**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

**x      QUARTERLY REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**

**EXCHANGE      ACT OF 1934**

**o      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.**

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

**APPLICABLE      ONLY TO CORPORATE ISSUERS**

----

**US      GLOBAL NANOSPACE, INC. **

|                    |   |                                                                     |   | PAGE                                 |
|-------------------------|--------|--------------------------------------------------------------------------|--------|--------------------------------------|
|                    |   |                                                                     |   | NUMBER                               |
| PART                I   |   |                                                                     |   |                                 |
|                    |   |                                                                     |   |                                 |
| Item                1 - |   | Financial                Statements                                      |   |                                 |
|                    |   |                                                                     |   |                                 |
|                    |   | Balance                Sheets as of December 31, 2006 (unaudited)        |   |                                 |
|                    |   | and                March 31, 2006                                        |   | 3                                    |
|                    |   |                                                                     |   |                                 |
|                    |   | Statements                of Operations - Three and Nine Months Ended    |   |                                 |
|                    |   | December                31, 2005 and 2006 and                            |   |                                 |
|                    |   | since                inception (March 20, 2002)                          |   |                                      |
|                    |   | through                December 31, 2006 (unaudited)                     |   | 4                                    |
|                    |   |                                                                     |   |                                 |
|                    |   | Statement                of Stockholders' Deficit -                      |   |                                 |
|                    |   | Nine                Months Ended December 31, 2006                       |   |                                      |
|                    |   | (unaudited)                                                              |   | 5                                    |
|                    |   |                                                                     |   |                                 |
|                    |   | Statements                of Cash Flows - Nine Months Ended              |   |                                 |
|                    |   | December                31, 2005 and 2006 and                            |   |                                 |
|                    |   | since                inception (March 20, 2002)                          |   |                                      |
|                    |   | through                December 31, 2006 (unaudited)                     |   | 6                                    |
|                    |   |                                                                     |   |                                 |
|                    |   | Notes                to the Financial Statements                         |   | 7                -                10 |
|                    |   |                                                                     |   |                                 |
| Item                2 - |   | Management's                Discussion and Analysis or Plan of Operation |   | 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                                           |   | 17     |
|                                                                                |   |   |
| Item                6 - Exhibits                                                    |   | 18     |
|                                                                                |   |   |
| Signature                Page                                                       |   |   |

