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

                                  FORM 10-QSB/A
                                (amendment No. 1)

     |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

               For the quarterly period ended: September 30, 2005

                                       OR

     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        Commission file number: 000-23339

                            US GLOBAL NANOSPACE, INC.

             (Exact name of registrant as specified in its charter)

          Delaware                                     13-3720542
(State or other jurisdiction of                     (I.R.S. Employer
 Incorporation or organization)                    Identification No.)

                      2533 North Carson Street, Suite 5107
                            Carson City, Nevada 89706
                    (Address of principal executive offices)

                                  775-841-3246
               (Registrant's telephone number including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days YES |X| NO |_|

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) YES |_| NO |X|

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 5, 2005 the issuer had
145,319,723 shares of Common Stock issued and outstanding.

Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|

<PAGE>

                                EXPLANATORY NOTE:

We are filing this Amendment No. 1 to our Quarterly Report on Form 10-QSB for
the three months and six months ended September 30, 2005 (as originally filed on
November 23, 2005, the "Original Report")to reflect the restatement of our
Financial Statements (the "Restatement"). The restatement reflects
reclassification of non-cash services expense to deferred compensation and
services for the quarter ended September 30, 2005. Please refer to Note 1 to our
interim financial statements included in this amendment on Form 10-QSB/A for a
further discussion of the restatement.

This Form 10-QSB/A includes all of the information contained in the Original
Report, and we have made no attempt in this Form 10-QSB/A to modify or update
the disclosures presented in the Original Report, except as identified above.
The disclosures in this Form 10-QSB/A continue to speak as of the date of the
Original Report, and do not reflect events occurring after the filing of the
Original Report. Accordingly, this Form 10-QSB/A should be read in conjunction
with our other filings made with the Securities and Exchange Commission
subsequent to the filing of the Original Filing, including any amendments to
those filings. The filing of this Form 10-QSB/A shall not be deemed an admission
that the Original Report when made included any untrue statement of a material
fact or omitted to state a material fact necessary to make a statement not
misleading.

<PAGE>

                            US GLOBAL NANOSPACE, INC.

                                      INDEX

                                                                       PAGE
PART I                                                                NUMBER

Item 1 - Financial Statements (as restated)

         Balance Sheets as of September 30, 2005 (unaudited)
                  and March 31, 2005                                   3

         Statements of Operations - Three and Six Months Ended
                  September 30, 2004 and 2005 and since inception
                  (March 20, 2002) through September 30, 2005
                  (unaudited)                                          4

         Statement of Stockholders' Deficit -
                  Six Months Ended September 30, 2005
                  (unaudited)                                          5

         Statements of Cash Flows - Six Months Ended
                  September 30, 2004 and 2005 and
                  since inception (March 20, 2002)
                  through September 30, 2005 (unaudited)               6

         Notes to the Financial Statements                             7 - 11

Item 2 - Management's Discussion and Analysis of
         Financial Condition and Results of Operations                 11 - 16

Item 3 - Controls and Procedures                                       17

PART II

Item 1 - Legal Proceedings                                             17

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds   17

Item 3 - Defaults Upon Senior Securities                               17

Item 4 - Submission of Matters to a Vote of Security Holders           17

Item 5 - Other Information                                             18

Item 6 - Exhibits                                                      18

Signature Page


                                       2
<PAGE>

                      PART I - ITEM 1 FINANCIAL STATEMENTS

                            US GLOBAL NANOSPACE, INC.
                          (A development stage company)
                                 BALANCE SHEETS

                          (as restated - see Note _1_)

<TABLE>
<CAPTION>
                                                                           September 30,     March 31,
                                                                                2005           2005
                                                                            (Unaudited)
                                                                           ------------     ------------
<S>                                                                        <C>              <C>
ASSETS
CURRENT ASSETS
    Cash                                                                   $     21,588     $     53,547
    Accounts receivable                                                          28,225          120,502
    Other receivables                                                           334,667           82,579
    Prepaid expenses                                                             25,800               --
    Inventory                                                                    62,569            1,729
                                                                           ------------     ------------

       Total current assets                                                     472,849          258,357

NONCURRENT ASSETS
    Deposits                                                                     11,000           11,000
                                                                           ------------     ------------

       Total assets                                                        $    483,849     $    269,357
                                                                           ============     ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
    Current maturities of bank note payable                                $    242,956     $    237,606
    Accounts payable                                                            607,199          683,302
    Accrued salaries, compensation and expenses                               1,457,746          787,547
    Accrued interest                                                             15,833           24,219
    Related party payable                                                       334,729          330,887
    Loans payable                                                               234,638          308,229
                                                                           ------------     ------------

       Total current liabilities                                              2,893,101        2,371,790
                                                                           ------------     ------------

BANK NOTE PAYABLE, less current portion                                         467,158          568,162
                                                                           ------------     ------------

STOCKHOLDERS' DEFICIT
    Preferred stock authorized, 10,000,000 shares $0.01 par value,
       none issued or outstanding                                                    --               --
    Common stock authorized, 300,000,000 shares $0.01 par value,
       145,069,723 and 105,752,751 issued and outstanding, respectively         145,068          104,794
    Additional paid-in capital                                               18,862,277       15,413,845
    Deferred compensation and services                                       (1,034,230)          (7,460)
    Deficit accumulated during the development stage                        (20,849,525)     (18,181,774)
                                                                           ------------     ------------

       Total stockholders' deficit                                           (2,876,410)      (2,670,595)
                                                                           ------------     ------------

       Total liabilities and stockholders' deficit                         $    483,849     $    269,357
                                                                           ============     ============
</TABLE>

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


                                       3
<PAGE>

                            US GLOBAL NANOSPACE, INC.
                          (A development stage company)
                      STATEMENTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                                                                                           Cumulative
                                                                                                      results of operations
                                                                                                       from March 20, 2002
                                         Three Months    Three Months     Six Months      Six Months   (date of inception)
                                             Ended           Ended           Ended          Ended           through
                                         September 30,   September 30,   September 30,   September 30,    September 30,
                                             2005             2004           2005             2004           2005
                                         -------------   -------------   -------------   -------------    -------------
<S>                                      <C>             <C>             <C>             <C>              <C>
REVENUES                                 $      21,619   $     305,121   $     115,196   $     399,809    $     971,746
COST OF REVENUES                                 4,758          32,387          42,310         105,658          450,592
                                         -------------   -------------   -------------   -------------    -------------

       Gross Profit                             16,861         272,734          72,886         294,151          521,154
                                         -------------   -------------   -------------   -------------    -------------

OPERATING EXPENSES
   Research and development
     Non-cash services                         165,322              --         199,150              --          251,195
     Other research and development            166,994         113,556         308,187         251,105        3,676,544
   General and administrative
     Non-cash compensation and services      1,166,469          56,970       1,295,547         545,019        9,257,641
     Other general and administrative          532,493         676,843         900,829       1,115,999        8,296,049
                                         -------------   -------------   -------------   -------------    -------------

       Total operating expenses              2,031,278         847,369       2,703,713       1,912,123       21,481,429
                                         -------------   -------------   -------------   -------------    -------------

       Operating loss                       (2,014,417)       (574,635)     (2,630,827)     (1,617,972)     (20,960,275)
                                         -------------   -------------   -------------   -------------    -------------

OTHER INCOME (EXPENSE)
   Debt restructure                                 --              --              --              --          918,573
   Other income                                  5,028              --          12,528              --           70,480
   Interest expense                            (22,828)        (34,061)        (49,452)        (90,645)        (878,303)
                                         -------------   -------------   -------------   -------------    -------------

       Total other income (expense)            (17,800)        (34,061)        (36,924)        (90,645)         110,750
                                         -------------   -------------   -------------   -------------    -------------

       NET LOSS                          $  (2,032,217)  $    (608,696)  $  (2,667,751)  $  (1,708,617)   $ (20,849,525)
                                         =============   =============   =============   =============    =============

Net loss per share, basic and diluted    $       (0.02)  $       (0.02)  $       (0.02)  $       (0.02)   $    (0.24)
                                         =============   =============   =============   =============    =============
Basic and diluted weighted average
   number of common shares                 124,887,226      91,951,134     118,255,506      90,332,077       87,257,877
</TABLE>

