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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-QSB**





x
            **Quarterly
                Report Under Section 13 or 15(****d****)
                of the Securities Exchange Act of
                1934.**


**For
      the Quarterly Period and Six Months Ended May 31, 2006**


**or**


o
            **Transition
                Report Under Section 13 or 15(d) of the Securities Exchange Act of
                1934.**


**For
      the Transition Period From ____________________ To
      __________________**





**Commission
      File Number: 000-51007**





**NANOSENSORS,
      INC.**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            **200452700**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)**1800
                Wyatt Drive, Suite #2**
              **Santa
                Clara, CA**
            **95054**(Address
                of principal executive offices)
            (Zip
                Code)




**Issuer’s
      telephone number: (408) 855-0051**




**N/A**


(Former
      Name, Former Address and Former Fiscal Year, if Changes


Since
      Last Report





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to the filing requirements
      for
      the past 90 days. Yes T No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes T No





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.





Class
            
            Outstanding
                at July 17, 2006Common
                Stock, $001 par value per share
            
            300,278,978
                shares





Transitional
      Small Business Disclosure Format (check one):   o Yes T No







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**NANOSENSORS,
      INC.**





**INDEX**





Page(s)**PART
                I. FINANCIAL INFORMATION****ITEM
                1. CONDENSED FINANCIAL
                STATEMENTS**
            3Balance
                Sheets - May 31, 2006 (unaudited) and November 30,
                2005
            3Statements
                of Operations for the Period from date of inception
                to May 31, 2006 and the six and three month periods ended May 31,
                2006 and
                May 31, 2005 (unaudited)
            4Statements
                of Cash Flows for the Period from date of inception
                to May 31, 2006 and the six month periods ended May 31, 2006 and May
                31, 2005 (unaudited)
            5Statement
                of Shareholders’ Equity for the Period from the date
                of inception to May 31, 2006 (unaudited)
            6Notes
                to Financial Statements
                (unaudited)
            7**ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS**
            12**ITEM
                3. CONTROLS AND PROCEDURES**
            16**PART
                II. OTHER INFORMATION****ITEM
                1. LEGAL PROCEEDINGS**.
            16**ITEM
                2. CHANGES IN SECURITIES**
            17**ITEM
                3. DEFAULTS UPON SENIOR
                SECURITIES**
            18**ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**
            18**ITEM
                5. OTHER INFORMATION**
            18**ITEM
                6. EXHIBITS**
            19Signatures
            20Certifications




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**PART
      I. FINANCIAL INFORMATION**


**ITEM
      1. FINANCIAL STATEMENTS**





**NANOSENSORS,
      INC.**


**(A
      Development Stage Company)**


**CONDENSED
      BALANCE SHEETS**


**May
                  31, 2006**
              
              **November
                  30, 2005****(Unaudited)****ASSETS****CURRENT
                  ASSETS:**Cash
              
              $
              122,641
              
              $
              191,940Cash
                  held in escrow
              
              $
              940,000
              
              
              —Accounts
                  Receivable
              
              
              82
              
              
              —Prepaid
                  Expense
              
              
              1,443
              
              
              —**TOTAL
                  CURRENT ASSETS**
              
              
              1,064,166
              
              
              191,940**PROPERTY
                  AND EQUIPMENT - net of accumulated****depreciation
                  of $4,000 and $3,200, respectively**
              
              
              4,000
              
              
              4,800**OTHER
                  ASSETS:**Website
                  development - net of amortization
              
              
              4,167
              
              
              —Deposit
              
              
              3,000
              
              
              3,0007,167
              
              
              3,000**TOTAL
                  ASSETS**
              
              $
              1,075,332
              
              $
              199,740**LIABILITIES
                  AND SHAREHOLDERS' DEFICIT****CURRENT
                  LIABILITIES:**Accounts
                  payable and accrued expenses
              
              $
              208,762
              
              $
              246,830Accounts
                  payable - related party
              
              
              126,165
              
              
              163,757Liability
                  for warrants issued
              
              
              1,289,600
              
              
              —Client
                  escrow funds
              
              
              940,000
              
              
              —**TOTAL
                  CURRENT LIABILITIES**
              
              
              2,564,527
              
              
              410,587**COMMITMENTS
                  AND CONTINGENCIES****SHAREHOLDERS'
                  DEFICIT:**Common
                  stock, $.001 par value; 500,000,000 sharesauthorized;
                  224,225,000 and 205,025,000 shares issuedand
                  outstanding in 2006 and 2005, respectively
              
              
              224,225
              
              
              205,025Additional
                  paid-in capital
              
              
              (507,385
              )
              
              659,752Deficit
                  accumulated during the development stage
              
              
              (1,206,035
              )
              
              (1,075,624
              )(1,489,195
              )
              
              (210,847
              )**TOTAL
                  LIABILITIES AND SHAREHOLDERS' DEFICIT**
              
              $
              1,075,332
              
              $
              199,740


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




-3-
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          to Table of Contents**


**NANOSENSORS,
      INC.**


**(A
      Development Stage Company)**


**STATEMENTS
      OF OPERATIONS**


**(Unaudited)**




**For
                  the Cumulative****Period
                  from Inception**
              
              **Six
                  Months**
              
              **Six
                  Months**
              
              **Three
                  Months**
              
              **Three
                  Months****(December
                  23, 2003) to**
              
              **Ended**
              
              **Ended**
              
              **Ended**
              
              **Ended****May
                  31, 2006**
              
              **May
                  31, 2006**
              
              **May
                  31, 2005**
              
              **May
                  31, 2006**
              
              **May
                  31, 2005****NET
                  SALES**
              
              $
              11,688
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0**COSTS
                  AND EXPENSES:**General
                  and Administrative Expense
              
              
              622,518
              
              
              128,813
              
              
              28,187
              
              
              36,959
              
              
              8,849Research
                  and Development
              
              
              477,450
              
              
              0
              
              
              101,788
              
              
              0
              
              
              0Depreciation
                  and Amortization
              
              
              38,084
              
              
              1,633
              
              
              10,300
              
              
              816
              
              
              5,150Write-off
                  of Licences
              
              
              61,750
              
              
              0
              
              
              0
              
              
              0
              
              
              0**TOTAL
                  COSTS AND EXPENSES**
              
              
              1,199,802
              
              
              130,446
              
              
              140,275
              
              
              37,775
              
              
              13,999**LOSS
                  FROM OPERATIONS**
              
              
              (1,188,114
              )
              
              (130,446
              )
              
              (140,275
              )
              
              (37,775
              )
              
              (13,999
              )**OTHER
                  INCOME(EXPENSE)**Interest
                  expense
              
              
              (18,604
              )
              
              0
              
              
              0
              
              
              0
              
              
              0Interest
                  income
              
              
              683
              
              
              35
              
              
              4
              
              
              29
              
              
              0**LOSS
                  BEFORE INCOME TAXES**
              
              
              (1,206,035
              )
              
              (130,411
              )
              
              (140,271
              )
              
              (37,746
              )
              
              (13,999
              )Income
                  Tax Expense
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0**NET
                  LOSS**
              
              
              ($1,206,035
              )
              
              ($130,411
              )
              
              ($140,271
              )
              
              ($37,746
              )
              
              ($13,999
              )**BASIC
                  AND DILUTED NET LOSS**
              
              
              ($0.01
              )
              
              ($0.00
              )
              
              ($0.00
              )
              
              ($0.00
              )
              
              ($0.00
              )**PER
                  SHARE****WEIGHTED
                  AVERAGE NUMBER OF**
              
              
              188,905,061
              
              
              206,715,110
              
              
              202,129,400
              
              
              207,644,565
              
              
              202,525,000**COMMON
                  SHARES OUTSTANDING**
 The
      accompanying notes are an integral part of these financial
      statements.