----

**PART      I - ITEM 1 FINANCIAL STATEMENTS **

**US      GLOBAL NANOSPACE, INC.**

**BALANCE      SHEETS **

|                                                                              |   | December                  31, |        | March                  31, |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------|-------------|----------------------------|--------|
|                                                                              |   | 2006                          |        | 2006                       |   |
|                                                                              |   | (Unaudited)                   |        |                       |   |
| ASSETS                                                                            |   |                          |        |                       |   |
| CURRENT                  ASSETS                                                   |   |                          |        |                       |   |
| Cash                                                                              |   | $                             | 17,646      |                       | $      | 21,256 |   |
| Accounts                  receivable                                              |   |                          | 20,259      |                       |   | 51,379 |   |
| Other                  receivables                                                |   |                          | 54,401      |                       |   | 75,130 |   |
| Prepaid                  expenses                                                 |   |                          | 500         |                       |   | 1,489 |   |
| Inventory                                                                         |   |                          | —     |                       |   | 4,134 |   |
|                                                                              |   |                          |        |                       |   |   |   |
| Total                  current assets                                             |   |                          | 92,806      |                       |   | 153,388 |   |
|                                                                              |   |                          |        |                       |   |   |   |
| Total                  assets                                                     |   | $                             | 92,806      |                       | $      | 153,388 |   |
|                                                                              |   |                          |        |                       |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS' DEFICIT                            |   |                          |        |                       |   |   |   |
|                                                                              |   |                          |        |                       |   |   |   |
| CURRENT                  LIABILITIES                                              |   |                          |        |                       |   |   |   |
| Current                  maturities of bank note payable                          |   | $                             | 710,114     |                       | $      | 710,114 |   |
| Accounts                  payable                                                 |   |                          | 601,527     |                       |   | 672,122 |   |
| Accrued                  salaries,compensation, and expenses                      |   |                          | 2,224,117   |                       |   | 1,451,730 |   |
| Accrued                  interest                                                 |   |                          | 146,134     |                       |   | 38,086 |   |
| Related                  party payable                                            |   |                          | 44,994      |                       |   | 39,108 |   |
| Loans                  payable                                                    |   |                          | 135,560     |                       |   | 141,560 |   |
|                                                                              |   |                          |        |                       |   |   |   |
| Total                  current liabilities                                        |   |                          | 3,862,446   |                       |   | 3,052,720 |   |
|                                                                              |   |                          |        |                       |   |   |   |
| COMMITMENTS                  & CONTINGENCIES                                  |   |                          | 65,963      |                       |   | 65,963 |   |
|                                                                              |   |                          |        |                       |   |   |   |
| STOCKHOLDERS'                  DEFICIT                                            |   |                          |        |                       |   |   |   |
| Preferred                  stock authorized, 10,000,000 shares $0.01 par value,   |   |                          |        |                       |   |   |   |
| none                  issued or outstanding                                       |   |                          | —     |                       |   | — |   |
| Common                  stock authorized, 300,000,000 shares $0.001 par value,    |   |                          |        |                       |   |   |   |
| 218,263,853                  and 176,487,425 issued and outstanding, respectively |   |                          | 218,264     |                       |   | 176,487 |   |
| Additional                  paid-in capital                                       |   |                          | 22,154,569  |                       |   | 20,874,108 |   |
| Deferred                  compensation and services                               |   |                          | (3,787      | )                          |   | (388,277 | ) |
| Deficit                  accumulated during the development stage                 |   |                          | (26,204,649 | )                          |   | (23,627,613 | ) |
|                                                                              |   |                          |        |                       |   |   |   |
| Total                  stockholders' deficit                                      |   |                          | (3,835,603  | )                          |   | (2,965,295 | ) |
|                                                                              |   |                          |        |                       |   |   |   |
| Total                  liabilities and stockholders' deficit                      |   | $                             | 92,806      |                       | $      | 153,388 |   |

----

**US      GLOBAL NANOSPACE, INC.**

**STATEMENTS      OF OPERATIONS (Unaudited) **

|                                                   |   | Three                  Months Ended December                  31, 2006 |        | Three                  Months Ended December                  31, 2005 |   | Nine                  Months Ended December                  31, 2006 |   | Nine                  Months Ended December                  31, 2005 |        | Cumulative                  results of operations from March 20, 2002 (date of inception) through                  December                  31, 2006 |   |
|--------------------------------------------------------|--------|------------------------------------------------------------------------|-------------|------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|-----------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| REVENUES                                               |   | $                                                                      | 47,259      |                                                                   | $      | 22,010                                                                |   | $                                                                     | 168,161     |                                                                                                                                                  | $      | 137,206 |   | $ | 1,284,680 |   |