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


                                       4
<PAGE>

                            US GLOBAL NANOSPACE, INC.
                          (A development stage company)
                       STATEMENT OF STOCKHOLDERS' DEFICIT
                       Six Months Ended September 30, 2005
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                      Accumulated
                                                                       Additional       Deferred      During the         Total
                                               Common Stock              Paid-in      Compensation    Development     Stockholders'
                                          Shares          Amount         Capital      and Services       Stage          Deficit
                                       ------------    ------------    ------------   ------------    ------------    ------------
<S>                                     <C>            <C>             <C>            <C>             <C>             <C>
Balance at April 1, 2005                105,752,751    $    104,794    $ 15,413,845   $     (7,460)   $(18,181,774)   $ (2,670,595)

Issuance of common stock on April 1,
2005 in consideration for services at
$0.097 per share                          1,055,986           1,056         101,375                                        102,431

Issuance of common stock on April 8,
2005 in consideration for wages at
$0.09 per share                           1,822,090           1,822         162,166                                        163,988

Issuance of common stock on May 3,
2005 in consideration for services at
$0.08 per share                              94,325              94           7,452                                          7,546

Issuance of common stock on May 9,
2005 in consideration for accounts
payable at $0.069 per share                 346,522             347          23,563                                         23,910

Issuance of common stock on May 11,
2005 in consideration for notes
payable at $0.064 per share               4,734,704           4,735         298,286                                        303,021

Issuance of common stock on May 18,
2005 in consideration for services
at $0.07 per share                          300,000             300          20,700                                         21,000

Issuance of common stock on June 1,
2005 in consideration for services
at $0.064 per share                          78,800              79           4,965                                          5,044

Issuance of common stock on July 28,
2005 in consideration for accounts
payable at $0.07 per share                  868,368             868          59,917                                         60,785

Issuance of common stock on August 3,
2005 in consideration for services
at $0.065 per share                       2,000,000           2,000         128,000        (86,666)                         43,334

Issuance of common stock on August 12,
2005 in consideration for accounts
payable at $0.12 per share                  382,934             383          45,569                                         45,952

Issuance of common stock on August 18,
2005 in consideration for accounts
payable at $0.077 per share                      --             958          72,330                                         73,288

Issuance of common stock on August 25,
2005 in consideration for services
at $0.084 per share                      19,850,000          19,850       1,647,550        (871,500)                       795,900

Issuance of common stock on
September 15, 2005 in consideration
for services at $0.13 per share           2,645,940           2,646         341,326                                        343,972

Issuance of common stock on
September 15, 2005 in consideration
For wages at $0.13 per share              1,599,275           1,599         206,307                                        207,906

Issuance of common stock on
September 27, 2005 in consideration
for services at $0.095 per share            526,316             526          49,474                                         50,000

Issuance of common stock on
September 27, 2005 in consideration
for accounts payable at $0.10 per share     339,099             339          33,571                                         33,910

Issuance of common stock on
September 29, 2005 in consideration
for accounts payable at $0.093 per share  1,167,236           1,167         107,386                                        108,553

Issuance of common stock on
September 29, 2005 in consideration
for services at $0.093 per share          1,505,377           1,505         138,495        (75,000)                         65,000

Amortization of deferred compensation
and services                                                                                 6,396                           6,396

Net loss for the period                                                                                 (2,667,751)     (2,667,751)
                                       ------------    ------------    ------------   ------------    ------------    ------------
Balance at September 30, 2005           145,069,723    $    145,068    $ 18,862,277   $ (1,034,230)   $(20,849,525)    $(2,876,410)
                                       ============    ============    ============   ============    ============    ============
</TABLE>

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


                                       5
<PAGE>

                            US GLOBAL NANOSPACE, INC.
                          (A development stage company)
                      STATEMENTS OF CASH FLOWS (Unaudited)

<TABLE>
<CAPTION>
                                                                                                              Cumulative
                                                                                                         results of operations
                                                                                                          from March 20, 2002
                                                                              Six months      Six months  (date of inception)
                                                                                ended           ended           through
                                                                             September 30,  September 30,    September 30,
                                                                                 2005           2004             2005
                                                                             ------------    ------------    ------------
<S>                                                                          <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
       Net loss                                                              $ (2,667,751)   $ (1,708,617)   $(20,849,525)
       Adjustments to reconcile net loss to net
         cash used in operating activities
              Common stock issued for services                                  1,494,698         545,019       9,508,836
              Forgiveness of loans and accounts payable                                --              --        (918,573)
      Changes in operating assets and liabilities:
                  Accounts receivable                                              92,277        (116,604)        (28,225)
                  Other receivables                                              (252,088)        (10,315)       (334,667)
                  Prepaid expenses                                                (25,800)             --         (25,800)
                  Inventory                                                       (60,840)          4,695         (62,569)
                  Deposits                                                             --           2,485         (11,000)
                  Accounts payable                                                270,295         446,391       2,637,526
                  Accrued salaries, compensation and expenses                     988,019         706,722       5,345,355
                  Accrued interest                                                  2,405           9,939         422,617
                  Related party payable                                             3,842          14,012         334,729
                                                                             ------------    ------------    ------------
                          Net cash used in operating activities                  (154,943)       (106,273)     (3,981,296)
                                                                             ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
          Cash acquired in conjunction with share
               exchange agreement                                                      --              --           2,946
                                                                             ------------    ------------    ------------

          Net cash provided by investing activities                                    --              --           2,946
                                                                             ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
         Proceeds from bank note payable                                               --              --       1,650,000
         Payments on bank note payable                                            (95,654)       (307,708)       (939,886)
         Proceeds from loans payable                                              235,700         423,660       3,164,805
         Payments on loans payable                                                (17,062)             --         (29,981)
         Proceeds from issuance of common stock                                        --              --         155,000
                                                                             ------------    ------------    ------------

               Net cash provided by financing activities                          122,984         115,952       3,999,938
                                                                             ------------    ------------    ------------

Net increase (decrease) in cash                                                   (31,959)          9,679          21,588

Cash at beginning of period                                                        53,547          18,437              --
                                                                             ------------    ------------    ------------

Cash at end of period                                                        $     21,588    $     28,116    $     21,588
                                                                             ============    ============    ============

SUPPLEMENTAL CASH FLOW INFORMATION AND
  NON-CASH INVESTING AND FINANCING ACTIVITIES
          Cash paid for:
                    Interest                                                 $     13,557    $     60,195    $    436,941
                                                                             ============    ============    ============
                    Income Taxes                                             $         --    $         --    $     13,288
                                                                             ============    ============    ============
         Accounts payable acquired in conjunction with share
           exchange agreement                                                $         --    $         --    $     (2,500)
                                                                             ============    ============    ============

         Common stock issued in exchange for accounts payable                $    346,398    $    241,194    $  2,031,947
                                                                             ============    ============    ============

         Common stock issued in exchange for loans payable
              and accrued interest                                           $    303,021    $  1,385,440    $  2,389,278
                                                                             ============    ============    ============

         Common stock issued in exchange for wages                           $    317,820    $    380,121    $  3,887,609
                                                                             ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements


                                       6
<PAGE>

                            US GLOBAL NANOSPACE, INC.
                          (A development stage company)

                        NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. FINANCIAL STATEMENTS (as restated)

The unaudited financial statements of US Global Nanospace, Inc. (the "Company")
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation have been included. The results of operations
for interim periods are not necessarily indicative of the results to be expected
for the entire fiscal year ending March 31, 2006. The accompanying unaudited
financial statements and related notes should be read in conjunction with the
audited financial statements and the Form 10-KSB of the Company for its fiscal
year ended March 31, 2005.

RESTATEMENT

Subsequent to the issuance of our financial statements for the quarter ended
September 30, 2005, our management determined that:

o Non-cash services expense was overstated for stock grants to purchase up to
16,350,000 shares of common stock under the 2005 Stock Plan

o Amounts previously shown on the statement of operations, as non-cash services
expense should be reclassified to deferred compensation and services for the
quarter ended September 30, 2005.

As a result, the financial statements for the quarter ended September 30, 2005,
have been restated. On August 25, 2005, the Company granted 16,350,000 shares of
its common stock under the 2005 Stock Plan to recipients for services recorded
at their fair market value of $1,373,400. Based upon further analysis of certain
vesting periods within certain of these stock grants the Company determined that
the non-cash services expense was overstated. Due to a reassessment of the
vesting periods within these grants the Company has determined that $871,500 of
non-cash services should have been deferred over vesting periods after September
30, 2005 through August 2006. As a result, the Company's results for the second
quarter of 2005 have been restated by the reclassification of non-cash services
expense to deferred compensation and services in the amount of $871,500. In
addition, the Company's net tax expense related to this change also decreased by
$92,613. The Company's total net loss decreased by $964,113.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense as incurred.

