customer's financial condition, general
         economic trends and management judgment. As of June 30, 2006, the
         allowance for doubtful accounts was $76,322. Bad debt expense was
         $20,782 and $55,540 for the years ended June 30, 2006 and 2005,
         respectively.

         f. Inventories

         Inventories are stated at the lower of average cost or market value.
         When there is evidence that the inventory's value is less than original
         cost, the inventory is reduced to market value. Inventories consist
         entirely of raw materials of $35,538 at June 30, 2006.

                                       F-8
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

         g. Property and Equipment

         Property and equipment are stated at cost less accumulated
         depreciation. Depreciation is calculated using the straight-line method
         over the estimated useful lives of the assets. When assets are disposed
         of, the cost and accumulated depreciation (net book value of the
         assets) are eliminated and any resultant gain or loss reflected
         accordingly. Betterments and improvements are capitalized over their
         estimated useful lives whereas repairs and maintenance expenditures on
         the assets are charged to expense as incurred.

                                                Life            2006

         Furniture and Fixtures              3-5 Years      $      31,696
         Less - Accumulated Depreciation                          (10,289)
                                                            -------------

              Net Property and Equipment                    $      21,407
                                                            =============

         Depreciation expense for the years ended June 30, 2006 and 2005 was
         $7,331 and $2,018, respectively.

         h. Basic Net Loss per Share of Common Stock

         In accordance with Financial Accounting Standards No. 128, "Earnings
         per Share," basic net loss per common share is based on the weighted
         average number of shares outstanding during the periods presented.
         Diluted earnings per share is computed using weighted average number of
         common shares plus dilutive common share equivalents outstanding during
         the period. Dilutive instruments have not been included and calculated
         for the year end computations as their effect is antidilutive.

                                                   June 30,      June 30,
                                                    2006           2005
                                                 -----------   -----------

         Net loss (numerator) ................  $ (1,669,353)  $(1,939,933)
         Weighted average shares outstanding
          (denominator) ......................    12,160,153     8,763,955
         Loss per share amount ...............  $      (0.14)  $     (0.22)

         i. Recent Accounting Pronouncements

         In December 2004, the Financial Accounting Standards Board (FASB)
         issued SFAS No. 123 (revised 2004), "Share-Based Payment," which is an
         amendment to SFAS No. 123, "Accounting for Stock-Based Compensation."
         This new standard eliminates the ability to account for share-based
         compensation transactions using Accounting Principles Board (APB) No.
         25, "Accounting for Stock Issued to Employees" (APB 25) and requires
         such transactions to be accounted for using a fair-value-based method
         and the resulting cost recognized in the Company's financial
         statements. This new standard is effective for interim and annual
         periods beginning after December 15, 2005. The Company is currently
         evaluating SFAS No. 123 as revised and intends to implement it in the
         first quarter of 2006. At June 30, 2006, there were no employee
         options. Therefore, the implementation of this standard will not
         initially have a material impact on the Company's financial statements.

                                       F-9
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

         i. Recent Accounting Pronouncements (Continued)

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." SFAS
         No. 151 clarifies the accounting for abnormal amounts of idle facility
         expense, freight, handling costs, and wasted material (spoilage). The
         Company will be required to apply this statement to inventory costs
         incurred after December 31, 2005. The adoption of this standard is not
         expected to have a material effect on the Company's financial position
         or results of operations.

         In December 2004, the FASB issued SFAS No. 153, "Exchange of
         Non-monetary Assets." SFAS No. 153 amends APB Opinion No. 29,
         "Accounting for Non-monetary Transactions," to eliminate the exception
         for non-monetary exchanges of similar productive assets. The Company
         will be required to apply this statement to non-monetary exchanges
         after December 31, 2005. The adoption of this standard is not expected
         to have a material effect on the Company's financial position or
         results of operations.

         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
         Error Corrections-A Replacement of APB Opinion No. 20 and FASB
         Statement No. 3." SFAS No. 154 changes the requirements for the
         accounting for and reporting of a change in accounting principle. The
         Company will be required to apply this statement for accounting changes
         and corrections of errors made in fiscal years beginning after December
         15, 2005. The adoption of this standard is not expected to have a
         material effect on the Company's financial position or results of
         operations.

