We have been aggressively expanding our portfolio of virus targets and drug candidates every year since our inception in May, 2005. We began with drug candidates against Influenza. We then shortly added a drug candidate against Rabies, one of the most difficult to tackle diseases. We started working on Ebola/Marburg viruses (filoviruses) and developed drug candidates worthy of further drug development. Shortly thereafter, we developed a drug candidate against Adenoviral Epidemic Kerato-conjunctivitis (EKC). In 2008, we added anti-HIV drug candidates to our growing portfolio. Last year, we improved upon our EKC drug candidates to develop new drug candidates that may be effective potentially against most known viral diseases of the external eye. Most of these viral diseases are caused by a wide variety of adenoviruses and herpes simplex viruses. We also developed new drug candidates against the herpes viruses (HSV-1 and HSV-2), for the treatment recurrent HSV skin infections, such as cold sores and genital warts. This year we also added drug candidates effective against dengue viruses to our pipeline.

Initially, we began developing three separate drug candidates against influenzas; one for seasonal influenza, aimed to be very broad in its spectrum, another for severe influenzas (more virulent forms of influenzas), and a third one for the then raging threat of H5N1, bird flu. We later improved the drug candidates to such an extent that we now have a single drug candidate which we believe is capable of effectively tackling all forms of influenza A viruses, including the recent H1N1/2009/CA “swine flu” virus, the H5N1 bird flu viruses, and several others. We believe that the drug dosage would be adjusted based on severity of the disease and virulence of the virus causing it. This rationalization enables us to significantly reduce our drug development costs for the influenza project, leading to a single FluCide™-I project now.

We have limited our expenditures on socially conscious projects such as “Neglected Tropical Diseases” (NTD´s), and “Bio-defense” projects to the extent that participatory funding from third parties is received. To this end, we attempt to obtain grants and contracts financing from government and non-government sources. Last year, we applied for and anticipated receiving a contract award from the Department of Defense for a broad-spectrum filovirus nanoviricide, being put on a “reserve list”. However, the funding did not ultimately come through. We will continue to work on these programs as time and resources permit. In addition, we continue to develop novel technologies such as ADIF™ (“Accurate-Drug-In-Field™”) which may possibly represent one of the best scientific approaches against manmade and natural novel disease agents. Outbreaks of natural novel viral diseases, such as SARS will continue to occur. At present, there is no feasible therapeutic intervention .

We now have five commercially significant active, drug development programs: (1) FluCide-I, against all Influenzas, (2) nanoviricide eye drops against adenoviral EKC and herpes keratitis, (3) HIVCide™-I against HIV/AIDS, (4) HerpeCide™-I skin cream formulation for herpes cold sores and genital warts, and (5) DengueCide™, a broad spectrum nanoviricide designed to attack all types of dengue viruses and expected to be effective in the Severe Dengue Disease syndromes including Dengue Hemorrhagic Fever (DHS) and Dengue Shock Syndrome (DSS). We continue to achieve very strong performance in the testing of these drug candidates. All of our biological testing is conducted by third parties.

Initially we focused on developing only injectable formulations since these afford the maximum bioavailability of the drug inside the body. We have since developed formulations to use as eye drops, and are now developing formulations to use as skin creams. We can rapidly develop different formulations because of the inherent strength of the nanoviricide platform technology. The technology also enables us to develop nasal sprays and bronchial aerosols. We plan to develop the appropriate formulations as necessary.

Our strategy is to minimize capital expenditure. We therefore rely on third party collaborations for the testing of our drug candidates. This year we have continued to successfully develop the additional collaborations we need for the new drug programs as well as for expansion of the existing programs. We have added new collaborations with well known universities and institutions this year, including A “Master Service Agreement” with the Southern Research Institute (“Southern Research”), Birmingham, AL. Southern Research is a well established, prestigious institution that has performed preclinical testing services for several vaccines and antivirals. A research and development agreement with Dr. Eva Harris´s laboratory at the University of California, Berkeley (UC Berkeley) for the development and testing of anti-dengue antivirals. A Research Agreement with the University of California, San Francisco (UCSF) for testing of its anti-HIV drug candidates, with Cheryl Stoddart, PhD, Assistant Professor in the UCSF Division of Experimental Medicine, as the Principal Investigator. A research and development agreement with Dr. Ken S. Rosenthal´s laboratory at Northeastern Ohio Universities Colleges of Medicine and Pharmacy for the development and testing of anti-herpes skin cream formulations to treat oral cold sores and genital herpes.

