UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              --------------------

                                   FORM 10-KSB
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                      Act of 1934 For the fiscal year ended
                                DECEMBER 31 2004

                      NANOBAC PHARMACEUTICALS, INCORPORATED
             (Exact name of registrant as specified in its charter)

          FLORIDA                       0-24696               59-3248917
(State or Other Jurisdiction    (Commission File Number)   (I.R.S. Employer
     of Incorporation)                                    Identification Number)


    2727 W. DR. MARTIN LUTHER KING JR. BLVD, SUITE 850, TAMPA, FLORIDA 33607
               (Address of Principal Executive Office) (Zip Code)

                                 (813) 264-2241
              (Registrant's telephone number, including area code)

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:
                         COMMON STOCK, WITHOUT PAR VALUE
                                (Title of Class)

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 a shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSBor any amendment to
this Form 10-KSB. [ ]

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act): Yes [ ] No [X]

State issuer's revenue for its most recent fiscal year:  $358,361

The approximate aggregate market value of voting and non-voting stock held by
non-affiliates of the registrant was $9,183,809 as of April 13, 2005. The shares
of Common Stock held by each current executive officer and director and by each
person who is known to the Company to own 5% or more of the outstanding Common
Stock have been excluded from this computation on the basis that such persons
may be deemed affiliates. The determination of affiliate status is not a
conclusive determination for other purposes.

As of April 13, 2005 there were 187,340,093 shares of the Registrant's Common
Stock outstanding.

<PAGE>

                      NANOBAC PHARMACEUTICALS, INCORPORATED

                                   FORM 10-KSB
                      FOR THE YEAR ENDED DECEMBER 31, 2004

                                TABLE OF CONTENTS
                                      PAGE

PART I
            Item 1.    Business                                                3
            Item 2.    Properties                                             13
            Item 3.    Legal Proceedings                                      13
            Item 4.    Submission of Matters to a Vote of the Security
                         Holders                                              13

PART II
            Item 5.    Market for Registrant's Common Stock and Related
                         Shareholder Matters and Small Business Issuer
                         Purchases of Equity Securities                       14
            Item 6.    Selected  Financial Data                               18
            Item 7.    Management's Discussion and Analysis of Financial
                         Condition and Results of Operations                  19
            Item 7A.   Quantitative and Qualitative Risk                      37
            Item 8.    Financial Statements and Supplementary Data            37
            Item 9.    Changes in and Disagreements with Independent
                         Auditors on Accounting and Financial Disclosure      37
            Item 9A.   Controls and Procedures                                38

PART III
            Item 10.   Directors and Executive Officers of the Registrant     39
            Item 11.   Executive Compensation                                 42
            Item 12.   Security Ownership of Certain Beneficial Owners and
                         Management and Related Stockholder Matters           45
            Item 13.   Certain Relationships and Related Transactions         47
            Item 14.   Principal Accountant Fees and Services                 48

PART IV
            Part 15.   Exhibits, Financial Statements, Schedules and
                         Reports on Form 8-K                                  49


                                       2
<PAGE>

                                     PART I
ITEM 1.  BUSINESS

Nanobac Pharmaceuticals, Incorporated and its subsidiaries (which may be
referred to as "Nanobac", "the Company", "NNBP", "we", "us", or "our") is a
research-based bio-lifescience company.

Our research is focused on investigating the role of Nanobacterium sanguineum,
("Nanobacteria") in human diseases. Researchers at Nanobac have discovered a
novel nano-sized particle that we believe is responsible for a majority of
diseases associated with soft tissue calcification or plaque. Nanobacteria are
extremely tiny, mineral forming units composed of calcium and phosphate, two
primary components of bones and teeth. Because of the mineralizing properties of
Nanobacteria, they have also been called calcifying nano-particles. Calcifying
nano-particles have been identified at the center (nidis) of numerous diseased
tissues and floating in blood vessels and in the urinary tract.

While calcification is a normal process for building healthy bones and teeth,
calcification also plays a role in other conditions related to diseases, such as
strokes and heart attacks. We believe that blood-borne nanobacteria forms
slow-growing calcified colonies in arteries and organs, much as coral reefs are
formed. Calcification of blood vessels typically involves the heart's coronary
arteries in atherosclerosis. It also occurs in arteries more generally
throughout the body in arteriosclerosis, or hardening of the arteries. Kidney
stones are calcifications within the urinary tracts. In addition, pathologic or
soft tissue calcifications are observed in many other diseases such as,
prostatitis (a painful inflammation of the prostate gland), and Polycystic
Kidney Disease (growths of cysts in the kidneys). Research has shown the
presence of Nanobacteria in the parts of the body affected by these diseases. We
believe that Nanobacteria may play a key role in the pathogenesis of these and
other diseases.

We believe that our research will lead to a better understanding of Nanobacteria
and its role in disease. This in turn will enable us to develop better
diagnostic tests to detect the presence of Nanobacteria and therapies to treat
Nanobacterial infection.

Our objective is to gain a better understanding of the role Nanobacteria plays
in diseases associated with soft tissue calcification (or the build up of
calcified deposits within the body), and to develop new methods to detect and
treat diseases associated with nanobacterial infection. At the same time, we
intend to expand the sales of our Dietary Supplements and In Vitro Diagnostic
products. Our business is comprised of three areas:

      o     Dietary Supplements
      o     In Vitro Diagnostics
      o     Bio-Medical Research - Pharmaceutical Drug Discovery


                                       3
<PAGE>

We believe these three areas will fuel each other. The development of new and
more effective methods to diagnose nanobacterial infection and diseases
involving pathologic calcification should increase the demand for our dietary
supplements and for new drugs that we may bring to the market alone or in
partnership. Likewise, as more effective therapies come to market, diagnostic
test ordering tends to increase.

While there is still a long way to go in the study of Nanobacteria, we are
pleased with the results we have achieved thus far and we are optimistic about
the prospects for the future development of diagnostic tests and treatments for
diseases caused by - or associated with - nanobacterial infection.

DIETARY SUPPLEMENT PRODUCTS

Through our research, we have developed a combination of dietary supplements
called "Nanobac Supplements" that are part of a patented therapeutic regimen.

Preliminary studies have shown that the Nanobac Supplements in combination with
the antibiotic Tetracycline may decrease soft tissue calcification. One
component of the Nanobac Supplements is a calcium disodium ethylene diamine
tetraacetic acid ("EDTA") rectal suppository. EDTA is a synthetic amino acid
that acts as a chelator (binding molecules such as metals and minerals and
holding them tightly so that they can be removed from a system). EDTA chelation
removes heavy metals and minerals from the blood, and is approved by the U.S.
Food and Drug Administration ("the FDA") for use in treating lead poisoning and
toxicity from other heavy metals. Studies have shown that EDTA may help break up
calcium deposits allowing the calcium to be removed from the body. The Company
also markets a dietary supplement that is combined with the EDTA suppository.
The Nanobac Oral Supplement is a proprietary blend of essential amino acids,
enzymes, antioxidants and natural anti-inflammatory components.

      -     Enzymes are proteins produced by living organisms and functioning as
            biochemical catalysts in living organisms. Enzymes can speed up
            reactions in the body and this may help injured tissue repair
            faster.

      -     An antioxidant is a chemical compound or substance that inhibits
            oxidation. The Nanobac Oral Supplement includes several major
            antioxidants. Increasing evidence suggests that using antioxidants
            can prevent LDL cholesterol lipoprotein oxidation and its resulting
            damage to arterial tissue.

We intend to maximize the sales of our existing Nanobac Supplements by
establishing revenue generating collaborations with medical providers and
expanding our channels of distribution through partnerships with complementary
technology companies.


                                       4
<PAGE>

A recent preliminary study of prostatitis patients provided evidence that
patients using the Nanobac Supplements, combined with the antibiotic
Tetracycline, over a three month period showed significant improvement in their
symptoms of chronic prostatitis / chronic pelvic pain syndrome. We are
encouraged by the findings of this and other studies and are actively marketing
the Nanobac Supplements while continuing our research into the cause of soft
tissue calcification and effect of Nanobacteria on diseases. Based upon our
findings, we anticipate developing more effective countermeasures to treat
diseases in which Nanobacteria may play a role.

DIAGNOSTICS

We have developed two diagnostic assays to identify the presence of Nanobacteria
in blood. One test measures levels of Nanobacterial antigen (NANO-CAPTURE -
Nanobacterial Antigen Assay) and the other test measures whether a patient has
been exposed to Nanobacteria (NANO-SERO - Nanobacteria Antibody Assay).

An antigen is generally defined as a substance that, when introduced into the
body, stimulates the production of an antibody. An antibody is generally defined
as any of various proteins in the blood that are generated in reaction to
foreign proteins or polysaccharides, neutralize them, and thus produce immunity
against certain microorganisms or their toxins.

In October 2004 we announced the signing of a Manufacturing Agreement with
Medicorp, Inc., for the production of NANO-CAPTURE and NANO-SERO Assays. Nanobac
is transferring production of both assays from our Nanobac OY research
laboratory in Kuopio, Finland to Medicorp in preparation for expanded
distribution and potential FDA clinical trials. Medicorp is Canada's largest,
independent ISO 9001-certified manufacturer and distributor of immunodiagnostic
and microbiology products.

The NANO-CAPTURE and NANO-SERO test kits will be sold through a distributor
network. We have signed a distribution agreement with Oxoid Ltd. ("Oxoid") for
territories in Europe, Brazil and Australia. Oxoid is one of the world's leading
manufacturers and distributors of microbiological culture media and other
diagnostic products. With corporate headquarters in Basingstoke, Hampshire,
Oxoid Ltd is supported by a network of wholly owned sales and distribution
companies in Europe, North and South America and Australia. We have also
recently received notification of CE Mark status, which is necessary for
distribution of our kits in Europe.

Our goal is to develop diagnostic assays that will be globally distributed for a
variety of diseases associated with nanobacterial infection and pathologic
calcification. Our diagnostic tests will facilitate further research into the
cause and effect of Nanobacteria and will allow researchers the ability to
measure changes in levels of Nanobacteria in their test patients.


                                       5
<PAGE>

RESEARCH

Nanobacterial research is ongoing around the world. Our lead scientists Olavi
Kajander and Neva Ciftcioglu, have formed multidisciplinary alliances with top
researchers including: Hojatollah Vali, McGill University, Canada; Mayo Clinic,
Rochester, Minnesota; University of South Florida; Iowa State University; D.
Shoskes, Cleveland Clinic; Garcia-Cuerpo, Spain; China Ghangsha group; Sommer,
Univ. of Ulm; Pretorius, South-Africa; G. Epstein/J.T. Salonen; Tom & Marcia
Hjelle, Univ. of Illinois; Y. Av-Gay, University of British Columbia; and R.
Berger, Miami Heart Institute, Miami FL. We intend to serve as the nexus for
research scientists and become the premier leader in nanobacterial research and
distribution of knowledge. We generally retain the rights for the
commercialization of intellectual property that result from these collaborative
studies.

To date, these collaborations have resulted in the publishing of over 80
articles, numerous abstracts and book chapters. Example publications since 1998
include articles in Science, Nature and Nature Medicine, Proceedings of the
National Academy of Sciences, Lancet, New Scientist, Molecular Medicine, PDA
Journal, Kidney International, Circulation, Journal of Pathophysiology, and
American Society for Microbiology.

In 2004, we entered into a Space Act Agreement with NASA's Johnson Space Center
("JSC"), Houston Texas, to collaborate on the research of nanobacteriium
sanguineum and its nature and role in pathological calcification, including the
detection and treatment of the pathogen. Since Astronauts may be more prone to
an increased rate of pathological calcification while in a zero gravity
environment, the collaboration will support NASA's need to better understand the
effects of long-term space travel on humans. In addition, Nanobac's work
provides a model for studying mineralized organic matters that could aid NASA in
the search for extraterrestrial life.

Nanobac co-founder and Director of Science, Neva Ciftcioglu, Ph.D. will remain
at NASA JSC as Staff Scientist and principal researcher. Under the agreement,
NASA will provide workspace at JSC for Nanobac's personnel located at JSC. The
agreement further provides Nanobac the opportunity to work together with a
multidisciplinary team of NASA researchers while having access to basic
laboratory services for nanobacteria science, including electron microscopy,
molecular biology and geology-mineralogy research facilities. Projects ranging
from searching for nanobacteria biosignatures in earth fossils and in Mars
meteorites to diagnosing and treating nanobacteria infection are anticipated.
Nanobac will provide JSC with equipment and specialty supplies for nanobacteria
research and apply its pioneering diagnostic and treatment experience in the
field.

We own the rights for the commercialization of intellectual property that
results from our collaborative research at NASA JSC. However, the U.S. Federal
Government retains the right to use this intellectual property for U.S.
Government purposes without compensation to us.


                                       6
<PAGE>

THE ROLE OF NANOBACTERIA IN CALCIFICATION ASSOCIATED DISEASES

CARDIOVASCULAR DISEASES

The most serious and widespread of the diseases caused by calcified plaque are
atherosclerosis (hardening of the arteries) and coronary heart disease. Coronary
heart disease is caused by a narrowing of the coronary arteries that feed the
heart, which may be caused by the build-up of Nanobacteria.

Many cardiovascular researchers have shown that atherosclerosis might be the
life-long result of our bodies' various healing mechanisms and inflammatory
responses to infection. Researchers have sought to isolate an infectious agent
that is present in our tissues that could stimulate the development of
atherosclerotic plaques. Until recently, no single infection, viral or
bacterial, had been implicated.

The Company believes that Nanobacteria might play a key role in the development
of atherosclerosis and consequently focused its early efforts on investigating
the relationship between Nanobacteria and atherosclerosis.

Three recently published studies conducted by prominent medical researchers have
collectively shown that Nanobacteria might be the previously unidentified agent
involved in the development of atherosclerotic heart disease. A group of
researchers at the Mayo Clinic, led by Virginia Miller, PhD showed that
Nanobacteria are present in calcified atherosclerotic coronary arteries and
heart valves.

Cardiovascular researcher Benedict Maniscalco, MD published a study that showed
that patients with severe coronary artery disease tested positive for
nanobacterial antigen. The study also indicated that a majority of cardiac
patients that received the Nanobac Supplements had a decrease in their coronary
artery calcium scores. Angina was decreased or ablated in 16 of 19 patients.
Lipid (fats and fat like materials) profiles also improved in most patients. Dr.
Maniscalco's study concluded that the coronary artery calcium scores of most
coronary artery disease patients decreased during the period they used the
Nanobac Supplements inferring regression of calcified coronary artery plaque
volume. The patients tolerated the therapy well and their angina and lipid
profiles improved.

Also, at a recent American Heart Association scientific session, one of the
world's most prominent heart disease researchers, Stephen E. Epstein, MD,
Director of the Cardiovascular Research Institute at Washington Hospital Medical
Center in Washington D.C., reported that 94% of people with calcified coronary
arteries have nanobacterial infection as measured by the Company's Nanobacterial
Antibody Assay, and that antibody results correlated with coronary calcification
scoring. Therefore, the Nanobacterial Antibody Assay may be a predictor of
patients with high levels of calcium in their coronary arteries. These patients
are at the highest risk for a heart attack. Thus, the Nanobacterial Antibody
Assay could be used as a biomarker that may predict which patients are at
greatest risk for a heart attack.

The collective weight of the three studies suggests that nanobacteria infection
may be the previously unknown infectious agent associated with atherosclerotic
plaque. The physical presence of Nanobacteria in the diseased artherosclerotic
tissues and the correlation with heart disease calcification levels suggests
that long-term nanobacterial infection is involved in the development of the
calcification in atherosclerotic heart disease.


                                       7
<PAGE>

Nanobac is continuing its research of the relationship between nanobacterial
infection and heart disease and has expanded its research to include other
diseases involving pathological calcification.

UROLOGICAL DISEASES

Kidney stones are one of the most common disorders of the urinary tract. A
kidney stone is a solid piece of material that forms in the kidney out of
substances in the urine. A problem stone can block the flow of urine and cause
great pain.

Prostatitis is a painful inflammation of the prostate gland. Symptoms may
include pain while urinating or ejaculating, chills or fever, perineal,
testicular, bladder or low back pain.

Polycystic kidney disease ("PKD") is a genetic disorder characterized by the
growth of numerous cysts in the kidneys. PKD cysts can slowly replace much of
the mass of the kidneys, reducing kidney function and leading to kidney failure.

Researchers have shown a relationship between Nanobacteria and urological
diseases such as kidney stones, prostatitis, and PKD. Until these studies, no
single infection, viral or bacterial, had been identified that could have caused
the progression of these diseases.

Nanobac has focused on investigating the relationship between Nanobacteria and
these urological diseases.

Kidney Stones: Several studies conducted by prominent medical researchers have
collectively shown Nanobacteria as a probable cause of kidney stone formation.
Depending upon the patient population, researchers have found that 62% to 97% of
kidney stones have Nanobacteria. The presence of Nanobacteria is independent of
the type of kidney stone.

It is believed that Nanobacteria create the calcific deposits that are
physically present in the kidney stones and therefore may be the cause of kidney
stone formation.

The Company has been working with scientists at NASA to research the effects of
Nanobacteria in the formation of kidney stones during space flights. Neva
Ciftcioglu, the Company's Director of Science, and a team of NASA scientists
used multiple techniques to determine that Nanobacteria infection multiplies
faster in space flight simulated conditions than on Earth. This determination is
especially important to NASA as it indicates that astronauts on future long-term
missions to the moon and Mars are at an increased risk for developing kidney
stones.

The Company is continuing its collaboration with NASA. The observation that
Nanobacteria grow faster in conditions simulating the microgravity conditions of
space also allows researchers to grow cultures faster. A problem facing
researchers in studying Nanobacteria had been in developing a sufficient amount
of material. Nanobacterial particles double about once every three days compared
to typical bacteria which doubles about every 20 minutes.


                                       8
<PAGE>

Prostatitis: A recent observational study of prostatitis patients, led by Daniel
A. Shoskes, M.D., of Cleveland Clinic Florida, demonstrated a significant
improvement in the symptoms of chronic prostatitis / chronic pelvic pain
syndrome for those patients who took Nanobac Supplements for a period of three
months. The treated group of fifteen patients had prostatic stones and
longstanding Chronic Pelvic Pain Syndrome ("CPPS") symptoms that were not
responsive to prior conventional therapies. Two of the patients in the test
group who had been on complete medical disability have returned to work.

Polycystic Kidney Disease ("PKD"): Studies have shown that 100% of kidney cyst
fluids and urine were positive for Nanobacteria. Nanobac plans to initiate
research trials that will evaluate the link between Nanobacteria and PKD.