         In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
         Hybrid Financial Instruments -- an amendment of FASB Statements No. 133
         and 140." SFAS 155 amends SFAS No. 133, "Accounting for Derivative
         Instruments and Hedging Activities" and SFAS No. 140, "Accounting for
         Transfers and Servicing of Financial Assets and Extinguishments of
         Liabilities" and related interpretations. SFAS 155 permits fair value
         re-measurement for any hybrid financial instrument that contains an
         embedded derivative that otherwise would require bifurcation and
         clarifies which interest-only strips and principal-only strips are not
         subject to recognition as liabilities. SFAS 155 eliminates the
         prohibition on a qualifying special-purpose entity from holding a
         derivative financial instrument that pertains to a beneficial interest
         other than another derivative financial instrument. SFAS 155 is
         effective for the Company for all financial instruments acquired or
         issued beginning January 1, 2007. The adoption of this standard is not
         expected to have a material effect on the Company's financial position
         or results of operations.

         In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
         of Financial Assets - an amendment of FASB Statement No. 140." SFAS 156
         requires an entity to recognize a servicing asset or servicing
         liability each time it undertakes an obligation to service a financial
         asset. It also requires all separately recognized servicing assets and
         servicing liabilities to be initially measured at fair value, if
         practicable. SFAS 156 permits an entity to use either the amortization
         method or the fair value measurement method for each class of
         separately recognized servicing assets and servicing liabilities. SFAS
         156 is effective for the Company as of January 1, 2007. The adoption of
         this standard is not expected to have a material effect on the
         Company's financial position or results of operations.

                                      F-10
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

         j. Income Taxes

         The Company accounts for income taxes in accordance with Statement of
         Financial Accounting Standards Board (SFAS) No. 109, "Accounting for
         Income Taxes." Under this method, deferred income taxes are determined
         based on the difference between the financial statement and tax bases
         of assets and liabilities using enacted tax rates in effect for the
         year in which differences are expected to reverse. In accordance with
         the provisions of SFAS No. 109, a valuation allowance would be
         established to reduce deferred tax assets if it were more likely than
         not that all or some portion of such deferred tax assets would not be
         realized. A full allowance against deferred tax assets was provided as
         of June 30, 2006.

         At June 30, 2006, the Company had net operating loss carryforwards of
         approximately $4,700,000 that may be offset against future taxable
         income through 2026. No tax benefits have been reported in the
         consolidated financial statements because the potential tax benefits of
         the net operating loss carry forwards are offset by a valuation
         allowance of the same amount.

         Due to the change in ownership provisions of the Tax Reform Act of
         1986, net operating loss carryforwards for Federal income tax reporting
         purposes are subject to annual limitations. Should a change in
         ownership occur, net operating loss carryforwards may be limited as to
         its future use by the Company.

         k. Reclassifications

         Certain amounts in the accompanying consolidated financial statements
         have been reclassified to conform to the current year presentation.

         l. Principles of Consolidation

         The consolidated financial statements include the accounts of Nova
         BioGenetics, Inc. and its wholly-owned subsidiaries Nova
         BioPharmaceuticals, Inc., Nova Specialty Chemicals, Inc., and Eco Group
         International Limited. All significant intercompany accounts and
         transactions have been eliminated in the consolidation.

         m. Checks Written in Excess of Cash in Bank

         Under the Company's cash management system, checks issued but not
         presented to banks frequently result in overdraft balances for
         accounting purposes. Additionally, at times banks may temporarily lend
         funds to the Company by paying out more funds than are in the Company's
         account. These overdrafts are included as a current liability in the
         balance sheets.

                                      F-11
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 3 - GOODWILL

         Goodwill represents the excess of cost over the fair value of net
         assets acquired through acquisitions. In the acquisition of Eco Group
         International Limited, this excess of cost over net assets acquired
         amounted to $720,211. In accordance with the provisions of Statement of
         Financial Accounting Standards No. 141, management of the Company has
         evaluated the resulting goodwill and has determined that the amount is
         impaired. It is unlikely that there is significant future value beyond
         the value of the net assets acquired of $246,289 and, therefore, the
         Company has recorded a loss on the impairment of goodwill in the amount
         of $720,211 for the year ended June 30, 2005. The amount of goodwill
         being carried as an asset at June 30, 2006 is $-0-.

NOTE 4 - RELATED PARTY TRANSACTIONS

         At June 30, 2006, the Company had a related party payable of $158,031.
         This amount includes $96,992 in accrued interest and $61,029 payable to
         the company indicated in Note 9 for prior services rendered.

NOTE 5 - ESCROW PAYABLE

         The Company owes Pyramid Financial Group ("Pyramid") for monies that
         were either expended on the Company's behalf or that were loaned to the
         Company on a short-term basis. These monies were held in escrow by
         Pyramid. The Company believes that pursuant to the terms of the escrow
         agreement the funds would be available to the Company for cash-flow
         purposes at times prior to closing of the escrow. At the time of the
         transactions Pyramid was owned by a former officer of the Company,
         however, no such relationship still exists. The amount still owing at
         June 30, 2006 is $199,500 plus accrued interest of $31,920 which is
         included on the balance sheet in accounts payable and accrued expenses.
         See Note 11 - Contingencies.