We have successfully registered the mark “nanoviricides” as a registered trademark with the US Patents and Trademarks Office (USPTO). The mark was entered into the “principal register“ of trademarks at the USPTO on April 20, 2010. The Company created the novel word “nanoviricide®” in 2005 to identify its antiviral technology and the various drug candidates to be derived from this technology.. The mark protects the word as a proprietary, registered intellectual property of the Company and limits its use to the Company.

To further protect our novel technology, certain international patent applications underlying the nanoviricide technology have entered the national or regional stages. One of these has become an issued letters patent registered in two different geographies, South Africa and the region OAPI. Additional technology developments continue. We are thus continuing to strengthen our already significantly extensive and broad intellectual property coverage.

On February 15, 2010 the Company approved an Additional License Agreement with TheraCour Pharma, Inc. (“TheraCour”). Pursuant to the exclusive Additional License Agreement, the Company was granted exclusive licenses, in perpetuity, for technologies, developed by TheraCour, for the development of drug candidates for the treatment of Dengue viruses, Ebola/Marburg viruses, Japanese Encephalitis, viruses causing viral Conjunctivitis (a disease of the eye) and Ocular Herpes.

We have continued to achieve significant milestones in our drug development activities. All of our drug development programs are presently at pre-clinical stage. We continue to test several drug candidates under each program even though we may achieve extremely strong results with some of the candidates.

In August 2009, we announced that our anti-herpes drug candidates had achieved 99.99% reduction in viral load in certain cell culture studies, conducted by TheVac, LLC. These results were later augmented by additional testing using a more virulent form of HSV-1 demonstrating almost complete inhibition of the virus, by Professor Ken Rosenthal lab at the NEOUCOM and reported by the Company in August 2010.

In November 2009, the Company reported significant improvement in the efficacy of FluCide drug candidates in totally lethal protocol animal studies. In this study, the oseltamivir treated animals died in 8 days, untreated mice died in 5 days, while all nanoviricides treated animals continued to survive well beyond those dates. The new version of FluCide drug candidate extended the lifespan of lethally infected mice to a phenomenal 14 days on average in this highly lethal model. We have since improved the FluCide drug candidate even further and will be committing it into additional studies.

In June 2010, the Company reported successful studies in two different cell culture models of dengue virus type 2 infection. These studies were conducted at the Prof. Eva Harris lab at the UC Berkeley. Our results were later confirmed and extended to animal studies.

The Company reported that its anti-Dengue drug candidates demonstrated significant protection in the initial animal survival studies of Dengue virus infection, in an animal study protocol modeled to simulate the ADE syndrome. The best nanoviricide drug candidates demonstrated 50% animal survival in this uniformly lethal mouse model. The studies were performed in the laboratory of Dr. Eva Harris, Professor of Infectious Diseases at the University of California, Berkeley (UC Berkeley).

Based on these data, the Company believes that it is feasible to develop a single nanoviricide drug against all types of dengue viruses that circumvents the primary issue of antibody-dependent enhancement (ADE) of dengue virus infection. ADE is thought to result in severe dengue disease syndromes such as dengue shock syndrome (DSS) and dengue hemorrhagic fever (DHF).

In June, 2010, we also reported that our anti-HIV drug candidates demonstrated efficacy in the recently completed cell culture studies using two distinctly different HIV-1 isolates. These studies were performed in the laboratory of Carol Lackman-Smith at the Southern Research Institute, Frederick, Maryland. These results corroborating our previous findings in Animal Studies. The Company had reported that its best nanoviricide drug candidate against HIV was more than 25 times superior to a three drug combo anti-HIV cocktail based on biomarker test response in all parameters tested. The parameters included improvement in human T cell populations in the animal model and reduction in HIV viral load.

In July 2010, our collaborators at the United States Army Medical Research Institute of Infectious Diseases (USAMRIID) presented the data on their evaluation of anti-Ebola/Marburg nanoviricides. Significant efficacy was reported to have been achieved in cell culture as well as animal studies of Ebola virus infection. The Company plans to improve the drug candidates further.

The studies of biological testing of materials provide information that is relatively easy to understand and therefore readily reported. In addition, we continue to engage in substantial work that is needed for the optimization of synthesis routes and for the chemical characterization of the nanoviricide drug candidates. We also continue to work on improving the drug candidates and the virus binding ligands where necessary. We continue to work on creating the information needed for the development of controlled chemical synthesis procedures that is vital for developing c-GMP manufacturing processes. We have recently purchased substantial amounts of laboratory equipment for the characterization of our nanomaterials. Much of this equipment is in the process of being set up and scientists are being trained to use the same. We are working on all fronts to enable us to go forward with filing a pre-IND application with the FDA in the first half of 2011.