NET LOSS PER SHARE

Basic loss per share is based on the weighted average number of shares
outstanding during each period and income available to common shareholders. Loss
per share assuming dilution is based on the assumption that outstanding stock
options and warrants were exercised. At September 30, 2005, all options and
warrants have expired and there were no shares of potentially issuable common
stock. Because of the net loss for the three and six months ended September 30,
2005 and 2004, and from inception (March 20, 2002) through September 30, 2005,
potentially issuable common stock was not included in the calculation of diluted
loss per share as their inclusion would be anti-dilutive.

INVENTORY

Inventory consists of finished goods and is stated at the lower of cost or
market. Cost is determined using the first-in, first-out method.

REVENUE RECOGNITION

We recognize revenues in accordance with SEC Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements", and as amended by SAB No.
104, "Revenue Recognition". Revenues are recognized when persuasive evidence of
an arrangement exists, delivery has occurred, or services have been rendered,
the price is fixed and determinable and collectibility is reasonably assured.
Revenue from product sales is recognized at the time of delivery of the product.
Revenue under contracts based on a fixed fee is recognized based on conditions
being met. Revenue under contracts based on royalty fees is recognized when the
amounts are earned and determinable, which is generally when cash payment is
received. However, since we are not able to forecast product sales by licenses,
royalty payments that are based on product sales by the licensees are not
determinable until the licensee has completed their computation of the royalties
due and/or remitted their cash payment. Should information on licensee product
sales become available so as to enable us to recognize royalty revenue on an
accrual basis, materially different revenues and results of operations could
occur.

RECLASSIFICATIONS

Certain reclassifications were made to previously reported amounts in the
accompanying financial statements and notes to make them consistent with the
current year presentation. In the September 30, 2004 10-QSB statements of cash
flows, we included an increase in other receivables of $10,315 in investing
activities, and an increase in related party payable of $14,012 in financing
activities. These amounts are now classified as operating activities.


                                       7
<PAGE>

NOTE 2. MANAGEMENT PLANS

The Company is considered a development stage enterprise as defined under
Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises." The Company is a solutions
oriented, research and development company that specializes in identifying,
developing, and commercializing advanced technologies and products for
integration into the defense and health and safety markets. These products
include complex polymer materials, polymer nanofiber materials, nanofiber filter
materials, biological and chemical decontaminants, and blast mitigation
materials. Currently, most of the Company's products are being developed for
defense and health and safety applications. Operating revenues have been
generated in the amount of $115,196 for the six months ended September 30, 2005.
Since inception, the Company obtained loans from a bank for amounts up to
$1,650,000 and the Company has received $3,164,805 in loans from third parties,
existing shareholders and directors. The Company does not manufacture or
distribute its products on a commercial scale. Under the Development and License
Agreement between the Company and Kidde Firefighting, Inc. dated as of August
13, 2004, Kidde Firefighting, Inc. is responsible for all of the costs of
manufacturing, marketing and distribution of the Company's All-Clear product. In
addition, the Company is in the process of negotiating certain licensing,
manufacturing or distribution arrangements with other international companies or
independent contractors that have the infrastructure to manufacture, distribute
or sell its products on a commercial scale worldwide. The Company is also in the
process of negotiating directly with certain government agencies and private
sector companies for the sale or licensing of its products. In addition, in
order to conserve the Company's cash, the officers and employees of the Company
have been deferring their salaries, and the employees accepted shares of the
Company's common stock in lieu of cash. During the next 12 months, if the
Company cannot generate sufficient funds to operate its business from sales or
licenses of its products, it will be required to seek financing from its largest
shareholder, who has provided financing and a loan guarantee for the Company in
the past. The shareholder is under no obligation to provide such funds. The
Company may also consider selling debt or equity securities. There is no
guarantee that the Company will obtain funds sufficient to continue its
operations during the next 12 months.

NOTE 3. INTELLECTUAL PROPERTY ASSIGNMENT AND ROYALTY AGREEMENT

On May 14, 2002, USDR Aerospace, Ltd. ("Aerospace"), a related party, entered
into an agreement with the Company to assign certain of its intellectual
property to the Company for consideration of $10, and a promise to pay a royalty
of 3.5% on all of the Company's sales until Aerospace has received a total of
$15 million and a royalty of 1% of all of the Company's sales thereafter until
all patent rights of the intellectual property have expired. As of September 30,
2005, the Company has incurred a total of $34,009 in royalties associated with
this agreement.

NOTE 4. LOANS PAYABLE

The Chairman of the Company has continued to provide cash to support the
Company's operations. The Chairman of the Company also controls USDR, Inc.
("USDR"). On May 13, 2005, the Company entered into a loan agreement with USDR
for amounts up to $350,000. The loan bears interest at 10% per annum and matured
on August 13, 2005. The Company owed USDR $221,517, including accrued interest,
as of September 30, 2005, under this loan agreement. On November 8, 2005, USDR
accepted restricted common stock in exchange for $173,853 on this loan, and
amended the maturity date to December 31, 2005.

On April 11, 2003 and April 18, 2003, the Company entered into two loans
totaling $16,000 from an existing shareholder. The loans bear interest at 10%
per annum and matured on April 30, 2004. The Company owes the shareholder
$19,951, including accrued interest, as of September 30, 2005. The shareholder
has agreed to extend the loans, date to be determined.


                                       8
<PAGE>

NOTE 5. RELATED PARTY PAYABLE

The Chairman of the Company controls Aerospace, which has licensed the
intellectual property to the Company as described in Note 3, under which we owe
Aerospace $34,009 in royalties as of September 30, 2005. Aerospace has provided
employees and product development services to the Company. Since inception
(March 20, 2002), Aerospace has provided such services, based on actual costs,
totaling approximately $2.9 million for which the Company currently owes
Aerospace $300,720 as of September 30, 2005. Aerospace has also provided
manufacturing and office equipment to support operations. As of January 1, 2003,
Aerospace substantially discontinued its operations and the Company hired
certain individuals previously employed by Aerospace. On November 7, 2005,
Aerospace accepted restricted common stock in exchange for $300,720 for such
services.

NOTE 6. BANK NOTE PAYABLE

The Company previously had lines of credit with a bank for amounts up to
$1,650,000. The lines of credit have been consolidated into one loan, which
bears interest at 10% per annum and matures on May 15, 2008. The terms require
principal and interest payments of $25,400 due monthly, beginning October 15,
2004, and one final principal and interest payment of $11,779 due on May 15,
2008. The loan is secured by the assets of the Company and guaranteed by the
Company's Chairman. As of September 30, 2005, the Company had an outstanding
principal balance of $710,114 and accrued interest totaled $9,004.

NOTE 7. STOCK-BASED COMPENSATION

The Company has stock-based compensation plans that are accounted for under APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations. No options have been granted under the plans since inception
(March 20, 2002). Options that were granted under a stock option plan of the
Company prior to its merger with USDR Global Aerospace, Ltd. on May 17, 2002
have all expired. Accordingly, no compensation expense would have been
recognized under the recognition provisions of FASB Statement No. 123,
"Accounting for Stock-Based Compensation", during the periods ended September
30, 2005 and 2004, and since inception (March 20, 2002). In December 2004, the
FASB issued SFAS No. 123R, which eliminates the ability to account for
share-based compensation transactions using the intrinsic value method under APB
Opinion No. 25 and generally would require instead that such transactions be
accounted for using a fair-value-based method. The Company adopted Statement of
Financial Accounting Standards No. 123R, Share-Based Payment, at the beginning
of the second quarter of 2005.

On April 10, 2003, the Company adopted the Amended and Restated 2002 Stock Plan
(as amended, the "2002 Stock Plan"). Under the 2002 Stock Plan, officers,
directors, employees, consultants, advisors and others related to the Company
may be granted incentive stock options or nonqualified stock options to purchase
up to an authorized 30,000,000 shares of the Company's common stock. The options
are to be granted at not less than 85% of the fair value of the Company's common
stock on the date of the grant. The options generally vest over five years and
expire ten years from date of grant. The plan also allows for the granting of a
stock award whereby the purchase price of the stock award granted also may not
be less than 85% of the fair value of the Company's common stock. In addition
the plan allows for the granting of stock bonuses. The terms of the awards and
bonuses are to be determined by a committee appointed by the Board of Directors,
or in the absence of a committee, by the Board of Directors.