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            to Table of
            Contents**
  **NANOSENSORS,
      INC.**


**(A
      Development Stage Company)**


**STATEMENTS
      OF CASH FLOWS**


**(Unaudited)**




For
                  the Cumulative
                Period
                  fromInception
                (December
                  23, 2003)
              
              Six
                  Months Ended
              
              Six
                  Months Endedto
                  May 31, 2006
              
              May
                  31, 2006
              
              May
                  31, 2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  Loss
              
              
              (1,206,035
              )
              
              (130,411
              )
              
              (140,271
              )Adjustment
                  to reconcile net loss to net cash utilized inoperating
                  activities:Depreciation
                  and Amortization
              
              
              38,084
              
              
              1,633
              
              
              10,300Write-off
                  of Licenses
              
              
              61,750
              
              
              —
              
              
              —Issuance
                  of common stock for expenses
              
              
              12,902
              
              
              —
              
              
              —Change
                  in operating assets and operating liabilities:Other
                  Accounts Receivable
              
              
              (82
              )
              
              (82
              )
              
              —Prepaid
                  Expenses
              
              
              (1,443
              )
              
              (1,443
              )
              
              —Accounts
                  payable and accrued expenses
              
              
              458,927
              
              
              (75,659
              )
              
              79,500**Net
                  cash used in operating activities**
              
              
              (635,897
              )
              
              (205,962
              )
              
              (50,471
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchase
                  of equipment
              
              
              (8,000
              )
              
              —
              
              
              —Purchase
                  of License
              
              
              (90,000
              )
              
              —
              
              
              —Website
                  Development Costs
              
              
              (5,000
              )
              
              (5,000
              )
              
              —Deposit
              
              
              (3,000
              )
              
              —
              
              
              —**Net
                  cash used in investment activities**
              
              
              (106,000
              )
              
              (5,000
              )
              
              0**CASH
                  FLOW FROM FINANCING ACTIVITIES:**Net
                  proceeds from issuance of common stock
              
              
              864,538
              
              
              141,663
              
              
              30,000Advances
                  from officers
              
              
              —
              
              
              —
              
              
              7,100**Net
                  cash provided by financing activities**
              
              
              864,538
              
              
              141,663
              
              
              37,100**NET
                  INCREASE IN CASH**
              
              
              122,641
              
              
              (69,299
              )
              
              (13,371
              )Cash
                  at beginning of period
              
              
              
              
              
              191,940
              
              
              13,558**CASH
                  EQUIVALENTS AT END OF PERIOD**
              
              $
              122,641
              
              $
              122,641
              
              $
              187**SUPPLEMENTAL
                  CASH FLOW INFORMATION:****Cash
                  paid during the period for:**Interest
              
              
              18,604
              
              
              —
              
              
              —**SUPPLEMENTAL
                  NON-CASH FINANCING ACTIVITIES**Issuance
                  of 116,350,000 common shares for services
              
              
              12,902
              
              
              —
              
              
              —Receipt
                  of escrow funds reflected as asset and liability
              
              
              940,000
              
              
              940,000
              
              
              —Cashless
                  exercise of warrants into common stock
              
              
              1,800
              
              
              1,800
              
              
              —Warrants
                  issued recorded as liability
              
              
              1,289,600
              
              
              1,289,600
              
              
              —Dividend
                  expense on induced conversion of warrants
              
              
              66,750
              
              
              66,750
              
              
              —


The
        accompanying notes are an integral part of these financial
        statements.
  -5-
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            to Table of
            Contents**
  **NANOSENSORS,
      INC.**


**(A
      Development Stage Company)**


**STATEMENT
      OF SHAREHOLDERS’ EQUITY**


**(Unaudited)**




DeficitAccumulatedAdditional
              
              During
                  thePaid
                  - in
              
              DevelopmentShares
              
              Amount
              
              Capital
              
              Stage
              
              Total**BALANCE
                  AT DECEMBER 23, 2003 ( INCEPTION)**
              
              
              
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Issuance
                  of common stock for license at $.001
              
              
              5,000,000
              
              
              5,000
              
              
              —
              
              
              —
              
              
              5,000Issuance
                  of common stock for services and expenses
              
              
              11,450,000
              
              
              11,450
              
              
              —
              
              
              —
              
              
              11,450at
                  $.001 per shareIssuance
                  of common stock for cash at $.05 per share
              
              
              9,500
              
              
              10
              
              
              465
              
              
              —
              
              
              475Issuance
                  of common stock for cash at $.20 per share-
              
              
              2,750,000
              
              
              2,750
              
              
              460,250
              
              
              —
              
              
              463,000net
                  of issuance costsIssuance
                  of common stock for note receivable - at
              
              
              88,000
              
              
              88
              
              
              4,312
              
              
              —
              
              
              4,400$.05
                  per share - paid in June 2004Issuance
                  of common stock for payment of debt
              
              
              620,000
              
              
              620
              
              
              123,380
              
              
              —
              
              
              124,000at
                  $.20 per shareIssuance
                  of common stock for expenses at $.0078 per share
              
              
              185,000
              
              
              185
              
              
              1,267
              
              
              —
              
              
              1,452Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (741,499
              )
              
              (741,499
              )**BALANCE
                  AS OF NOVEMBER 30, 2004**
              
              
              20,102,500
              
              
              20,103
              
              
              589,674
              
              
              (741,499
              )
              
              (131,722
              )Issuance
                  of common stock for cash at $.20 per share
              
              
              150,000
              
              
              150
              
              
              29,850
              
              
              —
              
              
              30,000Issuance
                  of common stock for cash at $1.00 per share, net
              
              
              250,000
              
              
              250
              
              
              224,750
              
              
              —
              
              
              225,000of
                  issuance costs10
                  for 1 stock split (Note 9)
              
              
              184,522,500
              
              
              184,522
              
              
              (184,522
              )Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (334,125
              )
              
              (334,125
              )**BALANCE
                  AS OF NOVEMBER 30, 2005**
              
              
              205,025,000
              
              $
              205,025
              
              $
              659,752
              
              
              ($1,075,624
              )
              
              ($210,847
              )Issuance
                  of common stock for cash at $.25 per share
              
              
              50,000
              
              
              50
              
              
              12,450
              
              
              
              
              
              12,500Issuance
                  of common stock for cash at $.30 per share
              
              
              90,000
              
              
              90
              
              
              26,910
              
              
              
              
              
              27,00010
                  for 1 stock split (Note 9)
              
              
              1,260,000
              
              
              1,260
              
              
              (1,260
              )Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (92,665
              )
              
              (92,665
              )**BALANCE
                  AS OF February 28, 2006**
              
              
              206,425,000
              
              $
              206,425
              
              $
              697,852
              
              
              ($1,168,289
              )
              
              ($264,012
              )Issuance
                  of common stock for cash at $.01 per share
              
              
              16,000,000
              
              
              16,000
              
              
              86,163
              
              
              
              
              
              102,163Cashless
                  exercise of 2,250,000 warrants into common stock
              
              
              1,800,000
              
              
              1,800
              
              
              (1,800
              )
              
              
              
              
              —Warrants
                  issued in private placement
              
              
              
              
              
              
              
              
              (1,289,600
              )
              
              
              
              
              (1,289,600
              )Dividends
                  expensed on induced conversion of warrants
              
              
              
              
              
              
              
              
              —
              
              
              
              
              
              —Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              ($37,746
              )
              
              ($37,746
              )**BALANCE
                  AS OF MAY 31, 2006**
              
              
              224,225,000
              
              
              224,225
              
              
              ($507,385
              )
              
              ($1,206,035
              )
              
              (1,489,195
              )


The
        accompanying notes are an integral part of these financial
        statements.
  -6-
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            to Table of
            Contents**
  **NANOSENSORS,
      INC.**


**(A
      Development Stage Company)**


**NOTES
      TO FINANCIAL STATEMENTS**


**May
      31, 2006**







1.
            ORGANIZATION:





The
      Company was incorporated under the laws of the State of Nevada on December
      23,
      2003 with authorized common stock of 500,000,000 shares at $.001 par value.





