**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 September 30, 2006 (unaudited)   |                                     |
|                                                                                           | and                  March 31, 2006                                    | 3                                        |
|                                                                                           |                                                                   |                                     |
|                                                                                           | Statements                  of Operations - Three and Six Months Ended |                                     |
|                                                                                           | September                  30, 2005 and 2006 and                       |                                     |
|                                                                                           | since                  inception (March 20, 2002)                      |                                          |
|                                                                                           | through                  September 30, 2006 (unaudited)                | 4                                        |
|                                                                                           |                                                                   |                                     |
|                                                                                           | Statement                  of Stockholders' Deficit -                  |                                     |
|                                                                                           | Six                  Months Ended September 30, 2006                   |                                          |
|                                                                                           | (unaudited)                                                            | 5                                        |
|                                                                                           |                                                                   |                                     |
|                                                                                           | Statements                  of Cash Flows - Six Months Ended           |                                     |
|                                                                                           | September                  30, 2005 and 2006 and                       |                                     |
|                                                                                           | since                  inception (March 20, 2002)                      |                                          |
|                                                                                           | through                  September 30, 2006 (unaudited)                | 6                                        |
|                                                                                           |                                                                   |                                     |
|                                                                                           | Notes                  to the Financial Statements                     | 7                  -                  10 |
|                                                                                           |                                                                   |                                     |
| Item                  2 - Management's Discussion and Analysis of                              |                                                                   |
|                                                                                           | Financial                  Condition and Results of Operations         | 11                  - 15                 |
|                                                                                           |                                                                   |                                     |
| Item                  3 - Controls and Procedures                                              | 16                                                                     |
|                                                                                           |                                                                   |                                     |
| PART                  II                                                                       |                                                                   |                                     |
|                                                                                           |                                                                   |                                     |
| Item                  1 - Legal Proceedings                                                    | 16                                                                     |
|                                                                                           |                                                                   |                                     |
| Item                  2 - Unregistered Sales of Equity Securities and Use of Proceeds          | 16                                                                     |
|                                                                                           |                                                                   |                                     |
| Item                  3 - Defaults Upon Senior Securities                                      | 16                                                                     |
|                                                                                           |                                                                   |                                     |
| Item                  4 - Submission of Matters to a Vote of Security                  Holders | 16                                                                     |
|                                                                                           |                                                                   |                                     |
| Item                  5 - Other Information                                                    | 17                                                                     |
|                                                                                           |                                                                   |                                     |
| Item                  6 - Exhibits                                                             | 17                                                                     |
|                                                                                           |                                                                   |                                     |
| Signature                  Page                                                                | 18                                                                     |

----

**PART        I - ITEM 1 FINANCIAL STATEMENTS **

**US        GLOBAL NANOSPACE, INC.**

**BALANCE        SHEETS **

|                                                                                |   |                    September                    30, |        |                    March                    31, |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------|-------------|------------------------------------------------------|--------|
|                                                                                |   | 2006                                                     |        | 2006                                                 |   |
|                                                                                |   | (Unaudited)                                              |        |                                                 |   |
|                                                                                |   |                                                     |        |                                                 |   |
| ASSETS                                                                              |   |                                                     |        |                                                 |   |
| CURRENT                    ASSETS                                                   |   |                                                     |        |                                                 |   |
| Cash                                                                                |   | $                                                        | 9,095       |                                                 | $      | 21,256 |   |
| Accounts                    receivable                                              |   |                                                     | 22,518      |                                                 |   | 51,379 |   |
| Other                    receivables                                                |   |                                                     | 45,284      |                                                 |   | 75,130 |   |
| Prepaid                    expenses                                                 |   |                                                     | 989         |                                                 |   | 1,489 |   |
| Inventory                                                                           |   |                                                     | —     |                                                 |   | 4,134 |   |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| Total                    current assets                                             |   |                                                     | 77,886      |                                                 |   | 153,388 |   |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| Total                    assets                                                     |   | $                                                        | 77,886      |                                                 | $      | 153,388 |   |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| LIABILITIES                    AND STOCKHOLDERS' DEFICIT                            |   |                                                     |        |                                                 |   |   |   |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| CURRENT                    LIABILITIES                                              |   |                                                     |        |                                                 |   |   |   |
| Current                    maturities of bank note payable                          |   | $                                                        | 710,114     |                                                 | $      | 710,114 |   |
| Accounts                    payable                                                 |   |                                                     | 707,051     |                                                 |   | 672,122 |   |
| Accrued                    salaries and expenses                                    |   |                                                     | 2,121,788   |                                                 |   | 1,451,730 |   |
| Accrued                    interest                                                 |   |                                                     | 108,776     |                                                 |   | 38,086 |   |
| Related                    party payable                                            |   |                                                     | 43,339      |                                                 |   | 39,108 |   |
| Loans                    payable                                                    |   |                                                     | 135,560     |                                                 |   | 141,560 |   |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| Total                    current liabilities                                        |   |                                                     | 3,826,628   |                                                 |   | 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,    |   |                                                     |        |                                                 |   |   |   |
| 193,917,838                    and 176,487,425 issued and outstanding, respectively |   |                                                     | 193,918     |                                                 |   | 176,487 |   |
| Additional                    paid-in capital                                       |   |                                                     | 21,702,099  |                                                 |   | 20,874,108 |   |
| Deferred                    compensation and services                               |   |                                                     | (1,777      | )                                                    |   | (388,277 | ) |
| Deficit                    accumulated during the development stage                 |   |                                                     | (25,708,945 | )                                                    |   | (23,627,613 | ) |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| Total                    stockholders' deficit                                      |   |                                                     | (3,814,705  | )                                                    |   | (2,965,295 | ) |
|                                                                                |   |                                                     |        |                                                 |   |   |   |
| Total                    liabilities and stockholders' deficit                      |   | $                                                        | 77,886      |                                                 | $      | 153,388 |   |