OTHER OPPORTUNITIES

Nanobacteria may also be contaminating biologics, like vaccines and bio-medical
devices, like implantable hip replacement parts. We are exploring commercial
opportunities to detect and eradicate nanobacterial infection or contamination
in the following additional markets:

      o     Bio-Medical- Vaccines and Blood Products
      o     Bio-Industrial- Implantable Durable Medical Devices and Medical Exam
            Equipment

NANOBACTERIUM SANGUINEUM BACKGROUND AND DESCRIPTION

Nanobacterium sanguineum (nanobacteria) was discovered in 1988 by Finnish
researcher Olavi Kajander, M.D., PhD. Dr. Kajander was carrying out mammalian
cell research when a routine mammalian cell culture experiment, using
commercially available fetal bovine serum as the growth media, just wasn't
getting off the ground. The cells weren't thriving and dividing like they
should; the cells were sickly and died off before any study could be done.
Strange vacuoles were forming up in many of the cells, and these cells
subsequently died. Dr. Kajander, like all basic cell researchers, had
encountered this problem before; sometimes their cell cultures worked, and
sometimes they didn't. Dr. Kajander researched this further and after several
weeks of culture, turbidity developed in one of the flasks. We believe this
represented the first isolation of Nanobacterium sanguineum.

In 1991 Dr. Kajander was joined by microbiologist Neva Ciftcioglu, Ph.D. at the
University of Kuopio, Finland. Their research established that the blood-borne
nanobacteria forms slow-growing calcified colonies in arteries and organs, much
as coral reefs are formed. Nanobacteria have been found in human and animal
blood, urine and saliva. The name "nanobacteria" was introduced and patented by
Dr. Olavi Kajander as the name for very small mineral-associated bacteria-like
particles.


                                       9
<PAGE>

COMPETITION

The market for providing physicians and managed care organizations with
nanobacteria related disease management and services is just emerging, and we
believe are currently the only company providing a comprehensive approach to
managing nanobacterial diseases.

The general market for academic researchers and clinical laboratories with In
Vitro diagnostic test kits is highly competitive and includes diagnostic
companies such as, Roche, Abbott, Bayer, Johnson & Johnson, and Dade Behring.

The general market for specialized clinical laboratory services for detection,
diagnosis, prognosis and monitoring is highly competitive and dominated by Quest
and Labcorp. Their competitive strength lies in their service capabilities and
their ability to provide local couriers for specimen pickup and broad-based
contracting ability with managed care organizations.

The general market for pharmaceuticals and dietary supplements is also highly
competitive and includes Fortune 500 pharmaceutical companies as well as small
to medium sized pharmaceutical and dietary supplement companies.

Nanobac believes that it will be able to grow and defend the specialized
nanobacteria related disease market niche due to its expertise in the field, its
disease management approach, and its technology leadership.


                                       10
<PAGE>

GOVERNMENT REGULATION

Clinical Reference Laboratory

The clinical reference laboratory operations are not regulated directly by the
FDA. Clinical reference laboratories in the United States are regulated under
the federal Clinical Laboratory Improvement Act (CLIA). Our reference laboratory
is located in Kuopio Finland and is regulated by European Union and Finland laws
and is not regulated by CLIA.

In Vitro Diagnostics

The FDA regulates in vitro diagnostic kits and reagents. We intend to begin
clinical studies to support an FDA filing for both the NANO-CAPTURE and
NANO-SERO assays. The timing of our clinical trials and FDA approval is
dependent on future funding. We recently received notification that our
NANO-CAPTURE and NANO-SERO assays meet the criteria for CE Mark in Europe.

Dietary Supplements

FDA regulates dietary supplements under a different set of regulations than
those covering "conventional" foods and drug products (prescription and
Over-the-Counter). Under the Dietary Supplement Health and Education Act of 1994
(DSHEA), the dietary supplement manufacturer is responsible for ensuring that a
dietary supplement is safe before it is marketed. FDA is responsible for taking
action against any unsafe dietary supplement product after it reaches the
market. Generally, manufacturers do not need to register with FDA nor get FDA
approval before producing or selling dietary supplements. Manufacturers must
make sure that product label information is truthful and not misleading.

FDA's post-marketing responsibilities include monitoring safety, e.g. voluntary
dietary supplement adverse event reporting, and product information, such as
labelling, claims, package inserts, and accompanying literature. The Federal
Trade Commission regulates dietary supplement advertising.

ENVIRONMENTAL MATTERS

We have not been impacted financially or operationally by environmental laws.

GEOGRAPHIC

We will initially focus our dietary supplement business in North America. To
date, over 95% of our revenue is from the United States. We also plan to develop
our markets in the European Union through the operations of our Finnish
Subsidiary, Nanobac OY.


                                       11
<PAGE>

EMPLOYEES

We have seven employees in our corporate headquarters in Tampa, Florida, one
employee at the NASA facility in Houston Texas and five employees in Finland.

FACTORS THAT MAY AFFECT THE COMPANY

We operate in a rapidly changing environment that involves a number of risks,
uncertainties, and assumptions, many of which are beyond our control. For a
discussion of some of these risks, see "--Risk Factors" in Item 7 of this
report. Other risks are discussed elsewhere in this Form 10-KSB.

INVESTOR INFORMATION

We are subject to the information requirements of the Securities Exchange Act of
1934 (the "Exchange Act"). Therefore, we file periodic reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "SEC"). Such reports, proxy statements, and other information may be
obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street,
NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition,
the SEC maintains an Internet site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically.

Financial and other information about the Company is available on our website
(http://www.nanobaclabs.com). We make available on our website, through links to
the SEC website, copies of our annual report on Form 10-KSB, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after filing such material electronically or otherwise
furnishing it to the SEC.


                                       12
<PAGE>

ITEM 2.  PROPERTIES

The following table sets forth a description of our facilities:

<TABLE>
<CAPTION>
                    Square Feet
    Location          (Approx)      Lease Expiration    Function
------------------  -------------  -------------------  ------------------------------
<S>                 <C>            <C>                  <C>
Tampa, Florida          7,700        June 2007 -        Headquarters for Nanobac
                                     June 2010          operations (approximately 2,100
                                                        square feet has been subleased to
                                                        an unaffiliated entity)

Koupio, Finland         1,500        3 months notice    Research and laboratory facility
</TABLE>


We expect that our current facilities will be sufficient for the foreseeable
future. To the extent that we require additional space in the near future, we
believe that we will be able to secure additional leased facilities at
commercially reasonable rates.

ITEM 3.  LEGAL PROCEEDINGS

Except as described below, we know of no material, active or pending legal
proceedings against us, nor are we involved as a plaintiff in any material
proceedings or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholders
are an adverse party or has a material interest adverse to us.

On September 24, 2004 a civil action was filed in United States District Court -
Southern District of California by World Health Products, LLC ("World Health")
broadly alleging that the Company, together with a customer of the Company
("Customer"), has infringed on its Patent Number 5,602,180 related to the sale
of suppositories included in the Company's supplement product. World Health
alleged additional complaints against the Customer to which the Company is not
liable. During February 2005, World Health dropped the Company from their
lawsuit as their tests of our suppositories determined that World Health's
patents were not being infringed upon.

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

No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of the year ended December 31, 2004.


                                       13
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Our common stock is traded under the symbol "NNBP".

From October 12, 1994 through August 18, 1997, the Company's Common Shares were
traded in the NASDAQ SmallCap Market under the symbol "NATD". Beginning August
18, 1997 the Company's Common Shares were traded on the Over The Counter
Bulletin Board. Effective March 27, 2000, the trade symbol was changed to
"AMER". Effective July 21, 2003, the trade symbol was changed to "NNBP". From
March 2001 through November 2004, our Common Shares have traded through the Over
The Counter Pink Sheets. From November 2004 to present, our Common Shares have
been traded on the Over The Counter Bulletin Board ("OTCBB"). The following
table sets forth the high and low bid prices for Common Shares as reported by
NASDAQ, OTC Pink Sheets, and OTCBB for the periods indicated. Quotations on
NASDAQ, OTC Pink Sheets and OTCBB reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.

                                 HIGH                      LOW
2003
First Quarter                    $1.70                    $0.50
Second Quarter                   $0.69                    $0.24
Third Quarter                    $1.34                    $0.62
Fourth Quarter                   $1.05                    $0.49

2004
First Quarter                    $0.90                    $0.41
Second Quarter                   $0.71                    $0.22
Third Quarter                    $0.30                    $0.16
Fourth Quarter                   $0.30                    $0.14

On April 13, 2005, the closing bid quote for the Common Shares was $.116 per
share, and there were 252 holders of record of Common Shares. Our common shares
are issued in registered form. Continental Stock Transfer & Trust Company, 17
Battery Place, New York, NY 10004 is the transfer agent for our common shares.

We have not paid cash dividends on our Common Shares and we do not anticipate
doing so in the foreseeable future. The Company intends to retain earnings, if
any, for future growth and expansion opportunities. Payment of cash dividends in
the future, as to which there can be no assurance, will be dependent upon the
Company's earnings, financial condition, capital requirements and other factors
determined by the Board of Directors.


                                       14
<PAGE>

CHANGES IN SECURITIES

During January 2004 we issued 4,500,000 shares to an entity affiliated with our
Chief Executive Officer ("CEO") as part of the plan of reorganization approved
by the United States Bankruptcy Court. This affiliate received its shares in
reliance upon Section 4(2) of the Securities Act of 1933, because the holder was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company.

During January 2004 and March 2004 (and amended in August 2004), we entered into
an employment agreements with E. Olavi Kajander and Neva Ciftcioglu which
included provisions to acquire their 35% ownership of Nanobac OY for 5,000,000
shares of our common stock, 5,000,000 warrants with an exercise price of $.005
per share and cash of 15,000 Euros. Each of these employees received their
shares in reliance upon Section 4(2) of the Securities Act of 1933, because each
holder was knowledgeable, sophisticated and had access to comprehensive
information about us. At all relevant times we were a reporting company under
the Securities Exchange Act of 1934 and there was readily available adequate
current public information with respect to the Company. We placed legends on the
certificates stating that the securities were not registered under the
Securities Act and set forth the restrictions on their transferability and sale.

From August 2004 through November 2004, we entered into agreements with three
creditors to convert $269,538 of current liabilities due to them for
professional services into 2,097,843 shares of our common stock. Each of these
creditors received their shares in reliance upon Section 4(2) of the Securities
Act of 1933, because each of the holders was knowledgeable, sophisticated and
had access to comprehensive information about us. At all relevant times we were
a reporting company under the Securities Exchange Act of 1934 and there was
readily available adequate current public information with respect to the
Company. We placed legends on the certificates stating that the securities were
not registered under the Securities Act and set forth the restrictions on their
transferability and sale.

On September 30, 2004, we entered into an agreement with our primary lender to
convert a $7.5 million loan balance into 29,999,964 shares of our common stock
at $0.25 per share. The lender is affiliated with our Chief Executive Officer.
The lender received these shares in reliance upon Section 4(2) of the Securities
Act of 1933, because each of the holders was knowledgeable, sophisticated and
had access to comprehensive information about us. At all relevant times we were
a reporting company under the Securities Exchange Act of 1934 and there was
readily available adequate current public information with respect to the
Company. We placed legends on the certificates stating that the securities were
not registered under the Securities Act and set forth the restrictions on their
transferability and sale.

From August 2004 through January 2005, we executed Subscription Agreements with
three unaffiliated investors and one affiliated investor. These investors paid
us 50% of the subscription price at execution and the remaining 50% is due
within five days from the date that a registration statement is declared
effective for the common shares that are being issued. In exchange for the cash
consideration, we are to issue these investors shares of our common stock equal
to the amount paid divided by the lesser of (a) $0.12 or (b) fifty-two percent
of the average closing bid price for our common stock for the five days
immediately prior to the date on which a registration statement is declared


                                       15
<PAGE>

effective ("The Fixed Price"). In addition, each of these investors will receive
an equivalent number of warrants with expiration dates of five years from the
date of issuance. One half of these warrants will be priced at 120% of the Fixed
Price and the remainder will be priced at 150% of the Fixed Price. The minimum
number of shares and warrants that will be issued under these Subscription
Agreements (assuming a Fixed Price of $0.12 per share) is as follows:

                                     Number
                                   of Shares     Per Share     Proceeds
                                ---------------  ---------   -------------
Common Stock:
   Unaffiliated Investors            16,250,000    $0.12        $1,950,000
   Affiliates                         8,333,333    $0.12        $1,000,000

                                ---------------              -------------
                                     24,583,333                 $2,950,000
                                ===============              =============

                                     Number      Exercise
                                  of Warrants      Price
                                ---------------  --------
Warrants:
   Unaffiliated Investors             8,125,000   $0.132
   Unaffiliated Investors             8,125,000   $0.180
   Affiliates                         4,166,667   $0.132
   Affiliates                         4,166,667   $0.180

                                ---------------
                                     24,583,333
                                ===============

As of December 31, 2004, 10,625,000 shares had been issued under the above
Subscription Agreements. The actual number of shares and warrants that
ultimately will be issued under these Subscription Agreements may be
substantially higher due to the variability of the Fixed Price. Based on our
recent traded price of $0.11 to $0.14 per share, approximately twice as many
shares and warrants would be issued as described above.

Each of these investors received their shares in reliance upon Section 4(2) of
the Securities Act of 1933, because each of the holders was knowledgeable,
sophisticated and had access to comprehensive information about us. At all
relevant times we were a reporting company under the Securities Exchange Act of
1934 and there was readily available adequate current public information with
respect to the Company.

A success fee was awarded to a broker for completing the transaction to one of
the above unaffiliated investors in the form of 5-year warrants equal to 20% of
the value of the transaction. These warrants have exercise prices equal to $0.16
to $0.22 per share for transactions completed to date. Future warrants issued
under this agreement will have an exercise price equal to NNBP's stock price on
the date of closing. We estimate that approximately 2.2 million warrants will be
issued to this broker.

PURCHASES OF EQUITY SECURITIES BY THE SMALL BUSINESS ISSUER AND AFFILIATED
PURCHASES

None


                                       16
<PAGE>


SELECTED QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
                                Mar 31           Jun 30           Sep 30           Dec 31
                                -------          -------          -------          -------
<S>                            <C>            <C>                <C>           <C>
2004 QUARTER ENDED
       Revenue                  $32,385          $73,564         $118,141         $134,271
       Net loss             ($4,279,240)     ($1,384,238)       ($994,276)     ($1,217,024)
      Loss per share:
          Basic                  ($0.03)          ($0.01)          ($0.01)          ($0.01)
          Diluted                ($0.03)          ($0.01)          ($0.01)          ($0.01)

                                Mar 31           Jun 30           Sep 30           Dec 31
                                -------          -------          -------          ------
2003 QUARTER ENDED
       Revenue                       $0          $77,637         $241,340         $163,838
       Net loss             ($1,234,083)       ($468,666)       ($929,230)     ($1,067,512)
      Loss per share:
          Basic                  ($0.03)          ($0.01)          ($0.01)          ($0.01)
          Diluted                ($0.03)          ($0.01)          ($0.01)          ($0.01)
</TABLE>

The 2003 results include the acquisition of LABS in June 2003.


                                       17
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data has been derived from our
consolidated financial statements. The information below should be read in
conjuncture with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our Consolidated Financial Statements and related
notes. The following information is presented as of and for the period from
February 22, 2002 (date of inception) through December 31, 2002 and as of and
for the years ended December 31, 2003 and 2004.

<TABLE>
<CAPTION>
                                                                        Years ended December 31,
                                                                   2004                 2003              2002
                                                                  -----                -----             ----
<S>                                                             <C>                 <C>               <C>
CONSOLIDATED BALANCE SHEET DATA:
     Working Capital                                            ($1,189,310)        ($6,763,635)      ($340,922)
     Total assets                                                $9,684,307          $6,044,090          $5,223
     Total liabilities                                           $3,573,463          $6,850,246        $346,145
     Shareholders' equity (deficit)                              $6,110,844           ($806,156)      ($340,922)
     Shares outstanding at period end                           187,240,093          99,968,840      19,982,965

CONSOLIDATED STATEMENT OF OPERATION DATA:
     Revenue                                                       $358,361            $482,815              $0
     Gross profit                                                  $257,891            $149,693              $0
     Operating loss                                             ($7,600,383)        ($2,700,211)       ($43,621)
     Loss from continuing operations                            ($7,817,510)        ($2,761,133)       ($43,621)
     Net loss                                                   ($7,874,778)        ($3,699,491)    ($1,475,299)
     Diluted earnings per share                                      ($0.05)             ($0.05)         ($0.11)
     Cash dividends                                                      $0                  $0              $0
     Cash dividends per share                                         $0.00               $0.00           $0.00

     Weighted average common shares                             152,903,084          67,489,524      13,941,197
</TABLE>


(1)   Consolidated Balance Sheet and Consolidated Statement of Operation data
      for the years ended December 31, 2004 and 2003 give effect to our
      acquisition of NanobacLabs Pharmaceuticals, Inc. in June 2003 and Nanobac
      OY in November 2003.

(2)   Consolidated Statement of Operation data for the years ended December 31,
      2004, 2003 and 2002 give effect for the October 2003 decision to dispose
      of the HealthCentrics business Unit. Accordingly, HealthCentrics'
      operations for 2002 and 2003 have been removed from continuing operations.


                                       18
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

During calendar 2004, and for the foreseeable future, our primary focus is on
the research of the role Nanobacteria plays in human diseases in which
pathologic calcification deposits are found. Since the beginning of 2004, there
have been an increasing number of studies linking Nanobacteria to serious health
problems, including cardiovascular diseases, peripheral vascular diseases,
prostatitis, kidney stones, and Polycystic Kidney Disease. These studies have
provided additional evidence of a relationship between Nanobacteria and these
diseases in which pathological calcification is present. Our focus is in
determining how Nanobacteria works and what countermeasures can be developed to
better treat these diseases.

Recently we signed a collaborative agreement with the Mayo Foundation for
Medical Education and Research to conduct research relating to the prevalence
and treatment of nanobacteria in specific disease populations. The parties will
evaluate the role of nanobacteria through four studies utilizing diagnostic test
kits developed by Nanobac.

We continue with our collaborative efforts with scientists at NASA researching
the effects of Nanobacteria in the formation of kidney stones under conditions
simulating space flight. We also signed a collaborative agreement with Iowa
State University to work with the Department of Geological and Atmospheric
Sciences to explore novel methodologies for detecting calcified nano-particles
which may be related to nanobacteria.