NOTE 6 - EQUITY TRANSACTIONS

         During the year ended June 30, 2005, the Company issued 1,660,000
         shares of common stock in a private placement for $0.50 per share. Each
         share issued in this private placement had an attached warrant to
         purchase an additional share of common stock for $0.50 per share and
         expire on March 31, 2010.

         During the year ended June 30, 2005, the Company issued 1,130,000
         shares of common stock to officers, directors and an attorney for
         services rendered. The shares were valued at the market price on the
         date the shares were authorized for issuance and range from $0.10 to
         $1.35 per share. In connection with these issuances, the Company
         recorded stock-based compensation of $295,500 during the year ended
         June 30, 2005.

         On June 30, 2005, the Company issued 966,500 shares of common stock for
         all of the issued and outstanding shares of a United Kingdom based
         company. The shares were valued at the market price on the date of
         acquisition of $1.00 per share, or $966,500. The net assets of the
         acquired company on the date of acquisition were $246,289. See Note 3 -
         Goodwill.

         During the year ended June 30, 2006, the Company issued 581,362 shares
         of common stock in a private placement for $0.79 per share.

                                      F-12
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 6 - EQUITY TRANSACTIONS (Continued)

         During the year ended June 30, 2006, the Company issued 90,000 shares
         of common stock to officers, directors and an attorney for services
         rendered. The shares were valued at $1.10 which was the market price on
         the date the shares were authorized for issuance. In connection with
         these issuances, the Company recorded stock-based compensation of
         $99,000 during the year ended June 30, 2006.

         During the year ended June 30, 2006, the Company issued 670,681 shares
         of common stock to pay for accrued salaries and labor.

         During the year ended June 30, 2006, the Company issued 790,000 shares
         of common stock for the exercise of stock options.

NOTE 7 - FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107 (SFAS 107),
         "Disclosures about Fair Value of Financial Instruments" requires
         disclosure of the fair value of financial instruments held by the
         Company. SFAS 107 defines the fair value of a financial instrument as
         the amount at which the instrument could be exchanged in a current
         transaction between willing parties. The following methods and
         assumptions were used to estimate fair value:

         The carrying amount of cash equivalents, accounts receivable and
         accounts payable approximate fair value due to their short-term nature.

NOTE 8 - NOTES PAYABLE

         The Company has notes payable consisting of the following:

                                                                       June 30,
                                                                         2006
                                                                       --------
         Note payable to an individual, non-interest bearing with a
         loan fee of $15,000, due in full on September 9, 2006,
         secured by all tangible and intangible assets of the
         Company, past due and in default ..........................   $ 50,000
                                                                       --------

         Total Notes Payable .......................................     50,000
         Less: Current Portion .....................................    (50,000)
                                                                       --------

         Long-Term Notes Payable ...................................   $      -
                                                                       ========

         For the above note in default, the Company is currently in
         negotiations to extend the terms. There has been no action
         regarding foreclosure by the note holder.

                                      F-13
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 9 - NOTES AND LOANS PAYABLE - RELATED PARTY

         The Company has been relying to a great extent on certain related
         parties for operating capital. Due to these transactions the Company
         has considerable loans payable due to related parties consisting of the
         following:

                                                                       June 30,
                                                                         2006
                                                                      ---------
         Note payable to a company, 6% interest, due
          June 30, 2003, secured by all tangible and intangible
          assets of the Company, past due and in default ...........  $ 490,404

         Note payable to an officer of the Company, non-interest
          bearing, due on demand, unsecured ........................     14,651

         Loan payable to an individual, non-interest bearing,
          due on demand, unsecured .................................     49,623

         Loan payable to an officer of the Company, non-interest
          bearing, due on demand, unsecured ........................     13,366

         Loan payable to an officer of the Company, non-interest
          bearing, due on demand, unsecured ........................      2,900

         Loan payable to a former officer of the Company,
          non-interest bearing, due on demand, unsecured ...........     22,795

         Loan payable to an officer of the Company, non-interest
          bearing, due on demand, unsecured ........................     10,898
                                                                      ---------

         Total Notes and Loans Payable - Related Parties ...........    604,637
         Less: Current Portion .....................................   (604,637)
                                                                      ---------

         Long-Term Notes and Loans Payable - Related Parties .......  $       -
                                                                      =========

         The above note in default of $490,404 is a note issued in connection
         with a joint venture agreement with International Biochemical
         Industries, Inc. (formerly BioShield Technologies, Inc.) ("IBCI") in
         the original amount of $500,000. At the time the joint venture
         agreement was entered into, a former Officer of the Company was also
         the president of IBCI. IBCI is currently undergoing Chapter 7
         bankruptcy proceedings. The balance at June 30, 2006 was $490,404 with
         an additional amount of $96,883 in accrued interest relating to this
         note that is shown on the balance sheet in due to related parties (see
         Note 4). The final outcome of the bankruptcy proceedings has yet to be
         determined and the Company may be able to settle for a lesser amount.

