AGREEMENT TO CONVERT DEBT

         This Agreement to Convert Debt (the "Agreement") is made as of the 3rd
day of August 2004 by and between ROBIN BAILEY (referred to herein as the
"Holder") and US GLOBAL NANOSPACE, INC., a Delaware corporation (referred to
herein as the "Company").

                                    RECITALS

            A. The Holder has loaned $47,283.50 to the Company, as evidenced by
            that certain promissory note dated January 8, 2004 (the "Note")
            executed by the Company in favor of the Holder. The Company and the
            Holder agree that, as of the date of this Agreement, the total
            amount of principal and accrued interest owed pursuant to the Note
            is $49,991.10 (the "Amount Owed").

            B. The Company wishes to pay the Amount Owed by issuing shares of
            its Common Stock, $0.001 par value, to the Holder and the Holder has
            agreed to accept shares of the Company's Common Stock as full and
            final payment of the Amount Owed, in accordance with the terms of
            this Agreement. In addition to the Amount Owed, the Holder has
            agreed to accept shares of the Company's Common Stock in full and
            final payment of expenses incurred through August 3, 2004 totaling
            $2,000.00 for which the Holder is entitled to be reimbursed (the
            "Expenses").

            Therefore, the Company and the Holder agree as follows:

                                    AGREEMENT

            1.    Transfer of Securities and Cancellation of Debt.

                  (a) Securities to be Issued. The Holder agrees to accept, and
                  the Company agrees to issue and transfer to the Holder, shares
                  of the Company's Common Stock. The number of shares of Common
                  Stock to be issued shall be determined by dividing the total
                  of the Amount Owed and the Expenses by the closing price of
                  the Common Stock on the trading date immediately prior to the
                  date of this Agreement. The Common Stock issued in payment of
                  the Amount Owed and as reimbursement for the Expenses shall be
                  referred to in this Agreement as the "Shares".

                  (b) Exchange of Documents. The certificate representing the
                  Shares shall be delivered to the Holder as soon as
                  practicable. Upon transfer of the Shares to the Holder, both
                  the Note and the Expenses will be paid in full and the Company
                  shall have no further obligation to the Holder either under
                  the Note or for reimbursement of the Expenses.

            2.    Representations by Company.

                  The Company hereby represents and warrants to the Holder as
                  follows:

                           (i) The Company is duly organized, validly existing
                  and in good standing under the laws of the State of Delaware.

                           (ii) The Company has all requisite power and
                  authority (corporate or otherwise) to execute, deliver and
                  perform this Agreement and the transactions contemplated
                  thereby, and the execution, delivery and performance by the
                  Company of this Agreement has been duly authorized by all
                  requisite action by the Company and this Agreement, when
                  executed and delivered by the Company, constitutes a valid and
                  binding obligation of the Company, enforceable against the
                  Company in accordance with its terms, subject to applicable
                  bankruptcy, insolvency, reorganization, fraudulent conveyance,
                  moratorium or other similar laws affecting creditors' rights
                  and remedies generally, and subject, as to enforceability, to
                  general principles of equity (regardless of whether
                  enforcement is sought in a proceeding at law or in equity).

<PAGE>

                           (iii) The Shares will be duly and validly issued,
                  fully paid and nonassessable, and free of any liens or
                  encumbrances.

            3.    Representations by the Holder.

                  The Holder hereby represents and warrants to the Company as
                  follows:

                           (i) The Holder has all requisite power and authority
                  (corporate or otherwise) to execute, deliver and perform this
                  Agreement and the transactions contemplated thereby, and the
                  execution, delivery and performance by the Holder of this
                  Agreement has been duly authorized by all requisite action by
                  the Holder and this Agreement, when executed and delivered by
                  the Holder, constitutes a valid and binding obligation of the
                  Holder, enforceable against the Holder in accordance with its
                  terms, subject to applicable bankruptcy, insolvency,
                  reorganization, fraudulent conveyance, moratorium or other
                  similar laws affecting creditors' rights and remedies
                  generally, and subject, as to enforceability, to general
                  principles of equity (regardless of whether enforcement is
                  sought in a proceeding at law or in equity).

                           (ii) The Holder has a pre-existing personal or
                  business relationship with the Company and its officers and
                  directors.

                           (iii) The Holder has complied with all applicable
                  investment laws and regulations in force relating to the
                  legality of an investment in the Shares in the jurisdiction in
                  which the Holder is subject, and the Holder has obtained any
                  consent, approval or permission required in that jurisdiction.