| COST                  OF REVENUES                      |   |                                                                   | 12,745      |                                                                   |   | 12,873                                                                |   |                                                                  | 43,761      |                                                                                                                                                  |   | 55,183 |   |   | 538,035 |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Gross                  Profit                          |   |                                                                   | 34,514      |                                                                   |   | 9,137                                                                 |   |                                                                  | 124,400     |                                                                                                                                                  |   | 82,023 |   |   | 746,645 |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| OPERATING                  EXPENSES                    |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Research                  and development              |   |                                                                   | 155,286     |                                                                   |   | 479,907                                                               |   |                                                                  | 839,708     |                                                                                                                                                  |   | 987,244 |   |   | 5,838,031 |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| General                  and administrative            |   |                                                                   | 331,435     |                                                                   |   | 991,476                                                               |   |                                                                  | 1,746,908   |                                                                                                                                                  |   | 3,187,852 |   |   | 21,039,344 |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Total                  operating expenses              |   |                                                                   | 486,721     |                                                                   |   | 1,471,383                                                             |   |                                                                  | 2,586,616   |                                                                                                                                                  |   | 4,175,096 |   |   | 26,877,375 |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Operating                  loss                        |   |                                                                   | (452,207    | )                                                                      |   | (1,462,246                                                            | )      |                                                                  | (2,462,216  | )                                                                                                                                                     |   | (4,093,073 | ) |   | (26,130,730 | ) |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| OTHER                  INCOME (EXPENSE)                |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Debt                  restructure                      |   |                                                                   | —     |                                                                   |   | —                                                               |   |                                                                  | —     |                                                                                                                                                  |   | — |   |   | 918,573 |   |
| Other                  income                          |   |                                                                   | —     |                                                                   |   | 7,508                                                                 |   |                                                                  | —     |                                                                                                                                                  |   | 20,036 |   |   | 80,488 |   |
| Interest                  expense                      |   |                                                                   | (43,497     | )                                                                      |   | (23,413                                                               | )      |                                                                  | (114,820    | )                                                                                                                                                     |   | (72,865 | ) |   | (1,072,980 | ) |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Total                  other income (expense)          |   |                                                                   | (43,497     | )                                                                      |   | (15,905                                                               | )      |                                                                  | (114,820    | )                                                                                                                                                     |   | (52,829 | ) |   | (73,919 | ) |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| NET                  LOSS                              |   | $                                                                      | (495,704    | )                                                                      | $      | (1,478,151                                                            | )      | $                                                                     | (2,577,036  | )                                                                                                                                                     | $      | (4,145,902 | ) | $ | (26,204,649 | ) |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Net                  loss per share, basic and diluted |   | $                                                                      | (0.00       | )                                                                      | $      | (0.01                                                                 | )      | $                                                                     | (0.01       | )                                                                                                                                                     | $      | (0.03 | ) |   |   |   |
|                                                   |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| Basic                  and diluted weighted average    |   |                                                                   |        |                                                                   |   |                                                                  |   |                                                                  |        |                                                                                                                                                  |   |   |   |   |   |   |
| number                  of common shares               |   |                                                                   | 201,172,485 |                                                                   |   | 155,931,920                                                           |   |                                                                  | 193,790,855 |                                                                                                                                                  |   | 130,912,531 |   |   |   |   |