----

**US        GLOBAL NANOSPACE, INC.**

**STATEMENTS        OF OPERATIONS (Unaudited) **

|                                                     |   | Three                    MonthsEndedSeptember                    30,2006 |        | Three                    MonthsEndedSeptember                    30,2005 |   | Six                    MonthsEndedSeptember                    30,2006 |   | Six                    Months Ended                      September                        30, 2005 |        | Cumulativeresults                          of operationsfrom                        March 20, 2002(date                        of inception)throughSeptember                      30,2006 |   |
|----------------------------------------------------------|--------|--------------------------------------------------------------------------|-------------|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |
| REVENUES                                                 |   | $                                                                        | 22,518      |                                                                     | $      | 21,619                                                                 |   | $                                                                                                  | 120,902     |                                                                                                                                                                                      | $      | 115,196 |   | $ | 1,237,421 |   |
| COST                    OF REVENUES                      |   |                                                                     | 5,357       |                                                                     |   | 4,758                                                                  |   |                                                                                               | 31,016      |                                                                                                                                                                                      |   | 42,310 |   |   | 525,290 |   |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Gross                    Profit                          |   |                                                                     | 17,161      |                                                                     |   | 16,861                                                                 |   |                                                                                               | 89,886      |                                                                                                                                                                                      |   | 72,886 |   |   | 712,131 |   |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| OPERATING                    EXPENSES                    |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Research                    and development              |   |                                                                     | 171,990     |                                                                     |   | 332,316                                                                |   |                                                                                               | 684,422     |                                                                                                                                                                                      |   | 507,337 |   |   | 5,682,745 |   |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| General                    and administrative            |   |                                                                     | 735,835     |                                                                     |   | 1,698,962                                                              |   |                                                                                               | 1,415,473   |                                                                                                                                                                                      |   | 2,196,376 |   |   | 20,707,909 |   |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Total                    operating expenses              |   |                                                                     | 907,825     |                                                                     |   | 2,031,278                                                              |   |                                                                                               | 2,099,895   |                                                                                                                                                                                      |   | 2,703,713 |   |   | 26,390,654 |   |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Operating                    loss                        |   |                                                                     | (890,664    | )                                                                        |   | (2,014,417                                                             | )      |                                                                                               | (2,010,009  | )                                                                                                                                                                                         |   | (2,630,827 | ) |   | (25,678,523 | ) |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| OTHER                    INCOME (EXPENSE)                |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Debt                    restructure                      |   |                                                                     | —     |                                                                     |   | —                                                                |   |                                                                                               | —     |                                                                                                                                                                                      |   | — |   |   | 918,573 |   |
| Other                    income                          |   |                                                                     | —     |                                                                     |   | 5,028                                                                  |   |                                                                                               | —     |                                                                                                                                                                                      |   | 12,528 |   |   | 80,488 |   |
| Interest                    expense                      |   |                                                                     | (36,110     | )                                                                        |   | (22,828                                                                | )      |                                                                                               | (71,323     | )                                                                                                                                                                                         |   | (49,452 | ) |   | (1,029,483 | ) |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Total                    other income (expense)          |   |                                                                     | (36,110     | )                                                                        |   | (17,800                                                                | )      |                                                                                               | (71,323     | )                                                                                                                                                                                         |   | (36,924 | ) |   | (30,422 | ) |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| NET                    LOSS                              |   | $                                                                        | (926,774    | )                                                                        | $      | (2,032,217                                                             | )      | $                                                                                                  | (2,081,332  | )                                                                                                                                                                                         | $      | (2,667,751 | ) | $ | (25,708,945 | ) |
|                                                     |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| Net                    loss per share, basic and diluted |   | $                                                                        | (0.01       | )                                                                        | $      | (0.02                                                                  | )      | $                                                                                                  | (0.01       | )                                                                                                                                                                                         | $      | (0.02 | ) |   |   |   |
| Basic                    and diluted weighted average    |   |                                                                     |        |                                                                     |   |                                                                   |   |                                                                                               |        |                                                                                                                                                                                      |   |   |   |   |   |   |
| number                    of common shares               |   |                                                                     | 193,906,968 |                                                                     |   | 124,887,226                                                            |   |                                                                                               | 190,030,450 |                                                                                                                                                                                      |   | 118,255,506 |   |   |   |   |