The
      Company was organized for the purpose of the development and marketing of
      sensors to detect explosives, chemicals, and biological agents. The Company
      is
      in the development stage and has not started any significant commercial
      operations.





The
      Company has elected November 30 as its fiscal year end.




2.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES:
  *Basis
        of Presentation*
  The
        interim financial information, as of May 31, 2006 and for the six and
        three-month periods ended May 31, 2006 and 2005 and for the cumulative period
        from inception (December 23, 2003) to May 31, 2006, has been prepared without
        audit, pursuant to the rules and regulations of the Securities and Exchange
        Commission (the "SEC"). Certain information and footnote disclosures normally
        included in financial statements prepared in accordance with generally accepted
        accounting principles have been condensed or omitted pursuant to such rules
        and
        regulations, although we believe that the disclosures made are adequate to
        provide for fair presentation. These financial statements should be read
        in
        conjunction with the financial statements and the notes thereto, included
        in the
        Company's Annual Report on Form 10-KSB for the fiscal year ended November
        30,
        2005, previously filed with the SEC.
  In
        the
        opinion of management, all adjustments (which include normal recurring
        adjustments) necessary to present a fair statement of financial position
        as of
        May 31, 2006, and results of operations, statement of shareholders’ deficit and
        cash flows for the six and three months ended May 31, 2006 and 2005, and
        for the
        cumulative period from inception (December 23, 2003) to May 31, 2006 as
        applicable, have been made. The results of operations for the six months
        ended
        May 31, 2006 are not necessarily indicative of the operating results for
        the
        full fiscal year or any future periods.
  *Basic
        and Diluted Net Income (Loss) Per Share*
  The
        Company presents “basic” and, if applicable, “diluted” earnings per common share
        pursuant to the provisions of Statement of Financial Accounting Standards
        No.
        128, “Earnings per Share” (“SFAS 128”) and certain other financial accounting
        pronouncements. Basic earnings per common share are calculated by dividing
        net
        income by the weighted average number of common shares outstanding during
        each
        period. The calculation of diluted earnings per common share is similar to
        that
        of basic earnings per common share, except that the denominator is increased
        to
        include the number of additional common shares that would have been outstanding
        if all potentially dilutive common shares, such as those issuable upon the
        exercise of warrants, were issued during the period. Due to a net loss for
        all
        periods, the effect of warrants in the calculation of diluted loss per share
        is
        anti-dilutive and has been excluded. Outstanding warrants as of May 31, 2006
        and
        2005 aggregated 76,375,000 and 58,325,000, respectively. All earnings per
        common
        share calculation reflect the 10:1 stock split made effective as of January
        5,
        2006.


3.
                      SHAREHOLDERS’
                          EQUITY:




The
      Company commenced a private placement of its equity securities during the
      quarter ended May 31, 2006, and issued 16,000,000 shares of Common Stock and
      16,000,000 Warrants at $0.01 per each share and warrant for gross proceeds
      of
      $160,000 (see Note 7. Significant Event). Fees associated with this offering
      and
      recorded into Additional Paid in Capital totaled $57,837.




-7-
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          to Table of Contents**




During
      the current quarter, the Company reduced the exercise price on 750,000 and
      1,500,000 warrants held by one investor from $.02 and $.03 respectively to
      $.01
      if these were exercised within 30 days and on a cashless basis. The investor
      exercised the warrants at the reduced price on a cashless basis and the Company
      issued a total of 1,800,000 shares of common stock. The Company recorded this
      as
      modification of the warrant and the resulting difference between the fair value
      of the warrant immediately prior to modification and the fair value of the
      modified warrant was recorded as dividend expense. Due to cumulative deficit,
      the dividend expense of $66,750 was recorded against additional paid-in capital
      resulting in no impact on additional paid-in capital. The cashless exercise
      was
      recorded by accounting for the issue of 1.8 million shares at the par value
      in
“common stock” with an offset to “Additional Paid in Capital”.




4.
            RELATED
                PARTY TRANSACTIONS:





During
      the year ended November 30, 2005, the President and Chief Executive Officer
      of
      the Company made advances to the Company in the aggregate amount of $9,658.
      These advances are non-interest bearing and are payable upon demand. As of
      May
      31, 2006, accounts and advances payable to related parties include consulting
      fees payable to Dr. Ted Wong and Dr. Mathew Zuckerman in the amounts of **$** 93,775 **** and
      $32,391 (see Part II Other Information - Item 1. Legal Proceedings),
      respectively.





5.
                  GOING
                      CONCERN:





The
      Company has incurred recurring operating losses in each of the periods since
      Inception (December 23, 2003) to May 31, 2006 aggregating $1,206,035 **** and
      has a
      working capital deficit of $1,500,361 as of May 31, 2006. The recurring
      operating losses are due to the Company being in the development stage and
      since
      we have not yet established commercial operations. The Company has no cash
      flows
      from revenues and has been spending available cash on research and development
      activities and administrative costs.





The
      Company will need additional capital for its future planned activity and for
      payment of its current liabilities, which raises substantial doubt about its
      ability to continue as a going concern. Continuation of the Company as a going
      concern is dependent upon sales, the exercising of outstanding warrants, and
      the
      proceeds from additional common stock offerings or debt financings. The net
      proceeds from these sources are expected to meet the Company’s need for the
      coming year.





If
      the
      Company does not obtain additional capital from these sources, other funds
      will
      be needed in order to produce other products currently in development. If
      additional funds are required earlier than anticipated there can be no assurance
      that the Company will be able to obtain such funds from financial
      institutions, government funding, the exercise of the warrants, and otherwise
      on
      a basis deemed acceptable.




6.
            COMMITMENTS
                AND CONTINGENCIES:




The
      Company leases office space in Santa Clara, California under an operating lease,
      with a two year commitment expiring February 29, 2008. The monthly payments
      of
      base rent plus operating expenses totaled $16,404 for the six months ended
      on
      May 31, 2006 and $8,986 for the three months ended on May 31, 2006. The
      Company’s remaining obligations under this lease are $55,641 for period from
      June 1, 2006 to February 28, 2008.




7.
            SIGNIFICANT
                EVENT:




*Private
      Placement*





On
      May
      11, 2006 the Company commenced a private offering of its securities consisting
      of shares of Common stock and Common Stock Purchase Warrants. The terms and
      conditions of various agreements provide for certain key features related to
      this offering, which are briefly summarized as follows:




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The
      Securities Purchase Agreement provides that each unit is at $.01 with a minimum
      investment of $50,000. Each unit entitles the investor to one common share
      (par
      value of $.001) and one warrant (“Investor Warrant”). The offering is for
      1,000,000 units with an additional 750,000 units as oversubscription amount.
      Pursuant to this agreement, the Company agreed that 60% of the gross proceeds
      will remain in escrow until the registration statement contemplated by
      the Registration Rights Agreement is declared effective by the
      Securities and Exchange Commission and the Company obtains shareholder approval
      to increase its authorized capital. Investor Warrants are exercisable at $0.04
      per share for a period of five years from the date of issuance. Investor
      Warrants have provision for cashless exercise at option of holder, redemption
      feature at option of the Company, transfer restrictions, registration rights
      and
      exercise limitations. The agreement also provides for appointment to its Board
      of Directors (the “Board”) of one independent director nominated for election by
      purchasers of a majority of the units subscribed for and nominate such
      individual for reelection to the Board for at least two subsequent years.