----

**US      GLOBAL NANOSPACE, INC.**

**STATEMENT      OF STOCKHOLDERS' DEFICIT **

**Nine      Months Ended December 31, 2006 **

|                                                                    |   | Common                  Stock |        | Additional                  Paid-in |   | Deferred                  Compensation and |   | Accumulated                  Development Stage |       | Total                  Stockholders' |   |
|-------------------------------------------------------------------------|--------|-------------------------------|-------------|-------------------------------------|--------|--------------------------------------------|--------|------------------------------------------------|------------|--------------------------------------|--------|
|                                                                    |   | Shares                        |        | Amount                              |   | Capital                                    |   | Services                                       |       | Deficit                              |   | Deficit |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |
| Balance                  at April 1, 2006                               |   |                          | 176,487,425 |                                | $      | 176,487                                    |   | $                                              | 20,874,108 |                                 | $      | (388,277 | ) | $ | (23,627,613 | ) | $ | (2,965,295 | ) |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on April 6, 2006 in           |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for accounts payable at $0.045 per share |   |                          | 1,154,539   |                                |   | 1,155                                      |   |                                           | 50,799     |                                 |   |   |   |   |   |   |   | 51,954 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on April 10, 2006 in          |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.041 per share         |   |                          | 3,418,860   |                                |   | 3,419                                      |   |                                           | 136,717    |                                 |   |   |   |   |   |   |   | 140,136 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on April 12, 2006 in          |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.041 per share         |   |                          | 365,854     |                                |   | 366                                        |   |                                           | 14,634     |                                 |   |   |   |   |   |   |   | 15,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on May 4, 2006 in             |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.063 per share         |   |                          | 2,301,587   |                                |   | 2,301                                      |   |                                           | 142,699    |                                 |   |   |   |   |   |   |   | 145,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on May 4, 2006 in             |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.049 per share         |   |                          | 1,546,392   |                                |   | 1,546                                      |   |                                           | 73,454     |                                 |   |   |   |   |   |   |   | 75,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on May 16, 2006 in            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for accounts payable at $0.05 per share  |   |                          | 2,337,879   |                                |   | 2,338                                      |   |                                           | 114,556    |                                 |   |   |   |   |   |   |   | 116,894 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on May 19, 2006 in            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.046 per share         |   |                          | 412,343     |                                |   | 412                                        |   |                                           | 18,556     |                                 |   |   |   |   |   |   |   | 18,968 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on May 23, 2006 in            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for accounts payable at $0.048 per share |   |                          | 621,630     |                                |   | 622                                        |   |                                           | 28,905     |                                 |   |   |   |   |   |   |   | 29,527 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on May 24, 2006 in            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.062 per share         |   |                          | 1,209,678   |                                |   | 1,210                                      |   |                                           | 73,790     |                                 |   |   |   |   |   |   |   | 75,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on June 6, 2006 in            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for wages at $0.047 per share            |   |                          | 443,263     |                                |   | 443                                        |   |                                           | 20,390     |                                 |   |   |   |   |   |   |   | 20,833 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on June 16, 2006 in           |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.045 per share         |   |                          | 2,474,771   |                                |   | 2475                                       |   |                                           | 108,890    |                                 |   |   |   |   |   |   |   | 111,365 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on July 1, 2006 in            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for lease settlement at $0.04 per share  |   |                          | 893,617     |                                |   | 894                                        |   |                                           | 34,851     |                                 |   |   |   |   |   |   |   | 35,745 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on July 5, 2006               |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| in                  consideration for services at $0.04 per share       |   |                          | 250,000     |                                |   | 250                                        |   |                                           | 9,750      |                                 |   |   |   |   |   |   |   | 10,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on October 4, 2006            |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| in                  consideration for services at $0.016 per share      |   |                          | 2,812,500   |                                |   | 2,812                                      |   |                                           | 42,188     |                                 |   |   |   |   |   |   |   | 45,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on November 16, 2006          |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| in                  consideration for services at $0.029 per share      |   |                          | 344,828     |                                |   | 345                                        |   |                                           | 9,655      |                                 |   |   |   |   |   |   |   | 10,000 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on December 6, 2006 in        |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for accounts payable at $0.024 per share |   |                          | 5,484,814   |                                |   | 5,485                                      |   |                                           | 126,151    |                                 |   |   |   |   |   |   |   | 131,636 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on December 12, 2006 in       |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| consideration                  for services at $0.02 per share          |   |                          | 12,288,226  |                                |   | 12,289                                     |   |                                           | 233,476    |                                 |   |   |   |   |   |   |   | 245,765 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on December 13, 2006          |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| in                  consideration for services at $0.019 per share      |   |                          | 1,034,482   |                                |   | 1,034                                      |   |                                           | 19,138     |                                 |   |   |   |   |   |   |   | 20,172 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on December 27, 2006          |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| in                  consideration for services at $0.010 per share      |   |                          | 450,000     |                                |   | 450                                        |   |                                           | 4,095      |                                 |   | (3,787 | ) |   |   |   |   | 758 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of common stock on December 28, 2006          |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| in                  consideration for wages at $0.010 per share         |   |                          | 1,931,165   |                                |   | 1,931                                      |   |                                           | 17,767     |                                 |   |   |   |   |   |   |   | 19,698 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Amortization                  of deferred compensation and              |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| services                                                                |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   | 388,277 |   |   |   |   |   | 388,277 |   |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Net                  loss for the period                                |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   | (2,577,036 | ) |   | (2,577,036 | ) |
|                                                                    |   |                          |        |                                |   |                                       |   |                                           |       |                                 |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2006                           |   |                          | 218,263,853 |                                | $      | 218,264                                    |   | $                                              | 22,154,569 |                                 | $      | (3,787 | ) | $ | (26,204,649 | ) | $ | (3,835,603 | ) |

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**US      GLOBAL NANOSPACE, INC.**