----

**US        GLOBAL NANOSPACE, INC.**

**STATEMENT        OF STOCKHOLDERS' DEFICIT**

**Six        Months Ended September 30, 2006**

|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |  Accumulated |   |                         |   |
|----------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------------|--------------|--------------------|------------------|-------------|---------------------------------------|---------------------|-------------------|--------|------------------------------|--------|
|                                                                                                                 |   |                                  |          |         |               |  Additional |        |  Deferred                        |                |  Development |   |  Total                  |   |
|                                                                                                                 |   |  Common                    Stock |  Paid-in |         |  Compensation |             |  Stage |                                  |  Stockholders' |              |
|                                                                                                                 |   |  Shares                          |          |  Amount |               |  Capital    |        |  and                    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 $.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                                                                            |   |                                  | 714,286       |         |               | 714              |        |                                  | 28,572              |              |   |                         |   |   |   |   |   | 29,286 |   |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| Issuance                    of common stock on April 10, 2006                    in consideration for services at    |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
|  $0.041                    per share                                                                            |   |                                  | 2,704,574     |         |               | 2,705            |        |                                  | 108,145             |              |   |                         |   |   |   |   |   | 110,850 |   |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| 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                                                                                  |   |                                  | 1,111,111     |         |               | 1,111            |        |                                  | 68,889              |              |   |                         |   |   |   |   |   | 70,000 |   |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| Issuance                    of common stock on May 4, 2006                    in consideration for services at       |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| $0.063                    per share                                                                                  |   |                                  | 1,190,476     |         |               | 1,190            |        |                                  | 73,810              |              |   |                         |   |   |   |   |   | 75,000 |   |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| 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     |         |               | 2,475            |        |                                  | 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 |   |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| Amortization                    of deferred compensation                                                             |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| and services                                                                                                    |   |                                  |          |         |               |             |        |                                  |                |              |   | 386,500                      |   |   |   |   |   | 386,500 |   |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| Net                    loss for the period                                                                           |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   | (2,081,332 | ) |   | (2,081,332 | ) |
|                                                                                                                 |   |                                  |          |         |               |             |        |                                  |                |              |   |                         |   |   |   |   |   |   |   |
| Balance                    at September 30, 2006                                                                     |   |                                  | 193,917,838   |         | $                  | 193,918          |        | $                                     | 21,702,099          |              | $      | (1,777)                    $ |   |   | (25,708,945 | ) | $ | (3,814,705 | ) |