While there remains significant work ahead, we are encouraged by the progress
being made in the study of Nanobacteria and the increasing level of acceptance
in the medical community that there may be a relationship between the
nano-particles we call Nanobacteria and the progression of certain diseases
involving pathologic calcification. Our continuing research and development
efforts, along with our efforts in obtaining recognition by various regulatory
agencies (e.g. the FDA and similar agencies throughout the world), will require
significant additional amounts of financing over the next several years.

We are attempting to protect the intellectual property rights to our discoveries
including our treatment therapies and our diagnostic methods by obtaining
patents. We currently have one issued patent and multiple patent applications
for treatment therapies including the combination of EDTA and tetracycline to
treat nanobacteria infections and the formula mix and treatment regimen for
Nanobac Supplements, We also have one issued patent and multiple patent
applications related to our diagnostic products We are attempting to further
protect our intellectual property rights by obtaining additional patents in
unique areas of research with respect to the role of Nanobacteria in pathologic
calcification. These efforts are ongoing and will require significant additional
infusions of financing to complete. It is also anticipated that additional
patents will be sought in the future as our research and development efforts
yield new discoveries.


                                       19
<PAGE>

We began direct sales of our Nanobac Supplements in June 2004. Nanobac
Supplements are currently being marketed to the alternative medicine market and
directly to the customer over the Internet. We anticipate that the Nanobac
Supplements are the first generation of treatment therapies that we will develop
and that the portfolio of treatments will increase as a result of our continuing
research into the effect of Nanobacteria in numerous diseases.

During calendar 2004, our two diagnostic tests have gained additional
recognition for their ability to identify Nanobacteria. We plan to initiate
marketing our diagnostic testing kits in Europe during the first half of 2005.

During April 2004, we announced a name change from Nanobac Pharmaceuticals,
Incorporated to Nanobac Life Sciences, Inc. to become effective upon approval by
the shareholders. RESULTS OF OPERATION The following table presents the
percentage of period-over-period dollar change for the line selected items in
our Consolidated Statements of Operations for the years ended December 31, 2004
and 2003. These comparisons of financial results are not necessarily indicative
of future results.

<TABLE>
<CAPTION>
                                                 ------------------------------------------------
                                                               YEAR ENDED DECEMBER
                                                 ------------------------------------------------
                                                       2004             2003          % Change
                                                       ----             ----          --------
<S>                                                <C>                <C>            <C>
      Revenue                                            $358,361         $482,815          -26%
      Cost of revenue                                     100,470          333,122          -70%

                                                 ----------------------------------
         Gross Profit                                     257,891          149,693           72%
         Gross Profit percentage                               72%              31%

      Selling, general and
      administrative                                    4,765,841        2,128,375          124%
      Research and development                          2,375,363          540,426          340%
      Depreciation and amortization                       717,070          181,103          296%

                                                 ----------------------------------
         Operating loss                                (7,600,383)      (2,700,211)         181%

      Other income (Expense)                             (217,127)         (60,922)         256%

                                                 ----------------------------------
         Loss from continuing operations               (7,817,510)      (2,761,133)         183%

      Discontinued Operations                             (57,268)        (938,358)         -94%

                                                 ----------------------------------
         Net loss                                     ($7,874,778)     ($3,699,491)         113%
                                                 ==================================
</TABLE>


                                       20
<PAGE>

2004 COMPARED TO 2003


REVENUE

Revenue for the years ended December 31, 2004 and 2003 is summarized as follows:

                                                2004             2003
                                                ----             ----

Nanobac Supplements                               $230,321               $0
License revenue                                     46,800                0
Nanobac TX                                               0          407,242
Diagnostic Products                                 81,240           75,573
                                           ---------------- ----------------
                                                  $358,361         $482,815
                                           ================ ================

During December 2003, we voluntarily discontinued offering NanobacTX, which
accounted for 84% of our revenue for the year ended December 31, 2003.
Accordingly, our revenue for the first half of 2004 was significantly reduced
from the level experienced in the last half of 2003. During February 2004, we
licensed a new product to an affiliated third party. Effective June 2004, the
above license agreement was cancelled and we initiated sales of this product
directly to customers under the name of Nanobac Supplements. We are in the
process of accelerating our research and developing new products for better
patient acceptance.

Revenue for the last quarter of 2004 averaged approximately $45,000 per month.
Revenue for the year ended December 31, 2003 represents seven months of sales
subsequent to our acquisition of LABS in June 2003.

COST OF REVENUE

Cost of revenue consists of direct materials, testing services (for diagnostic
products) and shipping. As a percentage of revenue, cost of revenue was 28% for
the year ended December 31, 2004 compared to 69% for the year ended December 31,
2003. Cost of revenue for 2003 included $150,000 of fixed lab fees for our
diagnostic products. Without this fee, our cost of revenue would have been
approximately 38% as a percentage of revenue. This fixed lab fee was eliminated
in October 2003 and replaced with a variable cost structure, which significantly
decreased cost of revenue.

In addition, the lower cost of revenue in 2004 was due in part to the 2004
license revenue having no direct costs. During June 2004, this licensing
agreement was terminated and we initiated sales of Nanobac Supplements directly
to customers, which has resulted in higher revenue and cost of revenue.


                                       21
<PAGE>

2004 COMPARED TO 2003 (CONTINUED)

GROSS PROFIT

Gross profit as a percentage of revenue was 72%, for the year ended December 31,
2004 compared to 31% for the year ended December 31, 2003. The increase in gross
profit percentage is attributable to the 2004 license revenue having no costs
and the existence of $150,000 of fixed lab costs in 2003 which were not incurred
in 2004. We anticipate gross profit as a percentage of revenue to be between 65%
and 70% for 2005.

 SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative ("SG&A") expenses for the years ended
December 31, 2004 and 2003 include a $2.6 million charge and a $750,000 charge,
respectively, for stock issued as part of the Plan of Reorganization as
confirmed by the Bankruptcy Court. SG&A expenses, excluding the above charges,
are summarized as follows:

                                              ----------------------------------
                                                     YEAR ENDED DECEMBER
                                              ----------------------------------
                                                   2004              2003
                                                   ----              ----

     SG&A as reported                              $4,765,841        $2,128,375
     Less charges for stock issuances             (2,562,750)         (750,000)

                                              ----------------------------------
     SG&A expenses net of charges for stock
     issuances                                     $2,203,091        $1,378,375
                                              ==================================

For 2004, 64% of the remaining SG&A expenses are comprised of payroll, travel
and professional fees. Expenses to operate as a public company (primarily
professional fees and investor relations costs) comprise an additional 18% of
the remaining SG&A expense. Other significant SG&A expenses include facility
rental and insurance.

The increase in SG&A for the year ended December 31, 2004 over December 31, 2003
(net of charges for stock issuances) is primarily attributable to the timing of
the acquisition of LABS in June 2003. Only seven months of SG&A for LABS is
included in the above SG&A expenses for 2003 compared to twelve months of
expenses in 2004.

SG&A expenses for HealthCentrics are included in "Discontinued Operations".


                                       22
<PAGE>

2004 COMPARED TO 2003 (CONTINUED)


RESEARCH AND DEVELOPMENT

For the year ended December 31, 2004, approximately 65% of research and
development ("R&D") expenses are for payroll and medical director fees and
approximately 25% of R&D expenses are for research studies. Expenses for
research studies fluctuate from year to year as these expenses are dependent on
specific initiatives and funding sources. Remaining R&D expenses include
patents, our Finland lab and travel.

R&D expenses for the year ended December 31, 2004 increased 340% compared to the
year ended December 31, 2003. The increase in R&D for the year ended December
31, 2004 over December 31, 2003 is primarily attributable to the acquisitions of
LABS and OY. LABS was acquired in June 2003 and OY was acquired in November 2003
and includes our laboratory in Koupio Finland. Accordingly, only seven months of
R&D for LABS and one and one-half months of R&D for OY are included in the above
expenses for the year ended December 31, 2003 compared to twelve months for
2004. This increase also reflects our emphasis on R&D subsequent to the June
2003 acquisition of LABS. Specific increases include increased payroll,
initiation of research studies, expansion of our patents and $500,000 of signing
bonuses with the execution of employment agreements for key scientific
personnel.

R&D expenses for HealthCentrics are included in "Discontinued Operations". We
intend to continue to our R&D investment in the coming year.

DEPRECIATION AND AMORTIZATION

Approximately 95% of depreciation and amortization are related to the
amortization of intangible assets acquired in the 2003 and 2004 acquisitions of
LABS and OY.

OTHER INCOME (EXPENSE)

Other income for the years ended December 31, 2004 and 2003 is summarized as
follows:

                                             2004               2003
                                             ----               ----
Interest expense
  Stockholder loan                            ($237,957)          ($23,703)
  Other                                         (10,096)           (19,231)
Foreign currency exchange gain                   32,021                  0
Other, net                                       (1,095)           (17,988)
                                       -------------------------------------
                                              ($217,127)          ($60,922)
                                       =====================================

Foreign currency gain results from exchange rate changes between the U.S. dollar
and the Euro on intercompany advances between our U.S. subsidiary and our
Finland subsidiary.


                                       23
<PAGE>

2004 COMPARED TO 2003 (CONTINUED)

LOSS FROM CONTINUING OPERATIONS

Loss from continuing operations for the year ended December 31, 2004 was $7.8
million compared to $2.8 million for the year ended December 31, 2003. Excluding
non-cash items for stock issuances and amortization and depreciation, the loss
from continuing operations for the years ended December 31, 2004 and 2003 were
as follows:

<TABLE>
<CAPTION>
                                                          2004               2003               Change
                                                          ----               ----               ------
<S>                                                    <C>                 <C>                  <C>
     Loss from continuing operations                     ($7,817,510)       ($2,761,133)        ($5,056,377)
     Depreciation and amortization                            717,070            181,103             535,967
     Charges for stock issuances                            2,562,750            750,000           1,812,750

     Loss from continuing operations
                                                   ----------------------------------------------------------
       excluding non-cash items                          ($4,537,690)       ($1,830,030)        ($2,707,660)
                                                   ==========================================================
</TABLE>

The loss from continuing operations excluding the above non-cash items increased
$2.7 million for the year ended December 31, 2004 compared to the year ended
December 31, 2003. This increase reflects $1.8 million of additional R&D costs
and an additional five months of LABS SG&A expenses in 2004 compared to 2003.

We are experiencing significant losses as we conduct research and development
related to nanobacteria and launch our products and services. We believe it will
take significant time before we will earn meaningful revenue to offset our
expenses and there is no assurance that we will be able to accomplish this goal.
As a result of the losses, we are dependent on affiliates of our CEO and other
investors to provide sufficient cash sources to fund our operations.


                                       24
<PAGE>

2004 COMPARED TO 2003 (CONTINUED)

DISCONTINUED OPERATIONS

During October 2003, we decided to divest our HealthCentrics' business unit to
focus exclusively on our nanobacteria business unit. We were unsuccessful in
finding a buyer in 2003 for this business unit. During March 2004, this business
unit was sold to an affiliate of our CEO for consideration of $250,000 plus
assumption of net liabilities of approximately $499,000. Our gain on disposal of
approximately $749,000 is accounted for as a capital contribution given the
related party nature of the arrangement.

As a result of our decision to dispose of the HealthCentrics business unit, the
operations of HealthCentrics were retroactively removed from continuing
operations and disclosed as a single line item on the statements of operations.
The loss from discontinued operations for the years ended December 31, 2004 and
2003 is summarized as follows:


                                                2004               2003
                                                ----               ----

      Revenue                                        $5,301            $19,970
      Cost of revenue                                 9,208             62,570

                                          ------------------ ------------------
        Gross profit (loss)                          (3,907)           (42,600)

      Selling, general & administrative              53,361            692,407
      Research and development                        -                203,351

                                          ------------------ ------------------
        Net loss                                   ($57,268)         ($938,538)
                                          ================== ==================


                                       25
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2004, we had total assets of $9.7 million of which only
$115,000 were current assets. At December 31, 2004, we had total current
liabilities of $1.3 million and a working capital deficit of $1.2 million.

Since the United States Bankruptcy Court confirmed a plan of reorganization that
allowed the Company to emerge from Chapter 11 during calendar 2002, the Company
has financed its activities primarily through loans made by entities affiliated
with our current Chief Executive Officer (referred to herein as "the Affiliated
Entities"). These loans were made as funding was needed and were extremely
advantageous to the Company in that the amounts were funded as the Company
needed financial infusions and allowed the Company to avoid the costs and
distractions of attempting to raise these amounts from unrelated parties. It is
unrealistic to believe that unrelated parties would have offered terms as
generous as those obtained from the Affiliated Entities, and it is also unlikely
that any financing could have been obtained under any terms without the
financing of the Affiliated Entities.

As discussed in Item 5, from time to time the Affiliated Entities have agreed to
allow a portion of the loan balances to be converted into shares of the
Company's common stock. On September 30, 2004, $7,500,000 of the loan balance
was converted into 29,999,964 shares of our common stock at a price of $.25 per
share. There is no obligation on the part of the Affiliated Entities to make
additional loans to the Company. The Affiliated Entities are also under no
obligation to convert any portion of the loan balances owed to it into
additional shares of the Company's stock.

As is also discussed in Item 5, since August of 2004, the Company has received
$1.4 million (net of $125,000 of expenses) from three unaffiliated investors and
one affiliate for shares of the Company's stock and an equal amount of warrants
to acquire additional shares of the Company's stock. The exact number of shares
to be issued is dependent upon the average closing bid price of the Company's
stock on the five trading days immediately prior to the date on which a
registration statement for these shares is declared effective. The purchase
price of the shares is equal to the lesser of (1) $.12 or (2) 52% of the average
closing price described above. An additional $1.5 million is to be received from
these investors within five days of registering the common shares and warrants.
A registration statement has not yet been filed for these shares. Successful
registration of the shares contemplated under the agreements discussed above
will provide significant amounts of needed capital into the Company. However, a
registration statement has not yet been filed with the Securities and Exchange
Commission ("SEC") and there are no assurances that the SEC will declare a
registration statement effective.

Net cash used in operations was $3.4 million for the year ended December 31,
2004. The negative cash flow from operations reflects the $7.9 million net loss
for the year offset by the non-cash charge for common stock issuances of $2.6
million, depreciation and amortization of $717,000, interest expense added to
the principal balance of the stockholder loan of $238,000, and an increase in
current liabilities of approximately $1.0 million.


                                       26
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Net cash provided by investing activities was approximately $165,000 for the
year ended December 31, 2004, which reflects the receipt of $200,000 from a
common stock option exercise related to the acquisition of LABS offset by our
purchase of fixed assets of approximately $37,000.

Net cash provided by financing activities was $3.2 million for the year ended
December 31, 2004, which is attributable to stockholder loans of $2.1 million
and $1.2 million from common stock Subscription Agreements as described in the
preceding paragraphs.

We are dependent on raising additional funding necessary to implement our
business plan as outlined above. Should we not be successful in raising cash
from the Affiliated Entities and other investors, we are unlikely to continue as
a going concern.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The statement
amends Accounting Research Bulletin ("ARB") No. 43, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. ARB No. 43 previously stated that these
costs must be "so abnormal as to require treatment as current-period charges."
SFAS No. 151 requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this statement requires that allocation of fixed production overhead to the
costs of conversion be based on the normal capacity of the production
facilities. The statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005, with earlier application permitted
for fiscal years beginning after the issue date of the statement. The adoption
of SFAS No. 151 is not expected to have any significant impact on our current
financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- An Amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting for
Nonmonetary Transactions," is based on the opinion that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged. SFAS
No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets whose results are not expected to
significantly change the future cash flows of the entity. The adoption of SFAS
No. 153 is not expected to have any impact on our current financial condition or
results of operations.


                                       27
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In December 2004, the FASB revised its SFAS No. 123 ("SFAS No. 123R"),
"Accounting for Stock Based Compensation." The revision establishes standards
for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, particularly transactions in which an entity
obtains employee services in share-based payment transactions. The revised
statement requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. That cost is to be recognized over the period during
which the employee is required to provide service in exchange for the award.
Changes in fair value during the requisite service period are to be recognized
as compensation cost over that period. In addition, the revised statement amends
SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be
reported as a financing cash flow rather than as a reduction of taxes paid. The
provisions of the revised statement are effective for financial statements
issued for the first interim or annual reporting period beginning after June 15,
2005, with early adoption encouraged. We are currently evaluating the impact
that this statement will have on our financial condition or results of
operations.

CRITICAL ACCOUNTING POLICIES

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

CONTRACTUAL OBLIGATIONS

         At December 31, 2004, the Company's contractual cash obligations, with
         initial or remaining terms in excess of one year, were as follows:

                                            Amount of Commitment
                                  Expired by year ending December 31,
                          ----------------------------------------------------
                                   Other          Operating
                                 Liability          Leases           Total
                                 ---------         --------          -----

      Less than 1 year            $      -         $174,281         $ 174,281
      1 - 2 years                   350,000         287,633           637,633

      3 - 4 years                         -         112,063           112,063

      5 - 7 years                         -          27,234            27,234

                          ----------------------------------------------------
        Total                      $350,000        $601,211         $ 951,211
                          ====================================================


                                       28
<PAGE>

FORWARD LOOKING STATEMENTS

Our disclosure and analysis in this 2004 Form 10-KSB contains some
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995 ("the Act"), that set forth anticipated results
based on our plans and assumptions. From time to time, we also provide
forward-looking statements in other materials we release to the public as well
as oral forward-looking statements. Such statements give our current
expectations or forecasts of future events; they do not relate strictly to
historical and current facts. We have tried wherever possible to identify such
statements by using words such as "anticipate", "estimate", "expect", "project",
"intend", "plan", "believe", "will" and similar expressions in connection with
any discussion of future operating or financial performance.

In light of the important factors that can materially affect results, including
those set forth above and elsewhere in this report, the inclusion of
forward-looking information herein should not be regarded as a representation by
us or any other person that our objectives or plans will be achieved. We may
encounter competitive, technological, financial and business challenges making
it more difficult than expected to continue to market our products and services;
competitive conditions within our industry may change adversely; we may be
unable to retain existing key management personnel; our forecasts may not
accurately anticipate market demand; and there may be other material adverse
changes in our operations or business. Certain important factors affecting the
forward looking statements made herein include, but are not limited to (i)
accurately forecasting capital expenditures; (ii) obtaining new sources of
external financing; (iii) serving as the nexus for nanobacteria research and
(iv) conducting successful clinical trials supporting Dr. Kajander's theories
that the human body does not recognize nanobacteria as harmful, and accordingly,
nanobacteria could be the cause of pathological disease causing calcification
found in multiple diseases. Assumptions relating to budgeting, marketing,
product development and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its capital expenditure or other budgets, which may in turn
affect the Company's financial position and results of operations.