                                      F-14
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 10 - STOCK WARRANTS OUTSTANDING

         As discussed in Note 6, the Company has granted warrants to purchase
         common stock in conjunction with certain stock issuances for cash. All
         warrants expire March 31, 2010. A summary of the status of the
         Company's stock warrants as of June 30, 2005, and changes during the
         years then ending, are presented below:

                                                         Weighted     Weighted
                                                          Average      Average
                                                         Exercise    Grant Date
                                           Options        Price      Fair Value
                                          ----------     --------    ----------

         Outstanding, June 30, 2005 ..     1,660,000     $   0.50    $        -

             Granted .................             -         -                -
             Canceled ................             -         -                -
             Exercised ...............             -         -                -
                                           ---------     --------    ----------

         Outstanding, June 30, 2006 ..     1,660,000     $   0.50    $        -
                                           =========     --------    ==========

NOTE 11 - COMMITMENTS AND CONTINGENCIES

         Operating Leases

         The Company is obligated under an agreement for the lease of its office
         space in the United States for a monthly payment of approximately
         $2,600 at June 30, 2006. The lease terminates on May 31, 2008 and is
         subject to an annual rent escalation of approximately 3 percent.

         The Company is obligated under an agreement for the lease of its office
         space in the United Kingdom for a monthly payment of approximately
         $1,600 at June 30, 2006. The lease is for an initial term of two years
         and is subject to annual inflationary rent escalation.

         Rent expense for the years ended June 30, 2006 and 2005 was $78,150 and
         $30,073, respectively.

         The future minimum lease payments are as follows:

                  June 30,   2007.................   $ 51,336
                             2008.................     47,942
                             2009+..............            -
                                                     --------

                           Total...................  $ 99,278
                                                     ========

                                      F-15
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

         Contingencies

         In accordance with a formal Order entered by the United States
         Securities and Exchange Commission ("SEC"), Nova has been subpoenaed
         requiring production of various documents relating to any offering of
         stock, warrants, or units by Nova or its subsidiaries from August 2004
         to October 8, 2004 as well as documents sufficient to identify any
         person or entity who invested in a private offering from September 1,
         2003 to October 8, 2004. Nova intends to cooperate with the Commission
         regarding this matter.

         During the year ended June 30, 2004, Nova BioPharmaceuticals, Inc.
         ("NBPI"), a wholly-owned subsidiary of Nova BioGenetics, Inc., was
         seeking investment capital in the form of a private placement of the
         NBPI's common stock. A former officer of the Company was in charge of
         fundraising activities. This fundraising was done in conjunction with a
         company, Pyramid Financial Group, which is owned by the former officer.
         There are allegations of misappropriation of investment funds by both
         the NBPI and the former officer against the other party, respectively.
         The following is a summary of the two situations:

         In one situation a prospective investor was contacted about purchasing
         NBPI's common stock pursuant to a private placement. This individual
         paid $400,000 to the former officer to be escrowed with Pyramid (see
         Note 5) for the purchase of 400,000 common shares. The NBPI claims to
         have had access to these funds prior to the closing of escrow for
         short-term borrowings. Pyramid disbursed amounts to NBPI, or one of its
         consolidated companies, on several occasions or made disbursements on
         their behalf. Amounts owing to the escrow were $199,500 at June 30,
         2005 (see Note 5 - Escrow Payable). There is a possibility that the
         NBPI may ultimately be responsible for either the repayment of the
         entire $400,000 (which includes the $199,500 in Note 5), the issuance
         of 400,000 shares of its common stock, or just the repayment of the
         $199,500 indicated in Note 5. As these allegations were made only
         recently and have not yet been resolved, the outcome is undeterminable
         at the present time.