----

**US          GLOBAL NANOSPACE, INC. **

**STATEMENTS          OF CASH FLOWS (Unaudited) **

|                                                                                                                    |   | Six                    months ended September 30, 2006 |       | Six                    months ended September 30, 2005 |   | Cumulative                    results of operations from March 20, 2002 (date of inception)                    through                    September 30, 2006 |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|------------|--------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |
| CASH                    FLOWS FROM OPERATING ACTIVITIES                                                                 |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Net                    loss                                                                                             |   | $                                                      | (2,081,332 | )                                                      | $      | (2,667,751                                                                                                                                                   | )      | $ | (25,708,945 | ) |
| Adjustments                    to reconcile net loss to net                                                             |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| cash                    used in operating activities                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Common                    stock issued for services and wages                                                           |   |                                                   | 997,802    |                                                   |   | 1,812,518                                                                                                                                                    |   |   | 16,421,738 |   |
| Forgiveness                    of loans and accounts payable                                                            |   |                                                   | —    |                                                   |   | —                                                                                                                                                      |   |   | (918,573 | ) |
| Changes                    in operating assets and liabilities:                                                         |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Accounts                    receivable                                                                                  |   |                                                   | 28,861     |                                                   |   | 92,277                                                                                                                                                       |   |   | (22,518 | ) |
| Other                    receivables                                                                                    |   |                                                   | 29,846     |                                                   |   | (252,088                                                                                                                                                     | )      |   | (45,284 | ) |
| Prepaid                    expenses                                                                                     |   |                                                   | 500        |                                                   |   | (25,800                                                                                                                                                      | )      |   | (989 | ) |
| Inventory                                                                                                               |   |                                                   | 4,134      |                                                   |   | (60,840                                                                                                                                                      | )      |   | — |   |
| Deposits                                                                                                                |   |                                                   | —    |                                                   |   | —                                                                                                                                                      |   |   | — |   |
| Accounts                    payable                                                                                     |   |                                                   | 233,304    |                                                   |   | 270,295                                                                                                                                                      |   |   | 3,113,578 |   |
| Accrued                    salaries, compensation and expenses                                                          |   |                                                   | 705,803    |                                                   |   | 670,199                                                                                                                                                      |   |   | 2,166,847 |   |
| Accrued                    interest                                                                                     |   |                                                   | 70,690     |                                                   |   | 2,405                                                                                                                                                        |   |   | 520,775 |   |
| Related                    party payable                                                                                |   |                                                   | 4,231      |                                                   |   | 3,842                                                                                                                                                        |   |   | 344,059 |   |
| Commitments                    and contingencies                                                                        |   |                                                   | —    |                                                   |   | —                                                                                                                                                      |   |   | 65,963 |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Net                    cash used in operating activities                                                                |   |                                                   | (6,161     | )                                                      |   | (154,943                                                                                                                                                     | )      |   | (4,063,349 | ) |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| 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                                                                                                                                                      | )      |   | (939,886 | ) |
| Proceeds                    from loans payable                                                                          |   |                                                   | —    |                                                   |   | 235,700                                                                                                                                                      |   |   | 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     | )                                                      |   | 122,984                                                                                                                                                      |   |   | 4,069,498 |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Net                    increase (decrease) in cash                                                                      |   |                                                   | (12,161    | )                                                      |   | (31,959                                                                                                                                                      | )      |   | 9,095 |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Cash                    at beginning of period                                                                          |   |                                                   | 21,256     |                                                   |   | 53,547                                                                                                                                                       |   |   | — |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Cash                    at end of period                                                                                |   | $                                                      | 9,095      |                                                   | $      | 21,588                                                                                                                                                       |   | $ | 9,095 |   |
|                                                                                                                    |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| SUPPLEMENTAL                    CASH FLOW INFORMATION AND                                                               |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| NON-CASH                    INVESTING AND FINANCING ACTIVITIES                                                          |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Cash                    paid for:                                                                                       |   |                                                   |       |                                                   |   |                                                                                                                                                         |   |   |   |   |
| Interest                                                                                                                |   | $                                                      | —    |                                                   | $      | 13,557                                                                                                                                                       |   | $ | 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                                                 |   | $                                                      | 198,375    |                                                   | $      | 346,398                                                                                                                                                      |   | $ | 2,408,147 |   |
| Common                    stock issued in exchange for loans payable and accrued                    interest            |   | $                                                      | —    |                                                   | $      | 303,021                                                                                                                                                      |   | $ | 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 **

**RECLASSIFICATIONS        **

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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**

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**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 SEPTEMBER 30, 2006 AS COMPARED TO THE QUARTER ENDED SEPTEMEBR 30, 2005      **

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**SIX      MONTHS ENDED SEPTEMBER 30, 2006 AS COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,      2005**

**LIQUIDITY      AND CAPITAL RESOURCES **

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**NEW      ACCOUNTING PRONOUNCEMENTS**

**OFF-BALANCE      SHEET ARRANGEMENTS**

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

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**RISKS      ASSOCIATED WITH OUR BUSINESS**

| ·   | 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)                                                                                                                                                               |

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**SIGNATURES**

|                                      |                                                |                                |
|-------------------------------------------|-----------------------------------------------------|-------------------------------------|
|                                      | **US                GLOBAL NANOSPACE, INC.**        |
|                                 |                                           |                           |
| Date: November              20, 2006 | By:                                       | /s/ Carl              Gruenler |
|                                      | Carl              Gruenler, Chief Executive Officer |
|                                      |                                                     |

|                                      |                                               |                               |
|-------------------------------------------|----------------------------------------------------|------------------------------------|
| Date: November              20, 2006 | By:                                      | /s/ Kevin              Cronin |
|                                      | Kevin              Cronin, Chief Financial Officer |
|                                      |                                                    |

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