On March 30, 2005, the Company issued to certain of its attorneys 957,706 shares
of common stock under the Amended and Restated 2002 Stock Plan as collateral to
secure an obligation to pay outstanding legal fees in the amount of $100,559
(the "Outstanding Obligation"). The holders of the shares had the right to sell
them at any time, and on August 18, 2005 the shares were all sold. All the
proceeds from the sale of such shares were applied to the Outstanding
Obligation, totaling $73,288. As the proceeds from the sale of such shares were
not equal to the amount of the Outstanding Obligation, the holders had the right
to seek payment of the difference from the Company. On September 29, 2005, the
Company issued 1,167,236 shares of common stock in consideration for the
Outstanding Obligation in full.

On August 25, 2005, the Company adopted the 2005 Stock Plan (the "2005 Stock
Plan"). Under the 2005 Stock Plan, officers, directors, employees, consultants,
advisors and others related to the Company may be granted incentive stock
options or nonqualified stock options to purchase up to an authorized 25,000,000
shares of the Company's common stock. The options are to be granted at not less
than 85% of the fair value of the Company's common stock on the date of the
grant. The options generally vest over five years and expire ten years from date
of grant. The plan also allows for the granting of a stock award whereby the
purchase price of the stock award granted also may not be less than 85% of the
fair value of the Company's common stock. In addition the plan allows for the
granting of stock bonuses. The terms of the awards and bonuses are to be
determined by a committee appointed by the Board of Directors, or in the absence
of a committee, by the Board of Directors.

On August 25, 2005, the Company granted 19,850,000 shares of restricted common
stock under the 2005 Stock Plan. 16,350,000 to recipients and 3,500,000 to our
CFO as a stock bonus having a fair market valuation of $1,667,400. 11,000,000 of
these shares are subject to vesting conditions and were recorded at their fair
value totaling $871,500 as deferred compensation and services, and are being
recognized over the vesting period of one year.

On September 15, 2005, the Company granted 1,599,275 shares of common stock
under the 2002 Stock Plan to recipients in lieu of wages with an award valuation
of $177,519, equaling 85% of the fair market value per share on the date of
grant of the award. The Company recognized $30,386 as additional non-cash
expense for the difference between the fair value of the stock and the wages
due.

The Company has accrued payroll taxes relating to the issuance of common stock
in lieu of wages in accrued salaries and expenses at the six months ended
September 30, 2005, and the Company recorded $334,667 in other receivables for
the employee's portion of the taxes due to the Company.

NOTE 8. CONTINGENT LIABILITIES

Pending or Threatened Legal Proceedings

From time to time, claims are made against the Company in the ordinary course of
its business, which could result in litigation. Claims and associated litigation
are subject to inherent uncertainties and unfavorable outcomes could occur, such
as monetary damages, fines, penalties or injunctions prohibiting the Company
from selling one or more products or engaging in other activities. The
occurrence of an unfavorable outcome in any specific period could have a
material adverse affect on the Company's results of operations for that period
or future periods.


                                       9
<PAGE>

In connection with the SEC matter described in Part II, Item 1, no settlement
has yet been mutually accepted by the parties involved. Due to the uncertainties
inherent in this matter, the Company can provide no assurance that it or its
officers and directors will settle the matter with the SEC. The Company
currently is unable to estimate with reasonable certainty the possible loss or
range of loss for this matter.

If the matter does settle and the Company's officers and directors pay certain
amounts in settlement, they may be entitled to indemnification by the Company
for such amounts. The Company's Amended and Restated Certificate of
Incorporation, as amended, provides for the indemnification of officers,
directors and agents of the Company to the fullest extent permitted by the
Delaware General Corporation Law. The Company does not maintain directors' and
officers' liability insurance.

The indemnification provision in the Company's Amended and Restated Certificate
of Incorporation may be sufficiently broad to permit indemnification of the
Company's officers and directors for liabilities (including reimbursement of
expenses incurred) arising under the Securities Act of 1933. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our officers and directors pursuant to the foregoing provision, or
otherwise, the Company has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification for such liabilities (other than the payment by the Company for
expenses incurred or paid by the Company's officers or directors in the
successful defense of the SEC matter) is asserted by the officers or directors,
the Company intends to, unless in the opinion of the Company's legal counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether the Company's indemnification
of its officers or directors is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of the
issue by the court. The Company cannot predict at this time whether any of its
officers and directors would seek indemnification from the Company in the event
they bear any of the liability in connection with the SEC matter.

By letter dated May 27, 2005, TIAX LLC notified the Company that TIAX believed
that the Company was in default under the Patent and Technology License
Agreement dated July 25, 2003, as amended, between TIAX and the Company for
failure to pay $192,914 TIAX alleged was due under the agreement. Under the
terms of the Agreement, the Agreement terminates upon 30 days written notice of
default if the default is not cured to the satisfaction of TIAX within the
30-day notice period. On June 27, 2005, the Company responded to TIAX, stating
that it disagreed with TIAX's assessment of the amounts due TIAX under this
agreement. The Company also informed TIAX that the decontaminant product being
marketed by Kidde had been jointly developed by the Company and Kidde, and that
the Company did not believe that this new product was subject to its agreement
with TIAX. The Company had made a counter-proposal to TIAX, offering to pay TIAX
25% of royalties received by the Company from Kidde. On July 19, 2005, TIAX
rejected the Company's counter-proposal to modify the payment terms of the
agreement and notified the Company that TIAX will exercise its right to
terminate the agreement, unless the Company paid $196,344 in full by August 18,
2005. Of this $196,344, the Company has received invoices from TIAX in an
aggregate amount of approximately $165,000 that it has reflected as accounts
payable in its financial statements as of June 30, 2005, although the Company
disputes this amount. Upon receipt of this notice from TIAX that the alleged
default had not been cured, the Company is taking the position that the
agreement has already terminated as of June 28, 2005. While collaborating on
development of the ALL-Clear product, the Company and Kidde discovered that the
formulation developed by TIAX did not meet the requirements for a commercial
product. Accordingly, the Company and Kidde developed their own, alternative
formulation that is more effective against chemical and biological pathogens
than the TIAX formulation, and that, in addition, is non-toxic and
non-Corrosive. The Company terminated its license agreement with TIAX because it
is not using the TIAX licensed technology, but is instead using its own,
patent-pending technology. It is the Company's understanding that TIAX disagrees
with this position. It is possible that this dispute may result in litigation
initiated by TIAX.


                                       10
<PAGE>

   PART 1 - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATION

This section and other parts of this report on Form 10-QSB/A by US Global
Nanospace, Inc. (the "Company) contains forward-looking statements. These are
statements regarding financial and operating performance and results and other
statements that are not historical facts. The words "expect," "project,"
"estimate," "believe," "anticipate," "intend," "plan," "forecast," and similar
expressions are intended to identify forward-looking statements. Certain
important risks could cause results to differ materially from those anticipated
by some of the forward-looking statements. Some, but not all, of the risks that
could cause actual results to differ from those suggested by the forward-looking
statements include, among other things:

o our ability to successfully market the products we have developed and to
continue to develop products with demonstrated competitive advantages for the
defense and health and safety markets;

o whether or not our products are able to compete successfully with products of
other suppliers and whether or not some or all of our products are rendered
obsolete by newer products;

o the implementation of any government regulation that could make it more
difficult or more costly to bring our products to market;

o our ability to obtain financing as and when we need it; and

other factors, all of which are difficult to predict and many of which are
beyond our control.

You are cautioned not to place undue reliance on these forward-looking
statements, which relate only to events as of the date on which the statements
are made. We undertake no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
You should refer to and carefully review the information in future documents we
file with the Securities and Exchange Commission.