The
      Company is required to pay to a Selling Agent, under a Selling Agent Agreement,
      a 10% commission on gross proceeds received by the Company and a 3%
      non-accountable expense reimbursement. The 10% commission is initially payable
      only on the non-escrowed funds and on the escrowed funds it is payable when
      they
      are released to the Company. Also the Company is required to issue to the
      Selling Agent, warrants (“Agent Warrant”) equal to 20% of total number of shares
      sold in the private placement. Each Agent Warrant is to be issued to the Selling
      Agent for $.0001 and the warrant is exercisable into one common share and one
      warrant at $.01 each. The additional warrant is further convertible into common
      shares at $.01 each. Both warrants are exercisable for five years. The terms
      of
      the Agent Warrants are generally similar to Investor Warrants, except for
      initial payment of $.0001 for each Agent Warrant compared to none for Investor
      Warrant; exercise price of $.01 compared to $.04; consideration is one common
      share and one warrant for each Agent Warrant as compared to just one common
      share for the Investor Warrant and the Agent Warrants have a cashless exercise
      at any time, while the Investor Warrants have a cashless exercise, if after
      180
      days following the final closing of the offering, an effective registration
      statement is not available for the resale of all of the warrant shares to be
      issued against the warrant.




The
      Registration Rights Agreement provides for preparing and filing with SEC a
      Registration Statement covering the resale of all Registrable Securities not
      already covered by an existing and effective Registration Statement for an
      offering to be made on a continuous basis pursuant to Rule 415. Each of the
      following events of non-compliance, (i) late filing of a Registration Statement,
      (ii) the Registration Statement is not declared effective by SEC prior to the
      100 th day or
      120 th day (as
      the case may be) or (iii) if after the effective date, the Registration
      Statement ceases to be effective for any reason, would result in a penalty
      of 2%
      per month of purchase price paid by each Investor up to a maximum of 6 months
      for each penalty event. The Company at its option may, instead of cash, issue
      shares for the 2% penalty based on the five-day average of closing bid price
      of
      the Company’s Common Stock for five trading days immediately preceding the
      penalty Event.




As
      of May
      31, 2006, in the first closing, the Company received $400,000 of gross proceeds
      of which $240,000 have been held in escrow. The amount held in escrow has been
      reflected as a current liability as no shares have been issued, pending the
      satisfaction of conditions by the Company. For the balance $160,000 received
      by
      the Company, it has issued 16,000,000 each of common shares and warrants.
      Expenses and fees totaling $57,837, including commission and non-accountable
      expense reimbursement to the Agent, have been recorded against additional
      paid-in capital. The Company also received $700,000 in additional deposits
      towards the second closing of the private placement, all of which were held
      in
      escrow as of May 31, 2006.




The
      company has accounted for the warrants issued to the investors and agent as
      follows: Under provisions of Statement of Financial Accounting Standards No.
      133, Accounting for Derivative Instruments and Hedging Activities, an embedded
      conversion option should be bifurcated and accounted for separately as a
      derivative instrument, unless the specific requirements for equity
      classification of the embedded conversion option, as stated in EITF 00-19:
      Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in, a Company's Own Stock (“EITF 00-19”) are met. EITF  00-19 provides
      that an equity classification is appropriate if the settlement criteria set
      forth therein for such classification are met and that the additional conditions
      necessary for equity classification, set forth therein, are also met. Since
      the
      liquidated damages under the Registration Rights Agreement could in some cases
      exceed a reasonable discount for delivering unregistered shares these warrants
      have been classified as a liability until the earlier of the date the warrants
      are exercised or expire, as required per paragraphs 14 to 18 of EITF 00-19.
      Further, in accordance with EITF 00-19, the Company has allocated a portion
      of
      the offering proceeds to the warrants based on their fair value.




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As
      of May
      31, 2006, the 16,000,000 Investor Warrants and the 3,200,000 Agent Warrants
      issued have been accounted as a liability. These warrants were valued at
      $1,289,600 based on a fair value model calculation. The company used the Black
      Scholes option-pricing model with the following assumptions: an expected life
      equal to the contractual term of the warrants (five years); no dividends; a
      risk
      free rate of return of 4.95%, which equals the five-year yield on Treasury
      bonds
      at constant (or fixed) maturity; and volatility of 265%.




EITF
      00-19 requires that the Company revalue the warrants as a derivative instrument
      periodically to compute the value in connection with changes in the underlying
      stock price and other assumptions, with the change in value recorded as interest
      expense or interest income. Upon the earlier of the warrant exercise or the
      expiration date, the warrant liability will be reclassified into shareholders’
equity. Until that time, the warrant liability will record at fair value based
      on the methodology described above. Changes in the fair value during each period
      will be recorded as other income or other expense. Liquidated damages under
      the
      registration rights agreement will be expensed as incurred and will be included
      in operating expenses.




The
      securities sold in the Offering have not been registered under the Securities
      Act of 1933, as amended, and were offered and sold in reliance upon the
      exemption from registration set forth in Section 4(2) thereof and Regulation
      D,
      promulgated under the Securities Act. The Company believes that the investors
      and the selling agent are “accredited investors,” as such term is defined in
      Rule 501(a) promulgated under the Securities Act.





*Settlement
      Agreement and General Release*





The
      Company has recorded a total liability of $119,500 for services rendered by
      three consultants for the period from March 2004 to February 2005. Subsequent
      to
      end of current quarter, the Company settled with these consultants for a total
      amount of $56,500 to be paid in two installments. The difference of $63,000
      between the recorded amount and settled amount of the liability was recorded
      in
      the current quarter as change in estimate based on the subsequent settlement.
      The first installment of $29,750 has been paid subsequent to May 31, 2006 and
      the balance amount is payable from the proceeds of the moneys held in escrow,
      when released (see under Private Placement in this Note).




*Notice
      to Class A Warrant Holders*





On
      May 9,
      2006 the Company announced in a Report on Form 8-K that it intended to reduce
      the exercise price on all if its outstanding Class A Warrants. Subsequent to
      the
      end of current quarter, the Company sent a notice to all holders of its
      outstanding Class A Warrants notifying them that the Company has reduced the
      exercise price on all of its Class A Warrants, of which there are currently
      26,600,000 outstanding, to $0.01 for a period of 30 days. At the end of such
      30
      day period, the exercise price of the Class A Warrants will reset to its current
      price of $0.03 per share. The dividend expense, if any, on account of reduction
      of the exercise price of the warrants will be accounted in the next quarter.


8.
                  SUBSEQUENT
                      EVENTS:





*Consulting
      Agreements*





Subsequent
      to the end of current quarter, the Company entered into consulting agreements
      with five technical consultants. Under the terms of these consulting agreements
      the Company will pay each individual $1,500 per month and issue each consultant
      warrants exercisable for 1,000,000 shares of its common stock at a per share
      exercise price based on the Company’s closing price per share on the date each
      consulting agreement was executed. These warrants vest on a monthly basis over
      a
      twenty-four month period. The Company can terminate these agreements, without
      cause, by providing two months notice. If the Company terminates these
      agreements within twenty-four months, then the unvested warrants are cancelled. These
      warrants were issued in reliance upon the exemption from registration set forth
      in Section 4(2) of the Securities Act of 1933, as amended and the
      securities were issued without any form of general solicitation or general
      advertising .




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*Warrant
      Exercises*





Subsequent
      to the end of current quarter, holders of an aggregate of 12,150,000 Class
      A and
      Bridge warrants exercised those securities, on a cashless basis, at an exercise
      price of $0.01, pursuant to which the Company issued a total of 10,600,978
      shares of Common Stock. These transactions were consummated in reliance upon
      the
      exemption from registration set forth in Section 4(2) of the Securities Act
      of
      1933, as amended.




*Private
      Placement*





In
      June
      2006, the Company closed its private placement of units and has raised
      cumulative gross proceeds of $1,729,500 from three closings and the sale of
      a
      total number of units consisting of 172,950,000 shares of common stock and
      investor warrants to purchase 172,950,000 shares of common stock. Investors
      purchasing $204,500 of units in the third closing waived the escrow requirement
      and authorized the release of their entire investment to the Company. Of the
      escrow amount, $25,000 which represented excess moneys sent by one investor
      was
      refunded in June 2006. Accordingly, of the gross proceeds received, $915,000
      is
      being retained in escrow until the Company satisfies post-closing covenants.