         In another situation involving this former officer and Pyramid several
         investors were contacted about purchasing common shares through a
         private placement of NBPI. These individuals paid $70,500 to Pyramid
         through the former officer for the purchase of 70,500 shares of the
         NBPI's common stock. NBPI never received these funds and was unaware
         that money was committed until later when one of the investors of
         $10,000 contacted NBPI trying to locate their 10,000 shares of stock.
         This particular investor was repaid for his investment and all claims
         have been forfeited. There is a possibility that the NBPI may
         ultimately be responsible for either the repayment of the entire
         $60,500 ($70,500 less $10,000 repayment) or the issuance of 60,500
         shares of its common stock. It is unknown at the present time whether
         there were additional shares sold through this private placement by the
         former officer. However, no additional investors beyond those indicated
         above have come forth requesting shares or repayment relating to this
         private placement up through the date of the audit report. As these
         allegations were made only recently and have not yet been resolved, the
         outcome is undeterminable at the present time.

                                      F-16
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

         Legal Proceedings

         The Company is party to the following legal proceedings:

         A former accountant of Nova's predecessor, Healthcare Network
         Solutions, Inc., has a pending judgment in the amount of $42,000
         against the Company for collection of past due fees. Nova asserts that
         it only owes them $15,000, which amount is accrued as a liability in
         accounts payable at June 30, 2006. The Company intends to contest this
         action vigorously. Management and the Company's attorneys have not yet
         determined an estimated range of loss, if any. Therefore, as the
         outcome is undeterminable at the present time, no additional amounts
         will be accrued in the consolidated financial statements as a result of
         this contingency.

         A former customer has filed suit against the Company because it has
         refused to continue to sell its EPA registered products to them. This
         suit is in the early stages and no assessment has yet been made by the
         Company or its attorneys as to any potential losses and therefore no
         amounts have been accrued for any potential losses in this case. This
         former customer still owes the Company $54,100 for past product sales
         which has been fully reserved for in accounts receivable.

         A suit has been filed by the bankruptcy trustee of a company that sold
         various patent rights to the Company claiming insufficient
         consideration was given. This suit is in the early stages and no
         assessment has yet been made by the Company or its attorneys as to any
         potential losses and therefore no amounts have been accrued for any
         potential losses in this case.

         Two parties have jointly filed suit against the Company alleging patent
         infringement. The Company believes that this suit has no merit and
         intends to contest this action vigorously. No amounts have been accrued
         for any potential losses in this case.

         Several shareholders have jointly filed suit against the Company for
         alleged discrepencies or failures to disclose certain information
         regarding a former officer of the Company in a private placement. The
         Company asserts that there have been no discrepencies or failures to
         disclose in this regard and intends to contest this action vigorously.
         No amounts have been accrued for any potential losses in this case.

                                      F-17
<PAGE>

                     NOVA BIOGENETICS, INC. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                             June 30, 2006 and 2005

NOTE 12 - CONCENTRATIONS OF RISK

         Major Customers

         For the year ended June 30, 2006, two customers' generated revenues in
         excess of 10% of the Company's total consolidated revenues. Revenues
         from these customers totaled $58,636, and $38,941 or 26.5%, and 17.6%,
         respectively.

         For the year ended June 30, 2005, four customers' generated revenues in
         excess of 10% of the Company's total consolidated revenues. Revenues
         from these customers totaled $127,500, $125,743, $71,123, and $60,797
         or 26.1%, 25.7%, 14.6%, and 12.4%, respectively.

NOTE 13 - GOING CONCERN CONSIDERATIONS

         The accompanying consolidated financial statements have been prepared
         using generally accepted accounting principles applicable to a going
         concern which contemplates the realization of assets and liquidation of
         liabilities in the normal course of business. As reported in the
         consolidated financial statements, the Company has incurred losses of
         approximately $4,700,000 from inception of the Company through June 30,
         2006. The Company's stockholders' deficit at June 30, 2006 was
         $1,408,404 and its current liabilities exceeded its current assets by
         $1,433,286. These factors combined, raise substantial doubt about the
         Company's ability to continue as a going concern. Management's plans to
         address and alleviate these concerns are as follows:

         The Company's management continues to develop a strategy of exploring
         all options available to it so that it can develop successful
         operations and have sufficient funds, therefore, as to be able to
         operate over the next twelve months. As a part of this plan, management
         is currently in negotiations with their target industries' key players.
         In addition, management is exploring options in order to raise
         additional operating capital through debt and/or equity financing. No
         assurance can be given that funds will be available, or, if available,
         that it will be on terms deemed satisfactory to management.

         The ability of the Company to continue as a going concern is dependent
         upon its ability to successfully accomplish the plans described in the
         preceding paragraph and eventually attain profitable operations. The
         accompanying financial statements do not include any adjustments
         relating to the recoverability and classification of asset carrying
         amounts or the amount and classification of liabilities that might
         result from the outcome of these uncertainties.

                                      F-18