Management's discussion and analysis of results of operations and financial
condition are based upon our financial statements. These statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America. These principles require management to make certain
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates based on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

OVERVIEW

We are a development stage company with expertise in the emerging field of
nanotechnology. The Company is a solutions oriented, research and development
company that specializes in identifying, developing, and commercializing
advanced technologies and products for integration into the defense and health
and safety markets. These products include complex polymer materials, polymer
nanofiber materials, nanofiber filter materials, biological and chemical
decontaminants, and blast mitigation materials. Currently, most of the Company's
products are being developed for defense and health and safety applications. We
are currently focusing our efforts on licensing and marketing the products that
we have developed for defense and health and safety applications. Our target
customers for these materials, formulas, and processes include agencies or
organizations under the direct control of the federal government of the United
States, domestic and foreign businesses and foreign government agencies or
organizations, to the extent permitted by applicable law or regulation.

Since our inception on March 20, 2002, we have been unprofitable. We have
incurred net losses of $20,849,525 since inception through September 30, 2005.
As a development stage company, our limited history of operations makes
prediction of future operating results difficult. We believe that
period-to-period comparisons of our operating results should not be relied on as
predictive of our future results.


                                       11
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of results of operations and financial
condition are based upon USGN's financial statements. These statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America. These principles require management to make certain
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates based on historical
experience that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

In consultation with our Board of Directors, we have identified the following
accounting principles that we believe are key to an understanding of our
financial statements and require our more significant judgments and estimates
used in the preparation of our financial statements.

We recognize revenues in accordance with SEC Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements", and as amended by SAB No.
104, "Revenue Recognition". Revenues are recognized when persuasive evidence of
an arrangement exists, delivery has occurred, or services have been rendered,
the price is fixed and determinable and collectibility is reasonably assured.
During the three and six months ended September 30, 2005, our revenues were
primarily derived from product sales. Revenue from product sales is recognized
at the time of delivery of the product. Revenue under contracts based on a fixed
fee is recognized based on conditions being met. Revenue under contracts based
on royalty fees is recognized when the amounts are earned and determinable,
which is generally when cash payment is received. However, since we are not able
to forecast product sales by licenses, royalty payments that are based on
product sales by the licensees are not determinable until the licensee has
completed their computation of the royalties due and/or remitted their cash
payment. Should information on licensee product sales become available so as to
enable us to recognize royalty revenue on an accrual basis, materially different
revenues and results of operations could occur.

RESULTS OF OPERATIONS

QUARTER ENDED SEPTEMBER 30, 2005 AS COMPARED TO THE QUARTER ENDED SEPTEMEBR 30,
2004

Our revenues from operations for the quarter ended September 30, 2005 were
$21,619 as compared to revenues of $305,121 for the quarter ended September 30,
2004. Our revenues increased during the quarter ended September 30, 2004
primarily due to the licensing of our All-Clear product. During the three months
ended September 30, 2005, our revenues were primarily derived from the sales of
our radomes. We anticipate our revenues will fluctuate until we receive steady
income from the licensing and sales of our products.

Our cost of revenues from operations for the quarter ended September 30, 2005
was $4,758 as compared to cost of revenues of $32,387 from the quarter ended
September 30, 2004. The cost of revenues includes the cost of raw materials,
packaging supplies, shipping charges, royalties, commissions, direct and
indirect labor and other indirect manufacturing costs. This decrease is
attributable to the decrease in sales.

During the quarter ended September 30, 2005, we spent $332,316 on research and
development as compared to $113,556 for research and development during the
quarter ended September 30, 2004. Of this amount from the quarter ended
September 30, 2005, $165,322 was expense we incurred for services in relation to
non-cash compensation. We paid our employees and consultants with our common
stock in order to conserve cash. Our overall research and development costs
increased because we focused on the development of our products during this
period. We anticipate our research and development costs will continue to be
significant as we continue to develop our products.

During the quarter ended September 30, 2005, we incurred $1,166,469 in expenses
related to general and administrative non-cash compensation as compared to
$56,970 related to general and administrative non-cash compensation during the
quarter ended September 30, 2004. This increase is primarily due to an increase
in marketing and sales, and the issuance of our restricted common stock to
recipients as bonuses. During the quarter ended September 30, 2005, we paid our
employees and consultants with our common stock in order to conserve cash. We
anticipate that general and administrative expenses will continue to be
significant as we continue our licensing and marketing efforts, and incur other
increased costs associated with operating as a public company.


                                       12
<PAGE>

During the quarter ended September 30, 2005, other general and administrative
expenses totaled $532,493 as compared to other general and administrative
expenses of $676,843 for the quarter ended September 30, 2004. General and
administrative expenses consist of salaries, legal fees, marketing, sales,
facility rental and utilities expense. This decrease is attributable to a
reduction of salaries and our focus on Research and Development for the quarter.

We had an operating loss of $2,014,417 for the quarter ended September 30, 2005,
as opposed to an operating loss of $574,635 for the quarter ended September 30,
2004. We had a net loss of $2,032,217 for the quarter ended September 30, 2005,
as compared to a net loss of $608,696 for the quarter ended September 30, 2004.
The increase in the operating loss and net loss is primarily attributable to an
increase in marketing and sales, and the issuance of our restricted common stock
to recipients .

Other income (expense) for the quarter ended September 30, 2005 was made up of
$5,028 in other income we received primarily from storage of equipment from
third parties. Also included was interest expense for the quarter ended
September 30, 2005 totaling $22,828 as compared to interest expense totaling
$34,061 for the quarter ended September 30, 2004. Interest expense decreased
because we reduced the principal on our bank note by $939,886, and reduced our
loans payable.

During the next 12 months we expect to continue upgrading our current products
and developing new products and methods of using our existing products. For the
quarter ended September 30, 2005, our research and development expenses totaled
$332,316. We anticipate that our research and development expenses will continue
to be significant.

SIX MONTHS ENDED SEPTEMBER 30, 2005 AS COMPARED TO SIX MONTHS ENDED SEPTEMBER
30, 2004

Our revenues from operations for the six months ended September 30, 2005 were
$115,196 as compared to revenues of $399,809 for the six months ended September
30, 2004. Our revenues increased during the six months ended September 30, 2004
primarily due to the licensing of our All-Clear product. During the six months
ended September 30, 2005, our revenues were primarily derived from the sales of
our radomes.

Our cost of revenues from operations for the six months ended September 30, 2005
was $42,310 as compared to cost of revenues of $105,658 from the six months
ended September 30, 2004. The cost of revenues includes the cost of raw
materials, packaging supplies, shipping charges, royalties, commissions, direct
and indirect labor and other indirect manufacturing costs. This decrease is
attributable to the decrease in sales.

During the six months ended September 30, 2005, we spent $507,337 on research
and development as compared to $251,105 for research and development during the
six months ended September 30, 2004. Of this amount from the six months ended
September 30, 2005, $199,150 was expense we incurred for services in relation to
non-cash compensation. We paid our employees and consultants with our common
stock in order to conserve cash. Our overall research and development costs
increased because we focused on the development of our products during this
period. We anticipate our research and development costs will continue to be
significant as we continue to develop our products.

During the six months ended September 30, 2005, we incurred $1,295,547 in
expenses related to general and administrative non-cash services as compared to
$545,019 related to general and administrative non-cash services during the six
months ended September 30, 2004. During the six months ended September 30, 2005,
we paid our employees and consultants with our common stock in order to conserve
cash. During the six months ended September 30, 2005, other general and
administrative expenses totaled $900,829 as compared to other general and
administrative expenses of $1,115,999 for the six months ended September 30,
2004. General and administrative expenses consist of salaries, legal fees,
marketing, sales, facility rental and utilities expense. The overall increase in
General and administrative expense is attributable to an increase in marketing
and sales, and the issuance of our restricted common stock to recipients as
bonuses. We anticipate that general and administrative expenses will continue to
be significant as we continue our licensing and marketing efforts, and incur
other increased costs associated with operating as a public company.

We had an operating loss of $2,630,827 for the six months ended September 30,
2005, as opposed to an operating loss of $1,617,972 for the six months ended
September 30, 2004. We had a net loss of $2,667,751 for the six months ended
September 30, 2005, as compared to a net loss of $1,708,617 for the six months
ended September 30, 2004. The increase in the operating loss and net loss is
primarily attributable to the increase in marketing and sales, and the issuance
of our restricted common stock to recipients .