On
      a
      cumulative basis to date, the aggregate offering proceeds released to the
      Company are $814,500, and the net proceeds to the Company, after payment of
      expenses and commissions, are approximately $645,000. The Company intends to
      use
      the offering proceeds for working capital and payment of accrued compensation.
      The Company paid cumulatively $81,450 to the selling agent and issued Agent
      Warrants to the selling agent to purchase 16,290,000 units of the Company’s
      securities, with each unit consisting of one share common stock and one common
      stock purchase warrant.




In
      this
      private placement, the Company has issued an aggregate of 81,450,000 shares
      of
      common stock and investor warrants for 81,450,000 shares of common stock to
      the
      investors and will issue them additional 91,500,000 shares of common stock
      and
      investor warrants to purchase 91,500,000 shares of common stock upon
      satisfaction of the post-closing covenants. In addition, assuming the Company
      is
      able to satisfy these post-closing covenants, the Company will issue an
      additional 18,300,000 Agent Warrants to the selling agent and pay commissions
      to
      the selling agents of $91,500 upon the release of the remaining funds from
      escrow.




The
      investors that agreed to waive the escrow requirement also agreed to a “lock-up”
provision restricting the resale of the securities purchased in the Offering
      for
      a period commencing on the closing date and ending six months after the first
      to
      occur of either the date that the registration statement contemplated by the
      Registration Rights Agreement is declared effective by the Securities and
      Exchange Commission or the date that such securities may first be sold pursuant
      to Rule 144.




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**FACTORS
      THAT MAY AFFECT FUTURE RESULTS**





*This
      report contains forward-looking statements within the meaning of Section 27A
      of
      the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended. These forward-looking statements include,
      but
      are not limited to, statements concerning our plans to continue development
      of
      our current product candidates; address certain markets; engage third-party
      manufacturers; and evaluate additional product candidates for subsequent
      commercial development. In some cases, these statements may be identified by
      terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of
      such terms and other comparable terminology. Although we believe that the
      expectations reflected in the forward-looking statements contained herein are
      reasonable, we cannot guarantee future results, levels of activity, performance
      or achievements. These statements involve known and unknown risks and
      uncertainties that may cause our or our industry’s results, levels of activity,
      performance or achievements to be materially different from those expressed
      or
      implied by forward-looking statements. Factors that may cause or contribute
      to
      such differences include, among other things, those discussed under the captions
      “Business,” “Risk Factors” and “Management’s Discussion and Analysis-Plan of
      Operation” in our reports and registration statements filed with the Securities
      and Exchange Commission.*




Unless
      the context requires otherwise, references in this Quarterly Report to
“NanoSensors”, “the Company”, “we”, “our” and “us” refer to NanoSensors, Inc.





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




*Management’s
      Discussion and Analysis of Financial Condition and Results of Operations should
      be read together with our financial statements and related notes included
      elsewhere in this Quarterly Report on Form 10-QSB. This Quarterly Report on
      Form
      10-QSB, including the following discussion, contains trend analysis and other
      forward-looking statements within the safe harbor provisions of the Private
      Securities Litigation Reform Act of 1995. Any statements in this Quarterly
      Report on Form 10-QSB that are not statements of historical facts are
      forward-looking statements. These forward-looking statements are based on a
      number of assumptions and involve risks and uncertainties. Actual results may
      differ materially from those set forth in such forward-looking statements as
      a
      result of factors set forth elsewhere in this Quarterly Report on Form 10-QSB.
      All share and per share data in this section, as well as in the entire report,
      other than the historical financial statements, unless otherwise noted, give
      retroactive effect to the 10 for 1 forward split declared by us on January
      12,
      2006.*





**Critical
      Accounting Policies**





In
      December 2001, the Securities and Exchange Commission requested that all
      registrants discuss their “critical accounting policies” in management’s
      discussion and analysis of financial condition and results of operations. The
      SEC indicated that a “critical accounting policy” is one that is both important
      to the portrayal of the company’s financial condition and results and that
      requires management’s most difficult, subjective or complex judgments. Such
      judgments are often the result of a need to make estimates about the effect
      of
      matters that are inherently uncertain. While NanoSensors’ significant accounting
      policies are more fully described in Note 2 to its financial statements
      contained in its Annual Report of Form 10-KSB for November 30, 2005, we
      currently believe the following accounting policies to be critical:





*Development
      Stage Company*





NanoSensors
      is considered to be in the development stage as defined in Statement of
      Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by
      Development Stage Enterprises.” NanoSensors has devoted substantially all of its
      efforts to business planning, research and development, recruiting management
      and technical staff, acquiring operating assets and raising capital.





*Start-up
      Costs*





In
      accordance with the American Institute of Certified Public Accountants Statement
      of Position 98-5, “Reporting on the Costs of Start-up Activities”, we expense
      all costs incurred in connection with the start-up and organization of
      NanoSensors.





*Research
      and Development*





Research
      and development costs are related primarily to our developing early prototypes.
      Research and development costs are expensed as incurred.




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*Income
      Taxes*





The
      income tax benefit is computed on the pretax loss based on the current tax
      law.
      Deferred income taxes are recognized for the tax consequences in future years
      of
      differences between the tax basis of assets and liabilities and their financial
      reporting amounts at each year-end based on enacted tax laws and statutory
      tax
      rates. No benefit is reflected for the six and three-months ended May 31, 2006.





**Results
      of Operations for the Three Months Ended May 31, 2006 as Compared to the Three
      Months Ended May 31, 2005.**





For
      the
      three months ended May 31, 2006 and May 31, 2005, we did not have sales. We
      are
      still in the development stage. Therefore, during the three months ended May
      31,
      2006, we incurred total costs and expenses of $37,775, whereas for the three
      months ended May 31, 2005, we recorded total costs and expenses of $13,999.
      If
      we include the impact of the reduction in our payable of $63,000 as a result
      of
      settlement agreements with three former consultants who were owed $119,500
      (see
      Note 7) the actual costs for the current quarter would have been higher by
      $63,000. Our increase in total costs and expenses resulted from consulting
      fees
      paid to Dr. Ted Wong and one other consultant, along with increase in legal
      and
      accounting fees.





Research
      and development expenses for the three months ended May 31, 2006 and 2005 was
      zero. No expenses were incurred during the three months ended May 31, 2006
      because we had limited funds at our disposal. All research and development
      costs
      are expensed as incurred. They are primarily incurred in connection with
      technology development.





Depreciation
      and amortization expense for the three month periods ended May 31, 2006 and
      May
      31, 2005 were $817 and $5,150 respectively, and mainly related to the license
      granted by our former Chief  Scientist (the “Axiom License”) in 2005.
      There was no amortization expense related to the Axiom license in 2006
      as the value of the license was written off during 2005





We
      did
      not incur interest expense for the three month periods ended May 31, 2006 and
      May 31, 2205.





**Results
      of Operations for the Six Months Ended May 31, 2006 as Compared to the Six
      Months Ended May 31, 2005.**





For
      the
      six months ended May 31, 2006 and May 31, 2005, we did not have sales. We are
      still in the development stage. Therefore, during the six months ended May
      31,
      2006, we incurred total costs and expenses of $130,446, whereas for the six
      months ended May 31, 2005, we recorded total costs and expenses of $140,275.
      If
      we include the impact of the reduction in our payable of $63,000 as a result
      of
      settlement agreements with three former consultants who were owed $119,500
      (see
      Note 7) the actual costs for the six months ended May 31, 2006 would have been
      higher by $63,000. The majority of our costs and expenses for the six months
      ended May 31, 2006, resulted from consulting fees paid to Dr. Ted Wong and
      one
      other consultant, along with increase in legal and accounting fees. For the
      six
      months ended May 31, 2005 the majority of our expenses were for research and
      development.