**STATEMENTS      OF CASH FLOWS (Unaudited) **

|                                                                      |   | Nine                  months endedDecember                  31,2006 |       | Nine                  months ended December 31,2005 |   | Cumulative                  results of operations from March 20, 2002(date                  of inception) throughDecember                  31, 2006 |   |
|---------------------------------------------------------------------------|--------|---------------------------------------------------------------------|------------|-----------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CASH                  FLOWS FROM OPERATING ACTIVITIES                     |   |                                                                |       |                                                |   |                                                                                                                                                |   |
| Net                  loss                                                 |   | $                                                                   | (2,577,036 | )                                                   | $      | (4,145,902                                                                                                                                          | )      | $ | (26,204,649 | ) |
| Adjustments                  to reconcile net loss to net                 |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| cash                  used in operating activities                        |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Common                  stock issued for services and wages               |   |                                                                | 1,340,971  |                                                |   | 2,909,581                                                                                                                                           |   |   | 16,764,907 |   |
| Forgiveness                  of loans and accounts payable                |   |                                                                | —    |                                                |   | —                                                                                                                                             |   |   | (918,573 | ) |
| Changes                  in operating assets and liabilities:             |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Accounts                  receivable                                      |   |                                                                | 31,120     |                                                |   | 96,913                                                                                                                                              |   |   | (20,259 | ) |
| Other                  receivables                                        |   |                                                                | 20,729     |                                                |   | (276,769                                                                                                                                            | )      |   | (54,401 | ) |
| Prepaid                  expenses                                         |   |                                                                | 989        |                                                |   | (5,115                                                                                                                                              | )      |   | (500 | ) |
| Inventory                                                                 |   |                                                                | 4,134      |                                                |   | (1,403                                                                                                                                              | )      |   | — |   |
| Deposits                                                                  |   |                                                                | —    |                                                |   | —                                                                                                                                             |   |   | — |   |
| Accounts                  payable                                         |   |                                                                | 259,416    |                                                |   | 447,171                                                                                                                                             |   |   | 3,139,690 |   |
| Accrued                  salaries, compensation and expenses              |   |                                                                | 808,133    |                                                |   | 738,049                                                                                                                                             |   |   | 2,269,176 |   |
| Accrued                  interest                                         |   |                                                                | 108,048    |                                                |   | 693                                                                                                                                                 |   |   | 558,134 |   |
| Related                  party payable                                    |   |                                                                | 5,886      |                                                |   | 4,612                                                                                                                                               |   |   | 345,714 |   |
| Commitments                  and contingencies                            |   |                                                                | —    |                                                |   | —                                                                                                                                             |   |   | 65,963 |   |
| Net                  cash provided by (used in) operating activities |   |                                                                | 2,390      |                                                |   | (232,170                                                                                                                                            | )      |   | (4,054,798 | ) |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| 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                            |   |                                                                | —    |                                                |   | (96,003                                                                                                                                             | )      |   | (939,886 | ) |
| Proceeds                  from loans payable                              |   |                                                                | —    |                                                |   | 291,688                                                                                                                                             |   |   | 3,241,818 |   |
| Payments                  on loans payable                                |   |                                                                | (6,000     | )                                                   |   | (17,062                                                                                                                                             | )      |   | (37,434 | ) |
| Proceeds                  from issuance of common stock                   |   |                                                                | —    |                                                |   | —                                                                                                                                             |   |   | 155,000 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Net                  cash provided by (used in) financing activities      |   |                                                                | (6,000     | )                                                   |   | 178,623                                                                                                                                             |   |   | 4,069,498 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Net                  increase (decrease) in cash                          |   |                                                                | (3,610     | )                                                   |   | (53,547                                                                                                                                             | )      |   | 17,646 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Cash                  at beginning of period                              |   |                                                                | 21,256     |                                                |   | 53,547                                                                                                                                              |   |   | — |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Cash                  at end of period                                    |   | $                                                                   | 17,646     |                                                | $      | —                                                                                                                                             |   | $ | 17,646 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| SUPPLEMENTAL                  CASH FLOW INFORMATION AND                   |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| NON-CASH                  INVESTING AND FINANCING ACTIVITIES              |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Cash                  paid for:                                           |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Interest                                                                  |   | $                                                                   | —    |                                                | $      | 71,693                                                                                                                                              |   | $ | 461,992 |   |
| Income                  Taxes                                             |   | $                                                                   | —    |                                                | $      | —                                                                                                                                             |   | $ | 13,288 |   |
| Accounts                  payable acquired in conjunction with share      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| exchange                  agreement                                       |   | $                                                                   | —    |                                                | $      | —                                                                                                                                             |   | $ | (2,500 | ) |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Common                  stock issued in exchange for accounts payable     |   | $                                                                   | 330,011    |                                                | $      | 415,150                                                                                                                                             |   | $ | 2,539,783 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Common                  stock issued in exchange for loans payable        |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| and                  accrued interest                                     |   | $                                                                   | —    |                                                | $      | 777,594                                                                                                                                             |   | $ | 2,863,851 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Common                  stock issued in exchange for former officer       |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Bank                  loan and lease guarantees                           |   | $                                                                   | —    |                                                | $      | —                                                                                                                                             |   | $ | 9,314 |   |
|                                                                      |   |                                                                |       |                                                |   |                                                                                                                                                |   |   |   |   |
| Common                  stock issued in exchange for lease settlement     |   | $                                                                   | 35,745     |                                                | $      | —                                                                                                                                             |   | $ | 35,745 |   |