Other income (expense) for the six months ended September 30, 2005 was made up
of $12,528 in other income we received primarily from storage of equipment from
third parties. Also included was interest expense for the six months ended
September 30, 2005 totaling $49,452 as compared to interest expense totaling
$90,645 for the six months ended September 30, 2004. Interest expense decreased
because we reduced the principal on our bank note by $939,886, and reduced our
loans payable.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2005, we had cash on hand of $21,588. Since our inception, we
have incurred significant losses, and as of September 30, 2005 we had an
accumulated deficit of $20,849,525. We have not achieved profitability and
anticipate that we will continue to incur net losses through the following
six-month period. We expect that our research and development and general and
administrative expenses will continue to be significant, and as a result we will
need to generate significant revenue to achieve profitability.

From our inception through September 30, 2005, we have financed our operations
in the amount of $1,650,000 from a bank, loans in an amount of $3,164,805 from
third parties, existing shareholders and directors and $1,042,226 of revenues
and other income. Our primary source of cash during the six months ended
September 30, 2005 were loans totaling $235,700, revenues totaling $115,196 and
other income totaling $12,528. As of September 30, 2005, we had outstanding
balances under loan agreements of $960,585, consisting of $221,516 under a loan
agreement with USDR, Inc., $19,951 under a loan agreement with an existing
shareholder, and $710,114 principal balance and accrued interest of $9,004 under
a loan agreement with a bank. The bank loan is secured by our assets and
personally guaranteed by our Chairman, and matures in May 2008. We have no
borrowing capacity under this bank loan.

The Chairman of USGN controls USDR Aerospace, Ltd. ("Aerospace"), which has
licensed its intellectual property to USGN. Since inception (March 20, 2002),
based on actual costs, Aerospace has provided property and services to us
totaling approximately $2.9 million for which, as of September 30, 2005, we owed
Aerospace $300,720. On November 7, 2005, Aerospace accepted restricted common
stock in exchange for $300,720 for such services.

Net cash used in operating activities for the six months ended September 30,
2005 was $154,943 as compared to $106,273 in the six months ended September 30,
2004. The primary uses of cash for the six months ended September 30, 2005
consisted of general operating costs, cost of revenues, and reducing bank notes
payable.

In order to conserve our cash, our officers and employees have been deferring
their salaries, and during the quarter ended September 30, 2005, the employees
accepted shares of our common stock in lieu of cash.

We do not manufacture or distribute our products on a commercial scale. Under
the Kidde agreement, Kidde Firefighting, Inc. is responsible for all of the
costs of manufacturing, marketing and distribution of our All-Clear product. In
addition, we are in the process of negotiating certain licensing, manufacturing
or distribution arrangements with other international companies or independent
contractors that have the infrastructure to manufacture, distribute or sell our
products on a commercial scale worldwide. We are also in the process of
negotiating directly with certain government agencies and private sector
companies for the sale or licensing of our products. We cannot be certain,
however, that sales or licensing of our products will ever generate enough
revenues to fund our business. During the next 12 months, if we cannot generate
sufficient funds to operate our business from product sales or licenses, we will
be required to seek financing from our largest shareholder, who has provided
financing and a loan guarantee for the us in the past. The shareholder is under
no obligation to provide such funds. We may also consider selling debt or equity
securities. We cannot be certain that we will be successful in obtaining
financing if we need it. If we cannot obtain financing when we need it, we may
be unable to maintain our operations.


                                       13
<PAGE>

During the six months ended September 30, 2005, in order to conserve cash, we
issued our common stock to satisfy notes payable totaling $303,021, accounts
payable totaling $346,398, and wages payable totaling 317,820.

The use of nanotechnology is a novel and unproven business model, which may or
may not be successful and will ultimately depend on demand for such products and
cost-effectiveness of manufacturing. We anticipate that any business model we
develop will be subject to change. At this time it is impossible for us to
predict the degree to which demand for our products will evolve or whether any
potential market will be large enough to provide any meaningful revenue or
profit for us.

NEW ACCOUNTING PRONOUNCEMENTS

In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 151, "Inventory Costs",
which clarifies the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material. SFAS No. 151 will be effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. We
do not believe the adoption of SFAS No. 151 will have a material impact on our
financial statements.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of "Nonmonetary
Assets", which eliminates the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. SFAS No. 153 will be
effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. We do not believe the adoption of SFAS No. 153 will have a
material impact on our financial statements.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment" which
eliminates the ability to account for share-based compensation transactions
using the intrinsic value method under Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and generally would require
instead that such transactions be accounted for using a fair-value-based method.
This statement is effective for the Company as of the first interim period or
fiscal year beginning after December 15, 2005. The Company adopted Statement of
Financial Accounting Standards No. 123R, Share-Based Payment, at the beginning
of the second quarter of 2005.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections". SFAS No. 154 changes the requirements for the accounting for and
reporting of a change in accounting principle. In addition, it carries forward
without change the guidance contained in APB Opinion No. 20 for reporting the
correction of an error in previously issued financial statements and a change in
accounting estimate. SFAS No. 154 requires retrospective application to prior
periods' financial statements of changes in accounting principle in most
circumstances. The provisions of SFAS 154 are effective in fiscal years
beginning after December 15, 2005. We do not believe the adoption of SFAS No.
154 will have a material impact on our financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet transactions.

FACTORS AFFECTING BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION

An investment in our securities is very speculative and involves a high degree
of risk. You should carefully consider the following risk factors, along with
the other matters referred to in this Annual Report, before you decide to buy
our securities. If you decide to buy our securities, you should be able to
afford a complete loss of your investment.


                                       14
<PAGE>

RISKS ASSOCIATED WITH OUR BUSINESS

WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE HAD LIMITED OPERATIONS TO DATE,
THEREFORE YOU HAVE NO BASIS ON WHICH TO DETERMINE IF OUR BUSINESS CAN BE
SUCCESSFUL.

Current management acquired control of USGN on May 17, 2002. We are a
development stage company and, to date, we have had limited operations. During
the six months ended September 30, 2005 we had a net loss of $2,667,751. Our
accumulated deficit since inception through September 30, 2005 was $20,849,525.

SOME OF OUR PRODUCTS ARE STILL BEING DEVELOPED AND, AS YET, THEY ARE UNPROVEN,
THEREFORE, WE CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL.

Our current business model depends on generating revenue through sales of our
products or licensing of our technology. Some of these products are in varying
stages of development and testing. If we cannot successfully develop and prove
our products, we will not become profitable.

THE SUCCESS OF OUR BUSINESS REQUIRES CONTINUED FUNDING. IF WE DO NOT RECEIVE
ADEQUATE FUNDING, WE MAY BE FORCED TO CEASE OPERATIONS.

Our ability to continue in existence and to develop our business depends upon
our ability to obtain funding for our operations. If we do not receive adequate
funding, it is unlikely that we could continue our business.

WE HAVE RECEIVED A WELLS NOTICE AND SUBPOENAS FOR INFORMATION AND TESTIMONY FROM
THE SEC FOR CERTAIN PRIOR PUBLIC STATEMENTS. WE CANNOT PREDICT THE OUTCOME OF
THIS MATTER. IT COULD RESULT IN A CIVIL ACTION INVOLVING, AMONG OTHER THINGS,
MONETARY RELIEF FROM US OR OUR OFFICERS AND DIRECTORS. ANY SUCH DEVELOPMENT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS, AND
FINANCIAL CONDITION.

On January 3, 2005, we received a Wells Notice from the staff of the U.S.
Securities and Exchange Commission. The Wells Notice notified us that the SEC
staff intended to recommend that the SEC bring a civil action against us and our
officers and directors for alleged violations of SEC laws. The SEC's concerns
principally regard certain prior public statements made by us regarding the
marketability of our products. We have prepared and submitted initial and
supplemental Wells Submissions in response to the Wells Notice. The SEC has also
issued subpoenas to us seeking information and testimony regarding the
technology incorporated into our products. Notwithstanding receipt of the Wells
Notice and the information and testimony currently being sought, we have
cooperated and continue to cooperate with the SEC. However, we cannot predict
the outcome of this matter, or when a negotiated resolution, if any, may be
reached and the likely terms of such a resolution.

Any civil action or any negotiated resolution may involve, among other things,
equitable relief, including material penalties, which could have a material
adverse effect on our business, results of operations and financial condition.

THE SUCCESS OF OUR BUSINESS REQUIRES ACCEPTANCE OF OUR PRODUCTS IN THE
MARKETPLACE. IF A DEMAND FOR OUR PRODUCTS DOES NOT DEVELOP, OUR BUSINESS WILL BE
UNSUCCESSFUL.