Research
      and development expenses for the six months ended May 31 2006 was zero, as
      compared with $101,788 for the six months ended May 31, 2005. No research and
      development expenses were incurred during the six months ended May 31, 2006
      because we had limited funds at its disposal. All research and development
      costs
      are expensed as incurred. We anticipate that we will increase our research
      and
      development spending over the next two quarters in light of receipt of
      additional funds from the private financing described below.




Depreciation
      and amortization expense for both the six month periods ended May 31, 2006
      and
      May 31, 2005 were $1,633 and $10,300 respectively, and mainly related to the
      Axiom license in 2005. There was no amortization expense related to the Axiom
      license in 2006 as the value of the license was written off during
      2005





We
      did
      not incur interest expense for the six month periods ended May 31, 2006 and
      May
      31, 2005.




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**Liquidity
      and Capital Resources at May 31, 2006**





We
      do not
      have an operating line of credit from a financial institution and consequently
      relied on financing from investors to support our operations. As of May 31,
      2006, we had unrestricted cash on hand of $122,641, as compared with $191,750
      on
      deposit in an escrow account at November 30, 2005. Our operations have been
      limited in light of our need for additional financing. Our available funds
      resulted from a private placement on November 10, 2005 with one unaffiliated
      investor. The investor purchased 250,000 units for $250,000 with each unit
      consisting of ten shares of common stock and warrants to purchase ten shares
      of
      Common Stock at $.225 per share.





In
      addition, we raised additional funds on May 26, 2006 through a private placement
      that commenced on May 11, 2006. These investors were accredited investors and
      purchased 16,000,000 shares of common stock and received 16,000,000 warrants
      exercisable immediately at $.04 per share. At the first closing, we received
      gross proceeds of $160,000 (see Note 7 Significant Event). The net proceeds
      received by us, after giving effect to commissions and expenses, of $102,163
      from this closing are being used for working capital and payment of accrued
      compensation expenses. As described in greater detail below, subsequent to
      the
      end of our fiscal quarter, we held two addition closings in this private
      placement and issued an additional 65,450,000 shares of common stock and
      warrants to purchase 65,450,000 shares of common stock to the investors for
      total gross proceeds of approximately $654,500. Net proceeds received by us
      subsequent to the quarter ended May 31, 2006, after payment of commissions
      and
      expenses, were $537,974. On a cumulative basis to date, in this financing we
      have issued an aggregate of 81,450,000 shares of common stock and warrants
      to
      purchase 81,450,000 shares of common stock to the investors and received total
      net proceeds of approximately $645,000. (Please see the discussion provided
      in
      Item 2 of Part II of this Quarterly Report on Form 10-QSB for additional
      information regarding this financing.)





In
      December 2003 and February 2004, we borrowed $80,000 and $40,000, respectively,
      from one unaffiliated investor and an additional $30,000 in January 2004, from
      a
      second unaffiliated investor neither of whom are selling shareholders or are
      otherwise affiliated with us. These loans are evidenced by interest bearing
      promissory notes. The first note for $80,000 had an original maturity date
      of
      January 20, 2005, although $30,000 plus $2,500 of interest was due as of April
      30, 2004. The entire $80,000 plus $2,500 of accrued interest was converted
      into
      4,125,000 shares of Common Stock. The second note for $40,000 matured on March
      9, 2004. In August 2004, this $40,000 note plus $1,500 of accrued interest
      was
      converted into 2,075,000 shares of Common Stock. The lender of these two notes
      received 3,000,000 shares of common stock at the time the loans were made in
      addition to the actual shares of Common Stock provided for upon conversion.
      The
      value of these shares has been expensed as loan costs in the statement of
      operations for the period ended November 30, 2004. We also issued a third note
      for $30,000 which bore interest at 10% per annum, matured on April 21, 2004
      and
      was repaid in August 2004. On January 17, 2005, the same lender was issued
      against $30,000 consideration, 1,500,000 shares of Common Stock and Warrants
      to
      purchase an additional 1,500,000 shares at an exercise price of $.03 per share.
      The lender received 750,000 shares of Common Stock and Warrants to purchase
      750,000 shares of Common Stock, exercisable at $.02 per share for three years
      and an unaffiliated party received 75,000 shares and warrants to purchase 75,000
      shares on the above terms for loan consulting services. All loan proceeds were
      used for administrative expenses and research and development expenditures.





In
      February 2004, we borrowed $100,000 in the aggregate from two private investors
      obtained through our investment banker, Meyers Associates, L.P. (“Meyers”).
      Meyers received a 10% sales commission and a 3% non-accountable expense
      allowance. Interest on each note (the “Bridge Notes”) accrued at a rate of 10%
      per annum. These notes matured on the earlier of (a) August 15, 2004, (b) the
      completion of a private placement of at least $500,000, or (c) an event of
      default. Payment of the Bridge Notes was guaranteed by our two founders. As
      consideration for the borrowings, in addition to the promissory notes, the
      investors each received five-year warrants to purchase 500,000 shares of common
      stock, exercisable at $.025 per share.





In
      April
      2004, we entered into a Placement Agent Agreement with an investment banking
      firm, Meyers Associates, L.P. to privately offer and sell on a “best efforts”
basis, $550,000 of our securities in a private offering, the “April 2004 Private
      Placement.” The private placement of units each consisted of ten shares of
      common stock and one Class A Warrant to purchase ten shares of Common Stock
      for
      five years at $.030 per share. On April 26, 2004, we closed on the entire
      $550,000 of private placement units and issued 27,500,000 shares. The Bridge
      Notes were paid from the proceeds of the private placement.





The
      placement agent received warrants to purchase 50% of the units sold in the
      equity offering or 13,750,000 warrants at the same offering price of $.02 per
      unit exercisable until April 30, 2009 and in addition received rights to another
      13,750,000 warrants with an exercise price of $.030 per unit exercisable until
      April 30, 2009. The $363,000 of net proceeds (after repayment of $100,000 of
      Bridge Notes) were used by NanoSensors for technology and product development,
      marketing, business development and general and administrative expenses. The
      bulk of the development work, to date, has been on sensor technology
      development.




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On
      November 10, 2005, we closed on an offering of 250,000 units, or an aggregate
      of
      $250,000, with each Unit consisting of ten shares of common stock, par value
      $.001 and one five year warrant expiring on November 30, 2010, to purchase
      ten
      shares of Common Stock at an exercise price of $.225 per share. As consideration
      for acting as financial consultant to us in this offering, Meyers Associates,
      L.P. received a lump sum financial advisory fee of $10,000 plus reimbursement
      of
      certain reasonable expenses in lieu of any and all other compensation which
      had
      been due under the Placement Agent Agreement dated April 2004. The $225,000
      of
      net proceeds are being used for working capital including the Chief Executive
      Officer's salary and payment of certain past due accounts payable.





During
      the quarter ended February 28, 2006, we issued 500,000 shares of common stock
      on
      the exercise of warrants at $0.025 per share for proceeds of $12,500, and
      another 900,000 shares of common stock on the exercise of warrants at $0.030
      per
      share for proceeds of $27,000.





For
      the
      quarter ended May 31, 2006, we issued 1,800,000 shares of common stock on the
      exercise of 2,250,000 warrants, on a cashless basis, at an exercise price of
      $0.01 per share. Subsequent to the quarter end, holders of an aggregate of
      12,150,000 warrants exercised those securities, on a cashless basis, at an
      exercise price of $0.01, pursuant to which we issued a total of 10,600,978
      shares of Common Stock.