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**US      GLOBAL NANOSPACE, INC. **

**NOTES      TO THE FINANCIAL STATEMENTS**

**NOTE      1. FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING      POLICIES**

**RESEARCH      AND DEVELOPMENT **

**NET      LOSS PER SHARE **

**INVENTORY      **

**REVENUE      RECOGNITION **

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**NOTE      2. MANAGEMENT PLANS**

** **

**NOTE      3. INTELLECTUAL PROPERTY ASSIGNMENT AND ROYALTY AGREEMENT**

----

**NOTE      4. RELATED PARTY PAYABLE**

**NOTE      5. LOANS PAYABLE**

**NOTE      6. BANK NOTE PAYABLE**

**NOTE      7. STOCK-BASED COMPENSATION**

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**NOTE      8. CONTINGENT LIABILITIES**

**Pending      or Threatened Legal Proceedings**

**Other**

----

**PART      1 - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

| ·   | 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; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | 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. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

**OVERVIEW**

**RECENT      DEVELOPMENTS**

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**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES**

**RESULTS      OF OPERATIONS**

**QUARTER      ENDED DECEMBER 31, 2006 AS COMPARED TO THE QUARTER ENDED DECEMEBR 31, 2005      **

----

**NINE      MONTHS ENDED DECEMBER 31, 2006 AS COMPARED TO NINE MONTHS ENDED DECEMBER 31,      2005**

**LIQUIDITY      AND CAPITAL RESOURCES **

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**NEW      ACCOUNTING PRONOUNCEMENTS**

*Inventory Costs*

*Exchanges of Nonmonetary Assets*

*Accounting Changes and Error Corrections, A Replacement of APB Opinion      No.      20 and FASB Statement No. 3*

*Accounting        for Certain Hybrid Financial Instruments*

*Fair        Value Measurements*

**OFF-BALANCE      SHEET ARRANGEMENTS**

**FACTORS      AFFECTING BUSINESS, OPERATING RESULTS AND FINANCIAL      CONDITION**

----

**RISKS      ASSOCIATED WITH OUR BUSINESS**

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

| ·   | We                may not have enough money to develop our products and bring them                to                market; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

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

| ·   | 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. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**PART      1 - ITEM 3 CONTROLS AND PROCEDURES**

**PART      II**

**ITEM      1. LEGAL PROCEEDINGS**

** **

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

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM      5. OTHER INFORMATION**

----

**ITEM      6. EXHIBITS**

| 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 (2)                                                                                                                                                                                                    |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 3.1.2                                          |   | First                    Amendment to Amended and Restated Certificate of Incorporation                    (2)                                                                                                                                                              |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 3.1.3                                          |   | Second                    Amendment to Amended and Restated Certificate of Incorporation                    (2)                                                                                                                                                             |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 3.2                                            |   | Bylaws                    (3)                                                                                                                                                                                                                                               |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 31.1        |   | Certification                    by Chief Executive Officer*                                                                                                                                                                                                                |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 31.2                                           |   | Certification                    by Chief Financial Officer*                                                                                                                                                                                                                |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 32                                             |   | Certification                    pursuant to 18 U.S.C. Section 1350*                                                                                                                                                                                                        |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 99.1                                           |   | Consent                    of Defendant US Global Nanospace, Inc. (4)                                                                                                                                                                                                       |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 99.2                                           |   | Unopposed                    Motion to Enter Agreed Final Judgment (4)                                                                                                                                                                                                      |
|                                           |   |                                                                                                                                                                                                                                                                        |
| 99.3                                           |   | Agreed                    Final Judgment as to Defendant US Global Nanospace, Inc.                    (4)                                                                                                                                                                   |

----

**SIGNATURES**

|                                       |                                                             |              |
|--------------------------------------------|------------------------------------------------------------------|-------------------|
|                                       | **US GLOBAL NANOSPACE,              INC.**                       |
|                                  |                                                        |         |
|                                            | By:                                                    | /s/ Pat Scorzelli |
|  Date:              February 20, 2007 | Pat              Scorzelli, Chief Executive              Officer |

|                                                       |                                                            |             |
|------------------------------------------------------------|-----------------------------------------------------------------|------------------|
|                                                            | By:                                                   | /s/ Julie Seaman |
|                Date:                February 20, 2007 | Julie              Seaman, Chief Financial              Officer |

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