RISK FACTORS

TRENDS, RISKS AND UNCERTAINTIES

We have sought to identify what we believe to be the most significant risks to
our business. However, we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. You should not consider the risks and assumptions
identified in this report to be a complete discussion of all potential risks and
uncertainties affecting the Company. Investors should carefully consider all
risk factors before making an investment decision with respect to our Common
Stock.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

We provide the following cautionary discussion of risks, uncertainties and
possible inaccurate assumptions relevant to our business and our products. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here could adversely
affect us.


                                       29
<PAGE>

RISK FACTORS (CONTINUED)

WE REQUIRE ADDITIONAL FINANCING IN ORDER TO CONTINUE IN BUSINESS AS A GOING
CONCERN, THE AVAILABILITY OF WHICH IS UNCERTAIN. WE MAY BE FORCED BY BUSINESS
AND ECONOMIC CONDITIONS TO ACCEPT FINANCING TERMS WHICH WILL REQUIRE US TO ISSUE
OUR SECURITIES AT A DISCOUNT, WHICH COULD RESULT IN FURTHER DILUTION TO OUR
EXISTING STOCKHOLDERS.

As discussed under the heading, "Management's Discussion and Analysis -
Liquidity and Capital Resources," we require additional financing to fund our
operations. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. In addition, any additional equity financing may
involve substantial dilution to our stockholders. If we fail to raise sufficient
financing to meet our immediate cash needs, we will be forced to scale down or
perhaps even cease the operation of our business, which may result in the loss
of some or all of your investment in our common stock.

In addition, in seeking debt or equity private placement financing, we may be
forced by business and economic conditions to accept terms which will require us
to issue our securities at a discount from the prevailing market price or face
amount, which could result in further dilution to our existing stockholders.

LIQUIDITY AND WORKING CAPITAL RISKS; NEED FOR ADDITIONAL CAPITAL TO FINANCE
GROWTH AND CAPITAL REQUIREMENTS

Throughout 2004 and 2003, affiliates of our Chief Executive Officer have
provided our capital needs through loans and capital contributions. While these
affiliates continue to provide for the majority of our cash requirements, they
are under no obligation to continue such financing and/or strategic guidance. In
the event these affiliates should discontinue their support, we may have
difficulty in continuing our operations. In such an event, shareholders could
lose their investment in its entirety. Historically, these affiliates have
provided capital to us on a demand debt basis after which they may convert debt
into shares of our common stock. If, in the future we require additional
capital, these affiliates may contribute some or all of our requirements. We
anticipate that as a part of any such loan, these affiliates would have rights
to convert into additional shares of our common stock. In such an event and to
the degree of which we require these affiliates' support, shareholders may
experience dilution. At present, we do not maintain key man insurance for our
CEO.

In addition to the financial support we may receive from affiliates of our CEO,
we may continue to seek to raise capital from public or private equity or debt
sources to provide working capital to meet our general and administrative costs
until net revenues make the business self-sustaining. We cannot guarantee that
we will be able to raise any such capital on terms acceptable to us or at all.
Such financing may be upon terms that are dilutive or potentially dilutive to
our stockholders. If alternative sources of financing are required, but are
insufficient or unavailable, we will be required to modify our growth and
operating plans in accordance with the extent of available funding.


                                       30
<PAGE>

RISK FACTORS (CONTINUED)

WE HAVE A HISTORY OF OPERATING LOSSES AND FLUCTUATING OPERATING RESULTS, WHICH
RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

Since inception through December 31, 2004, we have incurred aggregate losses of
$13.0 million. Our net loss for the year ended December 31, 2004 and 2003 was
$7.9 million and $3.7 million, respectively. There is no assurance that we will
operate profitably or will generate positive cash flow in the future. In
addition, our operating results in the future may be subject to significant
fluctuations due to many factors not within our control, such as the
unpredictability of when customers will order products, the size of customers'
orders, the demand for our products, and the level of competition and general
economic conditions.

Although we are confident that revenues will increase, we also expect an
increase in research and development costs and operating costs. Consequently, we
expect to incur operating losses and negative cash flow until our products gain
market acceptance sufficient to generate a commercially viable and sustainable
level of sales, and/or additional products are developed and commercially
released and sales of such products made so that we are operating in a
profitable manner.

POTENTIAL INCORRECT CONCLUSIONS ON THE DETECTION AND ERADICATION OF NANOBACTERIA

Most of our future revenue is based on our ability to detect and eradicate
Nanobacteria. If it is ultimately proved that our diagnostic methodologies and
treatment regimens as covered by our patents are ineffective or based upon
incorrect scientific conclusions, our existing patents and product lines may
lose most or all of their value. Further, if we are unsuccessful in leveraging
our diagnostic and therapeutic products to detect and treat nanobacterial
diseases, we may not generate sufficient revenue to offset our expenses.

ACCEPTANCE OF PRODUCTS IN THE MARKETPLACE IS UNCERTAIN.

Our future financial performance will depend, at least in part, upon the
introduction and customer acceptance of our proposed treatments and products.
Our treatments and products may not achieve market acceptance, and such adverse
marketing results could materially harm the Company.


                                       31
<PAGE>

RISK FACTORS (CONTINUED)

LIMITED OPERATING HISTORY ANTICIPATED LOSSES; UNCERTAINTY OF FUTURE RESULTS

We have a limited operating history upon which an evaluation of our Company and
our prospects can be based. Our prospects must be evaluated with a view to the
risks encountered by companies in early stages of development, particularly in
light of the uncertainties relating to the new and evolving biolife science
research which we intend to develop and market, and the acceptance of our
business model. We will be incurring costs to: (i) perform research studies to
prove the effectiveness of our pharmaceutical products, (ii) further develop and
market our products; (iii) establish distribution relationships; and (iv) build
an organization. To the extent that such expenses are not subsequently followed
by commensurate revenues, our business, results of operations and financial
condition will be materially adversely affected. We, therefore, cannot insure
that we will be able to immediately generate sufficient revenues. We expect
negative cash flow from operations to continue for at least the next 12 months
as we continue to develop and market our business. If cash generated by
operations is insufficient to satisfy our liquidity, we may be required to sell
additional equity or debt securities. The sale of additional equity or
convertible debt securities would result in additional dilution to our
stockholders. Our initial operations may not be profitable, since time will be
required to build our business to the point that our revenues will be sufficient
to cover our total operating costs and expenses. Our reaching a sufficient level
of sales revenues will depend upon a large number of factors, including
availability of sufficient working capital, the number of customers we are able
to attract and the costs of continuing development of our product line.

FEDERAL FOOD AND DRUG ADMINISTRATION

Some or all of our products may be governed by rules and regulations established
by the United States Food and Drug Administration ("FDA"). Changes in FDA
regulations and the enforcement thereof may affect our biolife science business.
Furthermore, we may not be successful in filing and obtaining approval of our
510K or PMA filings with the FDA for our Nano-Capture Antigen and Nano-Sero IgG
ELISA assays.

DATA OBTAINED THROUGH CLINICAL TRIALS.

Data obtained from pre-clinical studies and clinical trials do not necessarily
predict results that will be obtained from later pre-clinical studies and
clinical trials. Moreover, pre-clinical and clinical data is susceptible to
varying interpretations, which could delay, limit or prevent regulatory
approval. A number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after experiencing
promising results in earlier trials. The failure to adequately demonstrate the
safety and/or effectiveness of an intended product under development could delay
or prevent regulatory clearance of the potential drug or treatment, resulting in
delays to commercialization, and could materially harm the business.


                                       32
<PAGE>

RISK FACTORS (CONTINUED)

COMPETITORS IN THE PHARMACEUTICAL INDUSTRY MAY DEVELOP COMPETING TECHNOLOGIES

Drug companies and/or other health care companies may seek to develop and market
technologies which may compete with our Company's technology. While we believe
that our technology regarding the prescription treatment of nanobacterial
infections caused by nanobacterium sanguineum is unique, other competitors may
develop similar or different treatments which may become more accepted by the
marketplace.

REGULATIONS MAY INHIBIT OUR ABILITY TO SELL NANOBAC SUPPLEMENTS

Codex is a joint body comprising government representatives and non-governmental
organizations, jointly managed by the United Nation's (U.N.) Food and
Agriculture Organization (FAO) and the World Health Organization (WHO) of the
U.N. The Codex Committee on Nutrition and Foods for Special Dietary Uses
(CCNFSDU) has been attempting to develop international guidelines for vitamins
and minerals since 1991. In November 2004, these guidelines were finalized and a
vote to ratify will take place in July, 2005.

There is a school of thought within the dietary supplement community that buying
vitamins and other dietary supplements will be severely limited by this CODEX.
Passage of the above guidelines may inhibit our ability to sell Nanobac
Supplement outside of the United States. We do not believe that the passage will
impact United State revenue as the U.S. draft position states that "The United
States supports consumer choice and access to dietary supplements that are safe
and are labelled in a truthful and non-misleading manner." Further, the CODEX
Draft notes that the Codex Guidelines for Vitamin and Mineral Supplements will
not adversely affect the availability of safe and truthfully labelled supplement
products in the U.S. marketplace or to U.S. consumers. If our interpretation is
not correct passage of the international guidelines may inhibit the sales of
Nanobac Supplement inside and outside of the United States

RISK OF THIRD PARTY LAWSUITS.

We are exposed to potential product liability risks that are inherent in the
testing, manufacturing and marketing of pharmaceutical products. We cannot
assure potential investors that such claims will not be asserted against the
Company. A successful liability claim or series of claims brought against us
could have a material adverse effect on our financial condition. In addition, we
may be sued by third parties who claim that our products and treatments infringe
upon the intellectual property rights of others or that we have misappropriated
trade secrets of others. This risk is exacerbated by the fact that the validity
and breadth of claims covered in medical technology patents and the breadth and
scope of trade secret protection involve complex legal and factual questions for
which important legal principles are unresolved. Any litigation or claims
against us, whether or not valid, could result in substantial costs, could place
a significant strain on our financial resources, and could harm our reputation.


                                       33
<PAGE>

RISK FACTORS (CONTINUED)

GOVERNMENT REGULATION

Healthcare in general and the pharmaceuticals industry in particular are highly
regulated markets, subject to both federal and a multitude of state regulations
and guidelines. The majority of our business is still in clinical research
applications and is governed by the medical community. There can be no assurance
that changes to state or federal laws will not materially restrict our ability
to sell our products or develop new product lines.

INTELLECTUAL PROPERTY RIGHTS

We have a family of patents encompassing the detection and eradication of
nanobacteria. There are risks inherent in any intellectual property rights in
that they may be challenged as being invalid or not original. Additionally,
other parties may abuse such intellectual rights, causing the Company to defend
its rights.

DEPENDENCY UPON KEY TECHNICAL AND SCIENTIFIC PERSONNEL WHO MAY TERMINATE
EMPLOYMENT AT ANY TIME.

Our success will depend to a significant degree upon the continued services of
key technical and scientific personnel, including but not limited to E. Olavi
Kajander, MD, PhD. In addition, our success may depend on our ability to attract
and retain other highly skilled personnel. Competition for qualified personnel
is intense, and the process of hiring and integrating such qualified personnel
is often lengthy. We may be unable to recruit personnel on a timely basis, if at
all. All of the Company's management and other employees may voluntarily
terminate their employment with us at any time. The loss of the services of key
personnel, or the inability to attract and retain additional qualified
personnel, could result in delays to development, loss of sales, and/or
diversion of management resources that could have a material adverse affect on
the Company.

COMPETITION

The markets in which we compete include successful and well-capitalized
competitors that vary in size and scope. Principal competitors include Pfizer,
Merck and other pharmaceutical companies having unique treatments for
cardiovascular disease. All of these competitors are more established, benefit
from greater name recognition and have substantially greater resources than us.
Moreover, we could face additional competition as other established and emerging
companies enter the market and new products and technologies are introduced.
Increased competition could result in price reductions, fewer customer
subscriptions, reduced gross margins and loss of market share, any of which
could materially adversely affect our business, financial condition and
operating results. In addition, current and potential competitors may make
strategic acquisitions or establish cooperative relationships among themselves
or with third-parties, thereby increasing the ability of their products to
address the needs of our prospective consumers. While we believe we can
differentiate our product from these current and future competitors, focusing on
the products' functionality, flexibility, adaptability and features, there can
be no assurance that we will be able to compete successfully against current and
future competitors. The failure to effectively compete would have a material
adverse effect upon our business, financial condition and operating results.


                                       34
<PAGE>

RISK FACTORS (CONTINUED)

LACK OF INDEPENDENT DIRECTORS

We cannot guarantee our Board of Directors will have a majority of independent
directors in the future. In the absence of a majority of independent directors,
our executive officers, who are also principal stockholders and directors, could
establish policies and enter into transactions without independent review and
approval thereof. This could present the potential for a conflict of interest
between the Company's stockholders and the controlling officers and/or
directors.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our officers and directors are required to exercise good faith and high
integrity in our management affairs. Our Articles of Incorporation and By Laws
provide, however, that our officers and directors shall have no liability to our
shareholders for losses sustained or liabilities incurred which arise from any
transaction in their respective managerial capacities unless they violated their
duty of loyalty, did not act in good faith, engaged in intentional misconduct or
knowingly violated the law, approved an improper dividend or stock repurchase,
or derived an improper benefit from the transaction. Our Articles and By-Laws
also provide for the indemnification by us of the officers and directors against
any losses or liabilities they may incur as a result of the manner in which they
operate our business or conduct the internal affairs, provided that in
connection with these activities they act in good faith and in a manner they
reasonably believe to be in, or not opposed to, the best interests of the
Company, and their conduct does not constitute gross negligence, misconduct or
breach of fiduciary obligations.

CONTINUED CONTROL BY CURRENT OFFICERS AND DIRECTORS

The present officers and directors control approximately 50% of the outstanding
shares of Common Stock, and are in a position to elect all of our Directors and
otherwise control the Company, including, without limitation, authorizing the
sale of equity or debt securities of the Company, the appointment of officers,
and the determination of officer's salaries. Shareholders have no cumulative
voting rights.


                                       35
<PAGE>

RISK FACTORS (CONTINUED)

LIMITED MARKET DUE TO PENNY STOCK

The Company's stock differs from many stocks, in that it is a "penny stock." The
Securities and Exchange Commission has adopted a number of rules to regulate
penny stocks. These rules include, but are not limited to, Rules 3a5l-l, 15g-1,
15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange
Act of 1934, as amended. Because our securities probably constitute penny stock
within the meaning of the rules, the rules would apply to us and our securities.
The rules may further affect the ability of owners of our stock to sell their
securities in any market that may develop for them. There may be a limited
market for penny stocks, due to the regulatory burdens on broker-dealers. The
market among dealers may not be active. Investors in penny stock often are
unable to sell stock back to the dealer that sold them the stock. The mark-ups
or commissions charged by the broker-dealers may be greater than any profit a
seller may make. Because of large dealer spreads, investors may be unable to
sell the stock immediately back to the dealer at the same price the dealer sold
the stock to the investor. In some cases, the stock may fall quickly in value.
Investors may be unable to reap any profit from any sale of the stock, if they
can sell it at all. Stockholders should be aware that, according to the
Securities and Exchange Commission Release No. 34- 29093, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse. These
patterns include: - Control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; - Manipulation
of prices through prearranged matching of purchases and sales and false and
misleading press releases; - "Boiler room" practices involving high pressure
sales tactics and unrealistic price projections by inexperienced sales persons;
- Excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and - The wholesale dumping of the same securities by promoters
and broker- dealers after prices have been manipulated to a desired level, along
with the inevitable collapse of those prices with consequent investor losses.
Furthermore, the penny stock designation may adversely affect the development of
any public market for the Company's shares of common stock or, if such a market
develops, its continuation. Broker-dealers are required to personally determine
whether an investment in penny stock is suitable for customers. Penny stocks are
securities (i) with a price of less than five dollars per share; (ii) that are
not traded on a "recognized" national exchange; (iii) whose prices are not
quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still
meet requirement (i) above); or (iv) of an issuer with net tangible assets less
than $2,000,000 (if the issuer has been in continuous operation for at least
three years) or $5,000,000 (if in continuous operation for less than three
years), or with average annual revenues of less than $6,000,000 for the last
three years. Section 15(g) of the Exchange Act, and Rule 15g-2 of the Commission
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors in
the Company's common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock." Rule
15g-9 of the Commission requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for the Company's stockholders to resell their shares to third parties
or to otherwise dispose of them.


                                       36
<PAGE>

ITEM 7A.       QUANTITATIVE AND QUALITATIVE RISK

Most of our operations are conducted in the United States. With the November
2003 acquisition of Nanobac OY, we also operate a laboratory in Kuopio Finland.
We face two risks related to foreign currency exchange: translation risk and
transaction risk. Amounts invested in our Finland operations are translated into
US Dollars at the exchange rates in effect at the balance sheet date. Since the
functional currency of our Finland subsidiary is the local currency, foreign
currency translation of the balance sheet is reflected as a component of
stockholders' equity and does not impact operating results.

Our Finland subsidiary collects revenue and pays expenses in Euros, mitigating
transaction risk. Revenues and expenses in Euros translate into varying amounts
of US Dollars depending upon whether the US Dollar weakens or strengthens
against the Euro. Therefore, changes in exchange rates may negatively affect the
Company's consolidated revenues and expenses (as expressed in US Dollars) from
foreign operations.

Currency transaction gains or losses are incurred on our US Subsidiary's
intercompany advance to our Finland Subsidiary. We recognize a gain on the
intercompany advance as the US Dollar weakens against the Euro and we recognize
a loss when the US Dollar strengthens against the Euro. For 2004, our net
currency gain for 2004 was $32,000.

The Company has not entered into a material amount of foreign currency forward
exchange contracts or other derivative financial instruments to hedge the
effects of adverse fluctuations in foreign currency exchange rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated herein by reference to the
financial statements listed in Item 15(a) of Part IV of this Form 10-KSB Annual
Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

There have been no disagreements with any of our accountants on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. On January 30, 2004, we appointed Aidman Piser & Company as
the independent accounting firm engaged as the principal accounting firm to
audit our financial statements for the year ended December 31, 2003. The
decision to change the principal accounting firm was approved by our Board of
Directors on January 30, 2004. For further information relating to our change in
certifying accountants, please refer to our Current Report on Form 8-K dated
January 30, 2004 on file with the Commission.


                                       37
<PAGE>

ITEM 9(A). CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures within 90 days of the filing date of this report, and,
based on their evaluation, our principal executive officer and principal
financial officer have concluded that these controls and procedures are
effective.

Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.

SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002

Section 404 of the Sarbanes-Oxley Act of 2002 requires our report on Form 10-KSB
for 2005 or 2006 to include a report of management on internal control over
financial reporting. Internal control over financial reporting, as defined under
these rules, is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.

In our report, we will be required, among other things, to assess the
effectiveness of our internal control over financial reporting. The report must
also disclose any material weaknesses in internal control over financial
reporting identified by management, and if there are any material weaknesses, we
must conclude that our internal control over financial reporting was not
effective. A material weakness, under the applicable rules, is a control
deficiency, or combination of control deficiencies, that results in more than a
remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.

In conducting our ongoing assessment of its internal control over financial
reporting to prepare for compliance with the requirements under Section 404 of
the Sarbanes-Oxley Act, we have identified a lack of segregation of duties to be
a potential material weakness in internal controls. Lack of segregation of
duties is inherent to our company due to the small number of employees. Our
assessment is still in process to determine if this situation is actually a
material weakness or if there are any other material weaknesses.

CHANGES IN INTERNAL CONTROLS
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation.


                                       38
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
------------------------------- --------------------------------------- ------- ------------------------------------
                                                                                            DATE FIRST
NAME                                POSITION HELD WITH THE COMPANY       AGE           ELECTED OR APPOINTED
------------------------------- --------------------------------------- ------- ------------------------------------
<S>                             <C>                                     <C>     <C>
John Stanton                    Chief Executive and Financial             56               November 2000
                                Officer, and Chairman
------------------------------- --------------------------------------- ------- ------------------------------------
Alex Edwards                    Director                                  40        March 2003 and January 2004
------------------------------- --------------------------------------- ------- ------------------------------------
Dr. Jan Egberts                 Director                                  45               January 2004
------------------------------- --------------------------------------- ------- ------------------------------------
Dr. Stephen Rechtschaffen       Director                                  55               January 2004
------------------------------- --------------------------------------- ------- ------------------------------------
</TABLE>

BUSINESS EXPERIENCE

         The following is a brief account of the education and business
experience during at least the past five years of each director and executive
officer, indicating the principal occupation during that period, and the name
and principal business of the organization in which such occupation and
employment were carried out.

JOHN STANTON - CHAIRMAN CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER -
From March 2001 through January 2004, Mr. Stanton served as our Chief Executive
Officer ("CEO"). Mr. Stanton reassumed the role of CEO on July 23, 2004. From
March, 2001 through the present, Mr. Stanton has served as our Chairman of the
Board of Directors and Chief Financial Officer. From 1987 through the present,
Mr. Stanton served as the President and CEO of Florida Engineered Construction
Products, Corporation. Mr. Stanton has served as Chairman of the Board of
Directors of publicly-traded EarthFirst Technologies, Inc. from May 15, 2000
through the present. Mr. Stanton also serves on the Board of Directors of
publicly traded Medical Technology Systems, Inc., Powercerv Corp., Cybercare,
Inc. and White Knight SST, Inc. Since the early 1990's, Mr. Stanton has been,
and continues to be, involved in turn-around management for financially
distressed companies, providing both management guidance and financing. In 1981,
Mr. Stanton assumed the role of Chief Financial Officer for Florida Engineered
Construction Products, Corporation, a privately held manufacturer of residential
and commercial construction products, located in Tampa, Florida. Mr. Stanton
worked as an auditor with the international professional services firm that is
now known as Ernst & Young, LLP from 1973 through 1981. Mr. Stanton, a Vietnam
veteran of the United States Army, graduated from the University of South
Florida with a Bachelors Degree in Marketing and Accounting in 1972, and with an
MBA in 1973. Mr. Stanton earned the designation of Certified Public Accountant
in 1974 and was a Sells Award winner in the CPA examination.


                                       39
<PAGE>

ALEX EDWARDS - DIRECTOR - Beginning January 2004, Mr. Edwards served as our CEO.
He relinquished the CEO role to Mr. Stanton in July 2004. From March 2003
through January 2004, Mr. Edwards served as our Executive Vice President and
Chief Operating Officer. Mr. Edwards was also a Director from March 2003 through
May 2003. He rejoined the Board of Directors in January 2004 and continues to
serve on the Board of Directors through the present. From May 2002 through
present, Mr. Edwards is a managing partner of 360 Partners as well as president
and CEO of 360 Energy. From January 1997 to May 2002, Edwards was an executive
with SRI/Surgical Express. He served in roles that ranged from
vice-president/general manager to spending his last year with the company as
president. From February 1993 through December 1996, he worked in sales and
marketing with Dianon Systems, Inc. His positions included sales and sales
management roles as well as field and corporate marketing. Mr. Edwards also
served as an officer in the United States Navy with duty assignments ranging
from shipboard divisional leadership to executive assistant for the Naval
Surface Group Commander in Norfolk, Virginia. Mr. Edwards is a 1987 graduate of
the United States Naval Academy.

In August 2003 Mr. Edwards settled a civil enforcement action brought against
him by the Securities and Exchange Commission in U.S. District Court in Tampa,
Florida. The complaint alleged that Mr. Edwards, while serving as president of
SRI/Surgical Express, Inc. (SRI), a publicly traded Florida hospital supply
company, caused SRI to enter into two transactions that resulted in SRI
overstating its Fiscal 2001 third quarter revenue. Without admitting or denying
the allegations in the complaint, Mr. Edwards consented to the entry of a Final
Judgment permanently enjoining him from future violations of (or aiding and
abetting violations of) Sections 10(b), 13(b)(5), and 13(b)(2)(A) and (B) of the
Securities Exchange Act of 1934 and Exchange Act Rule 13b2-1. The Final Judgment
also imposed a $50,000 civil penalty.

DR. JAN EGBERTS - DIRECTOR - Dr. Egberts joined the Board of Directors on
February 2, 2004. From February 2001 to January 2004 Dr Egberts served as
Chairman of Molnlycke Healthcare, Inc. in Newtown, PA. In addition, he served
concurrently as President of the BARRIER division from February 2001 through
April 2002 and from April 2002 to January 2004 as Senior Vice President and
Global Marketing Director of Molnlycke Health Care in Goteborg Sweden. Prior to
Molnlycke, Dr. Egberts served as Vice President, Business and Market Development
World Wide for Johnson & Johnson, New Brunswick, NJ from November, 1996 to
February, 2001. At Johnson & Johnson, he served as a member of the Global
Management Board of the Johnson & Johnson Medical franchise where he was
responsible for licensing/acquisitions, equity investment and patent management.
Prior to Johnson & Johnson, Dr. Egberts held various positions with Merck & Co.
including Senior Director Marketing, Osteoporosis Business Group in West Point,
PA from February, 1994 to November, 1996; Partner in Egberts & Company, in
Amsterdam from September, 1993 to February, 1994 and various roles including
lastly Engagement Manager with McKinsey & Company in New York, Dusseldorf,
London and Amsterdam from September, 1989 to September, 1993. Finally, Dr
Egberts was the Project Manager with Cancer Biotechnology Research and
Development Organon / Bionetics Research, Inc. from September, 1995 to August,
1997.

Dr. Egberts received his medical degree from Erasmus University Medical School,
Rotterdam, the Netherlands in 1985. He pursued the final two years of his
Medical School at Harvard Medical School in Boston and served a Medical
Subinternship at John Hopkins Medical School in Baltimore. He received his MBA
from Stanford Graduate School of Business in 1989.


                                       40
<PAGE>

DR. STEPHAN RECHTSCHAFFEN - DIRECTOR -Dr. Rechtschaffen joined the Board of
Directors on February 2, 2004. He co-founded Omega Institute in 1977 and is the
present CEO and Chairman of the Board. He was the developer and director of
Foxhollow Wellness Spa in Lenox, MA from September 1987 through June 1989, and
director of the Rhinebeck Health Center in Rhinebeck, NY, from November 1983
through March1989. Dr. Rechtschaffen is the author of: TimeShifting; Creating
More Time to Enjoy Your Life, 1996, published in the United States by Doubleday,
and in England, Europe, Japan and Australia by Random House. He is co-author of
Vitality and Wellness, 1999, published by Dell. Dr. Rechtschaffen received his
medical degree in 1973 from New York Medical College in New York City. His
residency was at Harkness Community Hospital in San Francisco.

FAMILY RELATIONSHIPS

There are no family relationships between any of our company's directors or
executive officers.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16 of the Exchange Act requires Nanobac's directors and officers and
persons who own more than 10% of a registered class of Nanobac's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the SEC. Such persons are required by SEC regulations to furnish
Nanobac with copies of all Section 16(a) forms they file.

Specific due dates for such reports have been established by the Commission and
the Company is required to disclose any failure to file reports by such dates.
The Company believes that during the fiscal year ended December 31, 2004,
certain officers, directors and greater than ten percent stockholders have
failed to comply with applicable Section 16(a) filing requirements.

CODE OF ETHICS

We have not adopted a Code of Ethics as of April 13, 2005. The Board of
Directors is in the process of drafting a Code of Ethics specific to our
Company.


                                       41
<PAGE>

ITEM 11.          EXECUTIVE COMPENSATION

Particulars of compensation awarded to, earned by or paid to:

      (a)   our company's chief executive officer (the "CEO");

      (b)   each of our company's four most highly compensated executive
            officers who were serving as executive officers at the end of the
            most recently completed fiscal year and whose total salary and bonus
            exceeds $100,000 per year; and

      (c)   any additional individuals for whom disclosure would have been
            provided under

      (d)   but for the fact that the individual was not serving as an executive
            officer of our company at the end of the most recently completed
            fiscal year the Named Executive Officers are set out in the summary
            compensation table below.

<TABLE>
<CAPTION>
                                                        ANNUAL COMPENSATION            OTHER ANNUAL              ALL OTHER
NAME AND PRINCIPAL POSITION                YEAR         SALARY          BONUS          COMPENSATION          COMPENSATION (1)
                                           ----         ------          -----          ------------          ----------------
<S>                                       <C>          <C>             <C>            <C>                    <C>
John D. Stanton (2) (3)                    2004           $0              $0                $0                      $0
   Chairman of the Board;                  2003           $0              $0             $745,000                   $0
   Chief Executive Officer and             2002           $0              $0                $0                      $0

   Chief Financial Officer
Alex Edwards (4) (5)                       2004        $228,536           $0              $5,000                    $0
  Chief Executive Officer                  2003         $76,920           $0                $0                      $0
</TABLE>

----------
(1)   In accordance with SEC rules, other compensation in the form of
      perquisites and other personal benefits is omitted, such perquisites and
      other personal benefits constituted less than the lesser of $50,000 or 10%
      of the total annual salary and bonus for the Named Executive Officer for
      such year.

(2)   Mr. Stanton has served as the Chairman of the Board of Directors and Chief
      Financial Officer since March 2001 and served as Chief Executive Officer
      from March 2001 through January 2004 and July 2004 through present.

(3)   Other Annual Compensation for 2003 is the value of 59,433,890 shares of
      the Company's common stock or common stock equivalents issued to
      affiliates of Mr. Stanton in accordance with the American Enterprise.Com
      Corp. Bankruptcy Plan.

(4)   Mr. Edwards commenced employment with Nanobac in March 2003 and was named
      Chief Executive Officer in January 2004. He relinquished the Chief
      Executive Officer role in July 2004.

(5)   Other Annual Compensation is the value of 500,000 shares of the Company's
      common stock issued to Mr. Edwards in accordance with the American
      Enterprise.Com Corp. Bankruptcy Plan.


                                       42
<PAGE>

EMPLOYMENT AND COMPENSATION AGREEMENT

JOHN STANTON - Mr. Stanton does not have an employment or similar agreement with
Nanobac. To date, Mr. Stanton has received no salary or other compensation
except for the receipt of common and preferred shares in accordance with the
Company's bankruptcy plan.

ALEXANDER EDWARDS - Effective January 26, 2004, Mr. Edwards entered into a three
year employment agreement with Nanobac. The employment agreement was to expire
on the third anniversary of the effective date, and would automatically renew
for additional one year periods until either Nanobac or Mr. Edwards serves a 90
day notice of non-renewal. The employment agreement may be terminated by Nanobac
for good cause. Good cause is defined as including: (a) theft, embezzlement or
physical destruction with regard to material property of Nanobac; (b) continued
neglect by the employee in fulfilling his duties as Chief Executive Officer as a
result of habitual alcoholism, drug addiction or unauthorized absenteeism; (c)
appropriation of business opportunities of Nanobac for direct or personal gain;
(d) conviction or a plea of no contest for a felony or other criminal act for
which the possible penalties include a prison sentence of at least one year; (e)
a material breach of the restrictive covenants contained in the employment
agreement; or (f) default in a material respect of duties or willful and
malicious interference with Nanobac's operations.

Under the employment agreement, Mr. Edwards received a base salary of at least
$300,000 during the first year, $325,000 during the second year and $350,000
during the third year of the employment agreement. The Board of Directors may
increase, but not decrease, base compensation above these amounts. The
employment agreement also provided for annual bonus compensation as annually
approved by the Board of Directors or Compensation Committee. Mr. Edwards was
also eligible to receive stock options exercisable at fair market value on the
grant date, in such amounts and subject to such vesting provisions as determined
by the Board of Directors or Compensation Committee. Mr. Edwards will receive
all standard benefits made available to other executive employees of Nanobac.

In the event that Nanobac terminated Mr. Edwards's employment without good
cause, Mr. Edwards would receive a severance payment equal to 50% of base salary
payable under the remaining term of the employment agreement. If the termination
without good cause is within three years of a change of control of Nanobac, Mr.
Edwards would receive a severance payment equal to three times base salary
payable under the remaining term of the employment agreement plus an amount
equal to any bonus compensation paid in the previous year. The employment
agreement contains a non-competition covenant and non-solicitation covenants, in
respect to customers and employees of Nanobac, for a period of one year
following termination of employment.

On July 23, 2004, Mr. Edwards resigned as Chief Executive Officer and Mr.
Stanton assumed the role of Chief Executive Officer. Mr. Edwards continues to
serve as a member of the Board of Directors. As a result of his resignation as
Chief Executive Officer, Mr. Edwards voluntarily terminated the above employment
agreement and his salary was adjusted to $23,660 per year for the performance of
limited services to Nanobac.


                                       43
<PAGE>

DIRECTORS' COMPENSATION

Nanobac's directors, who are not also employees of Nanobac, receive no monetary
compensation. Each director is entitled to receive reimbursement of
out-of-pocket expenses for attending Board of Director or committee meetings.
Each independent Director is to receive options to acquire 1,500,000 shares of
Nanobac's common stock. The issuance of these options is contingent upon the
approval of a stock option plan by Nanobac's stockholders. If a stock option
plan is not approved, the Directors may receive 1,500,000 restricted shares of
Nanobac.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company has not formed a Compensation Committee, accordingly, the Board of
Directors acts in the Compensation Committee's capacity. The Board of Directors
is responsible for reviewing and recommending salaries, bonuses and other
compensation for Nanobac's executive officers.

Mr. Edwards is currently on the Board of Directors and was an employee of the
Company through April 1, 2005.

STOCK OPTIONS

We currently do not have a stock option plan.


                                       44
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS PRINCIPAL STOCKHOLDERS

The following table sets forth, as of April 13, 2005, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Beneficial ownership consists of a direct interest in
the shares of common stock, except as otherwise indicated.

<TABLE>
<CAPTION>
    -------------------------------------------------------------------------------------
                                              AMOUNT AND NATURE OF       PERCENTAGE
                                              BENEFICIAL OWNERSHIP      OF CLASS(1)
    -------------------------------------------------------------------------------------
    <S>                                       <C>                      <C>
    Gary S. Mezo (3)                               24,560,000              12.99%
    11407 Minaret Drive
    Tampa, FL 33626
    -------------------------------------------------------------------------------------
    John D. Stanton (4) (5)                        93,249,325              47.13%
    -------------------------------------------------------------------------------------
    Alexander Edwards III                           9,166,667              4.85%
    -------------------------------------------------------------------------------------
    Jan Egberts                                         -                  0.00%
    -------------------------------------------------------------------------------------
    Stephan Rechtschaffen                               -                  0.00%
    -------------------------------------------------------------------------------------
    DIRECTORS AND EXECUTIVE OFFICERS AS A
    GROUP (FOUR PERSONS)                           102,415,992             51.98%
    -------------------------------------------------------------------------------------
</TABLE>


----------
(1)   Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission and generally includes voting or
      investment power with respect to securities. For purposes of calculating
      the percentage beneficially owned, the number of shares deemed outstanding
      includes (i) 187,340,093 shares outstanding as April 13, 2005, and (ii)
      1,666,667 shares underlying a subscription agreement. Unless otherwise
      provided, the street address of each beneficial owner is c/o Nanobac
      Pharmaceuticals, Incorporated, 2727 W. Dr. Martin Luther King Blvd., Suite
      850, Tampa, Florida 33607.

(2)   Nanobac has relied upon information reported by the respective shareholder
      to the SEC pursuant to Section 13(d) or 13(g) of the Securities Exchange
      Act of 1934, as amended, as of April 12, 2005.


                                       45
<PAGE>

PRINCIPAL STOCKHOLDERS (CONTINUED)


(3)   Includes 9,760,000 shares held by Mr. Mezo's spouse, Nancy Schriewer, and
      160,000 shares held by Nancy Schriewer's father as to which he disclaims
      beneficial ownership.

(4)   Includes 74,442,658 shares held by the corporate entities of Escape
      Velocity of Tampa Bay, Inc., White Knight SST, Inc., Stone Enclosure,
      Inc., Wade Inc. of Tampa Bay and Denouement Strategies, Inc. in which Mr.
      Stanton owns a controlling ownership.

(5)   Includes 14,640,000 shares that an affiliate of Mr. Stanton has an option
      to purchase from Mr. Mezo.


CHANGES IN CONTROL

We are unaware of any contract or other arrangement the operation of which may
at a subsequent date result in a change of control of Nanobac.


                                       46
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS LOANS FROM ENTITY
AFFILIATE WITH THE COMPANY'S CHIEF EXECUTIVE OFFICER

Since emerging from bankruptcy in November 2002, Nanobac has financed its
activities primarily from advances from affiliates of the Company's CEO ("CEO
Affiliates"). As a result of the above advances, the amount due to CEO
Affiliates at September 30, 2004 was $7.5 million. On September 30, 2004, this
loan was converted into 29,999,964 shares of Nanobac's common stock.