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business. We recognized a net loss
      of
      $334,125 for Fiscal 2005 and a net loss of $37,746 and $130,411 for the three
      and six month period ended May 31, 2006. The Auditor’s Report in our Annual
      Report on Form 10-KSB for the year ended November 30, 2005 includes an
      explanatory paragraph which states that due to history of operating losses,
      as
      we have not yet commenced commercial operations and based on our needs for
      additional funds in 2006 for our planned activity and to service debt, there
      is
      a substantial doubt about our ability to continue as a going concern. See Note
      2
      of Notes to 2005 Financial Statements.





We
      suspended most of our operations during Fiscal 2005 until we were able to obtain
      additional financing of $250,000 in November 2005. Management believes that
      after closing its most recent private placement, that commenced on May 11,
      2006,
      that the current level of general and administrative expenses are necessary
      to
      accomplish our business strategy, and to further decrease these activities
      would
      delay our ability to carry out our business strategy. Furthermore, we also
      believe that our expenses will increase over the next few quarters as we
      continue to develop products and bring them to market.





We
      had a
      working capital deficit of $218,647 at November 30, 2005 and $1,500,361 at
      May
      31, 2006. We have funded our business throughout the development stage primarily
      through equity and convertible debt investments from accredited investors.





To
      date,
      we have not invested in derivative securities or any other financial instruments
      that involve a high level of complexity or risk. We plan to invest any excess
      cash in investment grade interest bearing securities.





**Plan
      of Operation**





Including
      the funds raised at the first closing of our recent private placement, we
      believe that we will meet working capital requirements with the cash on hand
      as
      of May 31, 2006 for only the next six months without any revenues and/or the
      release of the proceeds ($915,000) currently held in escrow in connection with
      our most recent private placement (see Note 7. Significant Event). We will
      take
      appropriate actions and reduce our product and technology development to match
      available funds. We will need to raise additional funds from debt or equity
      funding sources in order to produce other products currently in development.
      Furthermore, we also intend to seek financing from U.S. government agencies,
      such as Department of Homeland Security and Defense Advanced Research Projects
      Agency (DARPA). Management believes that contractors and systems integrators
      to
      the government may be sources of funding in exchange for obtaining marketing
      rights from us for these sensor technologies so that other companies may bear
      the cost of product development, marketing, manufacturing and sales. If
      additional funds are required earlier than anticipated or in any event, there
      can be no assurance that we will be able to obtain such funds, if at all, and
      on
      a basis deemed acceptable to us.





We
      expect
      that our operating and administrative expenses will increase, primarily in
      travel, salary and fees paid to outside consultants and professional service
      firms. The increased travel will be required as we increase our efforts to
      develop marketable products. In addition, besides our office lease (see Note
      6.
      Commitments and Contingencies) we do not have any significant commitments for
      capital expenditures. In
      view
      of our early stage of development, there is no assurance that we will perform
      in
      accordance with our plan of operation, or that we will continue as a going
      concern or that we will ultimately achieve profitable operations.




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**ITEM
      3. CONTROLS AND PROCEDURES**





*Disclosure
      Controls*





Management,
      including our President, Chief Executive Officer and Chief Financial Officer,
      has evaluated the effectiveness of our disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
      period covered by this report. Based upon that evaluation, the President, Chief
      Executive Officer and Chief Financial Officer concluded that the disclosure
      controls and procedures were effective to provide reasonable assurance that
      information required to be disclosed in the reports that we file and submit
      under the Exchange Act is (i) recorded, processed, summarized and reported
      as
      and when required and (ii) accumulated and communicated to our management,
      including our principal executive officer and principal financial officer,
      as
      appropriate to allow timely discussions regarding disclosure. In designing
      and
      evaluating the disclosure controls and procedures, management recognized that
      any controls and procedures, no matter how well designed and operated, can
      provide only reasonable assurance of achieving the desired control objectives,
      and management is required to apply its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures.




*Internal
      Controls*




During
      the quarter ended May 31, 2006, we retained consultants to assist us in
      identifying and implementing improvements to our internal controls over
      financial reporting and we have made changes in the organizational structure
      to
      provide a clearer segregation of responsibilities in connection with account
      reconciliations, manual journal entries, and the preparation and review of
      documentation to support the preparation of quarterly and annual financial
      statements. We will continue to implement additional measures in response to
      specific accounting and reporting weaknesses, including personnel and
      organizational changes to improve supervision and increased training for finance
      and accounting personnel. Except for the improvements described above, there
      have been no other changes in the internal control over financial reporting
      during the quarter ended May 31, 2006 that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




We
      do not
      expect that internal controls over financial reporting will prevent all errors
      or all instances of fraud. A control system, no matter how well designed and
      operated, can provide only reasonable, not absolute, assurance that the control
      system’s objectives will be met. Further, the design of a control system must
      reflect the fact that there are resource constraints, and the benefits of
      controls must be considered relative to their costs. Because of the inherent
      limitations in all control systems, no evaluation of controls can provide
      absolute assurance that all control issues and instances of fraud, if any,
      within its company have been detected. These inherent limitations include the
      realities that judgments in decision-making can be faulty, and that breakdowns
      can occur because of simple error or mistake. Controls can also be circumvented
      by the individual acts of some persons, by collusion of two or more people,
      or
      by management override of the controls. The design of any system of controls
      is
      based in part upon certain assumptions about the likelihood of future events,
      and any design may not succeed in achieving its stated goals under all potential
      future conditions. Over time, controls may become inadequate because of changes
      in conditions or deterioration in the degree of compliance with policies or
      procedures. Because of the inherent limitation of a cost-effective control
      system, misstatements due to error or fraud may occur and not be detected.





**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS.**





Except
      as
      set forth below, we are not a party to any legal proceedings.





On
      March
      15, 2006, NanoSensors, Inc. commenced a commercial arbitration before the
      American Arbitration Association against Mathew Zuckerman, a co-founder, former
      Chief Scientist and officer of the company and his affiliated consulting firm
      Axiom Corporation (collectively, “Zuckerman”). Pursuant to a license agreement
      entered into between us and Zuckerman, NanoSensors was granted an exclusive
      worldwide perpetual license to Zuckerman’s technology. Notwithstanding the
      parties’ termination of a Consulting Agreement entered into between them in
      March 2005, the perpetual License Agreement remained in effect and we retained
      all rights to the technology. NanoSensors has commenced the arbitration
      proceeding to seek injunctive relief barring future violations of the License
      Agreement, disgorgement of all NanoSensors stock previously issued to Zuckerman,
      monetary damages of $5 million and disgorgement of all fees earned by Zuckerman
      from dealings with third parties using the license. The parties entered into
      a
      Settlement Agreement and Release on April 20, 2006. Under the terms of this
      Settlement Agreement and Release, we agreed to pay Zuckerman $32,391 for
      consulting fees previously owed.




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In
      addition, we may be subject to other claims and litigation arising in the
      ordinary course of business. Our management considers that any liability from
      any reasonably foreseeable disposition of such other claims and litigation,
      individually or in the aggregate, would not have a material adverse effect
      on
      our consolidated financial position, results of operations or cash flows.





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





*Private
      Placement*





On
      May
      11, 2006, we commenced a private offering of up to $1,750,000 of our securities,
      consisting of shares of Common stock and Common Stock Purchase Warrants. During
      the quarter ended May 31, 2006, we
      issued an aggregate of 16,000,000 shares of Common Stock and 16,000,000 Warrants
      in connection with this private offering. The warrants are exercisable for
      a
      five year period at an exercise price of $0.04 per share. After payment of
      commissions and expenses associated with this closing, we received net proceeds
      of $102,163. We also issued an aggregate of 3,200,000 warrants to the selling
      agents at this closing, which agent warrants are exercisable at $0.01 per share
      for a period of five years.