                           (iv) The Holder understands and acknowledges that the
                  Shares have not been registered with the Securities and
                  Exchange Commission under Section 5 of the of the Securities
                  Act or registered or qualified with any applicable state or
                  territorial securities regulatory agency in reliance upon one
                  or more exemptions afforded from registration or
                  qualification.

                           (v) The Holder understands and acknowledges that the
                  Shares are deemed to be "restricted" securities under the
                  Securities Act, and may be re-sold only pursuant to exemptions
                  provided by the Securities Act. The Holder understands and
                  acknowledges that the Company is required to place a legend on
                  each certificate stating that the Shares have not been
                  registered under the Securities Act.

                           (vi) The Holder understands and acknowledges that:
                  (i) prior to any sale, transfer, assignment, pledge,
                  hypothecation or other disposition of the Shares, she must
                  either: (1) furnish the Company with an opinion of counsel, in
                  form and substance reasonably satisfactory to the Company and
                  to its legal counsel, to the effect that such disposition is
                  exempted from the registration and prospectus delivery
                  requirement under the Securities Act and the securities laws
                  of the jurisdiction in which the Holder resides, and legal
                  counsel for the Company shall have concurred in such opinion;
                  or (2) satisfy the Company that a registration statement on
                  Form SB-2 under the Securities Act (or any other form
                  appropriate under the Securities Act, or any form replacing
                  any such form) with respect to the securities proposed to be
                  so disposed of shall then be effective; and that such
                  disposition shall have been appropriately qualified or
                  registered in accordance with the applicable securities laws
                  of the jurisdiction in which the Holder resides.

<PAGE>

                           (vii) The Holder is entering into this transaction
                  for the Holder's own account, own risk and own beneficial
                  interest, is not acting as an agent, representative,
                  intermediary, nominee or in a similar capacity for any other
                  person or entity, nominee account or beneficial owner, whether
                  a natural person or entity (each such natural person or
                  entity, an "Underlying Beneficial Owner") and no Underlying
                  Beneficial Owner will have a beneficial or economic interest
                  in the Shares (whether directly or indirectly, including
                  without limitation, through any option, swap, forward or any
                  other hedging or derivative transaction) and does not have the
                  intention or obligation to sell, pledge, distribute, assign or
                  transfer all or a portion of the Shares to any Underlying
                  Beneficial Owner or any other person.

                           (viii) The Holder hereby represents and warrants that
                  the proposed investment in the Company does not directly or
                  indirectly contravene United States federal, state, local or
                  international laws or regulations applicable to the Holder,
                  including anti-money laundering laws (a "Prohibited
                  Investment").

                           (ix) Federal regulations and Executive Orders
                  administered by the U.S. Treasury Department's Office of
                  Foreign Assets Control ("OFAC") prohibit, among other things,
                  the engagement in transactions with, and the provision of
                  services to, certain foreign countries, territories, entities
                  and individuals. The lists of OFAC prohibited countries,
                  territories, persons and entities can be found on the OFAC
                  website at {www.treas.gov/ofac}. The Holder hereby represents
                  and warrants that the Holder is not a country, territory,
                  person or entity named on an OFAC list, nor is the Holder a
                  natural person or entity with whom dealings are prohibited
                  under any OFAC regulations.

                           (x) The Holder represents and warrants that neither
                  the Holder nor any Underlying Beneficial Owner is a senior
                  foreign political figure, or any immediate family member or
                  close associate of a senior foreign political figure within
                  the meaning of, and applicable guidance issued by the
                  Department of the Treasury concerning, the U.S. Bank Secrecy
                  Act (31 U.S.C. ss.5311 et seq.), as amended, and any
                  regulations promulgated thereunder.

                           (xi) The Holder agrees promptly to notify the Company
                  should the Holder become aware of any change in the
                  information set forth in subparagraphs (vii) through (x).

<PAGE>

                           (xii) The Holder agrees to indemnify and hold
                  harmless the Company, its affiliates, their respective
                  directors, officers, shareholders, employees, agents and
                  representatives from and against any and all losses,
                  liabilities, damages, penalties, costs, fees and expenses
                  (including legal fees and disbursements) which may result,
                  directly or indirectly, from the Holder's misrepresentations
                  or misstatements contained herein or breaches hereof relating
                  to paragraphs (vii) through (x).