From October 1, 2004 through April 13, 2005, an additional $1.9 million has been
advanced to Nanobac to fund current operations. During December 2004, $500,000
of this loan was converted into a subscription agreement as described below. The
remaining balance of approximately $1.4 million remains payable at April 13,
2005.

All loan amounts contemplated above are net of any periodic cash repayments.

SUBSCRIPTION AGREEMENT

During December 2004, the Company entered into a Subscription Agreement with an
entity affiliated with the Chief Executive Officer. Under the terms of the
Subscription Agreement, the entity converted a $500,000 loan to equity. The
Company is to receive additional cash of $500,000 within five days of
registering the common shares and warrants issued as a result of the
Subscription Agreements. The number of common shares to be issued is equal to
the amount received divided by the lesser of $.12 or 52% of the average closing
bid price of the Company's common stock on the five trading days immediately
prior to the date on which the registration statement is declared effective
("Fixed Price"). In addition, the Subscription Agreement provided for the
issuance of warrants equal to the number of common shares issued. Fifty percent
(50%) of the warrants are exercisable at 110% of the Fixed Price and the
remaining 50% of the warrants are exercisable at 150% of the Fixed Price.
Unexercised warrants will expire December 31, 2008.

LICENSE AGREEMENT

During February 2004, the Company entered into a licensing agreement with
Pegasus Worldwide, Inc. ("Pegasus") to market one of the Company's over the
counter products. The Company's Chief Executive Officer is a director of
Pegasus. Under the terms of the license agreement, the Company was due $75 for
each unit of product sold. For the year ended December 31, 2004, the Company
recognized revenue of $46,800. Effective June 1, 2004, this license agreement
was cancelled and the Company is selling this product directly to customers.


                                       47
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following summarizes the fees paid to Aidman, Piser & Company, P.A.,
Independent Auditors for the years ended December 31, 2004 and 2003:

                                                 2004                2003
                                                 ----                ----

      Audit                                     $45,000               $   -
      Audit-Related                              18,000                   -
      All Other                                       -                   -

                                          --------------      --------------
      Total Fees                                $63,000               $   -
                                          ==============      ==============

Audit-Related fees are attributable to quarterly review services connected with
our filing of our quarterly reports, Forms 10-QSB. Aidman, Piser & Company, P.A.
did not perform any professional services with respect to information systems
design and implementation for the years ended December 31, 2004 and 2003.

The Board of Directors has considered whether the Audit-Related services
provided by Aidman, Piser & Company, P.A. are compatible with maintaining that
firm's independence.

From and after the effective date of the SEC rule requiring Audit Committee
pre-approval of all audit and permissible non-audit services provided by
independent registered public accountants, the Board of Directors has approved
all audit and permissible non-audit services provided by Aidman, Piser &
Company, P.A.


                                       48
<PAGE>

                                     PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a)   The following documents are filed as part of this report:

      (1)   Financial Statements

The following Financial Statements are included herein:

                                                                           PAGE
                                                                          NUMBER
                                                                          ------
o     Report of Aidman Piser & Company, Independent Auditors                 F-1
o     Consolidated Balance Sheet at December 31, 2004                        F-2
o     Consolidated Statements of Operations for the years ended
        December 31, 2004 and 2003                                           F-3
o     Consolidated Statements of Stockholders' Equity  (Deficit)
       for the years ended December 31, 2004 and 2003                        F-4
o     Consolidated Statements of Cash Flows for the years ended
        December 31, 2004 and 2003                                           F-5
o     Notes to Consolidated Financial Statements                        F-6-F-22

      (2)   Financial Statement Schedules

            Financial Statement Schedules have been omitted because they are not
            applicable or are not required or the information required to be set
            forth therein is included in the consolidated financial statements
            or notes thereto.

(b)   Form 8-K

      (1)   Reports on Form 8-K filed during the quarter ended December 31,
            2004:

            None

(c)   Exhibits

      The following exhibits are filed as a part of, or are incorporated by
      reference into, this Report on Form 10-KSB:


                                       49
<PAGE>

                                  EXHIBIT INDEX
Exhibit
Number                                     Description
-------       ------------------------------------------------------------------

3.1           Restated Articles of Incorporation (Previously filed with the SEC
              as an exhibit to the Registrant's Annual Report on Form 10-KSB for
              the year ended December 31, 2003 and incorporated herein by
              reference)

3.2           By-Laws (Previously filed with the SEC as an exhibit to the
              Registrant's Annual Report on Form 10-KSB fore the year ended
              December 31, 2002 and incorporated herein by reference)

10.1          First Amended Plan of Reorganization of American Enterprise.com
              Corp. (Previously filed with the SEC as an exhibit to the
              Registrant's Current Report on Form 8-K dated December 10, 2002,
              and incorporated herein by reference)

10.2          Acquisition Agreement dated December 6, 2002, between American
              Enterprise Corporation and HealthCentrics, Inc. and its
              shareholders (Previously filed with the SEC as an exhibit to the
              Registrant's Current Report on Form 8-K dated December 13, 2002,
              and incorporated herein by reference)

10.4          Agreement and Plan of Reorganization dated June 1, 2003 between
              Nanobac Pharmaceuticals, Incorporated and NanobacLabs
              Pharmaceuticals, Inc. (Previously filed with the SEC as an exhibit
              to the Registrant's Annual Report on Form 10-KSB for the year
              ended December 31, 2003 and incorporated herein by reference)

10.5          Share Purchase Agreement dated September 25, 2002 between
              NanobacLabs, L.L.C. and selected shareholders of Nanobac OY
              (Previously filed with the SEC as an exhibit to the Registrant's
              Current Report on Form 8-K dated November 26, 2003, and
              incorporated herein by reference)

10.6          Convertible Promissory Note Loans Purchase Agreement dated
              September 25, 2002 between NanobacLabs, L.L.C. and selected
              shareholders of Nanobac OY (Previously filed with the SEC as an
              exhibit to the Registrant's Current Report on Form 8-K dated
              November 26, 2003, and incorporated herein by reference)

10.7          Closing Agreement dated November 5, 2003 between NanobacLabs,
              L.L.C. and selected shareholders of Nanobac OY (Previously filed
              with the SEC as an exhibit to the Registrant's Current Report on
              Form 8-K dated November 26, 2003, and incorporated herein by
              reference)


                                       50
<PAGE>

10.9          Lease Agreement dated April 17, 2002 between NanobacLabs, L.L.C.
              and MLK-Tampa Associates, LLC regarding 5,593 square feet of
              office space located at 2727 W. Martin Luther King Blvd. - Suite
              850, Tampa, Florida and First Amendment to Lease dated September
              1, 2002 between NanobacLabs, L.L.C. and MLK-Tampa Associates, LLC
              regarding 2,121 square feet of office space located at 2727 W.
              Martin Luther King Blvd. - Suite 101, Tampa, Florida

10.10         Loan Agreement dated December 31, 2003 between Nanobac
              Pharmaceuticals, Incorporated and Escape Velocity, Inc.
              (Previously filed with the SEC as an exhibit to the Registrant's
              Annual Report on Form 10-KSB for the year ended December 31, 2003)

10.11         Employment by and between Nanobac Pharmaceuticals, Incorporated
              and Alex H. Edwards III dated January 26, 2004 (Previously filed
              with the SEC as an exhibit to the Registrant's Annual Report on
              Form 10-KSB for the year ended December 31, 2003)

10.12         Sublease Agreement dated May 18, 2004 between NanobacLabs, L.L.C.
              and Tampa Bay Surgery Center Associates, Ltd regarding the
              sublease of 2,121 square feet of office space located at 2727 W.
              Martin Luther King Blvd. - Suite 101, Tampa, Florida

10.13         Share Purchase Agreement dated March 30, 2004 between Nanobac
              Pharmaceuticals, Incorporated and Escape Velocity of Tampa Bay,
              Incorporated for the sale of HealthCentrics, Inc. (Previously
              filed with the SEC as an exhibit to the Registrant's Current
              Report on Form 8-K dated March 30, 2004, and incorporated herein
              by reference)

10.14         Executive Employment Agreement between Nanobac Pharmaceuticals,
              Incorporated, and E. Olavi Kajander, MD, PhD, an individual dated
              January 15, 2004 (Previously filed with the SEC as an exhibit to
              the Registrant's Current Report on Form 8-K dated March 31, 2004,
              and incorporated herein by reference)

10.15         Executive Employment Agreement between Nanobac Pharmaceuticals,
              Incorporated and Neva Ciftcioglu, PhD, an individual dated March
              31, 2004 (Previously filed with the SEC as an exhibit to the
              Registrant's Current Report on Form 8-K dated March 31, 2004, and
              incorporated herein by reference)

10.16         Nonreimbursable Space Act Agreement between The National
              Aeronautics and Space Administration Lyndon B. Johnson Space
              Center and Nanobac Pharmaceuticals, Incorporated (Previously filed
              with the SEC as an exhibit to the Registrant's Current Report on
              Form 8-K dated September 13, 2004 and incorporated herein by
              reference)

10.17         Debt Cancellation Agreement dated August 30, 2004 between Nanobac
              Pharmaceuticals, Incorporated and E. Olavi Kajander.


                                       51
<PAGE>

10.18         Amendment to Executive Employment Agreement dated August 30, 2004
              between Nanobac Pharmaceuticals, Incorporated and E. Olavi
              Kajander.

10.19         Stock Purchase Agreement dated August 30, 2004 between Nanobac
              Pharmaceuticals, Incorporated and E. Olavi Kajander.

10.20         Amendment to Executive Employment Agreement dated September 10,
              2004 between Nanobac Pharmaceuticals, Incorporated and Neva
              Ciftcioglu

10.21         Subscription Agreement, Registration Rights Agreement and Form of
              Warrant dated August 13, 2004 between Nanobac Pharmaceuticals,
              Incorporated and The Nutmeg Group, LLC (serves as form of
              agreement for similar subscription agreements)

10.22         Subscription Agreement, Registration Rights Agreement and Form of
              Warrant dated September 3, 2004 between Nanobac Pharmaceuticals,
              Incorporated and Jaytern Associates, Inc.

10.23         Debt Cancellation Agreement dated September 20, 2004 between
              Nanobac Pharmaceutical, Incorporated and Escape Velocity, Inc.

10.24         Debt Cancellation Agreement dated October 18, 2004 between Nanobac
              Pharmaceutical, Incorporated and Benedict Maniscalco

10.25         Debt Cancellation Agreement dated December 14, 2004 between
              Nanobac Pharmaceutical, Incorporated and MacFarlane Ferguson &
              McMullen

16.1          Baumann, Raymondo & Company, P.A. letter to the Securities and
              Exchange Commission dated February 3, 2004 (Previously filed with
              the SEC as an exhibit to the Registrant's Current Report on Form
              8-K dated January 30, 2004, and incorporated herein by reference)

21.1          List of Subsidiaries

23.1          Consent of Aidman, Piser & Company, P.A.

31.1          Certification to Section 302 of the Sarbanes-Oxley Act of 2002 -
              Chief Executive Officer

31.2          Certification to Section 302 of the Sarbanes-Oxley Act of 2002 -
              Chief Financial Officer

32.1          Certification pursuant to 18 U.S.C. Section 1350, as adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief
              Executive Officer

32.2          Certification pursuant to 18 U.S.C. Section 1350, as adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief
              Financial Officer


                                       52
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned; thereunto duly authorized, on this 13th day of April,
2005.

                                                    NANOBAC PHARMACEUTICALS,
                                                    INCORPORATED

                                                    By: /s/ John D. Stanton
                                                      --------------------------
                                                      John D. Stanton
                                                      Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities indicated on April 13, 2005.

           SIGNATURE                                TITLE

   /s/    John D. Stanton           Chairman of the Board of Directors
-------------------------------     Chief Executive Officer and Chief Financial
          John D. Stanton           Officer Principal Executive, Financial and
                                    Accounting (Officer)


/s/    Alexander Edwards III        Director
-------------------------------
       Alexander Edwards III

     /s/   Jan Egberts              Director
-------------------------------
         Jan Egberts, M.D.

/s/    Stephan Rechtschaffen        Director
-------------------------------
    Stephan Rechtschaffen, M.D.



                                       53
<PAGE>

                          Independent Auditors' Report

Board of Directors
Nanobac Pharmaceuticals, Incorporated and Subsidiaries
Tampa, Florida

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Nanobac
Pharmaceuticals,   Incorporated  and  Subsidiaries  (F/K/A  American  Enterprise
Corporation)  (the  "Company"),  as  of  December  31,  2004,  and  the  related
consolidated statements of operations,  stockholders' deficit and cash flows for
the two years then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audit in  accordance  with  standards of the Public  Accounting
Oversight Board (United States of America). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Nanobac
Pharmaceuticals,  Incorporated and  Subsidiaries,  at December 31, 2004, and the
consolidated  results of their operations and their cash flows for the two years
then ended in conformity with accounting  principles  generally  accepted in the
United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
has working capital and net capital deficiencies and is dependent upon continued
financing  from  stockholders  and  outside   investors,   all  of  which  raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these  matters are also  described  in Note 1. The  financial
statements do not include any adjustments  that might result from the outcome of
this  uncertainty.  /s/  Aidman,  Piser & Company,  P.A.  April 12,  2005 Tampa,
Florida


                                      F-1
<PAGE>

<TABLE>
<CAPTION>
              NANOBAC PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                                                        December 31,
                                                                            2004
                                                                        ------------
<S>                                                                     <C>
                                     ASSETS
CURRENT ASSETS
     Cash                                                               $     17,908
     Account receivable                                                        3,395
     Inventory                                                                70,571
     Prepaid expenses                                                         23,649
                                                                        ------------
        Total current assets                                                 115,523
                                                                        ------------

FIXED ASSETS, less accumulated depreciation
        of $84,143                                                           124,995

OTHER ASSETS
     Security deposits                                                        68,054
     Intangible assets, less accumulated amortization
        of $832,701                                                        5,760,342
     Goodwill                                                              3,615,393
                                                                        ------------
        TOTAL OTHER ASSETS                                                 9,443,789
                                                                        ------------
            TOTAL ASSETS                                                $  9,684,307
                                                                        ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                                   $    645,491
     Accrued compensation                                                     50,611
     Accrued expenses                                                        335,861
     Short-term note payable                                                  62,379
     Other liabilities                                                        16,423
     Stockholder loans                                                       194,068
                                                                        ------------
        TOTAL CURRENT LIABILITIES                                          1,304,833

LONG-TERM LIABILITIES
     Accrued compensation                                                    350,000
     Stock settlement liability                                            1,918,630
                                                                        ------------
        TOTAL LIABILITIES                                                  3,573,463

COMMITMENTS AND CONTINGENCY (NOTES 9, 11 AND 13)                                  --

STOCKHOLDERS' EQUITY
     Common stock, no par value, 250,000,000 shares authorized,
        187,240,093 shares issued and outstanding                         16,296,550
     Preferred stock, no par value, 1,000,000 shares authorized,
        no shares issued and outstanding                                          --
     Additional paid-in capital                                            3,539,328
     Accumulated deficit                                                 (13,049,568)
     Accumulated other comprehensive loss                                   (675,466)
                                                                        ------------
        TOTAL STOCKHOLDERS' EQUITY                                         6,110,844
                                                                        ------------
            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $  9,684,307
                                                                        ============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                      F-2
<PAGE>

              NANOBAC PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                  Year             Year
                                                 ended             ended
                                             December 31,      December 31,
                                                 2004              2003
                                             -------------    -------------

REVENUE                                      $     358,361    $     482,815

COST OF REVENUE                                    100,470          333,122
                                             -------------    -------------
GROSS PROFIT                                       257,891          149,693
                                             -------------    -------------
OPERATING EXPENSES
     Sales, general and administrative           4,765,841        2,128,375
     Research and development                    2,375,363          540,426
     Depreciation and amortization                 717,070          181,103
                                             -------------    -------------
        TOTAL OPERATING EXPENSES                 7,858,274        2,849,904
                                             -------------    -------------
OPERATING LOSS                                  (7,600,383)      (2,700,211)

OTHER INCOME (EXPENSES)
     Interest expense                             (248,053)         (42,934)
     Foreign currency exchange gain                 32,021               --
     Other, net                                     (1,095)         (17,988)
                                             -------------    -------------
LOSS FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                       (7,817,510)      (2,761,133)

PROVISION FOR INCOME TAXES                              --               --
                                             -------------    -------------

LOSS FROM CONTINUING OPERATIONS                 (7,817,510)      (2,761,133)

DISCONTINUED OPERATIONS:
     Loss from discontinued operations (no
        applicable income taxes)                   (57,268)        (938,358)
                                             -------------    -------------
NET LOSS                                     $  (7,874,778)   $  (3,699,491)
                                             =============    =============

LOSS FROM CONTINUING OPERATIONS
     PER COMMON SHARE
     Basic and Diluted                       $       (0.05)   $       (0.04)
                                             =============    =============
NET LOSS PER COMMON SHARE
     Basic and Diluted                       $       (0.05)   $       (0.05)
                                             =============    =============

WEIGHTED AVERAGE NUMBER OF
     COMMON SHARES OUTSTANDING
     Basic and Diluted                         152,903,084       67,489,524
                                             =============    =============

   The accompanying notes are an integral part of these financial statements

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                    NANOBAC PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                        FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004


                                  COMMON          STOCK      PREFERRED     STOCK     ADDITIONAL    DUE FROM
                               ----------------------------- ----------- -----------   PAID-IN      OPTION      ACCUMULATED
                                  SHARES          VALUE        SHARES      VALUE       CAPITAL     EXERCISE       DEFICIT
                               -------------- -------------- ----------- ----------- ------------ ------------ --------------
<S>                             <C>           <C>            <C>         <C>         <C>          <C>          <C>
December 31, 2002 Balance         19,982,965      $1,134,377    368,815  $        -  $          - $         -     ($1,475,299)

Conversion of  preferred stock
    to common stock               16,268,430               -   (368,815)          -             -           -

Stock issued in connection
    with bankruptcy               23,335,445         399,516    794,569     350,484             -           -               -

Stock issues for services             50,000          30,175          -           -             -           -               -

Conversion of liabilities to
      shares of common stock       3,644,000         728,800          -           -             -           -               -

Sale of common stock               1,690,000         548,000          -           -             -           -               -

Common stock issued in
      acquisition of NanobacLabs
      Pharmaceuticals, Inc.       34,998,000       1,392,920          -           -             -    (200,000)              -

Comprehensive loss:
     Net loss                              -               -          -           -             -           -      (3,699,491)
     Foreign currency translation
          adjustment                       -               -          -           -             -           -               -