In
      June
      2006, we held two additional closings in this private placement of units and
      including the first closing held in May 2006, as described above, we raised
      total proceeds of $1,729,500 from the sale of a
      total
      number of units consisting of 172,950,000 shares of common stock and five-year
      warrants to purchase 172,950,000 shares of common stock at
      an
      exercise price of $0.04 per share.  Each
      unit
      was sold at a price of $50,000. Pursuant
      to the Securities Purchase Agreement, we agreed that 60% of the gross proceeds
      will remain in escrow until the registration statement contemplated by
      the Registration Rights Agreement is declared effective by the
      Securities and Exchange Commission and we obtain shareholder approval to
      increase our authorized capital. However, investors purchasing $204,500 of
      units
      in the final closing waived this escrow requirement and authorized the release
      of their entire investment to us. Of the escrow amount, $25,000 which
      represented excess moneys sent by one investor was refunded in June 2006.
      Accordingly, of the total proceeds received, $915,000 is being retained in
      escrow until we satisfy these post-closing covenants.





Including
      the proceeds received in the first closing held in May 2006, the aggregate
      gross
      offering proceeds released to us was $814,500, and the net proceeds to us,
      after
      payment of expenses and commissions, was approximately $645,000. We intend
      to
      use the offering proceeds for working capital and payment of accrued
      compensation. We paid
      total commissions to date of $81,450 to the selling agent and issued unit
      purchase warrants (a “Unit Warrant”) to the selling agents to purchase
      16,290,000 units of our securities, with each unit consisting of one share
      common stock and one common stock purchase warrant. These Unit Warrants are
      immediately exercisable at $0.01 per unit and expire five years from the date
      of
      issuance.





Accordingly,
      in this private placement, we issued an aggregate of 81,450,000 shares of common
      stock and warrants to purchase 81,450,000 shares of common stock to the
      investors, including the securities issued at the first closing. We will issue
      an additional 91,500,000 shares of common stock and warrants to purchase
      91,500,000 shares of common stock to the investors upon our satisfaction of
      the
      post-closing covenants. In addition, assuming we are able to satisfy these
      post-closing covenants, we will issue an additional 18,300,000 Unit Warrants
      to
      the selling agents and pay commissions to the selling agents of $91,500 upon
      the
      release of the remaining funds from escrow. If we
      are unable to satisfy these covenants, the investors have the right to demand
      the return of the funds held in escrow.





The
      investors also became parties to a Registration Rights Agreement, pursuant
      to
      which we agreed to file, within 40 days after closing, a registration statement
      covering the resale of the shares of common stock sold in the Offering and
      the
      shares that we may issue upon exercise of the Warrants issued to the investors
      and the placement agent. Further, the investors that agreed to waive the escrow
      requirement also agreed to a “lock-up” provision restricting the resale of the
      securities purchased in the Offering for a period commencing on the closing
      date
      and ending six months after the first to occur of either the date that the
      registration statement contemplated by the Registration Rights Agreement is
      declared effective by the Securities and Exchange Commission or the date that
      such securities may first be sold pursuant to Rule 144. The securities sold
      in
      the Offering have not been registered under the Securities Act of 1933, as
      amended, and were offered and sold in reliance upon the exemption from
      registration set forth in Section 4(2) thereof and Regulation D, promulgated
      under the Securities Act inasmuch
      as the securities were issued without any form of general solicitation or
      general advertising and the investors
      represented to us that they are “accredited investors,” as such term is defined
      in Rule 501(a) promulgated under the Securities Act.




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*Warrant
      Issuances*





Subsequent
      to the quarter end, we entered into consulting agreements with five technical
      consultants and issued each of them warrants that are exercisable for 1,000,000
      shares of our common stock at a per share exercise price based on our closing
      price per share on the date each agreement was executed. These warrants vest
      on
      a monthly basis over a twenty-four month period. If we terminate, or the
      consultant terminates, the consulting agreement within twenty-four months,
      then
      the unvested warrants are cancelled. These
      warrants were issued in reliance upon the exemption from registration set forth
      in Section 4(2) of the Securities Act of 1933, as amended and the
      securities were issued without any form of general solicitation or general
      advertising .





*Warrant
      Exercises*





For
      the
      quarter ended May 31, 2006, we issued 1,800,000 shares of common stock on the
      exercise of 2,250,000 warrants, on a cashless basis, at an exercise price of
      $0.01 per share. Subsequent to the quarter end, holders of an aggregate of
      12,150,000 warrants exercised those securities, on a cashless basis, at an
      exercise price of $0.01, pursuant to which we issued a total of 10,600,978
      shares of Common Stock. These transactions were consummated in reliance upon
      the
      exemption from registration set forth in Section 4(2) of the Securities Act
      of
      1933, as amended.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES.**





None





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





None





**ITEM
      5. OTHER INFORMATION.**





*Notice
      to Class A Warrant Holders*





In
      our
      Report of Form 8-K filed on May 9, 2006, we stated our intention to reduce
      the
      exercise price on all of our outstanding Class A Warrants. Subsequent to the
      quarter end, we sent a notice to all holders of our outstanding Class A Warrants
      notifying them that we have reduced the exercise price on all of our Class
      A
      Warrants, of which there are currently 26,600,000 outstanding, to $0.01 for
      a
      period of 30 days. At the end of such 30 day period, the exercise price of
      the
      Class A Warrants will reset to its current price of $0.03 per share.





*Lease
      Extension*





On
      June
      1, 2006, we executed an amendment to our office lease dated February 12, 2004,
      whereby we agreed to extend our lease to February 28, 2008. Our remaining
      obligations under this lease are $23,155 for the period of June 1, 2006 through
      February 28, 2007, and $32,486 for March 1, 2007 through February 28,
      2008.





*Formation
      of Technical Advisory Board*





On
      July
      12, 2006, we announced the establishment of our Technical Advisory Board, which
      consists of five experts in the nanotechnology industry. We formed our advisory
      board to assist us in identifying patented or patent-pending technologies at
      universities and government laboratories. The Technical Advisory Board includes
      Professor David Tomanek of Michigan State University, Professor Evangelyn
      Alocilja of Michigan State University, Professor Seunghun Hong of Seoul National
      University, Professor Hee Cheul Choi of Postech University and Dr. Yung Doug
      Suh
      of Korea Research Institute of Chemical Technology. Each of the advisory board
      members also entered into separate two-year consulting agreements with us
      pursuant to which we will pay each of these individuals a monthly retainer
      of
      $1,500 and grant them warrants to purchase 1,000,000 shares of our common stock
      on the terms described in Item 2 of Part II of this Report on Form 10-QSB,
      above.




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**ITEM
      6. EXHIBITS.**





The
      following exhibits are filed herewith or incorporated by reference.





Incorporated
                by ReferenceExhibitNumber
            
            Exhibit
                Description
            
            Form
            
            Dated
            
            Exhibit
            
            FiledHerewith4.1
            
            Form
                of Investor Warrant issued in connection with the sale of the Units
                in
                Private Placement
            
            8-K
            
            6/28/06
            
            4.14.2
            
            Form
                of Agent Warrant issued in connection with the sale of the Units
                in
                Private Placement
            
            8-K
            
            6/28/06
            
            4.210.1
            
            Form
                of Securities Purchase Agreement between NanoSensors, Inc. and Investors
            
            8-K
            
            6/28/06
            
            10.110.2
            
            Form
                of Registration Rights Agreement between NanoSensors, Inc. and
                Investors
            
            8-K
            
            6/28/06
            
            10.210.3
            
            Amendment
                to Lease dated June 1, 2006
            
            
            
            
            
            
            
            X31.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section 302 of the Sarbanes-Oxley Act of 2002
            
            
            
            
            
            
            
            X32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.
            
            
            
            
            
            
            
            X






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**SIGNATURES**





In
      accordance with Section 13 and 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized, on this July 17, 2006.




**NANOSENSORS,
              INC.**By:
            /s/ TED
              WONGName:  
                Ted Wong
              Title:     President,
                Chief Executive Officer and
              Chief
                Financial Officer






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