The use of nanotechnology is a novel and unproven business model, which may or
may not be successful and will ultimately depend on demand for our products. Our
ability to grow and sustain our business is dependent upon our ability to gain
significant acceptance of our products, primarily in the defense security and
health and safety markets. Without significant acceptance in these markets, we
will not be able to achieve and sustain profitable operations and your
securities will likely become worthless. At this time it is impossible for us to
predict the degree to which demand for our products will evolve or whether any
potential market will be large enough to provide any meaningful revenue or
profit for us.

WE ARE SUBJECT TO THE RISKS AND UNCERTAINTIES INHERENT IN NEW BUSINESSES. OUR
FAILURE TO PLAN OR FORECAST ACCURATELY COULD HAVE A MATERIAL ADVERSE IMPACT ON
OUR DEVELOPMENT.


                                       15
<PAGE>

We are subject to the risks and uncertainties inherent in new businesses,
including the following:

o Our projected capital needs may be inaccurate, and we may not have enough
money to develop our products and bring them to market;

o We may experience unanticipated development or marketing expenses, which may
make it more difficult to develop our products and bring them to market;

o Even if we are able to develop our products and bring them to market, we may
not earn enough revenue from the sales of our products to cover the costs of
operating our business.

If, because of our failure to plan or project accurately, we are unsuccessful in
our efforts to develop our products or if the products we provide do not produce
revenues as we project, we are not likely to ever become profitable and we may
be required to curtail some or all of our operations.

WE WILL CONTINUE TO NEED MONEY TO FUND FUTURE OPERATIONS. IF WE DO NOT RECEIVE
ADEQUATE FINANCING WE WOULD BE UNABLE TO CONTINUE OUR OPERATIONS.

Until we are able to generate significant revenues from licensing and the sale
of our products, we will require financing for our operations. We cannot assure
you that funds will be available to us on favorable terms, or at all. To the
extent that money is raised through the sale of our securities, the issuance of
those securities could result in dilution to our shareholders. Unavailability of
funds could have a material adverse effect on our ability to continue our
operations.

OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION COULD BE NEGATIVELY
IMPACTED IF DEMAND FOR OUR PRODUCTS IS LESS THAN WE ANTICIPATE.

Our growth depends on our ability to successfully develop and market our
products. The development and marketing of our products is dependent on a number
of factors, including our ability to:

o recruit and maintain a base of qualified scientists and engineers;

o initiate, develop and sustain corporate and government relationships;

o attract, integrate and retain qualified marketing and sales representatives;
and

o accurately assess the demands of the market.

Demand for our products or technology might be less than we anticipate, or we
may not be successful in recruiting and maintaining the representatives we need
to develop and sell our products. In either case, our business, operating
results and financial condition could be negatively impacted.

WE ARE DEPENDENT ON PROPRIETARY TECHNOLOGY, WHICH WE MAY NOT BE ABLE TO
ADEQUATELY PROTECT. ADDITIONALLY, THIRD PARTIES MAY ALLEGE THAT WE INFRINGE ON
THEIR INTELLECTUAL PROPERTY. IF WE WERE TO BECOME INVOLVED IN LITIGATION, IT
WOULD BE COSTLY AND WOULD DIVERT MANAGEMENT'S ATTENTION FROM OUR BUSINESS
OPERATIONS. THIS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

We rely on a combination of trade secret and patent laws, nondisclosure and
other contractual and technical measures to protect our proprietary rights in
our products. However, we cannot assure you that these provisions will be
adequate to protect our proprietary rights. In addition, the laws of certain
foreign countries do not protect intellectual property rights to the same extent
as the laws of the United States. Although we believe that our intellectual
property rights do not infringe upon the proprietary rights of third parties, a
competitor may claim that we have infringed on its products. Any litigation
relating to our intellectual property could result in substantial expense to us
and result in significantly diverting our technical and management personnel
from their routine activities. This could have an adverse effect on our
business.


                                       16
<PAGE>

                     PART 1 - ITEM 3 CONTROLS AND PROCEDURES

Based on an evaluation under the supervision and with the participation of our
management, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined under the
Securities Exchange Act of 1934, as amended ("Exchange Act")) were effective as
of September 30, 2005 to ensure that information required to be disclosed by us
in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
accordance with the Securities and Exchange Commission's rules and forms.

There were no changes in our internal controls over financial reporting
identified in management's evaluation during the six months ended September 30,
2005 that have materially affected or are reasonably likely to materially affect
our internal controls over financial reporting.

                                     PART II

ITEM 1. LEGAL PROCEEDINGS

On January 3, 2005, we received a Wells Notice from the U.S. Securities and
Exchange Commission. The Wells Notice notified us that the SEC staff intended to
recommend that the SEC bring a civil action against us and our officers and
directors for alleged violations of U.S. securities laws. The SEC's concerns
principally regard certain prior public statements made by us regarding the
marketability of our products. We have prepared and submitted initial and
supplemental Wells Submissions in response to the Wells Notice. The SEC has also
issued subpoenas to us seeking information and testimony regarding the
technology incorporated into our products. Notwithstanding receipt of the Wells
Notice and the information and testimony being sought, we have cooperated and
continue to cooperate with the SEC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On July 28, 2005, we issued 868,368 shares of our common stock, having a value
of $0.07 per share, which was the closing price of our common stock on July 28,
2005, to attorneys for legal services. The consideration received for these
shares was extinguishment of debt owed to the attorneys in the amount of
$60,786.

On August 3, 2005, we issued 2,000,000 shares of our common stock to our Chief
Executive Officer as an inducement for acceptance of employment, having a fair
market valuation of $130,000. 1,600,000 of these shares are subject to vesting
conditions and were recorded at their fair value totaling $86,666 as deferred
compensation and services, and are being recognized over the vesting period of
one year.

On August 12, 2005, we issued 382,934 shares of our common stock, having a value
of $0.12 per share, which was the closing price of our common stock on August
12, 2005, to attorneys for legal services. The consideration received for these
shares was extinguishment of debt owed to the attorneys in the amount of
$45,952.

On August 25, 2005, the Company granted 19,850,000 shares of our common stock
under the 2005 Stock Plan to recipients and our CFO having a fair market
valuation of $1,667,400.

On November 7, 2005, the Company and USDR Aerospace, Ltd. entered into an
agreement pursuant to which the Company issued 4,009,660 shares of its common
stock, at a value per share of $0.075, to USDR Aerospace, Ltd. as full and final
payment of employee and product development services in the amount of
$300,720.44 provided by USDR Aerospace, Ltd. to the Company.

On November 8, 2005, the Company and USDR, Inc. entered into an agreement
pursuant to which the Company issued 2,414,622 shares of its common stock, at a
value per share of $0.072, to USDR, Inc. as full and final payment of a loan
received from USDR, Inc. in the amount of $173,852.77, including interest
accrued through November 8, 2005.

We relied on the exemption from registration as set forth in Section 4(2) of the
Securities Act of 1933 for the issuance of securities described above as
transactions by an issuer not involving any public offering. The recipients of
securities in each transaction made representations that they were accredited
investors within the meaning of Regulation D under the Securities Act. They also
represented their intentions to acquire the securities for investment purposes
without a view to distribution and had access to information concerning the
Company and our business prospects, as required by the Securities Act of 1933,
as amended. In addition, there was no general solicitation or advertising for
the acquisition of these securities.

There were no underwritten offerings employed in connection with any of these
transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.


                                       17
<PAGE>

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The exhibits listed in the Exhibit Index are filed as part of this report.


                                       18
<PAGE>

                                   SIGNATURES

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

                            US GLOBAL NANOSPACE, INC.