     Comprehensive loss
                               -------------- -------------- ----------- ----------- ------------ ------------ ---------------
BALANCE, DECEMBER 31, 2003        99,968,840     $ 4,233,788    794,569  $  350,484  $          - $  (200,000)   $ (5,174,790)
                               -------------- -------------- ----------- ----------- ------------ ------------ ---------------
Conversion of  preferred stock
       to common stock            35,048,445         350,484   (794,569)   (350,484)            -           -               -

Cash received from
      option exercise                      -               -          -           -             -     200,000               -

Stock issued in connection
    with bankruptcy                4,500,000       2,562,750          -           -             -           -               -

Common stock issued in
      acquisition of Nanobac OY    5,000,000       4,267,500          -           -             -           -               -

Capital contribution
      associated with sale
      subsidiary to affiliate              -               -          -           -       749,327           -               -

Conversion of liabilities to
      shares of common stock      32,097,808       4,882,028          -           -     2,887,501           -               -

Sale of common stock              10,625,000               -          -           -       (97,500)          -               -

Comprehensive loss:
  Net loss                                 -               -          -           -             -           -      (7,874,778)
  Foreign currency translation
       adjustment                          -               -          -           -             -           -               -
  Derivative loss

  Comprehensive loss

                               -------------- -------------- ----------- ----------- ------------ ------------ ---------------
Balance, December 31, 2004       187,240,093    $ 16,296,550          -  $        -  $  3,539,328 $         -   $ (13,049,568)
                               ============== ============== =========== =========== ============ ============ ===============

<CAPTION>
                                                               ACCUMULATED
                                                  OTHER           OTHER
                                               COMPREHENSIVE  COMPREHENSIVE
                                                   LOSS            LOSS          TOTAL
                                              --------------- --------------- -------------
<S>                                           <C>             <C>             <C>
December 31, 2002 Balance                      $           -   $           -     ($340,922)

Conversion of  preferred stock
    to common stock                                                                      0

Stock issued in connection
    with bankruptcy                                        -               -       750,000

Stock issues for services                                  -               -        30,175

Conversion of liabilities to
      shares of common stock                               -               -       728,800

Sale of common stock                                       -               -       548,000

Common stock issued in
      acquisition of NanobacLabs
      Pharmaceuticals, Inc.                                -               -     1,192,920

Comprehensive loss:
     Net loss                                     (3,699,491)              -    (3,699,491)
     Foreign currency translation
          adjustment                                 (15,638)        (15,638)      (15,638)
                                               --------------
     Comprehensive loss                           (3,715,129)
                                               ==============
                                                              --------------- -------------
BALANCE, DECEMBER 31, 2003                                     $     (15,638) $   (806,156)
                                                              --------------- -------------
Conversion of  preferred stock
       to common stock                                     -               -             -

Cash received from
      option exercise                                      -               -       200,000

Stock issued in connection
    with bankruptcy                                        -               -     2,562,750

Common stock issued in
      acquisition of Nanobac OY                            -               -     4,267,500

Capital contribution
      associated with sale
      subsidiary to affiliate                              -               -       749,327

Conversion of liabilities to
      shares of common stock                               -               -     7,769,529

Sale of common stock                                       -               -       (97,500)

Comprehensive loss:
  Net loss                                        (7,874,778)              -    (7,874,778)
  Foreign currency translation
       adjustment                                    (16,198)        (16,198)      (16,198)
  Derivative loss                                   (643,630)       (643,630)     (643,630)
                                               --------------
  Comprehensive loss                              (8,534,606)
                                               ==============
                                                              --------------- -------------
Balance, December 31, 2004                                     $    (675,466) $  6,110,844
                                                              =============== =============

        The accompanying notes are an integral part of these financial statements
</TABLE>


                                            F-4
<PAGE>

<TABLE>
<CAPTION>
                        NANOBAC PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                              Year           Year
                                                                              ended          ended
                                                                           December 31,   December 31,
                                                                               2004           2003
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss                                                                   $(7,874,778)   $(3,699,491)
Adjustments to reconcile net loss to cash
  flows from operating activities:
    Depreciation and amortization                                              717,070        181,103
    Loss on disposition of assets                                                   --          7,659
    Charges from common stock issuances                                      2,562,750        780,175
    Minority interest in net loss                                                   --         (3,545)
    Interest expense added to stockholder loan                                 237,958             --
    Net (increase) decrease in assets:
       Accounts receivable                                                       2,370          9,125
       Inventory                                                               (54,360)        67,286
       Other assets                                                             (8,769)        78,383
    Net increase (decrease) in liabilities:
       Accounts payable                                                        530,196        278,107
       Accrued compensation                                                    464,768         46,658
       Accrued expenses                                                         10,628         99,218
       Deferred revenue                                                         16,423             --
                                                                           -----------    -----------
    Total adjustments                                                        4,479,034      1,544,169
                                                                           -----------    -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES                                    (3,395,744)    (2,155,322)
                                                                           -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of fixed assets                                                (36,765)       (18,157)
    Security deposits                                                            2,500         (2,932)
    Acquisition of subsidiary, net of cash received                               (901)       (81,022)
    Cash received from exercise of stock option in subsidiary                  200,000        300,000
                                                                           -----------    -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES                                       164,834        197,889
                                                                           -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Advances from line of credit, net                                               --        (36,453)
    Proceeds from issuance of common stock and
       stock subscription agreements, net of expenses                        1,177,500        548,000
    Proceeds from stockholder loans, net                                     2,066,091      1,997,467
    Payment of notes payable, net                                              (27,621)      (486,188)
                                                                           -----------    -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES                                     3,215,970      2,022,826
                                                                           -----------    -----------
EFFECT OF EXCHANGE RATE CHANGES                                                (16,907)       (15,638)
                                                                           -----------    -----------
       Net change in cash                                                      (31,847)        49,755
    Cash balance, beginning of period                                           49,755             --
                                                                           -----------    -----------
    CASH BALANCE, END OF PERIOD                                            $    17,908    $    49,755
                                                                           ===========    ===========
Supplemental disclosures of cash flow information:
    Cash paid for interest expense                                         $    10,095    $    42,934

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
    Common stock issued in acquisition                                     $ 4,267,500    $ 1,392,920
    Common stock issued for the conversion of debt                         $ 7,769,529    $   728,800
    Stockholder loan used for acquisition                                  $        --    $ 4,071,342
    Capital contribution associated with sale of subsidiary to affiliate
       Reduction in stockholder loan                                       $   250,000    $        --
       Assumption of accounts payable and accrued expenses                 $   499,327    $        --


              The accompanying notes are an integral part of these financial statements
</TABLE>


                                                 F-5
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

NATURE OF BUSINESS

Nanobac Pharmaceuticals, Incorporated and subsidiaries, ("Nanobac", the
"Company", or "NNBP") trades under the symbol "NNBP."

NNBP's primary business is the study and development of therapeutic and
diagnostic technologies related to nanobacterium sanguineum ("Nanobacteria").
Nanobacteria are believed to be small, slowly growing nano-particles that can be
found in human blood, kidney stones and arterial wall plaques.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation. On June 4, 2003, the Company
acquired a majority interest in NanobacLabs Pharmaceuticals, Inc. and on
November 11, 2003, the Company acquired 65% of Nanobac OY (see Note 2,
"Acquisitions"). In accordance with Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations", NNBP has included the results of
operations of LABS from June 4, 2003 and the results of operations of OY from
November 11, 2003.

Where losses applicable to the minority interest in a subsidiary exceed the
minority interest in the equity capital of the subsidiary, such excess and any
further losses applicable to the minority interest shall be charged against the
majority interest, as there is no obligation of the minority interest to make
good such losses.

LIQUIDITY AND MANAGEMENT PLANS

The accompanying financial statements have been prepared assuming that NNBP will
continue as a going concern. The Company has incurred recurring losses and has a
working capital deficiency at December 31, 2004. The Company is dependent on the
continued financing from outside investors including additional shareholder
loans. All of these matters raise substantial doubt about the ability of the
Company to continue as a going concern. Management believes that NNBP will need
to raise additional capital in order to launch new clinical trials, fund
research and development for new treatment areas, and general working capital
requirements. Capital may be raised through further sales of equity securities,
which may result in dilution of the position of current shareholders. At this
time, there are no firm commitments to invest in NNBP. If NNBP is unable to
obtain such financing, the business might not attain profitability.

There can be no assurances that NNBP will be successful in obtaining debt or
equity financing in order to achieve its financial objectives and continue as a
going concern. The financial statements do not include any adjustments to the
carrying amount of assets and the amounts and classifications of liabilities
that might result from the outcome of this uncertainty.

REVENUE RECOGNITION

Revenue is recognized when the Company's products are shipped and title has
passed or when diagnostic results are provided to the customer. Revenue is
recorded net of reserves for estimated discounts and incentives.


                                      F-6
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
(CONTINUED)

FINANCIAL INSTRUMENTS

The carrying value of NNBP's financial instruments, including cash, accounts
receivable, accounts payable, short-term note payable and stockholder loans
approximate their fair market values.

INVENTORY

Inventory is stated at the lower of cost or market. Cost is determined in a
manner which approximates the first-in, first-out (FIFO) method. Inventory
consists of raw materials for currently marketed products and materials and
processing costs for antibodies and antigens used in our Finland laboratory.
Inventory is shown net of applicable reserves and allowances. Shipping costs are
expensed as incurred and are included in cost of revenue.

FIXED ASSETS

Fixed assets consist of furniture, fixtures, computers and lab equipment and are
recorded at cost. Fixed assets are depreciated using the straight-line method
over the estimated useful lives of three to seven years.

INTANGIBLE ASSETS AND GOODWILL

Intangible assets are recorded at cost, less accumulated amortization.
Intangible assets consist of acquired technology rights obtained in the
acquisition of LABS and OY (see Note 2). Amortization of intangible assets is
provided over the following estimated useful lives on a straight-line basis:

         Patents                                     12 years
         Product rights                                5 years

In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142"), and Statement of
Financial Accounting Standards, No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), the Company reviews its
non-amortizable long-lived assets, including intangible assets and goodwill for
impairment annually, or sooner whenever events or changes in circumstances
indicate the carrying amounts of such assets may not be recoverable. Other
depreciable or amortizable assets are reviewed when indications of impairment
exist. Upon such an occurrence, recoverability of these assets is determined as
follows. For long-lived assets that are held for use, the Company compares the
forecasted undiscounted net cash flows to the carrying amount. If it is
determined that the long-lived asset will be unable to recover its carrying
amount, then it is written down to fair value. For long-lived assets held for
sale, assets are written down to fair value. Fair value is determined based on
discounted cash flows, appraised values for management's estimates, depending
upon the nature or the assets. Impairment within goodwill is tested using a two
step method. The first step is to compare the fair value of the reporting unit
to its book value, including goodwill. If the fair value of the unit is less
than its book value, the Company than determines the implied fair value of
goodwill by deducting the fair value of the reporting unit's net assets from the
fair value of the reporting unit. If the book value of goodwill is greater than
its implied fair value, the Company writes down goodwill to its implied fair
value. The Company's goodwill and intangible assets relate to the acquisition of
NanobacLabs Pharmaceuticals, Inc. and Nanobac OY. Goodwill and intangible asset
amortization is not deductible for income tax purposes.


                                      F-7
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
(CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

NET LOSS PER SHARE

Net loss per share represents the net loss attributable to common stockholders
divided by the weighted average number of common shares outstanding during the
period. The effect of incremental shares from common stock equivalents is not
included in the calculation of net loss per share as the inclusion of such
common stock equivalents would be anti-dilutive. Accordingly, fully dilutive
shares outstanding equal basic shares outstanding as of December 31, 2004 and
2003 which is summarized as follows:
                                              Year ended December 31,
                                            ----------------------------
                                                2004            2003
                                            ------------    ------------
Weighted average common stock outstanding    152,903,084      67,489,524
Warrants:
  Weighted average shares under
     warrants at end of period                 7,469,406              --

  Treasury stock which could be purchased     (2,146,285)             --
                                            ------------    ------------

Weighted average common stock equivalents      5,323,121              --
Reduction of common stock equivalents
  as inclusion would be anti-dilutive         (5,323,121)             --

Shares used in diluted earnings per share
  calculation                               ------------    ------------
                                             152,903,084      67,489,524
                                            ============    ============

Net loss per share for the years ended December 31, 2004 and 2003 is summarized
as follows:

                                                   Year ended December 31,
                                                   --------------------
                                                     2004        2003
                                                   --------    --------
Loss from continuing operations per common share   ($  0.05)  ($   0.04)

Discontinued operations per common share               0.00       (0.01)
                                                   --------    --------
Net loss per common share                          ($  0.05)  ($   0.05)
                                                   ========    ========


                                      F-8
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
(CONTINUED)

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss consists of derivative loss from derivative
financial instruments and foreign currency translation adjustment related to our
Finland operations. Accumulated other comprehensive income has no applicable
income tax.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company accounts for derivative financial instruments indexed to and
potentially settled in, its own stock in accordance with Emerging Issues Task
Force 00-19, which provides that if the number of shares deliverable in a
transaction be indeterminable, that said shares be presented as a liability in
the balance sheet. Further, the liability is to be measured at fair value until
such time as the obligation is settled. The shares issued in connection with the
2004 Subscription Agreement transactions discussed in Note 10 are derivative
transactions and as such have been presented in the accompanying balance sheets
as liabilities and other comprehensive income (loss). The other comprehensive
income (loss) component represents the difference in the share value as issued
and the value of said shares at the balance sheet date based on the trading
value of the stock at December 31, 2004. At settlement, other comprehensive
income (loss) will be charged to retained earnings as a constructive dividend.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are comprised of the following types of costs
incurred in performing R&D activities: salaries and benefits, occupancy costs of
our Finland laboratory, professional fees, clinical trial and related clinical
manufacturing costs. Research and development costs are expensed as incurred.

INCOME TAXES

NNBP records its federal and state tax liability in accordance with Financial
Accounting Standards Board Statement No. 109 "Accounting for Income Taxes". The
deferred taxes are recorded for temporary differences between the recognition of
income and expenses for tax and financial reporting purposes, using current tax
rates. Deferred assets and liabilities represent the future tax consequences of
those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled.


                                      F-9
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
(CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The statement
amends Accounting Research Bulletin ("ARB") No. 43, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. ARB No. 43 previously stated that these
costs must be "so abnormal as to require treatment as current-period charges."
SFAS No. 151 requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this statement requires that allocation of fixed production overhead to the
costs of conversion be based on the normal capacity of the production
facilities. The statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005, with earlier application permitted
for fiscal years beginning after the issue date of the statement. The adoption
of SFAS No. 151 is not expected to have any significant impact on the Company's
current financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- An Amendment of APB Opinion No. 29." APB Opinion No. 29, "Accounting For
Nonmonetary Transactions," is based on the opinion that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged. SFAS
No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets whose results are not expected to
significantly change the future cash flows of the entity. The adoption of SFAS
No. 153 is not expected to have any impact on the Company's current financial
condition or results of operations.

In December 2004, the FASB revised its SFAS No. 123 ("SFAS No. 123R"),
"Accounting for Stock Based Compensation." The revision establishes standards
for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, particularly transactions in which an entity
obtains employee services in share-based payment transactions. The revised
statement requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value of the award. That cost is to be recognized over the period during
which the employee is required to provide service in exchange for the award.
Changes in fair value during the requisite service period are to be recognized
as compensation cost over that period. In addition, the revised statement amends
SFAS No. 95, "Statement of Cash Flows," to require that excess tax benefits be
reported as a financing cash flow rather than as a reduction of taxes paid. The
provisions of the revised statement are effective for financial statements
issued for the first interim or annual reporting period beginning after June 15,
2005, with early adoption encouraged. The Company is currently evaluating the
impact that this statement will have on its financial condition or results of
operations.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation.


                                      F-10
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

2. ACQUISITIONS

NANOBACLABS PHARMACEUTICALS, INC.

On June 4, 2003, NNBP acquired approximately 74.4% of LABS in exchange for
24,400,000 restricted shares of NNBP. From June 5, 2003 through December 31,
2003, NNBP acquired the remaining 25.6% of LABS from various stockholders in
exchange for 6,598,000 restricted shares and additional consideration.

The total consideration for LABS was approximately $5.5 million, which included
the fair value of NNBP common stock issued, as well as direct transaction costs.
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed as of the acquisition date:

Current assets                   $   895,058
Investment in OY                     693,778
Fixed assets                         113,651
Identifiable intangible assets     1,350,000
Goodwill                           3,615,393
Other assets                          62,500
Current liabilities                 (768,280)
Note payable                        (486,188)

                                 -----------
                                 $ 5,475,912
                                 ===========

Acquired identifiable intangible assets consist of product rights for the
treatment of Nanobacteria. The allocation of the purchase price was based, in
part, on third-party valuations of the fair values of identifiable intangible
assets. Amortization of this asset commenced as of the acquisition date.


                                      F-11
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

2. ACQUISITIONS (CONTINUED)

NANOBAC OY

Nanobac OY is a Finnish company that performs similar research to that of the
Company in nanobacteria infection. On September 25, 2002, LABS entered into an
agreement to purchase 27% of Nanobac OY stock from three Finnish entities for
11,430 Euros. A separate agreement also required LABS to acquire convertible
promissory notes in Nanobac OY in the amount of 686,000 Euros plus interest. On
November 11, 2003, NNBP completed the acquisition of Nanobac OY when the final
payment was made and the Company exercised the conversion option in the
convertible promissory notes. Upon the conclusion of this transaction, the
Company owned 65% of OY.

During January through March 2004, NNBP acquired the remaining 35% of Nanobac OY
from Dr. Kajander and Dr. Ciftcioglu ("OY Minority Shareholders"). The purchase
price was (a) 5 million shares of NNBP's common stock, (b) 5 million warrants
convertible into NNBP's common stock at $.005 per share and (c) cash
consideration of 15,000 Euros. Total consideration to the OY Minority
Stockholders is valued at $4.3 million. The total consideration to date for OY
is $5.1 million, which included cash payments (made before and after the
acquisition of LABS), the fair value of NNBP common stock issued, as well as
direct transaction costs. The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed as of the acquisition
date:

Current assets                   $    37,534
Fixed assets                          29,286
Identifiable intangible assets     5,243,048
Other assets                           4,731
Current liabilities                  (11,884)
Advances from Nanobac               (228,119)

                                 -----------
                                 $ 5,074,596
                                 ===========

Acquired identifiable intangible assets consist of patents for the detection and
treatment of Nanobacteria. The allocation of the purchase price was based, in
part, on third-party valuations of the fair values of identifiable intangible
assets. Amortization of this asset commenced as of the acquisition date. In
addition, as part of the above agreement, the OY Minority Shareholders agreed to
employment agreements with NNBP. These agreements included $500,000 of signing
bonuses of which $150,000 was paid in 2004 and the remaining $350,000 is payable
two years from the agreement dates (January and March 2006) and is included in
long-term liabilities.