In this year we have also made significant strides in achieving exposure for the Company and its technologies. In June 2009, our CEO, Dr. Eugene Seymour was invited to present and participate in presenting a workshop on “Nanoparticle Formulation: principles and applications”, at the 3rd International Congress of NanoBiotechnology & NanoMedicine (NanoBio 2009) held in San Francisco in June 2009. In August 2009, our collaborator, Professor Gus Kousoulas of Louisiana State University and Vice President of Research of TheVac LLC, was interviewed by the local CBS TV affiliate, WBRZ, in which he explained the nanoviricides technology and the excellent anti-herpes results obtained in his laboratory for the nanoviricides anti-herpes drug candidates. Anil Diwan, PhD, President of the Company was asked to present at the NanoBusiness2009, the 8th annual NanoBusiness Conference in Chicago, IL, in September, 2009. The Company´s President, Anil R. Diwan, PhD, was invited to give a talk at the Nano and Green Tech 2009 Conference in November, 2009. The Company´s CEO, Eugene Seymour, MD, MPH, was invited to participate in a panel discussion “Evolving Role of Anti-Virals”in influenza treatment at the Influenza Congress USA 2009, in November. The Company President was invited to present at the New York Biotechnology Association´s (NYBA) 2010 Annual Meeting in the “Corporate Showcase” section in April 2010.

Our collaborators are also presenting technical and scientific data on the evaluation of nanoviricides drug candidates. This year, the results of the evaluation of several of our nanoviricides® anti-Ebola agents were presented on July 17th at the 2010 Annual Meeting of the American Society for Virology. The studies were performed in the laboratory of Dr. Gene Olinger at the United States Army Medical Research Institute of Infectious Diseases (USAMRIID), Frederick, MD. Dr. Corinne Scully, USAMRIID, delivered the presentation, which was entitled “Polymeric Micelle Nanomaterials as Antiviral Compounds For Ebola Virus Infection.”

In addition to the technical and scientific meeting presentations, the Company was also invited to participate in meetings designed to showcase the Company to potential investors and the finance industry in general. The Company´s CEO, Eugene Seymour, MD, MPH was invited as a panelist at the 2nd Annual Livingston Healthcare Summit in September, 2009. The Company was invited to present on January 12th at the Biotech Showcase™, a conference designed to showcase promising companies and technologies for partnering and investment purposes - this presentation was rendered by Anil R Diwan, our President. Recently, Dr. Eugene Seymour, our CEO was invited to present on behalf of the Company at the Rodman and Renshaw Annual Global Investment Conference in September 2010.

We believe that these presentations, resulting exposure, and related meetings and discussions have been extremely beneficial to the Company. This exposure as well as our continuing successes in the drug development efforts have enabled us to achieve significant amounts of financing this year.

The Company successfully raised more than $3,217,000 in September, 2009. This raise involved issuance of restricted shares and warrant conversions in private placements to certain accredited investors. The Company filed a Form 8-K disclosure with the SEC summarizing these activities on October 5, 2009. In March, 2010, the Company filed its first “Universal Form S-3 Shelf Registration” with the Securities and Exchange Commission (SEC) for the sale from time to time of up to $40 million of its securities. The Company had recently become eligible to file a shelf registration to register its securities. The registration statement became effective on April 29, 2010.

Subsequently, the Company raised $5,000,000, drawing down on this universal registered shelf offering, on May 12, 2010. This amounted to approximately $4.51 million net after expenses and the fees payable to Midtown Partners & Co., LLC, the Company´s placement agent. The Company received this financing from a single investor, Seaside 88, LP (“Seaside”), a Florida limited partnership. Seaside is a well known and well regarded investor in biopharmaceutical companies.

Subsequently on September 16, 2010, Seaside exercised its option to invest an additional $5,000,000 into the Company on substantially similar terms.

With these successful financing efforts, and our continued low rate of expenditure, the Company estimates that it now has cash in hand sufficient for more than eighteen months of further R&D and operating expenses.

We thus ended the financial year in the best financial condition the Company has ever been in. Further, we have also been able to secure a strong financial position for the ensuing year and the near future.

September 30th, 2010.