                                      By: /s/ Carl Gruenler
                                          --------------------------------------
Date:  March 22, 2006                 Carl Gruenler, Chief Executive Officer


                                      By: /s/ Kevin Cronin
                                          --------------------------------------
Date:  March 22, 2006                 Kevin Cronin, Chief Financial Officer


                                       19
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.       Description

2.          Agreement and Plan of Share Exchange between Caring Products
            International, Inc. and USDR Global Aerospace, Ltd. and the
            stockholders of US Global Aerospace, Ltd. dated as of May 15, 2002
            (1)

3.1.1       Amended and Restated Certificate of Incorporation (9)

3.1.2       First Amendment to Amended and Restated Certificate of Incorporation
            (9)

3.1.3       Second Amendment to Amended and Restated Certificate of
            Incorporation (9)

3.2         Bylaws (3)

10.1        Intellectual Property Assignment and Royalty Agreement dated May 14,
            2002 between USDR Aerospace, Ltd. and USDR Global Aerospace, Ltd.
            (4)

10.2        Settlement Agreement and Mutual Release among the Company, USDR
            Global Aerospace, Ltd., USDR Aerospace, Ltd. and Richard Wall dated
            November 19, 2002. (4)

10.3        Settlement Agreement and Mutual Release among the Company, USDR
            Global Aerospace, Ltd., USDR Aerospace, Ltd., Richard A. Wall, ECON
            Investor Relations, Inc. and Dawn Van Zant dated November 19, 2002
            (4)

10.4        Settlement Agreement and Mutual Release among ERBC Holdings, Ltd.,
            the Company, USDR Global Aerospace, Ltd., USDR Aerospace, Ltd., Live
            Oak Capital, LLC, Nicholas Lattanzio, Margaret K. Curtis, Smith
            Point Capital, LTD. and Daniel T. Guilfoile dated November 20, 2002.
            (4)

10.5        Promissory Note in the amount of $14,000 dated April 11, 2003 in
            favor of Wilford Simpson (5)

10.6        Promissory Note in the amount of $2,000 dated April 18, 2003 in
            favor of Wilford Simpson (5)

10.7        Promissory Note in the amount of $100,000 dated April 18, 2003 in
            favor of USDR Aerospace, Ltd. (5)

10.8        Gross Lease Agreement dated April 28, 2003 between the Company and
            West Harris Property, Inc. (4)

10.9        Addendum E to Lease/Guarantee executed by Julie Seaman (4)

10.10       US Global Nanospace, Inc. Amended and Restated 2002 Stock Plan (7)

10.11       Commercial Guaranty between John D. Robinson and Western Security
            Bank (4)

10.12       Promissory Note in the amount of $12,000 dated April 29, 2003 in
            favor of Julie Seaman (5)

10.13       Promissory Note in the amount of $10,000 dated April 30, 2003 in
            favor of John Robinson (5)

10.14       Promissory Note in the amount of $13,000 dated May 9, 2003 in favor
            of Julie Seaman (5)

10.15       Promissory Note in the amount of $125,000 dated June 6, 2003 in
            favor of U.S.D.R. (NV), Inc. (5)

10.16       Master Agreement by and between Y2-Ultra-Filter, Inc. and the
            Company dated June 19, 2003 (6)

10.17       Promissory Note and Commercial Security Agreement between the
            Company and Western Security Bank dated June 30, 2003 (4)

10.18       Patent and Technology License Agreement dated July 24, 2003 between
            the Company and TIAX, LLC (11)

10.19       Promissory Note in the amount of $500,000 dated August 7, 2003, as
            amended on December 19, 2003, in favor of John Robinson (9)


                                       20
<PAGE>

10.20       Amendment No. 1 dated October 3, 2003 to Patent and Technology
            License Agreement between the Company and TIAX LLC (11)

10.21       Promissory Note in the amount of $100,000 dated October 3, 2003 in
            favor of Julie Seaman (9)

10.22       Promissory Note in the amount of $47,283.50 dated January 8, 2004 in
            favor of Robin Bailey (7)

10.23       Promissory Note in the amount of $50,000 dated January 9, 2004 in
            favor of Paula Boozer (7)

10.24       Promissory Note in the amount of $195,649.94 dated January 27, 2004
            in favor of Steve Squires (7)

10.25       Agreement to Convert Debt between the Company and John Robinson
            dated April 23, 2004(9)

10.26       Agreement to Convert Debt between the Company and Julie Seaman dated
            April 23, 2004 (9)

10.27       Change in Terms Agreement dated June 11, 2004 to Promissory Note in
            the amount of $500,000 in favor of U.S.D.R. (NV), Inc. (9)

10.28       +Distribution Agreement between the Company and Vitusa Products,
            Inc. dated as of June 25, 2004 (10)

10.29       Change in Terms Agreement dated June 30, 2004 to Promissory Note in
            the amount of $200,000 in favor of USDR Aerospace, Ltd. (9)

10.30       Agreement to Convert Debt between the Company and John Robinson
            dated August 3, 2004 (9)

10.31       Agreement to Convert Debt between the Company and Julie Seaman dated
            August 3, 2004 (9)

10.32       Agreement to Convert Debt between the Company and Steve Squires
            dated August 3, 2004 (9)

10.33       Agreement to Convert Debt between the Company and Paula Boozer dated
            August 3, 2004 (9)

10.34       Agreement to Convert Debt between the Company and Robin Bailey dated
            August 3, 2004 (9)

10.35       +Development and License Agreement between the Company and Kidde
            Fire Fighting Inc. dated August 13, 2004 (8)

10.36       Change in Terms Agreement between the Company and Western Security
            Bank dated September 30, 2004 (9)

10.37       Change in Terms Agreement dated October 30, 2004 to Promissory Note
            in the amount of $500,000 in favor of USDR(NV) (9)

10.38       Change in Terms Agreement dated December 30, 2004 to Promissory Note
            in the amount of $500,000 in favor of USDR(NV).(12)

10.39       Change in Terms Agreement dated December 30, 2004 to Promissory Note
            in the amount of $200,000 in favor of USDR Aerospace, Ltd. (12)

10.40       Agreement to Convert Debt dated May 11, 2005 between the Company and
            USDR Aerospace, Ltd. (13)

10.41       Agreement to Convert Debt dated May 11, 2005 between the Company and
            USDR, Inc. (13)

10.42       Promissory Note in the amount of $350,000 dated May 13, 2005 in
            favor of U.S.D.R., Inc. (16)

10.43       Employment Agreement between the Company and Carl Gruenler dated
            August 3, 2005 (14)

10.44       2005 Stock Plan, as adopted August 25, 2005 (15)

10.45       Agreement to Convert Debt dated November 7, 2005 between the Company
            and USDR Aerospace, Ltd. (16)

10.46       Agreement to Convert Debt dated November 8, 2005 between the Company
            and USDR, Inc. (16)

14          Code of Ethics (7)

31.1        Certification by Chief Executive Officer


                                       21
<PAGE>

31.2        Certification by Chief Financial Officer

32          Certification pursuant to 18 U.S.C. Section 1350

----------
+     Confidential treatment requested as to certain portions, which portions
      were omitted and filed separately with the Securities and Exchange
      Commission.

(1)   Incorporated by reference from a Form 8-K filed with the Securities and
      Exchange Commission on May 30, 2002.

(2)   Incorporated by reference from Amendment No. 1 to the Registration
      Statement on Form SB-2 filed with the Securities and Exchange Commission
      on March 20, 1996.

(3)   Incorporated by reference from the Registration Statement on Form SB-2
      filed with the Securities and Exchange Commission on September 12, 1995.

(4)   Incorporated by reference from a Form 10-KSB filed with the Securities and
      Exchange Commission on July 11, 2003, as amended.

(5)   Incorporated by reference from a Form 10-QSB filed with the Securities and
      Exchange Commission on September 10, 2003.

(6)   Incorporated by reference from a Form 10-QSB filed with the Securities and
      Exchange Commission on November 14, 2003.

(7)   Incorporated by reference from a Form 10-KSB filed with the Securities and
      Exchange Commission on July 14, 2004.

(8)   Incorporated by reference from a Form 8-K/A filed with the Securities and
      Exchange Commission on June 1, 2005.

(9)   Incorporated by reference from a Form 10-QSB filed with the Securities and
      Exchange Commission on November 15, 2004.

(10)  Incorporated by reference from a Form 10-QSB/A filed with the Securities
      and Exchange Commission on November 16, 2004.

(11)  Incorporated by reference from a Form 10-QSB/A filed with the Securities
      and Exchange Commission on February 9, 2005.

(12)  Incorporated by reference from a Form 10-QSB filed with the Securities and
      Exchange Commission on February 25, 2005.

(13)  Incorporated by reference from a Form 8-K filed with the Securities and
      Exchange Commission on May 16, 2005

(14)  Incorporated by reference from a Form 10-QSB filed with the Securities and
      Exchange Commission on August 15, 2005

(15)  Incorporated by reference from a Form 8-K filed with the Securities and
      Exchange Commission on August 30, 2005

(16)  Incorporated by reference from a Form 10-QSB filed with the Securities and
      Exchange Commission on November 23, 2005.


                                       22