                           (xiii) The Holder understands and agrees that,
                  notwithstanding anything to the contrary contained in any
                  document (including any side letters or similar agreements),
                  if, following the Holder's investment in the Company, it is
                  discovered that the investment is or has become a Prohibited
                  Investment, such investment may immediately be redeemed by the
                  Company or otherwise be subject to the remedies required by
                  law, and the Holder shall have no claim against the Company
                  for any form of damages as a result of such forced redemption
                  or other action.

                           (xiv) Upon the written request from the Company, the
                  Holder agrees to provide all information to the Company to
                  enable the Company to comply with all applicable anti-money
                  laundering statutes, rules, regulations and policies,
                  including any policies applicable to a portfolio investment
                  held or proposed to be held by the Company. The Holder
                  understands and agrees that the Company may release
                  confidential information about the Holder and any Underlying
                  Beneficial Owner(s) to any person if the release of such
                  information is necessary to comply with applicable statutes,
                  rules, regulations and policies.

            4.    Miscellaneous.

                  (a) Amendments and Waivers. The provisions of this Agreement
                  may not be amended, modified or supplemented, and waivers or
                  consents to departures from the provisions hereof may not be
                  given, unless the same shall be in writing and signed by the
                  Company and the Holder.

                  (b) Notices. Any and all notices or other communications or
                  deliveries to be provided by the Holder hereunder shall be in
                  writing and delivered personally, by facsimile or sent by a
                  nationally recognized overnight courier service, addressed to
                  the Company at 2533 N. Carson St., #5107, Carson City, Nevada,
                  facsimile number (817) 375-3401, Attn: Controller or such
                  other address or facsimile number as the Company may specify
                  for such purposes by notice to the Holder delivered in
                  accordance with this Section. Any and all notices or other
                  communications or deliveries to be provided by the Company
                  hereunder shall be in writing and delivered personally, by
                  facsimile, sent by a nationally recognized overnight courier
                  service addressed to the Holder at an address and facsimile
                  number to be provided by Holder. Any notice or other
                  communication or deliveries hereunder shall be deemed given
                  and effective on the earliest of (i) the date of transmission,
                  if such notice or communication is delivered via facsimile at
                  the facsimile telephone number specified in this Section prior
                  to 5:30 p.m. (Central time), (ii) the date after the date of
                  transmission, if such notice or communication is delivered via
                  facsimile at the facsimile telephone number specified in this
                  Section later than 5:30 p.m. (Central time) on any date and
                  earlier than 11:59 p.m. (Central time) on such date, (iii) the
                  second Business Day following the date of mailing, if sent by
                  nationally recognized overnight courier service, or (iv) upon
                  actual receipt by the party to whom such notice is required to
                  be given.

<PAGE>

                  (c) Successors and Assigns. This Agreement shall inure to the
                  benefit of and be binding upon the successors and permitted
                  assigns of each of the parties. Neither the Holder nor the
                  Company may assign her or its rights or obligations hereunder
                  without the prior written consent of the other.

                  (d) Counterparts. This Agreement may be executed in any number
                  of counterparts, each of which when so executed shall be
                  deemed to be an original and, all of which taken together
                  shall constitute one and the same Agreement. In the event that
                  any signature is delivered by facsimile transmission, such
                  signature shall create a valid binding obligation of the party
                  executing (or on whose behalf such signature is executed) the
                  same with the same force and effect as if such facsimile
                  signature were the original thereof.

                  (e) Severability. If any term, provision, covenant or
                  restriction of this Agreement is held by a court of competent
                  jurisdiction to be invalid, illegal, void or unenforceable,
                  the remainder of the terms, provisions, covenants and
                  restrictions set forth herein shall remain in full force and
                  effect and shall in no way be affected, impaired or
                  invalidated, and the parties hereto shall use their reasonable
                  efforts to find and employ an alternative means to achieve the
                  same or substantially the same result as that contemplated by
                  such term, provision, covenant or restriction. It is hereby
                  stipulated and declared to be the intention of the parties
                  that they would have executed the remaining terms, provisions,
                  covenants and restrictions without including any of such that
                  may be hereafter declared invalid, illegal, void or
                  unenforceable.

                  (f) Headings. The headings in this Agreement are for
                  convenience of reference only and shall not limit or otherwise
                  affect the meaning hereof.

         IN WITNESS WHEREOF, the parties have executed this Agreement to Convert
Debt as of the date first written above.

                                       US GLOBAL NANOSPACE, INC.


                                       By: /s/ John Robinson
                                          --------------------------------------
                                         John Robinson, Chief Executive Officer

                                       /s/ Robin Bailey
                                       -----------------------------------------
                                       Robin Bailey
                                       4312 CR 617
                                       Alvarado, TX  76009