                                      F-12
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

2. ACQUISITIONS (CONTINUED)

The following unaudited table compares NNBP's reported operating results to pro
forma information prepared on the basis that the above acquisitions had taken
place at January 1, 2003. In management's opinion, the unaudited pro forma
combined results of operations are not indicative of the actual results that
would have occurred had the acquisitions been consummated at the beginning of
2003 or 2004 or of future operations of the combined companies under the
ownership and management of NNBP.

                                         Year ended December 31,
                                 -------------------------------------
                                  2004                    2003
                                  ----                    ----
As Reported
     Revenue                      $    358,361            $    482,815
     Net loss                     $ (7,874,778)           $ (3,699,491)
     Basic loss per share         $      (0.05)           $      (0.05)
     Diluted loss per share       $      (0.05)           $      (0.05)

Proforma
     Revenue                      $    358,361            $  1,183,210
     Net loss                     $ (7,911,923)           $ (5,518,739)
     Basic loss per share         $      (0.05)           $      (0.06)
     Diluted loss per share       $      (0.05)           $      (0.06)


3. DISCONTINUED OPERATIONS

During October 2003, NNBP decided to divest its HealthCentrics business unit to
focus exclusively on its nanobacteria business unit. NNBP was unsuccessful in
finding a non-affiliated buyer for this business unit. During March 2004, this
business unit was sold to an affiliate of the current CEO for consideration of
$250,000 (a reduction in amounts otherwise owed to the affiliate). NNBP's gain
on disposal was $749,326, which is accounted for as a capital contribution given
the related party nature of the arrangement. Summary operating results for the
discontinued operations for the years ended December 31, 2004 and 2003 are as
follows:

                                                2004         2003
                                                ----         ----

            Revenue                           $  5,301    $  19,970
                                              ========    =========

            Loss before income taxes          ($57,268)  ($ 938,358)
            Provision for income taxes              --           --
                                              --------    ---------
            Net loss                          ($57,268)  ($ 938,358)
                                              ========    =========


                                      F-13
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

4. FIXED ASSETS

Fixed assets at December 31, 2004 are summarized as follows:

                                                                   Dec 2004

Computer equipment                                                 $  44,683
Computer software                                                     17,982
Lab equipment                                                         49,008
Office equipment                                                      20,769
Furniture and fixtures                                                21,729
Leasehold improvements                                                54,967

                                                                   ---------
                                                                     209,138
Accumulated Depreciation                                             (84,143)

                                                                   ---------
                                                                   $ 124,995
                                                                   =========

Depreciation expense for the years ended December 31, 2004 and 2003 was $47,295
and $18,177, respectively.

5. INTANGIBLE ASSETS

Intangible assets as of December 31, 2004 are summarized as follows:

Product rights             $ 1,350,000
Patents                      5,243,043
                           -----------
                             6,593,043
Accumulated amortization      (832,701)
                           -----------
                           $ 5,760,342
                           ===========

Amortization expense for the years ended December 31, 2004 and 2003 was $669,775
and $162,926, respectively. Expected future amortization is summarized as
follows:

  Year ending December 31,
            2005                                        $   706,920
            2006                                            706,920
            2007                                            706,920
            2008                                            549,420
            2009                                            436,920
            Thereafter                                    2,653,242
                                                        -----------
                                                        $ 5,760,342
                                                        ===========


                                      F-14
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

6. ACCRUED EXPENSES

Accrued expenses as of December 31, 2004 are summarized as follows:

     Accrued professional fees                          $    79,500
     Royalty                                                150,479
     Employee expense reports                                19,843
     Payroll taxes and benefits                              18,507
     Other                                                   67,532
                                                        -----------
                                                        $   335,861
                                                        ===========

7. SEGMENT INFORMATION

With the disposition of its HealthCentrics business unit (see Note 3), NNBP
operates a single business segment. Geographic information is summarized as
follows:

                                         Year ended December 31,
                                  ---------------------------------------
                                         2004                2003
                                         ----                ----
Revenue
  United States                              $343,444           $472,735
  Finland                                      14,917             10,080

                                  -------------------- ------------------
                                             $358,361           $482,815
                                  ==================== ==================
Assets
  United States                            $3,281,026
  Finland                                   6,403,281

                                  --------------------
                                           $9,684,307
                                  ====================

The geographic classification of revenue was based upon the domicile of the
entity from which the revenues were earned. Approximately 98% of Finland assets
relate to patents recorded as a result of the acquisition of OY (see Note 2).


                                      F-15
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

8. INCOME TAXES

There was no current or deferred provision or benefit for income taxes for the
years ended December 31, 2004 and 2003. The components of deferred tax asset as
of December 31, 2004 and 2003 are as follows:
                                                        2004           2003
                                                   -------------   ------------
 Deferred tax asset:
 Net operating loss carryforwards                  $  3,690,000    $ 2,487,000
 Valuation allowance                                 (3,690,000)    (2,487,000)
                                                   -------------   ------------
 Deferred tax asset net of valuation allowance     $          -    $         -
                                                   =============   ============

As of December 31, 2004, the Company had approximately $9.1 million of net
operating loss carryovers which expire between 2016 and 2024.

The following table accounts for the differences between the actual tax
provision and the amounts obtained by applying the statutory U.S. federal income
tax rates of 34% to the loss from continuing operations before income taxes and
minority interest:

                                                   2004           2003
                                                   ----           ----

     Statutory tax benefit                      $2,756,000        $967,000
     State taxes, net of federal benefit           309,000          72,000
     Nondeductible expense for common
       stock issued for services                  (999,000)       (292,000)
     Amortization of intangible assets            (261,000)        (57,000)
     Nontaxable income in connection

       with HealthCentrics' disposition            305,000               -
     Increase in valuation allowance            (2,116,000)       (715,000)
     Other, net                                      6,000          25,000

                                               -------------   ------------
       Provision for taxes                      $        -        $      -
                                               =============   ============

Changes in the valuation allowance during the year ended December 31, 2004 were
as follows:

     Valuation allowance, beginning of year            $2,487,000

     Discontinued operations                             (913,000)
     Increase from continuing operations                2,116,000
                                                       ----------
     Valuation allowance, end of year                  $3,690,000
                                                       ==========


                                      F-16
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

9. RELATED PARTY TRANSACTIONS

Stockholder Loan

An entity controlled by the Chief Executive Officer (who is also the largest
stockholder of NNBP), had loaned NNBP approximately $8.2 million from June 2003
through December 2004. This loan had interest at 5% and is due on demand. On
September 30, 2004, $7.5 million of the above loan was converted into 29,999,964
shares of the Company's common stock. On December 13, 2004 and additional
$500,000 of the above loan was converted into 4,166,667 shares of the of the
Company's common stock. The remaining loan balance at December 31, 2004 was
approximately $194,000.

Interest expense for the above loans for the years ended December 31, 2004 and
2003 was approximately $238,000 and $23,000, respectively.

Short-Term Notes Payable

Short-term notes payable consist of unsecured advances from employees of the
Company. These notes bear interest at 5% and are due on demand.

Conversion of Debt into Equity

During August 2004, an employee and minority stockholder (less than 5% ownership
of the Company) converted an $111,000 liability due from the Company into
923,458 shares of the Company's common stock.

License Agreement

During February 2004, NNBP entered into a licensing agreement with Pegasus
Worldwide, Inc. ("Pegasus") to market one of NNBP's over the counter products.
NNBP's Chief Executive Officer is a director of Pegasus. Under the terms of the
license agreement, NNBP was due $75 for each unit of product sold. For the year
ended December 31, 2004, NNBP recognized revenue of $46,800 under this license
agreement. Effective June 1, 2004, this license agreement was cancelled and NNBP
is selling this product directly to customers.

Royalty Agreement

The Company was a party to a royalty agreement with the former majority owner of
LABS who, along with his spouse, own approximately 24.4 million common shares of
NNBP. Under the terms of the royalty agreement, this stockholder would receive
an annual fee of $50,000 plus ten percent of gross sales from applicable
products. On March 16, 2004, the U.S. Patent Office printed Patent 6,706,290
"Methods for Eradication of Nanobacteria". With the approval of this patent,
management believes that the above royalty agreement is not valid and no amounts
will ultimately be due under the above royalty agreement.


                                      F-17
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

10. STOCKHOLDERS' EQUITY

PREFERRED STOCK

The holder(s) of preferred shares are entitled to receive non-cumulative
dividends not to exceed $.10 per share when and as declared by the Board of
Directors. In the event of any liquidation, dissolution or winding down of the
company, either voluntary or involuntary, the holder(s) of each preferred share
shall be entitled to be paid on an amount equal to $4.00 per share. In the event
that the Company authorizes the redemption of all or any preferred shares, the
redemption price shall be $4.30 per share. The preferred shares are convertible
at any time into common at the ratio of 44.11 common shares to one preferred
share. Holders of preferred shares have a right to cast eight votes per
preferred share and the right to elect fifty percent of the authorized members
of the board of directors.

COMMON STOCK, PREFERRED STOCK AND WARRANT ISSUANCES

During 2004, creditors of the Company converted $7.8 million of liabilities into
32,097,808 shares of the Company's common stock as follows:

            Shareholder loan (Note 9)        29,999,964   $ 7,499,990
            Employee (Note 9)                   923,458       110,815
            Unaffiliated vendors              1,174 385       158,724
                                            -----------   -----------
                                             32,097,807   $ 7,769,529
                                            ===========   ===========

During 2004, the Company issued 5.0 million shares of its common stock and 5.0
million warrants with an exercise price of $0.005 per share in connection with
the acquisition of the minority interest in OY (see Note 2). The value of these
stock and stock equivalent issuances was $4.3 million.

From August 2004 through November 2004, the Company entered into Subscription
Agreements with two unaffiliated investors. Under the terms of the Subscription
Agreements, the Company received cash of $677,500 (net of $97,500 of expenses)
during the year ended December 31, 2004. The Company is to receive additional
cash of $775,000 within five days of registering the common shares and warrants
issued as a result of the Subscription Agreements. The number of common shares
to be issued is equal to the amount received divided by the lesser of $.12 or
52% of the average closing bid price of the Company's common stock on the five
trading days immediately prior to the date on which the registration statement
is declared effective ("Fixed Price"). In addition, the Subscription Agreements
provide for the issuance of warrants equal to the number of common shares
issued. Fifty percent (50%) of the warrants are exercisable at 110% of the Fixed
Price and the remaining 50% of the warrants are exercisable at 150% of the Fixed
Price. Unexercised warrants will expire December 31, 2008. The Company has
agreed to use its best efforts to promptly register the common shares and
warrants.

During December 2004, the Company entered into a Subscription Agreement with an
affiliate of the Company's Chief Executive Officer. Under the terms of the
Subscription Agreement, the Company received cash of $500,000 during the year
ended December 31, 2004. The Company is to receive additional cash of $500,000
within five days of registering the common shares and warrants issued as a
result of the Subscription Agreement. All other terms of the Subscription
Agreement are substantially the same as the Subscription Agreements to the
unaffiliated investors described in the preceding paragraph.


                                      F-18
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

10. STOCKHOLDERS' EQUITY (CONTINUED)

As a result of the above Subscription Agreements, at December 31, 2004, the
Company has issued 10,625,000 shares of common shares, which represents the
minimum number of shares to be issued under the Subscription Agreements in
exchange for cash received through December 31, 2004. If the price of the
Company's stock is less than $0.23 per share when the Company's registration
statement is declared effective, the Company will be required to issue
additional shares under the above Subscription Agreements equal to a price of
52% of the average closing bid price of the Company's common stock on the five
trading days immediately prior to the date on which the registration statement
is declared effective. The ultimate number of shares to be issued is
indeterminate as the number of shares is dependent on NNBP's closing bid price
when a registration statement is declared effective. As a result, the $1,275,000
of cash received under the Subscription Agreements through December 31, 2004 is
included in long-term liabilities.

At December 31, 2004, the Company measured the value of the shares to be issued
under the Subscription Agreements through December 31, 2004 based on the
Company's closing bid price at December 31, 2004 compared to the actual shares
issued. As a result of this measurement, an additional $643,630 long-term
liability was recorded as of December 31, 2004 with a charge to Other
Comprehensive Income.

From May 2001 through November 2002, the Company was subject to the jurisdiction
of the United States Bankruptcy Court ("the Bankruptcy Court") under Chapter 11
of the United States Bankruptcy Code. Throughout the bankruptcy proceedings, the
Company's CEO and an affiliated entity funded the Company's operations and
existence. As part of the plan of reorganization as approved by the Bankruptcy
Court, the Company was to issue 75 million shares of the Company's stock to
affiliates of the CEO in satisfaction of this obligation. This transaction was
recorded at $750,000 or $.01 per share fair value at the date of the award
(based on the value at the measurement date) although shares were issued
periodically throughout 2003. Certain shares were issued as preferred shares (at
an equivalent value based on the conversion ratio of 44.11 per share). During
January 2004, the number of authorized shares was increased to 250,000,000, at
which time the previously issued preferred stock was converted to 35,048,445
shares of common stock.

During January 2004, a remaining Bankruptcy obligation was satisfied when the
Company issued 4.5 million common shares to an entity that is an affiliate of
the Company's CEO. The Company recognized an expense of $2.6 million in 2004 in
connection with this 4.5 million stock issuance which is the approximate fair
value of the stock on the issuance date.

During 2003, a total of 34,998,000 shares of the Company's common stock were
issued for the acquisition of LABS (see Note 2) including 4.0 million common
shares to an affiliate of the Company's Chief Executive Officer in connection
with the facilitation and bridge funding for this acquisition. The value of
these share issuances was $approximately $1.4 million.

An aggregate of 3,644,000 shares of stock were issued during 2003 in connection
with the conversion of $728,800 in related party debt to equity. Stock issued
for services in 2003 aggregated 50,000 shares valued at $30,175.

In addition, the Company sold 1,690,000 shares of stock at prices ranging from
$.20 to $.40 for aggregate proceeds of $548,000 and 368,815 shares of preferred
stock were converted to 16,268,430 shares of common stock.


                                      F-19
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

10. STOCKHOLDERS' EQUITY (CONTINUED)

WARRANTS

As of December 31, 2004, in connection with the OY acquisition, 5,000,000
warrants were outstanding with an exercise price of $.005 per common share and
an expiration date of August 31, 2009 (see Note 2).

At the finalization of the Subscription Agreements described above,
approximately 23.4 million additional warrants will be issued with an estimated
weighted average exercise price of $.16 per common share and an expiration date
of five years from the date of issuance.

STOCK OPTION PLAN

No stock options were outstanding for the years ended December 31, 2004 and
2003.

11. COMMITMENTS

The Company leases administrative and laboratory facilities and office equipment
under cancelable and non-cancelable operating leases that expire through June
2010. The following table summarizes the minimum future rental commitments under
non-cancelable operating leases at December 31, 2004:

Year ending December 31,

     2005                                    $     174,281
     2006                                          178,408
     2007                                          109,225
     2008                                           58,163
     2009                                           53,900
     2010                                           27,234
                                             -------------
                                             $     601,211
                                             =============

Rent expense on operating leases for the years ended December 31, 2004 and 2003
was approximately $222,000 and $167,000, respectively.


                                      F-20
<PAGE>

             NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

13. CONTINGENCY

On September 24, 2004 a civil action was filed in United States District Court -
Southern District of California by World Health Products, LLC ("World Health")
broadly alleging that the Company, together with a customer of the Company
("Customer"), has infringed on its Patent Number 5,602,180 related to the sale
of suppositories included in the Company's supplement product. World Health
alleged additional complaints against the Customer to which the Company is not
liable. During February 2005, World Health dropped the Company from their
lawsuit as their tests of the Company's suppositories determined that World
Health's patents were not being infringed upon.


                                      F-21
<PAGE>

                         NANOBAC PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 YEARS ENDED DECEMBER 31, 2004 AND 2003

15. QUARTERLY DATA

<TABLE>
<CAPTION>
                                        Mar 31             Jun 30              Sep 30            Dec 31
                                        -------            -------             -------           -------
<S>                                  <C>               <C>                  <C>              <C>
2004 QUARTER ENDED
       Revenue                          $32,385            $73,564            $118,141          $134,271
       Gross profit                     $25,196            $42,072             $76,037          $114,586
       Loss from continuing
           operations               ($4,221,972)       ($1,384,238)          ($994,276)      ($1,217,024)
       Net loss                     ($4,279,240)       ($1,384,238)          ($994,276)      ($1,217,024)
      Loss per share:
         Basic and Diluted               ($0.03)            ($0.01)             ($0.01)           ($0.00)

2003 QUARTER ENDED
       Revenue                               $0            $77,637            $241,340          $163,838
       Gross profit                          $0            $17,174             $63,932           $68,587
       Loss from continuing
           operations                 ($935,446)         ($166,229)          ($679,241)        ($980,217)
       Net loss                     ($1,234,083)         ($468,666)          ($929,230)      ($1,067,512)
      Loss per share:
         Basic and Diluted               ($0.03)            ($0.01)             ($0.01)           ($0.01)
</TABLE>

RECONCILIATION OF 2003 QUARTERLY DATA TO FORMS 10-QSB AS FILED

<TABLE>
<CAPTION>
                                                         Mar 31              Jun 30              Sep 30
                                                         -------             -------             ------
<S>                                                 <C>                  <C>                  <C>
REVENUE
      Revenue as reported on Form 10Q                     $5,812             $84,049           $244,616
      Discontinued operations                             (5,812)             (6,412)            (3,276)

                                                   -----------------------------------------------------
        Revenue per above                                     $0             $77,637           $241,340
                                                   =====================================================
GROSS PROFIT
      Gross profit as reported on Form 10Q              ($10,300)             $3,034            $38,503
      Discontinued operations                             10,300              14,140             25,429
                                                   -----------------------------------------------------
        Gross profit per above                                $0             $17,174            $63,932
                                                   =====================================================
NET LOSS
      Net loss as reported on Form 10Q                 ($595,222)          ($449,924)         ($913,780)

      Amortization of intangible assets                        -             (18,742)           (90,000)
      Charge or reversal thereof for stock
      issuances to affiliates of officers               (650,000)                                74,550
      Other                                               11,139              -                   -
                                                   -----------------------------------------------------
        Net loss per above                           ($1,234,083)          ($468,666)         ($929,230)
                                                   =====================================================
</TABLE>



                                                  F-22